A bill to provide for the inclusion of independent regulatory agencies in the application of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1501 et seq.).

Mr. President, the Senate has resumed the motion to proceed to S. 1323, a bill to express the sense of the Senate on shared sacrifice in resolving the budget deficit. The time until 5:30 will be equally divided between the two leaders or their designees. At 5:30, there will be a rollcall vote on the motion to proceed to S. 1323.

Measure Placed on the Calendar--S. 1340

Mr. President, I understand S. 1340 is at the desk and due for a second reading.

Mr. President, I object to any further proceedings with respect to the bill.

I thank the Chair.

Mr. President, we are in the midst of a defining debate on the budget of the United States. All of us understand we have a debt threat looming over this country that is as significant as anything we have faced in many years. Democratic members of the Senate Budget Committee have worked for weeks to devise a blueprint we think has merit and that deserves to be a part of the debate. Today, I am here to outline the key elements of that budget blueprint.

First of all, I think it is critically important we all understand we are as a Nation borrowing 40 cents of every $1 we spend. That is not a sustainable circumstance. Admiral Mullen, the Chairman of the Joint Chiefs of Staff, has indicated that our national debt is our biggest national security threat. This is the top military man in our country saying the debt threat is the most serious national security threat.

Why does he say that? Here are the facts: The debt of the United States--the gross debt--all the debt we owe is now approaching 100 percent of our gross domestic product, which is the highest level it has been since after World War II. This chart shows a threshold of 90 percent and a gross debt of 90 percent. Why did we draw that line on this chart? Because the best

evidence we have tells us when we cross the 90-percent threshold on the gross debt of any nation, we are in the danger zone, we are in the red zone.

The distinguished economists Carmen Reinhart and Kenneth Rogoff wrote a book called ``Growth in a Time of Debt.'' Here is their conclusion:

We examined the experience of 44 countries spanning up to

two centuries of data on central government debt, inflation

and growth. Our main finding is that across both advanced

countries and emerging markets, high debt to GDP levels (90

percent and above) are associated with notably lower growth

outcomes.

This is a key fact all our colleagues need to know. When our gross debt goes over 90 percent of our gross domestic product, our future economic prospects are diminished. That means fewer jobs created, less economic opportunity--a nation that is at risk. That is where we are.

Look at what the Congressional Budget Office says is where we are headed. On the current trajectory, we are headed for a debt that will go to 200 percent of the gross domestic product of the country. This is not the gross debt; this is the publicly held debt, which is smaller than the gross debt. So this chart now looks at the publicly held debt and says it is headed for 200 percent of GDP. We cannot stay on this course. It is critically important we change direction.

For every 1 percentage point increase in interest we pay, $1.3 trillion is added to the debt. For those who say don't worry about the debt limit, let's remind them what will occur if the United States refuses to pay the bills it has already incurred, which is the interest rates will go up. Those who have loaned us money, if we renege on our commitments to pay them, will then insist on higher interest rates--all borrowers will insist on higher interest rates--and for every 1-percent increase in the interest rate, we will pay $1.3 trillion more on our debt. So those who think that somehow, by not extending the debt limit, we are going to help on the debt--no. The opposite is true. The debt will increase and increase dramatically.

Here are the hard facts with respect to the relationship between spending and revenue over the last 60 years in this country. The red line is the spending line. The green line is the revenue line. What this shows very clearly is that spending is the highest it has been as a share of GDP in 60 years. Yes, we have a spending problem. But it is not exclusively a spending problem, as some assert on this floor, because revenue as a share of GDP is the lowest it has been in 60 years. To deny that essential fact is to deny the significant elements of a compromise that are required to solve this problem.

Spending is the highest it has been in 60 years as a share of our national income. Revenue is the lowest it has been in 60 years as a share of our national income. Both have to be addressed if we are going to solve this problem.

For those who say: Well, it is not a revenue problem, oh, yes, it is.

This is an article that appeared Sunday, May 1, in the Washington Post: ``On the way to a surplus, a $12 trillion U.S. detour.''

Remember, in 2001, we were told we were on the way to paying off the debt of the United States. This article by Lori Montgomery in the Washington Post on May 1 indicated the fundamental reasons that instead of paying off the debt, we have a debt that is mushrooming. This one paragraph says it all:

The biggest culprit, by far, has been an erosion of tax

revenue triggered largely by two recessions and multiple

rounds of tax cuts. Together, the economy and the tax bills

enacted under former President George W. Bush, and to a

lesser extent by President Obama, wiped out $6.3 trillion in

anticipated revenue. That's nearly half of the $12.7 trillion

swing from projected surpluses to real debt. Federal tax

collections now stand at their lowest level as a percentage

of the economy in 60 years.

That is the point I just made.

So when Democrats on the Senate Budget Committee approached this problem, we looked at it in historical perspective. How did we get into this problem? Half of it is on the revenue side. So we chose to deal with a solution that deals on both sides of the ledger. Yes, we need to cut spending; absolutely, that must be done. But we also cut so-called tax expenditures that are just spending by another name--loopholes, exclusions, deductions, tax preferences, abusive tax shelters, and tax havens that are hemorrhaging revenue that rightfully belongs in the Treasury--people avoiding what they legitimately owe to the United States by engaging in abusive tax shelters and tax havens that is costing us substantial revenue. We will get into the specifics of that.

The House Republicans chose a different path. They only want to focus on half the problem. They only want to focus on the spending side of the equation. They don't want to touch the revenue side of the equation. I believe that denies reality. That runs away from the hard reality of how we got into this situation. Again, we got here by, yes, spending that is higher than it has been in 60 years as a share of national income but also revenue that is lower than it has been at any time in 60 years. If we are truthful with ourselves, we are going to have to deal with both sides of this equation.

The plan Senate Democrats on the Budget Committee have agreed on looks at a budget framework that includes roughly the same amount of deficit reduction as the House Republican plan. In fact, we have somewhat more deficit reduction than did they. They have a plan that was $3.9 trillion of deficit reduction. Our plan is $4 trillion. The actual difference is about $50 billion, but because of rounding, it turns out they are at $3.9 trillion, we are at $4 trillion. The actual difference is about $50 billion more in deficit reduction in the plan worked by Senate Democrats on the Budget Committee.

So this is what happens to deficits as a share of GDP under the framework we are offering. As you can see, this year the deficit is 9.3 percent of gross domestic product. We bring it down very steadily until we get down to 1.3 percent in the 10th year--a lower deficit in dollar terms, a lower deficit as a share of GDP than the House Republican plan. Let me repeat that. The Senate Democrats on the Budget Committee--our plan reduces the deficit by the 10th year by more than the Republicans in total, and in the 10th year we have a lower deficit in dollar terms and a lower deficit as a share of GDP.

As shown on this chart, this is what happens to the debt itself. The gross debt, as you can see, peaks out at 100 percent in 2011, and then we bring it down gradually but steadily to about 98 percent by 2021. The key is, instead of having the debt line going up, up, and away, burying this country under a mountain of debt, we stabilize the debt and begin to bring it down--something that every serious economist has said is absolutely essential.

In terms of spending, I indicated that current spending is the highest it has been as a share of GDP in 60 years. Our plan takes that down from 24 percent of GDP to 23 percent and then freezes it at 22 percent of GDP for the rest of this decade.

Now, some will say: There go the Democrats again. They are spending too much money. I would say to them: If we could get the spending down to the levels that were obtained during the Reagan administration, would that be acceptable? Because that is exactly what we do. Under the plan of Senate Budget Committee Democrats, we get spending to the exact same level that pertained during the administration of Ronald Reagan. During Ronald Reagan's 8 years, spending averaged 22.1 percent of GDP. That is precisely what our spending equals in the budget framework I have outlined here today. We include every part of the Federal budget, including the defense budget. Just as the fiscal commission did, just as every other bipartisan deficit reduction plan has included, we looked to defense spending for savings because no part of the budget can be off the table in terms of a deficit reduction plan.

I would say separately, Social Security we deal with separately because Social Security need not be, should not be part of a deficit reduction plan. Savings on Social Security ought to be for the purpose of extending the solvency of Social Security. But in terms of those parts of spending that are considered on budget, defense has to be included in any savings. Why do I say that? Well, look what has happened since 1997. Spending on defense and war has gone from $254 billion a year to $688 billion a year. It is a key reason spending has exploded.

Before the fiscal commission, some of the best defense analysts in the country came before us and told us that 51

percent of all Federal employees are at the Department of Defense--51 percent of all Federal employees are at the Department of Defense--and that does not count the contractors.

I asked these analysts: Well, how many contractors are there?

Their response was: Senator, we can't tell you.

I said: Is that a matter of security? Is that a matter of clearances?

They said: No, Senator. We don't know.

I said: Well, what is the range? About how many contractors are there working at the Department of Defense?

The answer was: Senator, 1 million to 9 million. Between 1 million and 9 million. We can't tell you which is right.

