[Congressional Record (Bound Edition), Volume 159 (2013), Part 9]
[Senate]
[Pages 12391-12393]
[From the U.S. 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.

[[Page 12392]]

  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.
  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

[[Page 12393]]

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.
  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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