[Congressional Record Volume 159, Number 108 (Thursday, July 25, 2013)]
[Senate]
[Pages S5958-S5960]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
COMPREHENSIVE TAX REFORM
Mr. HATCH. Mr. President, over the last few years, I have come to the
floor many times to advocate for comprehensive tax reform. I share the
belief of many in Congress that tax reform is a necessary step to
ensuring economic growth and prosperity in the future. This is why, as
the ranking member of the Senate Finance Committee, I have made tax
reform my top priority.
We are now at a crossroads when it comes to tax reform. Before us
there are two alternative paths. The first path is the one we took back
in 1986. It is the path that former House Democratic Leader Dick
Gephardt and former Treasury Secretary James Baker advised members of
the House Ways and Means Committee and the Senate Finance Committee to
take.
As you will recall, they were two critical players in the last
successful tax reform effort. In 2011, at one of our hearings, they
advised us to not mix deficit reduction and tax reform. This was a
joint Senate Finance and Ways and Means Committee hearing. To
paraphrase these two former leaders: Each is a hard enough task by
itself, but doing them together is nearly impossible. That is one path
we can take. The path that separates our tax reform efforts from our
deficit reduction efforts.
In 2011, they both advised us not to mix deficit reduction and tax
reform. They just basically said that each is a hard enough task by
itself, but doing them together is nearly impossible. That is one path
we can take, the path that separates our tax reform efforts from our
deficit reduction efforts.
The other path we can take is to condition tax reform on the raising
of additional revenues. Sadly, that seems to be the preferred path of
many of my friends on the other side of the aisle. I will never fully
understand why, except their propensity to spend. According to many
Democrats in the Senate, there can be no deal on tax reform unless they
get a second significant tax increase this year. We heard just today
from the Senate Democratic leadership that they want the Senate Finance
Committee to use the Senate budget, which included nearly $1 trillion
in tax hikes, as the model for tax reform. Essentially, what they are
saying is that unless they get a big tax hike, we have to keep the tax
system as it is, with all of its complexity, inequities, and
distortions. Right now this position is held by many on the other side
of the aisle, and it is the biggest barrier to fundamental tax reform.
Today, I would like to take a few minutes to examine this position
and to discuss the merits of conditioning tax reform on yet another
significant tax increase. Last October, one of my friends on the other
side put it this way:
Tax reform 25 years ago was revenue neutral. It did not
strive to cut the debt. Today we cannot afford for it not to.
Our national debt today is approximately 73 percent of GDP.
That is nearly double what it was in 1986.
At first glance, this argument may appear to be reasonable. However,
it falls apart under further examination. If my friends on the other
side of the aisle were serious about deficit reduction, they would not
focus their efforts on tax hikes. If they wanted to get a handle on our
Nation's debt problems, they would work with Republicans to address the
main drivers of our debt and deficits, our unsustainable entitlement
programs.
No one who has spent more than 5 minutes examining our Nation's
finances seriously disputes that the main drivers of our current debt
and deficits, and the source of the coming fiscal calamity, are Federal
entitlement programs, especially our health care entitlements, Medicare
and Medicaid.
I have a chart from the Bipartisan Policy Center that tracks the
trend lines on Federal spending. As the chart shows, in the coming
years, health care entitlement spending will overwhelm our Federal
fiscal picture and consume an outsized share of our economy. That is
represented by the top blue line on the chart.
All other categories of major Federal spending either increase at
significantly lesser rates or decline and stabilize. As we can see,
Social Security kind of levels off, discretionary spending--both
defense and nondefense--we have seen that go down. This is other
mandatory programs. As we can see, when it comes to deficit reduction,
getting our debt under control, entitlement reform, that upper line,
that is going off the charts. That is where the bodies are buried. Yet
if you listen to my friends on the other side of the aisle, the problem
is not our entitlement programs. The problem, they say, is that the
American people simply are not being taxed enough.