We have a serious problem of contractors working for the Department of Defense and the Department of Defense cannot even tell you how many contractors they have working for them. We have a problem.

The previous Secretary of Defense, Secretary Gates, said this:

. . . the budget of the Pentagon almost doubled during the

last decade.

And he is right about that. Our chart shows that.

But our capabilities didn't particularly expand. A lot of

that money went into infrastructure and overhead and,

frankly, I think a culture that had an open checkbook.

``A lot of that money went into infrastructure and overhead''-- overhead--``and, frankly . . . a culture that had an open checkbook.'' We cannot afford an open checkbook anywhere. We have to go after waste, fraud, and abuse in every department. We have to go after infrastructure spending that really does not contribute to improving our defense. We have to go after overhead, overhead costs that have really run amok.

Chairman Ryan of the House said this about defense:

There are a lot of savings you can get in defense. There's

a lot of waste over there, for sure.

Yet, when they came with their plan, they continued the path of increasing defense spending year over year without any discipline. This is the plan they outlined--from $529 billion a year headed for $667 billion a year, and that does not count the war funding.

In our plan, we have done what the fiscal commission called for. We have achieved the same savings out of security as the fiscal commission did--$886 billion out of the security category. Now, that includes defense. Obviously, defense is most of security, but in the ``security'' category also falls homeland security, and also included is veteran spending. Veteran spending, by the way, is one place we do not cut a nickel. The veterans deserve to have the promise we have made to them kept, and under our budget, every dollar that has been promised to veterans will go to them. That does not mean we cannot save money out of the security side. The fiscal commission--which, by the way, is the only bipartisan plan that has come from anywhere: five Democrats, five Republicans, one Independent--endorsed a plan with $886 billion of savings over 10 years out of the security category. The budget by Senate Budget Committee Democrats adopts that finding.

The budget that Senate Budget Committee Democrats are advancing also has governmentwide savings. We freeze the pay of Members of Congress for 3 years. We freeze the legislative branch and White House budgets for 3 years. We freeze civilian pay for 2 years. That has already been adopted, but we include that in our budget. We reduce the Federal vehicle fleet by 20 percent because, frankly, in our investigations we find in this area there has been an explosion of vehicles in the Federal fleet, and I think all of us have seen it with our own eyes. This is something that has to be taken on. We reduce travel costs of Federal agencies by 20 percent. We reduce Federal printing costs by $1 billion by 2015. We reduce the number of contractors, which we have previously described.

The House Republican plan on revenue is really almost impossible to believe. In a circumstance in which we have record debt, in a circumstance in which the revenue of this country is the lowest it has been in 60 years, what is part of their answer? Cut taxes some more, and cut them for the very wealthiest among us, cut them another $1 trillion for those who are the most fortunate among us. I am not making this up. This is the House Republican plan: Take a circumstance in which we have record debt, the lowest revenue we have had in 60 years, and cut taxes for the very wealthiest among us by another $1 trillion by extending the top rate cuts, by a $5 million estate tax exemption. They actually cut revenues $4.2 trillion below the CBO baseline. Let me repeat that. They actually cut revenue in their plan $4.2 trillion below the Congressional Budget Office baseline. That is inexplicable.

Maybe we can start to understand it when we look at what a former Reagan economic adviser said about the House Republican plan. Mr. Bartlett said this:

Distributionally, the Ryan plan----

The House Republican plan----

is a monstrosity. The rich would receive huge tax cuts while

the social safety net would be shredded to pay for them. Even

as an opening bid to begin budget negotiations with the

Democrats, the Ryan plan cannot be taken seriously. It is

less of a wish list than a fairy tale utterly disconnected

from the real world, backed up by make-believe numbers and

unreasonable assumptions. Ryan's plan isn't even an act of

courage; it's just pandering to the Tea Party. A real act of

courage would have been for him to admit, as all serious

budget analysts know, that revenues will have to rise well

above 19 percent of [gross domestic product] to stabilize the

debt.

Revenue today is 14.8 percent of GDP--again, the lowest it has been in 60 years. If we look at the last five times the budget has been balanced in the last 50 years, here is what we see: Revenues had to be close to 20 percent of GDP. They were 19.7 percent in 1969, 19.9 percent in 1998, 19.8 percent in 1999, 20.6 percent in the year 2000, and 19.5 percent in 2001. That is the last five times the budget has been balanced. Each of those times, revenue was close to 20 percent of GDP. Now it is 14.8 percent of GDP. Anyone who seriously argues that you can solve this problem just on the spending side of the equation is not being serious.

The budget framework we offer today has revenues at 19.5 percent of GDP--almost equivalent to what it was during the Clinton years, when we had balanced budgets and, in fact, stopped using Social Security money to pay other bills. During the Clinton years, revenue averaged 19.4 percent of GDP. Under our plan, it averages 19.5 percent. So revenue is clearly not out of line compared to the other times we balanced the budget and, in fact, during the Clinton years when we had the longest economic expansion in this Nation's history.

For our colleagues who say, oh, you can't touch revenue or you will kill the economy, you will kill job creation--really? How about the historic record? The historic record shows very clearly that during the Clinton years, when you had revenue at the same level as we have in this plan, you had the longest economic expansion in this Nation's history--39 quarters; 32 of those quarters during the Clinton years-- the longest uninterrupted period of economic growth in this Nation's history, and you had revenue at the same level we are talking about in this plan. Facts are stubborn things. A previous President said that. He was right. The fact is, we had the longest period of uninterrupted growth in our economy during a period in which revenue was at the level we are proposing in this budget. That is a fact.

Mr. President, the proposals in the budget framework also seek to bring us transparency. We have tax reform that simplifies the Tax Code, scales back tax loopholes, protects the middle class, improves progressivity and fairness of the code, promotes economic growth and U.S. competitiveness--because we lower the corporate rate from 35 percent to 29 percent to make America more competitive, and we pay for it by closing corporate loopholes. We also address the tax gap, offshore tax havens, and abusive tax shelters, and ensure that corporations pay their fair share.

The specifics of our revenue proposal are as follows: The tax cuts-- the so-called Bush-era tax cuts--are extended for singles earning up to $500,000 a year and for couples earning up to $1 million a year. So 99 percent of the American people will see no rate increase--none; 99 percent of the American people will see no rate increase. One percent will, and it will be those who are sufficiently fortunate to be earning over $1

million a year--the top 1 percent in this country. We ask them to go back to rates of the Clinton era, when the top rate was 39.6 percent, capital gains were 20 percent. Those are the rates that pertain--when we had the longest economic expansion in our Nation's history.

For those who say it is a job killer, they have to explain how that can be since history shows something quite different from their claim.

We also provide for alternative minimum tax relief. That costs $1.5 trillion. That is not a tax increase. We are lowering taxes that would be imposed by the alternative minimum tax, which is increasingly gobbling up middle-class taxpayers. We are preventing that from happening. It costs $1.5 trillion to fix. So we are replacing that revenue with other revenue. I don't consider that a tax increase. That is merely substituting revenue for revenue that we are subtracting to prevent middle-class people from being caught up in the alternative minimum tax.

We also reform the estate tax, going back to the 2009 levels which are $3.5 million a person and $7 million a couple. That means well over 99.5 percent of estates would be completely exempt. That is a fair plan.

We also assume net $2 trillion of additional funds from closing tax loopholes, cutting tax subsidies, promoting tax fairness. That is over 10 years.

We assume tax preferences for individuals are reduced 9 to 17 percent, depending on the amount of offshore tax havens and abusive tax shelters that are closed.

We assume, as I indicated earlier, that the corporate rate is lowered to 29 percent, offset by reducing corporate tax expenditures and closing corporate tax loopholes--specific policies to be determined by the Finance Committee, as they always are.

Mr. President, when I indicate there is a range for reducing tax expenditures from 9 to 17 percent, depending on how much savings we get out of offshore tax havens, here is the math. Over the next 10 years, the tax preferences--or expenditures, as they are sometimes called-- will cost the Treasury $14 trillion. Let me repeat that. The loopholes, the exclusions, the preferences in the Tax Code will cost the Treasury $14 trillion over the next 10 years.

On top of that, offshore tax havens and abusive tax shelters will cost the Treasury another $1.4 trillion. That is according to estimates based on data from the Permanent Subcommittee on Investigations. So if we recover nothing from tax havens, to reach our revenue numbers we would have to reduce tax expenditures 17 percent. On the other hand, if we recover 80 percent of tax haven losses and tax shelter losses, the reduction in tax expenditures would only have to be 9 percent--17 percent reduction in tax expenditures if we get no savings from tax havens and tax shelters, and a 9-percent reduction in tax expenditures if we recover 80 percent of the losses from tax havens and tax shelters.

Probably, the realistic expectation ought to be somewhere in between those extremes.

