A bill to express the sense of the Senate on shared sacrifice in resolving the budget deficit.

Mr. President, I am honored to follow my distinguished colleague from Maryland in this discussion about our priorities as we address the debt limit we are approaching. I think Leader Reid was wise to choose to cancel the scheduled Fourth of July recess so we could continue to work toward an agreement to prevent defaulting by the United States on our government debt and the financial consequences that would ensue here in America and around the world.

As we negotiate an end to this debt limit standoff, we also, obviously, have to address our looming budget deficits and our looming debt, which threaten to cripple our potential for economic growth in years to come. Where we are on this, of course, is that President Clinton put our budget on course to permanent surpluses. We would be a debt-free nation right now if the predictions the nonpartisan Congressional Budget Office had put in place when President Clinton left office had been kept. In fact, there were changes. President Bush and a Republican Congress squandered away those surpluses with unnecessary tax cuts and unwise spending increases. Our multitrillion- dollar deficits have resulted. We must now fix the budget and bring it back into balance.

So where are we in this standoff? Well, we need to cut spending. Democrats and Republicans agree on that. We need to protect ordinary families who enjoy ordinary levels of income from tax increases. Democrats and Republicans agree on that. The disagreement is whether we also need to raise some revenues in other areas to help balance the budget, areas such as oil and gas and ethanol subsidies, closing corporate tax loopholes, and putting an end to high-income tax-dodge schemes.

On that front, I rise in support of Leader Reid's resolution calling for a deficit reduction package that includes a ``more meaningful contribution'' from millionaires and billionaires.

The Republicans are threatening that they would rather let this government default on its obligations than to what they call ``raise revenues'' by requiring the wealthy to pay their fair share. Just last week, Senate Republican leader Mitch McConnell called on President Obama to take any raised revenues ``off the table'' and to balance the budget solely on spending cuts that affect the middle class and lower income families. In an opinion piece on cnn.com, Senator McConnell proclaimed that ``tax hikes can't pass the Congress.''

Well, let's pull the curtain back and take a little glimpse behind it as to whom the Republicans are fighting so hard to protect.

As shown in this picture I have in the Chamber, here is a building in New York City on Park Avenue, the Helmsley Building. Because this building is large enough to have its very own ZIP Code, we know from actual IRS information--not projections, not guesses, not conclusions drawn from rates; from actual paid-in IRS information--that the wealthy and successful individuals and corporations that call this building home paid a 14.7-percent total Federal tax rate in the last year they have done the calculation, 2007. That is lower than the actual tax rate, on average, of the New York City janitor or doorman or security guard who would work in this building. It is upside down. The people who serve the occupants of this building pay a higher tax rate than the occupants of this majestic building. The tax gimmicks that let those occupants pay a lower rate than the people who take care of the doors and the cleaning and the security for them--that is what the Republicans are fighting to protect.

This problem is not just a fluke in the Helmsley Building. Each year, the Internal Revenue Service publishes a report that adds up all the taxes paid by the 400 highest income earning Americans. I spoke earlier this year--several times, actually--on last year's report, which included data from 2007, like the same year as for the Helmsley Building. In that year, these super-high-income earners, making, on average, $\1/3\ billion, approximately--billion with a ``b''--paid a lower tax rate in 2007--the 400 of them did, on average--than an average hospital orderly who is a single payer pushing a cart down the halls of a Rhode Island hospital at night.

In May, the IRS published updated data on the top 400 income earners for 2008. Let's take a look at the status of the top 400 earners in that more recent year. Well, they are down from $\1/3\ billion, on average, to over $\1/4\ billion each. Certainly we can applaud that kind of success in America. That is definitely the American dream come true. But, on average, they paid an average tax rate of 18.2 percent. That is what they actually paid. That is what they put into the IRS. Once you get through all the tax dodges, all the different schemes, all the different deductions, all the different rates, when you actually put the pen to the paper at the bottom line, it is 18.2 percent.

We spent a lot of time around here debating whether the top income tax rate should be 35 percent or 39.6 percent. Folks, that is not what they are paying. The Tax Code is so filled with special provisions that tend to exclusively or disproportionately benefit the wealthy that the highest 400 income earners, earning more than $\1/4\ billion in 1 year, paid an average tax rate of 18.2 percent.

This means that the 400 highest earning individuals in the Nation, in 2008, paid the same effective tax rate as a truckdriver in Rhode Island. According to the Bureau of Labor Statistics, on average, an ordinary truckdriver earns $40,200, which is about the place in the Tax Code, on the way up, where you first hit paying 18.2 percent of your income in taxes.

So what the Republicans are asking as part of the debt limit compromise is that we cut employment and job training support now, at a time of record joblessness, while they continue to fight to make sure that people making a quarter of a billion dollars a year pay lower Federal tax rates than average middle-class families.

Here is another building that has a little story to tell. This is a building called Ugland House. It is over in the Cayman Islands. This building does not look like much. It is pretty nondescript. But over 18,000 corporations claim to be doing business out of this building-- 18,000 out of that little building. Clearly what is going on is that those corporations are hiding through shell companies, phony corporate identities that they and wealthy taxpayers use to hide assets and play tax games with the IRS.

This kind of mischief down in the Cayman Islands and elsewhere through these tax dodges is estimated to cost us as much as $100 billion every year. As part of a debt limit compromise, the Republicans are asking us to cut America's investments in science, cut America's investments in technology at the same time they are fighting to protect corporations that hide in offshore tax havens so that the honest American taxpayer has to pick up the burden for them. That is what they are fighting for when you pull back the curtain.

When all is said and done, everyone, Democrat and Republican, agrees that there needs to be cuts. And everyone, Republican and Democrat, agrees there should be no tax increases on ordinary middle-class families. Those concerns are not at issue. Where is the dispute? What is the blockade? Again, pull back the curtain and you will see that the Republicans are willing to let us as a nation default for the first time in our history on our debt, which would devastate our economy, all to defend tax rates for millionaires and billionaires that are lower than those paid by regular hardworking Americans; all to defend offshore tax havens that are used to evade taxes while ordinary families are expected to pay their taxes; all to defend corporate and special interest tax loopholes, earmarks for the wealthy and well- connected. That is where they have chosen to stand their ground. That is where they have chosen to pick a fight.

As our Nation rushes toward the August 2 deadline and the agreement deadline before August 2 when we must have something in place in order to get the President's signature on a bill by August 2--as we rush toward that, as the world's economy and America's economy are imperiled by the threat of our debt limit not being lifted, what are they fighting for? That is what they are fighting for, for the superprivileged, for the super well-connected, for the tax dodges they take

advantage of, and for the lower rates the superrich pay compared to the rest of all of us. Those are the interests that Republicans are protecting when they reject any revenue increases to bring down our unsustainable deficit. They say it is tax increases they are against. Well, the answer to that should be Americans asking the question back: Tax increases for who? Because if it is tax increases for the guy who is making a quarter of a billion dollars, and is paying a lower tax rate than a truckdriver, that is okay with me. That is a tax dodge we can get rid of. If it is a tax increase for a company that is going to hide in this building in the Cayman Islands to shelter its incomes so that Rhode Island corporations and Oregon corporations, American corporations have to make up the difference--American taxpayers have to make up the difference, and they cannot hide their income down there any longer, that is a tax increase I can live with. I do not think that is what ordinary Americans have in mind when they say we do not want tax increases. They mean we do not want our rates to go up. But ordinary Americans know that our Tax Code is filled, riddled with gimmicks and tricks and loopholes and deductions that have been put in it over the years by lobbyists. They are earmarks, they just happen to be earmarks in the Tax Code. They spend America's money through the Tax Code just as much as if it were an appropriation.

But what is the big difference? The big difference is it takes being a very wealthy individual or a very big corporation to be able to take advantage of those tricks, to be able to hire a lobbyist who can build that trick into the Tax Code, and to have the revenues and the resources to be able to maneuver through the Tax Code in that way. Ordinary Americans do not do that.

You can ask pretty much anybody in Rhode Island, show them the thousands of pages of the Internal Revenue Code and ask them: Who has a special provision in it for you? Nobody does. They are regular Americans. They pay regular taxes. They do things the way they are supposed to be done. The gimmicks and the tricks are all at the upper end, and it is time to clean house, particularly now when we so badly need the revenues to balance our budget.

It is simply inexcusable that our tax system permits billionaires to pay lower tax rates than truckdrivers, that it allows the wealthy to avoid taxes by hiding assets in phony offshore corporations. Even if we had no budget deficit, just being fair, honoring the principle of equality would demand that we address these inexcusable discrepancies that favor the wealthy and the well-connected. Our budget crisis, however, brings real urgency to the problem. So as we continue to work to avoid a debt default by the United States of America and to bring down our budget deficits and to reduce our crippling national debt, I hope Senator McConnell and the Republican Conference will revisit the potential to significantly cut the deficit by addressing tax loopholes, tax gimmicks and, frankly, outright injustice to the ordinary American taxpayer that they are now defending here in the Senate.

I see the distinguished Senator from Alabama arriving.

I yield the floor.

Would the Senator yield for a question?

I don't want to step on your colleagues' time.

One of the things I have been tracking is the share of wealth, income, and taxes at various percentages toward the top. The Senator was good enough to mention that the top 1 percent pays about 28 percent of the taxes, the top 5 percent pays a little over 44 percent of the taxes, and the top 10 percent pays 55.4 percent of the taxes.

