[Congressional Record Volume 157, Number 102 (Monday, July 11, 2011)]
[Senate]
[Pages S4461-S4478]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SHARED SACRIFICE IN RESOLVING THE BUDGET DEFICIT--MOTION TO PROCEED
The ACTING PRESIDENT pro tempore. Under the previous order, the
Senate will resume consideration of the motion to proceed to S. 1323,
which the clerk will report.
The legislative clerk read as follows:
Motion to proceed to the consideration of S. 1323, a bill
to express the sense of the Senate on shared sacrifice in
resolving the budget deficit.
The ACTING PRESIDENT pro tempore. Under the previous order, the time
until 5:30 p.m. will be equally divided and controlled between the two
leaders or their designees.
Who yields time?
The Senator from North Dakota.
SCHEDULE
Mr. CONRAD. Mr. President, the Senate has resumed the motion to
proceed to S. 1323, a bill to express the sense of the Senate on shared
sacrifice in resolving the budget deficit. The time until 5:30 will be
equally divided between the two leaders or their designees. At 5:30,
there will be a rollcall vote on the motion to proceed to S. 1323.
Measure Placed on the Calendar--S. 1340
Mr. CONRAD. Mr. President, I understand S. 1340 is at the desk and
due for a second reading.
The ACTING PRESIDENT pro tempore. The clerk will read the bill by
title for the second time.
The legislative clerk read as follows:
A bill (S. 1340) to cut, cap, and balance the Federal
budget.
Mr. CONRAD. Mr. President, I object to any further proceedings with
respect to the bill.
The ACTING PRESIDENT pro tempore. Objection is heard. The bill will
be placed on the calendar under the provisions of rule XIV.
Mr. CONRAD. I thank the Chair.
Mr. President, we are in the midst of a defining debate on the budget
of the United States. All of us understand we have a debt threat
looming over this country that is as significant as anything we have
faced in many years. Democratic members of the Senate Budget Committee
have worked for weeks to devise a blueprint we think has merit and that
deserves to be a part of the debate. Today, I am here to outline the
key elements of that budget blueprint.
First of all, I think it is critically important we all understand we
are as a Nation borrowing 40 cents of every $1 we spend. That is not a
sustainable circumstance. Admiral Mullen, the Chairman of the Joint
Chiefs of Staff, has indicated that our national debt is our biggest
national security threat. This is the top military man in our country
saying the debt threat is the most serious national security threat.
Why does he say that? Here are the facts: The debt of the United
States--the gross debt--all the debt we owe is now approaching 100
percent of our gross domestic product, which is the highest level it
has been since after World War II. This chart shows a threshold of 90
percent and a gross debt of 90 percent. Why did we draw that line on
this chart? Because the best
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evidence we have tells us when we cross the 90-percent threshold on the
gross debt of any nation, we are in the danger zone, we are in the red
zone.
The distinguished economists Carmen Reinhart and Kenneth Rogoff wrote
a book called ``Growth in a Time of Debt.'' Here is their conclusion:
We examined the experience of 44 countries spanning up to
two centuries of data on central government debt, inflation
and growth. Our main finding is that across both advanced
countries and emerging markets, high debt to GDP levels (90
percent and above) are associated with notably lower growth
outcomes.
This is a key fact all our colleagues need to know. When our gross
debt goes over 90 percent of our gross domestic product, our future
economic prospects are diminished. That means fewer jobs created, less
economic opportunity--a nation that is at risk. That is where we are.
Look at what the Congressional Budget Office says is where we are
headed. On the current trajectory, we are headed for a debt that will
go to 200 percent of the gross domestic product of the country. This is
not the gross debt; this is the publicly held debt, which is smaller
than the gross debt. So this chart now looks at the publicly held debt
and says it is headed for 200 percent of GDP. We cannot stay on this
course. It is critically important we change direction.
For every 1 percentage point increase in interest we pay, $1.3
trillion is added to the debt. For those who say don't worry about the
debt limit, let's remind them what will occur if the United States
refuses to pay the bills it has already incurred, which is the interest
rates will go up. Those who have loaned us money, if we renege on our
commitments to pay them, will then insist on higher interest rates--all
borrowers will insist on higher interest rates--and for every 1-percent
increase in the interest rate, we will pay $1.3 trillion more on our
debt. So those who think that somehow, by not extending the debt limit,
we are going to help on the debt--no. The opposite is true. The debt
will increase and increase dramatically.
Here are the hard facts with respect to the relationship between
spending and revenue over the last 60 years in this country. The red
line is the spending line. The green line is the revenue line. What
this shows very clearly is that spending is the highest it has been as
a share of GDP in 60 years. Yes, we have a spending problem. But it is
not exclusively a spending problem, as some assert on this floor,
because revenue as a share of GDP is the lowest it has been in 60
years. To deny that essential fact is to deny the significant elements
of a compromise that are required to solve this problem.
Spending is the highest it has been in 60 years as a share of our
national income. Revenue is the lowest it has been in 60 years as a
share of our national income. Both have to be addressed if we are going
to solve this problem.
For those who say: Well, it is not a revenue problem, oh, yes, it is.
This is an article that appeared Sunday, May 1, in the Washington
Post: ``On the way to a surplus, a $12 trillion U.S. detour.''
Remember, in 2001, we were told we were on the way to paying off the
debt of the United States. This article by Lori Montgomery in the
Washington Post on May 1 indicated the fundamental reasons that instead
of paying off the debt, we have a debt that is mushrooming. This one
paragraph says it all:
The biggest culprit, by far, has been an erosion of tax
revenue triggered largely by two recessions and multiple
rounds of tax cuts. Together, the economy and the tax bills
enacted under former President George W. Bush, and to a
lesser extent by President Obama, wiped out $6.3 trillion in
anticipated revenue. That's nearly half of the $12.7 trillion
swing from projected surpluses to real debt. Federal tax
collections now stand at their lowest level as a percentage
of the economy in 60 years.
That is the point I just made.
So when Democrats on the Senate Budget Committee approached this
problem, we looked at it in historical perspective. How did we get into
this problem? Half of it is on the revenue side. So we chose to deal
with a solution that deals on both sides of the ledger. Yes, we need to
cut spending; absolutely, that must be done. But we also cut so-called
tax expenditures that are just spending by another name--loopholes,
exclusions, deductions, tax preferences, abusive tax shelters, and tax
havens that are hemorrhaging revenue that rightfully belongs in the
Treasury--people avoiding what they legitimately owe to the United
States by engaging in abusive tax shelters and tax havens that is
costing us substantial revenue. We will get into the specifics of that.
The House Republicans chose a different path. They only want to focus
on half the problem. They only want to focus on the spending side of
the equation. They don't want to touch the revenue side of the
equation. I believe that denies reality. That runs away from the hard
reality of how we got into this situation. Again, we got here by, yes,
spending that is higher than it has been in 60 years as a share of
national income but also revenue that is lower than it has been at any
time in 60 years. If we are truthful with ourselves, we are going to
have to deal with both sides of this equation.
The plan Senate Democrats on the Budget Committee have agreed on
looks at a budget framework that includes roughly the same amount of
deficit reduction as the House Republican plan. In fact, we have
somewhat more deficit reduction than did they. They have a plan that
was $3.9 trillion of deficit reduction. Our plan is $4 trillion. The
actual difference is about $50 billion, but because of rounding, it
turns out they are at $3.9 trillion, we are at $4 trillion. The actual
difference is about $50 billion more in deficit reduction in the plan
worked by Senate Democrats on the Budget Committee.
So this is what happens to deficits as a share of GDP under the
framework we are offering. As you can see, this year the deficit is 9.3
percent of gross domestic product. We bring it down very steadily until
we get down to 1.3 percent in the 10th year--a lower deficit in dollar
terms, a lower deficit as a share of GDP than the House Republican
plan. Let me repeat that. The Senate Democrats on the Budget
Committee--our plan reduces the deficit by the 10th year by more than
the Republicans in total, and in the 10th year we have a lower deficit
in dollar terms and a lower deficit as a share of GDP.
As shown on this chart, this is what happens to the debt itself. The
gross debt, as you can see, peaks out at 100 percent in 2011, and then
we bring it down gradually but steadily to about 98 percent by 2021.
The key is, instead of having the debt line going up, up, and away,
burying this country under a mountain of debt, we stabilize the debt
and begin to bring it down--something that every serious economist has
said is absolutely essential.
In terms of spending, I indicated that current spending is the
highest it has been as a share of GDP in 60 years. Our plan takes that
down from 24 percent of GDP to 23 percent and then freezes it at 22
percent of GDP for the rest of this decade.
Now, some will say: There go the Democrats again. They are spending
too much money. I would say to them: If we could get the spending down
to the levels that were obtained during the Reagan administration,
would that be acceptable? Because that is exactly what we do. Under the
plan of Senate Budget Committee Democrats, we get spending to the exact
same level that pertained during the administration of Ronald Reagan.
During Ronald Reagan's 8 years, spending averaged 22.1 percent of GDP.
That is precisely what our spending equals in the budget framework I
have outlined here today. We include every part of the Federal budget,
including the defense budget. Just as the fiscal commission did, just
as every other bipartisan deficit reduction plan has included, we
looked to defense spending for savings because no part of the budget
can be off the table in terms of a deficit reduction plan.
I would say separately, Social Security we deal with separately
because Social Security need not be, should not be part of a deficit
reduction plan. Savings on Social Security ought to be for the purpose
of extending the solvency of Social Security. But in terms of those
parts of spending that are considered on budget, defense has to be
included in any savings. Why do I say that? Well, look what has
happened since 1997. Spending on defense and war has gone from $254
billion a year to $688 billion a year. It is a key reason spending has
exploded.
Before the fiscal commission, some of the best defense analysts in
the country came before us and told us that 51
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percent of all Federal employees are at the Department of Defense--51
percent of all Federal employees are at the Department of Defense--and
that does not count the contractors.
I asked these analysts: Well, how many contractors are there?
Their response was: Senator, we can't tell you.
I said: Is that a matter of security? Is that a matter of clearances?
They said: No, Senator. We don't know.
I said: Well, what is the range? About how many contractors are there
working at the Department of Defense?
The answer was: Senator, 1 million to 9 million. Between 1 million
and 9 million. We can't tell you which is right.
We have a serious problem of contractors working for the Department
of Defense and the Department of Defense cannot even tell you how many
contractors they have working for them. We have a problem.
The previous Secretary of Defense, Secretary Gates, said this:
. . . the budget of the Pentagon almost doubled during the
last decade.
And he is right about that. Our chart shows that.
But our capabilities didn't particularly expand. A lot of
that money went into infrastructure and overhead and,
frankly, I think a culture that had an open checkbook.
``A lot of that money went into infrastructure and overhead''--
overhead--``and, frankly . . . a culture that had an open checkbook.''
We cannot afford an open checkbook anywhere. We have to go after waste,
fraud, and abuse in every department. We have to go after
infrastructure spending that really does not contribute to improving
our defense. We have to go after overhead, overhead costs that have
really run amok.
Chairman Ryan of the House said this about defense:
There are a lot of savings you can get in defense. There's
a lot of waste over there, for sure.
Yet, when they came with their plan, they continued the path of
increasing defense spending year over year without any discipline. This
is the plan they outlined--from $529 billion a year headed for $667
billion a year, and that does not count the war funding.
In our plan, we have done what the fiscal commission called for. We
have achieved the same savings out of security as the fiscal commission
did--$886 billion out of the security category. Now, that includes
defense. Obviously, defense is most of security, but in the
``security'' category also falls homeland security, and also included
is veteran spending. Veteran spending, by the way, is one place we do
not cut a nickel. The veterans deserve to have the promise we have made
to them kept, and under our budget, every dollar that has been promised
to veterans will go to them. That does not mean we cannot save money
out of the security side. The fiscal commission--which, by the way, is
the only bipartisan plan that has come from anywhere: five Democrats,
five Republicans, one Independent--endorsed a plan with $886 billion of
savings over 10 years out of the security category. The budget by
Senate Budget Committee Democrats adopts that finding.
The budget that Senate Budget Committee Democrats are advancing also
has governmentwide savings. We freeze the pay of Members of Congress
for 3 years. We freeze the legislative branch and White House budgets
for 3 years. We freeze civilian pay for 2 years. That has already been
adopted, but we include that in our budget. We reduce the Federal
vehicle fleet by 20 percent because, frankly, in our investigations we
find in this area there has been an explosion of vehicles in the
Federal fleet, and I think all of us have seen it with our own eyes.
This is something that has to be taken on. We reduce travel costs of
Federal agencies by 20 percent. We reduce Federal printing costs by $1
billion by 2015. We reduce the number of contractors, which we have
previously described.
The House Republican plan on revenue is really almost impossible to
believe. In a circumstance in which we have record debt, in a
circumstance in which the revenue of this country is the lowest it has
been in 60 years, what is part of their answer? Cut taxes some more,
and cut them for the very wealthiest among us, cut them another $1
trillion for those who are the most fortunate among us. I am not making
this up. This is the House Republican plan: Take a circumstance in
which we have record debt, the lowest revenue we have had in 60 years,
and cut taxes for the very wealthiest among us by another $1 trillion
by extending the top rate cuts, by a $5 million estate tax exemption.
They actually cut revenues $4.2 trillion below the CBO baseline. Let me
repeat that. They actually cut revenue in their plan $4.2 trillion
below the Congressional Budget Office baseline. That is inexplicable.
Maybe we can start to understand it when we look at what a former
Reagan economic adviser said about the House Republican plan. Mr.
Bartlett said this:
Distributionally, the Ryan plan----
The House Republican plan----
is a monstrosity. The rich would receive huge tax cuts while
the social safety net would be shredded to pay for them. Even
as an opening bid to begin budget negotiations with the
Democrats, the Ryan plan cannot be taken seriously. It is
less of a wish list than a fairy tale utterly disconnected
from the real world, backed up by make-believe numbers and
unreasonable assumptions. Ryan's plan isn't even an act of
courage; it's just pandering to the Tea Party. A real act of
courage would have been for him to admit, as all serious
budget analysts know, that revenues will have to rise well
above 19 percent of [gross domestic product] to stabilize the
debt.