If the CBO scored the proposal by Senate Budget Committee Democrats, they would not say there is any tax increase here at all. Let me repeat that. If the Congressional Budget Office scored this proposal by Senate Budget Committee Democrats, they would say there is a $765 billion tax cut over 10 years. How can that be? How can I be saying there is $2 trillion of additional revenue over 10 years, and the Congressional Budget Office would say--if they evaluated this plan by Budget Committee Democrats--they would say it is a $765 billion tax cut? The reason is simple.

In our plan we extend all of the middle-class tax cuts. In addition, we actually broaden the middle-class tax cuts so that nobody is affected by a rate increase unless they are a couple earning over $1 million a year. We also provide the alternative minimum tax relief to prevent millions of middle-class people from being affected by that law.

As I indicated earlier, that costs $1.5 trillion over the next 10 years to shield middle-class taxpayers from that.

Third, we provide estate tax reform at the 2009 levels so that well over 99 percent of estates are completely shielded or exempt.

Again, when our Republican colleagues say--and some of them do--you can't have a higher tax rate, even on those earning over $1 million, it will kill the economy--really? How about looking at the facts. How about looking at the historic record. How about being informed by what has actually happened before because when we look at history, we find quite a different answer than our friends on the other side are providing.

What we find is that the last time the top rate for those earning $1 million was 39.6 percent, we experienced the longest period of uninterrupted economic growth in U.S. history. That is a fact. We had 39 quarters of economic growth from 1991 to 2000. For 32 of those quarters, Bill Clinton was President, and we had a top rate of 39.6 percent on those couples earning over $1 million a year.

Our friends on the other side say: You will kill jobs. Do you know what is fascinating? I remember this debate back when we passed deficit reduction under President Clinton. Our friends on the other side said the same thing then. I remember, I was seated here listening to the then-Republican leader claim that if we passed the Clinton plan to get the deficit down and balance the budget, we would crater the economy. Those were the exact words our friends on the other side used at that time--that if we raised rates on the wealthiest among us, it would crater the economy.

What happened? Not only did we not crater the economy, we had the longest period of economic expansion in our Nation's history, and 24 million jobs were created--the best record ever. That is the fact. That is what really happened--not some fairy tale about what happens if we get the country back on track, if we move toward balancing the budget, toward getting the debt down, because that is in fact what happened during the Clinton years.

Yes, we had the highest rate of 39.6 percent on those earning over $1 million. But it didn't crater the economy--no. The economy grew. We had the longest economic expansion in this Nation's history, and 24 million jobs were created during that period, the best record ever.

Let's look again at history. The last five times economic growth was above 4 percent in this country, the top tax rate was 39.6 percent on those earning over $1 million. Facts. Facts are stubborn things. In 1994, the top rate was 39.6 percent and the growth rate was 4.1 percent. In 1997, the top rate was 39.6 percent and economic growth was 4.5 percent. In 1998, we had 4.4 percent economic growth. In 1999, it was 4.8 percent. In 2000, we had 4.1 percent economic growth--the strongest economic growth, going back decades, in every year. The top rate on people earning over $1 million was 39.6 percent, which is precisely what we are proposing in this plan.

Mr. President, I think it is undisputed by serious economists, of whatever philosophical stripe, that these tax expenditures have to be reined in. We are spending $1.1 trillion a year on tax expenditures. Some of the most conservative economists in the country have said that is just spending by a different name. Here is Martin Feldstein, professor of economics at Harvard, Chairman of the Council of Economic Advisers under President Reagan. He has written a column called ``The Tax Expenditure Solution for Our National Debt.'' He said this:

Cutting tax expenditures is really the best way to reduce

government spending. . . .

It is called revenue, but it is really spending.

Eliminating tax expenditures does not increase marginal tax

rates or reduce the reward for saving, investment or risk-

taking. It would also increase overall economic efficiency by

removing incentives that distort private spending decisions.

And eliminating or consolidating the large number of

overlapping tax-based subsidies would also greatly simplify

tax filing. In short, cutting tax expenditures is not at all

like other ways of raising revenue.

This is from the head of the economic advisers under President Reagan, saying we ought to cut tax expenditures. That is exactly what the Senate Democratic budget plan does. We cut tax expenditures 9 to 17 percent, depending on how much we are able to save from closing off these offshore tax havens and the abusive tax shelters.

If we get no savings from tax havens and tax shelters, then we would have to reduce tax expenditures 17 percent. If we are able to reduce tax havens and

the other loopholes, offshore loopholes--the abusive tax shelters--by 80 percent, then we would be able to reduce tax expenditures by 9 percent.

Just like Martin Feldstein who said we ought to have after tax expenditures, also Alan Greenspan, former Chairman of the Federal Reserve, said this:

I think that Republicans are out to identify a very

significant amount of so-called tax expenditures, which in

fact are misclassified. They are expenditures, they are

outlays, and many are subsidies, and subsidies are not the

type of thing that you want for an efficient market system.

There are a lot of them.

Mr. President, that is what we are proposing. Let's go after these subsidies, these preferences, these exclusions. While we are at it, let's go after offshore tax havens, abusive tax shelters. Let's shut them down.

If there is any doubt about where this money is going, here it is: 26.5 percent of tax expenditures go to the top 1 percent in this country; 26.5 percent of all tax expenditures go to the top 1 percent. So when we are saying we may have to reduce tax expenditures 17 percent, we could do it all just with the top 1 percent. That is where the benefit is going.

Let me show you in another way. The top 1 percent, in dollar terms-- the value, on average, of tax expenditures for those who are in the top 1 percent in this country, earning an average of $1.1 million a year, they get, on average, a benefit every year from tax expenditures of over $205,000. For those who are in the middle quintile, those earning $39,000 a year, their average benefit is $3,000. You can see that the top 1 percent have a benefit from tax expenditures that is 66 times what people in the middle get. It is not unfair to go to those who have had the greatest benefit from the national economy over the last two decades and say to them: We need you to help a little bit more to get out of this debt rut we are in. And you know what, that is not unfair because they have had the greatest benefit over the last 15 years.

Here is something that I think shows it conclusively. This is the effective tax rate for the 400 wealthiest taxpayers in America. In 1992, it was about 27 percent. In 1995, the tax rate for the wealthiest 400 was 30 percent--29.9, to be exact. Look what has happened since 1995. The effective tax rate for the wealthiest 400 taxpayers in America has gone down to 16.6 percent. They have had their tax rates cut almost in half. Has anybody else had their taxes cut in half? I don't think so. The people who have had their taxes cut in half are the wealthiest among us. So it is not unreasonable to go back to them and say: Hey, wait a minute. We have to go back to what the tax rates were here--not back to an effective rate of 30 percent but a top rate that we had in the Clinton years when we had the largest economic and longest economic expansion in our Nation's history. That seems reasonable.

We also know it is not just on the individual side but on the corporate side as well. This is a little five-story building in the Cayman Islands. Now, 18,857 companies say they are doing business out of this little building. Anybody believe that? Anybody believe 18,857 companies are doing business out of this little 5-story building down in the Cayman Islands? I would say that is the most efficient building in the world. Imagine, a little 5-story building, and 18,857 companies say they are doing business out of there. They have maybe 100 employees in that building. Those are the most efficient people in the entire world. Unbelievable what they are doing.

You know what, they are not doing business; they are doing monkey business because what they are doing is cheating all the rest of us who pay what we owe. Why are they down in the Cayman Islands, those 18,857 companies, calling that little building home? Because there are no taxes down in the Cayman Islands, and they are showing their profits in subsidiaries they say are operating out of that little building so they can avoid paying the taxes the vast majority of us pay right here in the United States. That is outrageous. That is unfair. Our Republican friends say: Oh, you can't touch that; it is a tax increase if you do. Really? That is a tax increase? I don't think so.

Offshore tax haven abuse is proliferating. If anybody doubts it, go Google offshore tax havens and see what happens. See what happens if you Google offshore tax havens. The experts here on the Permanent Subcommittee on Investigations have said this:

Experts have estimated that the total loss to the Treasury

from offshore tax evasion alone approaches $100 billion per

year, including $40 billion to $70 billion from individuals

and another $30 billion from corporations engaging in

offshore tax evasion. Abusive tax shelters add tens of

billions of dollars more.

The Democrats on the Budget Committee said: We have had it. We are going after those people. We are going to insist they pay their fair share just as the vast majority of Americans already do. So we are saying: We are coming after you. If you have a tax haven down in the Cayman Islands, we are coming after you. If you have an abusive tax shelter, we are coming after you because it is not fair to all the rest of us who are paying what we owe.

There are critical priorities that shouldn't be cut. One is education. Education is the foundation for future economic strength.

An educated population is a key source of economic growth.

. . . Broad access to education was, by and large, a major

factor in the United States' economic dominance in the 20th

Century and in the creation of a broad middle class. Indeed,

the American Dream of upward mobility both within and across

generations has been tied to access to education.

This is a quote from Harvard economists Claudia Goldin and Lawrence Katz in ``The Future of Inequality: The Other Reason Education Matters So Much.''