Of course, the actual numbers tell a different story. Over the last
40 years, Federal revenues as a percentage of the gross domestic
product have averaged roughly 17.9 percent. While in recent years that
number has decreased due to the struggling economy, tax revenues are at
a pace to rise over the historic average and settle around 19 percent
of GDP.
Let me repeat that. Absent any changes in tax law, revenues are set
to rise above historic levels relative to GDP, the gross domestic
product. So despite my friends' claims to the contrary, the root of our
current fiscal crisis is not the lack of revenues, it is unsustainable
spending. More specifically, it is entitlement spending. That is just
health care. That doesn't include some of the others. That is why all
serious bipartisan deficit reduction discussions over the last few
years have included structural reforms to our entitlement programs.
Without significant changes, programs such as Medicaid and Medicare
and Social Security will remain unsustainable. In order to strengthen
and preserve these programs for future generations, we need to reform
them. If we do not reform them, we face a fiscal disaster, and it would
be a terrible disaster for all of our young people living today who are
going to have to foot this bill.
All of the major discussions seeking to reach a so-called ``grand
bargain'' on deficit reduction have come down to a mix of different
policies, but while they have all had different approaches, all of them
have included structural entitlement reforms.
[[Page S5959]]
When I talk about deficit reduction discussions, I am referring to
the Bowles-Simpson plan, the Domenici-Rivlin plan, the negotiations led
by Vice President Biden, the G8 Senate talks, the negotiations between
Speaker Boehner and President Obama, and the so-called supercommittee.
Each of those grand bargain discussions divided deficit reduction
policy issues into four categories. These categories are: No. 1,
discretionary spending; No. 2, nonhealth mandatory spending; No. 3,
health care entitlement programs; and, No. 4, revenue. Those have been
the agreed-upon areas of focus in our deficit reduction efforts. Yet,
if you listen to what my friends on the other side of the aisle have
been saying recently, you will see that their focus is entirely one-
dimensional. We don't hear much talk anymore about addressing
discretionary spending. We certainly don't hear much in terms of
reining in entitlement spending. No, their only focus is on raising
taxes.
More precisely, their most recent argument has been that we have cut
so much spending over the last few years that we are now at a point
where tax hikes are the only viable deficit reduction option. Now, of
course, with the exception of the sequester cuts that took effect this
year, we have not really seen any real spending reductions as of yet,
just promises, which future Congresses could easily undo.
Even though only a small portion of the promised spending cuts has
actually taken place, my friends on the other side of the aisle like to
claim they have all already happened. Still, let's take a look at the
record. Let's assume for a few minutes that all of the recently enacted
deficit reduction is real and take a closer look at what has been done
with respect to deficit reduction categories I referred to earlier.
In the last 2 years two bills have been enacted with the purpose of
major deficit reduction. The first was the Budget Control Act of 2011.
The second was the fiscal cliff deal or the American Tax Relief Act of
2012.
According to the Congressional Budget Office data and consultation
with the Senate Budget Committee, here is what has been done so far:
The category that has been tapped the most is discretionary spending,
to the tune of $1.36 trillion of promised spending reductions over 10
years. Remember, that is over 10 years. Once again, these are almost
entirely promised spending cuts that have yet to be realized. If
history has told us anything, it is that future promises to reduce
spending aren't likely to be kept. They are very unlikely to be kept.
If you don't believe me, look at the efforts by my friends on the
other side of the aisle to undo even the small amount of spending cuts
that are actually in place this year. Indeed, Democrats in Congress
have been actively looking for ways to eliminate the cuts for
discretionary spending. If history is any indication, they may very
well be successful in spite of the promises they made.
Those who argue against these cuts do not want to merely provide
flexibility over how the cuts will occur. They don't want any cuts to
occur even though they are spending cuts relative to a bloated baseline
that was supposed to be only temporarily elevated. Still, if we assume
that against all odds these spending cuts remain in place, we will have
reduced discretionary spending by $1.36 trillion relative to a baseline
of bloated spending.