Revenue today is 14.8 percent of GDP--again, the lowest it has been
in 60 years. If we look at the last five times the budget has been
balanced in the last 50 years, here is what we see: Revenues had to be
close to 20 percent of GDP. They were 19.7 percent in 1969, 19.9
percent in 1998, 19.8 percent in 1999, 20.6 percent in the year 2000,
and 19.5 percent in 2001. That is the last five times the budget has
been balanced. Each of those times, revenue was close to 20 percent of
GDP. Now it is 14.8 percent of GDP. Anyone who seriously argues that
you can solve this problem just on the spending side of the equation is
not being serious.
The budget framework we offer today has revenues at 19.5 percent of
GDP--almost equivalent to what it was during the Clinton years, when we
had balanced budgets and, in fact, stopped using Social Security money
to pay other bills. During the Clinton years, revenue averaged 19.4
percent of GDP. Under our plan, it averages 19.5 percent. So revenue is
clearly not out of line compared to the other times we balanced the
budget and, in fact, during the Clinton years when we had the longest
economic expansion in this Nation's history.
For our colleagues who say, oh, you can't touch revenue or you will
kill the economy, you will kill job creation--really? How about the
historic record? The historic record shows very clearly that during the
Clinton years, when you had revenue at the same level as we have in
this plan, you had the longest economic expansion in this Nation's
history--39 quarters; 32 of those quarters during the Clinton years--
the longest uninterrupted period of economic growth in this Nation's
history, and you had revenue at the same level we are talking about in
this plan. Facts are stubborn things. A previous President said that.
He was right. The fact is, we had the longest period of uninterrupted
growth in our economy during a period in which revenue was at the level
we are proposing in this budget. That is a fact.
Mr. President, the proposals in the budget framework also seek to
bring us transparency. We have tax reform that simplifies the Tax Code,
scales back tax loopholes, protects the middle class, improves
progressivity and fairness of the code, promotes economic growth and
U.S. competitiveness--because we lower the corporate rate from 35
percent to 29 percent to make America more competitive, and we pay for
it by closing corporate loopholes. We also address the tax gap,
offshore tax havens, and abusive tax shelters, and ensure that
corporations pay their fair share.
The specifics of our revenue proposal are as follows: The tax cuts--
the so-called Bush-era tax cuts--are extended for singles earning up to
$500,000 a year and for couples earning up to $1 million a year. So 99
percent of the American people will see no rate increase--none; 99
percent of the American people will see no rate increase. One percent
will, and it will be those who are sufficiently fortunate to be earning
over $1
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million a year--the top 1 percent in this country. We ask them to go
back to rates of the Clinton era, when the top rate was 39.6 percent,
capital gains were 20 percent. Those are the rates that pertain--when
we had the longest economic expansion in our Nation's history.
For those who say it is a job killer, they have to explain how that
can be since history shows something quite different from their claim.
We also provide for alternative minimum tax relief. That costs $1.5
trillion. That is not a tax increase. We are lowering taxes that would
be imposed by the alternative minimum tax, which is increasingly
gobbling up middle-class taxpayers. We are preventing that from
happening. It costs $1.5 trillion to fix. So we are replacing that
revenue with other revenue. I don't consider that a tax increase. That
is merely substituting revenue for revenue that we are subtracting to
prevent middle-class people from being caught up in the alternative
minimum tax.
We also reform the estate tax, going back to the 2009 levels which
are $3.5 million a person and $7 million a couple. That means well over
99.5 percent of estates would be completely exempt. That is a fair
plan.
We also assume net $2 trillion of additional funds from closing tax
loopholes, cutting tax subsidies, promoting tax fairness. That is over
10 years.
We assume tax preferences for individuals are reduced 9 to 17
percent, depending on the amount of offshore tax havens and abusive tax
shelters that are closed.
We assume, as I indicated earlier, that the corporate rate is lowered
to 29 percent, offset by reducing corporate tax expenditures and
closing corporate tax loopholes--specific policies to be determined by
the Finance Committee, as they always are.
Mr. President, when I indicate there is a range for reducing tax
expenditures from 9 to 17 percent, depending on how much savings we get
out of offshore tax havens, here is the math. Over the next 10 years,
the tax preferences--or expenditures, as they are sometimes called--
will cost the Treasury $14 trillion. Let me repeat that. The loopholes,
the exclusions, the preferences in the Tax Code will cost the Treasury
$14 trillion over the next 10 years.
On top of that, offshore tax havens and abusive tax shelters will
cost the Treasury another $1.4 trillion. That is according to estimates
based on data from the Permanent Subcommittee on Investigations. So if
we recover nothing from tax havens, to reach our revenue numbers we
would have to reduce tax expenditures 17 percent. On the other hand, if
we recover 80 percent of tax haven losses and tax shelter losses, the
reduction in tax expenditures would only have to be 9 percent--17
percent reduction in tax expenditures if we get no savings from tax
havens and tax shelters, and a 9-percent reduction in tax expenditures
if we recover 80 percent of the losses from tax havens and tax
shelters.
Probably, the realistic expectation ought to be somewhere in between
those extremes.
If the CBO scored the proposal by Senate Budget Committee Democrats,
they would not say there is any tax increase here at all. Let me repeat
that. If the Congressional Budget Office scored this proposal by Senate
Budget Committee Democrats, they would say there is a $765 billion tax
cut over 10 years. How can that be? How can I be saying there is $2
trillion of additional revenue over 10 years, and the Congressional
Budget Office would say--if they evaluated this plan by Budget
Committee Democrats--they would say it is a $765 billion tax cut? The
reason is simple.
In our plan we extend all of the middle-class tax cuts. In addition,
we actually broaden the middle-class tax cuts so that nobody is
affected by a rate increase unless they are a couple earning over $1
million a year. We also provide the alternative minimum tax relief to
prevent millions of middle-class people from being affected by that
law.
As I indicated earlier, that costs $1.5 trillion over the next 10
years to shield middle-class taxpayers from that.
Third, we provide estate tax reform at the 2009 levels so that well
over 99 percent of estates are completely shielded or exempt.
Again, when our Republican colleagues say--and some of them do--you
can't have a higher tax rate, even on those earning over $1 million, it
will kill the economy--really? How about looking at the facts. How
about looking at the historic record. How about being informed by what
has actually happened before because when we look at history, we find
quite a different answer than our friends on the other side are
providing.
What we find is that the last time the top rate for those earning $1
million was 39.6 percent, we experienced the longest period of
uninterrupted economic growth in U.S. history. That is a fact. We had
39 quarters of economic growth from 1991 to 2000. For 32 of those
quarters, Bill Clinton was President, and we had a top rate of 39.6
percent on those couples earning over $1 million a year.
Our friends on the other side say: You will kill jobs. Do you know
what is fascinating? I remember this debate back when we passed deficit
reduction under President Clinton. Our friends on the other side said
the same thing then. I remember, I was seated here listening to the
then-Republican leader claim that if we passed the Clinton plan to get
the deficit down and balance the budget, we would crater the economy.
Those were the exact words our friends on the other side used at that
time--that if we raised rates on the wealthiest among us, it would
crater the economy.
What happened? Not only did we not crater the economy, we had the
longest period of economic expansion in our Nation's history, and 24
million jobs were created--the best record ever. That is the fact. That
is what really happened--not some fairy tale about what happens if we
get the country back on track, if we move toward balancing the budget,
toward getting the debt down, because that is in fact what happened
during the Clinton years.
Yes, we had the highest rate of 39.6 percent on those earning over $1
million. But it didn't crater the economy--no. The economy grew. We had
the longest economic expansion in this Nation's history, and 24 million
jobs were created during that period, the best record ever.
Let's look again at history. The last five times economic growth was
above 4 percent in this country, the top tax rate was 39.6 percent on
those earning over $1 million. Facts. Facts are stubborn things. In
1994, the top rate was 39.6 percent and the growth rate was 4.1
percent. In 1997, the top rate was 39.6 percent and economic growth was
4.5 percent. In 1998, we had 4.4 percent economic growth. In 1999, it
was 4.8 percent. In 2000, we had 4.1 percent economic growth--the
strongest economic growth, going back decades, in every year. The top
rate on people earning over $1 million was 39.6 percent, which is
precisely what we are proposing in this plan.
Mr. President, I think it is undisputed by serious economists, of
whatever philosophical stripe, that these tax expenditures have to be
reined in. We are spending $1.1 trillion a year on tax expenditures.
Some of the most conservative economists in the country have said that
is just spending by a different name. Here is Martin Feldstein,
professor of economics at Harvard, Chairman of the Council of Economic
Advisers under President Reagan. He has written a column called ``The
Tax Expenditure Solution for Our National Debt.'' He said this:
Cutting tax expenditures is really the best way to reduce
government spending. . . .
It is called revenue, but it is really spending.
Eliminating tax expenditures does not increase marginal tax
rates or reduce the reward for saving, investment or risk-
taking. It would also increase overall economic efficiency by
removing incentives that distort private spending decisions.
And eliminating or consolidating the large number of
overlapping tax-based subsidies would also greatly simplify
tax filing. In short, cutting tax expenditures is not at all
like other ways of raising revenue.
This is from the head of the economic advisers under President
Reagan, saying we ought to cut tax expenditures. That is exactly what
the Senate Democratic budget plan does. We cut tax expenditures 9 to 17
percent, depending on how much we are able to save from closing off
these offshore tax havens and the abusive tax shelters.
If we get no savings from tax havens and tax shelters, then we would
have to reduce tax expenditures 17 percent. If we are able to reduce
tax havens and
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the other loopholes, offshore loopholes--the abusive tax shelters--by
80 percent, then we would be able to reduce tax expenditures by 9
percent.
Just like Martin Feldstein who said we ought to have after tax
expenditures, also Alan Greenspan, former Chairman of the Federal
Reserve, said this:
I think that Republicans are out to identify a very
significant amount of so-called tax expenditures, which in
fact are misclassified. They are expenditures, they are
outlays, and many are subsidies, and subsidies are not the
type of thing that you want for an efficient market system.
There are a lot of them.
Mr. President, that is what we are proposing. Let's go after these
subsidies, these preferences, these exclusions. While we are at it,
let's go after offshore tax havens, abusive tax shelters. Let's shut
them down.
If there is any doubt about where this money is going, here it is:
26.5 percent of tax expenditures go to the top 1 percent in this
country; 26.5 percent of all tax expenditures go to the top 1 percent.
So when we are saying we may have to reduce tax expenditures 17
percent, we could do it all just with the top 1 percent. That is where
the benefit is going.
Let me show you in another way. The top 1 percent, in dollar terms--
the value, on average, of tax expenditures for those who are in the top
1 percent in this country, earning an average of $1.1 million a year,
they get, on average, a benefit every year from tax expenditures of
over $205,000. For those who are in the middle quintile, those earning
$39,000 a year, their average benefit is $3,000. You can see that the
top 1 percent have a benefit from tax expenditures that is 66 times
what people in the middle get. It is not unfair to go to those who have
had the greatest benefit from the national economy over the last two
decades and say to them: We need you to help a little bit more to get
out of this debt rut we are in. And you know what, that is not unfair
because they have had the greatest benefit over the last 15 years.
Here is something that I think shows it conclusively. This is the
effective tax rate for the 400 wealthiest taxpayers in America. In
1992, it was about 27 percent. In 1995, the tax rate for the wealthiest
400 was 30 percent--29.9, to be exact. Look what has happened since
1995. The effective tax rate for the wealthiest 400 taxpayers in
America has gone down to 16.6 percent. They have had their tax rates
cut almost in half. Has anybody else had their taxes cut in half? I
don't think so. The people who have had their taxes cut in half are the
wealthiest among us. So it is not unreasonable to go back to them and
say: Hey, wait a minute. We have to go back to what the tax rates were
here--not back to an effective rate of 30 percent but a top rate that
we had in the Clinton years when we had the largest economic and
longest economic expansion in our Nation's history. That seems
reasonable.
We also know it is not just on the individual side but on the
corporate side as well. This is a little five-story building in the
Cayman Islands. Now, 18,857 companies say they are doing business out
of this little building. Anybody believe that? Anybody believe 18,857
companies are doing business out of this little 5-story building down
in the Cayman Islands? I would say that is the most efficient building
in the world. Imagine, a little 5-story building, and 18,857 companies
say they are doing business out of there. They have maybe 100 employees
in that building. Those are the most efficient people in the entire
world. Unbelievable what they are doing.
You know what, they are not doing business; they are doing monkey
business because what they are doing is cheating all the rest of us who
pay what we owe. Why are they down in the Cayman Islands, those 18,857
companies, calling that little building home? Because there are no
taxes down in the Cayman Islands, and they are showing their profits in
subsidiaries they say are operating out of that little building so they
can avoid paying the taxes the vast majority of us pay right here in
the United States. That is outrageous. That is unfair. Our Republican
friends say: Oh, you can't touch that; it is a tax increase if you do.
Really? That is a tax increase? I don't think so.
Offshore tax haven abuse is proliferating. If anybody doubts it, go
Google offshore tax havens and see what happens. See what happens if
you Google offshore tax havens. The experts here on the Permanent
Subcommittee on Investigations have said this:
Experts have estimated that the total loss to the Treasury
from offshore tax evasion alone approaches $100 billion per
year, including $40 billion to $70 billion from individuals
and another $30 billion from corporations engaging in
offshore tax evasion. Abusive tax shelters add tens of
billions of dollars more.
The Democrats on the Budget Committee said: We have had it. We are
going after those people. We are going to insist they pay their fair
share just as the vast majority of Americans already do. So we are
saying: We are coming after you. If you have a tax haven down in the
Cayman Islands, we are coming after you. If you have an abusive tax
shelter, we are coming after you because it is not fair to all the rest
of us who are paying what we owe.