When we see what our friends on the other side are doing, they are cutting education 15 percent. We don't believe that is the right priority for the country. Yes, overall spending has to be cut. We do cut spending--almost $2 trillion in the Democratic blueprint, almost $2 trillion--but not education.

Another key priority is energy. We all know what has happened to gas prices. They have soared from $1.81 in December of 2008 to over $3.50 a gallon by July 4. I just paid $3.77. We all know what is happening to gas prices. Many of us believe a key priority is to reduce our dependence on foreign energy. House Republicans have a different idea. They cut the programs to reduce our dependence on foreign energy by 57 percent. We reject that proposal. We don't think it is in the national interest.

Infrastructure--roads, bridges, airports, rail. Here is what the U.S. Chamber of Commerce has said about infrastructure spending:

If we don't change course over the next five years, the

economy could forgo as much as $336 billion in lost economic

growth as transportation networks continue to deteriorate. I

am well aware of the fiscal constraints facing this Congress

and the nation. But we must avoid cutting off our nose to

spite our face. Without proper investment and attention to

our infrastructure, the United States' economic stability,

potential for job growth, global competitiveness, and quality

of life are all at risk.

That is a quote from Thomas Donohue, the president and CEO of the U.S. Chamber of Commerce.

Republicans in the House weren't listening because they propose cutting transportation funding in their budget by 30 percent. We reject that cut as well. It does not make sense to cut education, to cut infrastructure. It does not make sense. It will only weaken our position.

On health care, the House Republican plan ends Medicare as we know it. It replaces it with a voucher system, block grants Medicaid, and shifts costs on seniors, children, the disabled, and individual States. It ends the countercyclical nature of Medicaid, and it defunds health care reform, increasing the number of uninsured by at least 34 million people in this country. The House Republicans have said their plan saves Medicare. I don't think so. I think it kills Medicare. Why do I say that? Because under traditional Medicare now, the beneficiary pays 25 percent. Someone who is eligible for Medicare pays 25 percent of the bill. Under the House Republican plan, they would pay 68 percent of the bill. That just stands things on their head. Instead of people having Medicare as a social safety net when they get to their senior years, they would have it pulled out from under them.

We have rejected the House GOP approach and would remind our colleagues that we have had large health

care savings that were already enacted last year in health care reform. The Congressional Budget Office says that will save in the second 10 years $1.3 trillion. So, yes, everything has to be on the table, but we just took a big run at getting our health care costs back in line--$1.3 trillion in deficit savings, according to CBO.

In conclusion, the overview of the budget framework we are offering our colleagues for their consideration provides $4 trillion in deficit reduction over 10 years. It is actually $5 trillion if measured on the same basis as the fiscal commission. We have adopted what we think is a more plausible baseline in light of things that have happened over this year. It stabilizes the debt by 2014 and cuts the deficit to 2\1/2\ percent of GDP by 2015 and 1.3 percent by 2021. We have tax reform that simplifies the code. This closes loopholes and goes after offshore tax havens and abusive tax shelters and restores fairness. We reject the House GOP plan to end Medicare as we know it. We protect education, energy, and infrastructure investments. And we have a balanced deficit and debt reduction plan, cutting spending by about $2 trillion and providing additional revenue by about $2 trillion.

Let me conclude as I began by saying that our revenue plan would be scored by the Congressional Budget Office as being a $765 billion tax cut because we are replacing revenue lost by extending other tax cuts. We are extending all the middle-class tax cuts and expanding middle- class tax cuts up to those earning $1 million a year. And we are fixing the alternative minimum tax. That costs $1.5 trillion over 10 years. I don't consider that a tax increase at all because you are reducing revenue that would otherwise come into the Treasury under the alternative minimum tax--which I think almost all of us think is unfair--and replacing it with revenue by reducing tax expenditures. Even the most conservative economists in the country say that needs to be done.

That is the blueprint the Senate Budget Committee Democrats are laying before our colleagues. We are under no illusions. We know this is a year in which the normal process is not being followed. We understand there are leadership negotiations at the highest level, so we understand this is not going to be dealt with in the normal course of doing business. We understand there is leadership negotiation, but we believe there are some ideas in this package that deserve consideration as those negotiations go forward.

Mr. President, I thank my colleagues for their courtesy and their patience, and I look forward to this continuing debate as we take on the debt threat that looms over our Nation.

I thank the Chair, and I yield the floor.

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

Mr. President, in recent days I have spoken several times on the matter of tax expenditures. I am going to address this subject again today. It is a timely topic. Everyone is talking about our out- of-control deficits and debt. There are divergent opinions on how best to deal with our Nation's increasingly perilous fiscal situation, but there is one thing everyone seems to agree on: Both the deficit and the debt are unsustainable. If we keep going down this fiscal path, the United States will face a crisis similar to that in Greece and sooner rather than later. The numbers could not be clearer. Federal spending as a share of our economy is trending at a pace 15 percent to 20 percent greater than its historical average of 20.6 percent of GDP. If we leave in place this year's level of taxation, including the marginal rate of relief between the 2001 and 2003 tax cuts, and patch the alternative minimum tax, or AMT, the Federal tax take will equal or exceed its historic share of the economy.

Liberals suggest the deficit and debt can only be resolved with a significant tax increase. This is either deliberately misleading or sadly delusional. They are either selling snake oil to the American people or they refuse to come to grips with reality. Sticking their heads in the sand is not an option. As you can see, here are Federal taxes and spending as a percentage of GDP. The red line happens to be the spending line. And as you can see, we are way up here in the Obama 2012 budget. The blue line happens to be the average between 1960 and 2009. As you can see, it is way down here. Our spending is out of control. The markets and the American people understand the nature of our crisis. Nondefense discretionary spending is at historic levels and our entitlement programs are headed for bankruptcy.

When former Speaker of the House Nancy Pelosi responded to the utter failure of President Obama and congressional Democrats to come up with a Medicare reform plan, she responded, ``We have a plan. It's called Medicare.'' That attitude is the recipe for bankrupting the Nation, a bankruptcy that will take our seniors down with it. The left might prefer to ignore reality, but here is the undeniable truth: Our Nation faces a spending crisis that tax increases cannot fix. I wish the media would get this. They are so enamored with the idea of a grand bargain on deficit reduction, a little spending reduction here, a little tax increase there, that they miss the fundamental point. The problem is spending, as you can easily see by this red line. It is way out of whack, and going back to the dry well of raising taxes on the rich is not going to work.

The fact that Democrats in the Senate have not put forward a budget in over 800 days is neglecting one of the core constitutional responsibilities, and it is all the evidence we need that they are afraid of the bill coming due on all of their spending. They understand their hard left base will not accept structural changes to our biggest spending programs under any circumstances. But they also understand that the American people will not stomach for a minute the tax increases that will be necessary in the absence of such reforms. This is a difficult position to be in, so rather than deal with the facts, they traffic in obfuscation. This morning I heard the ranking Democratic member on the House Budget Committee following the President's lead and suggesting that removing some tax breaks for energy companies would fix our deficit crisis. Getting rid of those tax breaks would raise $21 billion over the next 10 years. Yet this fiscal year alone, in 2011, we will have a projected budget deficit of $1.5 trillion to $1.6 trillion. So where is the rest of our money going to come from?

Last week I came under fire for stating what I thought to be a relatively noncontroversial fact. Here is what I said:

In 2009, 51 percent of Americans had zero or negative

income tax liability.

Here is what that means. In 2009 only 49 percent--a minority of all households in this country--49 percent of tax units shouldered 100 percent of the Nation's tax burden. And 51 percent of the tax units--a majority of all tax units in this country--either owed nothing to the IRS or, better yet, got money back from the IRS in excess of their tax liability. Mr. President, 23 million of them got refundable tax credits, much more than they pay in employment taxes, which are Social Security. By the way, as they pay into Social Security, they only pay a third of what they will ultimately draw out according to the actuaries, but they are not paying income taxes. This should be no less controversial than saying the Sun rises in the east. This is not conjecture. It is a demonstrable fact, yet apparently touched a nerve. Because last week after raising this issue on the Senate floor, MSNBC and the liberal blogosphere, presumably armed with the talking points from the Senate Democratic war room, went ballistic, suggesting that I wanted to balance the budget by raising taxes on the poor. I am not surprised, but this completely misses my point, and the point is this: No matter what these Democrats tell you, the wealthy and middle class are already shouldering around 100 percent of the Nation's tax burden and 51 percent pay absolutely nothing in income taxes. Furthermore, because of this perverse distribution of Federal income taxes, there is no way to fix our deficit hole and pay down the debt by increasing taxes on the so-called rich.

