[Congressional Record Volume 158, Number 73 (Monday, May 21, 2012)]
[Senate]
[Pages S3295-S3300]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FOOD AND DRUG ADMINISTRATION SAFETY AND INNOVATION ACT--MOTION TO
PROCEED
Mr. REID. Mr. President, I now move to Calendar No. 400, S. 3187.
The ACTING PRESIDENT pro tempore. The clerk will report the motion.
The legislative clerk read as follows:
Motion to proceed to Calendar No. 400, S. 3187, a bill to
amend the Federal Food, Drug, and Cosmetic Act to revise and
extend the user-fee programs for prescription drugs and
medical devices, to establish user-fee programs for generic
drugs and biosimilars, and for other purposes.
Schedule
Mr. REID. Mr. President, we are now on the motion to proceed to the
FDA user fees bill. At 4:30 the Senate will proceed to executive
session to consider the nomination of Paul Watford to be U.S. Circuit
Judge for the Ninth Circuit. At 5:30 there will be a cloture vote on
the Watford nomination. If we are able to confirm his nomination, we
should expect a second vote on the motion to proceed to the FDA user
fees legislation.
Obstructionism Repeated
Mr. President, this week the Senate must complete work on legislation
that will enact crucial reforms that will prevent drug shortages and
bring lifesaving medicines to market more quickly. Senators Harkin and
Enzi, a Democrat and a Republican, worked very hard to bring this
legislation to the floor. I am cautiously optimistic that the spirit of
bipartisanship will continue because Democrats cannot pass this
legislation without the cooperation of our Republican colleagues. I
certainly hope they will allow us to advance this bill this evening
without additional delay caused by another filibuster. I would like
Senators from both parties to be free to offer relevant amendments to
improve a worthy bill, but before we can get to work on this
legislation in earnest, I urge my Republican colleagues to stop their
filibuster. Americans living with cancer and other life-threatening
illnesses are watching closely to see whether the Senate is capable of
moving to quick action to ease shortages of crucial medicines or
whether we will once more be paralyzed by Republican obstructionism.
Americans have seen that obstruction time and time again this
Congress. They are frustrated with the slow pace of Senate action to
reauthorize the Violence Against Women Act, Iran sanctions, and on
legislation to stop interest rates from doubling on student loans.
Earlier this month Republicans blocked an attempt to keep higher
education affordable for 7 million students. But Democrats have not
given up. I hope our Republican colleagues will come to their senses
and allow us to prevent this crisis that affects 7 million young men
and women before it is too late.
Republican obstruction and infighting has also stalled critical new
sanctions on Iran. For 2 months Democrats have worked to resolve
Republican objections to this bipartisan measure which passed out of
the Banking Committee unanimously. The stakes couldn't be higher.
Sanctions are a key tool to stopping Iran from obtaining a nuclear
weapon, threatening Israel, and jeopardizing U.S. national security. We
cannot afford more delays to putting stronger sanctions in place. I
hope my Republican colleagues will see
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how important it is to advance these important measures and prevent
Iran from obtaining a nuclear weapon.
Republicans have also needlessly blocked progress on reauthorization
of the Violence Against Women Act. This helps law enforcement
effectively combat and prosecute domestic crimes against women.
Although both Chambers have passed a version of this legislation, House
Republicans have refused to go to conference with the Senate. Their
excuse--a hypertechnical budget issue called a blue slip--isn't much of
a figleaf to hide their blatant obstruction. The truth is that they are
looking for any excuse to stall or kill this worthy legislation, but
American women have not been fooled. If Republicans really want to give
police the tools they need to prosecute domestic abusers, they will
drop this facade. If Republicans really care about protecting women and
families, they will abandon these hypertechnical objections and join us
in conference.
There are differences between the House and Senate bills that could
be worked out easily. American women and families are counting on our
action. But in this Congress it seems the Republicans are more
interested in inaction than action; they are more interested in
blocking worthy legislation for partisan gain than in working together.