There are critical priorities that shouldn't be cut. One is
education. Education is the foundation for future economic strength.
An educated population is a key source of economic growth.
. . . Broad access to education was, by and large, a major
factor in the United States' economic dominance in the 20th
Century and in the creation of a broad middle class. Indeed,
the American Dream of upward mobility both within and across
generations has been tied to access to education.
This is a quote from Harvard economists Claudia Goldin and Lawrence
Katz in ``The Future of Inequality: The Other Reason Education Matters
So Much.''
When we see what our friends on the other side are doing, they are
cutting education 15 percent. We don't believe that is the right
priority for the country. Yes, overall spending has to be cut. We do
cut spending--almost $2 trillion in the Democratic blueprint, almost $2
trillion--but not education.
Another key priority is energy. We all know what has happened to gas
prices. They have soared from $1.81 in December of 2008 to over $3.50 a
gallon by July 4. I just paid $3.77. We all know what is happening to
gas prices. Many of us believe a key priority is to reduce our
dependence on foreign energy. House Republicans have a different idea.
They cut the programs to reduce our dependence on foreign energy by 57
percent. We reject that proposal. We don't think it is in the national
interest.
Infrastructure--roads, bridges, airports, rail. Here is what the U.S.
Chamber of Commerce has said about infrastructure spending:
If we don't change course over the next five years, the
economy could forgo as much as $336 billion in lost economic
growth as transportation networks continue to deteriorate. I
am well aware of the fiscal constraints facing this Congress
and the nation. But we must avoid cutting off our nose to
spite our face. Without proper investment and attention to
our infrastructure, the United States' economic stability,
potential for job growth, global competitiveness, and quality
of life are all at risk.
That is a quote from Thomas Donohue, the president and CEO of the
U.S. Chamber of Commerce.
Republicans in the House weren't listening because they propose
cutting transportation funding in their budget by 30 percent. We reject
that cut as well. It does not make sense to cut education, to cut
infrastructure. It does not make sense. It will only weaken our
position.
On health care, the House Republican plan ends Medicare as we know
it. It replaces it with a voucher system, block grants Medicaid, and
shifts costs on seniors, children, the disabled, and individual States.
It ends the countercyclical nature of Medicaid, and it defunds health
care reform, increasing the number of uninsured by at least 34 million
people in this country. The House Republicans have said their plan
saves Medicare. I don't think so. I think it kills Medicare. Why do I
say that? Because under traditional Medicare now, the beneficiary pays
25 percent. Someone who is eligible for Medicare pays 25 percent of the
bill. Under the House Republican plan, they would pay 68 percent of the
bill. That just stands things on their head. Instead of people having
Medicare as a social safety net when they get to their senior years,
they would have it pulled out from under them.
We have rejected the House GOP approach and would remind our
colleagues that we have had large health
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care savings that were already enacted last year in health care reform.
The Congressional Budget Office says that will save in the second 10
years $1.3 trillion. So, yes, everything has to be on the table, but we
just took a big run at getting our health care costs back in line--$1.3
trillion in deficit savings, according to CBO.
In conclusion, the overview of the budget framework we are offering
our colleagues for their consideration provides $4 trillion in deficit
reduction over 10 years. It is actually $5 trillion if measured on the
same basis as the fiscal commission. We have adopted what we think is a
more plausible baseline in light of things that have happened over this
year. It stabilizes the debt by 2014 and cuts the deficit to 2\1/2\
percent of GDP by 2015 and 1.3 percent by 2021. We have tax reform that
simplifies the code. This closes loopholes and goes after offshore tax
havens and abusive tax shelters and restores fairness. We reject the
House GOP plan to end Medicare as we know it. We protect education,
energy, and infrastructure investments. And we have a balanced deficit
and debt reduction plan, cutting spending by about $2 trillion and
providing additional revenue by about $2 trillion.
Let me conclude as I began by saying that our revenue plan would be
scored by the Congressional Budget Office as being a $765 billion tax
cut because we are replacing revenue lost by extending other tax cuts.
We are extending all the middle-class tax cuts and expanding middle-
class tax cuts up to those earning $1 million a year. And we are fixing
the alternative minimum tax. That costs $1.5 trillion over 10 years. I
don't consider that a tax increase at all because you are reducing
revenue that would otherwise come into the Treasury under the
alternative minimum tax--which I think almost all of us think is
unfair--and replacing it with revenue by reducing tax expenditures.
Even the most conservative economists in the country say that needs to
be done.
That is the blueprint the Senate Budget Committee Democrats are
laying before our colleagues. We are under no illusions. We know this
is a year in which the normal process is not being followed. We
understand there are leadership negotiations at the highest level, so
we understand this is not going to be dealt with in the normal course
of doing business. We understand there is leadership negotiation, but
we believe there are some ideas in this package that deserve
consideration as those negotiations go forward.
Mr. President, I thank my colleagues for their courtesy and their
patience, and I look forward to this continuing debate as we take on
the debt threat that looms over our Nation.
I thank the Chair, and I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Georgia.
Passage of Dodd-Frank
Mr. ISAKSON. Mr. President, I commend the Budget Committee chairman
on his contribution to this debate and his contribution to our country.
I enjoy listening to his remarks and appreciate many of the ideas he
has offered today.
I rise to talk about an anniversary today--no, it is not my
anniversary or his but the anniversary of Dodd-Frank, which passed a
year ago today.
This morning at a press conference, Barney Frank, then-chairman of
the House Banking Committee and the Frank portion of the Dodd-Frank
legislation, gave a speech before the National Press Club. In it he
made some comments that are very important, and I wanted to share my
agreement and support for some of the things Chairman Frank said.
I did not vote for Dodd-Frank when it passed 1 year ago, but I did,
along with Senator Hagan and Senator Landrieu, offer an amendment which
was adopted by the Senate and ultimately agreed to by the House in the
conference committee. It was an amendment known as QRM, qualifying
residential mortgage, an amendment to carve out an exemption from risk
retention for a well-underwritten mortgage loan.
The Dodd-Frank bill, as many in this room will remember, originally
called for a total 5-percent risk retention on every residential
mortgage made, which would have eliminated many people from making any
residential mortgages at all. Ranking Member Frank today in his
comments said: Well, we had a 100-risk retention prior to 1994.
He is right. That is when savings and loans made loans, and that is
when the Federal Government insured the others, and savings and loans
had preferential interest rate treatment so they could make
preferential payments to people to save in their institution versus the
bank. But the Federal Government took away the one-quarter percent
differential that savings and loans had and the banks became
competitive with savings and loans for short-term and long-term
deposits of savings and all the savings money flowed to the banks that
offered other products. So savings and loans went out of business. When
they did, there was no residential mortgage money, at least no
conventional money, available in America.
So what happened? The securitized market began. Freddie and Fannie
began to play a significant role in providing conventional residential
mortgage money. Until the collapse, which began in 2006 and culminated
in 2009 and we still are suffering from today--until that collapse,
securitization was a very reasonable and safe way of raising capital
for mortgages.
What happened in the mortgage collapse was not a failure of equity or
skin in the game by the borrower; it was the collapse of underwriting.
Mortgage lenders got into loosey-goosey underwriting--subprime credit.
They made loans to people who were higher risk in order to price it at
a higher rate, and they blurred qualifying requirements to where, all
of a sudden, if you walked in and fogged up a mirror with your breath,
you could probably get a mortgage loan and they could probably
securitize it.
Dodd-Frank was designed to see to it that didn't happen again, and I
commend them for it. But as government often does, sometimes it goes
too far when the pendulum swings back the other way.
Thus is the dilemma we are in today, as the rule being proposed by
the FDIC, the Federal Reserve, Comptroller of the Currency on the QRM
rule is going to require, in addition to quality underwriting, a
minimum 20-percent downpayment.
For years in this country we have had 90 percent and 95 percent
conventional financing or, in terms of FHA, 3.5 percent downpayment and
VA none at all. There have been various varieties of downpayments that
have been allowed based on the loan and its insurance. But with this
rule of requiring risk retention on any loan with a downpayment of less
than 20 percent, except for an FHA or VA loan, it is going to literally
destroy what is left of the residential housing market because it will
extract what is probably 40 to 45, maybe 50 percent, of the current
market today.
Senator Landrieu, Senator Hagan, and myself in QRM proposed that
people have a qualifying ratio of debt to income that is sufficient to
amortize the debt, a third-party verification they have a job, a credit
score that indicates they are willing to pay their payments, an
appraisal that indicates the house is worth what they are paying for,
and a downpayment with mortgage insurance required if the downpayment
was less than 20 percent.
Today, I wish to quote Ranking Member Frank. When talking about risk
retention, he said: I am troubled because there is an assault now on
risk retention--Barney Frank--adding that even though he believes the
20 percent requirement in the QRM rule being circulated is too high.
When asked further what would be a good downpayment, he said at least 4
or 5, something above FHA.
I wish to commend the ranking member because he is precisely right.
Although he in his original intent with Dodd-Frank did not want to
bifurcate residential qualifying mortgages by some having risk
retention and some not, he recognized the importance of doing some of
that bifurcation and having some exception to risk retention. They
would have realized that anyway, if you recognize they exempted Freddie
Mac, Fannie Mae, and FHA from the requirements of Dodd-Frank and left
them solely on the conventional market.
So I wish to thank Congressman Frank today for his comments as they
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related to QRM and his identifying the downpayment requirement
currently being circulated is entirely too high. It is entirely too
high, and it is very important that we get the final rule, which will
be published on August 1, to have a reasonable downpayment of 5 percent
or more, rather than 20 percent or more. Five percent or more will
ensure there is skin in the game; and with the other qualifying and
underwriting provisions in QRM, it will ensure that quality residential
mortgages are being made.
I am not one to offer advice often to the President. He is the
President. He can do as he wishes. But today in Politico there is an
article about the President is now returning to revisit the residential
housing market because he understands employment is not coming back
until housing comes back; he understands the American dream is, for
some people, now the American nightmare; and he understands what has
been done so far has not been working.
I wish to suggest to the President that if he thinks what is
happening now is a nightmare, you just wait until this QRM rule that is
being circulated now actually goes into effect. Without it being
changed and a continued requirement of a 20-percent downpayment, you
will have a further lack of demand in the housing market, which already
is almost at least anemic, if not feeble, because most Americans who
want to buy a home can afford 5 percent or maybe 10 percent down, but
they can't afford 20, and that is middle America. If you pull them out
of what is already an anemic housing market, you would have no housing
market at all.
So as this Dodd-Frank rule is being circulated in the next 2\1/2\ to
3 weeks before it is finalized, I hope we can all keep up the drumbeat
for the regulators to be reasonable in their approach--understand risk
retention is important but also understand home ownership is important
and understand we had a collapse that was not downpayment related. We
had a collapse that was underwriting related.
So if you have strong underwriting and minimal skin in the game of at
least 5 percent, you have a qualified residential mortgage that does
not have to have risk retention; therefore, you will have enough
capital raised in the mortgage markets to fund a housing demand which
hopefully is going to continue to grow.
In the absence of securitization, in the absence of an exemption of
risk retention for a qualified residential mortgage, there will be no
housing market in the United States of America.
FHA is already under so much stress and duress, it is awful and it is
frightful. The Veterans' Administration is a privileged loan for those
who have served and made the ultimate sacrifice for our country, and
they deserve it. Freddie and Fannie are exempted because we have them
in conservatorship. But they are not going to be a source of money for
long. Something will have to replace them, a new entity, probably
something with securitization. But if the QRM rule being circulated now
does, in fact, go into place as it is written, with a minimum 20-
percent downpayment, it will be the last nail in the coffin of the
American housing market. The unintended consequence of reaching too far
to react to the terrible crisis which we had will put the death knell
of the housing market squarely on the shoulders of this Congress, this
administration, and these regulators who are currently carrying out
those rules.
I wish to commend Ranking Member Frank on his comments today, his
recognition that the QRM rule being circulated asks too much,
recognizing that a 5-percent or greater downpayment is a reasonable
approach and recognizing that underwriting is the important key to see
to it that we have a housing market.
I commend the gentleman from Massachusetts. I thank him for adding
that comment today to the National Press Club. I hope the regulators,
the FDIC, the Federal Reserve, the Comptroller of the Currency, and the
Treasury heard it too. If they didn't hear it and they remain silent
and continue with 20 percent, they will be doing exactly the opposite
of what the President of the United States stated he wants to do; that
is, bring the housing market back in America.
I yield back.
The ACTING PRESIDENT pro tempore. The Senator from Alaska is
recognized.
Mr. BEGICH. Mr. President, before I talk about the budget, I wish to
commend the Senator from Georgia.
As someone who has been in the real estate business for many years,
such as the Senator from Georgia, he is absolutely right. If homeowners
are stuck with a 20-percent minimum, the odds are it will crush the
housing market. I can tell you this personally because I am helping my
mother do the paperwork now for her home. If she was required to put 20
percent down, she would not be buying that home today. We hope to close
on the home in the next 45 days. We are fortunate she is able to do
that, but 20 percent would take her right out of the market, unable to
buy the home she wants to retire in.
So I say to the Senator from Georgia, I hope more people hear it in
the administration, because if they don't hear that, as we know with
the housing market, it is a critical component of our ability to pull
ourselves out of the recession. I thank the Senator for making those
comments and noting that.
I know Senator Conrad was down here earlier, the chair of the Budget
Committee, to talk about the budget framework. I first wish to say
thanks to Chairman Conrad. Here is someone who has been on the Budget
Committee for 25 years, since 1986, and has been chairman for many of
those years, an unbelievable capacity and understanding of the budget
and what needs to be done. He understands it. He clearly recognizes we
have to have a balanced approach.
For months, yourself, Mr. President, and myself, sitting on the
Budget Committee, along with the chairman on the Democratic side, have
been working to try to figure out how do we craft a balanced approach.
