[Congressional Record Volume 159, Number 74 (Thursday, May 23, 2013)]
[Senate]
[Pages S3826-S3829]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SEQUESTRATION
Mr. LEVIN. Mr. President, I wish to start by thanking Senator
Whitehouse who has shown such strong leadership on the issue we are
going to be discussing this afternoon, which is how do we get out of
the sequestration box we are now in. I also wish to thank him for
joining with me in sponsoring the Cut Unjustified Tax Loopholes Act,
which could do so much to address the problems we will be discussing
today, including the need to move forward on solutions to our budget
deficit and to ending sequestration.
I ask unanimous consent that following my remarks, the Senator from
Rhode Island be recognized for his remarks on this subject.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LEVIN. Mr. President, at the beginning of March, when Congress's
failure to reach a compromise on deficit reduction triggered
sequestration, some in Congress were ready to declare victory.
``Sequestration will take place . . . [and] I am excited,'' said one
Member of the House of Representatives. ``It's going to be a home
run,'' said another Member of the House of Representatives. ``This will
be the first significant tea party victory,'' said a third Member of
the House of Representatives.
Well, sequestration may be a victory for the tea party, but it isn't
a victory for the American people. It is not a victory for the men and
women of our military and their families.
Over the past 2 months, the Senate Armed Services Committee has heard
testimony from our highest ranking military leaders, including the
Chairman of the Joint Chiefs of Staff, the Army Chief of Staff, the
Chief of Naval Operations, the Air Force Chief of Staff, the Commandant
of the Marine Corps, and the Combatant Commanders who are responsible
for our forces in Afghanistan and Korea and around the world. Each of
these military leaders told us that continued sequestration will damage
our security and harm the troops they lead.
General Dempsey, the Chairman of the Joint Chiefs of staff, warned
us:
If sequestration occurs, it will severely limit our ability
to implement our defense strategy. It will put the Nation at
greater risk of coercion, and it will break faith with men
and women in uniform.
He warned us that continued sequestration would ``destroy'' military
readiness. General Amos, the Commandant of the Marine Corps, told us:
``Sequestration will leave ships in ports, aircraft grounded for want
of necessary maintenance and flying hours, units only partially trained
and reset after 12 years of continuous combat, and modernization
programs canceled.'' The result, he stated, would be ``a lapse in
American leadership.''
General Odierno, the Chief of Staff of the Army, told us:
Sequestration will result in delays to every one of our 10
major modernization programs, the inability to re-set our
equipment after 12 years of war, and unacceptable reductions
in unit and individual training. . . . It will place an
unreasonable burden on the shoulders of our soldiers and
civilians. . . . If we do not have the resources to train and
equip the force, our soldiers, our young men and women, are
the ones who will pay the price, potentially with their
lives.
The Vice Chief of Staff of the Air Force warned:
Lost flight hours will cause unit stand-downs which will
result in severe, rapid, and long-term unit combat readiness
degradation. We have already ceased operations for one-third
of our fighter and bomber force. Within 60 days of a stand
down, the affected units will be unable to meet emergent or
operations plans requirements.
The Vice Chief of Naval Operations told us:
In FY13, we will reduce intermediate-level ship
maintenance, defer an additional 84 aircraft and 184 engines
for depot maintenance, and defer eight of 33 planned depot-
level surface ship maintenance availabilities. At our shore
bases, we have deferred about 16% of our planned FY13 shore
facility sustainment and upgrades, about $1 billion worth of
work. . . . By the end of FY13 . . . nearly two thirds of the
fleet . . . will be less than fully mission capable and not
certified for Major Combat Operations.
We rely on the men and women of our military to keep us safe and to
help us meet the U.S. national security objectives around the world. We
expect our men and women in uniform to put their lives on the line
every day, but in return what we tell them is that we will stand by
them, we will stand by their families, we will provide them the best
training, the best equipment, and the best support available to any
military anywhere in the world. Sequestration in fiscal year 2013 is
already undermining that commitment to the men and women in the
military and their families.
There may be a few people who, hearing all of this, might still
consider sequestration a ``victory.'' But members of the Armed Services
Committee who have heard the testimony--Democrats and Republicans--
believe the continued sequestration is a grave mistake.
These cuts will damage our military readiness, restrict our ability
to respond when crisis erupts, and restrict our flexibility in
confronting national security threats from Iran to North Korea to
international terrorism. These cuts will cost taxpayers in the long run
because maintaining our military readiness today is far less expensive
than rebuilding our military readiness tomorrow after it has been
squandered.