Their infighting and partisan games have stopped reauthorization of the
Violence Against Women Act, Iran sanctions, and the student loan fix--
stopped them right in their tracks. These are just a few of their ways
of stopping legislation, a few important measures they have stopped
over the past few weeks. But the FDA bill, which will prevent drug
shortages and make lifesaving medicines available more quickly, must
not become another victim of this partisanship. I hope Republicans
seize this opportunity to be cooperative rather than be combative.
Mr. President, would you announce the business of the day?
Reservation of Leader Time
The ACTING PRESIDENT pro tempore. Under the previous order, the
leadership time is reserved.
The motion to proceed is now pending.
Mr. REID. Mr. President, I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Order of Procedure
Mr. REID. Mr. President, I ask unanimous consent that the cloture
votes which were scheduled this afternoon on Watford be vitiated, all
of the provisions of that order remain in effect.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Mr. REID. Mr. President, I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Ms. MIKULSKI. Mr. President, I ask unanimous consent that the call of
the quorum be rescinded.
The PRESIDING OFFICER (Mr. Coons). The Senator from Maryland.
Ms. MIKULSKI. Mr. President, I come to the floor to lend my voice to
asking my colleagues to vote for the motion to proceed to the FDA
Safety and Innovation Act. Like the Presiding Officer, who is from
Delaware, where its excellent private sector and public sector have
been the hallmark of innovation, I represent a State that is absolutely
critical to the innovation economy.
Those of us from Maryland know life science innovation is one of the
important economic engines in our economy both today and in the future.
We are the home to flagship government agencies such as the National
Institutes of Health, the FDA, and iconic internationally branded
universities that do research and move it into clinical practice at
Johns Hopkins and the University of Maryland. There are also lots of
thriving biotech companies and some medical devices. So for us life
science is part of the lifeblood of the Maryland economy, and it is
also part of the lifeblood of the American economy.
Think of what we do. We come up with new biological products, new
pharmaceuticals, new medical devices that not only save and improve
lives but also enable them to help people in our own country. Because
they are FDA approved--the gold standard for safety and efficacy--they
can sell these products around the world, often to countries that will
never be able to afford an FDA.
We have worked very closely on a bipartisan basis to be able to
create the legislative framework called PDUFA, the Pharmaceutical Drug
User Fee Act, and there will be a lot of other UFAs, user fees, in
this. As I said, we have worked together on a bipartisan basis to bring
this legislation to the floor.
I note on the Senate floor at this moment is the ranking member of
the Health, Education, Labor, and Pensions Committee, the Senator from
Wyoming, Mr. Enzi, who has been a leader in fashioning legislation
where we can continue the mission of what we want at FDA: safety and
efficacy, moving drugs into clinical practice, regulations that are
sensible, regulate but not strangulate the innovation economy or the
potential for saving and improving lives. The bill before us is
integral to achieving this shared goal.
This is not new legislation. PDUFA was enacted in 1992. At that time
we were almost facing a crisis in our country. There was an unduly long
wait for patients to have access to new medicines and technologies. For
FDA, it often took 2 or 3 years to review a drug application. Materials
were submitted manually in a very costly fashion. It cost manufacturers
to the tune of almost $10 million a month.
So we decided to come together in the era when Bill Clinton said big
government was over--not to make government to be bigger but for
government to be smaller--and we came up with a public-private
partnership called the PDUFA, the pharmaceutical user fee legislation.
PDUFA supports drug review, so that those who make the products pay a
fee to be able to have their drugs reviewed. They also expect their
government to reduce the time it takes to move reviews expeditiously
yet safely.
Let's be clear: This is a public-private partnership. For FDA, as it
looks at its--remember, FDA has two jobs, which are food safety and
then the safety of drugs and medical devices. More than 60 percent of
funding for drugs and medical devices comes from industry fees--$712
million. The remainder comes from Federal appropriations--$473 million.
