Defend and Save Social Security Act

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I ask unanimous consent to speak as in morning business.

Mr. President, I rise today to talk about our debt crisis, our short-term debt crisis and our long-term debt crisis. I come here today to discuss ways to address them and ways not to address them.

Our most immediate debt crisis is now upon us. In order to maintain the full faith and credit of the U.S. Government, Congress will have to vote to raise the debt ceiling within a matter of weeks. This is something Congress has done as a matter of course many times over the years as our national debt has grown.

Let us be clear about what exactly it means to raise the debt ceiling and why it is necessary. As a nation, we have accumulated $14.3 trillion in debt. This in and of itself is a very bad and dangerous thing. That means our national debt is currently 93 percent of our gross national product. Again, this is a very bad and dangerous thing. We have been in this situation before. Actually, it has been worse. After World War II, our national debt was at 121.7 percent of our gross national product. We certainly had something to show for it. We had won World War II.

Through the 1940s, 1950s, 1960s, and 1970s, we worked our way to a point where our national debt fell to 32.5 percent of GDP in 1981. We did this through a combination of growth and some inflation. Our debt was in pretty good shape until we hit the 1980s, during which we quadrupled our national debt under Presidents Ronald Reagan and George H.W. Bush.

We have hashed over time and again who is to blame for the situation we find ourselves in. But let me leave that alone for the moment and get back to what it means to raise the debt ceiling. As I said, our debt currently stands at $14.3 trillion. I think we can agree on this: That number reflects past choices, not current ones.

The debt ceiling also stands at $14.3 trillion. We have to raise the debt ceiling because we as a nation have certain obligations we must meet. We have to pay for the wars we are currently engaged in. We have obligations to veterans who have served our Nation. We have obligations to have the dedicated men and women at FEMA who have been responding to the many floods and fires our Nation has been facing.

We have obligations to seniors who have paid into Social Security all their working lives and have a right to expect a check every month of their retirement.

We have obligations under Medicare, not just to seniors, who again have paid in, but to clinics and hospitals and health care providers and to those who supply medicine and medical equipment.

We have contractual obligations of all kinds to many different businesses, whether they are building roads or water towers or providing IT services to the VA or the Park Service or the Senate. I think almost everyone would agree it is good to have guards in our Federal prisons, except maybe the prisoners. The list of obligations goes on and on, and one of our most fundamental obligations is to pay principal and interest to bondholders who have invested in what has been for decades and decades considered the safest investment in the world: the U.S. Treasury bond.

Currently, we simply are not taking in enough revenues to meet all these obligations, so we must borrow more. Of course, we must pay interest on our debt, at an interest rate that is now actually quite low.

The surest way to increase the interest on our debt would be to default on our debt obligations. And make no mistake, that is exactly what will happen if we fail to raise the debt ceiling. Even an increase in interest rates of just 1 percent would add $1.3 trillion to our interest payments over the next decade. So, as you can see, defaulting on our debt to make a point about the seriousness of our current position would, to say the least, be counterproductive. Yet some of my colleagues are willing to do just that, and that is irresponsible.

As to the notion that bondholders could be paid while other obligations were postponed, Scott Elmendorf, Chair of the Congressional Budget Office, said:

Defaulting on any government obligation is a dangerous

gamble.

We are not absolutely certain what exactly will happen if we default, but we have a pretty good idea. We know it would roil the international financial markets, induce rating downgrades of our Treasury notes, create fundamental doubts about the creditworthiness of the United States, and force us to pay higher interest rates to induce people to buy our bonds. It would damage the dollar and the special role of Treasury securities in global markets for decades to come--a dangerous gamble, one we cannot afford to take.

Defaulting on our debt would also be, as David Brooks so aptly put it, a stain upon our national honor. Are we actually going to become a country that cannot be relied on to pay its debts?

Yet we have Members of the House and Members of this body threatening to vote against raising the debt ceiling unless the President and Democrats in Congress meet their demands on how to address the deficit going forward.

Are my friends suggesting we act like a deadbeat who buys a new car and then, some time down the line, decides: ``You know, I just don't feel like making the payments''?

I think these Members are doing an enormous disservice by holding our Nation's economy and, indeed, the entire global economy hostage to their demands. Because the U.S. Treasury bond has been the foundation of the world financial system, it is not an overstatement to say that defaulting on our debt at this fragile point in the global economic recovery could throw us into a worldwide depression.

I am hardly alone in this regard. The U.S. Chamber of Commerce shares my alarm. It is no small secret that the Wall Street backers of the Republican Party are beseeching their allies in Congress to come to their senses.

Yet Republican leaders know there are also those in their party who believe this is their chance. This is their opportunity to exact concessions from the White House and Democrats in Congress precisely because the situation is so fraught with peril. They know the President of the United States cannot play a game of chicken with the full faith and credit of the United States of America. And in a game of chicken, the irrational and irresponsible player holds a distinct strategic advantage over the rational and responsible player.

So we find ourselves in this place at this time.

What are the demands?

Well, Republican leaders here in the Senate are holding the debt ceiling hostage so they can end Medicare as we know it. Democrats are trying to protect Medicare and ensure its solvency, and the Affordable Care Act is already doing that. Not only does the Affordable Care Act provide more benefits to Medicare recipients, it also extends the solvency of Medicare by 7 years. That is the conclusion of the most recent report of the Medicare trustees.

Of course, the first big idea from our friends on the other side of the aisle this Congress was to repeal the Affordable Care Act, and they all voted to do that. So please understand that one of their first votes this Congress would

have had the effect of diminishing the solvency of Medicare, shrinking the solvency of Medicare by 7 years.

Not only that, but according to the Congressional Budget Office, the Affordable Care Act will reduce the debt over the next decade by $210 billion, and over the decade following that by more than $1 trillion. So rather than saving money by making our health care system stronger, making our delivery of care more efficient, and keeping our constituents healthy, Republicans voted to repeal the health reform law. So the big Republican contribution to the sustainability of Medicare and our national debt was to vote to shorten Medicare's life expectancy by 7 years and to add well over $1 trillion to the debt in the next two decades.

There is no doubt that the biggest threat to the sustainability of our long-term debt is the cost of health care. That is why so much of the Affordable Care Act is designed to address the cost of the delivery of medical care.

Let me give you a couple of examples. First, the value index. The value index will direct that health care providers be reimbursed by the value of the care they provide rather than by the volume--the quality of the care rather than the quantity of care. In Minnesota, for instance, we do health care a lot better than most other States. We provide higher quality care at a lower cost than almost any other State. There is room for improvement in Minnesota, of course. As a health care economist told me: In Minnesota, we get an A, but that is because we grade on a curve.

In Texas, they get reimbursed 50 percent more per patient in Medicare than we do in Minnesota and yet we have better outcomes.

Why? Well, we have a different health care culture in Minnesota. We tend to do more coordinated, fully integrated care. We tend to see patients as people who we want to keep healthy and out of the hospital. In Texas, patients are more often viewed as profit centers. There are some excellent, high-value centers of health care in Texas, such as Baylor University. Then, there are some egregiously low-value ones, like some in McAllen, TX. And, by and large, Texas doctors order more procedures than Minnesota doctors so they can bill for more procedures.

But the idea here isn't to pit Minnesota against Texas. The idea is to incentivize low-value States to do health care more like high-value States. Imagine if we could bring down the cost of health care in Texas by one-third. Imagine the savings to Medicare and Medicaid.

One more example. Senator Lugar and I wrote a provision into the bill called the Diabetes Prevention Program. It is based on a CDC program piloted in Indianapolis and in St. Paul. They took folks that had been diagnosed with ``prediabetes'' and gave them 16 weeks of nutritional training and 16 weeks of physical exercise at the YMCA, all at a cost of only about $300 per person.

The number of people with prediabetes who later developed full-blown type 2 diabetes was reduced by almost 60 percent--60 percent! Caring for chronic disease is the most expensive piece of our health care system in this country. One of the most common chronic illnesses is diabetes. It costs our Nation $218 billion a year to treat diabetes.

A couple weeks after the Affordable Care Act passed, I brought the Under Secretary of Health and Human Services into my office to meet with diabetes experts from the CDC and with United Health Group, the country's largest insurance company. The goal of the meeting was to get HHS on board to bring the piloted Diabetes Prevention Program up to scale nationwide. The executive from United Health said she would definitely reimburse their policy holders for going through the 16-week program. She said, ``You know why? Because for every dollar we spend, we'll save four dollars.''

The value index and the Diabetes Prevention Program are but two of the many programs in the Affordable Care Act that have been written into the law. Jonathan Gruber, the MIT professor who helped put together the health reform system in Massachusetts when Mitt Romney was Governor there, has said of the Affordable Care Act, ``It's really hard to figure out how to bend the cost curve, but I can't think of a thing to try that they didn't try . . . You couldn't have done better than they are doing.''

Since then, in the House, Representative Paul Ryan and the Republicans in Congress have taken an entirely different approach. Instead of putting in the long, hard hours of consulting with health care providers, health care economists, patient groups, hospitals, rural health groups, and medical researchers to actually try to build on protocols that have been proven to bring down the cost of delivering quality medicine, Representative Ryan decided just to slash the funding of Medicare, give the money left over to seniors, and let them fend for themselves to buy their own health care from insurance companies.

Now, we know there was no functional market for health insurance for folks 65 and over before Medicare and Medicaid started in 1965. It is doubtful that there would be one now. Under the Republican plan, seniors would essentially get a voucher for a significantly lower amount than their Medicare is worth now. Remember that the cost to Medicare for administering its program is less than 2 percent. Insurance companies, on the other hand, spend around 11 percent on administration. The CBO estimates that under the Ryan plan, out-of- pocket cost for health care for each senior will more than double to over $12,500 a year.

This is not Medicare as we know it. It is not Medicare. So, understand this: the Republican plan to end Medicare would make huge cuts in Medicare benefits and put insurance companies in charge of seniors' health care. This would double the out-of-pocket costs for seniors and toss aside all the new benefits offered by the Affordable Care Act.

There is no question which vision of Medicare holds more hope for seniors and which takes a scientific, evidence-based, best practices approach to addressing the long-range cost of delivering health care to all Americans.

And yet my colleagues on the other side of the aisle are telling us that they are willing to risk throwing the global economy into depression if Democrats don't act more responsibly on Medicare.

Well, ok. Here is an idea. Allow Medicare to negotiate with the pharmaceutical companies on drugs for Medicare Part D. The VA does it. And guess what. The VA pays an average of 48 percent less than Medicare does for the top 10 most prescribed drugs. Now the pharmaceutical industry tells us they need us to pay the higher price because they need the money for research. But, in fact, they spend more money on advertising and marketing than they do on research.

