TAXING AND SPENDING
(Senate - July 20, 2011)

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[Pages S4695-S4699]
                          TAXING AND SPENDING

  Mr. SESSIONS. Mr. President, many of our good colleagues like to 
suggest our Nation has historic deficits because the American people 
are not taxed enough. Some claim the so-called Bush tax cuts are the 
culprit, but the numbers tell a different story. In fact, these tax 
cuts were fully implemented in 2003. Annual revenues have increased 
steadily from $1.782 trillion to $2.524 trillion in 2008, and they 
increase every year, for an increase of more than 40 percent. That is 
double the rate of inflation after the tax cuts took effect.
  In fact, since the recession of 2008 and the weakest economic 
recovery in modern history, revenue has now declined. That makes sense. 
With high unemployment there are fewer taxpayers and, naturally, 
revenue declines.
  Going forward, however, the CBO projects revenue as a share of the 
GDP will rise to 18.4 percentage points of GDP by 2021. That is 
assuming extension, not elimination, of the 2001 and 2003 tax 
reductions. Revenue is therefore projected to return to its historic 
18.4 percent average.
  It would seem, then, that the American people are already taxed 
enough to finance a government whose spending has grown wildly out of 
control. The real problem is, while revenue will return to its historic 
average, if nothing is done to slow spending, annual outlays will 
increase from $3.7 trillion today to $5.7 trillion by 2021, for an 
increase of more than 50 percent. As a share of GDP, spending will 
remain, on average, above 23 percent of GDP. That is nearly 3 
percentage points above the historic average.

  Mr. HATCH. Mr. President, I could not agree more with the Senator's 
point on the real driver of our deficit and debt. We have this debt 
because government is spending too much. But this is not a matter of 
personal preference; this is an indisputable and empirically verifiable 
fact. The systemic

[[Page S4696]]

problem this country faces is too much spending, not too little tax 
revenue.
  I understand our friends on the other side of the aisle are in a 
tough spot. They know this, but their left wing base refuses any 
changes to the spending programs driving these deficits and debt. They 
don't want to scare off middle-class Americans by recommending the tax 
increases necessary to close the gap without major changes for spending 
programs.
  When it comes to offering any real plans, they have resorted to 
burying their heads in the sand, as indicated on this photo. They 
choose to ignore the real problem. They hope their friends in the media 
do the same thing--ignore the fact that they are ignoring the problem. 
As you can see from this chart, the problem is spending.
  Mr. SESSIONS. Our friends on the other side of the aisle are almost 
exclusively focused on hitting up the taxpayer for more revenue.
  Mr. HATCH. That is right. They are talking about revenue, but the tax 
increases they are recommending are more distracting than illuminating. 
I think it is fair to say that all of the talk by the President and his 
congressional allies about corporate jets and yachts is a classic red 
herring. On this chart, it indicates this:

       The name of this fallacy comes from the sport of fox 
     hunting in which a dried, smoked herring, which is red in 
     color, is dragged across the trail of the fox to throw the 
     hounds off the scent. Thus, a ``red herring'' argument is one 
     which distracts the audience from the issue in question 
     through the introduction of some irrelevancy.

  Mr. SESSIONS. Well, we use this turn of phrase all the time, but I am 
afraid it is worth discussing how politicians use it.
  Mr. HATCH. As you can see, that is what they are doing. I am glad the 
Senator brought this up. As I just read, my research found that the 
term ``red herring'' comes from the sport of fox hunting. Again, a red 
herring argument is one that distracts the audience from the issue in 
question through the introduction of some relevancy.
  In my view, all of these tax issues that President Obama and those on 
the other side of the aisle are discussing are red herrings. They want 
to distract Americans from the real driver of our deficits and debt and 
the real choices Democrats have to but are refusing to make.

