[Congressional Record Volume 158, Number 117 (Thursday, August 2, 2012)]
[Senate]
[Pages S5934-S5940]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     VETERANS JOBS CORPS ACT OF 2012--MOTION TO PROCEED--Continued

  Ms. STABENOW. Mr. President, I would suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. McCAIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Whitehouse). Without objection, it is so 
ordered.


                                 Syria

  Mr. McCAIN. Mr. President, at this late hour of our session, until 
September, I think it is important we continue to pay attention to and 
be concerned about the situation in Syria. Today, Kofi Annan, the 
former Secretary General of the United Nations, announced the failure 
of his mission. If there is anything about the conflict in Syria that 
did not surprise most of us, it is the fact that Kofi Annan's mission 
was a failure. It was doomed to failure from the beginning. It was 
based on the premise that somehow Bashar Assad would be motivated to 
stop the massacre of his people. It was motivated on the premise that 
somehow U.N. observers could come in and stand between the two fighting 
forces but totally ignore the fundamentals of this conflict.
  The fundamentals of this conflict are simple: It is the Syrian people 
attempting to assert their God-given rights and throw off the yoke of a 
brutal and unconscionable dictator, and on the other side of the 
equation Bashar Assad's commitment to doing whatever is necessary, 
including massacring now as many as 20,000 of his own people in his 
desperate quest to remain in power in Syria.
  Let's not forget that one of the reasons we have seen heavy Russian 
involvement in the form of supplies of arms and equipment and continued 
Russian veto of resolutions in the U.N. Security Council that would 
have imposed even the mildest sanctions on Bashar Assad is what seems 
to be some kind of nostalgia on President Putin's part for the old 
Russian empire and the maintenance of their one base on the 
Mediterranean port in Syria.
  The Russians' behavior in this throughout, as they continue to block 
one resolution after another, of course, is revealing of the true 
nature of the Putin regime, the autocracy and kleptocracy that has now 
asserted its full power and weight in Russia. In addition to that, of 
course, we have the Chinese joining Russia in their sustaining of 
vetoes in the U.N. Security Council.
  It is hard to overstate the damage these actions by Russia and China 
have done to them, but it is also hard to overstate the damage that has 
been done to the Syrian people, with Russian equipment being supplied 
constantly, Iranian boots on the ground helping to set up torture 
centers, and continued encouragement of Bashar Assad to remain in 
power.
  I am not here to again critique this administration's abysmal record, 
but isn't it ludicrous--isn't it ludicrous--to base your entire policy 
toward Syria on the belief that somehow the Russians would convince 
Bashar Assad that he should leave Syria? Isn't it foolish to somehow 
base your policy and nonintervention on the belief that somehow the 
mission of a former Secretary General of the United Nations would 
succeed when it was clear the Syrian people were not going to be 
satisfied with the continuous barbarous regime of Bashar Assad, and 
certainly Bashar Assad was not going to give up?
  It is clear through Iran's actions that its rulers are playing for 
keeps in Syria, and they will stop at nothing to prevent the fall of 
Bashar Assad. Why are the Iranians so committed and involved? The words 
of General Mattis, the Commander of U.S. Central Command, described it 
before the Senate Armed Services Committee when he said that the fall 
of Bashar Assad would be ``the greatest blow to Iran in 25 years.''
  So the United States does have more than a humanitarian interest in 
what

[[Page S5935]]