The devastating effects of sequestration are also felt in other of
our agencies and departments. These effects are going to harm students
and seniors and farmers and families across this Nation. Continued
sequestration will set back our slow climb out of recession, as well as
education and medical research and health care and public safety.
As former Defense Secretary Panetta told our committee in February:
It's not just defense, it's education, loss of teachers,
it's childcare. . . . It's about food safety, it's about law
enforcement, it's about airport safety.
The desire to avoid this outcome is, I believe, bipartisan. That is
why it is so baffling to me that some of our Republican colleagues
still refuse to allow us to take the necessary next step to avert this
continued damage. By refusing to allow a House-Senate conference
[[Page S3827]]
committee to meet--a meeting in which Members of both Chambers and both
parties would work to resolve differences between the Senate- and
House-passed budgets--a few Senate Republicans are objecting to the
search for a solution to sequestration. For reasons I do not
understand, they are objecting now to the normal budget process they
previously urged us on with such energy to follow.
It is truly baffling because 2 months ago we heard from some
Republicans that it was a travesty that we had failed to pass a budget.
They called failure to pass a budget an outrage. Now that we have
passed a budget, a few of our colleagues across the aisle are
preventing us from going to conference so we can work out our
differences with the House and finalize a budget.
Those colleagues want a guarantee in advance of a conference in which
they will get their way on a number of issues or else, they say, they
are going to prevent the conference from even occurring. They want the
rules of the game to guarantee they are going to win even before they
agree to play. The budget resolution is no game, but the analogy is
apt.
I cannot understand the reasoning--I simply cannot understand that
reasoning--but at a time when our national security is challenged on so
many fronts and we face the effects of sequestration that I have
outlined, this is not just illogical, it makes responsible governing
impossible. It is harmful to our Nation. Getting to conference and
working out our differences is simply essential.
I am very much encouraged that some of our Republican colleagues have
come to the floor to point this out. They have spoken forcefully,
admirably, courageously about the need for the Senate to move forward.
They give me hope. Those Senate Republicans who have come to the floor
and urged us to go to conference and urged those who are blocking our
move to conference to remove the blockage have a mission which I hope
succeeds.
I have spoken on this floor on a number of occasions about what I see
as the proper path to sensible deficit reduction, and that is the
reverse of sequestration. A significant majority of Americans believes
we need a balanced deficit reduction plan to dig us out of the hole we
are in. Such an approach would include some additional discretionary
budget cuts, but prudent, prioritized cuts, replacing the hatchet which
is sequestration with a scalpel instead.
Such an approach would include reforms to entitlement programs, and
it would include revenue. Budget experts of all ideological stripes
know additional revenue must be part of our deficit solution. By
closing unjustifiable tax loopholes, such as those my Permanent
Subcommittee on Investigations has outlined in detail on a bipartisan
basis, we can provide tens of billions of dollars for deficit
reduction--deficit reduction that does not require us to raise the
burden on working families or on the men and women in uniform who put
their lives on the line to keep us safe. That kind of revenue will help
us reverse sequestration--part of a solution to this budget crisis we
are in.
A balanced approach to deficit reduction is the approach to the
budget which this body passed on March 24. I hope this position
prevails in conference when we get to conference with the House. I
would hope the Senate position prevails. But I cannot even believe that
Members of this body would consider obstructing the budget process
until they were given a guarantee they could get their way. It is the
wrong way to govern. Most of us know it. You cannot guarantee in
advance of a conference that the conference is going to have your
outcome. If you want to instruct conferees, fair enough, and that is
what the effort has been here on the part of the Democratic majority
leader. But for some Members of this body to insist that unless they
are guaranteed they will get their way in conference or else they are
going to block us going to conference is not the way we are able to get
anything done here. If we all took that position, we would never get
anything done.
This obstruction does a disservice to the men and women who serve in
our military and to the people of this great Nation whom they protect.
Their position is as damaging as it is illogical. I hope they will soon
relent to logic, to the needs of the Nation, and end the objection to
proceeding to conference with the House of Representatives, because
that is the way we can try to work out our differences, finalize a
budget, and take the necessary steps toward deficit reduction and the
end of sequestration.
I thank our Presiding Officer.
Again, I thank Senator Whitehouse. It is his initiative that brings
us to the floor today. It is his initiative which has cast a light in
so many ways on the budget dilemmas we face, but also the solution to
these challenges.
I yield the floor.
The PRESIDING OFFICER. The Senator from Rhode Island.
