[Congressional Record (Bound Edition), Volume 159 (2013), Part 1]
[Senate]
[Pages 792-795]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            BUDGET AUSTERITY

  Mr. WHITEHOUSE. Mr. President, I am here because I was on the floor 
the other day and I heard--while I was waiting my turn to speak--
Senator Hatch give a speech. I have the very highest regard for my 
friend, the Senator from Utah, and his speech was very thoughtful. It 
was passionate. It was thorough. I thought it deserved a respectful 
response and so I am here to respond to that and I hope to begin a 
debate or engage in a debate, if not begin it.
  Senator Hatch was talking about the fiscal situation, and he framed 
his remarks with the observation that our $16.4 trillion debt is too 
high and the observation that ``annual trillion-dollar deficits have 
become the norm with the current administration.''
  Senator Hatch is certainly right that debt is too high and annual 
trillion-dollar deficits have indeed briefly become the norm. But I 
would suggest that is not the norm recently because of this 
administration; it is the norm because the economy collapsed.
  We all remember the economy collapsed. To withdraw Federal spending 
from a collapsing economy is only to make things worse. The economic 
collapse created these deficits and, as the economy recovers, we can 
draw them down.
  There is not agreement on that. Some have preached austerity as the 
way forward when the economy collapses. When this began, there was 
lively debate between those who thought

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that stimulating the economy and supporting the economy would be more 
sensible than applying austerity. We are past theory and now we are 
into experience. The experience of foreign countries belies that 
austerity works when economies are collapsing. From Spain to Greece, 
European countries that responded to the economic downturn by slashing 
their budgets are suffering from shrinking economies and persistent 
double-digit unemployment rates.
  A recent IMF, International Monetary Fund, report estimates that 
budget austerity in a weak economy might actually inflict significant 
harm and have a much lower than expected effect on the deficit, 
consistent with the observations in Europe.
  The reason this is this way--I will get into jargon just for a 
minute--economists measure the effects of changes in government 
spending on GDP with a metric called the fiscal multiplier. A 
multiplier of 0.5, for example, means that a $1 decrease in government 
spending would reduce GDP by 50 cents.
  The higher the fiscal multiplier, the worse the impact a cut in 
spending has on the overall economy and, therefore, the lower its 
actual ultimate effect on deficit reduction.
  The new IMF report suggests that in the United States--as in other 
countries that are recovering from the great recession--the fiscal 
multiplier is actually greater than 1, meaning that a $1 reduction in 
government spending shrinks the overall economy by more than $1, doing 
net harm.
  Oxford Economics puts the fiscal multiplier of the United States at 
1.4, which means that for every $1 we cut, we would lose $1.40 in gross 
domestic product. Goldman Sachs, which is not exactly a leftwing 
outfit, has put the multiplier for the United States close to 1.5--cut 
$1; lose $1.50 in gross domestic product. Economists at the University 
of California found that during recessions--and it is important, during 
recessions--the fiscal multiplier in developed countries generally 
falls between 1.5 and 2.
  That complicated economic gobbledygook boils down to this: $1 in 
reduced government spending will reduce gross domestic product by more 
than $1--by $1.40 or $1.70 or whatever the multiplier is--and damage 
the economy without accomplishing the intended deficit reduction.
  Other countries attempted budget austerity during the economic 
downturn. Spain, Greece, and Portugal, particularly, have persistent 
double-digit unemployment--over 26 percent in Spain and Greece--and 
they have anemic or negative economic growth rates. Contrast that with 
the United States, where a more balanced approach to the economic 
crisis yielded an unemployment rate that is still far too high but 
markedly lower than the austerity countries and economic growth of 2.1 
percent, where all the other countries are experiencing negative 
economic growth--Spain, Greece, and Portugal.
  So let's not fault the President and the administration for deficits 
that were caused by, A, an economic collapse and, B, the wise decision 
to avoid the austerity path that has thrown Spain and Greece into 
nearly 27 percent unemployment rates and all three countries into 
negative GDP growth.