How do we ensure that at the end of the day, we recognize we have to
have a budget that continues to help grow our economy, creates fairness
in the system, and makes sure we take the responsibility of creating a
more accountable and financially responsible budget, not only for this
year but for the years out, and dealing with a comprehensive approach
to dealing with the deficit?
This is not an easy task, to say the least. I can say, standing here,
and I know, Mr. President, as a member of the Budget Committee also,
none of those meetings were easy in the discussion, if I could say
that--robust debates, robust controversy in some of the issues we
talked about but also a lot of ideas. But what is in front of us?
No one can match the chairman's approach of how to address an issue
such as this as he lays out slide after slide the impacts, from the
macro to the micro, of this budget and what it will mean. But it is
clear the budget proposal he has laid out, the framework, as he calls
it, by the Democratic majority of the Budget Committee is $4 trillion
in cuts for deficit reduction and is achieved in a very fair and
balanced way, without putting the burden on the backs of seniors,
working families, and small business. This is a balanced approach. The
deficit-cutting mechanisms are drawn half from savings and half from
revenues. Revenues mean closing loopholes.
His photo there, which as we sit here and present to the President
our positions is hard for people in the balconies to see, but it is of
an amazing five-story building. It is not a very attractive building,
just a small five-story building in a tax haven that grants thousands
and thousands of businesses a shelter from their fair share of paying
their taxes.
The idea of this revenue component of the proposal we put forth is
closing loopholes, closing down tax avoidance schemes that rely on
abusive tax shelters, and, yes, cutting tax subsidies, ending the
practice of giving the wealthiest of the wealthy tax subsidies they
simply do not need. It is about promoting fairness.
As we dealt with this budget, a $4 trillion reduction--a number that
the bipartisan commission hit as their target, one we hear out there
now in the press a lot but one we felt was a reasonable approach. It is
more than the House budget that was proposed. The House budget included
savings only on the spending side and actually worsened the outlook on
the revenue side
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that we simply do not believe is good enough.
The budget is about fairness, about ensuring that we have a system
that is balanced but also investing in the right areas so we have long-
term and continued growth. We do not give more tax breaks to
corporations and the rich and then put the burden on the backs of
seniors, poor kids, working families, disabled. It is unacceptable to
put the burden on our most vulnerable population. The budget is truly a
moral document. It defines where we are going to go, what we are going
to do, and how we are going to look in the next 10 years or 20 years as
a country.
When I was mayor of Anchorage in 2003, when I got elected, I had a
budget around $215 million, with about a $33 million hole in it--pretty
significant in the sense of proportions. We had to deal with spending
and reducing it. We had to create a fairness in the revenue, but we
also had to invest. But we also knew the document and the work we were
doing in the budget would define where our community went, not just in
the year we were doing it but in the next several years down the road.
I was very pleased. When I got elected to the Senate, it was, I
think, Business Week and others that rated the city that I was mayor
of, Anchorage, as probably the most likely city in the country to
recover from the recession the fastest. As a matter of fact, Forbes has
listed it, not only last year but this year, I think, No. 3 this year
as the city of job growth because there was a foundation laid. We had
to make some tough decisions, and I remember as mayor they were no fun.
I remember the role of the Presiding Officer in the community he
represented. There are tough decisions we have to make, but you have to
make them.
I can still remember one headline that as we were trying to figure
out what do with our library system that wasn't run as well as it could
be, I still remember this headline to this day: ``Begich Lays Off 21
Librarians,'' which is not a very good headline, to say the least.
But what did we do? We reexamined it, reinvested, increased our
partnerships with the private sector today, and the library system is
more robust than ever before, with new branch libraries serving more
kids than ever before, better facilities, new equipment, new
technology. It is more robust than it has been in decades because we
had to make some tough decisions for the long term.
That is where we are today, especially after the disappointing news
we had this last week with regard to the job market, when the
economists thought we were going to have 120,000 new jobs and we ended
up with just 18,000, unemployment rising to 9.2 percent.
As I said, this plan protects critical investment that will help us
build the future of our economy here. It invests, as mentioned by the
chairman of the Budget Committee, Chairman Conrad, in education,
energy--which is, of course, for my State critical--and infrastructure,
core infrastructure.
I use my experience as a mayor. In my short term as mayor of
Anchorage, we built more roads than all the mayors combined in the
previous 20 years. We built more vertical construction--fire stations,
convention center, museums, and other facilities that helped water,
sewer, power, new generation of gas turbines--all that because when you
build that infrastructure, the private sector will attach to it, will
be attracted to it and will build off of that.
This budget that is being presented by the majority on the Budget
Committee keeps our investments in education, energy, infrastructure,
which in turn will ensure that we continue to move back into the realm
of being more competitive on the worldwide market.
We have all heard the budget proposal lays out some ideas on tax
reform--not just a little bit here and a little bit there, but fairly
significant. When we talk about our corporate rate in this budget
proposal by the majority in the Budget Committee, it brings it down to
about 29 percent. It is not where I would like it, but it is better
than where it is today. It gets us more competitive on the world
market.
A group of us also have introduced legislation in advance of this
budget proposal, the Wyden-Coats-Begich Bipartisan Tax Fairness and
Simplification Act. The legislation provides real tax reform for our
very outdated system. It plays off of exactly what the majority laid
out, a budget proposal that talks about tax reform to create certainty
for our business community for long-term investments, and we take it
one more step. Not only do we look at the corporate component, we look
at the individuals.
Can you imagine, as an individual right now we deal with six
different rate structures. If we can reduce it to three, which our bill
does, and you could do your tax return on one page--can you imagine the
amount of time, effort, and money individuals will save? We take the
budget proposal that the committee I sit on and the Presiding Officer
sits on one step further. Not only do we focus on stability and
certainty for the business community, which is critical for long-term
investments they need to make to ensure all those trillions they have
literally locked up in their cash accounts because they are not sure
where we are headed as a country, we create the certainty, but we also
ensure the individual has a compressed rate, a more fair system, and
simplified, which we think is important.
Tax reform is an integral part of the conversation on deficit
reduction. I am pleased Senator Conrad's proposal also provides some of
the same tax reform principles I mentioned. As I mentioned, it not only
deals with the rate structure but, as he detailed, very aggressively
closing shelters and loopholes, and not just for one industry over
another industry, which has been some of the debate, it is for fairness
of all. We look at it all because we want everyone to be treated
fairly.
Let me talk about a couple of more pieces in the majority's budget
from the Budget Committee. Chairman Conrad went through it in great
detail but I want to emphasize this point. The AMT, the middle-class
tax cuts--what does this mean? What does this mean for the average
person here?
Right now, 4.3 million taxpayers are affected by the AMT, which is a
small tax provision that many years ago was set in place to get the
richest of the richest. But it was never indexed, never inflation
adjusted, so it has grown. There are 4.3 million taxpayers we have
affected today. If we do not fix this tax problem, it will increase to
31 million people who will have additional taxes to pay.
What are we doing? We are putting on the AMT patch to fix this
problem so 30-plus million people will not have this additional tax
burden. We think it is right. We think it is the right approach. It
goes to the people who need it the most.
In addition, this framework that was laid out today, for singles
earning $500,000 and couples earning $1 million or more, they will not
receive the same tax relief as everyone below them will receive. The
tax relief will be focused on families who earn $1 million or less. Why
is that important? Because not only are they families, but almost 98
percent of all small business earn $1 million or less pretax. So we
protect the backbone of my State. I can tell you as a small
businessperson, the Presiding Officer knows that as someone who worked
in a small business and it grew to a larger business, it is the
backbone. It is what makes the difference in hiring people. Every day
when people see their revenue stream start to increase, small
businesses start hiring people. They need those employees.
But this proposal is not only for the individual, and then also the
larger corporation bringing in that corporate rate, but it protects
almost all the small businesses in this country--and, of course, being
very biased--and in my State.
What does that mean? That means when you calculate it all in real
dollars, and you heard the numbers, when you think about the tax
reductions, the tax savings for middle-class Americans and small
business, it is well over $1 trillion between the AMT and preserving
the tax relief for families earning under $1 million. It is
significant. That is money that small businesses will reinvest into
their businesses, employing other small businesses to do the work. It
is families who will have more disposable income to put into the
economy which means more purchases from businesses which means more
hiring and this has a constant ripple effect.
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When you talk to business owners, and I have--I spent a lot of time
with them as a small businessperson and a Senator now, meeting with
business folks on a regular basis--over and over again they tell me put
the money in the hands of the consumer. Then the consumers will spend
that money and improve the economy because, as they spend money, we
will hire more employees and buy more product. It goes on and on.
There is a difference between what we are trying to do in the sense
of the value, who receives the benefit of a comprehensive budget
proposal, a budget proposal that the majority in the Budget Committee
has worked on for the last 2 or 3 months, at least, and before that
trying to figure out the right approach. It is a balanced approach. It
focuses, as I said, on dealing with budget reductions, accountability,
ensuring that where there is waste we go after it aggressively. Where
people are taking advantage of the system at the cost of the everyday
person, we go after that. But we don't forget that we have to invest in
the core issues of education, energy, and infrastructure, so we
continue to grow this economy.
We must have a balanced approach in this process. I know on the other
side they will argue over and over, first let's do spending and then we
will deal with other things. You have to do it all together. I am
telling you this as a person who ran a city for almost six years, ran
businesses for many years: you cannot do it on one piece of the
equation. It is a three-pronged attack. Some of the folks I know around
here after years of service have gotten a little amnesia as to how it
will occur. We can blame individuals, blame certain Presidents, certain
majorities, but we are where we are and we have to deal with this.
It is not going to be fun. It will be uncomfortable. It will make us
have to dig deep into what is right for the long-term health of this
country and what we need to do to ensure America becomes what it used
to be--a stronger country economically than it is today where we are in
the lead when comes to innovation and we are in the lead when it comes
to developing new technologies to lead this world in its economic
growth.
We cannot do it in this process of I am only going to do one thing
and one thing only. That does not work. It has to be a broad, sweeping
approach.
We are not going to forget in this process that we are not going to
throw people overboard who have helped build this country. When you
think of our seniors, the generation that built our country to where it
is, ensuring that people such as myself, the Presiding Officer, and
others have an incredible opportunity, thinking about where they need
to be, this budget plan keeps Social Security off the table.
We recognize there are issues and we have to deal with it in its
sustainability and we recognize that, but it is not a driver. It has
not contributed 1 penny to this deficit. We need to treat Social
Security in a way that ensures sustainability in the long term and
there are simple solutions to that that I know we can get to.
We also ensure that Medicare is taken care of, that benefits are not
reduced. Also, as the chairman said so eloquently earlier, we have to
ensure that our veterans are protected, those who serve now in Iraq and
Afghanistan and all around the world, and served before. We owe a great
deal to veterans. In some cases before I got here I know there was a
lot of debate in the Veterans' Committee on which I sit. We have been
working to be very sure they get the benefits they deserve. We need to
make sure we fund them. When we send them to war and they become
veterans after their service, we have an obligation, an obligation that
should not be sliced and diced because we want to make political
statements on the budget cutting process. They need to be protected.
As I said, this budget does good things. It is a fair approach. It
may not be perfect in all senses. I can tell you there are things I
don't like in it that are going to impact groups that are concerned
about how we approach this, but we are all in this together. We need to
make the approach the right way. But those who are so hardened now who
say it is only going to be about spending cuts--which, let me make it
very clear, I think the Budget Committee, the majority on the Budget
Committee, is not afraid of dealing with the budget cuts. We have done
that--$2 trillion of budget cuts. We have to get used to it when we are
here in the Senate, not Bs or Ms, they are Ts, $2 trillion of budget
cuts. We also balance it getting rid of loopholes and tax shelters in a
fair and balanced way so everyone pays their fair share, but we also
make sure we invest in the future.
If we are shortsighted around this place, we will pay for it next
year and the year after that and the year after that. This is truly I
think the right approach that goes after ensuring the middle class are
not the people carrying the burden as they have been doing for the last
several years--especially in the last 2 years, clearly--and that
everyone participates. But we also make sure investment is done the
right way.
The chairman laid out in great detail all that is in the framework.
We think it is an important piece to lay down, that Democrats have been
working on. We have been working every hour, every day. Even when we
are back in our home States, trying to talk to constituents, we are
talking about the budget. The Presiding Officer tells me stories. Every
night he heads home and he meets with constituents to try to find out
what the right approach is here. We bring all that information right
here in this body. We did it in the majority in the Budget Committee. I
know I put up a Web site request asking Alaskans what it is they want
to cut. What do they want to save or have as revenues? Like good
Alaskans, they were not bashful. They were very adamant about what they
wanted and what they did not want and where we should cut and where we
should not cut. I have taken all that in, and I have used that as part
of my debate and discussion with the majority of the Budget Committee
to figure out what the right approach is. I think this is the right
approach. I think some might call it a big deal. In the Senate, this is
the big deal. We are in the big place. This is where big deals happen.
This is where it all has to happen. It is where we drive the economy in
the sense of our certainty and our policies. If we cannot have a strong
deficit reduction budget, we are not going to create the certainty the
business community needs to invest, which will, in turn, employ more
people and create a better economy for us here and obviously will have
an impact around the world.
I want to say thank you for an opportunity to say a few words, again,
commending the chairman, who was here earlier, for all of his work. It
is a tough call. I will end on this comment, the story I told you about
the librarians and the headline I had to have. That was in my first 6
months in office when I was mayor. Mr. President, 2\1/2\ years later, I
won reelection with one of the largest margins in the city's history.
So I would say this to anybody who is trying to figure out if they are
going to win their primary, win their general election: Put that all
aside. That is what I did when I was mayor. I had to make some tough
calls. Did I know if I would win reelection? No. I didn't know. I knew
I did the right thing because it was the city I lived in. It was the
State I grew up in. It was important for us to make the right decision,
which at the end of the day is usually the right political decision.
That is what this body has to do. It is not fun because people face
primaries. They face general elections. Some will win, some will lose.
But if we are true public servants, truly it doesn't matter if we are
sitting in this room or outside there; we are always public servants.