  Let me walk through some examples. If we were to raise the 
depreciable life on corporate Jets from 5 years to 7 years, as the 
Democrats propose, it would yield us $3.1 billion over 10 years.
  Mr. SESSIONS. How many days of debt reduction over that 10-year 
period would a $3 billion savings or increase in taxes amount to?
  Mr. HATCH. To hear the President talk, you would think this is the 
key to balancing our budget. We all know he is overstating the case. It 
would provide only a month of debt reduction is about all it would do? 
Given its essential role in his deficit reduction proposals, you would 
hope so. But I am sorry to disappoint my friend from Alabama, because, 
according to our calculations, that amount equates to only 20 hours and 
23 minutes of the debt over the next 10 years. Unfortunately, that 
doesn't even begin to solve the problem. Of course, as you can see 
here, $13 trillion, the Obama debt; there would be $3.1 billion over 
time with the corporate jet taxes; and remaining above the debt--
assuming they didn't spend more, which is an assumption you can't 
make--would be $12.9 trillion. Is the problem solved? Of course not.
  Mr. SESSIONS. Well, let me say I appreciate the work of the ranking 
member of the Finance Committee, a long-time member of that committee. 
It seems to me pretty clear that the President's budget he submitted 
earlier this year--which I have to say was voted down 97 to 0 in the 
Senate--would have increased the deficit over 10 years by $13 trillion. 
He has also suggested his plan to increase taxes on corporate jets by 
$3 billion would somehow make a difference in that. I think Senator 
Hatch is right, that is not accurate.
  How about other proposals we hear from the Democratic side, such as 
cutting back mortgage interest deduction for yachts used for second 
homes?
  Mr. HATCH. Well, in other words, by our calculations, the savings 
from this proposal would be even more meager. If Congress enacted this 
change, we could cover the debt from the Obama budget for all of 15 
hours and 47 minutes. Again, this is not solving the problems of the 
burdensome debt the President is piling on.
  Mr. SESSIONS. It is shocking to see how small those numbers are, and 
we aren't hearing that in the press and in the national discussions. 
From the talk we have heard about these proposals, you would think they 
would yield more than 2 days of debt reduction over 10 years.
  Mr. HATCH. You would think so. But the other 3,651 days of debt under 
the 10-year Obama budget would not even be touched.
  There is a third red herring that has been thrown out there. Maybe 
that one closes the gap. We have all heard the President talk about 
hitting American oil companies by reducing or eliminating domestic 
energy incentives. This is a real priority of his and of congressional 
Democrats.
  We had a cloture vote on a bill by our friend from New Jersey to 
extract $21 billion in revenue from U.S. oil companies. The Finance 
Committee had a hearing where the other side touted the benefits of 
this tax increase by grilling the CEOs of the top five oil companies. 
If you listened to my friends on the other side, one would think an 
additional $21 billion would solve all our fiscal problems. Their 
rhetoric suggests this is the only thing standing between more money to 
send kids to college and provide school lunches.
  But I wonder if my friend from Alabama might put into perspective how 
much of the 10 years of debt under the President's budget this proposal 
would cover.
  Mr. SESSIONS. Well, with $13 trillion--that is 13 thousand billion--
$21 billion won't amount to much.
  Mr. HATCH. Well, here is how many days of the 10-year debt of the 
Obama budget that would be covered. Keep in mind, this proposal 
originated from our friend from New Jersey, the head of the Senate 
Democratic campaign operation, and his tag teammate, the head of the 
Senate Democratic message operation--the so-called war room--the senior 
Senator from New York. I will let others decide whether this proposal 
was more political than substantive, but people should at least know 
the facts about this proposal before deciding.
  As a deficit reduction proposal, this is very weak tea. This is a 
much ballyhooed proposal, and it would cover the deficit for, in 
actuality, 5 days 18 hours and 47 minutes.
  As you can see, here is the oil rig proposal. We have a $13 trillion 
debt--actually it is about a $13.5 trillion debt right now--and you 
would save $21 billion from the extra taxes on oil and gas. Even at 
that, we would have a remaining debt of $12.9 trillion. So is the 
problem solved? Of course not.
  Mr. SESSIONS. The Senator has served on the Finance Committee for a 
number of years and is now the senior ranking Republican there. If you 
listen to our friends on the other side of the aisle, it would appear 
that all fiscal problems could be resolved by taxing millionaires. Is 
that an argument that the Senator is familiar with?
  Mr. HATCH. Well, I sure am. Anyone watching C-SPAN will see our 
friends on the other side making the argument day in and day out. When 
I hear this argument, I often think of a saying from the distinguished 
former chairman of the Senate Finance Committee, Senator Russell Long. 
When talking about tax reform, Senator Long said: Some might reduce the 
politics to this: ``Don't tax you, don't tax me, tax that fellow behind 
the tree.''
  And since there are a lot more folks who aren't millionaires than 
are, the Democrats have calculated the politics of class warfare works. 
All of our problems could be solved if the rich paid their fair share, 
according to the Democrats. As politics, this might sound--I don't even 
think it sounds good, but as tax policy and its proposal to reduce our 
deficits and debt, this is the fourth red herring. It does not come 
close to fixing the deficit from the Obama budget.
  Our friends on the other side frequently cite the Tax Policy Center--
or TPC--for tax data. That makes some sense. TPC is a professional 
think tank that is a joint venture of two center-left think tanks, the 
Urban Institute