But I think in order to get a complete picture, it is also important to note that the top 1 percent controls 24 percent of the income, the top 5 percent controls 39 percent of the income, and the top 10 percent controls 50 percent of the income. If you go to wealth, the top 1 percent controls 33.8 percent of the wealth, the top 5 percent controls 60.4 percent of the wealth, and the top 10 percent controls 71.5 percent of the Nation's wealth.

So if you are in the top 10 percent and you control 71.5 percent of the Nation's wealth, it doesn't seem to be unreasonable that you should be paying 55 percent of the Nation's taxes, particularly if you are taxing based on dollars and not on just number of people.

I don't know if those numbers are wrong. We got them from the Federal Reserve Board, from the IRS, and from the Congressional Budget Office. I think they are accurate. It would appear to show that at the very high end, although these individuals are paying considerable taxes toward our Nation's economy, they are paying considerably less than the amount of wealth they control and not much more than the amount of income they control. In a graduated system of progressive taxation, which we are supposed to have, that is not surprising. In fact, what is surprising is that the top 24 percent of the income only pays 28.3 of the taxes.

I would be delighted to do that. And I might actually throw in the data from the IRS that shows that the top 400 income earners in the country in the most recent period that they have actually gone back and done the calculation paid 18.2 percent total taxes, which is less than I think the average American, certainly the average middle-class American family pays. So there is this reversal at the high end where people actually end up paying less.

Indeed, in one building in New York, the payment for the most recent year was 14.7 percent from the occupants, whereas janitors and doormen and security guards are paying up in the 20-percent ranges. It is not progressive in that sense. It is regressive at the high ends, according to those things. So let's get the information together, and we will have that discussion.

That is why I think the loopholes need to be closed, and I thank the distinguished Senator for the colloquy.

Exhibit 1

[From the National Review Online, July 5, 2011]

Politics vs. Reality

(By Thomas Sowell)

It is hard to understand politics if you are hung up on

reality. Politicians leave reality to others. What matters in

politics is what you can get the voters to believe, whether

it bears any resemblance to reality or not.

Not only among politicians, but also among much of the

media, and even among some of the public, the quest is not

for truth about reality but for talking points that fit a

vision or advance an agenda. Some seem to see it as a

personal contest about who is best at fencing with words.

The current controversy over whether to deal with our

massive national debt by cutting spending, or whether instead

to raise tax rates on ``the rich,'' is a classic example of

talking points versus reality.

Most of those who favor simply raising tax rates on ``the

rich''--or who say that we cannot afford to allow the Bush

``tax cuts for the rich'' to continue--show not the slightest

interest in the history of what has actually happened when

tax rates were raised to high levels on ``the rich,'' as

compared with what has actually happened when there have been

``tax cuts for the rich.''

As far as such people are concerned, those questions have

already been settled by their talking points. Why confuse the

issue by digging into empirical evidence about what has

actually happened when one policy or the other was followed?

The political battles about whether to have high tax rates

on people in high income brackets or to instead have ``tax

cuts for the rich'' have been fought out in at least four

different administrations in the 20th century--under

Presidents Calvin Coolidge, John F. Kennedy, Ronald Reagan,

and George W. Bush.

The empirical facts are there, but they mean nothing if

people don't look at them, and instead rely on talking

points.

The first time this political battle was fought, during the

Coolidge administration,

the tax-cutters won. The data show that ``the rich'' supplied

less tax revenue to the government when the top income tax

rate was 73 percent in 1921 than they supplied after the

income tax rate was reduced to 24 percent in 1925.

Because high tax rates can easily be avoided, both then and

now, ``the rich'' were much less affected by high tax rates

than was the economy and the people who were looking for

jobs. After the Coolidge tax cuts, the increased economic

activity led to unemployment rates that ranged from a high of

4.2 percent to a low of 1.8 percent.

But that is only a fact about reality--and, for many,

reality lacks the appeal of talking points.

The same preference for talking points, and the same lack

of interest in digging into the facts about realities,

prevails today in discussions of whether to have a

government-controlled medical system.

Since there are various countries, such as Canada and

Britain, that have the kind of government-controlled medical

systems that some Americans advocate, you might think that

there would be great interest in the quality of medical care

in these countries.

The data are readily available as to how many weeks or

months people have to wait to see a primary-care physician in

such countries, and how many additional weeks or months they

have to wait after they are referred to a surgeon or other

specialist. There are data on how often their governments

allow patients to receive the latest pharmaceutical drugs, as

compared with how often Americans use such advanced

medications.

But supporters of government medical care show virtually no

interest in such realities. Their big talking point is that

the life expectancy in the United States is not as long as in

those other countries. End of discussion, as far as they are

concerned.

They have no interest in the reality that medical care has

much less effect on death rates from homicide, obesity, and

narcotics addiction than it has on death rates from cancer or

other conditions that doctors can do something about.

Americans survive various cancers better than people anywhere

else. Americans also get to see doctors much sooner for

medical treatment in general.

Talking points trump reality in political discussions of

many other issues, from gun control to rent control. Reality

simply does not have the pizzazz of clever talking points.

Exhibit 2

[From the National Review Online, July 4, 2011]

Entitlement Bandits

(By Michael F. Cannon)

The budget blueprint crafted by Paul Ryan, passed by the

House of Representatives, and voted down by the Senate would

essentially give Medicare enrollees a voucher to purchase

private coverage, and would change the federal government's

contribution to each state's Medicaid program from an

unlimited ``matching'' grant to a fixed ``block'' grant.

These reforms deserve to come back from defeat, because the

only alternatives for saving Medicare or Medicaid would

either dramatically raise tax rates or have the government

ration care to the elderly and disabled. What may be less

widely appreciated, however, is that the Ryan proposal is our

only hope of reducing the crushing levels of fraud in

Medicare and Medicaid.

The three most salient characteristics of Medicare and

Medicaid fraud are: It's brazen, it's ubiquitous, and it's

other people's money, so nobody cares.

Consider some of the fraud schemes discovered in recent

years. In Brooklyn, a dentist billed taxpayers for nearly

1,000 procedures in a single day. A Houston doctor with a

criminal record took her Medicare billings from zero to $11.6

million in one year; federal agents shut down her clinic but

did not charge her with a crime. A high-school dropout, armed

with only a laptop computer, submitted more than 140,000

bogus Medicare claims, collecting $105 million. A health plan

settled a Medicaid-fraud case in Florida for $138 million.

The giant hospital chain Columbia/HCA paid $1.7 billion in

fines and pled guilty to more than a dozen felonies related

to bribing doctors to help it tap Medicare funds and

exaggerating the amount of care delivered to Medicare

patients. In New York, Medicaid spending on the human-growth

hormone Serostim leapt from $7 million to $50 million in

2001; but it turned out that drug traffickers were getting

the drug prescribed as a treatment for AIDS wasting syndrome,

then selling it to bodybuilders. And a study of ten states

uncovered $27 million in Medicare payments to dead patients.

These anecdotes barely scratch the surface. Judging by

official estimates, Medicare and Medicaid lose at least $87

billion per year to fraudulent and otherwise improper

payments, and about 10.5 percent of Medicare spending and 8.4

percent of Medicaid spending was improper in 2009. Fraud

experts say the official numbers are too low. ``Loss rates

due to fraud and abuse could be 10 percent, or 20 percent, or

even 30 percent in some segments,'' explained Malcolm

Sparrow, a mathematician, Harvard professor, and former

police inspector, in congressional testimony. ``The

overpayment-rate studies the government has relied on. .

.have been sadly lacking in rigor, and have therefore

produced comfortingly low and quite misleading estimates.''

In 2005, the New York Times reported that ``James Mehmet, who

retired in 2001 as chief state investigator of Medicaid fraud

and abuse in New York City, said he and his colleagues

believed that at least 10 percent of state Medicaid dollars

were spent on fraudulent claims, while 20 or 30 percent more

were siphoned off by what they termed abuse, meaning

unnecessary spending that might not be criminal.'' And even

these experts ignore other, perfectly legal ways of

exploiting Medicare and Medicaid, such as when a senior hides

and otherwise adjusts his finances so as to appear eligible

for Medicaid, or when a state abuses the fact that the

federal government matches state Medicaid outlays.

Government watchdogs are well aware of the problem. Every

year since 1990, the U.S. Government Accountability Office

has released a list of federal programs it considers at a

high risk for fraud. Medicare appeared on the very first list

and has remained there for 22 straight years. Medicaid

assumed its perch eight years ago.

How can there possibly be so much fraud in Medicare and

Medicaid that even the ``comfortingly low'' estimates have

ten zeros? How can this much fraud persist decade after

decade? How can it be that no one has even tried to measure

the problem accurately, much less take it seriously? The

answers are in the nature of the beast. Medicare and

Medicaid, the two great pillars of Pres. Lyndon Johnson's

``Great Society'' agenda, are monuments to the left-wing

ideals of coerced charity and centralized economic planning.

The staggering levels of fraud in these programs can be

explained by the fact that the politicians, bureaucrats,

patients, and health-care providers who administer and

participate in them are spending other people's money--and

nobody spends other people's money as carefully as he spends

his own. What's more, Medicare and Medicaid are spending

other people's money in vast quantities. Medicare, for

example, is the largest purchaser of medical goods and

services in the world. It will spend $572 billion in 2011.