We have to do what is right in this critical time for this country and
in the global perspective. If we don't do the right deficit plan, it
will ripple through this country and it will ripple through this world
in the wrong direction.
Thank you for the opportunity. Thank you for the chance to say a few
words, but also I implore my colleagues on the other side to think
about today's opportunities for the generations in the future and not
about today's elections. And I mean on both sides of the aisle. It is
about the moment of what people do for this country.
I yield the floor.
Mr. HATCH. Mr. President, I ask unanimous consent that I be permitted
to speak until I finish my remarks.
[[Page S4470]]
The ACTING PRESIDENT pro tempore. The Senator from Utah.
Mr. HATCH. Mr. President, in recent days I have spoken several times
on the matter of tax expenditures. I am going to address this subject
again today. It is a timely topic. Everyone is talking about our out-
of-control deficits and debt. There are divergent opinions on how best
to deal with our Nation's increasingly perilous fiscal situation, but
there is one thing everyone seems to agree on: Both the deficit and the
debt are unsustainable. If we keep going down this fiscal path, the
United States will face a crisis similar to that in Greece and sooner
rather than later. The numbers could not be clearer. Federal spending
as a share of our economy is trending at a pace 15 percent to 20
percent greater than its historical average of 20.6 percent of GDP. If
we leave in place this year's level of taxation, including the marginal
rate of relief between the 2001 and 2003 tax cuts, and patch the
alternative minimum tax, or AMT, the Federal tax take will equal or
exceed its historic share of the economy.
Liberals suggest the deficit and debt can only be resolved with a
significant tax increase. This is either deliberately misleading or
sadly delusional. They are either selling snake oil to the American
people or they refuse to come to grips with reality. Sticking their
heads in the sand is not an option. As you can see, here are Federal
taxes and spending as a percentage of GDP. The red line happens to be
the spending line. And as you can see, we are way up here in the Obama
2012 budget. The blue line happens to be the average between 1960 and
2009. As you can see, it is way down here. Our spending is out of
control. The markets and the American people understand the nature of
our crisis. Nondefense discretionary spending is at historic levels and
our entitlement programs are headed for bankruptcy.
When former Speaker of the House Nancy Pelosi responded to the utter
failure of President Obama and congressional Democrats to come up with
a Medicare reform plan, she responded, ``We have a plan. It's called
Medicare.'' That attitude is the recipe for bankrupting the Nation, a
bankruptcy that will take our seniors down with it. The left might
prefer to ignore reality, but here is the undeniable truth: Our Nation
faces a spending crisis that tax increases cannot fix. I wish the media
would get this. They are so enamored with the idea of a grand bargain
on deficit reduction, a little spending reduction here, a little tax
increase there, that they miss the fundamental point. The problem is
spending, as you can easily see by this red line. It is way out of
whack, and going back to the dry well of raising taxes on the rich is
not going to work.
The fact that Democrats in the Senate have not put forward a budget
in over 800 days is neglecting one of the core constitutional
responsibilities, and it is all the evidence we need that they are
afraid of the bill coming due on all of their spending. They understand
their hard left base will not accept structural changes to our biggest
spending programs under any circumstances. But they also understand
that the American people will not stomach for a minute the tax
increases that will be necessary in the absence of such reforms. This
is a difficult position to be in, so rather than deal with the facts,
they traffic in obfuscation. This morning I heard the ranking
Democratic member on the House Budget Committee following the
President's lead and suggesting that removing some tax breaks for
energy companies would fix our deficit crisis. Getting rid of those tax
breaks would raise $21 billion over the next 10 years. Yet this fiscal
year alone, in 2011, we will have a projected budget deficit of $1.5
trillion to $1.6 trillion. So where is the rest of our money going to
come from?
Last week I came under fire for stating what I thought to be a
relatively noncontroversial fact. Here is what I said:
In 2009, 51 percent of Americans had zero or negative
income tax liability.
Here is what that means. In 2009 only 49 percent--a minority of all
households in this country--49 percent of tax units shouldered 100
percent of the Nation's tax burden. And 51 percent of the tax units--a
majority of all tax units in this country--either owed nothing to the
IRS or, better yet, got money back from the IRS in excess of their tax
liability. Mr. President, 23 million of them got refundable tax
credits, much more than they pay in employment taxes, which are Social
Security. By the way, as they pay into Social Security, they only pay a
third of what they will ultimately draw out according to the actuaries,
but they are not paying income taxes. This should be no less
controversial than saying the Sun rises in the east. This is not
conjecture. It is a demonstrable fact, yet apparently touched a nerve.
Because last week after raising this issue on the Senate floor, MSNBC
and the liberal blogosphere, presumably armed with the talking points
from the Senate Democratic war room, went ballistic, suggesting that I
wanted to balance the budget by raising taxes on the poor. I am not
surprised, but this completely misses my point, and the point is this:
No matter what these Democrats tell you, the wealthy and middle class
are already shouldering around 100 percent of the Nation's tax burden
and 51 percent pay absolutely nothing in income taxes. Furthermore,
because of this perverse distribution of Federal income taxes, there is
no way to fix our deficit hole and pay down the debt by increasing
taxes on the so-called rich.
Here is the bottom line. All of the ``let's talk about taxes on the
rich'' and closing loopholes and going after corporate tax breaks is
meant to divert attention from the sad fact that the President's out-
of-control spending puts Democrats in a position of having to raise
taxes big time on the middle class since they are going to balance the
budget without structural reforms to our largest spending programs. Tax
increases on the wealthy will not get our Nation to fiscal balance.
Even if we let the Bush tax breaks expire from the top income bracket,
the total amount raised over 10 years would be $615 billion. That is
over 10 years. Yet our deficit this year alone is $1.5 trillion to $1.6
trillion. This is why the issue of tax expenditures is critical. So
everybody knows, I made it clear, I thought, in my last remarks that I
don't want to tax the truly poor, those who would help themselves if
they could. I do not want to tax them. But you can't tell me that 51
percent of all households are the truly poor. I don't want to tax them
either, to be honest with you, but it is apparent we are going to have
to find a better way of broadening the base of the tax system.
Democrats talk about tax expenditures as though they were the holy
grail of deficit reduction. Just close these loopholes and happy days
are here again. The public is being misled in this type of debate, but
don't take my word for it. Today the Associated Press had a story with
the following lines:
SPIN METER: Obama, Dems skirt issue on tax hikes.
This is what the body of the article has to say:
Proposals under consideration include raising taxes on
small business owners and potentially low- and middle-income
families.
You won't hear about that from President Obama. Instead, the
President focuses on the very rich and speaks euphemistically. Here are
a few of the phrases the President has used of late of what amounts to
raising taxes for some:
What we need to do is to have a balanced approach where
everything is on the table.
He goes on to say:
We need to take on spending in the tax code. The tax cuts I
am proposing we get rid of are tax breaks for millionaires
and billionaires, tax breaks for oil companies, hedge fund
managers and corporate jet owners. You can't reduce the
deficit to the levels it needs to be reduced without having
some revenue in the mix.
All those are quotes by the President. They are doing their best to
hide their intentions, but the writing is on the wall. Democrats are
angling for historic tax increases on the middle class, and the way
they want to accomplish this is by reducing or eliminating tax
expenditures. Cutting back tax expenditures is a convenient way for
Democrats to tax middle-class tax-paying families without having to say
they are raising their tax rates. As I noted last week, this is what we
were talking about when Democrats discussed tax expenditures. They are
talking about your pension. They are talking about your Medicare. They
are talking about your ability to purchase a home or save for
retirement or give to your church or put away money for your
[[Page S4471]]
children's education. This is exactly what we are talking about. That
is where the money is. It is not in bonus depreciation for corporate
jets, and it is not in tax benefits for energy companies.
When Democrats talk about tax expenditures and tax loopholes as a way
to bring down the deficit and debt, they are putting a bull's-eye on
the backs of middle-class American families. We heard a lot this
morning about Republicans walking away from the President's grand
bargain on deficit reduction. Well, I know that the people of Utah
applaud Speaker Boehner for not signing on to this bogus deal. This
morning the President's allies in the media were asking why Republicans
walked away from this deal. With the President willing to put
entitlement spending on the table, why aren't Republicans willing to
put taxes on the table? It is worth noting that the President and his
Democratic allies steadfastly refuse any structural changes to
entitlement spending.
Second, for Democrats, putting taxes on the table and tax
expenditures means tax increases on the middle class, and that is a
nonstarter. This issue of tax expenditures is confusing and demands
greater clarity. As ranking member of the Finance Committee, it is my
responsibility to correct the record on what the curtailment or
elimination of tax expenditures would mean for taxpayers and families.
If you listen to my friends on the other side of the aisle, you would
think tax expenditures are ``spending through the Tax Code.'' You would
think they are mostly loopholes in the tax law designed by and for
special interests such as ethanol blenders. Another mantra you will
hear too often uncritically reviewed by many in the media is that tax
expenditures disproportionately benefit wealthy taxpayers.
A few days ago I talked about what tax expenditures are and what tax
expenditures are not. They are not spending. You can find the text of
that speech from July 6 on the Finance Committee Web site. They are
not, in the main, loopholes for special interests. The other day, I
talked about the major features of family financial planning that would
be upended if tax expenditures were curtailed. I referred to employee
pension plans such as 401(k) accounts. I also mentioned charitable
gifts and home ownership. If my friends on the other side are
successful in cutting back tax expenditures, American families,
workers, and investors can expect the cost of all of these activities
to rise. If the cost rises, as a nation, we will be poorer because we
will have less retirement savings, fewer charitable contributions and
more expensive homeowners. You can find the text of that speech last
Thursday on the committee Web site as well.
Today I am going to consider the oft-repeated line that tax
expenditures disproportionally benefit the wealthy taxpayers.
For purposes of this discussion only, I will adopt the President's
definition of rich; that is, singles with adjusted gross incomes over
$200,000 per year and married couples with incomes over $250,000 per
year. I wish to be clear that I do not lump all of these folks in with
Bill Gates, Jr., LeBron James, Warren Buffett, or Gilligan's Island
resident millionaire Thurston Howell, III. Here is good old Thurston
who was the millionaire on Gilligan's Island. I am using the
President's definition of rich because most of my friends on the other
side use it. They also claim tax expenditures reside disproportionately
with rich taxpayers.
The Democrats' rhetoric on expenditures does not jibe with the
reality of our Tax Code. The data is clear. Tax expenditures tend to
skew toward taxpayers below the President's definition of the rich. If
my friends on the other side examine the data, they will find their
assertion about who benefits from tax expenditures does not square with
the facts. They will find their assertion that tax expenditures
disproportionately benefit the wealthy falls flat on its face.
In much of the coverage of tax expenditures, it has been taken as an
article of faith that they disproportionately benefit wealthy
taxpayers. Similar assertions have come from the White House and
congressional Democrats. The one exception is my friend, the ranking
Democrat on the Ways and Means Committee, Sander Levin. Congressman
Levin has cautioned against treating tax expenditures as rich persons'
tax benefits. His position is well founded. The source for this
assertion, that tax expenditures are tax benefits for the rich, is a
Tax Notes article dated May 3, 2011.
I ask unanimous consent to have it printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Tax Policy Center, May 5, 2011]
Who Benefits From Tax Expenditures?
(By Roberton Williams)
The federal income tax is replete with tax expenditures,
provisions that grant special benefits to selected taxpayers
or for selected activities. Exclusions and deductions reduce
taxable income, preferential rates cut the tax on specific
types of income, and tax credits are subtracted directly from
tax liability.
The various kinds of tax expenditures reduce taxpayers'
individual income tax liability differently throughout the
income distribution (see graph). More than 90 percent of the
tax savings from preferential tax rates on long-term capital
gains and qualified dividends go to taxpayers in the top
quintile (or fifth) of the income distribution, and nearly
half the benefits go to people in the top one-tenth of 1
percent. The top quintile gets about three-fourths of the
savings from itemized deductions and more than 60 percent of
the benefits of exclusions of selected sources of income such
as employer health insurance contributions. High-income
households receive relatively larger benefits from special
rates, deductions, and exclusions, because they have
relatively more income from certain tax-favored sources
(capital gains, dividends, tax-exempt interest) and because
under our graduated income tax, exclusions and deductions are
worth more to taxpayers in higher rate brackets.
In sharp contrast, most of the value of tax credits goes to
households in the bottom four quintiles. Nearly 80 percent of
nonrefundable credits and more than 95 percent of refundable
credits benefit those households. Many credits phase out for
high-income taxpayers, limiting their value, but they are a
major reason why nearly half of all tax units pay no federal
income tax. Nearly one-third of all refundable credits go to
the poorest one-fifth of all households and often result in
net payments from the government.
Overall, tax expenditures give more benefits to high-income
households relative to income but are roughly proportional to
tax liabilities. The top quintile collects 55 percent of all
income, pays 67 percent of all taxes, and gets nearly 65
percent of the value of tax expenditures. Middle-income
households earn slightly more than 40 percent of all income,
pay one-third of taxes, and get one-third of tax benefits.
The poorest quintile of households receives slightly less
than 4 percent of both income and benefits from tax
expenditures but pays only 0.5 percent of federal taxes,
largely because refundable credits offset almost all their
tax liabilities.
Mr. HATCH. The article is written by Roberton Williams of the Tax
Policy Center or TPC. TPC is a tax policy think tank that is the
product of two center-left think tanks. The article presents
conclusions from a TPC distribution analysis of tax expenditures.
The analysis concludes that about two-thirds of tax expenditures
benefit the top quintile of households in the study. Viewers on C-SPAN
may wonder what a quintile is. It refers to one-fifth of the given
population. The TPC analysis is, therefore, measuring the top one-fifth
of the population.
According to that study, where does that top one-fifth of the
population begin? It begins at $123,000 of household income. It should
be noted that household income is a bit broader than the adjusted gross
income which is the basis of the President's definition. According to
TPC, that top quintile earns 55 percent of income and shoulders a huge
amount of the Federal tax burden. They say it is 67 percent.