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and the Brookings Institution. With the exception of its director, 
Donald Marron, TPC is largely staffed by highly qualified tax 
professionals who worked in Democratic Treasury Departments and 
Democratic Hill offices. TPC is a solid professional outfit, but you 
can't ignore its institutional perspective. To be fair, I would say the 
same thing about the Heritage Foundation. Their institutional 
perspective is more likely to line up with folks on my side of the 
aisle. Nevertheless, I am drawing from TPC data, some of the 
assumptions with which I might not agree.
  According to TPC models and estimates, for 2011, American households 
earning more than $1 million account for 12 percent of the Nation's 
pretax income, they pay 19 percent of Federal taxes and carry an 
average tax rate of 29 percent.
  Even more critical from my perspective, these taxpayers also account 
for 38 percent of all flow-through income. Flow-through income is 
predominantly earnings from the ownership of small businesses. So 
raising rates on the rich will squarely hit those who create and expand 
the small businesses that need to be the engine of our economic 
recovery.
  But let us be clear about something: Higher taxes on these wealthy 
individuals will not only have adverse economic consequences, it will 
not even provide the deficit and debt reduction suggested by the left. 
Even if all the income--every dime they earned, of those earning more 
than $1 million--were confiscated with a 100-percent rate--with the 
unlikely assumption of no taxpayer behavioral response--for the year of 
confiscation, these higher taxes would yield about $893 billion. That 
would be a one-time confiscation. Surely none of these folks would 
continue to work, save, or invest in the future if the government were 
to confiscate all their income. They would have to cover all their 
other expenses, including State and local taxes, from savings. After 
taking everything from the folks behind the tree--in this case, the 
folks earning more than $1 million--how many days of the 10-year Obama 
budget debt would be eliminated?
  Mr. SESSIONS. Well, not many, is my answer to that. But as often as 
the President talks about taxing the rich or spreading the wealth 
around as a cure for our fiscal problems, you would think it would 
balance the budget. But would he get us there?
  Mr. HATCH. I say to my friend from Alabama, confiscating all the 
income from those earning over $1 million does not even fix 1 year of 
the 10 years of projected Obama debt. It would cover 244 days, 16 hours 
and 34 minutes. That is it. Not even 1 year.
  Look at this. Federal policymakers could kiss that revenue source 
goodbye after an event such as confiscation. So there you are: $13 
trillion. Take the $893 billion. If we took every dime that 
millionaires make this next year, the $893 billion, we would be down to 
$12.1 trillion in remaining debt. Is the problem solved? Of course not.
  Mr. SESSIONS. Going back to the other chart on taxation and spending 
under the Obama budget, I would note President Obama's budget raised 
taxes significantly, increased spending even more, and as a result, 
over 10 years, created more debt projected than if he had made no 
budget at all.
  Mr. HATCH. That is right.
  Mr. SESSIONS. That is a stunning thing. You can talk about raising 
taxes on American workers, on families, on small businesses and on the 
wealthy and investors all you want, but this talk is easy. It ignores 
the root causes of the deficit and debt problem here in Washington: 
out-of- control spending.
  It may sound like a cliche to the American people that Republicans 
are always talking about out-of-control spending. We wish it were a 
joke, but sadly, it is true.
  Mr. HATCH. I wish it were too. I am surprised about this debate. The 
press is not pushing Democrats on what a joke their proposals about 
jets and yachts are, but the American people--the people I represent in 
Utah--understand these are red herrings. These proposals deal with the 
President's legacy of debt for less than 2 days--less than 2 days--over 
the next 10 years. Add in the much-publicized tax hit on the hated oil 
companies and you get another 5 days.