Here is the bottom line. All of the ``let's talk about taxes on the rich'' and closing loopholes and going after corporate tax breaks is meant to divert attention from the sad fact that the President's out- of-control spending puts Democrats in a position of having to raise taxes big time on the middle class since they are going to balance the budget without structural reforms to our largest spending programs. Tax increases on the wealthy will not get our Nation to fiscal balance. Even if we let the Bush tax breaks expire from the top income bracket, the total amount raised over 10 years would be $615 billion. That is over 10 years. Yet our deficit this year alone is $1.5 trillion to $1.6 trillion. This is why the issue of tax expenditures is critical. So everybody knows, I made it clear, I thought, in my last remarks that I don't want to tax the truly poor, those who would help themselves if they could. I do not want to tax them. But you can't tell me that 51 percent of all households are the truly poor. I don't want to tax them either, to be honest with you, but it is apparent we are going to have to find a better way of broadening the base of the tax system. Democrats talk about tax expenditures as though they were the holy grail of deficit reduction. Just close these loopholes and happy days are here again. The public is being misled in this type of debate, but don't take my word for it. Today the Associated Press had a story with the following lines:

SPIN METER: Obama, Dems skirt issue on tax hikes.

This is what the body of the article has to say:

Proposals under consideration include raising taxes on

small business owners and potentially low- and middle-income

families.

You won't hear about that from President Obama. Instead, the President focuses on the very rich and speaks euphemistically. Here are a few of the phrases the President has used of late of what amounts to raising taxes for some:

What we need to do is to have a balanced approach where

everything is on the table.

He goes on to say:

We need to take on spending in the tax code. The tax cuts I

am proposing we get rid of are tax breaks for millionaires

and billionaires, tax breaks for oil companies, hedge fund

managers and corporate jet owners. You can't reduce the

deficit to the levels it needs to be reduced without having

some revenue in the mix.

All those are quotes by the President. They are doing their best to hide their intentions, but the writing is on the wall. Democrats are angling for historic tax increases on the middle class, and the way they want to accomplish this is by reducing or eliminating tax expenditures. Cutting back tax expenditures is a convenient way for Democrats to tax middle-class tax-paying families without having to say they are raising their tax rates. As I noted last week, this is what we were talking about when Democrats discussed tax expenditures. They are talking about your pension. They are talking about your Medicare. They are talking about your ability to purchase a home or save for retirement or give to your church or put away money for your

children's education. This is exactly what we are talking about. That is where the money is. It is not in bonus depreciation for corporate jets, and it is not in tax benefits for energy companies.

When Democrats talk about tax expenditures and tax loopholes as a way to bring down the deficit and debt, they are putting a bull's-eye on the backs of middle-class American families. We heard a lot this morning about Republicans walking away from the President's grand bargain on deficit reduction. Well, I know that the people of Utah applaud Speaker Boehner for not signing on to this bogus deal. This morning the President's allies in the media were asking why Republicans walked away from this deal. With the President willing to put entitlement spending on the table, why aren't Republicans willing to put taxes on the table? It is worth noting that the President and his Democratic allies steadfastly refuse any structural changes to entitlement spending.

Second, for Democrats, putting taxes on the table and tax expenditures means tax increases on the middle class, and that is a nonstarter. This issue of tax expenditures is confusing and demands greater clarity. As ranking member of the Finance Committee, it is my responsibility to correct the record on what the curtailment or elimination of tax expenditures would mean for taxpayers and families.

If you listen to my friends on the other side of the aisle, you would think tax expenditures are ``spending through the Tax Code.'' You would think they are mostly loopholes in the tax law designed by and for special interests such as ethanol blenders. Another mantra you will hear too often uncritically reviewed by many in the media is that tax expenditures disproportionately benefit wealthy taxpayers.

A few days ago I talked about what tax expenditures are and what tax expenditures are not. They are not spending. You can find the text of that speech from July 6 on the Finance Committee Web site. They are not, in the main, loopholes for special interests. The other day, I talked about the major features of family financial planning that would be upended if tax expenditures were curtailed. I referred to employee pension plans such as 401(k) accounts. I also mentioned charitable gifts and home ownership. If my friends on the other side are successful in cutting back tax expenditures, American families, workers, and investors can expect the cost of all of these activities to rise. If the cost rises, as a nation, we will be poorer because we will have less retirement savings, fewer charitable contributions and more expensive homeowners. You can find the text of that speech last Thursday on the committee Web site as well.

Today I am going to consider the oft-repeated line that tax expenditures disproportionally benefit the wealthy taxpayers.

For purposes of this discussion only, I will adopt the President's definition of rich; that is, singles with adjusted gross incomes over $200,000 per year and married couples with incomes over $250,000 per year. I wish to be clear that I do not lump all of these folks in with Bill Gates, Jr., LeBron James, Warren Buffett, or Gilligan's Island resident millionaire Thurston Howell, III. Here is good old Thurston who was the millionaire on Gilligan's Island. I am using the President's definition of rich because most of my friends on the other side use it. They also claim tax expenditures reside disproportionately with rich taxpayers.

The Democrats' rhetoric on expenditures does not jibe with the reality of our Tax Code. The data is clear. Tax expenditures tend to skew toward taxpayers below the President's definition of the rich. If my friends on the other side examine the data, they will find their assertion about who benefits from tax expenditures does not square with the facts. They will find their assertion that tax expenditures disproportionately benefit the wealthy falls flat on its face.

In much of the coverage of tax expenditures, it has been taken as an article of faith that they disproportionately benefit wealthy taxpayers. Similar assertions have come from the White House and congressional Democrats. The one exception is my friend, the ranking Democrat on the Ways and Means Committee, Sander Levin. Congressman Levin has cautioned against treating tax expenditures as rich persons' tax benefits. His position is well founded. The source for this assertion, that tax expenditures are tax benefits for the rich, is a Tax Notes article dated May 3, 2011.

I ask unanimous consent to have it printed in the Record.

The article is written by Roberton Williams of the Tax Policy Center or TPC. TPC is a tax policy think tank that is the product of two center-left think tanks. The article presents conclusions from a TPC distribution analysis of tax expenditures.

The analysis concludes that about two-thirds of tax expenditures benefit the top quintile of households in the study. Viewers on C-SPAN may wonder what a quintile is. It refers to one-fifth of the given population. The TPC analysis is, therefore, measuring the top one-fifth of the population.

According to that study, where does that top one-fifth of the population begin? It begins at $123,000 of household income. It should be noted that household income is a bit broader than the adjusted gross income which is the basis of the President's definition. According to TPC, that top quintile earns 55 percent of income and shoulders a huge amount of the Federal tax burden. They say it is 67 percent.

Now, perhaps not too surprisingly, TPC finds that tax expenditures for the top quintile approximate that top one-fifth's share of the tax burden. With the exception of the refundable credit tax expenditures, a taxpayer has to pay income tax to benefit from the tax deduction credit or exclusion.

Those asserting that tax expenditures are mainly wealthy taxpayer benefits are principally relying on TPC's distribution analysis. If confronted with the TPC data, it seems to me they have four choices. Their first choice would be to revise downward the income basis of their definition of ``rich.'' They could say we really did not mean families at $250,000 of income; we meant families of $123,000 of income. That would be similar to the adjustment made for ObamaCare. Joint tax distribution tables for ObamaCare showed that for every family below $200,000 who received an exchange credit, four families paid higher taxes. For

every middle-class family who receives a premium subsidy, five pay higher taxes. That is just a fact. I guess I said five. It really would be four who would pay higher taxes.

A second choice would be to revise the proportion of tax expenditures so that the tax expenditure dollar amount reflects the benefits attributable to taxpayers defined by the President as rich. The President's rich taxpayer definition is the top 3 to 5 percent of taxpayers. It means the group of taxpayers who are roughly 25 to 33 percent of the size of the group in the TPC analysis.

Put another way, the TPC population of rich taxpayers is three to four times the size of the group the President and my friends on the other side define as rich. If a consistent definition of the rich were used, the dollar amounts of tax expenditures in play would be considerably lower. Since the goal of the group pushing the cutback of tax expenditures is to relieve spending constituencies of the pressure of curtailing spending, my guess is they will not choose to reduce the tax expenditure kitty.

Their third choice would be to simply curtail or eliminate tax expenditures for higher income taxpayers. This, of course, could largely eliminate the preferential rates for capital gains and dividends.

Let's take another look at this chart because it shows a big share of the capital gains tax expenditure goes to the top one-fifth. It looks as though about 95 percent of tax expenditures accrues in the top one- fifth. We see that about 50 percent of it accrues to the top one-tenth of 1 percent. Do we think it would make sense in the current economic climate to double or triple the tax hit on investment?

At one point, at least, the President's answer was no. In August 2009 the President was asked by a resident of Indiana:

[e]xplain how raising taxes on anyone during a deep

recession is going to help with the economy.

Here was the President's response:

Normally, you don't raise taxes in a recession, which is

why we haven't and why we've instead cut taxes. . . . You

don't raise taxes in a recession. We haven't raised taxes in

a recession.