Now, perhaps not too surprisingly, TPC finds that tax expenditures
for the top quintile approximate that top one-fifth's share of the tax
burden. With the exception of the refundable credit tax expenditures, a
taxpayer has to pay income tax to benefit from the tax deduction credit
or exclusion.
Those asserting that tax expenditures are mainly wealthy taxpayer
benefits are principally relying on TPC's distribution analysis. If
confronted with the TPC data, it seems to me they have four choices.
Their first choice would be to revise downward the income basis of
their definition of ``rich.'' They could say we really did not mean
families at $250,000 of income; we meant families of $123,000 of
income. That would be similar to the adjustment made for ObamaCare.
Joint tax distribution tables for ObamaCare showed that for every
family below $200,000 who received an exchange credit, four families
paid higher taxes. For
[[Page S4472]]
every middle-class family who receives a premium subsidy, five pay
higher taxes. That is just a fact. I guess I said five. It really would
be four who would pay higher taxes.
A second choice would be to revise the proportion of tax expenditures
so that the tax expenditure dollar amount reflects the benefits
attributable to taxpayers defined by the President as rich. The
President's rich taxpayer definition is the top 3 to 5 percent of
taxpayers. It means the group of taxpayers who are roughly 25 to 33
percent of the size of the group in the TPC analysis.
Put another way, the TPC population of rich taxpayers is three to
four times the size of the group the President and my friends on the
other side define as rich. If a consistent definition of the rich were
used, the dollar amounts of tax expenditures in play would be
considerably lower. Since the goal of the group pushing the cutback of
tax expenditures is to relieve spending constituencies of the pressure
of curtailing spending, my guess is they will not choose to reduce the
tax expenditure kitty.
Their third choice would be to simply curtail or eliminate tax
expenditures for higher income taxpayers. This, of course, could
largely eliminate the preferential rates for capital gains and
dividends.
Let's take another look at this chart because it shows a big share of
the capital gains tax expenditure goes to the top one-fifth. It looks
as though about 95 percent of tax expenditures accrues in the top one-
fifth. We see that about 50 percent of it accrues to the top one-tenth
of 1 percent. Do we think it would make sense in the current economic
climate to double or triple the tax hit on investment?
At one point, at least, the President's answer was no. In August 2009
the President was asked by a resident of Indiana:
[e]xplain how raising taxes on anyone during a deep
recession is going to help with the economy.
Here was the President's response:
Normally, you don't raise taxes in a recession, which is
why we haven't and why we've instead cut taxes. . . . You
don't raise taxes in a recession. We haven't raised taxes in
a recession.
So what is their fourth choice? Their fourth choice would be coming
clean with the American people. Under this option they would admit that
tax expenditures disproportionately go to families who are not rich
under the President's own definition. They would acknowledge that
cutting back tax expenditures as part of a deficit-reduction exercise
would hit the middle class and betray the President's promise not to
raise taxes on middle-class families.
As we can see, the proponents of these tax increases are in political
quicksand, and there is additional evidence that they are sinking as
they struggle against the facts. I would ask my friends on the other
side to take a look at the Joint Tax distribution tables on many of the
major tax expenditure categories. Joint Tax publishes these tables
every year. They are available on the Joint Tax Web site.
I have a chart that summarizes the percentages of tax expenditures
that go to taxpayers under $200,000. I will have to bring that with me
the next time. That is the break point that Joint Tax uses--the
percentage of tax expenditures that go to taxpayers under $200,000. It
closely squares with the definition of ``rich'' used by the President
and his liberal allies.
Anybody above $200,000 is rich under my Democratic friends'
definition. Anybody under $200,000 is not rich. You can find this data
in the tax expenditures pamphlet published annually by the nonpartisan
Joint Tax staff.
Now I wish to talk about the tax expenditures that Joint Tax
distributes by income. I have listed them in order, from the largest in
dollar volume down to the lowest in dollar volume. The first one is
well known to tens of millions of our constituents. It is the mortgage
interest deduction.
If a taxpayer saves up a downpayment and borrows for a home, they can
take the interest paid on the mortgage as an itemized deduction. That
means 30 percent of the benefit of the mortgage interest tax
expenditure goes to taxpayers over $200,000. Taxpayers with incomes
below $200,000 receive 70 percent of the benefit of the mortgage
interest deduction.
Now, how do we measure whether the mortgage interest deduction
disproportionately benefits taxpayers over $200,000? There is a line in
bold letters that reads: ``Compare Total Federal Tax Burden.'' That is
the baseline of how much tax is shouldered by the group of taxpayers
above and below $200,000. We have a very progressive tax system.
Taxpayers earning more than $200,000 shoulder 64 percent of the tax
burden. Taxpayers earning less than $200,000 shoulder 36 percent of the
tax burden.
Taxpayers earning less than $200,000 receive 70 percent of the
mortgage interest deduction while shouldering 36 percent of the tax
burden. Who benefits from these tax expenditures? We are going to get
into that. That means by a ratio of almost 2 to 1, taxpayers under
$200,000 benefit from the mortgage interest deduction; and since
$200,000 basically fits the definition of ``rich'' used by my friends
on the other side of the aisle, we can see that other taxpayers who are
nonrich, or the middle-income group, disproportionately benefit from
the mortgage interest rate deduction.
Now, let me talk about another tax expenditure. I am referring to the
earned-income credit, or EIC. It is a refundable credit. That means
taxpayers receive it whether they pay income tax or not. That is why
the credit is basically scored as spending by the Congressional Budget
Office--the CBO--and Joint Tax.
There is a bit of irony about this tax expenditure because it is
refundable. It is more popular with my friends on the other side than
other tax expenditures. That is because those other tax expenditures go
to taxpayers who actually pay income tax. The refundable credit is
popular with my friends on the other side because it is a robust
income-reducing mechanism.
President Obama, in his famous exchange with Joe the Plumber,
captured the economic theory supporting this policy when he said we
need to ``spread the wealth around.''
Here is the irony. My friends on the other side derisively describe
all tax expenditures as ``spending through the Tax Code.'' Yet the tax
expenditures they most support are the refundable ones, such as the
earned-income credit. It should come as little surprise that the left's
favorite tax expenditure is the one that is scored as spending by
congressional spending scorekeepers.
Because the earned-income credit tax expenditure is refundable, we
shouldn't be surprised to find that so-called rich taxpayers do not
benefit from it. The chart confirms this point.
The third tax expenditure is right here: the current $1,000-per-child
tax credit. It is, by definition, limited to lower and middle-income
taxpayers. We should not be surprised to find that none of it goes to
higher income taxpayers, and the chart confirms this point: zero to
taxpayers over $200,000; 100 percent to taxpayers under $200,000.
Let's take a look at State and local taxes. It is the fourth one on
here. The chart shows that 50 percent of this broad-based deduction
goes to middle-income families.
No. 5 on this list is a tax benefit near and dear to many of my
fellow Utah families. It is the itemized deduction for charitable
contributions or donations. Of all the tax expenditures listed on this
chart--this big chart right here--this one, charitable itemized
deductions--distributes in the highest proportion to taxpayers above
$200,000 in income. The chart says 55 percent, right here; 45 percent
for those under $200,000. Keep in mind, overall, taxpayers with income
over $200,000 bear 64 percent of the tax burden.
Now, this means proportionately, the charitable deduction benefits
taxpayers under the $200,000 level more than taxpayers above the
$200,000 level.
Now let's take a look at No. 6 on this chart. It is the tax-free
portion of Social Security benefits, right there. Anyone advocating a
cutback on tax expenditures is advocating a cutback on the aftertax
Social Security benefits for a big chunk of the senior population.
Guess what. We are not talking about wealthy seniors. According to this
chart, 2 percent of that favorable tax treatment of Social Security
goes to seniors with incomes over $200,000. My guess is that few of the
seniors benefitting from this policy own yachts or regularly fly
corporate jets.
No. 7 is the itemized deduction for real property taxes. Right now,
their
[[Page S4473]]
constituents take the edge off that heavy local tax hit with the
itemized deduction. If many of my friends on the other side have their
way and hack away or eliminate tax expenditures without also cutting
their constituents' Federal tax rate, guess what happens. In the case
of local property taxes, the net effect will be to raise the property
tax rate by as much as 35 percent.
Some of my friends may suggest that only those with villas are taking
the property tax deduction. This chart says otherwise. It says 80
percent of the real property tax benefits go to taxpayers under
$200,000.
How about No. 9 on the list? No. 9 on the list is the itemized
deduction for medical expenses. ObamaCare cut back on that one. But if
my friends on the other side reduce or eliminate side tax expenditures
to avoid dealing with out-of-control government spending, this
deduction will be cut back even more. The chart shows on these medical
itemized deductions that 89 percent of this tax benefit goes to
taxpayers earning less than $200,000.
No. 10 is the dependent childcare credit. This is a modest tax credit
that working moms and dads can tap. Like the child tax credit, it
mainly is used by middle-income families. The chart confirms it. It
indicates that 96 percent of the benefits of this credit go to families
earning less than $200,000.
The final item on the list is the student loan interest deduction, as
shown right here on this chart. This tax benefit is income limited. Not
surprisingly, all of the benefit goes to taxpayers earnings learning
less than $200,000--100 percent of the benefit. I do not think a lot of
the recent college graduates using this deduction are in the market for
a yacht. But if you listen to my friends on the other side, you would
think because this benefit is labeled a tax expenditure, those who
benefit from it have a schooner docked in the local harbor.
I am not saying that only middle-income families benefit from tax
expenditures. Wealthy taxpayers benefit from the lower capital gains
and dividends rates.
Let me refer to this chart of the 10 largest tax expenditures for the
period 2010 to 2014. But the lion's share of tax expenditures goes to
that part of the middle class that is already shouldering much of the
Nation's tax burden. Most of the tax expenditures are either income
limited or of limited value to wealthy taxpayers. Likewise, low-income
families do not pay income taxes. They receive tax expenditures that
are designed for the nontaxpaying population.
So who is left? The answer is the taxpayers who are not rich by the
President's own definition. The answer is middle-class families.
On our side, the reaction to all these choices would be simple. Many
on our side, including Ways and Means Committee Chairman Camp, have put
it this way. Keep your hands off tax increases, including cutbacks in
tax expenditures, for deficit reduction. Reserve those tax expenditures
for tax reform. In that way, taxpayers receive a benefit--lower rates
in exchange for a broader base. That broader base would include reform
of tax expenditures, if Chairman Camp and I have our way. Any other
approach is just another tax increase. And they on the other side will
spend every dime of it.
The President this morning gave another press conference. He asked
what the holdup was in arriving at a deficit reduction compromise. The
answer seems pretty obvious. Contrary to the President's vague
assertions, the leftwing base he is depending on for his reelection
refuses any meaningful structural reforms to the spending programs that
are currently bankrupting our country. That means the only serious
deficit reduction option available to Democrats is massive tax
increases on the middle class. Democrats will not acknowledge the
inevitable tax increases their agenda assumes, and Republicans will not
give the President any cover in his drive to ``spread the wealth
around.'' That is what is holding up this process.
So let me offer a suggestion. Instead of berating Republicans for not
signing on to historic and economy-crushing tax increases, when
unemployment is at 9.2 percent, maybe the President should take his own
party to the woodshed. Maybe he should ask the liberals in his party
who refuse any meaningful structural reforms to entitlements to get
serious. Maybe he could go on television and explain to the American
people that we have over $60 trillion in liabilities and that tax
increases are not going to bring that into balance.
Instead, the President and his party sit around and spread the myth
that simply getting rid of tax expenditures and loopholes--and they
certainly are not loopholes, the ones I have been talking about--will
fix our deficits and debt. We have two reasons to worry about that
wrongheaded approach. One, to the extent deficit reduction energies are
diverted to cutting back tax expenditures, pressure is taken off the
root cause of the deficit and debt problem. That is, pressure that
should be brought to bear on out-of-control spending programs is
released. Two, the productive sectors of the economy--workers, small
business owners, and investors--are burdened with yet more Federal
taxes.
For many reasons, cutbacks in tax expenditures are a deficit
reduction dog that will not hunt.
If you look at all individual tax expenditures, you can see these are
the 10 highest tax expenditures by percentage.
Let me go back to the preceding chart. If you look at all these tax
expenditures, for the mortgage interest itemized deduction, 70 percent
are people earning under $200,000; for the earned income tax credit,
100 percent; for the child tax credit, 100 percent; for the State and
local taxes, other than real property, 50 percent; for charitable
itemized deductions, 45 percent--yes, the rich had 55 percent by their
definition--for Social Security benefits, 98 percent; for the real
property tax itemized deduction, 80 percent; for the education credit,
100 percent; for medical itemized deductions, 89 percent; for the
dependent childcare credit, 96 percent; for student loan interest, 100
percent.
Look, my point is, we have to come up with a better Tax Code. I am
dedicated to changing this awful Tax Code we have that is too
complicated, too large, too expensive, does not do the job, and is a
bunch of muttering around and puttering around by Members of Congress,
and simplifying that Code so everybody knows which end is up.
On tax expenditures, I am going to be happy to look at tax
expenditures, but they should be reserved until we do real tax reform.
If you have to give up some of these expenditures, then there better be
appropriate reductions to account for that, and we have to do it by
flattening out that tax system that we all know is completely out of
control and completely difficult to comply with. As a matter of fact, I
do not know of anybody on the Senate Finance Committee who fills out
their own tax forms. I do not think most of us could do it because if
you had 10 different tax preparers on a semicomplicated tax return, you
would probably have 10 different approaches to it. That shows the
pathetic system that is wrecking our country.
To make it clear, when the President took over, the bottom 40 percent
of all households did not pay income taxes. Yes, they paid payroll
taxes, but 23 million of them got refundable tax credits, much more
than they paid in payroll taxes. Keep in mind, I do not believe we
should tax the truly poor. But now that is up to 51 percent in a little
over 2 years under this administration of people who do not pay any
income taxes. Are they all truly poor? I do not know. All I know is, it
does not sound right that the majority of people, the majority of tax
units in this country, do not pay income taxes, and the minority has to
carry the whole burden.