happens in Syria. In fact, if Bashar Assad falls, Syria loses its 
position as far as Lebanon is concerned, the Lebanese people have an 
opportunity to lose their client status of Syria, and Hezbollah absorbs 
a serious blow because they lose their patron in Syria.
  So the fall of Bashar Assad is not only a victory for the force of 
democracy and freedom, but it would also mean a significant--a 
significant--advance in our interest in the region as our major concern 
today remains the Iranian continued development of nuclear weapons. The 
path they are on sooner or later may provoke an attack by either Israel 
and/or the United States of America.
  I say that with some authority because the President of the United 
States, President Obama, has appropriately said it would be 
unacceptable for Iran to acquire nuclear weapons.
  I have been, along with my friend Joe Lieberman, to a refugee camp in 
Turkey on the Syrian border. There have now been thousands and 
thousands of additional residents there who have had to flee the 
brutality of Bashar Assad inside Syria. I met young men who were 
freshly wounded. I met defectors from the Syrian Army who described how 
they are instructed--they are instructed and indoctrinated to rape, to 
murder, and to torture. I met individuals who have watched their 
children murdered before their very eyes, and I met a group of young 
women who had been gang raped.
  I wish every American could have had the opportunity to see these 
people whose only reason--only reason--to rise up is because they want 
to achieve their God-given rights.
  What is going on now in Syria is very important, because the longer 
the conflict drags out, the more jihadists and foreign fighters and 
extremists come into the fight.
  Every day that goes by that Bashar al-Assad is in power is another 
day which will make it more difficult once he leaves--and he will 
leave, but the question is when--but how difficult it will be for Syria 
to knit their country back together and become a functioning democracy.
  There is also a very serious issue of chemical weapons. It is well 
known, and for the first time recently, the Syrian government 
acknowledged that they have stores of chemical weapons. These chemical 
weapons pose a great threat in a very unstable region. There are 
various scenarios that we should be deeply concerned about. One of them 
is that if chemical weapons fall into the hands or shift to Hezbollah, 
what kind of a threat does that pose to Israel? I remind my colleagues 
that Hezbollah has committed to the extinction of the State of Israel, 
as has Iran.
  So what happens with these chemical weapons is a very important 
issue. The more chaos and the more disorder and the more frustration 
and anger that is displayed on both sides, the more likely it is that 
these chemical weapons can fall into the wrong hands, and they are not 
located in one place.
  So there is a great deal at stake. There is one thing I hope we could 
all agree on; that is, the longer it lasts, the greater the danger, the 
greater the chaos, the more killing, the more rapes, the more murders.
  Today we have information that the President of the United States has 
made a decision--and I am not sure of the details because I only know 
the media reports, but the best way to describe, as I understand it 
is--to facilitate the flow of weapons to the Syrian resistance 
fighters. I don't know how that is done. I don't know how that is 
accomplished, but I do know this, that they also need a sanctuary. They 
need an area that is secure, the same way the Libyans needed Benghazi, 
so they can train, equip, and establish a government.
  The resistance, as we all know, is fractured. The best way to join 
them together is to have a central council they can answer to and that 
can make sure the weapons go to the right place. That is a vital 
component that should happen sooner rather than later.
  None of us seeks to put American boots on the ground for a whole lot 
of reasons. I know the American people are war-weary and focused on our 
own domestic challenges. Both of these sentiments are genuine and 
legitimate. But what has unfolded in Syria over the past 1\1/2\ years 
not only offends the conscience of our country, it also poses real and 
growing risk to our national security interests and to those of some of 
our closest allies.
  I don't believe Bashar Assad can last, even under current conditions. 
But I do know for sure America's national security interests in Syria 
will remain long after Assad's fall. In many ways, they could become 
more precarious because of our inaction, because of the failure of the 
President of the United States to speak up for these people. Why 
doesn't the President of the United States speak up for them? I have 
never understood that.
  Because of our inaction, the people who will inherit the country in 
Syria will remember that in their hour of greatest need, when the 
bravest among them were fighting and dying for their freedom in a 
grossly unfair fight, America stood idly by and refused to help.
  As the sister of a fallen opposition fighter in Syria recently 
remarked, ``When we control Syria, we won't forget that you forgot 
about us.'' Millions of her fellow Syrians share that sentiment.
  If we continue on this path of inaction, mass atrocities will 
continue to unfold in Aleppo and other places in Syria. We have the 
power to prevent this needless death and advance our strategic 
interests in the Middle East at the same time. If we don't, if we 
continue this shameful behavior, our failure of leadership will haunt 
us for a long period to come.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. BLUMENTHAL. Mr. President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                             THE DREAM ACT

  Mr. BLUMENTHAL. Mr. President, I hope that many of my colleagues, in 
returning to their home States for the August recess, may have an 
opportunity to attend a citizenship ceremony. I do so regularly when I 
go home. During the July 4th break, I had the wonderful opportunity to 
attend several. These ceremonies can occur in courthouses or in 
townhalls. They swear the oath and are newly made citizens. They are 
accompanied by families and friends. It is a uniquely joyous and proud 
day in their lives. Many have waited years to become U.S. citizens, and 
they do so not only willingly but joyfully. There are tears in many of 
their eyes, and there are tears in my eyes as well because it recalls 
to me the day many years ago, decades ago, when I first attended such a 
ceremony, which in turn recalls for me the stories of my own relatives 
who came to this country from other shores. So did many of the parents 
or grandparents--forebears of we who serve in this body.
  The meaning of citizenship of the United States and the value of 
those rights that come with citizenship are often forgotten or 
unappreciated by many of us who were born in this country. We 
sometimes, unfortunately, take them for granted. But there is a 
tremendous value placed on those rights and liberties by people who 
come to the United States.
  Today I wish to talk about people who come to the United States or 
more precisely are brought to the United States as young people, as 
infants or children, many under 4 or 5 years old, and this country 
becomes the only one they have known. The history of this country is 
their history. They may not even know the language of the country from 
which they came. The language of this country is the only one they 
know, and they have no memories or scant recollections of the countries 
where they were born. These young people are here, and they were 
brought here perhaps by parents who came illegally, but they are here 
through no fault of their own.
  Many of them have achieved remarkably and have contributed 
extraordinarily. Their promise of future achievement is staggering, 
extraordinarily impressive in its potential contribution to the lives 
of their communities--to teaching, to giving back to their 
communities--their contributions in terms of scientific or literary 
accomplishments.
  One such young person is Muller Gomes. I am going to tell his story 
today much as Senator Durbin has told