So what is their fourth choice? Their fourth choice would be coming clean with the American people. Under this option they would admit that tax expenditures disproportionately go to families who are not rich under the President's own definition. They would acknowledge that cutting back tax expenditures as part of a deficit-reduction exercise would hit the middle class and betray the President's promise not to raise taxes on middle-class families.

As we can see, the proponents of these tax increases are in political quicksand, and there is additional evidence that they are sinking as they struggle against the facts. I would ask my friends on the other side to take a look at the Joint Tax distribution tables on many of the major tax expenditure categories. Joint Tax publishes these tables every year. They are available on the Joint Tax Web site.

I have a chart that summarizes the percentages of tax expenditures that go to taxpayers under $200,000. I will have to bring that with me the next time. That is the break point that Joint Tax uses--the percentage of tax expenditures that go to taxpayers under $200,000. It closely squares with the definition of ``rich'' used by the President and his liberal allies.

Anybody above $200,000 is rich under my Democratic friends' definition. Anybody under $200,000 is not rich. You can find this data in the tax expenditures pamphlet published annually by the nonpartisan Joint Tax staff.

Now I wish to talk about the tax expenditures that Joint Tax distributes by income. I have listed them in order, from the largest in dollar volume down to the lowest in dollar volume. The first one is well known to tens of millions of our constituents. It is the mortgage interest deduction.

If a taxpayer saves up a downpayment and borrows for a home, they can take the interest paid on the mortgage as an itemized deduction. That means 30 percent of the benefit of the mortgage interest tax expenditure goes to taxpayers over $200,000. Taxpayers with incomes below $200,000 receive 70 percent of the benefit of the mortgage interest deduction.

Now, how do we measure whether the mortgage interest deduction disproportionately benefits taxpayers over $200,000? There is a line in bold letters that reads: ``Compare Total Federal Tax Burden.'' That is the baseline of how much tax is shouldered by the group of taxpayers above and below $200,000. We have a very progressive tax system. Taxpayers earning more than $200,000 shoulder 64 percent of the tax burden. Taxpayers earning less than $200,000 shoulder 36 percent of the tax burden.

Taxpayers earning less than $200,000 receive 70 percent of the mortgage interest deduction while shouldering 36 percent of the tax burden. Who benefits from these tax expenditures? We are going to get into that. That means by a ratio of almost 2 to 1, taxpayers under $200,000 benefit from the mortgage interest deduction; and since $200,000 basically fits the definition of ``rich'' used by my friends on the other side of the aisle, we can see that other taxpayers who are nonrich, or the middle-income group, disproportionately benefit from the mortgage interest rate deduction.

Now, let me talk about another tax expenditure. I am referring to the earned-income credit, or EIC. It is a refundable credit. That means taxpayers receive it whether they pay income tax or not. That is why the credit is basically scored as spending by the Congressional Budget Office--the CBO--and Joint Tax.

There is a bit of irony about this tax expenditure because it is refundable. It is more popular with my friends on the other side than other tax expenditures. That is because those other tax expenditures go to taxpayers who actually pay income tax. The refundable credit is popular with my friends on the other side because it is a robust income-reducing mechanism.

President Obama, in his famous exchange with Joe the Plumber, captured the economic theory supporting this policy when he said we need to ``spread the wealth around.''

Here is the irony. My friends on the other side derisively describe all tax expenditures as ``spending through the Tax Code.'' Yet the tax expenditures they most support are the refundable ones, such as the earned-income credit. It should come as little surprise that the left's favorite tax expenditure is the one that is scored as spending by congressional spending scorekeepers.

Because the earned-income credit tax expenditure is refundable, we shouldn't be surprised to find that so-called rich taxpayers do not benefit from it. The chart confirms this point.

The third tax expenditure is right here: the current $1,000-per-child tax credit. It is, by definition, limited to lower and middle-income taxpayers. We should not be surprised to find that none of it goes to higher income taxpayers, and the chart confirms this point: zero to taxpayers over $200,000; 100 percent to taxpayers under $200,000.

Let's take a look at State and local taxes. It is the fourth one on here. The chart shows that 50 percent of this broad-based deduction goes to middle-income families.

No. 5 on this list is a tax benefit near and dear to many of my fellow Utah families. It is the itemized deduction for charitable contributions or donations. Of all the tax expenditures listed on this chart--this big chart right here--this one, charitable itemized deductions--distributes in the highest proportion to taxpayers above $200,000 in income. The chart says 55 percent, right here; 45 percent for those under $200,000. Keep in mind, overall, taxpayers with income over $200,000 bear 64 percent of the tax burden.

Now, this means proportionately, the charitable deduction benefits taxpayers under the $200,000 level more than taxpayers above the $200,000 level.

Now let's take a look at No. 6 on this chart. It is the tax-free portion of Social Security benefits, right there. Anyone advocating a cutback on tax expenditures is advocating a cutback on the aftertax Social Security benefits for a big chunk of the senior population. Guess what. We are not talking about wealthy seniors. According to this chart, 2 percent of that favorable tax treatment of Social Security goes to seniors with incomes over $200,000. My guess is that few of the seniors benefitting from this policy own yachts or regularly fly corporate jets.

No. 7 is the itemized deduction for real property taxes. Right now, their

constituents take the edge off that heavy local tax hit with the itemized deduction. If many of my friends on the other side have their way and hack away or eliminate tax expenditures without also cutting their constituents' Federal tax rate, guess what happens. In the case of local property taxes, the net effect will be to raise the property tax rate by as much as 35 percent.

Some of my friends may suggest that only those with villas are taking the property tax deduction. This chart says otherwise. It says 80 percent of the real property tax benefits go to taxpayers under $200,000.

How about No. 9 on the list? No. 9 on the list is the itemized deduction for medical expenses. ObamaCare cut back on that one. But if my friends on the other side reduce or eliminate side tax expenditures to avoid dealing with out-of-control government spending, this deduction will be cut back even more. The chart shows on these medical itemized deductions that 89 percent of this tax benefit goes to taxpayers earning less than $200,000.

No. 10 is the dependent childcare credit. This is a modest tax credit that working moms and dads can tap. Like the child tax credit, it mainly is used by middle-income families. The chart confirms it. It indicates that 96 percent of the benefits of this credit go to families earning less than $200,000.

The final item on the list is the student loan interest deduction, as shown right here on this chart. This tax benefit is income limited. Not surprisingly, all of the benefit goes to taxpayers earnings learning less than $200,000--100 percent of the benefit. I do not think a lot of the recent college graduates using this deduction are in the market for a yacht. But if you listen to my friends on the other side, you would think because this benefit is labeled a tax expenditure, those who benefit from it have a schooner docked in the local harbor.

I am not saying that only middle-income families benefit from tax expenditures. Wealthy taxpayers benefit from the lower capital gains and dividends rates.

Let me refer to this chart of the 10 largest tax expenditures for the period 2010 to 2014. But the lion's share of tax expenditures goes to that part of the middle class that is already shouldering much of the Nation's tax burden. Most of the tax expenditures are either income limited or of limited value to wealthy taxpayers. Likewise, low-income families do not pay income taxes. They receive tax expenditures that are designed for the nontaxpaying population.

So who is left? The answer is the taxpayers who are not rich by the President's own definition. The answer is middle-class families.

On our side, the reaction to all these choices would be simple. Many on our side, including Ways and Means Committee Chairman Camp, have put it this way. Keep your hands off tax increases, including cutbacks in tax expenditures, for deficit reduction. Reserve those tax expenditures for tax reform. In that way, taxpayers receive a benefit--lower rates in exchange for a broader base. That broader base would include reform of tax expenditures, if Chairman Camp and I have our way. Any other approach is just another tax increase. And they on the other side will spend every dime of it.

The President this morning gave another press conference. He asked what the holdup was in arriving at a deficit reduction compromise. The answer seems pretty obvious. Contrary to the President's vague assertions, the leftwing base he is depending on for his reelection refuses any meaningful structural reforms to the spending programs that are currently bankrupting our country. That means the only serious deficit reduction option available to Democrats is massive tax increases on the middle class. Democrats will not acknowledge the inevitable tax increases their agenda assumes, and Republicans will not give the President any cover in his drive to ``spread the wealth around.'' That is what is holding up this process.

So let me offer a suggestion. Instead of berating Republicans for not signing on to historic and economy-crushing tax increases, when unemployment is at 9.2 percent, maybe the President should take his own party to the woodshed. Maybe he should ask the liberals in his party who refuse any meaningful structural reforms to entitlements to get serious. Maybe he could go on television and explain to the American people that we have over $60 trillion in liabilities and that tax increases are not going to bring that into balance.

Instead, the President and his party sit around and spread the myth that simply getting rid of tax expenditures and loopholes--and they certainly are not loopholes, the ones I have been talking about--will fix our deficits and debt. We have two reasons to worry about that wrongheaded approach. One, to the extent deficit reduction energies are diverted to cutting back tax expenditures, pressure is taken off the root cause of the deficit and debt problem. That is, pressure that should be brought to bear on out-of-control spending programs is released. Two, the productive sectors of the economy--workers, small business owners, and investors--are burdened with yet more Federal taxes.