Each year, it pays 1.2 billion claims to 1.2 million health-

care providers on behalf of 47 million enrollees.

For providers, Medicare is like an ATM: So long as they

punch in the right numbers, out comes the cash. To get an

idea of the potential for fraud, imagine 1.2 million

providers punching 1,000 codes each into their own personal

ATMs. Now imagine trying to monitor all those ATMs.

For example, if a medical-equipment supplier punches in a

code for a power wheelchair, how can the government be sure

the company didn't actually provide a manual wheelchair and

pocket the difference? About $400 million of the

aforementioned fines paid by Columbia/HCA hospitals were for

a similar practice, known as ``upcoding.''

And how does the government know that providers are

withdrawing no more than the law allows? Medicaid sets the

prices it pays for prescription drugs based on the ``average

wholesale price.'' But as the Congressional Budget Office has

explained, the average wholesale price ``is based on

information provided by the manufacturers. Like the sticker

price on a car, it is a price that few purchasers actually

pay.'' Pharmaceutical companies often inflate the average

wholesale price so they can charge Medicaid more. Teva

Pharmaceuticals recently paid $27 million to settle

allegations that it had overcharged Florida's Medicaid

program by inflating its average wholesale prices, and the

Department of Justice has accused Wyeth of doing the same.

Merck recently settled a similar case.

Most ominously, how does the government know that people

punching numbers into the ATMs are health-care providers at

all? In his testimony, Malcolm Sparrow explained how a

hypothetical criminal can make a quick million: ``In order to

bill Medicare, Billy doesn't need to see any patients. He

only needs a computer, some billing software to help match

diagnoses to procedures, and some lists. He buys on the black

market lists of Medicare or Medicaid patient IDs.'' With this

information in hand, Billy strides right up to the ATM, or

several at a time, and starts punching in numbers. ``The rule

for criminals is simple: If you want to steal from Medicare,

or Medicaid, or any other health-care-insurance program,

learn to bill your lies correctly. Then, for the most part,

your claims will be paid in full and on time, without a

hiccup, by a computer, and with no human involvement at

all.'' These schemes are sophisticated, so Billy might hire

people within Medicare and at his bank to help him avoid

detection.

Last year, the feds indicted 44 members of an Armenian

crime syndicate for operating a sprawling Medicare-fraud

scheme. The syndicate had set up 118 phony clinics and billed

Medicare for $35 million. They transferred at least some of

their booty overseas. Who knows what LBJ's Great Society is

funding?

And there are other forms of fraud. An entire cottage

industry of elder-law attorneys has emerged, for instance, to

help well-to-do seniors appear poor on paper so that Medicaid

will pay their nursing-home bills. Medicaid even encourages

the elderly to get sham divorces for the same reason. It's

all perfectly legal. It's still fraud.

Medicaid's matching-grant system also invites fraud. When a

high-income state such as New York spends an additional

dollar on its Medicaid program, it receives a matching dollar

from the federal government--that is, from taxpayers in other

states. Low-income states can receive as much as $3 for every

additional dollar they devote to Medicaid, and without limit.

If they're clever, states can get this money without putting

any of their own on the line. In a ``provider tax'' scam, a

state passes a law to increase Medicaid payments to

hospitals, which triggers matching money from the federal

government. Yet in the very same law, the state increases

taxes on hospitals. If the tax recoups the state's original

outlay, the state has obtained new federal Medicaid funds at

no cost. If the tax recoups more than the original outlay,

the state can use federal Medicaid dollars to pay for bridges

to nowhere. As Vermont began preparations for its Obamacare-

sanctioned single-payer system this year, it used a provider-

tax scam to bilk taxpayers in other states out of $5.2

million. In his book Stop Paying the Crooks, consultant Jim

Frogue chronicles more than half a dozen ways that states

game Medicaid's matching-grant system to defraud the federal

government.

Since 1986, the GAO has published at least 158 reports

about Medicare and Medicaid fraud, and there have been

similar reports by the HHS inspector general and other

government agencies. In 1993, Attorney General Janet Reno

declared health-care fraud America's No 2 crime problem,

after violent crime. Since then, Congress has enacted 194

pages of statutes to combat fraud in these programs, and

countless pages of regulations.

Yet federal and state anti-fraud efforts remain uniformly

lame. Medicare does almost nothing to detect or fight fraud

until the fraudulent payments are already out the door, a

strategy experts deride as ``pay and chase.'' Even then,

Medicare reviews fewer than 5 percent of all claims filed.

Congress doesn't integrate Medicare's myriad databases, which

might help prevent fraud, nor does it regularly review the

efficacy of most of the anti-fraud spending it authorizes.

Many of the abuses noted above, such as those of the Brooklyn

dentist, were discovered not by the government but by curious

reporters poking through Medicaid records. The amateurs at

the New York Times found ``numerous indications of [Medicaid]

fraud and abuse that the state had never looked into,'' but

``only a thin, overburdened security force standing between

[New York's] enormous program and the unending attempts to

steal from it.

The federal government's approach to fraud is sometimes so

inept as to be counterproductive. Sparrow testified that a

defect in the strategy of Billy, our hypothetical criminal,

is that he doesn't know which providers and patients on his

stolen lists are ``dead, deported, or incarcerated.'' But

Medicare's anti-fraud protocols help him solve this problem.

When Medicare catches those claims, it sends Billy a notice

that they have been rejected. ``From Billy's viewpoint,''

Sparrow explained, ``life could not be better. Medicare helps

him `scrub' his lists, making his fake billing scam more

robust and less detectable over time; and meanwhile Medicare

pays all his other claims without blinking an eye or becoming

the least bit suspicious.''

Efforts to prevent fraud typically fail because they impose

costs on legitimate beneficiaries and providers, who, as

voters and campaign donors respectively, have immense sway

over politicians. At a recent congressional hearing, the

Department of Health and Human Services' deputy inspector

general, Gerald T. Roy, recommended that Congress beef up

efforts to prevent illegitimate providers and suppliers from

enrolling in Medicare. But even if Congress took Roy's

advice, it would rescind the new requirements in a heartbeat

when legitimate doctors--who are already threatening to leave

Medicare over its low payment rates--threatened to bolt

because of the additional administrative costs (paperwork,

site visits, etc.).

Politicians routinely subvert anti-fraud measures to

protect their constituents. When the federal government began

poking around a Buffalo school district that billed Medicaid

for speech therapy for 4,434 kids, the New York Times

reported, ``the Justice Department suspended its civil

inquiry after complaints from Senator Charles E. Schumer,

Democrat of New York, and other politicians.'' Medicare

officials, no doubt expressing a sentiment shared by members

of Congress, admit they avoid aggressive anti-fraud measures

that might reduce access to treatment for seniors.

It's not just the politicians. The Legal Aid Society is

pushing back against a federal lawsuit charging that New York

City overbilled Medicaid. Even conservatives fight anti-fraud

measures, albeit in the name of preventing frivolous

litigation, when they oppose expanding whistle-blower

lawsuits, where private citizens who help the government win

a case get to keep some of the penalty.

Sparrow argued that when Medicare receives ``obviously

implausible claims,'' such as from a dead doctor, ``the

system should bite back. . . . A proper fraud response would

do whatever was necessary to rip open and expose the business

practices that produce such fictitious claims. Relevant

methods include surveillance, arrest, or dawn raids.'' Also:

``All other claims from the same source should immediately be

put on hold.''

Some of the implausible claims will be honest mistakes,

such as when a clerk mistakenly punches the wrong patient

number into the ATM. And sometimes the SWAT team will get the

address wrong, or will take action that looks like overkill,

as when the Department of Education raided a California home

because it suspected one of the occupants of financial-aid

fraud. How many times would federal agents have to march a

handcuffed doctor past a stunned waiting room full of

Medicare enrollees before Congress prohibited those measures?

``It seems extraordinary,'' Sparrow said, that the HHS

Office of Inspector General recommends ``weak and inadequate

response[s] . . . to false claims and fake billings'' and

that Medicare ``fail[s] . . . to properly distinguish between

the imperatives of process management and the imperatives of

crime control.'' Extraordinary? How could it be any other

way? Anti-fraud efforts will always be inadequate when

politicians spend other people's money. Apologists for

Medicare and Medicaid will retort that fraud against private

health plans is prevalent as well, but this only drives home

the point: Since employers purchase health insurance for 90

percent of insured non-elderly Americans, workers care less

about health-care fraud, and have a lower tolerance for anti-

fraud measures, than they would if they paid the fraud-laden

premiums themselves.

The fact that Medicare and Medicaid spend other people's

money is why the number of fraud investigators in New York's

Medicaid program can fall by 50 percent even as spending on

the program more than triples. That is why, as Sparrow

explained in an interview with The Nation, ``The stories are

legion of people getting a Medicare explanation of benefits

statement saying, `We've paid for this operation you had in

Colorado,' when those people have never been in Colorado. And

when you complain [to Medicare] about it, nobody seems to

care.''

The Ryan plan offers the only serious hope of reducing

fraud in Medicare and Medicaid. Its Medicare reforms,

especially if they were expanded later, would make it easier

for the federal government to police the program, and its

Medicaid reforms would increase each state's incentive to

curb fraud.