  We will need to address the debt more and more as economic conditions 
improve, and Senator Hatch was correct to point to health care expense 
as our biggest national fiscal concern. It would, however, I believe, 
be a misdiagnosis to focus on Medicare and Medicaid as the source of 
the health care spending problem. Indeed, Medicare may be the single 
most efficient health care provider in our entire health care system. 
Medicare is a place where the health care cost problem hits the Federal 
budget because the Federal budget pays for Medicare, but Medicare is 
not the underlying source of the problem. I hope this was what Senator 
Hatch meant when he said ``the problems with the program are 
systemic,'' and when he said the solution is ``structural reforms.''
  I know that one of the leading health care providers in the country, 
one of the best at seeing the health care cost problem as systemic and 
one of the best at addressing it with structural reforms, is the health 
care system in Senator Hatch's home State of Utah, Intermountain 
Healthcare. The Senator has a living example at home that health care 
spending can be addressed through structural reforms, through delivery 
system reforms.
  One example is that just a few weeks ago, Intermountain clinicians in 
Utah were recognized for their work in greatly reducing the number of 
patients who die from sepsis, which is the leading cause of death in 
U.S. hospitals. So it is no small matter. Through a new protocol to 
better detect and treat sepsis, these doctors and nurses brought the 
death rate for septic patients entering through the emergency room down 
from over 20 percent, 5 years ago, to under 9 percent. These advances 
have saved hundreds of lives in Utah, and they are a model to be 
applied by hospitals around the world.
  That is an example of how the real problem in health care is the 
total cost of the underlying system. We pay more for health care than 
any other developed nation. Here is the United States at 17.6 percent 
of our gross domestic product spent on health care. The most expensive 
and least efficient other industrialized nation in the world is the 
Netherlands at 12 percent. Behind it fall France and Germany at 11.6 
percent, Switzerland at 11.4 percent, and England and Japan at 9.6 and 
9.5 percent, respectively.
  If we could simply make our health care in this country as bad as the 
worst other industrialized country in terms of efficiency, if we could 
just meet the standard met by the other least efficient country in the 
world, we would save about $800 billion a year.
  So there is a huge savings opportunity in the health care system for 
all of that extra spending. For that $800 billion a year in extra 
spending that we do, do we get great outcomes? Are Americans healthier 
and better cared for than people in those other countries? Well, 
unfortunately, the answer is not at all. Each little dot represents one 
of the OECD countries. This represents life expectancy from 72 to 84, 
which is a pretty good measure of how good the health care system is, 
if it is making you live longer.
  This represents the cost per person of health care. As you can see, 
virtually everybody is grouped kind of around in here, with reasonably 
good life expectancy between 78 and 82. Japan has actually driven it up 
to 83. It is roughly $2,000 to $4,000 per individual.
  Everybody--I can almost cover them all with my hand. This is the 
United States of America, below all of them in life expectancy, above 
all of them in cost. So let's not pretend there is not a lot of room 
for progress.
  The worst part is that this is the rate of growth of our U.S. health 
care system. Look at this: 1960--I will astound the pages who are 
listening by telling them that I was alive in 1960; I was 5 years old 
then--$27.4 billion. Now it is $2.7 trillion. We spend 100 times as 
much on health care now as we did when I was 5 years old. We blew 
through the halfway point probably back in around 1990. We have doubled 
since then to $2.7 trillion.
  This is what is happening to our national health care costs. This is 
our national health care cost curve. If you think that with this kind 
of a rocketing cost structure, we are going to be able to solve this 
problem by cutting Medicare, that is not going to work. Trying to solve 
that kind of a cost-increase problem by cutting Medicare benefits is a 
losing game. It will cut Medicare away to nothing.