If they are truly poor, I understand and I would be the last one to
tax them, and I think I have a 35-year record here of being fair to the
poor and fair to families and, above all, fair to children. My name is
on an awful lot of important bills around here, and I have led the
fight on a lot of bills that help people in distress. So you can
imagine how aggrieved I felt when one of our great television stations
was distorting one sentence--it seemed to me one sentence--out of a 30-
minute set of remarks on the floor that made it very clear that I do
not want to tax the truly poor. But surely we have to have everybody
participate. I actually think everybody ought to participate, even if
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it is only $1. We ought to all have some skin in the game. We ought to
all help save this country, and we cannot do it without the middle
class. And the middle class is not just the top 49 percent of all wage
earners.
This is an important issue, and it is one we have to resolve, and we
have to resolve it fairly, we have to resolve it in a way that is
meaningful and in a way that will help save our country too. I think I
have more than made the case that you cannot pile it all on the so-
called 3 to 5 percent, the so-called rich, which includes 800,000 small
businesses, where 70 percent of all jobs are created. And everybody
knows that is true. Every time you tax them and take moneys away from
them like that, when they are paying pretty hefty taxes as it is, they
hire less, they do less, they quit their businesses, some move
offshore, some move their businesses to other countries, and some just
plain give up.
We cannot let that happen. We have to have a fair tax situation. We
have to have Democrats and Republicans work on it together. We have to
quit playing this card that basically pits one group of people against
another.
All I can say is this. I am concerned. I am pointing out difficulties
in our Tax Code. I am pointing out difficulties in some of the
arguments the President is making. And I have to say that anybody who
reads my remarks fairly will know these points I am making are real
points. These charts are important. As you can see, taxpayers earning
under $200,000 will be bereft without these benefits unless we can
revamp the whole Tax Code in a way that you do not have to have tax
expenditures. Tax expenditures are certainly not spending--at least
these ones we are talking about right here and now.
So if you compare the total Federal tax burden, those earning over
$200,000 pay 64 percent; those earning under $200,000 pay 36 percent.
All of that is important for us to understand.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Merkley). The Senator from Wyoming.
Mr. ENZI. Mr. President, I rise today to talk about some missed
opportunities. Last week, I talked a little bit about how I thought the
President had missed the opportunity with his deficit commission, he
had missed the opportunity with his State of the Union speech, and he
had missed the opportunity with his budget.
Well, almost 2 weeks ago, President Obama scolded Congress for not
making enough progress on debt ceiling and budget negotiations. He said
we needed to stay in Washington last week and get things done. I took
him at his word. I thought the administration and the majority were
serious about staying in Washington to push forward and get some
results. We were all in Washington last week, but we did not get
anything done. The debt and the deficit and the lack of a budget are
not the only issues facing America. When are we going to have real
issues processed through committees that provide real solutions?
Despite reports suggesting that Democrats have reached an agreement
on a budget deal among themselves, the majority did not present us with
that budget. Despite the President's comments that Congress needed to
be in session to reach an agreement, he refused to meet with our
caucus. We have gone more than 800 days without passing any sort of
budget in the Senate. When we stayed in Washington last week to work on
a budget deal, Democrats refused to bring up that budget for a vote.
Last week, we had an opportunity to make headway on the debt ceiling
issue. I spoke on the floor last Wednesday and implored my colleagues
on both sides of the aisle to join me in rolling up our sleeves and
figuring out a way to solve the fiscal mess this country is in. I laid
down the facts and figures--frightening numbers that should have
galvanized us all into action. Instead, we are still pushing for a
comprehensive solution to the problem or none at all. This isn't ``deal
or no deal'' time.
Now, here we are, and what was supposed to have been an important
workweek has come and gone. What do we have to show for it? We had one
vote canceled on the Libya resolution, a substitute vote on whether the
Sergeant at Arms should compel attendance, which was a nonbudget-
related matter, and we had one legislative vote on Senator Reid's
resolution about tax increases. This resolution is a sense of the
Senate, which is not something that could become law. At this juncture
more than ever, we don't need publicity pieces.
What we could have done was moved forward with the balanced budget
amendment that all 47 Republicans have cosponsored or we could have
voted on my legislation to reduce spending by 1 percent each year until
we achieve a balanced budget or we could have voted on legislation
other Republicans have offered that would cap spending or we could have
voted on legislation offered by Republicans to ensure we pay our
creditors in the event we cannot reach an agreement on the debt
ceiling. Unfortunately, we didn't do any of that. Instead, we spent a
week holding one legislative vote on a sense of the Senate about
raising taxes that even if passed would not have the force of law.
Republicans have proposed a variety of ideas that will help us get
out of this fiscal mess we are in. Some are baby steps; some are giant
steps. Every bill doesn't have to be comprehensive.
Members of the majority have said Republicans were using every tactic
to delay. What was last week? A vote on a sense of the Senate? The
House passed a budget in April. The Senate Republicans proposed two
additional budget measures. The only plan presented by the majority--
President Obama's budget for fiscal year 2012--was unanimously opposed,
0 to 97. Not even a single Democrat voted for the President's budget.
It sounds like a different course is needed.
I thought we were here to take care of business. Is one legislative
vote on an opinion piece considered taking care of business? Not in my
mind. I am willing to bet the American people don't think so either.
This is exactly the kind of behavior that is frustrating the people in
Wyoming and all across the country. They have asked us to come do a
job. They have put their faith in us to take care of business and put
this country back on solid fiscal footing. The American people want us
to thoughtfully and seriously work to address the debt ceiling and
reduce spending. Taking one legislative vote in a week doesn't pass the
smell test for getting the job done. The work product we gave the
American people last week is appalling.
We are staring the most predictable crisis in American history in the
face, and, with only one legislative vote last week, we essentially
said it is not dire enough for us to get something done; it is not
important enough to stop playing political games and stop running the
clock. I am hopeful that this week will be different. I am hopeful that
we will actually make progress on budget negotiations.
I am encouraged that the President has finally taken it upon himself
to engage leaders on the matter. His direct engagement should have been
happening for months, and his refusal to get directly involved has put
us in the situation we are in today, with 3 weeks until the Treasury
Department is left without options for the debt ceiling. We have lost
time. We have lost opportunities. We have lost the focus started by the
deficit commission. Every day that passes that we don't get anything
done is one more option lost and more money spent on borrowed time and
borrowed money.
Businesses all across the country can't afford to waste a day, much
less a week, without productivity, and if they did, I guarantee they
would pay a heavy price. If that unproductive behavior continued, they
would have to close their doors. People going to work every day cannot
afford to sit around and not do their jobs. If Americans and businesses
in this country have to work hard and stay productive to provide for
their families and keep their businesses running, so should we. The
standards should not be any different in the Senate.
As for a solution that relies on increased taxes, when Congress fails
by spending too much, the easy answer is always to raise taxes. There
are many Republican proposals for raising revenue without raising
taxes. But we cannot get in a situation where, when we fail, we charge
the people more. It usually results in less revenue anyway.
The motion we are voting on tonight is a sham. When it passes, we
have permission to add amendments to the
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sense-of-the-Senate resolution--maybe. In other words, we can amend the
opinion of the Senate that cannot become law. How long will we amend
and debate an opinion?
I am disappointed we didn't get anything done last week. I hope we
all learned a lesson from the week we just lost. The issues facing the
country today are too important and too dire for us to waste time the
way we did. I know right now committees are not having real markups, so
there is nothing in the drawer to vote on. Even the few times a bill
has been brought up, the majority didn't want to vote on amendments and
shut the process down. That isn't getting us anywhere. We need to
change course. The time for action is now, and I hope we can use last
week's failure to get things done as an incentive to roll up our
sleeves and get to work.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. KYL. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KYL. Mr. President, I ask unanimous consent to speak for up to 5
minutes as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Arizona is recognized.
(The remarks of Mr. Kyl pertaining to the introduction of S. 1344 are
located in today's Record under ``Statements on Introduced Bills and
Joint Resolutions.'')
Mr. KYL. Mr. President, I ask unanimous consent that the time during
the quorum call be equally divided, and I suggest the absence of a
quorum.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. WYDEN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WYDEN. Mr. President, last week, the House Speaker--Speaker
Boehner--and President Obama and his administration were both calling
for comprehensive tax reform as part of a large budget deal. Obviously,
today, that seems to have lost some momentum, and I wanted to start
this afternoon by saying tax reform is too important to abandon after
48 hours' worth of discussion.
To his credit, Chairman Conrad recognizes that, and certainly that is
what I heard this weekend when, similar to the distinguished Presiding
Officer, I was home and had the chance to travel across eastern Oregon,
stopping in small towns. I think there is a keen awareness that it is
not possible to cut our way out of this economic challenge; that we
also have to grow. We have to grow. We have to make growth-oriented
changes in tax law.
That is what the Conrad budget clearly offers a wide berth to do. In
fact, I am of the view that progrowth tax reform, for example, is one
of the few ways to generate revenue that both Democrats and Republicans
will support. When you put people to work--and we have millions and
millions of our fellow citizens out of work today--those are folks who
can, in the private sector, start paying taxes again. That is what
happened after the last major tax reform bill in 1986. In those 2
years--the 2 years after major tax reform--6.3 million new jobs were
created in the private sector. We have an opportunity to do that again,
and the Conrad budget offers a wide berth in which to do it.
So you generate revenue--revenue that both Democrats and Republicans
can support--and create jobs in the private sector the way Democrats
and Republicans have said they want to do. Certainly, it is pretty
clear, as of today, there isn't anything as promising in the economic
toolshed for long-term growth as tax reform. The fact is, a lot of
other alternatives have been tried. Certainly, the Federal Reserve has
done its share. We have the Recovery Act. There have been a variety of
steps that have been taken.
My colleague from Oregon, in my view, has done yeomen's work on the
effort to make sure homeowners--which is an enormous economic problem--
have additional time to work through the very challenging situations
millions are facing in the housing market. So we have thrown a lot of
economic tools at this huge challenge, but we obviously have a lot more
to do. I don't see any more promising path--no more promising path--
than tax reform for the long-term economic growth this country needs.
The Conrad budget offers a wide berth in order to tap that opportunity.
The fact is, we understand what needs to be done in terms of tax
reform. The fundamental language--the principles of that kind of
reform--are laid out in the Conrad budget. We ought to go in there,
clean out a score of these special interest tax loopholes, use that
money to hold down rates for everybody, and keep progressivity. Those
are the three key principles.
A number of my colleagues have spoken. I know my friend from Arizona,
with whom I serve on the Finance Committee, Senator Kyl, in a very fine
op-ed piece he wrote in the Wall Street Journal not too long ago,
talked about tax reform built around exactly those principles--cleaning
out the loopholes, holding down the rates, and, to his credit, Senator
Kyl specifically talked about the need to ensure progressivity in the
Tax Code.
Senator Coats and I have introduced legislation that picks up on
those key principles of the 1986 tax reform legislation. In fact, we
modernize the code in line with that kind of thinking--certainly
important to do because there have been thousands and thousands of tax
changes made since 1986. So it is certainly time to go in there and
trim out all those unnecessary special interest tax breaks, and we can
do it in a way that will create jobs.
For example, right now, in the Federal Tax Code, there are actually
incentives to export jobs out of the United States. Say that to
yourself--export jobs out of the United States. What we want to do is
export goods out of the United States. In rural Oregon this weekend,
the farmers were telling me about how they want to get their
agricultural products into Asia and other markets around the world. So
we can grow things here, make things here, add value to them here and
ship them somewhere. That is what we would like to be exporting.
Instead, under the tax law, there is actually an incentive to export
jobs.
When you set up shop overseas and you are doing business overseas,
you get to defer your American taxes. So what Senator Coats and I seek
to do--and this is something I think is even more important today than
it was a quarter century ago because of the global economic challenge--
is to take that incentive that now goes for exporting jobs out of the
United States and we would use those very same dollars to dramatically
slash rates for companies that offer what I call red, white, and blue
jobs--jobs in this country. The Conrad budget offers a very substantial
berth for taking that kind of approach in tax reform, where he
specifically calls for lowering tax rates for American businesses. I
particularly wish to see that done because of the message I heard this
last weekend, where folks specifically, without my even mentioning tax
reform, talked about the need to keep jobs here at home.
We are going to, over the next few days, see, of course, the
negotiations with the President and the Congressional leadership go
forward. Chairman Conrad and other members of the Budget Committee will
be out discussing these issues as well. But I just hope, No. 1, the
cause of tax reform is seen as far too important to give up on after
only a 48-hour flurry of interest and everybody then saying: Well, I
guess we will have to do it another time. The time to make sure it is
done is now.
Senator Coats and I said earlier this month that what we ought to
do--recognizing that you can't write a complete tax reform bill between
now and August 2--is to get a commitment, lock in a strategy, to do
comprehensive tax reform in the fall and early next year. That alone
would send, in my view, a positive and bipartisan message to the
financial markets of this country that there are going to be some
changes. So what we need is a roadmap for economic growth.
[[Page S4476]]
There are other features of the Conrad budget I think make a lot of
sense. I am particularly pleased about the opportunities for investment
in infrastructure--roads and bridges. Certainly, that would provide an
opportunity for something that has worked in the past--the Build
America Bonds program, which has been so successful in our State. I
think Senator Kerry's ideas for an infrastructure bank are excellent
ones. I support those as well. The best thing about that approach is we
know we have to find a way in our consumer-driven society to start
stimulating demand--demand for goods and services.
There are few economic multipliers in our country for the short term,
such as transportation. So the Conrad budget that puts a premium on
those kinds of approaches in the short-term makes a lot of sense for me
as we look to the longer term, which I would define as the opportunity
to set this country on a progrowth economic strategy, with tax reform
in the forefront in a way that helps our economy to be both fairer and
more efficient. We will also see a lot of other benefits.