To see how the Ryan plan would reduce Medicare fraud,

imagine that the proposal really were what its critics claim

it is: a full-blown voucher program, with each enrollee

receiving a chunk of cash to spend on medical care, apply

toward health-insurance premiums, or save for the future.

Instead of processing 1.2 billion claims, Medicare would hand

out just 50 million vouchers, with sick and low-income

enrollees receiving larger ones. The number of transactions

Medicare would have to monitor each year would fall by more

than 1 billion.

Social Security offers reason to believe that a program

engaging in fewer (and more uniform) transactions could

dramatically reduce fraud and other improper payments. As a

Medicare-voucher program would, Social Security adjusts the

checks it sends to enrollees according to such variables as

lifetime earnings and disability status. The Social Security

Administration estimates that overpayments account for just

0.37 percent of Social Security spending. Overpayments are

higher in the Supplemental Security Income (SSI) program

(8.4 percent), a much smaller, means-tested program also

administered by the Social Security Administration. But

total overpayments across both programs still come to less

than 1 percent of outlays.

In reality, the Ryan ``voucher'' is much closer to the

current Medicare Advantage program, through which one in four

Medicare enrollees selects a private health plan and the

government makes risk-adjusted payments directly to insurers.

Skeptics will rightly note that, judging by the official

improper-payment rates, Medicare Advantage (14.1 percent) is

in the same ballpark as traditional Medicare (10.5 percent).

Therefore, the Ryan plan should be seen not as a solution to

Medicare fraud in itself, but as a step toward a vastly

simplified, Social Security-like program in which the task of

policing fraud is less daunting.

The Ryan plan would also vastly increase the states'

incentive to curb Medicaid fraud. Just as a state that

increases funding for Medicaid gets matching federal funds, a

state that reduces Medicaid fraud gets to keep only (at most)

half of the money saved. As much as 75 percent of recovered

funds revert back to the federal government. In a report for

the left-wing Center for American Progress, former Obama

adviser Marsha Simon noted that ``states are required to

repay the federal share . . . of any payment errors

identified, even if the money is never collected.'' The fact

that Albany splits New York's 50 percent share of the

spending with municipal governments may explain why the

Empire State is such a hot spot for fraud: No level of

government is responsible for a large enough share of the

cost to do anything about it. The result is that states'

fraud-prevention efforts are only a tiny fraction of what

Washington spends to fight Medicare fraud.

Ryan would replace Medicaid's federal matching grants with

a system of block grants. Under a block-grant system, states

would keep 100 percent of the money they saved by eliminating

fraud. In many states, the incentive to prevent fraud would

quadruple or more. Block grants performed beautifully when

Congress used them to reform welfare in 1996. They can do so

again.

The Ryan plan would not reduce Medicare and Medicaid fraud

to tolerable levels, but neither would any plan that retains

a role for government in providing medical care to the

elderly and disabled. What the Ryan plan would do is reduce

how much the fraudsters--many of whom sport congressional

lapel pins--fleece the American taxpayer. And that is no

small thing.

Madam President, what is the order at this point?

Madam President, I ask unanimous consent that I be able to proceed for 30 minutes.

I thank the Chair.

Madam President, I listened to my colleague just now and I have listened to colleagues over the last weeks and there are a lot of crocodile tears being shed on the floor of the Senate about why we are not doing something, all of which completely ignores the fact that everything we try to do, the folks on that side of the aisle make us take longer and longer and longer than we have ever taken before because they push every single procedural objection possible. Even the most routine thing we try to do on the floor of the Senate requires 60 votes or requires a motion to proceed. The most perfunctory, simple thing requires us to go through every procedural hoop and parliamentary process because they have persistently pursued a strategy aimed at gridlock.

The idea is to make Americans see the dysfunction and then blame it on the party in power and run against them. It is the most cynical, craven, and dangerous policy I have ever seen in the 27 years I have been in the Senate, and I regret it for our country.

There is a reason Democrats are standing, as a matter of principle, against the Ryan budget and against the proposals our Republican friends keep proposing. That is because they are the only party who have consistently stood and said: We are not going to consider everything. We are just going to give you a tiny, little menu, and you have to balance the budget out of spending cuts only. That is all that is in their budget. The only thing in their budget is spending cuts. Twelve percent of the entire budget is all they have put on the table in order to try to do something responsible about the deficit of our country.

We, on the other hand, have consistently said: We will put everything on the table--everything--Medicare, Medicaid, reforms--not benefits. We are not going to cut the benefits on people because we don't have to in order to deal with this problem, but we can reform them. We can certainly be more effective and efficient, and we are prepared to do that. There are a lot of other things we are prepared to do--defense spending, wars, and a whole series of things.

Last week, one of our newest colleagues made a very interesting and I thought revealing observation. The Senator from Delaware, Chris Coons, who balanced budgets in county government, who took cases all the way to the Supreme Court, who has seen decisions made in the business world as well as in the nonprofit world and who is an enormously capable person but new to the Senate, made the observation that some people are actually looking into the language of the 14th amendment and the debt limit in order to learn whether ``there might be some way to save us from ourselves.''

That observation brought home to me how absurd this place must look right now, not just to a new Senator who came here with hopes of getting the business of our Nation done but to the average American, to people who invest in the extraordinary mythology that surrounds this great institution we are all a part of--the greatest deliberative body in the world. We can laugh at that one today. There is an absence of deliberation--a great absence of deliberation--and I think a lot of people are alarmed by the dysfunction they see with respect to this great institution.

It is extraordinary when we have to look at the language of the Constitution to find possible ways to do what Congress and the Senate are supposed to do on their own--take tough votes, look at the tough issues, make tough decisions but, most importantly, do it in the interest of the United States, not in the interest of either party or of some ideology.

Here we are, less than 5 weeks from August 2, the day the U.S. Government will default on its obligations for the first time in its history, and Washington is still playing the same old political game--a dangerous game of chicken--with enormous consequences for our economy and our future in every respect--economic, social, and national security.

I hear this in my travels. Senator McCain and I were in Egypt recently, and we had people turning to us and saying: Hey, how about you guys? Can you get your act together before you are telling everybody else what they ought to be doing with respect to their future?

You are promoting democracy. How is your democracy doing back there in the United States? Working out all right, right now?

Washington is stuck, and it is stuck because we have a few ideologues and some people outside of the U.S. Senate who cower our fellow colleagues with threats of primaries. People are going to run against them if they move off of the orthodoxy of extremism. The result is that nothing is happening. Fear has gripped the Senators who raised their right hand and said: I swear to uphold the Constitution of the United States.

Well, everyone here I think acknowledges that defaulting on our obligations would be disastrous for our country. Everyone here simultaneously says they don't want the default to happen. But here we are with a small minority holding the debt limit hostage to an ideological agenda, saying they will not consider an approach that most observers consider indispensable and reasonable in reaching an equitable solution to our crisis.

Frankly, the consequences of not doing something are not far off in the future. Every day that we are here not getting this decision made, we are

weakening our economy and we are making our government and, through it, our country look helpless and adrift. The fact is that it is already having consequences with respect to business decisions. Capital is holding back. Businesspeople are reluctant to invest, uncertain of what the budget of the United States is going to look like, uncertain of what kinds of signals we are going to send to the marketplace. Certainty. I keep hearing colleagues say we have to send certainty. But when they look at this chaotic debate, what kind of certainty could any businessperson possibly take from what is not happening in Washington today?

Our friends on the other side of the aisle say they want to create jobs, but Moody's chief economist, Mark Zandi, has said that hiring is only going to resume if we can get our act together and settle this debate, and the sooner, the better. At the beginning of the month, Moody's announced that it might downgrade our country's credit rating if Congress isn't able to come to an agreement by the middle of July. That is a week away. If that happens, I promise you our economic recovery is going to halt in its tracks. Maybe some people want that. I hope not. But today investors are looking at the scene here in Congress, and they are wondering if we are ever going to get it together. And the longer we wait to get serious, the higher the interest rates are going to move. That hurts everyone in America. Everyone who owns a home or runs a small business is going to be squeezed while Congress is in this ideological standoff.

I read David Brooks' column this morning in the New York Times, a brilliant column talking about the unreasonableness of taking things off the table in this discussion.

Recently, 235 economists, including 6 Nobel Prize winners, sent a letter to congressional leadership urging them to raise the debt limit immediately. Not doing so, they said, could have a substantial, negative impact on economic growth at a time when the economy looks a bit shaky, and, at worst case, it could push the United States back into recession. So are we going to listen to 235 economists, including 6 Nobel Prize winners, or are we going to be driven by this extremist position that does not allow for reasonable discussion about what ought to be on the table?

I think this is a dangerous and irresponsible moment in our country. Not raising the debt limit would result in a crisis potentially far more severe than the financial crisis of 2008 and 2009. The consequences would include any number of things, from increases in State and local government borrowing costs, increases in corporate borrowing costs, including mortgage interest, declines in equity prices and home values, declines in 401(k)s and other retirement savings, reductions in the willingness of investors here and around the world to invest in the United States, and job losses on a significant scale.