[[Page S5936]]

other stories on the floor of this Chamber in his steadfast and 
energetic advocacy of a measure called the DREAM Act. I want to follow 
him in engaging this Chamber in this effort. I thank distinguished 
colleagues, such as Senator Durbin, who have been tireless advocates 
for the passage of the DREAM Act.
  The DREAM Act, called by its full name, ``Development, Relief, and 
Education for Alien Minors,'' should be a top priority for this 
Congress. States such as Connecticut have passed their versions of it, 
but a national and uniform effort is essential. Much as we hope and I 
support that we will have comprehensive immigration law reform, I also 
believe the DREAM Act is an idea whose time has more than come. We 
should be adopting it as soon as possible in this Chamber to provide 
the kind of certainty and promise that is so important to young people 
like Muller Gomes.
  Muller Gomes was brought to this country from Brazil when he was 5 
years old. He came with a tourist visa in 1995. The tourist visa 
expired a year later, in 1996, so he has been here without proper 
documentation since then. He has been through the Bridgeport public 
schools, Central High School in Bridgeport, and then he went to 
Fairfield University.
  This is this young man at his graduation from Fairfield University--
his graduation summa cum laude. He was a member of Phi Beta Kappa, Pi 
Mu Epsilon and Sigma Xi. He won the American Chemical Society 
Outstanding Senior Chemistry Major Award, and he has been accepted at 
the University of California at Berkeley's physical chemistry Ph.D. 
program.
  All that he lacked was a student visa to pursue his studies at UC 
Berkeley. He lacks a student visa, and if he returns to Brazil to seek 
one, he will be denied it because he has been undocumented in this 
country.
  If there were ever a catch-22, Muller Gomes is its poster child under 
our current immigration law. Under current law, that student visa will 
be denied him. Fortunately, on June 15, 2012, the Obama administration 
made a very strong statement of support for young men and women like 
Muller Gomes. They issued a regulation or a directive that will permit 
him to remain in this country. That directive is lacking in a number of 
respects compared to the DREAM Act. It will be temporary--only for a 
couple of years. It is not a path to citizenship, as the DREAM Act 
would provide. It does not make him eligible for the kind of financial 
aid he would need. Most importantly, it requires him to go through the 
stress and uncertainty of applying again for deferred action. It is 
only a deferral of deportation.
  So the DREAM Act remains a vitally important measure for literally 
thousands of young people--between 11,000 and 20,000 young people 
living in Connecticut who would benefit from the DREAM Act and 2 
million young people nationwide. Under the DREAM Act, they would comply 
with rigorous standards and requirements--lack of criminal record, 
criminal history, and they would in effect be provided this pathway to 
citizenship because of their promise and their potential for 
contributing to this country--in Muller Gomes' case, the potential for 
contributing to this country as a scientist who would make new 
discoveries, perhaps breakthrough discoveries that would benefit the 
entire country. We laud young people like him who are motivated and 
smart and dedicated to this country.
  I am committed to comprehensive immigration reform achieved through 
bipartisan congressional action. That ought to be one of our immediate 
goals so that young people like Muller Gomes, brought to this country 
as children through no fault of their own, will have the opportunity to 
contribute to this Nation and be part of their communities, as the 
DREAM Act would provide and as comprehensive immigration reform would 
also achieve. But in the meantime, let's pass the DREAM Act so these 
dreamers, such as Muller Gomes, will have the basic guarantees and 
certainty that they can remain in this country and that the promise of 
the greatest Nation in the history of the world will be truly theirs 
and irrevocable. This country will be theirs regardless of religion, 
race, gender, or any of the arbitrary labels we say consistently and 
constantly should have no place in our judgments about human beings.

  Our Nation will be better because Muller Gomes will be with us and 
our Nation would be better still if the millions like him have the 
security and certainty of a path toward citizenship--a path that will 
benefit them and benefit the greatest Nation in the history of the 
world.
  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.
  The PRESIDING OFFICER (Mrs. Shaheen). The Senator from Rhode Island.
  Mr. REED. Madam President, I ask unanimous consent that the quorum 
call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                             Cyber Security

  Mr. REED. Madam President, first, let me express my disappointment 
that my colleagues on the other side of the aisle blocked consideration 
of vitally important cyber security legislation. The Secretary of 
Defense, when asked about a potential threat to the United States, 
declares emphatically that his biggest concern is that the next Pearl 
Harbor will be a cyber attack upon the United States and if we cannot 
at least fully debate, amend the bill, and pass the bill, then I think 
we are not performing up to the expectations of the American people.
  So I am very disappointed that we were not able to complete this 
legislation in a timely fashion this week and give the necessary tools 
to our national leadership to protect the country against potential 
cyber threats.