  We have to address the conditions that caused this increase. We have 
to address the discrepancy between us and other nations and, indeed, as 
the Senator from Connecticut who is presiding well knows, the 
discrepancy between different States. His brother is one of the great 
experts on the discrepancy that allows Medicare to pay 2\1/2\ times 
more per patient in Miami than it does for a patient in Minneapolis, 
when the patient in Minneapolis is getting as good or better care.
  We have to be able to get those discrepancies out of the system. When 
we do, when we do it that way, the savings will fall to Medicare and 
Medicaid. Indeed, 40 percent of those savings will go

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into the Federal Government, Medicare, Medicaid, VA, TRICARE, employee 
benefits. It will also help Blue Cross, Kaiser, and United. It will 
help all the private companies that pay for private insurance. It will 
help individuals who have to pay for that skyrocketing cost now because 
we run a system that is 50 percent more inefficient than the least 
efficient industrialized country with which we compete.
  So this is a big deal. It is not just me saying so; some very 
credible folks agree. President Obama's Council of Economic Advisers 
says that you can save annually out of our health care system $700 
billion. The National Institute of Medicine says it is $750 billion a 
year. The New England Health Care Institute estimated that it was $850 
billion. And a well-regarded group that studies health care called the 
Lewin Group, together with George Bush's Treasury Secretary Paul 
O'Neill, has estimated that it is $1 trillion a year in savings to be 
had. So this would look a lot better if instead of $2.7 trillion you 
were spending only $1.7 trillion. And those are the kinds of savings 
that are conceivable, are possible. We really have to focus on that.
  The Commonwealth Fund recently released a report that outlines a 
variety of policies that would accelerate health care delivery system 
reform and slow health care spending by $2 trillion from 2014 to 2023. 
Those are the policy ideas we should be considering because those ideas 
go to the real heart of the cost problem. Going after Medicare benefits 
rather than going directly after the underlying health care cost 
problem reflects a misdiagnosis of the problem. When you have a 
misdiagnosis of the problem, you get the cure wrong.
  Senator Hatch was very thoughtful, and he offered some specific 
proposals. I think the proposals to combine deductibles for Parts A and 
B and the limitation on first-dollar coverage of Medigap plans could 
well fit into a good health care compromise. I suggest we should also 
include letting Medicare use its substantial market power to negotiate 
drug prices just as the VA now does. It is hard to imagine that our 
deficit problem could be as dire as Senator Hatch has described and at 
the same time less important than providing this notorious Federal 
handout to immensely profitable pharmaceutical companies.
  Finally, let me say that Senator Hatch indicated he thought the 
revenue discussion was now done. I would respectfully disagree. The 
revenue discussion is not done. To date, through the Budget Control Act 
and through other measures enacted in the last Congress, we have cut 
the deficit by $2.4 trillion. In rough numbers, we have achieved $1.7 
trillion of that through spending cuts and then the related interest 
savings. In contrast, we have only cut the deficit by $700 billion 
through new revenues, by restoring Clinton-era tax rates for the top 1 
percent of income earners. That is what we have done so far.
  I think it is probably safe to say the tax rate discussion is 
probably done, but we have not even begun to discuss tax loopholes. Why 
should millionaires get more tax benefits against their charitable 
contributions than middle-class families do? Why should a billionaire 
who builds a wing on a museum and puts his name on it get more tax bang 
for his charitable buck than the middle-class family who gives to their 
local church? Is protecting that benefit for high-end charitable donors 
more important than addressing our deficit?
  How about tax subsidies to the most profitable companies in the 
world, the Big Oil behemoths? The American taxpayers have to provide 
money to big and often foreign oil companies. Is keeping Big Oil 
lobbyists happy with subsidies from the American people more important 
than addressing our deficit?
  Should companies and wealthy individuals be allowed to hide their 
money from the tax man in offshore accounts, while working families pay 
their taxes fair and square? Is protecting that tax gimmick more 
important than addressing the deficit?