So the private sector carries a big part of this responsibility. The
kind of staffing, expertise, and modernization we have at FDA could not
have happened without this public-private partnership. It has been a
success.
More than 1,500 new medicines or technologies have been approved
since 1992 for everything from the dread ``C'' words such as cancer or
cardiovascular disease, to infectious disease, to the dread ``A'' words
such as Alzheimer's, which we are working on, and others. It has
allowed the FDA to have more scientists and staff, and for that it is
giving value to the private sector to be able to decrease review times.
We reduced review times from 2 years in 1992 to 1.1 years today.
We had excellent hearings. They were very civil, very content rich.
But I also launched a listening tour in Maryland where I went out to
the major biotech companies and heard from over 25 different companies
about what they thought we needed to do. I asked them where their
government helped them and where their government hurt them, where
should their government get out of the way, and where did they need a
more muscular government, meaning moving things ahead. They had great
ideas. It was fantastic.
What I heard was we have to reauthorize PDUFA quickly, and we must
make the improvements to the programs. We need to improve the drug
review process; we need to increase communication in order to speed the
drug review process. We have made sure we have increased a number of
mandatory performance requirements between FDA and the life science
product sponsors. I say life science because it is bio, it is pharma,
it is medical devices, and some things that are both. PDUFA V,
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which this is--it is the fifth time--allows us to use biomarkers to
decrease development time by helping to demonstrate therapeutic benefit
more quickly. It requires FDA to develop a dedicated program for drug
development and training of staff.
We face a turnover, and there are a lot of reasons for that which I
will come back to. But we want to make sure those young people who are
so smart in science know how to work to have the science evaluated in a
timely way. This is absolutely critical.
We have also incentivized the development of drugs for rare diseases.
Particularly for parents of children with very unique and poignant,
heart-breaking diseases, we would require FDA to develop guidance
related to advancing and facilitating increased outreach to patient
representatives, not only to the industry but to those who represent
the patient advocacy groups. Again, we seek to develop training and
certificate programs within FDA on how to review drugs for rare
diseases.
I could go through the many benefits of PDUFA. We have done also in
here MDUFA, the medical device act, and we do generic PDUFA. So there
are several bills in this bill. But we have to act. There has to be a
sense of urgency. This is a different bill than many others. If we
don't reauthorize many other bills, they keep on going, but with the
PDUFAs and the other user fee legislation, they actually will be
sunsetted if we do not pass them by October. One might say, Well, we
will wait until October. We will deal with it on the cliff.
We can't do that, because of the impact on both the people in the
private sector and those in the public sector. Failure to reauthorize
in a timely manner would have catastrophic effects on FDA's ability to
carry out its important role. If the user fee agreement expires,
patients, public health, and industry will suffer. This isn't Senator
Barb speaking, this is what our leading business and public health
advocates are telling us. If we don't reauthorize, the user fees
sunset, so that means U.S. pharmaceutical industries, which support 4
million jobs, would be adversely affected. There would be no FDA to
work with.
In 2010, Maryland private life science companies supported over
25,000 jobs. These companies are true innovators. On average, it takes
a new medicine 10 to 15 years to develop. If we fail to reauthorize
PDUFA, which ensures an efficient, consistent, and predictable
regulatory environment, our private sector will lose out. We are going
to lose out to Europe and we are going to lose out to China. China is
stealing our patents as we speak. It will have a terrible consequence
on patients as tens of millions of them rely on drugs and biologics and
medical devices.
We know we have legislation that works, we have a legislative
framework that works and now we need to get to work. If we do not pass
this bill, and reauthorize these major programs, what will happen is we
will need to send out RIF notices. We won't do it, but Dr. Mary
Hamburg, the FDA CEO, the Commissioner, will have to, starting in July
and August, send out RIF notices to 4,000 Federal employees at FDA,
from the Ph.D. and the M.D. to the important lab techs and others who
keep FDA going. This is no fooling around, I say to my colleagues. This
isn't: Let's wait for the cliff. We will come to the brink if we do not
reauthorize. Think about the role of FDA. If one thinks one is going to
lose their job, that is what they are going to be preoccupied with.