Now, as I have said, I don't believe that is going to happen. But the question is, Are we going to get a deal that hurts America or helps America? If we eat America's seed corn in this deal--by that, I mean don't invest in America's infrastructure, don't invest in education, don't invest in the research and development that is so critical to the creation of new jobs--if all we do is what the other folks in the House said we ought to do by just looking at 12 percent of the budget and cutting spending, if that is all we do, we will eat America's seed corn, and the next generation will pay the price. Without investing in our future, we could face an economic downslide unlike anything we have seen in recent memory.

In 1983, President Reagan wrote:

Denigration of the full faith and credit of the United

States would have substantial effects on the domestic

financial markets and on the value of the dollar in exchange

markets. The Nation can ill afford such a result.

Nearly 30 years later, we are facing that kind of incalculable damage.

The fact is, Chairman Bernanke and Secretary Geithner have already used extraordinary measures to try to keep the Nation from default and keep the economy moving.

Already, Treasury Secretary Geithner has used extraordinary measures to keep our Nation from default. And, these measures have bought us some time to deal with congressional negotiations, but it happens that some Republicans have proven themselves willing to sacrifice our Nation's economy in a misguided attempt to score political points. I know they will protest and say ``we're just trying to solve our debt crisis,'' but the truth is there is more than one way to do that not just their way and particularly not when that way can have disastrous consequences on the economy.

Federal Reserve Chairman Ben Bernanke says failing to raise the debt ceiling on time could cause ``severe disruptions'' in the markets. He said:

We should avoid unnecessary actions or threats that risk

shaking the confidence of investors in the ability and

willingness of the U.S. government to pay its bills.

As of this moment, no one knows for sure how much time our financial markets will give Congress to come up with a solution before severe disruptions could occur. According to a J.P. Morgan analysis, the delay in raising the debt ceiling is likely to negatively impact markets, as investors undertake risk management actions in preparation for a potential Treasury default.

These effects could include immediate liquidity shortages as borrowers attempt to raise additional cash and increase the tenor of their borrowings, large auction concessions especially if Treasury were to postpone an auction, increases in open volatility that cover the June/July period, and general weaker demand for Treasury securities. As time goes on, failure to raise the debt ceiling could touch off a mini- financial panic, perhaps throwing the fragile economy back into recession.

If you don't believe me about moments like this, just look at our history and you don't have to look far. Just look back 3 years to September 2008, when Congress initially voted down Treasury Secretary Paulson's $700 billion plan to provide assistance to financial institutions. Investor confidence was brutally shaken and the Standard & Poor's 500-stock index plunged 8.8 percent that day.

If we do not act and act very soon indeed those who lend us resources will eventually demand higher interest rates. Government borrowing will crowd out private investment. A larger share of our Federal budget will be devoted to interest payments instead of productive investments like education, national security, and programs for our elderly and most vulnerable. Higher borrowing costs for American households and businesses will discourage future private investment, lowering our capital stock, reducing our economic growth and depressing our standard of living.

Mr. President, this isn't half as complicated as some have chosen to make it. We are not as far apart as this debate would imply. We can all agree that deficits are too high. We can all agree that we shouldn't be borrowing 40 cents on every dollar that we spend. We even agree that we need $4 trillion in deficit reduction to put us on a sustainable path.

But in the end, this budget debate can't just be about just cutting spending which is all the Republicans have offered. Our future is at stake--literally. Everyone says that job creation and investments in infrastructure, clean energy, and medical research are essential. We need to give the economy the tools to recover. As Ben Bernanke affirmed just the other day, we can't just cut our way to jobs and recovery. The Americans who sent us here understand that and want investment in our future.

I believe there are better choices that we face. This is not half as complicated as some have chosen to make it. In fact, I don't think we are as far apart in this debate, when you talk to a lot of our reasonable colleagues on the other side of the aisle, as some want to imply. Everybody can agree deficits are too high. We can all agree we shouldn't be borrowing 40 cents on every dollar we spend. We can all agree we need about $4 trillion in deficit reduction to put us on a sustainable path. But in the end, this budget debate cannot be just about cutting spending, even though it must include cutting spending.

Everyone has said that job creation and investments in clean energy, infrastructure, and medical research are essential, and I think we need to do the things that would make our economy move. Let me give an example of this. In America today, we are living off of the investments our parents and our

grandparents made. The Interstate Highway System didn't just sprout up one day; it was a government program investing taxpayer dollars in building a nationwide road system that helped America to grow and be unparalleled in its strength compared to any other nation in the world. That was a President Eisenhower program.

The truth is that today we are falling further and further behind other nations in terms of our investment in the infrastructure of the future. The United States is spending less than 2 percent of its GDP on infrastructure. Compare that. China is spending 9 percent of GDP on infrastructure. Europe is spending 5 percent of GDP on infrastructure. They have trains and airports and other things that work and get people where they want to go faster than our trains.

We are looking at a country now that has about a $2.2 trillion deficit in the infrastructure of our Nation. We have 69,000-plus bridges that are structurally deficient. We need to invest in them so they don't fall down like the bridge in Minnesota. We need to invest in our airport structures so we don't have airport delays or potential of collisions in our aircraft.

According to one study, $1 billion in investment in infrastructure results in 18,000 jobs. So at a time when America is begging for more jobs, why would we not be investing in infrastructure in this country? You go to Germany or Brazil, and they are investing huge amounts in their future, and right now both countries are threatening to leave the United States behind with respect to alternative and clean energy investments of the future.

Millions of Americans know we can do a lot better. Frankly, in the 1980s you couldn't find three more ideologically different people than Tip O'Neill, Bob Dole, and Ronald Reagan, but they put politics aside and they saved Social Security. And they didn't capitulate. They compromised. They found common ground. They did it because they knew America's future was more important than either party.

I often hear my colleagues on the other side of the aisle only talking about the spending problems of the country.

Madam President, may I ask how much time I have used?

I thank the Chair.

I often hear my colleagues talking about the spending problem. What they forget about is we had a surplus we created in the 1990s by making the tough decisions. We invested in the future of our country, and we created 23 million new jobs. And in the 1990s, when we balanced the budget--let's not forget that. Some of us were here and made those tough votes, and we balanced the budget, and we created 23 million jobs. Every income level in America went up--every single income level--and we did it at a time when the total relationship of spending- to-GDP was exactly where many of us believe we ought to take it today, somewhere around 21 or 22 percent.

The fact is that it was President Bush's tax cuts for the wealthiest Americans that we couldn't afford and a war that he refused to pay for in Afghanistan and then Iraq--both wars totaling approximately $2 trillion. The tax cuts and the wars account for approximately $7 trillion in deficits in 2009 and going forward.

The facts are clear. The tax cuts President Bush put in place contributed to the deficit, and the revenues have to be addressed if we are going to go forward and deal with this. Federal revenues today--the money the government takes in--is at its lowest level since 1950. We have had a 60-percent reduction in revenue and a 60-percent increase in expenditures, and right now we are at the lowest level of revenue taken in that we have been at since the 1950s, and they are only about 14 percent of the total GDP. The fact is that the last five times we balanced the budget, those revenues were about 19 or 20 percent of GDP. So here we are at 14 percent, we have balanced the budget five times previously, and the revenues were at about 19.5 to 20 percent of GDP. Doesn't that tell us something?

There is another problem we have. It is right here on my desk. We have a Tax Code. The Tax Code has 8 volumes, over 72,500 pages. This is the Internal Revenue Code, 4,052 pages. I would ask any American, do you have your own page in this Tax Code? How many Americans have their own page in this Tax Code? Well, I have got news for you: 72,500 entities--a lot of businesses--have found a way to get their little break in the Tax Code.

Last month, the Senate, by a vote of 73 to 27, sent a clear signal that we ought to start looking at some of these subsidies. This entire Tax Code is riddled with special deals which lobbyists have worked against the interests of average Americans in most cases. Let me give you a couple of examples.

Section 168 in this Code has a special rule for racehorse depreciation. How many folks in America are worried about their racehorse today and the depreciation on it? But they have a provision in here that allows the depreciation of racehorses to go from 7 years to 3 years, and the difference of 7 years to 3 years costs the average American money. The average American is supporting that because it is a foregone revenue. We are giving away the revenue, and we are giving it back to somebody who doesn't fundamentally need it.

The Tax Code includes a definition of 3-year property. Get this: any horse other than a racehorse which is more than 12 years old at the time it is placed in service. I mean, who writes this stuff? Where does this come from? Not only is that a waste of taxpayer money, it makes the Tax Code more complex, and it requires more regulations and more confusion.

A lot of tax lawyers love these eight volumes, but the average American ought to be furious at these volumes because these volumes are stealing America's opportunities in a host of other choices we could be making, such as education, investment in energy, energy independence, taking care of our veterans--doing a whole bunch of things that are substitutes for some of the choices that are made.

Let me give a couple of other examples. Here is a provision. It is included in one of the regulations.

On April 2000, E acquires a horse to be used in E

thoroughbred racing. On October 1, 2003, F buys the horse

from E and will use the horse in F's horse breeding business.

The use of the horse by E in its racing business prevents the

original use of the horse from commencing with F. Thus F's

purchase price of the horse does not qualify for the

additional first year depreciation deduction.

How ridiculous can it get that we are getting into specific cases like that which run contrary to the common sense of average Americans? One has to be able to afford a lobbyist to be on one of these pages.