Mr. WHITEHOUSE. Mr. President, let me first thank Chairman Levin for
the immense amount of work and passion and good thought he has put into
trying to accelerate the day when we can say good riddance to the
sequester. He sees firsthand, as chairman of the Armed Services
Committee, how much damage the sequester is doing to the military, to
the soldiers and sailors and airmen and marines who honor us by their
service, to the talented and loyal civilians who support their efforts.
But families all across the country also are feeling the painful
consequences of this sequester.
Just in my small State, Rhode Island, 8,100 folks have already seen
their weekly unemployment checks reduced by $50. For a family
struggling to get by, losing $50 can hurt. Federal rental assistance
has been eliminated for 500 low-income Rhode Island families, which may
cause some even to lose their homes.
Economy-wide, our nonpartisan Congressional Budget Office estimates
that the $85 billion in sequester cuts this year will cost us 750,000
jobs nationwide. We have 12 million Americans out of work already. Why
on Earth would we want to cut 750,000 more jobs?
As Chairman Levin said, it does not have to be this way. In fact,
Leader Reid tried twice to bring up measures that would get rid of the
sequester, but twice Republicans filibustered. Now they refuse even to
allow the process to go forward that would negotiate a solution through
the regular legislative process. They will not even let us appoint
Senators to negotiate a compromise between the Senate and the House
budgets.
It has been 61 days since we passed our budget, and each time we try
to move the process along, Republicans object. If their rule is: I have
to have it my way before I am willing to enter into negotiations and I
need a guarantee, I would like some of that deal too. I have some
things I feel pretty passionately about, and if they want to play by
those rules, then we should all be playing by those rules. If not, then
let's follow the regular order and let the process of democracy work.
From government shutdowns to Federal default, the other party has a
strategy: to manufacture one crisis after another, each time holding
our economy hostage to demands for radical policies that the vast
majority of the American people reject.
They demand the end to Medicare as we know it. The American people
want no part of that. They demand cuts to Social Security. The American
people want no part of that. They refuse to close a single--not one,
not a single--corporate tax loophole. Well, huge majorities of
Americans want that to happen. But our friends do not care. They are
extremists.
It is not just the American public, by the way, that rejects the
extremist tea party agenda. So do economists. What economists say has
been confirmed in practice by the experiences of other nations that
followed the Republican austerity strategy.
Republicans say budget cuts are necessary to reduce the deficit, but
their fervor ignores the established economic effect that has during a
recovery. Right now, for every $1 we cut, the economy shrinks by more
than $1. Their theory is when you cut $1 in government spending, that
releases the economy to grow more rapidly. Well, the fact is, during a
recovery the exact opposite is true. The way this is measured is
through an economic phenomenon called the fiscal multiplier.
There have been a number of recent studies that try to identify what
the fiscal multiplier is right now, and they range from 1.4 to 3.7,
which means that
[[Page S3828]]
for every $1 you cut, the economy takes a $1.40 hit. There is an extra
40-cent harm for each $1 cut to our national economy.
If this one is right, 3.7, then every $1 cut is $3.70 worth of harm
to our economy. It is a multiplier of damage from government cuts. So
shrink the GDP, which we do if we have a fiscal multiplier of 1, and
collect less taxes. Less taxes means less of the deficit reduction that
is supposedly achieved by the budget cuts. It is a vicious cycle that
could keep our economy weak and our deficits high. We can go backward,
and Europe proves it from Spain to Portugal to Greece.
Countries slashed their budgets and things got worse, double-digit
unemployment and negative growth. We have a U.S. unemployment rate of
about 7.5 percent. That is way too high, but it is way better than 27
percent in Spain, 27 percent in Greece, and 16 percent in Portugal. We
had 2.3 percent growth last year. They had negative growth rates.
Negative growth rates. Their economies contracted.
The evidence from the austerity experiment is in countries that cut
the deepest hurt themselves the worst. As we can see, employment in the
eurozone is worse by about 20 percent since the major austerity
programs kicked in.
Over that same time period unemployment in the United States is
better by about 25 percent. Their policies, unemployment worse by 20
percent; our policies, employment better by 25 percent. A lot of these
Republican calls for harmful U.S. austerity cited a 2010 paper called
``Growth in a Time of Debt'' by Harvard economists Reinhart and Rogoff.
Republicans loved Reinhart and Rogoff. They cited them at least five
dozen times on the House and Senate floors to justify their demands for
budget cuts.