They are not going to be occupied with looking at these clinical trials
and moving their advances forward.
We have worked so hard on this legislation. The private sector has
worked hard to find a sensible center, and so has Dr. Mary Hamburg and
her team. Our committee has worked so well. We can do this. We have to
have the will. If we want to stay ahead in the global economy, it has
to include passing this legislation.
Everybody talks about stopping China. I don't know what China is
going to do, but I know we can stop ourselves if we don't pass
legislation that promotes innovation in our country and private sector
jobs in a partnership with government.
I conclude by urging my colleagues to vote for the motion to proceed.
I yield the floor.
The PRESIDING OFFICER. The Senator from Wyoming.
Mr. ENZI. Mr. President, I thank the Senator from Maryland, Ms.
Mikulski, for her passion and understanding and intense work on this
particular bill. Of course, she extends her passion and intense work on
any bill she is involved in. I am so pleased this bill has gone to
committee and has had the time for the committee to work on it. We have
a very bipartisan approach on the bill and a very reasonable way to do
it.
I rise to support S. 3187, the Food and Drug Administration Safety
and Innovation Act of 2012, and I appreciate Senator Mikulski making
the opening statement. This bill will reauthorize FDA's drug and
medical device user fee programs, authorize new user fees for generic
drugs and biosimilars, and make a small number of targeted bipartisan
policy reforms at the same time.
This legislation represents over a full year of work by the HELP
Committee. Fridays have been dedicated to coming up with solutions on
this for over a year, and it has paid off. It reflects the information
we have learned from hundreds of meetings with patients, with
advocates, with stakeholders, with outside experts, and with the FDA.
More importantly, it reflects both the ideas and the feedback we have
gotten from every member of the HELP Committee and a lot of people
outside the HELP Committee. The HELP Committee approved this bill by a
voice vote on April 25 and reported the bill out of committee on May 7.
This bill will make important changes to how FDA does business.
Thanks to the efforts of Senators Burr and Coburn, the bill now
includes new requirements that will make FDA more accountable and
transparent. A fundamental principle of effective management is that
one has to be able to measure performance if one wants to improve it.
The ideas of Senators Burr and Coburn will help provide those
measurements and, as a result, Americans are going to get better access
to safe, innovative medical devices and medicines.
The bill will also modernize how the FDA inspects foreign facilities
to better account for the global nature of drug manufacturing. It will
allow FDA to prioritize and target riskier oversized facilities, which
will help prevent the recurrence of the problems with drugs such as
heparin.
It will also improve how FDA regulates medical devices. For the past
several years, FDA premarket review of medical devices has involved
significant delay and unpredictability. This has threatened American
manufacturing jobs which have started to migrate overseas because of
the unfavorable regulatory environment here in the United States. It
has also threatened patient access to new therapies. I believe this
bill will reverse those trends.
The bill reflects the concerns I have heard in my meetings with
committee members regarding the current shortages of vital and
lifesaving drugs. Senators Blumenthal, Roberts, Casey, Alexander,
Bennet, and Hatch should be thanked for all the work they put into the
drug shortage proposal. The new notification and coordination
requirements are important steps that will help prevent future drug
shortages.
The bill also enjoys broad support. We have received numerous letters
of support from industry, patient groups, consumer groups, and a whole
raft of other stakeholders.
We also worked to guarantee that any mandatory spending generated by
the bill would be fully offset. Over the past several weeks, we have
developed offsets to pay for those provisions that produce mandatory
spending. As a matter of fact, according to the Congressional Budget
Office, this bill will reduce the Federal deficit.