Almost every other developed country uses its size to negotiate with the pharmaceutical companies. Why does the American taxpayer have to be the chump who pays full price? I say we negotiate with the pharmaceutical companies and bring down the cost to Medicare by as much as $24 billion a year, or $240 billion over the next 10 years. That could go straight to paying off the debt. There. I got you a $240 billion cut to Medicare. Now can we please vote to raise the debt ceiling and avert a worldwide economic catastrophe?

If my friends on the other side are really serious about getting our deficit under control, couldn't we start by getting rid of a measly $2 billion a year in taxpayer subsidies to oil companies--the companies that are getting record profits because the price of oil is so high? Unfortunately, according to my Republican colleagues, this would be a tax hike.

In order for us to agree to balance the budget, everyone has to pay. Who is in a better position to give? Exxon or a little girl in Minnesota named Evelyn. You see, Evelyn was born with cystic fibrosis. When she was 10, her liver failed, and her own toxins started to poison her. But Medicaid helped her get the care she needed. That is what this is about. Exxon or Evelyn. Frankly, it makes me kind of sad.

So there are some more billions for deficit reduction. Get rid of the subsidies to the five biggest oil companies--$21 billion over the next 10 years. And you know what? If we are seriously going to address our debt crisis, we have to increase revenues.

Now under the Republican plan, the cuts to end Medicare as we know it and to slash Medicaid all go to pay for tax cuts to the wealthiest Americans. That's right. The Republican plan cuts taxes on the top marginal rates for millionaires and billionaires from 35 percent to 25 percent.

Now my Republican friends like to say that tax cuts always produce revenue increases. Besides the fact that that is simply not true, it also contradicts the other argument Republicans use for not raising taxes. Raising taxes, Republicans often argue, would just give the government more money to spend. According to that oft-repeated Republican argument, cutting taxes will lower revenue and ``starve the beast.''

Here is President Ronald Reagan making this exact point in 1981:

There were always those who told us that taxes couldn't be

cut until spending was reduced. Well, you know, we can

lecture our children about extravagance until we run out of

voice and breath. Or we can cure their extravagance by simply

reducing their allowance.

In other words, cutting taxes cuts revenues and forces the children, in this case, the government, to cut spending.

So, at the heart of my friends' argument on why we must cut taxes are two completely contradictory, mutually exclusive arguments. On the one hand, according to my friends, lowering taxes always increases revenues and therefore brings down the deficit. On the other hand, they argue, lowering taxes decreases revenues. Which is it? Because you can't have it both ways.

I will try to provide some context for my friends. After President Reagan cut taxes in 1981, we immediately started amassing enormous deficits. They were so bad that President Reagan felt compelled to raise taxes in 1982 and then again in 1983. In fact, President Ronald Reagan, the supply-side icon, raised taxes 11 times. If President Reagan did that today, the Tea Party and, in fact, the entire Republican Party would run him out of town on a rail.

But, you see, President Reagan knew that to raise revenue, you have to either raise marginal tax rates, or get rid of tax loopholes for the wealthy and for big corporations. Which is what he did repeatedly.

Even so, our national debt nearly tripled during the Reagan Presidency. The national debt continued to grow rapidly during the George H. W. Bush administration. In fact, in 1993, he handed President Bill Clinton what at that point was the largest deficit in history.

So what did President Clinton do? Well, in his 1993 deficit reduction package, he added two new marginal tax rates at the top end--36 percent for those making over $180,000 and 39.6 percent for those making over $250,000. Every Republican voted against the package. They said that raising the top marginal tax rate would cause a recession. Former Speaker Newt Gingrich said:

I believe this will lead to a recession next year. This is

the Democrat machine's recession, and each one of them will

be held personally accountable.

Senator Phil Gramm of Texas said:

The Clinton plan is a one-way ticket to recession. This

plan does not reduce the deficit. But it raises taxes and it

puts people out of work.

Representative John Kasich, then ranking member of the House Budget Committee, said:

This plan will not work. If it was to work, I'd have to

become a Democrat.

Well, it worked. Not only did we have an unprecedented expansion of our economy for 8 years, creating more than 22 million new net jobs, but we balanced the budget and Bill Clinton handed George W. Bush a record surplus. I call that ``working.''

Now President Clinton, and especially the Democrats in Congress, paid a political price for the 1993 deficit reduction package. The Democrats went down to defeat in 1994, losing control of the House for the first time in 40 years. You could say that Democrats took a shellacking.

Nevertheless, between 1993 and 2001 the Nation created an unprecedented number of jobs benefiting every quartile of our economy, decreasing the number of Americans in poverty, increasing median income, and creating more millionaires than ever--to which my colleagues on the other side of the aisle might say, ``Sure, it worked in practice. But does it work in theory?''

President Clinton's deficit reduction plan not only reduced the deficit as planned, it eliminated it entirely and gave incoming President George W. Bush a record surplus. In fact, when President Bush took office, we were on track to completely pay off our national debt with $5 trillion of surpluses projected over the next 10 years. In other words, we would have zeroed out our national debt this year.

Five days after President Bush took office--again, after President Bush took office--Alan Greenspan testified to the Senate Budget Committee that we were in danger of paying off the national debt too quickly and entering uncharted territory in which the Federal Government would have too much money. The Federal Government, Greenspan warned, would have to put its excess money into private equities, thereby distorting and decreasing the efficiency of our markets.

President Bush told the country that a surplus meant that Americans were paying too much in taxes. This was our money, he told us, and so we all deserved a tax cut. Then after the economy went into recession, Bush told us that what we needed was another tax cut to stimulate the economy. So, in other words, ``when the economy is going strong, tax cuts are in order.'' And ``when the economy is weak, tax cuts are in order.'' Combine those with the aforementioned contradictory ``tax cuts reduce revenues forcing government to spend less of our money'' and ``tax cuts always increase revenues'' and you have an exquisitely incomprehensible economic theory.

But that exquisitely incomprehensible theory needed just one more element to make it downright dangerous. And that element would be provided by Vice President Richard Cheney.

By late 2002, the surplus President George W. Bush had inherited from Bill Clinton was turning once again into huge deficits. According to then-Treasury Secretary Paul O'Neill, he tried to warn Vice President Cheney that budget deficits were growing at an alarming rate, posing a threat to the economy. Vice President Cheney cut O'Neill off, saying, ``You know, Paul, Reagan proved deficits don't matter.''

By the end of his Presidency, George W. Bush left President Obama a budget deficit projected at $1.2 trillion for fiscal year 2009. Meanwhile, President Bush had doubled our national debt.

What was to blame? Could it have had anything to do with the fact that for the first time in history we cut taxes while we were at war?

Well, not according to the Republican leader. In July of last year Senator McConnell said: ``There's no evidence whatsoever that the Bush tax cuts actually diminished revenue.''

But adjusting for inflation, since the Bush tax cuts were enacted, revenues have fallen 17 percent. And that is not even taking into account growth in our population, which was 9 percent over this period. When you add the effect of population growth, revenues declined by about 24 percent per capita. I think this clearly constitutes evidence that the Bush tax cuts actually diminished revenue.

So it should be no surprise that reduced revenues are responsible for a lot of our deficit, as you can see here. This chart by the Center on Budget and Policy Priorities is based on CBO data and shows that the Bush tax cuts were responsible for 25 percent of the deficit in 2010. And that is only going to grow. By 2019, the tax cuts will account for almost 60 percent of our deficit.

And the fact is that not only did the national debt double during the Bush administration, we also had a dismal record of job creation. And during the Bush years, for the first time since we started keeping records, median income fell in America. And more Americans fell into poverty. One in five children in America now lives in poverty. It is even higher in rural America.

There is one group that did very well during the Bush years, and continues to do very well: The extremely wealthy.

We now have in this country the greatest disparity in income and wealth that we have had since the 1920s.

So the one thing that there is no evidence whatsoever of is that cutting taxes on the wealthiest Americans can

create jobs and keep the deficit under control.

So why would we do it, when the evidence is so stark that the Bush tax cuts coincided with a huge spike in both the debt and unemployment?

Why not look back on what has worked in the past and learn from it?

As I said earlier, after World War II our debt as a percentage of GDP was, in fact, significantly larger than it is today. But what did we do? Well, we passed the G.I. bill so that our troops returning from the war could go to college.

Truman started the Marshall plan to help Europe get on its feet.

And it is not as if we had smooth sailing as far as Defense spending. We went to war in Korea, losing nearly 35,000 Americans. After that war ended, we found ourselves in an extended Cold War. We built the largest infrastructure project in our history, the Interstate Highway System-- it added enormously to our economic development, because now we could transport our goods around the country so much more efficiently.

When the Soviets launched Sputnik into space, we jump-started our space program and our investment in science and math education. My brother and I were Sputnik kids. He was 11 and I was 6 when it was launched. My parents took us into our living room in Minnesota and told us that we had to study math and science in order to beat the Soviets. I thought that was a big burden to place on an 11-year-old and a 6- year-old. But we were obedient sons, and so we studied math and science. And wouldn't you know it, my parents were right. We beat the Soviets.

The space program created all kinds of dividends in technology and to our economic development. I watched a Senate debate last fall in which the Republican candidate said that government had never created a job. The debate, of course, was broadcast by satellite.

I think you get the idea. The fact is the investments we made in the 1940s, 1950s, 1960s, and 1970s in science and technology, in our State universities, in infrastructure that was the envy of the world brought our debt as a percentage of GDP from 121 percent in 1945 to 33 percent in 1980.

Erskine Bowles is right. We can't get out of our current debt crisis with growth alone. But I will tell you most certainly that we will not get out of it without growth.

And so we have to choose wisely in what we invest in, in when we invest, and in how we invest; and in what we cut, and when we cut, and how we cut--which we must do--and in how we increase revenues, when we increase revenues, and from whom we get those revenues.

Why not invest in retrofitting our buildings when we have so many in the building trades out of work, sitting on the sidelines, and knowing that we can recoup that investment in energy savings within 3 to 5 years? Let's find creative ways of financing that, such as PACE financing, which lets families get a loan from their local government and pay it back on their property taxes. This is how cities pay for streetlights and sidewalks. It adds value to homes; and when the family moves, the loan stays with the property. We should also create incentives for banks to lend to small businesses for retrofitting commercial buildings.

There is a company in Minnesota called McQuay that makes heating and air conditioning systems for commercial buildings. They are actually supplying the system for the new World Trade Center, and their systems are so energy efficient that they pay for themselves in 3 to 5 years through energy savings.