For many reasons, cutbacks in tax expenditures are a deficit reduction dog that will not hunt.

If you look at all individual tax expenditures, you can see these are the 10 highest tax expenditures by percentage.

Let me go back to the preceding chart. If you look at all these tax expenditures, for the mortgage interest itemized deduction, 70 percent are people earning under $200,000; for the earned income tax credit, 100 percent; for the child tax credit, 100 percent; for the State and local taxes, other than real property, 50 percent; for charitable itemized deductions, 45 percent--yes, the rich had 55 percent by their definition--for Social Security benefits, 98 percent; for the real property tax itemized deduction, 80 percent; for the education credit, 100 percent; for medical itemized deductions, 89 percent; for the dependent childcare credit, 96 percent; for student loan interest, 100 percent.

Look, my point is, we have to come up with a better Tax Code. I am dedicated to changing this awful Tax Code we have that is too complicated, too large, too expensive, does not do the job, and is a bunch of muttering around and puttering around by Members of Congress, and simplifying that Code so everybody knows which end is up.

On tax expenditures, I am going to be happy to look at tax expenditures, but they should be reserved until we do real tax reform. If you have to give up some of these expenditures, then there better be appropriate reductions to account for that, and we have to do it by flattening out that tax system that we all know is completely out of control and completely difficult to comply with. As a matter of fact, I do not know of anybody on the Senate Finance Committee who fills out their own tax forms. I do not think most of us could do it because if you had 10 different tax preparers on a semicomplicated tax return, you would probably have 10 different approaches to it. That shows the pathetic system that is wrecking our country.

To make it clear, when the President took over, the bottom 40 percent of all households did not pay income taxes. Yes, they paid payroll taxes, but 23 million of them got refundable tax credits, much more than they paid in payroll taxes. Keep in mind, I do not believe we should tax the truly poor. But now that is up to 51 percent in a little over 2 years under this administration of people who do not pay any income taxes. Are they all truly poor? I do not know. All I know is, it does not sound right that the majority of people, the majority of tax units in this country, do not pay income taxes, and the minority has to carry the whole burden.

If they are truly poor, I understand and I would be the last one to tax them, and I think I have a 35-year record here of being fair to the poor and fair to families and, above all, fair to children. My name is on an awful lot of important bills around here, and I have led the fight on a lot of bills that help people in distress. So you can imagine how aggrieved I felt when one of our great television stations was distorting one sentence--it seemed to me one sentence--out of a 30- minute set of remarks on the floor that made it very clear that I do not want to tax the truly poor. But surely we have to have everybody participate. I actually think everybody ought to participate, even if

it is only $1. We ought to all have some skin in the game. We ought to all help save this country, and we cannot do it without the middle class. And the middle class is not just the top 49 percent of all wage earners.

This is an important issue, and it is one we have to resolve, and we have to resolve it fairly, we have to resolve it in a way that is meaningful and in a way that will help save our country too. I think I have more than made the case that you cannot pile it all on the so- called 3 to 5 percent, the so-called rich, which includes 800,000 small businesses, where 70 percent of all jobs are created. And everybody knows that is true. Every time you tax them and take moneys away from them like that, when they are paying pretty hefty taxes as it is, they hire less, they do less, they quit their businesses, some move offshore, some move their businesses to other countries, and some just plain give up.

We cannot let that happen. We have to have a fair tax situation. We have to have Democrats and Republicans work on it together. We have to quit playing this card that basically pits one group of people against another.

All I can say is this. I am concerned. I am pointing out difficulties in our Tax Code. I am pointing out difficulties in some of the arguments the President is making. And I have to say that anybody who reads my remarks fairly will know these points I am making are real points. These charts are important. As you can see, taxpayers earning under $200,000 will be bereft without these benefits unless we can revamp the whole Tax Code in a way that you do not have to have tax expenditures. Tax expenditures are certainly not spending--at least these ones we are talking about right here and now.

So if you compare the total Federal tax burden, those earning over $200,000 pay 64 percent; those earning under $200,000 pay 36 percent. All of that is important for us to understand.

Mr. President, I yield the floor.

Mr. President, before I talk about the budget, I wish to commend the Senator from Georgia.

As someone who has been in the real estate business for many years, such as the Senator from Georgia, he is absolutely right. If homeowners are stuck with a 20-percent minimum, the odds are it will crush the housing market. I can tell you this personally because I am helping my mother do the paperwork now for her home. If she was required to put 20 percent down, she would not be buying that home today. We hope to close on the home in the next 45 days. We are fortunate she is able to do that, but 20 percent would take her right out of the market, unable to buy the home she wants to retire in.

So I say to the Senator from Georgia, I hope more people hear it in the administration, because if they don't hear that, as we know with the housing market, it is a critical component of our ability to pull ourselves out of the recession. I thank the Senator for making those comments and noting that.

I know Senator Conrad was down here earlier, the chair of the Budget Committee, to talk about the budget framework. I first wish to say thanks to Chairman Conrad. Here is someone who has been on the Budget Committee for 25 years, since 1986, and has been chairman for many of those years, an unbelievable capacity and understanding of the budget and what needs to be done. He understands it. He clearly recognizes we have to have a balanced approach.

For months, yourself, Mr. President, and myself, sitting on the Budget Committee, along with the chairman on the Democratic side, have been working to try to figure out how do we craft a balanced approach. How do we ensure that at the end of the day, we recognize we have to have a budget that continues to help grow our economy, creates fairness in the system, and makes sure we take the responsibility of creating a more accountable and financially responsible budget, not only for this year but for the years out, and dealing with a comprehensive approach to dealing with the deficit?

This is not an easy task, to say the least. I can say, standing here, and I know, Mr. President, as a member of the Budget Committee also, none of those meetings were easy in the discussion, if I could say that--robust debates, robust controversy in some of the issues we talked about but also a lot of ideas. But what is in front of us?

No one can match the chairman's approach of how to address an issue such as this as he lays out slide after slide the impacts, from the macro to the micro, of this budget and what it will mean. But it is clear the budget proposal he has laid out, the framework, as he calls it, by the Democratic majority of the Budget Committee is $4 trillion in cuts for deficit reduction and is achieved in a very fair and balanced way, without putting the burden on the backs of seniors, working families, and small business. This is a balanced approach. The deficit-cutting mechanisms are drawn half from savings and half from revenues. Revenues mean closing loopholes.

His photo there, which as we sit here and present to the President our positions is hard for people in the balconies to see, but it is of an amazing five-story building. It is not a very attractive building, just a small five-story building in a tax haven that grants thousands and thousands of businesses a shelter from their fair share of paying their taxes.

The idea of this revenue component of the proposal we put forth is closing loopholes, closing down tax avoidance schemes that rely on abusive tax shelters, and, yes, cutting tax subsidies, ending the practice of giving the wealthiest of the wealthy tax subsidies they simply do not need. It is about promoting fairness.

As we dealt with this budget, a $4 trillion reduction--a number that the bipartisan commission hit as their target, one we hear out there now in the press a lot but one we felt was a reasonable approach. It is more than the House budget that was proposed. The House budget included savings only on the spending side and actually worsened the outlook on the revenue side

that we simply do not believe is good enough.

The budget is about fairness, about ensuring that we have a system that is balanced but also investing in the right areas so we have long- term and continued growth. We do not give more tax breaks to corporations and the rich and then put the burden on the backs of seniors, poor kids, working families, disabled. It is unacceptable to put the burden on our most vulnerable population. The budget is truly a moral document. It defines where we are going to go, what we are going to do, and how we are going to look in the next 10 years or 20 years as a country.

When I was mayor of Anchorage in 2003, when I got elected, I had a budget around $215 million, with about a $33 million hole in it--pretty significant in the sense of proportions. We had to deal with spending and reducing it. We had to create a fairness in the revenue, but we also had to invest. But we also knew the document and the work we were doing in the budget would define where our community went, not just in the year we were doing it but in the next several years down the road.

I was very pleased. When I got elected to the Senate, it was, I think, Business Week and others that rated the city that I was mayor of, Anchorage, as probably the most likely city in the country to recover from the recession the fastest. As a matter of fact, Forbes has listed it, not only last year but this year, I think, No. 3 this year as the city of job growth because there was a foundation laid. We had to make some tough decisions, and I remember as mayor they were no fun. I remember the role of the Presiding Officer in the community he represented. There are tough decisions we have to make, but you have to make them.

I can still remember one headline that as we were trying to figure out what do with our library system that wasn't run as well as it could be, I still remember this headline to this day: ``Begich Lays Off 21 Librarians,'' which is not a very good headline, to say the least.