Chairman Harkin and I have worked very hard to make this bill as
bipartisan and uncontroversial as possible. We tried to avoid
controversy because we understand this bill needs to get done. If we
don't reauthorize the drug and device user fee programs before they
expire this fall, the FDA will be forced to lay off 2,000 to 4,000 key
employees. This will cause FDA's review of new drugs and devices to
grind to a halt. This, in turn, will threaten biomedical industry jobs,
patient access to new medical therapies, and America's global
leadership in biomedical innovation. We are talking about 4 million
jobs overall and 2,000 to 4,000 that
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will have to be chopped off because the money runs out when this bill
expires, the previous bill expires, so it is critical that we get that
done.
Another important thing with those 2,000 to 4,000 people who will
have to be laid off at FDA is those are key technicians, scientists,
informed people who have been working on this for a long time. If we
lose this, they will still have jobs, it just will not be where we can
get drugs on the market faster, devices on the market faster, generic
drugs out faster, and all of the other things this bill covers.
So in conclusion, I would like to thank Chairman Harkin and all the
other members of the HELP Committee, FDA, industry, and many other
groups for working with us on this important legislation.
I particularly want to point out the cooperation Senator Harkin has
provided, the leadership he has provided on the bill, and the way his
staff members and mine have worked together for at least a year in
regular meetings with all members of the committee. So I think a lot of
the controversy that could come up with a bill like this has been taken
care of. I am hoping it has so we can get this done expeditiously.
I thank the Chair and yield the floor.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. KYL. Mr. President, I ask unanimous consent to speak as in
morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Economy
Mr. KYL. Mr. President, what I would like to talk about this
afternoon is a bit about the President's economic record. I am sure
Americans have noticed the President barely mentions this economic
record when he is out on the campaign trail, and I can well understand
why. It is not a very impressive record, especially if you are a
taxpayer or a business owner.
Our national debt creeps closer to $16 trillion each day. It is now
more than $5 trillion more than it was when the President took office.
It now adds up to about $50,000 per person in the United States, and
that is exclusive of interest payments. By way of contrast, the median
yearly household income--in other words, all the people in the house--
is less than $50,000. It is $49,445.
Unemployment recently dropped, but it did so for the simple reason
that fewer people are searching for work.
The President's signature legislative items--the stimulus bill,
ObamaCare, and Dodd-Frank--have not only been unhelpful in boosting
growth, but they have left a trail of crushing debt, uncertainty, and
new regulations in their wake. I want to make a few points about each
of those bills because I think they paint a fair picture of the
President's economic record.
First, let me talk about the stimulus. We have not forgotten about
the stimulus, even though I suspect the President might like to--$1.2
trillion. It, obviously, failed to achieve the promised results. An
Associated Press reporter wrote shortly before it was signed into law:
They call it ``stimulus'' legislation, but the economic
measures racing through Congress would devote tens of
billions of dollars to causes that have little to do with
jolting the country out of recession.
Of course, that is exactly what happened. It seemed more designed to
shower taxpayer dollars on certain favored constituencies and pet
interests than to actually jump-start the economy. Much of it was
simply wasteful Washington spending. Many investors must have asked
themselves why they should put their money to risk on new job-creating
ventures when they have to compete with well-connected firms that can
simply wring taxpayer-provided stimulus dollars out of Congress or the
Obama administration.
A Washington Post poll released just last week showed that 48 percent
of Americans have an unfavorable view of the stimulus--and this was,
after all, the President's signature effort to spur the economy.
Indeed, as Jeffrey Anderson notes in a recent issue of the Weekly
Standard magazine, the administration does seem to be downplaying the
law. Not only has the stimulus failed to create robust growth, the
costs have become more outrageous. He writes:
It has now been five months since the Administration last
put out a report card on [the stimulus.]. . . . the December
report marked the sixth straight quarterly report showing
that stimulus's cost per job is rising: In reports spanning
January 2010 to December 2011, the stimulus's cost per job
more than doubled, rising from $146,000 (in January 2010) to
$317,000 (in December 2011). With each passing quarter, the
stimulus has become an even worse deal for taxpayers.