They have been taking out loans from banks since they are a large creditworthy company, but then they give out loans to customers who install their systems. It is a win-win, because they are selling more units and putting people back to work, and their customers are actually making money in the long run through energy savings. McQuay has a good model, and we should be figuring out how to encourage others to do the same thing.

Why not cut our Defense spending when $100 billion in cuts have been identified by our service chiefs at Secretary Gates' request, and when cost overruns on our weapons systems are absurdly high? The GAO recently revealed that when you add up the growth in costs of major Defense weapons systems over their original estimates, the total is over $402 billion.

Why not raise revenue by increasing taxes on the wealthiest in this Nation--those who have benefited the most from the economy in recent years--especially when we can look to the recent past and see that their tax cuts created virtually no jobs and contributed mightily to our deficit?

Only when the middle class is strong does our economy grow, because the middle class has always been the part of our society that creates demand. There are just not enough rich people to buy enough stuff. The middle class spends its money. But today, companies are sitting on trillions of dollars because there is just not enough demand. And that is because there is a lot of unemployment and because wages for the middle class have gone down over the last decade.

Creating a middle class is not an end unto itself. A strong middle class leads to strong consumer spending, and therefore to a strong economy and to national prosperity. The middle class is also where you get entrepreneurs and small businesses--it is the engine of our economy.

Why not invest in early childhood education when we know that the return on quality early childhood education is up to $16 for every $1 spent? We know that children who have had quality early childhood education are less likely to need special education, less likely to repeat grades, they have better health outcomes, and that the girls are less likely to get pregnant as teenagers. We know children who have quality early childhood education are more likely to graduate from high school, more likely to go to college, more likely to get a good job and pay taxes, and much less likely to go to prison.

My friends on the other side say that we must cut the deficit for our children's sake, and I agree. But why then are such a disproportionate amount of the cuts aimed at programs that help kids? As I said, one of every five children in America lives in poverty, and even more in rural areas.

But the Republicans want to cut Head Start and Early Head Start. We currently serve about 40 percent of children who qualify for Head Start and less than 4 percent of children who qualify for Early Head Start. Do we really want to cut that? Do we really want to cut Pell grants? The Republican budget slashes Medicaid. About 50 percent of the recipients of Medicaid are children. We know we are going to have to make shared sacrifices to get the budget under control, but do we really think that sick kids should make those sacrifices?

You know, immediately after this last election, Republican leadership said that their No. 1 priority was seeing to it that Barack Obama is a one-term President. They didn't say their No. 1 priority was getting Americans back to work, or educating our kids, or even balancing the budget.

Their No. 1 priority was winning the next election. But I don't think that is what Americans want. The American people want us to get to work to solve problems, to improve their lives. We don't have to agree on how to do that but they sent us here to work together. If the time between elections just becomes about jockeying for the next election, then what in the world is the point of getting elected in the first place? I thought we were here to work together constructively in the interest of the American people.

Now the Senate Republican leader is saying that raising any new revenues is off the table; that he will not vote to raise the debt ceiling if part of our compromise on the budget going forward involves any tax increase on anyone, no matter how wealthy they are, no matter what their income.

I ask all my colleagues, for the good of the country, to step back from the brink, to step back from brinksmanship on this debt ceiling. Let's not panic. We are going to be on this planet for a while. Let's have some confidence in ourselves to do this in a smart thoughtful way so that our children will say, ``Well, they might not have been the Greatest Generation, but they were a Pretty Good Generation.''

I suggest the absence of a quorum.

Mr. President, yesterday I spoke about the matter of tax expenditures, and I would like to expand on that topic today. They are becoming a critical issue in negotiations over the debt ceiling.

First, Mr. President, I ask unanimous consent that I be permitted to finish my remarks.

Mr. President, Democrats say they want to eliminate tax expenditures. They refer to them as loopholes or spending through the Tax Code. This might be a good political argument, but it bears little relationship to the understanding of tax expenditures and tax law or tax policy.

Yesterday, I outlined a general definition of tax expenditures. They are most definitely not spending through the Tax Code, as President Obama so creatively put it, and they are most definitely not, by and large, loopholes. Rather, they were intentionally included in the Tax Code by Congress in order to realize certain policy goals.

Tax expenditures are an opportunity for families and businesses to keep more of their income. Unfortunately, rather than have a serious conversation about tax expenditures and tax policy, President Obama and his liberal allies are intent on setting new ground for juvenile public discourse.

Faced with a $14.3 trillion debt--and going up every day--Social Security and Medicare Programs that are set for bankruptcy--ruining America's seniors--and a legitimate fiscal crisis that poses a clear and present danger to the Nation's security and the security of America's families and businesses, President Obama is again talking about shared sacrifice. Well, I like the term. The only thing is, I would prefer to have shared prosperity because all we are going to get out of this administration is shared sacrifice, which means everybody is going to suffer. I would like to have shared prosperity where everybody is lifted.

The first time we really started hearing about this concept of shared sacrifice was in the debate over ObamaCare. For those who are unfamiliar with Washington-speak, this is what the President meant by shared sacrifice: I am going to raise taxes on families and businesses by over $\1/2\ trillion, and I am going to do it by shaking down businesses.

He made them an offer they couldn't refuse: Pay up now or pay up more later. So when we started hearing again about shared sacrifice, we knew what was coming: more proposals for tax increases. But I have to say I remain shocked at how ham-fisted most of these proposals are. They are nothing but a series of bad talking points that can be used for the President's reelection campaign. These talking points were tired by the end of the 1936 Presidential election.

I would not be surprised to see President Obama dust off Franklin Roosevelt's speeches and start railing against economic royalists by the end of the debt limit negotiations.

Sadly, the Senate's leadership has followed suit. After making a big to-do about keeping the Senate in session to address the fiscal crisis, we are spending this week debating a nonbinding resolution demanding higher taxes on millionaires. Really? The Democrats' solution to $14.3 trillion in debt is to attack corporate jets. Seriously? Three billion dollars over ten years. The last time they did that, they wound up with their tails between their legs in 1990, and in 1993 had to reverse the whole thing because it cost thousands of jobs.

I never underestimate liberals' lack of respect for the intelligence of the American people, but this is a new low. Do they think that ordinary Americans are so consumed with class hatred that they will respond like Pavlovian dogs to the criticism of corporate jets, and forget that it was programmatic liberalism, not bonus depreciation of corporate jets or tax benefits to energy companies, that got us into this debt crisis?

This is how the left perceives Republicans. They want to score some cheap points against Republicans by going after corporate jets, as though all Republicans love corporate jets. I would venture to say that an awful lot of corporate jets are owned by very wealthy Democrats. What are we going to get next week, a tax on monocles and top hats? Maybe we will spend next week debating a nonbinding resolution on the need to tax madras blazers for the good of the country.

Unfortunately, not all of the Democratic proposals are a laughing matter. They have been down this road in the past pushing tax increases on luxury items such as yachts. Today, the press ridiculed Republicans for ``defending the yachting class.'' There is no yachting class in this country, unless you count the Democratic party of Martha's Vineyard.

But there is a class of people who build yachts. This is what happened to those people the last time the Democrats engaged in class warfare of this kind. In the 1990 budget deal, a new luxury excise tax was created applying to yachts, aircraft, jewelry, and furs, first applying to the 1991 year. The similarities are eerie.

Faced with soaring deficits, Democrats insisted that revenues be part of the equation. And how did this work out? The tax was repealed in 1993 because, as the Democratic-controlled Senate Finance Committee report, as reported by the Budget Committee, explains:

During the recent recession, the boat, aircraft, jewelry,

and fur industries have suffered job losses and increased

unemployment. The Committee believes that it is appropriate

to eliminate the burden these taxes impose on the interest of

fostering economic recovery in those and related industries.

Republicans are not defending the yachting class. They are defending the people whose jobs will be lost to Democratic class warfare.

Of course, the left cannot contain themselves to these targeted tax increases. Today we read in the paper that the President is eager to reform Social Security. Yet it appears he is only willing to do so if we let the 2001 and 2003 tax cuts expire, tax cuts which only last December the President acknowledged were necessary components of our economic recovery.

I would not be surprised to see the old Democratic hobby horse, an increase in the Social Security tax max, make an appearance in the Democrats' list of demands.

These are nonstarters, and everyone understands why. These broad- based tax increases would be a weight around our economic recovery.

But the issue of tax expenditures continues to cause confusion and must be addressed. Those who advocate limiting or eliminating these tax expenditures suggest that they are spending and loopholes that benefit wealthy individuals.

Yesterday, I offered a grown-up definition of what a tax expenditure is. Today, I wish to highlight what are in fact the top tax expenditures. What we will find is that the tax expenditures that would generate the largest amount of revenue are also those that are available to the middle class, enabling them to give to their churches and synagogues, and to save for a home, for college, and for retirement. To get at meaningful deficit reduction, Democrats would have to eliminate these expenditures. Is that what they want to do? That might be a good question at the President's next press conference. Maybe someone could give him

a copy of this chart right here, and ask which of these tax expenditures he is willing to eliminate in the interest of deficit reduction:

No. 1, exclusion for employer-provided health care. Is he going to get rid of that? That is 13 percent of all tax expenditures.

How about home mortgage interest deductions? Is he going to get rid of that? That is 9 percent.

How about preferential rates for dividends and capital gains? That is 8 percent.

Exclusion of Medicare benefits. Are they going to do away with that? That is 7 percent.

Net exclusion of defined benefit pension contributions and earnings. Are they going to attack our pensions? That is 6 percent.

And earned income tax credit. My gosh, that is 5 percent.

Deduction for State and local taxes, except real property. That is 5 percent.

No. 8, net exclusion of defined contribution/earnings. That is 4 percent.

How about No. 9, exclusion of capital gains at death? That is 4 percent.

And how about No. 10, deductions for charitable contributions? That is 4 percent.

I venture to say hardly any American is going to want to do away with all of those in the interest of getting more revenue so the Democrats can spend it back here.

Look at that chart. It is a list of the top 10 tax expenditures. Maybe someone can give him a copy of this chart and ask which of these tax expenditures he is willing to eliminate in the interest of deficit reduction. I encourage all my friends to look at this chart. It is a list of the top 10 tax expenditures.

With the rhetoric coming out of the White House, you might be surprised to learn that tax benefits for yachts and corporate jets are not in the top two. Not only do they not make the top 10, they don't even come close.

If you take the so-called savings that would come from the corporate jet tax approach of the President, it would take us 3,000 years to even reach the approximately $800 billion stimulus package. In the context of the President's trillion-dollar deficits, they are statistical noise.