Last year, more than $3.5 billion was spent on lobbying in Washington, DC. There are more than 13,000 lobbyists trying to influence the legislation in Washington. Believe me, it works. Look at the last 50 years.

Back in 2004 we passed a bill which the New York Times described as including ``goodies for almost every kind of corporation'' and that ``perhaps the most amazing provision might be called the foreign gambler relief act.''

Under prior law, if a person is lucky and they win big at the horse or dog track, their winnings are subject to a withholding tax. It is kind of logical. But now foreigners do not have to pay tax on their winnings. They found a lobbyist and they got it in the Tax Code and we passed it somehow.

Section 872 of the Tax Code excludes from gross income, ``income derived from wagering transactions in certain parimutuel pools.'' It specifically says, ``gross income derived by a nonresident alien individual from a legal wagering transaction initiated outside the United States in a parimutuel pool with respect to a live horse race or dog race in the United States.''

Until I read this I was not absolutely certain what a parimutuel pool was, but I do know a provision like that does not get in here without lobbying. It comes at the expense of a lot of other choices because the problem is all these breaks--whether it is subsidies for oil or subsidies for gas exploration--which made sense 60 and 70 years ago, but here we are with record profits coming into these companies, $35 billion of profit just for the last quarter, 3 months. Yet they get a break. That break comes at the expense of average folks having the school they deserve, having the road they want to ride on properly, and having decent public transportation. Those are the choices and those are some of the things for which we are fighting.

Not only are lobbyists arguing for tax breaks, highly skilled tax lawyers have a history of finding looping holes for corporations to exploit. We use to have a provision in the Tax Code which was finally eliminated that provided a tax credit for synthetic fuels for coal. I found this process questionable and one company admitted it was profitable just because of this tax credit. Some firms getting this credit were simply spraying newly mined coal with diesel fuel or some other substance. We need to work together to find these type of provisions and remove them.

If there is a loophole, someone will find a way through it. I think we all remember how one oil company was getting a tax credit for co- processing animal fat with biodiesel from biomass. We shut that one down but other loopholes have opened.

Last year, we thought that we had seen the end of the ``black liquor boondoggle.'' Paper mills were using a mixture of diesel fuel and a byproduct of the pulping process as an energy source for the mill. The intended purpose of this credit is to produce motor fuels from biomass. These companies were getting a windfall that was never intended. I am now hearing that some companies are still finding a way to benefit from black liquor. I have also heard that some are trying to benefit from this same credit for alternative fuels by adding cow waste and other waste to diesel fuel. This was not the intended purpose of this provision. In past Congresses, I have introduced line-item veto legislation which included tax benefits. These are abuses that we can all agree to end.

For years, we have been trying to repeal subsidies for major oil companies. Just last month, we failed to eliminate $2 billion a year in tax incentives for oil companies. These incentives are no longer needed. We needed to jointly review the Tax Code and remove the deadwood. Some subsidies are no longer needed. And some are completely necessary. The Tax Code has become riddled with special interests. Over the past 25 years, Congress has introduced billions of dollars of worth of special tax breaks, loopholes and subsidies into the Tax Code-- making total tax expenditures now exceed $1 trillion.

With the future of our country at stake we have to decide if we want to care for our elderly and educate our children or provide tax breaks for those who do not need them. Would we rather invest infrastructure or allow race horse owners a shorter period to depreciate their horse?

As we consider legislation to increase our debt limit, our colleagues in the minority refuse to even discuss eliminating any of the tax expenditures that these lobbyists have helped enact into law. Not one permanent tax expenditures. I guess they prefer to increase the spending cuts that hurt low and moderate-income families.

I think we need to review the $1 trillion in expenditures and decide what is really needed instead of slashing programs which will weaken our economy. It is time for us in Congress to stop falling prey to corporate lobbyists and stand up for our future. To reduce the deficit we need to make hard choices and we should not be afraid of saying ``no.'' If we do not start eliminating tax expenditures, we will not be able to reduce the deficit without gutting Medicare or Medicaid.

We hear a lot about the Ryan budget, but make no mistake: the House passed budget does not eliminate the deficit. It just makes a series of spending cuts to provide tax cuts to those at the very top even greater than the existing 2001/2003 tax cuts.

And Chairman Ryan may call his budget the ``Path to Prosperity,'' but that is not where its path would take our seniors. At least two-thirds of the over $4 trillion in budget cuts come from programs serving those of modest means. To be clear, the House budget is not about reducing the debt. It is about putting in place Republican priorities-- increasing tax cuts for the wealthy and slashing social programs that people depend on.

We should examine all spending and not leave defense spending off the table. For example, we should be cutting programs like the Medium Extended Air Defense System, MEADS, which had a budget request of $406 million for fiscal year 2012 but the Pentagon said was running over schedule and running over cost. Or the F-22 raptor fighter jet, which in 2009 we were able to cut $1,750,000,000 in procurement funds of a plane that was costing too much money and wasn't appropriate for the 21st century wars we are engaged in. We should aggressively go after fraud and abuse, eliminate erroneous payments to health providers, and better coordinate health care for people who receive both Medicare and Medicaid. These dual eligible beneficiaries account for only 15 percent of Medicaid enrollment but constitute nearly 40 percent of Medicaid spending.

Instead of digging more ideological trenches, we should look at the last time we actually achieved a path to fiscal stability. The bipartisan 1990 budget agreement included discretionary caps and revenue increases. It was a real compromise that looked at both sides of our budget equation. And in January of 2001, the Congressional Budget Office projected that the debt would be erased by 2006 and that by 2011, there would be a $2.3 trillion surplus.

Yet somehow, in the years since this real bipartisan success, too many people in this building seem to have forgotten that there are two sides of the budget ledger.

Just look at the balanced budget amendment House and Senate Republican leaders proposed. It caps Federal spending in any fiscal year at a completely unrealistic 18 percent of GDP. It wouldn't just result in unthinkable cuts to Social Security, Medicare, and Medicaid; it would also impose arbitrary limits on the Federal Government's ability to respond to the recession. So the recession could be deepened by increasing the number of unemployed, decreasing business investment, and withholding services needed to jump-start the economy. And yet this same proposal would require a two-thirds vote to increase revenues, making it nearly impossible to eliminate wasteful tax loopholes or unnecessary tax giveaways.

So let's be realistic. We need to set ourselves on a course to rein in deficits and debt. No one disputes it. To do this, the budget negotiations should include a budget enforcement mechanism--and it can't result in a sequestration of spending only; if a budget enforcement mechanism only focuses on spending cuts, we are only addressing part of the problem. It would slash essential programs while ignoring revenues. That is simply not a responsible long-term budget solution, and it would never get bipartisan support.

For an enforcement mechanism to work, both sides should not want the trigger to occur. We shouldn't be hoping for automatic spending tax cuts or increased revenues. A tough budget enforcement mechanism will force us to make difficult choices, both substantively and politically.

It is time to end the polarization over how to resolve our budget crisis. We can't hide behind global spending caps, unrealistic constitutional amendments, or pledges vowing opposition to tax increases. The cuts that would be required to meet the spending targets of a cap would have to be as drastic as or even worse than proposals included in the House-passed budget resolution.

Spending for Social Security, Medicare, and Medicaid are driven by factors beyond the programs' control. Under spending caps, their percentage cuts would be bigger than the percentage cut in discretionary programs and they would be subject to automatic large cuts.

We need to think hard about what is fair in America. The only tax President Obama or we Democrats have talked about is on the wealthiest people. Millionaires. People who earn more than $1 million a year. That is about 7,000-plus lucky families and individuals in the United States. All we are doing is talking about asking those who benefit enormously from the strength of our economy and the strength of our military and all the things we need to do--we are just asking them is it too much to go from 36.9 percent up to 39.6 percent, which is where they were in the year 2000, before President Bush gave them a tax cut we could not pay for.

It is not as if they have done badly these last 10 years. The fact is, more wealth has been accumulated in the hands of the smallest part of America, the top 1 percent, than at any time in America's history. The wealthy are far wealthier than when we had no income tax and when we had the great names

of the 1920s and 1930s and the industrial revolution: Pierponts, Morgans, Carnegies, Mellons, Rockefellers, and so forth. They are much wealthier today. Yet they are paying far less of their share than at any time in modern history.

Here we are with a deficit problem. They are talking about cutting Medicaid. They are talking about cutting Medicare. They are talking about cutting education loans, making it more expensive for kids to go to college--the one thing we desperately need in order to compete with the rest of the world, people who have a college education. I do not hear anybody in America saying make it harder for my kid to go to college, but that is what they are doing in their budget. That is exactly what they are doing. But they stand up adamantly and say: No way will we allow people earning more than $1 million a year to pay anything additional into the system. It is just wrong. It is morally wrong. It is repugnant in this country we are condoning the institutionalization of a larger and larger gap between the haves and the have-nots, between the people who have already gotten their brass rings and the people who are trying to reach it. That is not the American story. I believe we need to fight to have a balanced approach.

President Obama and the Democratic proposals I have seen and we have talked about--and I hope people will hear more about in the next days-- give a tax cut to about 98 percent of America. The only people we are talking about asking to kick in and give us some more revenue are people earning the most.