So this is the administration's own report card on the stimulus,
concluding in the last report, $317,000 per job. Think about that for a
moment. To create each job, the taxpayers shell out $317,000.
Numbers like these remind me of a quip from writer Christopher
Buckley. He said writing political satire these days can be difficult
because it has to compete with reality--$317,000 for one job under the
President's stimulus.
Well, second, ObamaCare. The $2.6 trillion bill is not aging very
well. Since its passage, the act has imposed an estimated $14.9 billion
in private sector burdens, approximately $7 billion in costs to the
States, and 58.6 million annual paperwork hours, according to a weekly
regulatory report.
The April Kaiser health tracking poll showed that more Americans have
an unfavorable view of the law than favorable. It is 43 to 42 percent.
More than half of Americans oppose its central provision, the so-called
individual mandate. All told, the new taxes in ObamaCare would add up
to $\1/2\ trillion over 10 years. Many of these taxes will coincide
with the biggest tax increase in history--the one scheduled for the end
of this year. So at the very time the income tax rates are scheduled to
go up, the new taxes from ObamaCare will hit--$\1/2\ trillion worth of
new taxes over the next 10 years.
Finally, there is the Dodd-Frank financial regulatory reform bill.
When it comes to financial regulatory reform, I think most Americans
believe there should be two simple goals: preventing new crises from
happening and making sure the taxpayers are not on the hook for Wall
Street's mistakes.
Well, the Dodd-Frank bill did not achieve either goal. It is a
complex web of regulations that institutionalized ``too big to fail''
and has served to increase uncertainty, increase moral hazard, and
increase economic distortions, all the while adding 52.9 million
paperwork hours since its passage.
So, as I said, President Obama does not seem to be running for
reelection on this record of the stimulus package, ObamaCare, or Dodd-
Frank regulatory reform. Instead, he is going to be sending--or maybe
he has already sent it--to Congress a to-do list, things he would like
for Congress to do, most of which are tax credits and other very short-
term proposals that are not likely to have a big effect on jobs or
growth because the business sector is not impressed with a one-time-
only, short-term proposition. It wants to know that when it invests
money, that investment is going to be for the long term. Apparently, he
is going to campaign on this most recent list when he goes out to Iowa
later this week.
Well, this happens to be Small Business Week, and one would think the
President would turn to something that businesses have actually said
they would like to do; that is, to prevent this tax tsunami coming at
the end of this year--as I mentioned, the biggest tax increase in the
history of the country, which automatically would take effect on
January 1 of next year, unless Congress does something about it and the
President can sign the legislation.
The NFIB, the National Federation of Independent Business, recently
released a list of the top five uncertainties in the Tax Code that they
say would harm small businesses. Let me just mention three of these
uncertainties.
One is the pending increase in marginal tax rates, which will
devastate the estimated 75 percent of small businesses that file as
individuals. Every one of the five tax rates in the IRS Code will be
increased as of January 1. Since most of the businesses now pay--
especially small businesses--as individuals--so-called passthrough
entities--these rate increases directly will impact small businesses.
Secondly, they are concerned about the death tax. That is going to
ensnare 900 times more small business owners and 2,200 times more
family farmers if the rate increases to 55 percent and the exemption
falls to $1 million, as is scheduled to occur on January 1.
Third is the alternative minimum tax which will hit 27 million more
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Americans--including many small businesses--if it is not patched or
repealed. Well, small business cannot afford this, what has been called
``taxmageddon'' and its devastating consequences.
I would hope, instead of this to-do list the President is sending us,
he would take up the cause of preventing this big tax increase at the
end of the year and help the small businesses and families that need
that help.
Finally, I ask unanimous consent to have printed in the Record at the
conclusion of my remarks a piece in National Review Online by Larry
Kudlow dated May 17 called ``Extend the Bush Tax Cuts Now.''