So what are the big tax expenditures?

No. 1 is an issue from the ObamaCare debate. It is the exclusion for employer-provided health insurance. The exclusion of employer-provided health insurance from income is the single largest tax expenditure, representing 13 percent of tax expenditures.

Yesterday a Member of the other side's leadership pointed out that the largest tax expenditure is one for corporations. Boy, is he wrong. Here is what he said:

The biggest single deduction is the employer's exclusion

for health care premiums. So employers are able to exclude

from income the amount of money they spend for health

insurance for their employees. That's the biggest.

Well, that is an incorrect description of the law that they are arguing. Employers always have been allowed, and should be allowed, a deduction for the cost of benefits they provide to their employees. Employee compensation, including the provision of health insurance to one's employees, is a cost of doing business and thus properly deductible by the employer so as to accurately measure the income, or profit, of the employer. That has never been considered a tax expenditure. The exclusion at issue, which is a tax expenditure, refers to the employee's tax treatment, not the employer's tax treatment. That is, most compensation that an employee receives from his employer is includable as taxable income. One of the few exceptions to that general rule is that employees do not include in taxable income the value of employer-provided health insurance.

Coming in at No. 2 is the home mortgage interest deduction. This expenditure alone accounts for 9 percent of all tax expenditures.

The third largest? There we have the lower rate on capital gains and dividends. Do away with this expenditure, and the rate on capital gains and dividends will almost triple in about 18 months. Capital gains and dividends represent about 8 percent of all tax expenditures.

What is No. 4? Here we have an untaxed piece of Medicare benefits. Imagine that. I wonder how many folks on the other side realize this or even if the President does. When my friends on the other side categorically talk about cutting back tax expenditures as the yellow brick road to deficit reduction, I wonder if they know that hiding behind the curtain is an increase in the aftertax cost of Medicare.

Do my friends on the other side realize this? A few months ago, a liberal group ran an ad showing my friend, the chairman of the House Budget Committee, Paul Ryan, pushing an old woman in a wheelchair over a cliff. His crime? Recommending policy changes that would prevent the inevitable bankruptcy of Medicare.

I am not going to hold my breath waiting for this same group to pull the fire alarm, because the Democrats' talk of eliminating tax expenditures might result in seniors getting hit with higher taxes on Medicare benefits. But this is what the President and the Democrats are talking about. If they are serious about using tax expenditures to reduce the deficit, these are the things that will have to be on the table. These are the big expenditures. This expenditure is real. You can look it up in the handy tax expenditure publication from the nonpartisan Joint Committee on Taxation. It is significant, representing 7 percent of all tax expenditures, to the exclusion of Medicare benefits.

At No. 5 is the pre-tax treatment for defined benefit pension plan contributions and the inside buildup on the accounts. This is a tax benefit that reduces the cost for those workers who make the decision to save for retirement. This represents 6 percent of all tax expenditures.

What is No. 6? It is the refundable earned income tax credit, the EITC. When folks describe tax expenditures as spending through the Tax Code, this is one that could properly be labeled that way. Under congressional budget rules, this one, for the most part, scores as spending. That is not the case with the other tax expenditures on this list. Refundable tax credits score as spending because the government cuts a check to the taxpayer. With the other tax benefits on this list, the taxpayer is receiving a portion of the money back in the form of reduced taxes. There are some serious tax hikes there. This tax expenditure accounts for 5 percent of tax expenditures.

No. 7 is the deduction for State and local taxes. My friends on the other side need to be particularly careful with this one. So far, they would hit seniors, families who have health insurance through their employers, people with mortgages, and anyone who owns stocks and bonds. But with this, many Democrats risk alienating every last taxpayer in their States. Removing this deduction is going to hit high-tax States hard. If you are from a so-called blue State, it is likely that constituents are already heavily burdened with State and local taxes. Take away this and you will, in effect, drive up the marginal rate of your constituents who take their deduction by as much as 35 percent.

I am convinced that many of the inroads Democrats made between 2006 and 2008 were due to carefully crafted Trojan horse campaigns. Skillful operatives ran Democratic campaigns promising moderate tax and spending policies that would be respectful of families and businesses. But once that Trojan horse got inside the Capitol, and former Speaker Pelosi and President Obama took charge, frustrated liberals spilled out and started taxing anything that could move to pay for the largest expansion of government since Lyndon Johnson was in office.

Removing the deduction for State and local taxes might be the final act that restores purple America to its traditional red hue. At 5 percent of all tax expenditures, this would represent a massive tax increase, this net exclusion of defined benefit pension contribution. And that is No. 7, after State and local taxes, except for real property.

What is No. 8? This is the pre-tax treatment for the contributions workers make to their defined contribution plans and the inside buildup on the accounts. Many of us know of these retirement plans as 401(k) plans. At 4 percent of tax expenditures, this is a significant incentive to families to save for retirement.

No. 9 is a bit more obscure but no less critical for families. It is the tax expenditure for the step up in basis at

death. We all know the saying that nothing is as certain as death and taxes. Well, if this tax expenditure were eliminated, this step up in basis at death, this saying would take on an even darker meaning. Death could now be taxed twice. First, the decedent's estate might get hit with the death tax. Then the decedent's heirs would be taxed again on the gain embedded in any inherited asset should they decide to sell. This accounts for 4 percent of tax expenditures.

We close with No. 10, the tax expenditure and probably the most important one to my constituents in Utah. It is the tax benefit for donations to charities other than education and health care institutions.

When you make your weekly or yearly donation to your church, you can now deduct it for tax purposes. This charitable deduction represents 4 percent of all tax expenditures. The folks in my State all pay tithing--almost all of them. That is 10 percent of their gross income. I do it every year. I have to tell you, you would hit a lot of very charitable people and a lot of churches with the loss of that one, No. 10. Yet that is the smallest of the whole 10.

As the chart shows, these widespread everyday tax policies account for almost two-thirds of tax expenditures. We are not talking about yachts or corporate jets.

Now, I have already suggested it, but rolling back many of these expenditures would have an immediate adverse impact on American families and taxpayers.

It would also undercut longstanding Federal policies promoting saving, home ownership, and charitable giving.

Let's turn first to retirement security.

About half of Americans save for retirement. The overwhelming bipartisan consensus is that this number is way too low. Ideally, all American workers would be saving for retirement.

More savings means less financial stress on Social Security and Medicare. Most importantly, it means retirees can enjoy their retirement if they can rely on a nest egg. That is why there has been a bipartisan desire to incentivize retirement savings through worker participation in retirement plans.

A time-honored method has been to offer a tax benefit up front in the case of the traditional defined benefit plan, traditional defined contribution, or traditional IRA. The benefit remains untaxed during the individual's working years. It is only taxed when received in retirement. By contrast, Roth pension plans and IRAs provide a tax benefit on the back end, when a worker retires and begins drawing on the account.

Former Finance Committee Chairman William Roth captured the policy rationale best by noting the deliberate tax policy bias toward savings. Chairman Roth used to make the point with a rhetorical question. He would ask: ``Is there any bad saving?''

Of course, the answer is no.

One thing we know for sure. Curtail or eliminate the tax expenditure for retirement savings and the after-tax cost of savings will rise. Savers will react. It is true that some will continue to save. But it is also true they will have less to save if they choose to do so. For middle income taxpayers, it will probably mean lower savings rates.

Is that a good policy to put in place?

Consider this: According to the Joint Committee on Taxation, for 2009 over half of households paid no income tax. Forty-nine percent of Americans shouldered 100 percent of the income tax burden.

The half shouldering the income tax burden are also, generally speaking, the part of the population making sound personal decisions like saving for retirement. That behavior is good in both a micro and macro sense. In the micro sense workers are sacrificing current consumption for security and a better standard of living in the future. In a macro sense, the collective behavior of these citizens stabilizes our aging society.

To encourage this kind of sacrifice, our tax policy provides a tangible tax benefit. Take away that tax benefit and, as with raising taxes on anything else, you will get less of the behavior. Take away the tax benefit, and you will get less saving for retirement. Does that make any sense?

In order to avoid restraining the rapid growth in government spending, our friends on the other side would have us send the wrong policy signal to the half of our population that saves. They would add to the burden of those who are already shouldering the entire burden of funding the Federal Government. At the same time, by discouraging saving and personal responsibility we would further unleash the appetite of those who want us to spend more.

Take another look at the chart. Add up the tax expenditures from defined benefit plans and defined contribution plans. They account for 10 percent of tax expenditures. Over 5 years, the revenue from these expenditures amounts to almost $700 billion. On a per-year average basis, it is $140 billion. That is an annual policy shift of $140 billion in incentives for private savings to $140 billion in incentives for growing government spending.

Do we want a society where more saving is encouraged? Or do we want a society where dependency and more government spending are encouraged?

Do we want to look more like Switzerland or do we want to look like Greece?

The answer to this question is clear to the citizens of this country.

Unfortunately, not all of their representatives seem to have thought through the implications of going after tax expenditures.

To get at this from another angle, I would like to discuss the impact on taxpayers of cutting back some of these tax expenditures that come in the form of itemized deductions.

I am going to examine the effects of cutting back these itemized deductions by applying President Obama's budget proposal to cap itemized deductions at 28 percent.

It is clear that some in the White House are pushing this 28 percent cap hard in the negotiations over the debt limit.

As noted before, itemized deductions generally are considered tax expenditures. But itemized deductions impact a number of basic, longstanding features of American life. Itemized deductions include the home mortgage interest deduction, the charitable contribution deduction, and the State and local tax deduction. The President is proposing to chisel away at these itemized deductions, and we should carefully reflect on what that would mean.

President Obama has proposed repeatedly ``to limit the tax rate at which high-income taxpayers can take itemized deductions to 28 percent.'' It appears that this proposal is designed to lessen the benefit to higher income taxpayers of itemized deductions. The Joint Committee on Taxation says that this provision would mean the Federal Government would collect an additional $293 billion in taxes over 10 years.

True to form, this is just another version of the same soak-the-rich play that the left has been running for decades. From their perspective, it is unfair that higher income individuals get a more valuable tax benefit than lower income individuals? But this perspective mischaracterizes a critical issue. The 35 percent bracket was established by Congress with an understanding that itemized deductions would allow a significant tax benefit. Had Congress known that higher income taxpayers would be disallowed some of their itemized deductions--as the President now proposes--undoubtedly Congress would have set that bracket at lower than 35 percent.