                     Federal Housing Finance Agency

  Having said that, I also want to rise today to express my profound 
disappointment in the Federal Housing Finance Agency's decision to 
prohibit the use of principal reduction by Fannie Mae and Freddie Mac 
as one more tool to avoid foreclosure under the HAMP Principal 
Reduction Alternative (PRA).
  As conservator, the acting FHFA Director, Mr. DeMarco, has a duty to 
not only carry on the business of both Fannie Mae and Freddie Mac but 
also to preserve and conserve the assets of both, which FHFA has stated 
repeatedly requires them to minimize losses. At the same time he has 
other statutory responsibilities. Under section 110 of the Emergency 
Economic Stabilization Act, there is a requirement that FHFA 
``implement a plan that seeks to maximize assistance for homeowners and 
use its authority to encourage the servicers of the underlying 
mortgages, and considering net present value to the taxpayer, to take 
advantage of . . . available programs to minimize foreclosures.''
  So there is a clear statutory direction to do all that he can to 
minimize foreclosures while he is also balancing the portfolio and 
minimizing losses to Fannie and Freddie.
  To boil all of this down, FHFA has to minimize Freddie Mac and Fannie 
Mae losses, and pursuant to the Emergency Economic Stabilization Act, 
which passed this Chamber on a strong bipartisan vote of 74 to 25, this 
requirement to protect homes from foreclosure or the people from the 
threat of foreclosure is a strong bipartisan objective. FHFA was 
directed by Congress to throw its weight in favor of avoiding 
foreclosures, especially in those instances in which a policy decision 
may be a close call. I believe that is the plain meaning of ``maximize 
assistance'' to ``minimize foreclosures.'' Maximize assistance--not 
provide assistance but to maximize assistance to avoid foreclosure. I 
would further note that section 110 of the Emergency Economic 
Stabilization Act explicitly permits ``reduction of loan principal.''
  So we consciously gave the Acting FHFA Director the specific tool of 
principal reduction and the specific directive to maximize assistance 
to minimize foreclosure. We did that in the context of the overall 
mission to try to minimize losses of the Fannie and Freddie portfolio. 
But to turn essentially a blind eye to the thousands of Americans who 
are facing foreclosure is to ignore a vital responsibility and a vital 
authority which he has been given.

[[Page S5937]]

  After reading FHFA's July 31, 2012, letter to Members of Congress, my 
impression is that FHFA has done exactly the opposite of what we have 
asked them to do. Indeed, the letter contradicts itself in arriving at 
its conclusion. FHFA states in one part of the letter that it will not 
allow principal reductions under the PRA program. But in another part 
of the letter, FHFA goes on to write,

       Short sales and deeds-in-lieu, which the Enterprises offer, 
     result in principal forgiveness as part of exiting the house.

  In other words, it seems, in their view, principal reduction is 
acceptable in some cases, especially if the owners leave their home.
  Now, I think there are thousands of Americans who are facing huge 
challenges to stay in their homes. It is ironic that FHFA will reduce 
the principal, only after the person actually loses their home. But if 
it, through PRA, allows a person to keep their home, and avoid 
foreclosure, then FHFA will not do it.
  In the same letter FHFA also states that:

       Forgiving debt owed pursuant to a lawful, valid contract 
     risks creating a longer-term view by investors that the 
     mortgage contract is less secure than ever before. Longer-
     term, this view could lead to higher mortgage rates, a 
     constriction in mortgage credit lending or both, outcomes 
     that would be inconsistent with FHFA's mandate to promote 
     stability and liquidity in mortgage markets and access to 
     mortgage credit.

  So forgiving debt is inconsistent with FHFA's mandate, but FHFA 
admits to allowing principal forgiveness in certain cases? Again, let 
me repeat their own words.

       Short sales and deeds-in-lieu, which the Enterprises offer, 
     result in principal forgiveness as part of exiting the house.

  But FHFA also states:

       Forgiving debt owed pursuant to a lawful, valid contract 
     risks creating a longer-term view by investors that the 
     mortgage contract is less secure than ever before.

  Well, how does this make any real common sense? We will forgive 
principal if homeowners are going to get kicked out of their house, 
which presumably upsets the long-term perspective of investors and 
bonds that support those mortgages. But if homeowners are staying in 
their house, we will not reduce principal through PRA.
  Turning to the point of moral hazard, which is implicit in all that 
has been discussed by FHFA, and given that FHFA has blessed principal 
forgiveness in these two instances of short sales and deeds-in-lieu, 
and additionally permits principal reduction as part of the Hardest Hit 
Fund, which also utilizes Treasury incentives, I can only assume that 
FHFA must have found a way to control and avoid moral hazard when they 
want to and use moral hazard as an excuse when they don't want to do 
something.
  Either it is an issue that must be consistently addressed, which they 
don't do, or it is an after-the-fact rationalization for failure to 
pursue a policy which for other reasons they don't want to do.
  Having made these points, let me give FHFA the benefit of the doubt 
here and assume for the sake of argument that FHFA wants greater 
certainty and assurances. I think they said as much when they wrote:

       FHFA weighed these potential benefits and costs, 
     recognizing the inherent uncertainties associated with these 
     estimates, and concluded that the potential benefit was too 
     small and uncertain relative to known and unknown costs and 
     risks to warrant the dedication of additional taxpayer 
     resources to Fannie Mae and Freddie Mac to implement HAMP 
     PRA.