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. KYL. In this piece, Larry Kudlow, a noted economist, notes that
with respect to this ``taxmageddon''--the increase in everybody's taxes
at the end of this year--it is the uncertainty of it all that is
preventing the investment by business which would create the jobs we
would all like to see. I would just like to quote three paragraphs and
a couple sentences in a fourth. He says:
The uncertainty over the Bush tax cuts already has caused a
number of business leaders to threaten a hiring freeze and a
dampening of investment until they can figure out the after-
tax cost of capital and rate of return on investment. Hiring
has slowed noticeably in recent months. And a number of Wall
Street economists are marking down the anemic recovery even
more, suggesting that the 3 percent growth at the end of last
year, which faltered to 2 percent growth in the first
quarter, could be even less in the period ahead.
Then he goes on to say:
A bunch of CEOs have even formed their own march on
Washington. Eighteen of them just wrote to Treasury man
Timothy Geithner, begging him to oppose tax-rate hikes on
dividends--
Which would go from 15 to 45 percent--
and capital gains (from 15 to near 30 percent. . . .)
``Equity capital is the life blood of investment and job
creation for U.S. companies.''
That is what these CEOs wrote in the letter to Treasury Secretary
Geithner.
Kudlow goes on to say:
And they argued that the administration's tax-hike plans
would do great harm to American competitiveness and capital
formation.
Then he quotes the Ernst & Young firm to say this:
. . . the top U.S. integrated tax rate on corporate profits
and dividends is on course to hit 68.6 percent, significantly
higher than all other OECD countries--
Those are the developed countries of the world--
as well as Brazil, Russia, India, and China. Capital gains
would rise to 56.7 percent.
In other words, he is pointing out that not only would these higher
tax rates hurt the small businesses and the families because of the
individual tax rate, marginal rate increases, but raising the dividends
and capital gains taxes would be even more detrimental because we are
asking companies in America to compete with firms all over the world,
and their rate would be much higher with this tax increase than the
rate in all of the other developed countries, as well as countries such
as Brazil, Russia, India, and China. How can American businesses
compete in that situation?
Then, finally, Kudlow notes the effect of all of this uncertainty on
what matters most to most Americans; that is, the fact that they cannot
get work. He says:
Bizarrely, some 25 million people have vanished from the
labor force--from unemployment, underemployment, or simply
dropping out all together. And half of U.S. households are
now on some form of federal-transfer-payment assistance. So
as we pay so many people not to work, we're sapping the
vitality of the economy.
This is absolutely true. With half of the people in the country on
some form of Federal assistance, with 25 million people having just
vanished from the labor force not even looking for work anymore,
businesses sitting on the sidelines because they cannot calculate what
kind of return on investment they could get because of the potential
for the huge tax increase that is going to occur on January 1, it is no
wonder we cannot move forward with an economic recovery.
So I would just say to President Obama that providing long-term tax
rate certainty would go a long way toward establishing a sound economy
in this country, putting Americans back to work, and, ironically,
establishing a better record on which the President could run. A year
and a half ago, the President actually proposed--and I think Congress
was very happy to go along with--a continuation of the existing tax
rates because, as he said at the time, not to do so would be very
damaging to the economy. I would submit it is equally damaging for that
to happen at the end of this year.
So I would ask the President, help give the American people and
American businesses the certainty they need to invest, to create jobs,
to advance our economic growth, and create prosperity for our future.
Exhibit 1
[From National Review, May 17, 2012]
Extend the Bush Tax Cuts Now
(By Larry Kudlow)
House Speaker John Boehner is playing a heroic role right
now. In his efforts to prevent the Bush tax cuts from
expiring, Boehner is aggressively taking on President Obama's
leadership ineptitude on the economy. In essence, Boehner is
pushing a Republican policy to wrap up a debt-limitation bill
and extend the Bush tax cuts in one fell swoop before the
election--and before all the last-minute, crisis-oriented,
political machinations that would come in a lame-duck
Congress, threatening another credit downgrade and leading to
a business-hiring freeze and plunging stock market, all of
which happened last year.