They cannot get enough of Reinhart and Rogoff. It turns out there is
a big problem. There were numerous errors in Reinhart and Rogoff's
computations; math errors, programming errors, dropping a column of
data. Oh, oops. With the fiscal multiplier over 1, the best thing we
can do to accelerate our recovery is to lift the harmful European-style
sequester cuts. The Job Preservation and Sequester Replacement Act of
2013 would do just that, through September 30, giving us time to
negotiate a broader compromise.
Cosponsored by Chairman Levin, Chairman Harkin, Senator Lautenberg,
Senator Merkley, Senator Schatz, and Senator Warren, it would replace
the sequester from the Buffet rule and from closing corporate tax
loopholes, sensible tax changes that on their own we should do because
they make the Tax Code fairer.
The Buffet rule would ensure that multimillion-dollar earners pay at
least a 30-percent effective Federal tax rate. Last year we debated
whether the top income tax rate should be 35 percent or 39.6 percent.
But the fact is that many at the top, people making hundreds of
millions of dollars in a single year, will not pay anything close to
that rate. Why? Because the Tax Code is riddled with special provisions
that favor ultra-high-income earners.
For example, investment income is taxed at the special rate of 20
percent. The so-called carried interest loophole allows billionaire
private equity fund managers to pay this low rate. So many of them pay
the same tax rate or even less than a hard-working average firefighter
or brick mason in Rhode Island making $50,000 a year. So at $200
million a year, they are paying the same tax rate as folks making
$50,000 a year. The Buffet rule follows the common sense that people
earning millions of dollars a year, even hundreds of millions of
dollars a year, should pay higher tax rates than middle-class families.
It would also cut the deficit by $71 billion.
Another loophole, the so-called Edwards-Gingrich loophole, lets high-
earning professionals dodge paying payroll taxes by calling themselves
corporations. We close that too, saving another $9 billion. We save
another $3 billion by going after a deduction that allows private jet
owners to depreciate their planes faster than commercial aircraft are
allowed to be depreciated, another commonsense change.
The fourth part of the proposal would contribute $24 billion to
lifting the sequester by ending tax breaks for Big Oil. Over the past
decade, the five largest oil companies have reaped over $1 trillion in
profits. That is trillion with a ``t''--$1 trillion in profits. While
they are making that massive profit, they nevertheless pull strings in
Congress to keep billions of dollars a year that regular taxpayers have
to cough up for them in tax giveaways. As with all of the elements in
this bill, repealing Big Oil giveaways is something we should be doing
anyway, just because it is the right thing to do.
Finally, we end a tax break for companies that ship jobs overseas.
Believe it or not, the Tax Code allows manufacturers to indefinitely
delay paying taxes on profits in overseas operations. Ending this
unfair and un-American advantage would lower the deficit by another $20
billion. Each one of those five reforms would make the Tax Code fairer
for all Americans. They are each worth passing for that reason alone.
They are embarrassments in our Tax Code. Getting rid of them could stop
the sequester while Democrats and Republicans work together on a
balanced deficit reduction package; that is, of course, if we could get
Republicans to actually work with us and negotiate and go through the
regular order they have claimed for so long to seek, to get to a
balanced and negotiated deficit reduction package.
But as Chairman Levin pointed out, at the moment they refuse to even
appoint conferees to begin the process. They want to be assured they
will have it their way before they even begin to negotiate. As I said
earlier in the speech, if that is the way they are going to behave, I
want some of that action myself. I have many things I feel very
strongly about.
I could be in a position to say I will not allow us to go to
conference either until we are clear that we are never going to do
chained CPI and put that burden on our Social Security-receiving
seniors. I could do that and say we are never going to go to conference
unless I get a guarantee that we are going to get a carbon fee so the
big polluters are paying their share and we are not having to subsidize
what they are doing to our atmosphere and oceans. I could say those
things. Any one of us could say those things.
Mr. LEVIN. If the Senator would yield for a question, if that
position were taken by all of us, that is a guarantee of inaction?
Mr. WHITEHOUSE. That is a guarantee of total gridlock and failure.
That is why it is so important that no one in this body try to use that
kind of hostage-taking extremist tactic, rather than allowing the
regular order to continue.
Mr. LEVIN. Since I have interrupted the Senator, let me ask one
additional question. I notice that even though the Senator's menu
yields $127 billion, that he only requires $85 billion for the 1-year
sequester replacement, which means that, for instance, if just the
Buffet rule were put in place, which is a tax fairness approach, plus
the bottom one, a tax break for offshoring, those two items out of this
menu--and there are many other items which are not on the Senator's
menu, those two items alone could reverse sequester for 1 year?