  I have heard a couple of my Republican colleagues talk about how what 
FHFA should be doing is what the private sector is doing, looking to 
the business men and women, who protect their shareholders. In fact, I 
think that is a good place to look for some direction. But what is the 
private sector doing when it comes to principal reduction?
  For one, Laurie Goodman, Senior Managing Director at the Amherst 
Securities Group, a broker/dealer specializing in the trading of 
residential and commercial mortgage-backed securities that performs 
extensive, data-intensive studies to keep its clients informed of 
critical trends in the residential mortgage-backed securities market, 
has testified before the Senate Banking Committee that principal 
reductions are, in her words, ``the most effective type of 
modification.''
  Next, John DiIorio of 1st Alliance Lending, whose clients consist of 
major banks, investment banks, and sophisticated financial 
counterparties, has stated that his clients are in favor of principal 
reduction ``not out of a sense of charity, but because they believe it 
is in their best financial interest to do so.'' In other words, there 
is a very strong business case for principal reduction--a business 
argument, apparently, that FHFA has ignored or totally rejected.
  Finally, when we look at the newest data from the Office of the 
Comptroller of the Currency, we see that banks have granted principal 
reductions on 28.9 percent of the loans they hold, which is up from 
11.5 percent a year earlier. By the way, they also have lower default 
rates than Fannie Mae and Freddie Mac.
  So when we look at the private sector, what they are doing appears to 
be different; indeed, perhaps the opposite, of what FHFA is doing. They 
are going through their portfolios and, in appropriate ways, reducing 
principal not because they want to provide charity, but because it is 
the best way to preserve their portfolio and generate value for their 
shareholders. That is what their business is doing. In fact, they have 
a fiduciary duty to do that.
  So it would appear the private sector seems not only completely 
comfortable with principal reduction, but they, in fact, are doing it 
because it is good for their bottom line.
  Yet, we have FHFA essentially saying, well, we can't do PRA. I think 
this is one of those examples where they just don't get it, frankly.
  If principal reduction provides greater value than foreclosure to a 
private investor, such as these banks I cited, and on top of that keeps 
a family in their home, aren't these the types of decisions we should 
make and we should support?
  The real moral hazard, if there is one, is that FHFA is inexplicably 
choosing not to use every available tool, especially one the private 
sector is already using extensively to help homeowners and investors 
time and time again.
  There are people in this Chamber on both sides of the aisle who say 
we have to run this government more like a business. Well, guess what. 
The businesses are using principal reduction, and FHFA is saying they 
can't do PRA. This is shortsighted and it is wrong. I urge the FHFA to 
reconsider and, in the meanwhile, I am going to continue my efforts to 
do what I can do to help these homeowners who are facing foreclosure.
  It is very difficult--and I know it is for my colleague from New 
Hampshire and my colleague from Utah--to go back home and see a 
homeowner who is struggling with a mortgage that might be 5 percent or 
6 percent, knowing that banks can borrow at less than 1 percent, and 
this homeowner has difficulty getting access to a better mortgage rate 
because he or she is underwater.
  I hope we adopt some of the smarter business practices around here 
and that FHFA leads the way, and I am going to do all I can to ensure 
that outcome becomes a reality.
  With that, I yield the floor, and I thank my colleague from Utah for 
his consideration in letting me speak.
  The PRESIDING OFFICER (Mr. Blumenthal). The Senator from Utah.
  Mr. HATCH. I thank my colleague. He is always gracious and a very 
fine man, and I enjoy serving with him very much.


                             Cyber Security

  Mr. President, I was very disappointed that we were not able to 
proceed with the cyber security bill today. This side had the votes 
against cloture. The reason is because the Senate is not being run as 
an open Senate anymore.
  This is such an important bill. It is not some itty-bitty bill that 
we can call up and foreclose any amendments. In fact, most bills are 
not that are brought to the floor. I think if it were the other way 
around and the Republicans were in the majority and they started doing 
what we have been going through lately--I don't blame Senator Reid for 
this; I know it comes from his caucus. If we were pulling the same type 
of thing, I have to say the Democrats would be in orbit.
  Usually in the Senate we never build a procedural pyramid until after 
there has been a reasonable time for debate

[[Page S5938]]

and open amendments. That is the way it is usually done. In recent 
months--frankly, over the last few years--they call up a bill, file 
cloture as though we are filibustering when we are not, and then tie up 
the parliamentary tree so we can't have amendments, in the greatest 
deliberative body in the world, supposedly. That has been very 
irritating to people on our side.
  I would caution my friends on the other side: This is getting to the 
point where it is becoming a matter of grave concern to everybody and 
irritation to everybody as well. I think we ought to get back to being 
the Senate that we all know works better if we respect both sides and 
their ability to come up and say what they need to and bring the 
amendments up that they feel are good amendments.

  But be that as it may, that is the way it is right now. We have to do 
the cyber security bill. Everybody knows that. The fact that cloture 
was not invoked does not mean we shouldn't return to that bill and put 
the time into it and make sure we resolve the conflicts that have 
arisen, some of which are very important suggestions, and allow the 
type of proceeding that the Senate has always been known for.