If a person is earning $500,000 a year, they would not pay any additional tax on their first $250,000. On the next $250,000 all they would pay is $12,000 of additional tax. Let me ask--no, I will say I know this. There is not one business person, there is not one millionaire for whom $12,000 will change one consumer purchase, one decision of investment--not one. All this talk about how it will slow down the economy or hurt America is just bunk. It is not true.

We need to have a real discussion. We need to have a real effort that I think matches the greatness of this institution with this moment. This can be the world's greatest deliberative body, but we need to put all of these issues on the table. We need to debate them openly. We need to have the courage of our convictions and vote up or down and do what is needed to put our country on track because right now we are losing countless investment opportunities, countless job opportunities. If we do not make the right choices we are going to have a very difficult time living up to the promise all of us hope to live up to in our time in this office.

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.

Madam President, I am going to speak to another issue first. But I want to thank my colleague from Georgia for his comments. We are in different political parties, but I listened to him and I know he is sincere. I think it is that spirit that can lead us to a solution. I hope we can find it. I will address the specifics of it later in my remarks.

Trying Warsame

But first I wish to address the comments made by the Republican Senate Minority Leader McConnell. It relates to a front-page story across the United States this morning, where we have apprehended the man Ahmed Abduikadir Warsame, a Somali individual who is now being charged with terrorist crimes and going to be tried in the State of New York.

This man apparently was apprehended and held for several months on a naval vessel of the United States where he was interrogated about his involvement in terrorism and then they brought in prosecutors, criminal prosecutors from the United States, who interrogated him about what they thought would be actionable crimes that could be prosecuted in the United States.

He is now being brought to New York for a trial. The statement made by Senator McConnell this morning on the floor of the Senate suggests that this was a bad decision on the part of our President and the Department of Justice to try this man in the criminal courts of the United States.

Senator McConnell has made this speech many times before. He believes that trying terrorists in the courts of the United States makes America less safe, and it less likely that we could convict them. He argues they should be held at Guantanamo and tried in military tribunals. His argument has some surface appeal unless you know the facts.

The facts are that under President Bush after 9/11 and under President Obama, more than 400 suspected terrorists have been tried in the criminal courts of America, article III constitutional courts, and convicted. They have been tried in our courts and convicted. They are serving time in the prisons of the United States of America. That is right: convicted terrorists, convicted in criminal courts, now serving time in prisons across America, including in my home State of Illinois at the Marion Federal Penitentiary.

So to argue that we cannot successfully convict a terrorist in the United States, as Senator McConnell did this morning, is to ignore reality. The reality is that President Bush used his Department of Justice and our courts to successfully prosecute terrorists. During the period of time since 9/11, only around 5 accused terrorists were tried in military tribunals--400 in article III criminal courts, 5 in military tribunals.

Senator McConnell makes the argument--and others have joined him-- that the only place to try them is in military tribunals. The fact of the matter is, we do not have a very good record in military tribunals trying would-be terrorists. There is a variety of reasons for it. The Supreme Court did not agree with our procedures. Some of the cases were not very good. The bottom line, though, is to say to any President, whether it is Republican George Bush or Democrat Barack Obama, Congress is going to tell you the best place to try a terrorist--do we have that expertise? I do not. I am not sure Senator McConnell does. I think it is up to the President, the Secretary of Defense, the Central Intelligence Agency, and the Attorney General to make that call.

Take the would-be terrorist to the court where we are most likely to convict. Take him to a tribunal where they are going to get a fair hearing in the eyes of the world, and conviction is most likely. That is what I think the American people want.

To come here and second guess the President because he has held a man for 2 months in military interrogation and now is being prosecuted in our criminal courts is totally unfair, unfair because the same standard was not applied to the Republican President who tried hundreds of would-be terrorists--accused terrorists--in our criminal courts successfully. That is a fact. That should be on the record.

I meant what I said about Senator Isakson of Georgia. He is a Republican, I am a Democrat. He is my friend. I

like him. We do not agree on everything. Our voting records are much different. But what he had to say this morning was the right thing. And what he had to say this morning, I think, should open the eyes of America about where we need to go.

Yesterday, the President sat down and said, we need to be serious about deficit reduction. We do not need a mini deal, we need something that speaks authoritatively to the world that the United States understands its deficit challenge and is prepared to make the hard choices to address it. I think the President is right.

I was interviewed this morning by a Quincy, IL, radio station. They said: Well, why would not you take a mini deal and get it over with? Well, if you think you will take a mini deal, you will probably be offered a mini, mini deal. At the end of the day, little or nothing will happen. Here is the problem we face. It is a real problem. For every dollar we spend in Washington, we borrow 40 cents. We borrow it from countries all around the world. The No. 1 creditor of the United States is China. China loans us money so that we can spend for government purposes.

How do we spend the money? Well, if you look at Federal employees, more than half of the Federal employees in the United States of America work for one department, the Department of Defense. If you look at expenditures, some of the fastest growing sections of our budget have been on the military side as we wage wars in Iraq and Afghanistan, and participate in the NATO exercise in Libya.

That is a pretty expensive undertaking. We know that that has gone up 84 percent--military spending in the last 10 years, gone up 84 percent. We know at the same period of time that spending on mandatory programs, such as Social Security, Medicare, Medicaid, agriculture payments, veterans payments, spending for those payments over the last 10 years has gone up 32 percent.

We know that the rest of the budget, the so-called domestic discretionary spending, which would include things such as building highways, keeping Federal prisons open, providing Pell grants to college students, giving children from poor families early childhood education, putting money at the National Institutes of Health for medical research, that is one section of the budget--it comprises 12 percent of our budget--and in the last 10 years, that part of our budget has gone up zero percent; no increase in spending in that section.

Most of our spending goes into the military--84 percent increase over 10 years--and mandatory programs--32 percent over 10 years. The biggest driver, in terms of Federal spending, the thing we cannot seem to get hold of, is health care costs. And you know that as an individual, whether you are trying to buy health insurance for your family, run a small business and trying to cover the owners and workers, or look at it from a State and local viewpoint when it comes to public employees.

I could analyze the health care system, I do know about it. But I will tell you that it is a model that is unsustainable. You cannot watch the cost of health care go up beyond inflation every single year and expect to control deficits, whether it is your family deficit, your city deficit, or your national deficit. But that is the reality of where we are today as we face the current situation.

I listened as the Senator from Georgia, whom I respect very much, talk about what President Obama inherited. I wish to add a little perspective to it. The last time the Federal Government balanced the budget, ran a surplus, was in the final 2 years of the Clinton administration, William Jefferson Clinton, Democratic President of the United States.

We generated a surplus in those years; that is, we collected more money in taxes and revenue than we paid out. That had not happened for decades. At that point, as William Jefferson Clinton left office as President, the national debt of America, the accumulated net national debt of America from George Washington through William Jefferson Clinton was $5 trillion--$5 trillion, and we had a surplus in our annual budget. When President George W. Bush took over and President Clinton handed him the keys to the White House, he said: Next year, if you follow my budget, you will have a $120 billion surplus.

That is what President George W. Bush inherited: $5 trillion national debt, a government running a surplus of $120 billion in the next year.

Fast forward 8 years later. At the end of President George W. Bush's 8 years in office, let's take a snapshot. What did it look like then? The national debt was no longer $5 trillion 8 years later, it was almost $11 trillion. It more than doubled in an 8-year period of time. And, when President Obama took office, instead of being handed a budget for the next year with a $120 billion surplus, as President Bush was handed by President Clinton, President Obama was given a budget and he said: Next year, if you follow our budget you will have a $1.2 trillion deficit, 10 times the amount that President Bush had in surplus. President Obama was told: You will have that in deficit. You will owe that much. The books do not balance.

What happened in 8 years? Well, several things happened. First, we waged two wars in Iraq and Afghanistan and we did not pay for them. I think back in my history, and I can remember as a kid that every birthday I would receive a savings bond, U.S. savings bond. I used to think it was interesting. They would hand me these $25 U.S. savings bonds, and I knew they cost $18.75. But if I did not do anything with them and held onto them for almost 10 years, they would be worth $25. So Grandma and Grandpa would give me the $25 savings bond--I would think it is only $18.75, and I stuck it away. You know. The reason I bring it up is those savings bonds were the way we financed wars. Americans sacrificed and loaned money to their government, and they bought savings bonds.

It was my family tradition. It was a tradition of America. But when it came to the two most recent wars, in Iraq and Afghanistan, that did not happen. We borrowed the money from other countries. So during that 8-year period of time, under President Bush, we waged two wars and borrowed the money and added it to the national debt.

We did something else. No President in the history of the United States of America ever has cut taxes in the midst of a war. You know why? Because you have your ordinary budget of government. You have got to pay for it. Now you have got a new expenditure, with hundreds of thousands of troops in the field, and families saying, keep them safe and bring them home, and you are spending billions of dollars there. How could you cut taxes?

That is what happened. During the Bush administration, they cut taxes. Two wars unpaid for, cut taxes, and then President Bush signed into law programs--dramatically expensive programs that were not paid for. Medicare prescription Part D was one of them. So you had these programs signed into law, wars not paid for, taxes cut, and, at the end of an 8-year period of time, the national debt rose from $5 trillion to over $10 trillion, almost $11 trillion.