So, taking away some of the benefit of itemized deductions for higher income taxpayers, while leaving the high-income tax rates at their current levels, upsets the balance struck by prior Congresses. Obviously, Congress is allowed to do this, but let's not pretend that these expenditures are loopholes or oversights by prior Congresses. The President and the Senate's Democratic leadership are free to do this if they choose, but they should at least come clean about what they are doing. They are significantly raising taxes on the people who are already shouldering the lion's share of the Federal income tax burden-- 98 percent of them, as a matter of fact.

Even aside from the staggering character of this tax increase--one that would clearly violate President Obama's campaign pledge not to raise taxes on middle class Americans the macroeconomic impact of this cap is negative at best.

President Obama's 28 percent cap would reduce the benefit from the home mortgage interest deduction. For 5 years now, our Nation has been experiencing a bursting of the real estate bubble. Current headlines indicate that this trend will continue for a time. Limiting the value of the home mortgage interest deduction would apply additional downward pressure on home prices--not only for high end homes, but for all homes. By repeatedly proposing to limit the benefit of the home mortgage interest deduction, is it the President's intent to further depress housing prices, or is this mere collateral damage from his desire to raise taxes.

But the damage from this cap does not stop at the housing market. President Obama's 28 percent cap would also reduce the benefit from the charitable contribution deduction. This would almost surely reduce the amount of contributions people would make to churches, synagogues, temples, soup kitchens, shelters, universities, and museums. Is that the President's intention? Does the President know that these revenues might never materialize because the elimination of this deduction will step up pressure for direct government assistance for the poor, for students, and for the arts?

Finally, this cap would reduce the benefit of the State and local tax deduction. I touched on this point earlier. High-tax States are able to soften the blow of their high taxes by pointing out to their citizens the Federal deductibility of such taxes. So, my colleagues from high- tax States might want to talk to their governors about the impact the President's proposed cap would have on State and local public finance.

I want to be clear about something. Our Tax Code is a colossal, awful mess. And tax expenditures must be a part of any conversation about tax reform. But I want to emphasize that the conversation about tax expenditures should happen in a conversation about broad based tax reform--reform that flattens the code while lowering rates.

The conversation about tax expenditures should be a sober one in the context of a meaningful discussion about tax policy. Unfortunately, the President has chosen instead to target tax expenditures willy nilly with little regard for the policy implications of these tax hikes.

Make no mistake, whatever the President wants to call it--reducing spending through the Tax Code, closing loopholes, or making people pay their fair share--these are tax increases plain and simple. And they are tax increases on the middle class.

There has been some criticism in recent days about Republicans for their commitment to a pledge many of them took against any net tax increase.

I have to admit I am at a loss here.

Conservative Republicans, convinced that taxes are already high enough, promise their taxpaying citizens that they will never support a net tax increase.

They gave their constituents their word, and are sticking to it.

Meanwhile, President Obama, who promised not to raise taxes on the middle class when running for office, vows to break this promise at every opportunity.

And yet it is the conservative Republicans who are somehow lacking integrity? Hardly.

I don't care how many blows I take from sophisticated Washingtonians and professional leftists for sticking by my pledge to the people of Utah. I will resist any effort by the President to include tax increases as part of the deal to increase the debt ceiling. I will do so for a number of reasons. First, our Tax Code needs a fundamental overhaul. It is a complicated mess that is lacking in fundamental fairness. Yet the President's proposal to reduce tax expenditures for deficit reduction, is a proposal to maintain a tax code that grows more burdensome by the day. The President's proposal essentially robs the government of the revenues that it might use later to flatten the Tax Code and lower rates.

More importantly, I oppose the President's proposed tax hikes as a matter of principle. Flattening the tax base without any offsetting rate reduction is a tax increase.

My friend, the ranking member on the Senate Budget Committee, Senator Sessions captured the point well in an interview the other day. I will quote Senator Sessions:

We have to be honest and recognize that if you are going to

eliminate systematically a host of deductions and keep the

money or spend it for new programs, then you've raised taxes.

. . . It just is unless we've changed the English language.

The campaign against tax expenditures is a campaign for a tax increase.

It is a tax increase that could send the wrong signal to those Americans who sacrifice current consumption and save for retirement. It could raise the bar for those Americans who want to experience the American dream of home ownership. It would mean the residents of high tax States would face even higher State and local taxes. And it could mean a cutback back in the volume of charitable giving.

This is shared sacrifice that the Nation cannot afford.

I prefer shared prosperity by cutting taxes and giving the small businesses and businesses the opportunity to use that money to hire people and get people working and get more people paying taxes. I think it is abysmal that the bottom 51 percent do not pay income taxes, and 23 million of them get refundable tax credits from the government that are far more than the payroll taxes they might have to pay, which are Social Security payments.

I listened to my colleague from Vermont saying we cannot do anything on Social Security, we cannot do this, cannot do that, the poor people are going to be hurt. Where are they going to be when Social Security is bankrupt? Where are they going to be when Medicare and Medicaid are bankrupt? The way we are going, that is where they are going to be.

We cannot keep spending like this, and we have to quit playing the phony game with tax expenditures.

All I can say is we have to get with it around here and we have to start working together as Democrats and Republicans in the best interests of the American people, and that is reforming this awful Tax Code, getting taxes down for everybody, and taking care of the poor but also expecting everybody to have some skin in the game--except the really poor--and help our country pull out of the mess we are in.

Mr. President, I suggest the absence of a quorum.

Mr. President, I rise today to discuss the Senate's upcoming trade agenda and its impact on Pennsylvania workers and Pennsylvania jobs.

Like so many of our States, Pennsylvania has always played a critically important role in America's manufacturing and commercial heritage. The coal and waterways of our State helped make the Commonwealth legendary for steelmaking and helped turn the United States into an industrial powerhouse. During its heyday, 60 percent of the domestic steel production in the United States came from Pennsylvania.

During World War II, almost one-third of the Nation's steel came from Pennsylvania, which was a full 20 percent of global production at the time. The then-Governor of Pennsylvania, Arthur James, put it this way: ``Pennsylvania was truly the arsenal of democracy and the arsenal of America.''

Given its dominance in the steel industry, it is no surprise that the Commonwealth was sixth in the Nation in total war production during the Second World War, leading in shipbuilding and munitions production. More money was spent to expand production capacity in Pennsylvania than in any other State during the war.

We know at the time it did not stop there. It did not stop at the end of the war. After the war was over, these manufacturing facilities were used to make American products and fuel the growth of a thriving middle class.

Today, so many of these plants have gone away, due in part to our failed trade policies. Over the last 30 years, we have seen trade deficits soar, currency manipulation go unchecked, lavish subsidies by foreign governments go ignored, and exploitation of workers in other countries overlooked. That is why I am very concerned that today the Finance Committee is moving forward the pending agreements with South Korea, Colombia, and Panama. For the last several weeks, the Presiding Officer, Senator Brown, and I have persistently asked the tough, critical questions about the impact of these agreements before they are considered. A review of the impact of past trade agreements offers very little comfort. In 1994, Congress passed the North American Free Trade Agreement. We know it as NAFTA. Since NAFTA's passage, U.S. Trade policies have steadily chipped away at Pennsylvania's manufacturing base.

It is a critical sector for our State and so many others. According to a recent study--and the chart on my left depicts it--from the Industrial Resource Centers, from 1997 to 2010, just 13 years, manufacturing went from 16.4 percent of our gross State product to 12.1 percent, a remarkable drop in just 13 years. What does that mean for the total number of jobs? In total, Pennsylvania lost nearly 300,000 manufacturing jobs. You can see it from the chart, starting in 1997, the drop to 12.1 percent in just those 13 years--300,000 jobs in 13 years.

Despite these alarming numbers and statistics, advocates for the trade deals, including the pending agreement with South Korea, promised significant economic benefits from exploding export potential to job creation. Proponents argue a significant net positive from these agreements every time they are considered. In reality, instead of creating opportunities for Pennsylvania, our trade policies did little more than offshore good-paying jobs, while giving our trading partners unlimited access to our markets.

So we must take the time now to ask the tough questions. Specifically, as a Senator from Pennsylvania, I must ask three basic questions about any trade deal. No. 1, will the agreement protect current Pennsylvania jobs and create new jobs in Pennsylvania and across America? No. 2, will the agreement help create a level playing field for American businesses and workers? No. 3, does the agreement provide new opportunities for American manufacturers to export?

I will focus on the South Korean Free Trade Agreement in the context of each question. First, will the agreement protect and create jobs in Pennsylvania and across the Nation? In these uncertain times, job creation must be our top priority. In Pennsylvania, the manufacturing sector is critical. Manufacturing remains the Commonwealth's largest source of good-paying jobs, with chemical primary metal products, fabricated metal products, food products, and machinery making up the top five manufacturing sectors supporting Pennsylvania families. These benefits extend beyond individual manufacturing businesses in our State--in fact, the economic benefits of a strong manufacturing sector experienced throughout Pennsylvania's economy. According to research commissioned by the Pennsylvania Industrial Resource Centers, every $1 increase in demand for products manufactured in our State leads to an increase in growth value of $2.52 across all industries. So one buck in activity can lead to $2.52 in value.

The manufacturing jobs that are created support middle-income families, and the creation of those jobs and the support they provided for those families in 2008 meant the following: The average annual compensation of a worker in the manufacturing sector was over $65,000. The average pay for the rest of the workforce was $10,000 less. Each good-paying job in this country allows for more money to flow back into the economy. Given the importance of manufacturing jobs in Pennsylvania, we must ask ourselves: Will the Korea trade agreement create jobs, especially in the manufacturing sector? I believe it will not create a substantial number of new jobs in this critical sector.

Looking back over the last 20 years, trade-related job expansion has been an unfulfilled promise for Pennsylvania and the Nation. We need to look no further than NAFTA. In 1993, when the agreement was signed, NAFTA promised to deliver hundreds of thousands of jobs across the United States. Leading economists at the time projected NAFTA would bring 170,000 new jobs in the near term alone. These gains were not realized. Instead, since NAFTA was signed into law through 2002, 525,094 workers were certified as displaced under NAFTA, according to the Department of Labor. I am sure that number has grown since that 2002 data point. Furthermore, when NAFTA was negotiated, leaders suggested that American exports would expand greatly to meet the new- found demands of the open Mexican market with all its new customers. The opposite has occurred.