The next highest deficit reduction category is revenues. Revenues
have been increased by roughly $600 billion over 10 years--part of the
fiscal cliff deal. This includes only the revenues generated by the
fiscal cliff deal. It does not include the $1 trillion of new taxes
enacted as part of ObamaCare.
Unlike the promised discretionary spending cuts I cited earlier, this
revenue number is very real and not just promises. While it may be a
10-year number that can theoretically be changed, history tells us that
once tax hikes are in place, they always tend to stay there.
So of the four deficit reduction categories, we have already taken
significant steps with regard to promised discretionary spending
reductions and actual revenue hikes. Where are we with the other
categories?
As I said, health care entitlement spending is the driver of future
deficit and debt. No one who looks at this seriously disputes this. The
trust funds in Social Security, which are to finance retirement and
disability payments, are on clear paths to exhaustion, with the
disability insurance trust fund scheduled to dry up in 2016. Yet, to
date, very little of our deficit reduction attention has been focused
on entitlement spending. So far we have done absolutely nothing to deal
with unsustainable Social Security promises, and we have done nothing
to address the insolvency of the retirement and disability trust funds.
So far we have reduced health care entitlements by a mere $81 billion
over the next 10 years. That amounts to roughly 4 percent of overall
promised deficit reduction we have enacted. That amount is minuscule
relative to the amount of scheduled spending entitlements over the next
10 years.
Take a look at this chart. We can barely see the red line on the
right side of the chart. That red line stands for $81 billion in
entitlement cuts. If we look at the 10-year spending--as the chart
behind me shows--over the next decade, we will spend roughly $22
trillion on the three major entitlement programs. That is trillion with
a ``t.''
Despite cutting spending and reducing deficits over the last couple
of years, we have only been able to reduce entitlement spending by a
mere $81 billion. Look at that little red line compared to the 10-year
spending on Medicare, Medicaid, and Social Security, which is
unsustainable, and yet nothing is being done by the majority.
By the way, all of those spending reductions have come in the form of
cuts to health care providers. They are cutting out doctors, hospitals,
and health care providers, as if that is going to keep them on the job.
There is a high percentage of doctors who are now ready to retire or
quit and find other ways of living. All of those spending reductions
have come in the form of cuts to health care providers, not structural
entitlement reforms, and they know that is not sustainable. Just that
little bit is not sustainable.
Once again, this approach is at odds with the grand-bargain efforts
we have seen over the last few years. All of those efforts--every
single one of them--put structural entitlement reform on the table.
Yet, to date, my colleagues on the other side of the aisle have been
unwilling to do the same.
As I said, my friends like to brag about all of the promised deficit
reduction they have enacted thus far--even the deficit reduction they
are actively trying to repeal--but they refuse to even entertain a
serious conversation about the main sources of our future debt and
deficit.
So where are we? The Senate Finance Committee is engaged in a
bipartisan effort to reform our Nation's Tax Code and bring some sense
of sanity to our Nation's tax system. Chairman Baucus and I have asked
our colleagues to assist us in this effort by sharing their views on
what elements of the current Tax Code should be preserved. I would like
to thank my Republican colleagues on the Finance Committee for their
input thus far. I have met with every one of them individually on this
issue except for one, and he is meeting with my staff. I really
appreciated their thoughtful comments and advice.
While I remain hopeful that we will be able to move on tax reform
this year, I am disheartened by comments I heard from my friends on the
other side of the aisle. Indeed, many of my Democratic colleagues have
stated that they are unwilling to engage in tax reform without
assurances that it will have to include another massive tax increase.
Once again, their message to the American people is that we have to
keep the current system--which virtually everyone in the country agrees
is a problem--unless the Republicans agree to higher taxes. They want
to hold simplicity in the Tax Code hostage to demands for even more
taxes. They want to hold efficiency in the economy--which stimulates
growth and creates jobs--hostage to demands for the second tax hike of
the year in order to pay for more of their spending and more of their
expansion of government even further. They want to hold competitiveness
of our businesses at home and around the globe hostage to demands that
flowthrough businesses face yet another tax hike--even after having
been hit already at the start of this year.