The Republican Party has a philosophy, the Democratic Party has a philosophy. There are those of us who think that sometimes we should listen to one another and try to learn from one another. I think this is one of those occasions. But I will say to my friends on the Republican side of the aisle in the Senate and the Republican leaders in the House, those who are arguing that the best way to get the American economy moving forward at this point is to give tax cuts to the wealthiest people in America, they have forgotten their history. That is exactly what we did under President George W. Bush, and look what happened--the biggest deficits in the history of the United States. When Barack Obama raised his hand off of that Lincoln Bible, taking the oath of office, that month we lost 700,000 jobs in America. Unemployment was running rampant and kept going.

Using the Republican economic theory of tax cuts for the wealthiest people in America--it did not work then. It will not work now. It is a tired old idea. It may give them points in opinion polls. It does not give America points and credibility around the world. It is a position they are taking.

Having said that, I guess I could stop here and they would say: Durbin, that was a heck of a Democratic speech.

Let me go a little further. I was on the deficit commission. I sat there for 10 months and listened to everything. It was split, Democrats and Republicans, and the President appointed the commission. There were Democratic and Republican Senators, and the same thing with House Members. I came to the conclusion that there were some positions the Republicans had taken that were wrong, and there were positions that Democrats had taken that were also wrong. It was time for us to try to do something smart and do it bipartisanly. I voted for the deficit commission; 11 out of 18 of us did. I think I surprised more people than I ever imagined. But I think it was the right thing to do.

The morning I voted for it, my son, who happens to live in Brooklyn, in the Presiding Officer's State, sent me an e-mail saying: Thanks, Dad, you are doing the right thing. Well, every dad wants to hear that once in a while. I said that at this commission meeting. It meant a lot to me that my son, whom I greatly love, would have that kind of respect for that kind of decision.

Here is what we did and what we need to do now. Here is what we need to say to the American people: We can get out of this mess. America is a good, strong nation. We are good people, smart, hard working, and we have a great tradition when it comes to dealing with challenges, whether it is waging wars, or fighting recessions, or putting a man on the Moon. We can do it. We have done it, and we will do it again. Start with that premise. Don't bad-mouth this country, because we are blessed to be living here. This country and its history have proven over and over again that it can tackle the biggest challenges and meet them head on. Do you know who wins this battle? It is average Americans--those who have waged our wars, who were the soldiers and went off to war, my brothers in the Korean war, and others, regular old families who said it is our patriotic duty and we will serve. They continue to do it time and again.

When it comes to sacrifice, Americans know that spirit as well--not only the can-do spirit, but the spirit of, sure, my brothers each gave 4 years of their lives to the U.S. Navy, and so many others did. It says that Americans are willing to step up and participate in a national effort. When they think we are all together as a nation moving in the right direction, they want to be part of it, I want to be part of it, America wants to be part of it. When we talk about solutions to problems, we talk about everybody rolling up their sleeves and getting involved.

I know the poorest of the poor can't. They don't have the resources, or they may not have the physical or mental ability, whatever their circumstance, and I am ready to help the most vulnerable people. Asking them to sacrifice and pitch in is maybe too much in some circumstances. The rest of us should pitch in.

Here is what we ought to do. First, we should not say that anybody in America who is wealthy and comfortable in life is going to be spared in sacrifice. Everybody has to give. Those who are better off than some should give more. I don't think that is unfair. Life has been good to them; America has been good to them. When we need them, they should be asked to help. So the notion of raising taxes on the wealthiest people should not be something we automatically reject. It should be part of the conversation.

Second, we have a Tax Code that you could not carry with two arms because it is so big, loaded with laws and regulations and, frankly, most people don't know what is in it. I will tell you the people who do know: the special-interest lobbyists in Washington, the tax lawyers, and some people in congressional committees. In there, you will find that we spend almost $1.2 trillion in tax expenditures. Most people don't understand that. I learned a little about it in the deficit commission; $1.2 trillion in tax expenditures in the Tax Code equals all the credits, all the deductions, all the exclusions, and everything that you can take to reduce your tax burden. And $1.2 trillion also represents the entire amount of discretionary spending each year in the United States. It is a big sum of money. So we spend it in our expenditure levels, from the Defense Department all the way through the Agriculture Department, and everything in between; and we forgive, or don't collect, the same amount in the Tax Code.

Who benefits from that? Let's look at the basics. Seventy percent of the American taxpayers do not itemize on their tax returns. They file a standard return. So the Tax Code doesn't mean anything to them. If there is a special deduction, unless it is a refundable tax credit--a rare category--it doesn't help them. Seventy percent of Americans don't touch it. What are the biggest deductions under the U.S. Tax Code today? In all my wisdom and education and experience on Capitol Hill, I said it is the mortgage interest deduction, right? Wrong. The biggest single deduction is the employers' exclusion for health care premiums. Employers are able to exclude from income the amount of money they spend for health insurance for their employees. No. 2 is the mortgage interest deduction. I use it. My wife and I bought our home and thought about it ahead of time. OK, we have mortgage interest deduction, maybe we can buy a little more home. A lot of families do. When you look at the mortgage interest deduction and realize that 70 percent of Americans don't itemize, look at the 30 percent who do, it turns out that mortgage interest deduction--the lion's share of that money goes to the very highest income categories in America. So that comes as a surprise. Do you think it is a middle class tax cut? It is not. It is, by and large, a tax cut for wealthy people.

I want to preserve that part that protects middle-income families. But, again, shouldn't those in the highest income categories be willing to see a change in that deduction if it means America's deficit is going to be finally brought under control?

When we look at the Tax Code, we need to be honest about it. There are things in there we cannot afford to do any longer--things that maybe we never should have done. We can clean up that Tax Code. What we found in the deficit commission is that by cleaning it up, we could actually produce enough revenue to lower marginal tax rates. I hope my Republican friends tune in at this point. They applaud this, and I do too. If we can lower marginal tax rates for families--even businesses in America--that is a good thing; I am for it. But it means being honest and tackling the Tax Code.

The other thing we have to look at is entitlements. This is where it gets dicey on my side. I like Paul Ryan. Congressman Paul Ryan is from the Midwest, and maybe I am partial as a result. He is from Janesville, WI. He studied this issue and knows it well. We come to different conclusions, but he did tackle the entitlements. I think he went too far with Medicare. Doubling the out-of-pocket expenses for people under Medicare is a nonstarter. Eliminating Medicare as we know it and putting these folks in the ``loving arms'' of health insurance companies in their sixties and seventies is not any kind of favor for the elderly in America. So I disagreed with his conclusions. I would not vote for that. In fact, I voted against him.

I don't disagree with Paul Ryan saying that we have to look honestly at Medicare. If we don't do that, in 10 or 12 years it will go broke. We cannot let that happen. So we have to look at Medicare in a sensible way to reduce the costs of Medicare.

Let me give one example. In the Medicare prescription Part D Program, prescription drugs for seniors, I think Medicare ought to offer an option. The government ought to have an option that people can choose voluntarily, one way or the other, to try to buy pharmaceutical drugs in bulk, reducing their costs, so that seniors pay less. Is that a radical concept? No. It is exactly what we do in the Veterans' Administration. We can do it under Medicare prescription Part D, reducing that program and the costs to seniors, and create as part of the spectrum of competition a Medicare prescription program--one people can opt into if they want to. So there are ways to save money in Medicare without endangering basic benefits.

Here is the last thing I will say. I see my colleague from Louisiana here. I don't want to keep him waiting. Tomorrow, I will be honored to be invited to the White House with Senator Reid to meet with the President and the leadership in the House and Senate--Democrats and Republicans. The President said: Leave your ultimatums at

the door. That is good advice. He understands that if we don't extend the debt ceiling by August 2, it will have a dramatic negative impact on the American economy. It is as if you would default on your mortgage--same result. Our creditors around the world will say: Oh, America is not going to pay its bills on time, so maybe we won't loan them money. Maybe if we loan them money, we will raise the interest rate. If they raise the interest rate on our government, they will raise the interest rates across our economy, whether you are borrowing for a home, a car, or whatever it is. It would be the height of irresponsibility for us to default on America's debt. That debt ceiling needs to be extended so that interest rates don't go up, because if they do, it will hurt our economic recovery and put more Americans out of work.

The template for our meeting tomorrow should be the President's deficit commission. I will only take exception to one thing Senator Isakson said earlier. He said that the President did not let it come to the floor for a vote--his deficit commission. In fairness to Senator Isakson, that wasn't the President's responsibility. It is our responsibility to bring it to the floor for a vote. I have been trying for 6 months now, with a handful of other colleagues--Democrats and Republicans--to bring this to the floor so that we would have a vote on it. I will keep on trying, as we should. I think it remains the best way to approach the deficit challenge. Let's put everything on the table. Look to the deficit commission, the Simpson-Bowles commission, which gave us guidance as to how to get out of this. If we do get it done--and we can do this--I think it is going to inspire people around the world to believe again in America's future as an economy, to invest in America, and we will create jobs. It is going to be like the turnaround that occurred when Bill Clinton came to office and said, ``I am taking the deficit seriously,'' and he passed the deficit reduction plan by one vote in the House--I was there--and by one vote in the Senate when Vice President Al Gore cast the deciding vote. Look what happened to the economy. There was a dramatic increase in business ownership, business creation, and home ownership.

That, to me, can happen again if we come up with a bipartisan, sensible, inclusive budget deficit plan of the magnitude the President called for yesterday.

I yield the floor.