In 1993, the United States had a small trade surplus. We had a surplus with Mexico. According to the official Census Bureau statistics, by 2010, 17 years later, we were running a trade deficit with Mexico of $66.4 billion. So a surplus in trade with Mexico became a huge deficit. Trade with Canada also saw a widening trade deficit from $10 billion in 1993 to $28 billion in 2010. So there a deficit got bigger; whereas, in the case of Mexico, it went from a surplus to a massive deficit of $66 billion. The impact of these policies is plainly seen in employment data. Pennsylvania has seen a dramatic decline in manufacturing employment since NAFTA was implemented, losing a total of over 300,000 jobs. With this rosy prediction of NAFTA in mind, a close

look at the government's projections of the South Korea agreement should be viewed with great skepticism. While the International Trade Commission predicts our bilateral trade with Korea will improve, the total U.S. trade deficit is predicted to get larger. While proponents of the agreement argue U.S. exports to Korea will increase, they are neglecting to tell the whole truth. Companies will simply shift from exporting to Korea, to creating current customers in other places, rather than increasing total exports.

The second question I ask is, Will this agreement help create a level playing field after enactment? I believe this agreement, South Korea agreement, will fail to create a level playing field for our workers and our companies. Modern trade agreements do more than cut tariffs. These agreements contain hundreds of provisions that make substantial changes to nontrade policies, and the Korea agreement is no exception. According to the group Public Citizen, these nontrade provisions limit the authority granted to elected representatives of the American people over product and food safety, financial regulations, health care and energy regulations, patent terms, and even our tax dollars that can be spent by the government. The agreement allows Korean exporters to take investment disputes out of courts and into unaccountable and secretive international tribunals through a process known as investor-to-state dispute system that is similar to NAFTA.

Additionally, the investment chapters were signed prior to the current financial crisis back in 2007. These specific chapters include rules that prohibit either country from imposing firewalls between the sorts of financial services one firm may offer to limit the spread of risk, for example. Important protections put in place after the financial crisis of 2007 and 2008 could potentially be challenged under the pending agreement. Even more troubling is the issue of Korea's currency. South Korean currency manipulation remains an unaddressed problem. As we have seen in China, an intentionally weakened currency leads to a fundamentally unbalanced trade relationship and brutal conditions for U.S. companies. In a June 17 report, the Economic Policy Institute calculated that if Asian currencies were strengthened to appropriate market-determined levels, if that were done, U.S. gross domestic product would increase by as much as $285.7 billion or 1.9 percent, creating up to 2.25 million U.S. jobs; that is, if Asian currencies were strengthened to those appropriate levels. Unfortunately, as with other NAFTA-style free-trade agreements, this South Korea agreement is silent on currency. This is unacceptable because South Korea devalued their currency twice, once in 1988, once in 1998. Both interventions devalued their currency by 50 percent or more. South Korea was one of the first countries cited as a currency manipulator by the Treasury Department in 1988. South Korea continues their long history of manipulating their currency. In fact, the most recent Treasury report to Congress on international economic and exchange rate policies, from May 27, 2011, noted that South Korea intervened ``heavily'' in its currency market during the financial crisis and has continued uninterrupted since. Treasury urged South Korea to ``adopt a greater degree of exchange rate flexibility and less intervention.'' Currency policy has played a central role in China's mercantilist trade policies and has cost the United States thousands of jobs. We should not be cutting tariffs for the country, with South Korea's heavy history on currency manipulation, without language to deal with protecting us in a competitive environment in the devaluations that they have undertaken before.

Additionally, several groups raised the possibility that the agreement could be used to weaken U.S. trade laws. The free trade agreement creates a bilateral commission on trade laws. While our Trade Representative argues that this will not change any existing U.S. trade laws, this avenue could be used by advocates of weaker enforcement in the future.

Finally, I turn to the last question. Does the agreement provide new opportunities for Pennsylvania manufacturers to export their goods? Similar to NAFTA, the benefits of the South Korea deal have been, in my judgment, overstated, while the risks have been largely ignored. Rather than opening a new market for Pennsylvania farmers and manufacturers, I am concerned that the benefits to the United States are minimal, at best. There are specific reasons this deal fails to deliver for Pennsylvania exporters. First, most of the benefits are based on an overly optimistic projection for agriculture. These projections, compiled by supporters of the agreement, assume that a cut in tariffs will immediately equal a growth in market share.

We know from past experience that Asian markets, including South Korea, have come up with a host of unjustified nontariff restrictions to keep U.S. beef out of their country. These barriers to free trade are likely to limit export potential and are largely unaddressed in the agreement. There are other troubling clauses dealing with the beef industry. The South Korea agreement will allow American beef packagers to use Canadian or Mexican cattle and then export the packaged Mexican or Canadian beef as ``American'' beef. This policy, while great for beef packagers, undercuts the U.S. ranchers. Given our difficulties in gaining a foothold in these markets, we should rely solely on U.S. cattle, which we know are safe.

Second, one of Pennsylvania's most important sectors--dairy--the competing European Union Free Trade Agreement with South Korea could inhibit our ability to compete in the South Korean market. The text of the European Union agreement specifies that certain types of cheese, including mozzarella, must come from specific regions. As a result, European exporters could challenge U.S. producers selling cheese in South Korea as ``mozzarella'' or ``parmesan.'' In this sense, the Europeans have negotiated a better agreement, giving European companies an advantage over American companies.

Another problem with the agreement is which goods qualify for the ``Made in South Korea'' designation--the sticker, so to speak--and are allowed to, therefore, enter the United States duty free. Under the rules of origin in annex 6-A of the agreement, 65 percent of the value of many goods, including automobiles shipped duty free to the United States can come from South Korea and still be considered ``Made in South Korea.''

This standard is lower than the European Union agreement. The European Union agreement has a 55-percent content standard where content can be foreign and, once again, places our companies at a comparative disadvantage in international competition. Just as the chart depicts, 35 percent Korea plus 65 percent China will equal ``Made in Korea.'' I don't think that is what the American people bargain for when they expect us to get trade policies right. In a sense, this opens the door--a back door--for products primarily made in places such as North Korea or China to enter the United States of America duty free. That is wrong. It should be changed. We should not broker an agreement that has that in it.

Let me conclude with the three questions I started with. First, will the agreement create a substantial number of new jobs? I am concerned it will not. In previous agreements such as NAFTA, if they are any indication, the U.S.-Korea agreement will lead to job losses, especially in the critical manufacturing sector.

Second, will the agreement help create a level playing field? It will not. The agreement fails to address critical issues such as currency manipulation that have already hurt American businesses and cost us jobs.

Third, does the agreement provide new opportunities for American manufacturers to export? Proponents have overstated the benefits. Certainly industries and firms are likely to benefit, while many others will not. What is clear is that in its failure to address nontariff barriers to trade, the agreement leaves American firms unprotected and on a playing field that is not level.

Instead of moving ahead with a broken model, we need to focus on the bigger picture--formulating a strategy that helps American manufacturers, that leads to job creation to help middle-income families, helping us create the jobs of the future.

To make real sustained progress, Washington needs to have a plan, a

strategy. We must develop and commit ourselves to a national manufacturing strategy that includes job-creating trade policies as well.

Recently I convened a roundtable in Pennsylvania with leaders of several southwestern Pennsylvania companies at the Universal Electric Corporation in Canonsburg, Washington County, to listen to their ideas and bring them to Washington, DC, to keep a focus on supporting manufacturing. I heard a number of common themes. First of all, we should develop a national strategy, as I mentioned, for manufacturing. Second, we should make the R&D tax credit permanent. Third, we should crack down--really crack down--on China's currency manipulation and other unfair trade policies so that Pennsylvania companies and their workers have at least a fair shot. Legislation I recently introduced gives us those tools to hold countries accountable for manipulating currencies.

We also need to extend trade adjustment assistance to help workers who have lost their jobs to overseas unfair foreign competition so they can build new skills and find new employment.

Finally, we need to invest in science, technology, engineering, and math, the so-called STEM discipline, which we know will create many jobs in the future.

Manufacturing is the heart and soul of Pennsylvania and our Nation's economy. Our future depends on developing policies that help our workers and our businesses compete in the global production of goods. Our workers and our businesses can outcompete anyone in the world--any country in the world. We just need to give them a fair shot. We need to give them a strategy. These agreements don't do that.

Mr. President, I yield the floor.

Mr. President, as we discuss the need to bring down the deficit, we should acknowledge a few basics. First is cannot achieve the deficit reduction we need with spending cuts to nondefense discretionary programs alone. They simply aren't large enough to make the difference we need, and the damage we would do to American families from drastic cuts in those programs is simply too great.

Second is that in light of those facts and in the interest of basic fairness, a balanced solution to deficit spending must include revenues as well as spending cuts. If we ask college students relying on Federal aid, workers in need of Federal job training, seniors in need of health care to sacrifice in the name of deficit reduction, so, too, should those who benefit from loopholes and handouts in the Tax Code, including loopholes that often benefit only highly profitable corporations, one of those huge loopholes that benefits corporations that dole out large stock option pay to their executives.

Current law provides an unwarranted tax subsidy to executive stock option compensation thereby increasing the tax burden on working families and increasing our deficit. According to the Joint Committee on Taxation, closing this loophole would reduce the deficit by about $25 billion.

Today, under tax rules for reporting stock options, corporations report stock option expenses on their books when those stock options are granted but use another method to claim a different and a typically much higher expense on their tax returns when the stock options are exercised. The result is, corporations can claim larger tax deductions for options on their tax returns than the actual expense they show on their books for those same options.

Stock options are the only type of compensation where the Tax Code allows a corporation to deduct more than the expense shown on their books. For all other types of compensation--cash, stock, bonuses, and others--the tax return deduction equals the book expense. In fact, if corporations deducted on their tax returns more than their books showed as compensation, it could constitute tax fraud. The sole exception to that rule is stock options. It is an exception we can no longer afford.

The Permanent Subcommittee on Investigations, which I chair, held a hearing in June of 2007, when we examined the stock option tax gap in detail at nine companies. We found that those nine companies claimed tax deductions that were a combined $1 billion greater than the expenses shown on their books. Let me repeat, just nine companies, $1 billion in excess tax deductions.

We were shocked by that finding, and we asked the IRS to calculate the stock option tax gap for the country as a whole. Using actual data from tax returns, the IRS found that for the first full year in which data was available, U.S. companies claimed an excess of $61 billion in stock option tax deductions compared to their book expenses. Since then, IRS data shows that the stock option tax gap has persisted for 5 years. They looked at 2005 to 2009, which was the latest year for which data was available, with the size of the excess tax deductions varying from $11 billion to $52 billion per year. These excessive deductions mean billions of dollars in reduced taxes for corporations wealthy enough to provide substantial stock option compensation to their already well-paid executives and all at the expense of ordinary taxpayers and an increase in the deficit.