[[Page S5960]]
My colleagues insist that their demands for higher taxes are all
about deficit reduction. But let's face it. If deficit reduction was
the real goal, entitlement reform would also be on the table. It would
have to be on the table. After all, that is where the money is. That is
where we have a chance to really reduce the deficit. That is where the
future of our young people is going to be killed if we don't attack
that problem now and do it in an intelligent way.
According to my friends on the other side of the aisle, entitlement
reform is not on the table. Despite the stated desire of President
Obama and a number of congressional Democrats for a grand bargain on
deficit reduction, when the rubber meets the road they simply are not
willing to engage in a real discussion about entitlement reform. Sure,
they will talk about cuts to providers and other cosmetic changes to
these programs, and they will talk about modifying cost-of-living
adjustments in Social Security if they get hundreds of billions of
dollars of new tax revenue in return. But at the end of the day
structural entitlement reforms simply are not part of their deficit
reduction equation.
Despite many claims to the contrary, Republicans are willing to
engage, as they have in the past, in a bipartisan grand bargain for
deficit reduction. Ask Senators Crapo, Coburn, and former Senator
Gregg. They voted for Bowles-Simpson. Oddly enough, the remaining
sitting Democratic Senator who voted for Bowles-Simpson has walked away
from the entitlement reform concessions he made and instead has focused
on calls for more revenues and as a result tax reform is being held
hostage.
Republicans and Democrats agree on the importance of tax reform. Our
tax system is in dire need of reform. It is, quite frankly, one of the
major obstacles standing between us and sustained economic growth. Most
Democrats claim they agree with this sentiment, but their desire for
more revenues apparently trumps this belief in the need for tax reform.
Something has to change. As I have said before, we have been
counseled by some of our former leaders not to mix tax reform and
deficit reduction. I think that is pretty good advice, and these are
two of the leaders who helped to put through the 1986 bill. They are
both highly regarded by people on both sides of the aisle here in the
Senate.
Sadly, if Democrats in the Congress continue on their current course,
neither tax reform nor deficit reduction will be possible. Indeed, if
they continue to condition tax reform on additional tax hikes and if
they continue to refuse to engage in a real discussion about
entitlement reform, very little is going to be accomplished on either
front.
This spending game has got to be over. We have to start living within
our means. We on this side of the aisle--and I in particular--have seen
every tax increase amount to more spending, not deficit reduction, so
it is a phony argument. And that is what is going to happen if we are
so dumb as to increase taxes in accordance with the comments of our
leadership on the other side of the aisle that were made just today. It
is unbelievable that they get away with it. It is unbelievable that
after all of these years we have to put up with that type of argument
when we know they are not going to use that money for the appropriate
reasons, and they never have.
One Senator said to me the other day: I just live for the day where
we reform the Tax Code and it is not changed 4 years later by our
friends on the other side of the aisle for the worse. The 1986 bill was
a good bill by any standard. It did a lot of good, but in about 4 years
our friends started to change it. As a result, today we have the
monstrosity we call the U.S. Tax Code that nobody really believes in
and everybody knows is a detriment to our country.
I am very concerned. I think we are going to have to have some folks
stand up on the other side of the aisle. We are willing to stand with
them, and we are willing to solve these problems in ways that will
preserve the entitlement programs. They are not going to be preserved
in their current form if we keep going the way we are. And tax
increases aren't the answer either. We are spending so much, and it
will not be long until we will be in a category with Greece if we don't
watch it.
We have to overcome this because no other entity in the world is
going to bail us out; we have to bail ourselves out. We have to do it
by doing what is right, now, and not by increasing taxes. It means
resolving these problems on a structural reform basis. It will take
good people on both sides of the aisle to do it. I call on my friends
on the other side to get with it. Get real. Quit the tax charade.
We know that is not going anywhere. We also know it is phony to begin
with.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Warner). The clerk will call the roll.
The bill clerk proceeded to call the roll.
The PRESIDING OFFICER. The Senator from Michigan.
Ms. STABENOW. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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