[Congressional Record (Bound Edition), Volume 159 (2013), Part 6]
[Senate]
[Pages 7646-7649]
[From the U.S. 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.

[[Page 7647]]

  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 
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

[[Page 7648]]

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 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

[[Page 7649]]

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 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.

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