It is a tax loophole that is fueling excessive executive pay, increasing the pay gap between millionaires and the middle class, and enabling profitable corporations to avoid paying their fair share to reduce the deficit.

I will soon be reintroducing the same legislation I have introduced in past years to end this misalignment of the Tax Code.

The bill would cure the problem simply by requiring the corporate stock option tax deduction to equal the stock option expense shown on the corporate books. It would not affect the taxes paid by individuals who receive the stock options. It would not affect so-called incentive stock options which receive favored tax treatment under section 422 of the Tax Code and are often used by startup companies.

In addition, the bill would make stock options pay subject to the same $1 million cap on corporate tax deductions that applies to other forms of executive pay. Congress established that $1 million cap so that taxpayers would not have to subsidize enormous paychecks for executives. But the cap can't end that tax subsidy without including stock options. Even if included under the cap, stock options could still be awarded in excess of $1 million, but not at the expense of ordinary taxpayers.

I do not know of any Senator who does not want to reduce the budget deficit. I do not know of any Senator who believes it is wise to subsidize executive paychecks at the expense of working families. But as it now stands, the excessive corporate tax deduction for stock option pay widens the deficit while increasing the tax burden on ordinary taxpayers. By closing this tax gap, by ending the illogical treatment of corporate stock options in current law, we can reduce the budget deficit and bring much-needed fairness to the Tax Code.

Mr. President, I ask unanimous consent that I be allowed to proceed as in morning business for 8 minutes.

Mr. President, the Department of Justice announced earlier this week that Ahmed Abdulkadir Warsame, an accused member of the terrorist group Al-Shabaab, has been indicted on charges of providing material support to Al-Shabaab and al-Qaida in the Arabian Peninsula, conspiring to teach and demonstrate the making of explosives, possessing firearms and explosives in furtherance of crimes of violence, and other violations of Federal law. He will be tried for these offenses in Federal court in New York.

Warsame is a Somali national who was captured in the gulf region in late April and taken to a U.S. Navy vessel for detention and interrogation. The Department of Defense has stated that the interrogation was conducted by an interagency team comprised of U.S. military personnel, with assistance from the High-Value Detainee Interrogation Group. After the completion of this interrogation and a hiatus of several days, Warsame was turned over to a team of FBI officials for law enforcement questioning, and in that he waived his Miranda rights and continued to talk.

This case appears to be an example of our national security and law enforcement teams working together in the manner we would hope they would toward the twin objectives of collecting critical intelligence information and ensuring a successful criminal prosecution of the detainee.

Published reports indicate that Warsame was captured by American military forces on a boat in international waters between Yemen and Somalia after the United States acquired intelligence indicating that a significant terrorist figure was on board the vessel. Under these circumstances, it was appropriate for the military to detain and interrogate Warsame to obtain actionable intelligence. The United States is currently engaged in military operations pursuant to the 2001 Authorization for Use of Military Force. As the Supreme Court held 7 years ago in the case of Hamdi v. Rumsfeld, the capture and detention of both lawful and unlawful combatants is a ``fundamental and accepted . . . incident to war.'' I understand these interrogations were conducted in a manner fully consistent with the interrogation techniques authorized under the Army Field Manual on interrogations.

Once our national security team determined that the collection of actionable intelligence had been completed, a separate decision was made, on the basis of the specific facts of this case, as to the best forum in which to prosecute Warsame for his alleged crimes.

The indictment sets forth evidence that Warsame violated a number of Federal statutes, including sections of the Criminal Code prohibiting trafficking in explosives, use of dangerous weapons, acts of international terrorism, providing material support to foreign terrorist organizations, and receiving military-type training from foreign terrorist organizations--making him a candidate for prosecution in a Federal court with jurisdiction over such violations.

Warsame also appears to have engaged in acts of terrorism and material support to terrorism, both of which are crimes under the Military Commissions Act, if they are committed ``in the context of and associated with hostilities'' against the United States. What has not been resolved is whether Warsame meets the jurisdictional threshold in the Military Commissions Act of having acted in the context of hostilities against the United States and having engaged in or materially supported such hostilities.

The administration's national security team unanimously agreed that prosecution in Federal court was the better option and the one most likely to lead to a conviction under the facts of this case. Our Federal prosecutors and Federal courts have a proven track record in prosecuting terrorists. Two years ago, the Justice Department informed us that there were 208 inmates in Federal prisons who had been sentenced for crimes related to international terrorism and an additional 139 inmates who had been sentenced for crimes related to domestic terrorism. By contrast, prosecution of the Warsame case before a military commission would have raised a difficult jurisdictional issue that could have resulted in dismissal or even acquittal.

Critics of the decision to try Warsame in Federal court apparently would prefer that he be tried before a military commission, even though he might be less likely to be convicted there due to the jurisdictional issue. I disagree with that position. In my view, the most appropriate forum for trial should be determined, as it was here, on the basis of the nature of the offense, the nature of the evidence, and the likelihood of successful prosecution. The executive branch officials who made the determination in this case are in a much better position to weigh those factors and make that judgment than is the Congress.

By the way, the approach taken by the administration in this case is consistent with the bipartisan detainee provisions included in the National Defense Authorization Act, as reported by the Senate Armed Services Committee last month.

Those provisions would authorize military detention for enemy belligerents captured in the course of hostilities authorized by the 2001 Authorization for Use of Military Force. That authority appropriately encompasses the detention of an individual like Warsame, who is suspected of participation in such hostilities, until such time as the military has been able to interrogate the detainee and make an appropriate status determination. While we may not have enough evidence to prove beyond a reasonable doubt that Warsame participated in hostilities against the United States, we undoubtedly had sufficient evidence to hold him for the time required to interrogate him and obtain the intelligence that our military needs.

The provisions in the Senate Armed Services Committee-reported bill would also expressly authorize the transfer of such a detainee ``for trial by an alternative court or competent tribunal having lawful jurisdiction.'' Indeed, an amendment to delete this authority was defeated in committee by a bipartisan vote of 7 to 19. We decided, in other words, to leave it up to executive branch officials to determine on a case-by-case basis, as they did here, the most appropriate forum for prosecution, whether it be a Federal court or a military commission.

By contrast, the House version of the defense authorization bill includes a provision that would expressly prohibit the trial in Federal court of any alleged foreign terrorist who might be subject to trial by a military commission--even if he is arrested inside the United States. This provision may well be unconstitutional, given that article III of the U.S. Constitution expressly states that:

The judicial power shall extend to all Cases, in Law and

Equity, arising under this Constitution, the Laws of the

United States, and Treaties made, or which shall be made,

under their Authority.

Under the plain language of this provision, Congress would appear to lack the authority to exclude the prosecution of violations of the laws of the United States in the Federal courts.

The effort to direct all terrorist cases to military commissions could also be highly counterproductive, providing jurisdictional arguments that defendants could use to seek the dismissal of charges against them. If the House language were adopted, a case in Federal court on a terrorism charge would be at risk of being dismissed on the grounds that it could only have been brought before a military commission, while at the same time, because of the limited jurisdiction of military commissions, the military commission might not have jurisdiction either. In such a case, it would be impossible to prosecute an alleged terrorist in any

forum. The critics of the Department of Justice decision should end their effort to score political points here. The stakes are too high, and if the critics get their way, we might not be able to try some terrorists at all--anywhere.

Some may contend that holding alleged terrorists in the United States for trial could needlessly subject Americans to retaliatory attacks by terrorist organizations. There is no basis for that argument. We have tried hundreds of alleged terrorists in our Federal courts over the last decade. We are currently holding many more--including the Christmas Day bomber, who is being held in my hometown of Detroit. So far as I know, none of these cases have led to retaliatory attacks by terrorist organizations. In any event, we know that al-Qaida and its allies are already seeking avenues to attack us on American soil and would do so if they could. Moving the location of a trial to Guantanamo or some other foreign location is unlikely to deter such an attack.

Last month, ADM William McRaven--the President's nominee to be commander of U.S. Special Operations Command--testified before our Armed Services Committee that a suspected enemy belligerent detained outside the war zones in Afghanistan and Iraq would likely be put on a naval vessel until ``we can prosecute that individual in a U.S. court or we can return him to a third party country.'' Admiral McRaven made it clear later in his testimony that such an individual could also be transferred for trial by a military commission. In other words, we have a choice. We should preserve that choice.

In summary, the Warsame case demonstrates that we do have the capacity to detain and interrogate suspected terrorists in military custody for the purpose of obtaining actionable intelligence, and then to transfer them to an appropriate forum for trial--whether it be a Federal court or a military commission. This case demonstrates that we do not have to sacrifice actionable intelligence for law enforcement purposes, and that we do not have to sacrifice criminal prosecution in order to collect intelligence information. And it demonstrates that we can pursue both of these objectives without being pushed to what Admiral McRaven described as the ``unenviable option'' of having to release the detainee.

The only ``unenviable'' outcome is the one that the critics of the Department of Justice decision would lead us to--prohibiting the criminal trial of suspected foreign terrorists in Federal court and requiring them to be tried by military commissions, even in cases like the Warsame case, where a jurisdictional problem might lead a military commission to dismiss the case.

The action of the administration in the Warsame case is sound. The prosecutorial discretion they exercised as to the best forum for the trial should be preserved and should not be interfered with by the Congress.

I yield the floor.

Mr. President I would observe the current Presiding Officer has had the misfortune of being in the chair whenever I am coming down to speak, so I appreciate his patience.

Today, congressional leaders are meeting with the President of the United States to discuss what can be done to reduce the Nation's out- of-control deficit, to deal with our unsustainable debt, to get America back to work and help grow our economy. I congratulate the President for convening this meeting, which will probably be one of the last chances we will have to deal with this deadline of August 2 to deal with the debt limit--a situation wherein we have maxed out our Nation's credit card. Forty-three cents out of every dollar the Federal Government spends today is borrowed money, making the deficit worse and not better and making the debt worse and not better. This is the chance to kick the habit of out-of-control spending here in Washington.

I appreciate the fact the President has moved from his initial position wherein he advocated for Congress to simply raise the debt limit without putting Washington and Congress on a spending diet. I appreciate the fact he has moved in his position. I read today in the daily newspapers that he is putting a lot of things, including Social Security reform, on the table, together with other entitlements. I hope this represents a change of position, a change of attitude, and the President and our negotiators will seize this opportunity to do the kind of grand bargain that will put America back on to a more solid fiscal path. Every child born in the United States today--while being one of the luckiest people in the world being born in the United States of America, but at the same time being burdened--every child born today will be burdened with $46,000 for their share of the national debt. That is simply wrong and we all know it.