Mr. WHITEHOUSE. Yes.
Mr. LEVIN. I wish to make one more comment about offshoring. My dear
friend from Rhode Island knows that my permanent subcommittee has done
a lot of work on the tax breaks for offshoring. In addition to what the
Senator said about delaying the tax on profits, under our Tax Code,
companies which move jobs overseas get a tax deduction for the cost of
the moving?
Mr. WHITEHOUSE. They do.
Mr. LEVIN. If they are building a plant overseas, the cost of that
plant can be deducted currently?
Mr. WHITEHOUSE. It can.
Mr. LEVIN. This is perhaps the most stunning thing I have learned
fairly recently. It is even possible under our Tax Code for the cost of
operations of that facility to be deducted currently, while the tax on
the profits or the income of that operation is delayed, which means
they can cut domestic taxes by the cost of running a foreign operation
currently. That takes a little bit of gimmickry to do it, but that is
what is going on. I just wanted to kind of fill in that one little
element of some of these offshore bonanzas, these incredible loopholes
that are in the Tax Code.
As the Senator from Rhode Island said, we should get rid of some of
these
[[Page S3829]]
things even if we had no deficit because, as the Senator put it, they
are embarrassments.
Mr. WHITEHOUSE. Nobody has spent more time and more energy and put
more effort into the way in which American income gets hidden offshore
so people can avoid paying taxes and corporations can avoid paying
taxes than Chairman Levin. He is our expert. There are indeed other
loopholes that are exploited, primarily by corporations but also by
very high-income taxpayers, hiding money in the Cayman islands, putting
assets into Ireland and other tax havens, and refusing to treat them as
American, even though it is nominally an American company. There are
enumerable tricks.
I will close by making one point. Very often people look at what we
are trying to accomplish, and even actually pretty honest reporters
will say the Democrats actually want to raise taxes. That is the fight.
Republicans want to cut spending; Democrats want to raise taxes. No. We
raised taxes once already. We raised the rates for people over $450,000
thousand a year in the last big agreement. What we want to do now is to
go into the Tax Code and close down the loopholes. That is all we are
looking for.
What most Americans do not understand is that if we look at how much
money goes out the backdoor of the Tax Code through loopholes, through
special rates, through exemptions and so forth, it is very nearly the
same amount of money that is actually collected through the Tax Code
and becomes the revenue of the United States of America. We let almost
as much money out the backdoor of the Tax Code as we collect through
the Tax Code. If we take a look at the areas where Chairman Levin has
done so much good research, that money actually never gets into the Tax
Code to go out the backdoor.
If we were to count that, in addition to the money that is allowed
out the backdoor of the Tax Code, there is actually more that goes out
the backdoor of the Tax Code and is avoided coming through the Tax Code
than is actually collected as the revenues of the United States of
America.
So it is a big number. The refusal of the Republicans to let us
attack one single loophole, not one loophole--every loophole is sacred
right now to them--I think is unjustified. I hope the people of America
understand we are not looking at more tax rate increases; we are
looking only at closing these loopholes. It is a rich field to pursue
because more money goes through that than actually gets collected. You
can bet, if you are an average American, that when those loopholes were
being carved into the Tax Code, you were not in the room. The special
interests were in the room.
That is why a lot of people want to defend them. But it is also a
very good reason for making a more honest Tax Code that gets rid of
these loopholes. But our friends want to crisis manufacture. They want
to do crisis manufacture so they can force-feed on all of us bad
economic ideas that Americans do not want. I think we need to resist
that.
I yield to the chairman.
Mr. LEVIN. Again, if my friend would yield, the name of the bill
which the Senator cosponsored is called Cut Unjustifiable Tax
Loopholes.
There are plenty of tax deductions which are totally justified.
Mortgage interest is justified, accelerated depreciation, there are all
kinds of contributions.
Mr. WHITEHOUSE. Charitable deductions.
Mr. LEVIN. These are justifiable tax deductions. What we are talking
about are the unjustifiable ones which shouldn't be there. As the
Senator points out, we are not proposing tax rate increases. The way I
phrase it is I am talking about collecting taxes which should be paid.
Mr. WHITEHOUSE. Yes.
Mr. LEVIN. Not increasing taxes or the rates for taxes, but
collecting the taxes which, in all justice, really should be collected
by Uncle Sam.
Mr. WHITEHOUSE. Let me thank the chairman for allowing me to join him
today. He has shown great leadership in this area, and I am privileged
to be here with him today.
I yield the floor.
____________________