Tax-cut certainty is so vital right now because the anemic
economic recovery may be moving towards deflation. That's the
message of a gold price that has collapsed by near 20
percent, falling from around $1,900 an ounce to the mid-
$1,500s. With a risk-averse economy at home, and with the
Greek and European financial crises abroad, the demand for
dollars seems to exceed the dollar supply printed by the Fed.
This could be solved by more quantitative easing. But a
better approach for a system already oversupplied with unused
liquidity would be the extension of tax-rate growth
incentives, not more monetary pump-priming.
The uncertainty over the Bush tax cuts already has caused a
number of business leaders to threaten a hiring freeze and a
dampening of investment until they can figure out the after-
tax cost of capital and rate of return on investment. Hiring
has slowed noticeably in recent months. And a number of Wall
Street economists are marking down the anemic recovery even
more, suggesting that the 3 percent growth at the end of last
year, which faltered to 2 percent growth in the first
quarter, could be even less in the period ahead.
A bunch of CEOs have even formed their own march on
Washington. Eighteen of them just wrote to Treasury man
Timothy Geithner, begging him to oppose tax-rate hikes on
dividends (from 15 to 45 percent) and capital gains (from 15
to near 30 percent, taking the ``Buffett Rule'' into
account). ``Equity capital is the life blood of investment
and job creation for U.S. companies,'' they wrote. And they
argued that the administration's tax-hike plans would do
great harm to American competitiveness and capital formation.
According to accounting firm Ernst & Young, the top U.S.
integrated tax rate on corporate profits and dividends is on
course to hit 68.6 percent, significantly higher than all
other OECD countries, as well as Brazil, Russia, India, and
China. Capital gains would rise to 56.7 percent.
And Speaker Boehner knows this. So he's begun a valiant
fight to get supply-side tax reform at the top of the
congressional agenda well before the election. Similarly,
House budget chairman Paul Ryan is suggesting at least a six-
month extension of the Bush tax cuts, so as not to disrupt
business. (By the way, the Ryan tax-and-spending-reform
budget got 41 votes in the Senate, while Obama's budget got
none.)
In a recent interview, former top Obama economic adviser
Larry Summers told me the U.S. recovery is going ``ahead of
schedule.'' Really? But former Obama economist Austan
Goolsbee gives a more realistic assessment by referring to a
subpar 2 percent forecast that is way too slow to spark
faster job creation.
Bizarrely, some 25 million people have vanished from the
labor force--from unemployment, underemployment, or simply
dropping out all together. And half of U.S. households are
now on some form of federal-transfer-payment assistance. So
as we pay so many people not to work, we're sapping the
vitality of the economy.
Mitt Romney recently gave a fine speech, blasting Obama's
profligate spend-and-borrow policies. He described ``a
prairie fire of debt sweeping across Iowa and the nation,''
and he tied our newfound debt to the ``tepid recovery.''
But lower spending alone, while important, is not going to
solve the economic-growth problem. Yes, moving spending to 20
percent of GDP from 24 percent will free up private
resources. But lower tax-rate incentives on the extra dollar
earned and invested is a more powerful economic-growth tool.
Romney should push his 20 percent tax-rate-reduction plan.
That would add liquidity to fight deflation, and would
provide new economic-growth incentives.
[[Page S3300]]
As for John Boehner's goal of an early extension of the
Bush tax cuts, it's going to be an uphill climb. Democrats
want to raise taxes, not cut them. But at least the GOP will
have a coherent growth-and-jobs message. They can tell the
public how important it is to avoid falling off the massive
tax cliff which looms ahead. Deflationary fears can ease. And
they can make it plain to voters that the GOP has a growth
message in these perilous economic times, while the Obama
Democrats do not.
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