Unfortunately, there has been a lot of discussion about the White House and some of our Democratic colleagues wanting to raise taxes as part of this grand bargain. Indeed, I think that is the notion behind this sense-of-the-Senate resolution the majority leader has introduced, which is targeted at millionaires and billionaires. The sense-of-the- Senate resolution the majority leader wants us to vote on says it is the sense of the Senate that any agreement to reduce the budget deficit should require that those earning $1 million or more per year make a more meaningful contribution to deficit reduction.

Unfortunately, this is not real legislation. This won't change anything. This is a sense of the Senate. This is a resolution, which I think is a missed opportunity to actually deal with the issue rather than pretend as though we are treating it seriously.

When the White House proposes that working families and small businesses, among others, suffer a $400 billion tax increase over the next 10 years, it strikes me that in one sense this is like a diet where a person says, I am going to give up dessert. I am not going to eat dessert. But then that person binges on the buffet. In other words, it is not real. It is not going to work.

To put this in perspective, the Federal Government is currently borrowing $4 billion every day this year. So actually raising taxes in this amount--while this only amounts to 10 days of what Washington spends--raising taxes by $400 billion over 10 years, as we can see, won't make a serious dent in the deficit and the debt, and they are very serious job-killing proposals as well. It strikes me as common sense to say if we want more jobs, we make it easier to create jobs. If we want less jobs, we make it harder to create jobs by raising taxes, by excessive regulation, and other obstacles to job creation. The irony is that I am not confident our friends on the other side who propose tax increases as part of this grand bargain actually want to use that increased revenue to pay down the deficit and the debt. To the contrary, I fear what they want to do is continue spending at the current levels. So it is kind of a shell game, saying we are going to cut $2 trillion but we are going to raise taxes by $2 trillion. What does that mean? Unless that $2 trillion in additional revenue is used to pay down the debt, it means it is a wash and government and Washington continue business as usual. I don't think the American people want us to continue doing business as usual. I think they want us to listen to them and to mend our ways.

Let me give a context for how nonserious some of the proposals are, including out of the President of the United States. All of a sudden he focused last week on this depreciation schedule for corporate jets. Depreciation is a normal part of the Tax Code which says if one uses something in a business, one can basically write it down over time. It won't surprise us to find that if a person did that, if a person did what the President said--eliminate depreciation of corporate jets--it would generate about $3 billion in revenue to the Federal Treasury over 10 years--$3 billion over 10 years. But to get a sense of what a minuscule contribution that would make to solving the problem, consider what our annual deficit is. This is in 1 year. This is what $1.5 trillion looks like. It has 12 zeroes; a 1, a 5, and 11 zeroes after the 5. That is our annual deficit.

The President says to solve this annual deficit, we need to raise $3 billion in additional revenue from corporate jet owners. Obviously, it is a drop in the bucket. But it is even worse when we look at the debt. The deficit, of course, is the difference between what the Federal Government brings in and what it spends. Right now it is spending about $1.5 trillion more each year than it brings in, in revenue. That is the deficit. But the accumulation of those deficits represents the debt. This is how much red ink our Federal Government is spending--or where we find ourselves--and that is $14 trillion. This is the number the President wants us to raise--$14 trillion. That is like the max on a credit card. If a person is spending too much money, that person bumps up against the credit card limit. The President, in essence, rather than cutting back on spending and making sure we are paying our bills we already owe, wants to raise it so the Federal Government can spend more money.

As I mentioned, this $14 trillion in debt boils down to $46,000 for every man, woman, and child in the country. So when the President gives a press conference--and I can't remember how many times he mentions chartered jets--but he talks about $3 billion in revenue over 10 years, it is a drop in the bucket when dealing with a 1-year deficit, or a deficit each year, currently of $1.5 trillion, or a $14 trillion debt. So the fact is we cannot get there from here, even if we did what the President said. It is not serious. It is not honest. It is not candid in terms of

what we need to do to get our country back on a solid fiscal pathway.

So let's talk about Federal tax reform. There has been a lot of discussion about that, where we want to take the Tax Code with all of its multiple provisions and get it on the table and take a look at it to make sure it is, in my view, flatter, fairer, and simpler. But right now, the fact of that according to the Committee on Joint Taxation, 51 percent--that is a majority of American households--paid no income tax in 2009. Zero. Zip. Nada. No income tax was paid by 51 percent of the households in America in 2009. Actually, to show how out of whack things have gotten, 30 percent of American households actually made money from the tax system by way of refundable tax credits, the earned income tax credit, among others. So 51 percent of American households paid no income tax in 2009, but 30 percent actually made money under the current system. According to the Internal Revenue Service, the top 10 percent of wage earners in America paid 70 percent of total income taxes. The top 5 percent of income earners in America paid nearly 60 percent of income taxes, and the top 1 percent paid 38 percent of income taxes.

So what is the President talking about and what is the majority leader trying to--what point are they trying to make when they suggest we pass a sense-of-the-Senate resolution saying that millionaires should ``make a more meaningful contribution to the deficit reduction effort''? What is their point? Is their point that we ought to raise taxes on people who are already paying taxes? Is their point that we should expand the pool of people who do not pay any income tax or should we perhaps expand the pool of people who actually benefit from cash transfers, payments as a result of a refundable tax credit?

Well, I think it is pretty obvious we need tax reform. I am skeptical that we have time between now and Secretary Geithner's stated deadline of August 2 to do what we need to do and to repair and fix our broken tax system. But I think this helps put in context the frankly cynical suggestion that somehow we could solve the problem if we just go after the fat cats and the corporate jet owners. If we just make the millionaires and billionaires pay more money, it will all be all right. Well, I think the American people are smarter than that. When confronted with the facts, I think they can readily conclude and will readily conclude that the system is broken and needs to be fixed. We do not need a bunch of smoke and mirrors and phony arguments about class warfare. That is not going to solve the problem. We need to solve the problem.

Well, let's look at the President's economic record. I know there have been some press reports about that the President said we are making a comeback. I think he called this summer ``the summer of recovery,'' if I am not mistaken. But, in fact, we know the President's policies are actually making things worse.

All you need to do is look at the number of people who are unemployed in America. There were 12 million people unemployed on his inauguration day. Now it is almost 14 million. Almost 2 million more Americans are unemployed. Is that making things better? No. It is making things worse. And we know there are a lot of people who are taking minimum- wage jobs and other jobs not up to their full potential because they want to provide for their families, so we call those people underemployed. That would make that number even higher. When the President was inaugurated in January of 2009, the unemployment rate was 7.8 percent. Today, it is 9.1 percent. That is a 17-percent increase. In other words, unemployment is worse today than it was when the President was sworn in.

Gas prices. We all know what has happened to gas prices. They have gone through the roof. People are having to deny themselves other discretionary expenditures because they simply have to have the gasoline to be able to drive to work, drive the kids to school, or take care of their daily business. The fact is, when the President was sworn in, gasoline prices were $1.85. Well, wouldn't it be great if gas prices were $1.85 today? Instead, they average $3.58. That is almost a 100-percent increase in gasoline prices since President Obama put his hand on the Bible and was sworn in as President of the United States. It is a 94-percent increase.

Then we were talking about the Federal debt. The Federal debt when the President was sworn in--some people will tell you: Oh, it is all about President Bush and fighting two wars that were not paid for. It is about the Bush tax cuts and other things. Well, I agree there is bipartisan blame when it comes to our national debt, but we ought to link arms and work together to try to solve the problem rather than continue to make it worse. The Federal debt when President Obama was sworn in was $10.6 trillion. Today, it is $14.3 trillion. It is 35 percent worse. The debt has gone up by 35 percent since President Obama was sworn in.

I mentioned this factor earlier. As shown on this chart, this is what every American citizen owes in terms of their share of the national debt. When President Obama was sworn in, it was $34,000. Today, it is 46,000. So, congratulations, everyone within the sound of my voice owes $11,000 more to the national debt since President Obama became President of the United States.

Then there is health insurance. We have had a lot of debate about health insurance costs. We were told that if we just passed this giant health care bill, health insurance costs would go down, we would fix problems, and we would make sure more people had access to health care. Well, since President Obama became President, health insurance premiums have gone up by 19 percent--19 percent. Did he make it better or did he make it worse?

Well, we need to unburden the economy from higher taxes, excessive regulation, and all the sorts of obstacles that get in the way of small businesses--the primary job-creating engine in our economy--doing what they do best; that is, growing the economy, creating jobs. If our friends across the aisle want more tax revenue, well, the best way to get more revenue is to get more Americans back to work so they pay taxes rather than remain unemployed, losing their homes because they cannot pay their mortgages. That is how we ought to increase revenue, not by raising rates, not by some of these silly class-warfare arguments that seem to target unpopular sectors of the economy.

And, yes, we need to increase exports to create more jobs. We can do that by ratifying the outstanding trade agreements without adding unnecessary spending to them.

And, yes, when it comes to energy policy, the high price of gasoline--which has gone up 94 percent since President Obama became President of the United States--we can open more domestic energy reserves, more American natural resources, rather than continue to have to import it from places abroad that are not necessarily our friends or which may be in political turmoil or even war, such as Libya. So if we had a rational national energy policy where the EPA, rather than looking for excuses to deny us access to things such as the natural gas discoveries we have found in Texas and around the country--if we had a way to take advantage of and did, in fact, take advantage of more domestic energy production, it could help us put more Americans back to work and help us reduce our dependency on energy from abroad and help bring down this price to one that does not break the backs of the average working families.

I yield the floor and suggest the absence of a quorum.

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I have a correction. My staff told me I undercounted $14 trillion. I asked ahead of time, but we actually got the number wrong. The number I have on the chart is actually three zeros too few. So just to make sure the record is correct, that is 12 zeros after the ``14.'' That reflects our national debt. I would like to say I made the mistake and it was actually lower, but it actually is much higher, which I think reinforces my point.

Thank you, Mr. President.

Well, Mr. President, responding to my friend from Alabama, the number, I am advised, is roughly $3 billion in additional revenue to the Treasury, and that would be over 10 years. But, as you can see, it is a drop in the bucket when it comes to the deficit for 1 year, which is $1.5 trillion, and the national debt of $14 trillion.

I apologize, I am not used to dealing with numbers that big, which demonstrates that these numbers really have kind of lost their meaning here. I remember Everett Dirksen being quoted as saying: A million here, a million there, and pretty soon you are talking about real money.

The fact is we are not talking about millions, we are not talking about billions, we are talking about trillions. I think most people's minds have a very difficult time conceiving of how big a number that is.