                            Value-Added Tax

  I wish to change the subject. Recently, there has been some 
commentary about the lack of substance in our political debates. This 
concern, that Washington has failed to confront our deepest political 
challenges, which are, in large part, fiscal challenges, is not without 
some merit. But I would add one caveat to this analysis. It is not for 
lack of trying on the part of Republicans to have a grownup debate 
about our Nation's fiscal and economic future. Republicans are putting 
forward real ideas about tax and entitlement reform with real numbers 
attached. However, I would submit that only one side has put a team on 
the field for this debate. When it comes to putting forward solutions 
to our nearly $16 trillion of debt and our archaic Tax Code, the 
President and his Democratic allies have largely stayed on the 
sideline. Instead of offering up bold proposals to bring down the debt 
that has ballooned, given the President's commitment to ever larger and 
more active government, they have determined to give the American 
people talking points that attack the wealthy and successful small 
businesses in the name of equality.
  Given the fiscal cliff threatening America's families and businesses, 
this decision to put politics above solutions is madness. But there is 
a method to it. The fact is the President and his liberal allies are 
not able to put forward serious solutions because they are between a 
rock and a hard place. The rock is their base--a liberal minority that 
refuses any meaningful reforms of the spending programs that are 
bankrupting our country. The hard place is the vast majority of the 
American people who flatly object to the massive tax increases, and 
especially those 940,000 small businesses that would be hit the 
hardest. Of course, those massive tax increases would be required to 
finance on a permanent basis the President's commitment to larger 
government.
  The bottom line is that the President is unable to come clean. He 
cannot tell the American people what the true tax bill would be for his 
expansion of government. He suggests that our books can be balanced by 
taxing the rich. We all know that is poppycock. Hence his commitment to 
the Buffett tax and other redistributionist schemes that have been 
pursued by the Senate's Democratic leadership over the past 2 years as 
though they are serious. Give me a break. No serious person believes 
the Obama administration's government can be financed simply by going 
after the so-called wealthy. The only way to do it is by going after 
all Americans and raising taxes on all citizens. That is the silent 
plan the President will not discuss on the campaign trail. That is the 
Democrats' phantom budget. And that is what I want to discuss today.
  When it comes to addressing our deficits and debt, only one party in 
Washington has been willing to put its cards on the table. Only one 
party has been willing to acknowledge the difficult choices that have 
to be made. The other side has refused to provide any concrete 
solutions of their own, while demonizing anyone who has had the 
temerity to propose anything resembling a workable solution.
  A case in point. It has been more than 3 years--3 years--since the 
Senate, which has been under Democratic control the entire time--passed 
a budget resolution. Those budget resolutions are mandatory. Yet they 
blindly ignore it. Three years--three years--without a budget. Four 
years ago, if someone wrote a novel or a screenplay about a Senate 
majority that refused to pass a budget for 3 years, people in both 
parties would have laughed and called it absurd. Yet here we are 3 
years later.
  In fact, the only budget proposals from the Democrats have come from 
the White House and they have been anything but serious. According to 
the CBO, the President's most recent budget would keep the United 
States on the same unsustainable path, with an ever-widening gap 
between revenues and spending, varying from 8.7 percent to 2.5 percent 
of GDP, and averaging 3.2 percent of GDP.
  We should keep this in mind when we hear the President and his allies 
suggest we can get our debt under control simply by raising taxes on 
the wealthy. The President raises plenty of taxes on upper income 
individuals and small businesses in his budget. Yet under the 
President's budget, debt held by the public would still reach 76.3 
percent of GDP by the end of the budget window.
  Even the President's budget, which raises taxes significantly, comes 
in with a debt limit that is well above what leading economists such as 
Kenneth Rogoff and Carmen Reinhart consider the danger zone of 70 
percent. The President claimed a few weeks ago that his biggest failing 
over the last 3 years was that he cared too darn much about policy. If 
only that were true. But the fact is he ignores the policy experts and 
their warnings when it comes to the debt.
  Consider what CBO Director Elmendorf wrote to House Budget Committee 
Chairman Paul Ryan regarding the debt earlier this year. I have to say, 
Mr. Elmendorf is a Democrat, but I found him to be extremely 
trustworthy and honest. Here is what he wrote:

       Budgetary policies affect the economy in a variety of ways 
     . . . All else being equal, scenarios with higher debt tend 
     to imply lower output and income in the long run than do 
     scenarios with lower debt, because increased government 
     borrowing generally crowds out private investment in 
     productive capital, leading to a smaller stock of capital 
     than would otherwise be the case.

  Director Elmendorf continues:

       Moreover, that same crowding out leads to increases in 
     interest rates, raising the government's interest payments 
     and therefore further boosting government deficits and debt. 
     A perpetually rising path of debt relative to GDP is 
     unsustainable.

  That is what our CBO Director, a Democrat, says. Again, I will vouch 
for the fact that he is a very good economist who, as far as I have 
seen over all of these years I have worked with him in Washington and 
watched him help our committees, is totally honest.
  No one can legitimately dispute that our entitlement programs--
Medicare, Medicaid, and Social Security, in particular--are the major 
forces driving our future national debt. No one can dispute that.
  This chart I have in the Chamber, produced by the Bipartisan Policy 
Center, shows the cannibalization of the budget and ultimately the 
American economy if we go with the status quo on health care 
entitlements.
  Look at this blue line on the chart: health care spending. Under the 
questioning by Members of Congress, leading Obama administration 
economic policy officials, such as Treasury Secretary Geithner, 
basically demur on dealing with the runaway entitlement spending. You 
can see, it is running away.
  In February, Secretary Geithner identified to House Republicans that 
the administration was putting forth no plan to reform entitlements, 
but, as he said: ``we know we don't like yours.''
  The only official proposals we receive from the President and his 
administration would simply maintain the status quo--a status quo that 
is so unacceptable that not one Member of the House or the Senate 
supported the President's budget, not one in either body.
  So what proposals do Senate Democrats support?
  Keep in mind, this blue line on the chart is the health care spending 
line. The red line shows Social Security, which is relatively flat. It 
goes up a little bit. That is the Social Security