  So after all the demagoguery on jets and yachts and oil companies, 
you get about 1 week of deficit reduction. And even throwing in a one-
time confiscation of all the income for taxpayers earning above $1 
million, you can only add 244 days. Add it all up and there is still 
less than 1 year. All those tax increases don't even get to one-tenth 
of the debt President Obama will add over the next 10 years.
  It is class warfare. We all know that. All the talk from the White 
House and from our friends on the other side is on behalf of proposals 
that would address, at best, less than 10 percent of the debt forced on 
American families by the President's budget.
  I ask my friend from Alabama if he might conclude with the classic 
definition of a red herring.
  Mr. SESSIONS. Let's take another look at the definition of red 
herring on the chart. It says: The name of this fallacy comes from the 
sport of fox hunting in which a dried, smoked herring, which is red in 
color, is dragged across the trail of the fox to throw the hounds off 
the scent. Thus, a ``red herring'' argument is one which distracts the 
audience from the issue in question through the introduction of some 
irrelevancy.
  Our friends on the other side, using White House talking points, 
sophisticatedly prepared, appear to have resorted to red herrings with 
their deficit reduction proposals. They want the American people to 
think a few easy tax increases on the rich or yacht owners or corporate 
jet users or oil companies--the people behind the tree--can solve our 
debt crisis without spending reforms. They hope these red herrings will 
hide a serious Democratic vulnerability. If they are not going to 
address spending in a serious way, then massive tax increases on the 
middle class will be a necessity.
  These red herrings are designed to throw those citizens who care 
deeply about reducing the $13 trillion debt that the President's budget 
will incur off the trail.
  The trail of deficit reduction leads to one of two places: 
restraining out-of-control spending; or crushing tax relief increases 
on middle-class families.
  Restraining spending is not a red herring. It cuts to the heart of 
our fiscal problems. It goes to the root of the problem.
  The President and his allies need to come clean with the American 
people. The President so far has refused to present a deficit reduction 
plan in these negotiations that are going on. He says he has one, but 
we never see it so it can be scored and analyzed. The White House seems 
content to produce cheap talking points justifying these red herrings, 
rather than meaningfully addressing our debt crisis. As I have said 
before, and will again, this shows a disrespect for the American 
people.
  Our people deserve better. They need honest, fair analyses of the 
problems we face. I expect they will reward those who talk straight 
with them and offer serious grown-up efforts to reduce our debt with 
their support; and I think they will be unhappy once it is realized how 
little these proposals would impact the huge debt crisis we are now 
facing.
  Mr. HATCH. I thank my colleague for his kind remarks.
  I have to say that not only would it not impact it, but it would 
impact a lot of jobs.
  I remember when we did the so-called yacht tax back in the early 
1990s, the left thought that was a wonderful thing. We got after all 
these rich yacht owners. When they found out that thousands and 
thousands of jobs were lost because of that bill, they immediately 
turned tail and got rid of the bill pretty quickly.
  What we haven't said is we are assuming the $13 trillion is going to 
stay the same. Actually, in the next 10 years there is a good chance it 
will double to over $20 trillion and possibly as high as $25 trillion 
or $26 trillion the way this administration is spending. Frankly, we 
are going to have a very difficult time ever coming out of this hole we 
are in right now.
  All I can say is I like the President personally, but he hasn't 
presented a program. He is calling on Congress to do it all, and we 
have our various problems here in getting together, but he hasn't led 
out on these programs, and neither have the other people down at the 
White House.
  In fact, one of the problems is I can't name one person at the White 
House