  How about that carried interest trick that allows hedge fund 
billionaires to treat their income as low-tax capital gains while their 
chauffeurs, gardeners, maids, and executive assistants pay regular 
income taxes? Is it more important to keep that sweet deal running than 
it is to fix the deficit?
  Our friends on the other side cannot have it both ways. They cannot 
say that the deficit is so desperately important that we have to cut 
Medicare, cut food stamps, cut off scientific research, cut the FBI and 
the national parks and Big Bird, for Lord's sake--that is how important 
the deficit is--and then say that the deficit is not such a big deal 
after all, that it is less important than tax breaks for offshore 
corporations, special deals for the pharmaceutical industry, favors for 
high-income Americans that regular families do not get, and subsidies 
to Big Oil.
  It cannot be both things at once. Frankly, even without the deficit, 
many of those tax deals are the things we should get rid of just on the 
merits, just because they are sleazy and unfair and the product of 
Washington insider dealing. We should be rid of them. They cannot be 
more important to keep than addressing the deficit.
  So while there are surely still ways to trim the deficit by improving 
inefficient programs and cutting wasteful spending, let's not say tax 
revenue is done before we have even gotten into the rich trove of tax 
deals and gimmicks that we give away every year through the Tax Code.
  In 2012, corporations benefited from an estimated $127 billion in 
loopholes and special provisions. In addition, the individual income 
tax code permitted over $1 trillion in deductions, exclusions, and 
credits last year--$1 trillion in 1 year. Many of those only benefit 
the wealthiest taxpayers. Overall, there are hundreds of billions of 
dollars a year in tax expenditures that we can use to address the 
deficit.
  My last point on revenues is this: As our friend Kent Conrad, the 
former chairman of the Budget Committee, used to point out, every time 
in recent history that we have had a balanced budget, we balanced it 
with revenues and spending around 20 percent of gross domestic product. 
Our revenues are now at about 16 percent of gross domestic product. If 
we balanced our budget at that level, at 16 percent of gross domestic 
product, it would be the lowest level of Federal spending since 1951, 
when half of the Federal budget still went to the Department of Defense 
and half of American seniors still lived in poverty.
  They say the Republican Party wants to go backward, but do they 
really want to go back to that? That would change our country 
dramatically and for the worse at a time when, even with Federal 
student aid, the cost of college remains unaffordable for too many 
aspiring students, when our energy and technology infrastructure is 
lagging and our transportation infrastructure is crumbling, and when 
our international competitors are making greater investments in 21st 
century innovation than we are.
  Saving money by reforming how we deliver health care is not just 
possible, it is happening around us. A 2008 report from the Dartmouth 
Atlas Project held up some promising examples, predicting that, using 
the Mayo Clinic as a benchmark, the Nation could reduce health care 
spending by as much as 30 percent for acute and chronic illnesses. A 
benchmark based on Senator Hatch's home State company, Intermountain 
Healthcare, predicts a reduction of more than 40 percent.
  So let's get to work, together in a bipartisan fashion, to give 
American families the health care system they deserve.
  Instead of waste and inefficiency, poor outcomes and missed 
opportunities, let's have a health care system that is the envy of the 
world, not an outlier on high costs and low results.
  This approach has a triple benefit: It protects seniors and families 
who rely on Medicare and Medicaid. It improves patient outcomes and 
makes our experience of the health care system better in terms of 
results, and it dials back health care spending and helps protect us 
from that exploding cost.
  The alternative, slashing benefits, does nothing to curb the 
underlying cost problem, and it certainly doesn't

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improve care. It only does one thing, harms seniors and degrades the 
programs they count on.
  During a 2011 Senate HELP Committee hearing that I chaired, Greg 
Poulsen of Utah's Intermountain Healthcare said:
  Intermountain and other organizations have shown that improving 
quality is compatible with lowering costs and, indeed, high-quality 
care is generally less expensive than substandard care.
  Let this be our guiding principle as we work together to ease the 
burden of excessive health costs on both the Federal balance sheet and 
on our fellow Americans' pocketbooks.

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