[[Page S5939]]

line. The green line happens to be discretionary spending, which has 
gradually come down--or will come down from 2012 to 2052, according to 
what we are trying to do. Other mandatory programs are pretty much 
even. But health care spending is running out of control. That is 
Medicaid and Medicare and all the other health care spending--but 
especially Medicaid and Medicare.
  What proposals do the Senate Democrats support?
  On that, they prefer to keep the American people guessing. Perhaps 
the President will keep the American people in the dark until he 
possibly gets ``more flexibility.''
  Democrats have not been willing to put their vision down on paper. By 
comparison, there is the budget put forward by Paul Ryan. Unlike the 
Democrats who are hiding the ball from the American people, Republicans 
have not been afraid to talk about the Ryan budget.
  This is a comparison of budgets on this chart. The Ryan budget 
constrains Federal spending and keeps it close to its historic average 
at 21 percent of GDP. Here is the House Ryan budget, as shown on this 
chart in the red. By exercising that spending discipline, the budget 
pulls the deficit down to 1.7 percent of GDP.
  By comparison, President Obama's budget deficits are at 3.2 percent 
of GDP, on average--nearly double those of the Ryan budget.
  When you boil it down, there is $3.5 trillion more in deficit 
reduction in the Ryan budget than in the President's budget, which is 
represented by the blue line on the chart. There is a $3.5 trillion 
difference between these two. That is how much the Federal Government 
currently spends in 1 year.
  Because of the President's failure to tackle runaway entitlement 
spending, that yawning fiscal gap between the two plans only gets much 
bigger in the outyears.
  As you can see right here on this chart, look at how health care 
spending is going up in these outyears, from 2012 all the way to 2052. 
As you can see, it is constantly going up from 2012.
  Whether we are debating the budget or the debt ceiling or 
Taxmageddon, one thing is clear: The President and the Democrats in 
Congress do not like to talk in specific numbers. Instead, they want 
the American people to measure specific Republican alternatives like 
the Ryan plan against a series of campaign speeches and attack ads.
  The current fiscal debate is between the Ryan budget and a phantom 
Democratic budget. Apparently, the Chicago campaign sharpies have 
determined it is safer to wait until after the election to finally 
unveil the details of the phantom budget, which just in health care 
spending is going to go forever up and eat our country alive. And their 
advice has been heeded by the Democrats.
  If your proposals are never written down, no one can check your math. 
We do not know the actual fiscal position of my friends on the other 
side of the aisle, but we can fill in some blanks.
  We know by their vicious attacks on the spending restraints in the 
Ryan budget and other Republican proposals that the President and his 
allies in Congress have no interest--zero; no interest--in reducing 
spending.
  We know their income tax proposals do not add up to much in terms of 
revenue. Even if they let the entirety of the current tax relief 
expire--which is a distinct possibility given the game of chicken they 
are currently playing with the fiscal cliff--there probably is not 
enough money to be found in the income tax to pay for the coming 
explosion in entitlement spending. You can see it right there on this 
chart in health care alone.
  So where does the Democrats' phantom budget find the fiscal juice to 
fill its structural hole? The answer is simple: a European-style value-
added tax, the VAT, or its green cousin, a carbon tax.
  I am quite certain my colleagues on the other side of the aisle will 
write this off as fear-mongering and fabrication. But what other 
conclusions are left to draw?
  Without significant reductions in spending or reforms in our 
entitlement system--neither of which we can expect from this President 
or the Democrats currently in Congress--there is not enough money to be 
found in traditional revenue streams to cover the President's spending 
bill. A VAT, a value-added tax--or some other euphemized form of a 
VAT--appears to be the only option left to our friends on the other 
side of the aisle if they want to continue spending at current 
projections.
  Many prominent Democrats have expressed some level of support for the 
value-added tax in the past. In 2009, during an appearance on the 
Charlie Rose show, then-House Speaker Nancy Pelosi said that a VAT was 
``on the table.''
  A year later, President Obama, in a CNBC interview, expressed a 
willingness to consider a VAT to address the deficit.
  Countless high-profile Democratic strategists and advisors--people 
such as John Podesta and Paul Volcker--have unapologetically suggested 
implementing a VAT in the United States.
  Ezra Klein, a writer with real cache among liberal Democrats, 
expressed similar views in the Washington Post in 2009. Here is a 
revealing quote from Mr. Klein's article:

       First, a simple fact: Tax rates will rise over the next 
     decade. Even with painful spending cuts, tax rates will rise. 
     At some point, taxes have to come further into line with 
     spending, and that means the direction they will travel is 
     up. But--and this isn't a fact--they won't rise within the 
     current system. People don't trust the current tax system. It 
     feels opaque and unfair, largely because it is. An increase 
     in revenues will have to come alongside a change in the tax 
     system. And the change in the tax system that most economists 
     prefer and that most other countries use is a value-added 
     tax.