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who has ever created a private-sector job. And let's face it, they are 
good at creating public-sector jobs, but they are not very good at 
creating private-sector jobs.
  The real answer is to work our way out of them, and instead of 
talking about shared sacrifice, let's talk about shared prosperity by 
allowing the engine of this economy, the small business community, to 
pull us out.
  Even so, we haven't even talked about the fact that the deficit this 
year, in 1 year, is $1.5 trillion, $1.6 trillion. I might add that we 
are going to have at least probably close to $1 trillion deficit every 
year under the President's own actuarial program, every year up through 
2020. You can imagine how we are going to continue to increase the debt 
without doing anything about it. Frankly, that is if his actuaries are 
right, and they are usually always wrong on the low side. That includes 
actuaries on both sides, to be honest with you. The expenses have 
always been more.
  I think what is important here is that we get real about working 
together and coming up with a way of resolving these tremendous debt 
problems. The future of our young people in this country depend on 
that, and I don't want to let them down.
  I want to thank my colleague for his colloquy with me and I 
appreciate it very much.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from South Dakota.
  Mr. JOHNSON of South Dakota. Mr. President, I suggest the absence of 
a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  The PRESIDING OFFICER. The Senator from New Jersey.
  Mr. MENENDEZ. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. MENENDEZ. Mr. President, I came to the floor. I heard an 
interesting colloquy going on between my colleagues, my friend from 
Utah and my friend from Alabama, and I saw that my name was invoked, so 
I thought I would come to the floor and maybe elucidate for them and 
set the record a little bit straight.
  No. 1 is I am no longer the chairman of the Democratic Senatorial 
Campaign Committee, so my focus in ending the tax breaks that the big 
five oil companies in this country get to the tune of $21 billion that 
the taxpayers of this country give in essence to big five oil companies 
that will make $144 billion in profits this year I simply think don't 
need it in order to be able to achieve what the marketplace has allowed 
them to do. And I am happy for them. I am happy for all their 
stockholders and shareholders and everyone else, but they don't need 
$21 billion of the taxpayers' money and tax break--which, by the way, 
they describe them as these poor oil companies that, wow, we are going 
to stop domestic production.
  One of the breaks I want to finish actually says you can't be doing 
what you are doing. Here in the United States, when you get access to 
the lands and waters to drill for oil and gas, you pay a royalty. 
Basically, a royalty is a license fee.
  The oil companies figured out, Well, when I do this in other 
countries in the world, instead of paying a license fee, let me ask 
them to pay a tax for the same amount that it would have cost to pay a 
license fee. Because then I get the tax and I get to deduct it totally 
against my obligations here in the United States, which means that for 
those poor oil companies that I just heard about, we are, in essence, 
as taxpayers, subsidizing the exploration of foreign oil which goes on 
a world marketplace--does not come back to the United States--to the 
tune of $21 billion.