It was brought up to me over the weekend at home, in eastern Oregon,
matters we have talked about before, such as the alternative minimum
tax. Talk about something that just defies common sense: the idea that
the alternative minimum tax would force middle-class people, people
making $60,000, $70,000, $80,000 a year, to fill out their taxes twice
using two separate systems just defies any semblance of sanity.
So referring, again, to what happened this weekend, are we really
going to tell American taxpayers getting clobbered by the alternative
minimum tax that after 2 days' worth of discussion about tax reform we
are just going to walk away and pursue some other topic? That doesn't
make any sense to me. Certainly, Chairman Conrad's budget, which does,
as I have indicated, provide a broad berth for tax reform, makes it
clear that he shares our view.
So, finally, if we have in front of us, as we will with progrowth tax
reform, the opportunity to create jobs in the private sector, generate
revenue in a way that Democrats and Republicans can agree on, make
ourselves more competitive in tough global markets, and do it in a way
that brings the political parties together, I think it is clear that
has the fundamentals of what can take this country's economy in a
better and healthier direction.
I want it understood that in spite of what happened this weekend, in
spite of the sense that maybe tax reform is going to be put off yet
again, I am not going to give up for a minute. We are going to have
another hearing that is going to be very important this week--Chairman
Baucus, Chairman Camp, the Finance Committee, the Ways and Means
Committee getting together to talk about tax reform. So we know what
needs to be done. Now it is a question of having the political will to
go forward.
I simply want to say to the President, and I think I can say to the
Senate today--Senator Coats and I--despite the idea that this is too
hard to do, that it can't be done now, let's put it off for another
time, we are going to come back to this floor and say again and again:
It has been done. We need to do it now when there are so few other
tools in the economic toolshed. It would be wrong to walk away after
this brief flurry of interest in something that is so fundamental to
the economic well-being of millions of our people.
I yield the floor and note the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. PORTMAN. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. PORTMAN. Mr. President, I rise to discuss an amendment to the
underlying bill. This amendment is designed to give American employers
some relief from the regulatory burdens that continue to hold back our
economy and hinder job creation. This amendment is actually identical
to the bill I introduced in April, S. 817, which has been endorsed by
both the Chamber of Commerce and the National Federation of Independent
Businesses. It is the same amendment I also introduced on the small
business bill, the Economic Development Administration bills, and also
part of the larger regulatory relief bill I introduced in June, which
currently has 22 cosponsors.
Last week, as we know, we heard more troubling economic news. This
time it was the June jobs report, which unfortunately showed the
unemployment rate had actually risen to 9.2 percent and hiring slowed
to just 18,000 new jobs.
These are, of course, very disappointing numbers, but much more
important are the families who are affected by it, families in my home
State of Ohio and across the Nation who are struggling to find a job
and to get the paycheck they need to make ends meet. The real
discussion in Washington, this month in particular, has been focused on
the fiscal reforms we need to get our fiscal house in order, to get the
economy back on track. But there are other things we can do as well and
one, of course, is to reduce the regulatory burden, particularly on
small businesses. I hear from them all the time. I am sure my
colleagues do as well.
This burden is increasing. One recent study commissioned by the Small
Business Administration put that burden at $1.75 trillion annually. By
the way, that is more than the IRS collects in income taxes. I have
been encouraged by what the current administration has been saying
about improving our regulatory system, but I continue to be deeply
concerned about the new regulatory costs this administration is
imposing on the private sector as we meet here today.
We have seen a sharp uptick over the past 2 years in what are called
major or economically significant rules. These are regulations that
have an economic effect of $100 million or more. According to OMB and
GAO data, the current administration has been regulating at an average
pace of 84 of these major rules per year--which, by the way, is a 50-
percent increase over the average regulatory output during the Clinton
administration, which had 56 major rules per year. These figures
include both the executive branch agencies and the so-called
independent agencies. Today, I was pleased to see that President Obama
issued a new executive order that specifically addressed independent
agencies. These are the regulatory bodies that are not within the
executive agencies but are considered independent. They would include
the Commodity Futures Trading Commission, the Securities and Exchange
Commission, and the newly created Financial Protection Bureau, which
has been subject to a lot of debate on the floor. These are all
independent agencies which are designed by law to be insulated from
Presidential control. This new order the President issued today and the
accompanying Presidential memorandum endorsed two goals. First, it asks
independent agencies to participate in ongoing regulatory look-backs.
That means looking back retrospectively at rules that are already on
the books to see if they make sense. Every administration since
President Ronald Reagan has done this, undertaken some kind of look-
back, and it is important this work continue. Second, and more
importantly in my view, it calls on independent agencies to evaluate
the costs and the benefits of new regulations, as executive agencies
are already required to do under executive orders, including an
executive order by President Clinton and an executive order by
President Obama in January. I am encouraged by the words of this new
executive order and Presidential memorandum on independent agencies. It
endorses a very commonsense principle; that independent agencies, no
less than executive agencies, should evaluate the costs of new
regulations before imposing a new burden on the economy. It is common
sense. It is also consistent with these amendments I have been offering
on legislation this year and the independent agency part of the
regulatory relief bill that was introduced in June.
The problem is the President's order today is entirely nonbinding
because independent agencies don't answer to the President, so it has
no force of law. The amendment I will offer would effectively write the
President's new request into law. The President has now agreed with
this principle. We need to expand this cost-benefit analysis to
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independent agencies, but we need legislation to do it because these
independent agencies are not answerable to the President.
Specifically, this amendment would extend the Unfunded Mandates
Reform Act of 1995, which was a bipartisan piece of legislation, where
I was the Republican cosponsor in the House. It expands the two
independent agencies. Major rules issued by what is sometimes called
the headless fourth branch of government are today exempt not only from
the Unfunded Mandate Reform Act but also from the cost-benefit review
overseen by the Office of Information and Regulatory Affairs, OIARA, at
the Office of Management and Budget.
This amendment would change that, effectively making the President's
order he issued today binding on these independent agencies. They would
be required, under the Unfunded Mandates Reform Act, to evaluate
regulatory costs, benefits, and less costly alternatives before issuing
any rule that would impose a cost of $100 million or more on the
private sector or on State, local, and tribal governments. Based on the
GAO data, it appears there are nearly 200 independent agency
regulations that have been issued between 1996 and 2011 that would be
considered major; in other words, have over a $100 million impact on
the economy. They were excluded from review under this cost-benefit
analysis we have been talking about. In 2009 and 2010 alone, the last
couple years, independent agencies issued 56 economically significant
regulations, representing billions of dollars in regulatory costs
exempt from the standard cost-benefit analysis rules. But this affects
our economy in a big way. It affects jobs and our ability to get this
economy back on track.
Closing this independent agency loophole is a reform those of us on
both sides of the aisle should join the President in supporting. This
is the right vehicle to be able to achieve that. No major regulation,
whatever its source, should be imposed on American employers or on
State or local governments without a serious consideration of what the
costs are, what the benefits are, and whether there is available a less
burdensome alternative to achieve the same objective. This amendment
moves us closer toward that goal. It is a commonsense amendment, again,
taking the President's executive order and memorandum of today and
actually putting it into force through the force of law.
I yield the floor, and I note the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. WHITEHOUSE. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WHITEHOUSE. I ask unanimous consent to speak for up to 10
minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The remarks of Mr. Whitehouse pertaining to the submission of S.
Res. 230 are located in today's Record under ``Submission of Concurrent
and Senate Resolutions.'')
Mr. WHITEHOUSE. Mr. President, on the pending motion, I ask for the
yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second? There appears to
be a sufficient second.
The question is on agreeing to the motion.
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from Ohio (Mr. Brown) is
necessarily absent.
Mr. KYL. The following Senators are necessarily absent: the Senator
from Alaska (Ms. Murkowski), the Senator from Florida (Mr. Rubio), and
the Senator from Louisiana (Mr. Vitter).
The PRESIDING OFFICER (Mr. Manchin). Are there any other Senators in
the Chamber desiring to vote?
The yeas and nays resulted--yeas 69, nays 27, as follows:
[Rollcall Vote No. 107 Leg.]
YEAS--69
Akaka
Alexander
Baucus
Begich
Bennet
Bingaman
Blumenthal
Boxer
Brown (MA)
Burr
Cantwell
Cardin
Carper
Casey
Coats
Collins
Conrad
Coons
Corker
Cornyn
Durbin
Feinstein
Franken
Gillibrand
Graham
Hagan
Harkin
Hoeven
Hutchison
Inouye
Johanns
Johnson (SD)
Kerry
Kirk
Klobuchar
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Manchin
McCain
McCaskill
McConnell
Menendez
Merkley
Mikulski
Murray
Nelson (FL)
Pryor
Reed
Reid
Rockefeller
Sanders
Schumer
Sessions
Shaheen
Snowe
Stabenow
Tester
Thune
Udall (CO)
Udall (NM)
Warner
Webb
Whitehouse
Wyden
NAYS--27
Ayotte
Barrasso
Blunt
Boozman
Chambliss
Coburn
Cochran
Crapo
DeMint
Enzi
Grassley
Hatch
Heller
Inhofe
Isakson
Johnson (WI)
Lee
Lugar
Moran
Nelson (NE)
Paul
Portman
Risch
Roberts
Shelby
Toomey
Wicker
NOT VOTING--4
Brown (OH)
Murkowski
Rubio
Vitter
The motion was agreed to.
Mr. REID. Mr. President, the Senate has just adopted a motion to
proceed to a bill, S. 1323, to express the sense of the Senate on
shared sacrifice in resolving the budget deficit we have been so
concerned about.
It is my understanding the minority has amendments they wish to have
considered. I am happy to work with the Republican leader to figure out
a way for this to happen. In the meantime, however, we need to push
forward. We all need to do that. I am going to fill the tree and file
cloture on this bill. I am happy to continue to talk with the
Republican leader and anybody else who is interested in having specific
amendments to this legislation we are now on.
I will not allow this legislation to be bogged down by an endless
list of unrelated amendments. It is too important for the Senate to
reaffirm its commitment to ensuring all Americans--including
millionaires and billionaires and profitable corporations--contribute
to the collective effort to reduce this deficit. This is a commonsense
statement that we believe in simple fairness. Middle-class families and
seniors have already been asked to sacrifice too much.
Democrats have gone on record saying that the wealthiest of the
wealthy should be asked to contribute to this effort and make similar
sacrifices. We hope our Republican colleagues will finally join us in
this effort.
Over the past several weeks, I have had good conversations with the
Republican leader and the chairman and ranking member of the
Appropriations Committee about trying to work through appropriations
bills under the regular order.
As a result of these conversations, in an effort to move forward, I
am going to file cloture on a motion to proceed to the Military
Construction-VA Appropriations bill tonight. I hope we can show the
country that the Senate can work through an important appropriations
bill without getting bogged down.
Remember, there are different rules on these matters. You can't deal
with legislative matters on appropriations bills. I hope we can have
some amendments on our sense-of-the-Senate resolution dealing with
having the wealthiest of the wealthy contribute to the problems we have
with the deficit in this country, and following that I hope we can move
to Military Construction-VA. Our servicemen and veterans who have
served our country so well need this.
Amendment No. 529
Mr. REID. Mr. President, I have an amendment at the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Nevada [Mr. Reid] proposes an amendment
numbered 529.
At the end, add the following new section:
SEC. 2. EFFECTIVE DATE.
The provisions of this Act shall become effective 3 days
after enactment.
Mr. REID. Mr. President, on this amendment I ask for the yeas and
nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Amendment No. 530 to Amendment No. 529
Mr. REID. Mr. President, I have a second-degree amendment at the
desk.
The PRESIDING OFFICER. The clerk will report.
[[Page S4478]]
The assistant legislative clerk read as follows:
The Senator from Nevada [Mr. Reid] proposes an amendment
numbered 530 to amendment No. 529.
In the amendment, strike ``3'', insert ``2''.
Motion to Commit With Amendment No. 531
Mr. REID. Mr. President, I have a motion to commit the bill with
instructions, which is also at the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Nevada [Mr. Reid] moves to commit the bill
(S. 1323) to the Committee on Finance, with instructions to
report back forthwith with an amendment numbered 531.
The amendment is as follows:
On page 2, line 10, after ``deficit'' strike all that
follows and insert the following:
``(1) should require that those earning $1,000,000 or more
per year make a more meaningful contribution to the deficit
reduction effort; and
(2) should not end Medicare as we know it.''
Mr. REID. Mr. President, I ask for the yeas and nays on that
amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Amendment No. 532
Mr. REID. Mr. President, I have an amendment to the instructions at
the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Nevada [Mr. Reid] proposes an amendment
numbered 532 to the instructions of the motion to commit.
After ``Medicare'', strike all that follows and insert
``and Medicaid as we know it.''.
Mr. REID. I ask for the yeas and nays on this amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Amendment No. 533 to Amendment No. 532
Mr. REID. I have a second-degree amendment at the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Nevada [Mr. Reid] proposes an amendment
numbered 533 to amendment No. 532.
Strike ``we'' and insert ``all Americans''
Cloture Motion
Mr. REID. Mr. President, I have a cloture motion at the desk.
The PRESIDING OFFICER. The cloture motion having been presented under
rule XXII, the clerk will report the cloture motion.
The assistant legislative clerk read as follows:
Cloture Motion
We, the undersigned Senators, in accordance with the
provisions of rule XXII of the Standing Rules of the Senate,
hereby move to bring to a close debate on S. 1323, a bill to
express the sense of the Senate on shared sacrifice in
resolving the budget deficit.
Harry Reid, Richard J. Durbin, Patty Murray, Daniel K.
Inouye, Christopher A. Coons, Sheldon Whitehouse,
Barbara Boxer, Robert P. Casey, Jr., Bernard Sanders,
Frank R. Lautenberg, Sherrod Brown, Jack Reed, Dianne
Feinstein, Jeff Merkley, Benjamin L. Cardin, Carl
Levin, Charles E. Schumer.
____________________