  I agree with Mr. Klein that our current tax system is a mess. But 
while he and other liberals see that as an opportunity to seek larger 
pots of tax revenue elsewhere, my fellow Republicans and I see it as a 
call to reform the Tax Code.
  And we disagree on the fundamental assumption behind Mr. Klein's 
arguments. Like most of my friends on the other side, Mr. Klein takes 
at face value the benefits of future spending. Notice how he uses the 
phrase ``taxes will have to come further into line with spending.''
  His focus is almost entirely on the revenue side, with only a passing 
reference to the possibility of reducing spending.
  A VAT would increase Federal revenues, but it would also effectively 
be a tax hike on every American, including those who currently pay no 
income tax. If a VAT were imposed on top of our existing income tax 
system, it would likely cripple our economy by imposing new costs on 
virtually every purchase of goods and services in the United States. It 
would hamper manufacturing and kill entire retail sectors. Worst of 
all, it would be the most regressive tax ever imposed on the American 
people, disproportionately impacting families with lower incomes who 
spend a higher percentage of their wages on necessities.
  Simply put, a VAT would be bad policy in a strong economy. But in the 
midst of a slow economic recovery, it would be tantamount to economic 
suicide. It would be jet fuel for larger and larger government.
  Numerous studies, including a 2010 study by former CBO Director 
Douglas Holtz-Eakin, have demonstrated that in virtually every 
instance, the implementation of a VAT in other industrialized countries 
inexorably led to increased spending and an expansion of government.
  Make no mistake, the current administration and my Democrat friends 
know only one way of engaging in fiscal reform--broaden the base. And 
every middle-income family in America should know that they will get 
hit with higher taxes to pay for the Democratic goal of ever-expanding 
government control over our economy, over our lives, and over your 
paychecks.
  The contention that implementing a VAT would make our government more 
fiscally responsible is a dog that just won't hunt. The purpose of a 
VAT would not be to shore up deficits and pay down debts, but to expand 
the government into new areas backed by an all-new source of funding.
  Once again, I am quite certain that virtually all of my Democratic 
colleagues would publicly deny that their phantom budget includes a 
VAT. For now, they want us to ignore the VAT behind the curtain and 
instead listen

[[Page S5940]]

as the Great and Powerful Oz proclaims that every government program 
can be funded and every budget balanced simply by eliminating the so-
called tax cuts for the rich.
  But the American people are not so easily duped. And they are showing 
up at Emerald City looking for real leadership and real answers, not 
just talking points.
  That is the real choice facing the American people today. They can 
choose the fiscal leadership of those such as Chairman Ryan who have 
put forth actual, real-world proposals to bring about reasonable 
restraints on entitlement spending and maintain taxation at its 
historic levels, or they can choose the President's impersonation of 
fiscal leadership, which is built on a phantom budget and large-scale 
attacks on anyone, such as Chairman Ryan, who offers a real, verifiable 
alternative.
  But let's be clear. The phantom budget simply cannot translate into 
reality without collecting taxes that go far beyond those the President 
and congressional Democrats publicly support. Given the limitations on 
existing revenue streams, a value-added tax, even with all of its many 
drawbacks, is one of very few logical alternatives left to the other 
side. If they do not plan on instituting a VAT, they need to come clean 
with the American people and let everyone know how they plan to pay for 
their outsized spending.
  Regardless of who wins this election, Congress will have to do more 
than just click its heels and wish for enough money to pay all our 
bills. Therefore, I think it is fair to assume that, in lieu of a line 
item for ruby slippers, the Democrats' phantom budget includes levels 
and forms of taxation heretofore unseen in the United States. You can 
be sure that if it is not a VAT, it will be something equally damaging 
to our economy.
  Let me end with one other thought; that is, that we all know, 
according to the Joint Committee on Taxation, of which I am a member--
but it is a nonpartisan committee run by very good economists--the 
bottom 51 percent of all households--not just people; all households--
do not pay a dime of income tax.
  We have brought that about out of compassion for them, I have to say, 
but it means the upper 49 percent are paying for just about everything. 
Well, my friend Treasury Secretary Geithner pointed out: But, yes, they 
pay payroll taxes. Well, we all do. That is Social Security. They do 
not pay a dime of income taxes. I was quick to point out to Mr. 
Geithner that 23 million of them, approximately, get refundable tax 
credits from the government that are more than they pay in payroll 
taxes, so they are really not paying payroll taxes. Almost 16 million 
of them get refundable tax credits from all of us others out there, 
from the government itself, which is more than they and their employers 
pay in payroll taxes.
  The fact is, I fail to understand why my friends on the other side 
are looking for ways to spread the base to an unsuspecting 51 percent 
who currently do not pay any real income taxes. I think there has to be 
a better way of spreading the base than doing it through a VAT, which 
in Europe has proven to be a ready way for politicians to increase 
spending over and over without really any inhibition or any real 
inhibition.
  So if what I am talking about today is prophetic, it means without 
question that our friends on the other side want to keep spending. They 
want the Federal Government to keep growing, all at a cost to 
individuals, and they want to do it because that is what has kept them 
in power all of these years, taking all of your money out there and 
claiming that they are compassionate with your money when they are 
unwilling to be compassionate enough to keep living within our means.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Maryland.

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