  If we want to talk about the poor, I want to talk about poor people 
whom Republicans, it seems, want to go after. They want to go after in 
their budget the things people need to get through every day. It is 
called Medicare for seniors and the disabled. I know it from my 
mother's own life. She worked in the factories of New Jersey, worked a 
lifetime to help build family and community. She had a terrible 
disease, Alzheimer's, and she would not have lived with the dignity she 
deserved in the twilight of her life but for what my sister and I were 
able to do for her and Medicare as her baseline of retirement security. 
That is what I call poor.
  I call poor, young children who, under Medicaid, are getting money 
for specific health care that through no fault of their own they 
desperately need in order to have the quality of life--to even be able 
to breathe, children with respiratory ailments--so they can fulfill 
their God-given potential in school. That is poor.
  But oil companies that are going to make $144 billion in profits, 
they are poor? Give me a break. I know we belittle the fact that it is 
only $21 billion that we would put directly to deficit reduction, but 
if we start putting in those $21 billion and then put in the billions 
in ethanol subsidies and then the horse racing industry and the 
corporate jets and we start adding it all up, maybe if, instead of 
working-class and middle-class working families whom our Republican 
colleagues in the Congress seem to want to put all the emphasis on, if 
we talked about the wealthiest people in the country and said to them: 
We need you to help the country get out of this difficult time, they, I 
think, would be incredibly patriotic.
  I have talked to a lot of wealthy people who told me if it is to help 
the country and if we are going to get our house in order, I am willing 
to help the country. I am willing to pay a little bit more.
  But, no, that is not possible to even talk about. It is not possible 
to talk about big oil companies that are going to make record profits. 
It is not possible to talk about ethanol. It is not possible to talk 
about the wealthiest in the country, millionaires, multimillionaires, 
and billionaires. Yet I did not hear any of these voices when Ronald 
Reagan raised the debt ceiling 17 times for the equivalent of $4 
trillion in today's money. I never heard any of these voices say how 
irresponsible it was when George Bush raised it seven times, for $5 
trillion--basically, the same amount of money he used to give tax cuts 
to the wealthiest people in the country but which became the collective 
debt of the United States. No, I did not hear any of it then.
  I had no intention of coming to the floor. But when the facts are 
wrong and my name is invoked, I intend to come and set the record 
straight. I am happy to debate my colleagues. We need to make sure 
working-class, middle-class families in this country do not bear the 
overwhelming consequences of our effort to end our deficits and meet 
our obligations. We cannot continue to hear we cannot close the 
loopholes in the Tax Code for the poor oil companies, poor corporate 
jets, poor multimillionaires and billionaires, all because that would 
somehow be a tax increase, but we can take it right out of the pockets 
of middle-class and poor families by virtue of the services we deny 
them--so they will not have the money to be able to produce or scrounge 
or keep what little they have been able to acquire--and say that 
somehow is not a tax increase.
  I hear about entitlements all the time. I have a new sense of what my 
Republican colleagues mean by entitlements. The oil companies are 
entitled to their $21 billion. Those are just two provisions. I could 
come up with a whole bunch of others for which they get tax breaks. The 
oil companies are entitled. The ethanol producers, they are entitled. 
The large agribusinesses in the country, they are entitled. But 
families who struggle every day to make ends meet? No, they are not 
entitled. We have to cut their entitlements.
  Something is wrong with that equation. A nation, at the end of the 
day, in its budget, talks about its values as a country. We all have a 
budget. We may not think about it as a budget in our personal lives, 
but it is income, however we derive it, through gainful employment, the 
job we have, maybe some investments we make, maybe some interests we 
get from our savings. That is our revenue. Then there are our 
expenditures. The house we keep for our family, the insurance we 
provide for their health care, the education, the tuition we pay for 
the education we want them to achieve, the church or synagogue we tithe 
to, the charitable contribution we make to an organization that we 
believe is worthy of the

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work we do, that is an expression of our personal values.
  The Nation's budget, which is both revenues and expenditures, is an 
expression of our collective values as a country. I cannot understand, 
in that expression of collective values, how it is that the very 
wealthy, that the very influential, that Big Oil is entitled but 
working-class families and the poorest among us are not entitled to 
realize their hopes, dreams, and aspirations in the greatest country on 
the face of the Earth.
  Anyhow, I wanted to come, since I heard my name invoked before. I 
think the facts were not quite up to par. There is, obviously, a 
different view.
  Having had the opportunity to set the record straight, I yield the 
floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Cardin). The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. TOOMEY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Merkley). Without objection, it is so 
ordered.

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