But what did we do? We reexamined it, reinvested, increased our partnerships with the private sector today, and the library system is more robust than ever before, with new branch libraries serving more kids than ever before, better facilities, new equipment, new technology. It is more robust than it has been in decades because we had to make some tough decisions for the long term.

That is where we are today, especially after the disappointing news we had this last week with regard to the job market, when the economists thought we were going to have 120,000 new jobs and we ended up with just 18,000, unemployment rising to 9.2 percent.

As I said, this plan protects critical investment that will help us build the future of our economy here. It invests, as mentioned by the chairman of the Budget Committee, Chairman Conrad, in education, energy--which is, of course, for my State critical--and infrastructure, core infrastructure.

I use my experience as a mayor. In my short term as mayor of Anchorage, we built more roads than all the mayors combined in the previous 20 years. We built more vertical construction--fire stations, convention center, museums, and other facilities that helped water, sewer, power, new generation of gas turbines--all that because when you build that infrastructure, the private sector will attach to it, will be attracted to it and will build off of that.

This budget that is being presented by the majority on the Budget Committee keeps our investments in education, energy, infrastructure, which in turn will ensure that we continue to move back into the realm of being more competitive on the worldwide market.

We have all heard the budget proposal lays out some ideas on tax reform--not just a little bit here and a little bit there, but fairly significant. When we talk about our corporate rate in this budget proposal by the majority in the Budget Committee, it brings it down to about 29 percent. It is not where I would like it, but it is better than where it is today. It gets us more competitive on the world market.

A group of us also have introduced legislation in advance of this budget proposal, the Wyden-Coats-Begich Bipartisan Tax Fairness and Simplification Act. The legislation provides real tax reform for our very outdated system. It plays off of exactly what the majority laid out, a budget proposal that talks about tax reform to create certainty for our business community for long-term investments, and we take it one more step. Not only do we look at the corporate component, we look at the individuals.

Can you imagine, as an individual right now we deal with six different rate structures. If we can reduce it to three, which our bill does, and you could do your tax return on one page--can you imagine the amount of time, effort, and money individuals will save? We take the budget proposal that the committee I sit on and the Presiding Officer sits on one step further. Not only do we focus on stability and certainty for the business community, which is critical for long-term investments they need to make to ensure all those trillions they have literally locked up in their cash accounts because they are not sure where we are headed as a country, we create the certainty, but we also ensure the individual has a compressed rate, a more fair system, and simplified, which we think is important.

Tax reform is an integral part of the conversation on deficit reduction. I am pleased Senator Conrad's proposal also provides some of the same tax reform principles I mentioned. As I mentioned, it not only deals with the rate structure but, as he detailed, very aggressively closing shelters and loopholes, and not just for one industry over another industry, which has been some of the debate, it is for fairness of all. We look at it all because we want everyone to be treated fairly.

Let me talk about a couple of more pieces in the majority's budget from the Budget Committee. Chairman Conrad went through it in great detail but I want to emphasize this point. The AMT, the middle-class tax cuts--what does this mean? What does this mean for the average person here?

Right now, 4.3 million taxpayers are affected by the AMT, which is a small tax provision that many years ago was set in place to get the richest of the richest. But it was never indexed, never inflation adjusted, so it has grown. There are 4.3 million taxpayers we have affected today. If we do not fix this tax problem, it will increase to 31 million people who will have additional taxes to pay.

What are we doing? We are putting on the AMT patch to fix this problem so 30-plus million people will not have this additional tax burden. We think it is right. We think it is the right approach. It goes to the people who need it the most.

In addition, this framework that was laid out today, for singles earning $500,000 and couples earning $1 million or more, they will not receive the same tax relief as everyone below them will receive. The tax relief will be focused on families who earn $1 million or less. Why is that important? Because not only are they families, but almost 98 percent of all small business earn $1 million or less pretax. So we protect the backbone of my State. I can tell you as a small businessperson, the Presiding Officer knows that as someone who worked in a small business and it grew to a larger business, it is the backbone. It is what makes the difference in hiring people. Every day when people see their revenue stream start to increase, small businesses start hiring people. They need those employees.

But this proposal is not only for the individual, and then also the larger corporation bringing in that corporate rate, but it protects almost all the small businesses in this country--and, of course, being very biased--and in my State.

What does that mean? That means when you calculate it all in real dollars, and you heard the numbers, when you think about the tax reductions, the tax savings for middle-class Americans and small business, it is well over $1 trillion between the AMT and preserving the tax relief for families earning under $1 million. It is significant. That is money that small businesses will reinvest into their businesses, employing other small businesses to do the work. It is families who will have more disposable income to put into the economy which means more purchases from businesses which means more hiring and this has a constant ripple effect.

When you talk to business owners, and I have--I spent a lot of time with them as a small businessperson and a Senator now, meeting with business folks on a regular basis--over and over again they tell me put the money in the hands of the consumer. Then the consumers will spend that money and improve the economy because, as they spend money, we will hire more employees and buy more product. It goes on and on.

There is a difference between what we are trying to do in the sense of the value, who receives the benefit of a comprehensive budget proposal, a budget proposal that the majority in the Budget Committee has worked on for the last 2 or 3 months, at least, and before that trying to figure out the right approach. It is a balanced approach. It focuses, as I said, on dealing with budget reductions, accountability, ensuring that where there is waste we go after it aggressively. Where people are taking advantage of the system at the cost of the everyday person, we go after that. But we don't forget that we have to invest in the core issues of education, energy, and infrastructure, so we continue to grow this economy.

We must have a balanced approach in this process. I know on the other side they will argue over and over, first let's do spending and then we will deal with other things. You have to do it all together. I am telling you this as a person who ran a city for almost six years, ran businesses for many years: you cannot do it on one piece of the equation. It is a three-pronged attack. Some of the folks I know around here after years of service have gotten a little amnesia as to how it will occur. We can blame individuals, blame certain Presidents, certain majorities, but we are where we are and we have to deal with this.

It is not going to be fun. It will be uncomfortable. It will make us have to dig deep into what is right for the long-term health of this country and what we need to do to ensure America becomes what it used to be--a stronger country economically than it is today where we are in the lead when comes to innovation and we are in the lead when it comes to developing new technologies to lead this world in its economic growth.

We cannot do it in this process of I am only going to do one thing and one thing only. That does not work. It has to be a broad, sweeping approach.

We are not going to forget in this process that we are not going to throw people overboard who have helped build this country. When you think of our seniors, the generation that built our country to where it is, ensuring that people such as myself, the Presiding Officer, and others have an incredible opportunity, thinking about where they need to be, this budget plan keeps Social Security off the table.

We recognize there are issues and we have to deal with it in its sustainability and we recognize that, but it is not a driver. It has not contributed 1 penny to this deficit. We need to treat Social Security in a way that ensures sustainability in the long term and there are simple solutions to that that I know we can get to.

We also ensure that Medicare is taken care of, that benefits are not reduced. Also, as the chairman said so eloquently earlier, we have to ensure that our veterans are protected, those who serve now in Iraq and Afghanistan and all around the world, and served before. We owe a great deal to veterans. In some cases before I got here I know there was a lot of debate in the Veterans' Committee on which I sit. We have been working to be very sure they get the benefits they deserve. We need to make sure we fund them. When we send them to war and they become veterans after their service, we have an obligation, an obligation that should not be sliced and diced because we want to make political statements on the budget cutting process. They need to be protected.

As I said, this budget does good things. It is a fair approach. It may not be perfect in all senses. I can tell you there are things I don't like in it that are going to impact groups that are concerned about how we approach this, but we are all in this together. We need to make the approach the right way. But those who are so hardened now who say it is only going to be about spending cuts--which, let me make it very clear, I think the Budget Committee, the majority on the Budget Committee, is not afraid of dealing with the budget cuts. We have done that--$2 trillion of budget cuts. We have to get used to it when we are here in the Senate, not Bs or Ms, they are Ts, $2 trillion of budget cuts. We also balance it getting rid of loopholes and tax shelters in a fair and balanced way so everyone pays their fair share, but we also make sure we invest in the future.

If we are shortsighted around this place, we will pay for it next year and the year after that and the year after that. This is truly I think the right approach that goes after ensuring the middle class are not the people carrying the burden as they have been doing for the last several years--especially in the last 2 years, clearly--and that everyone participates. But we also make sure investment is done the right way.

The chairman laid out in great detail all that is in the framework. We think it is an important piece to lay down, that Democrats have been working on. We have been working every hour, every day. Even when we are back in our home States, trying to talk to constituents, we are talking about the budget. The Presiding Officer tells me stories. Every night he heads home and he meets with constituents to try to find out what the right approach is here. We bring all that information right here in this body. We did it in the majority in the Budget Committee. I know I put up a Web site request asking Alaskans what it is they want to cut. What do they want to save or have as revenues? Like good Alaskans, they were not bashful. They were very adamant about what they wanted and what they did not want and where we should cut and where we should not cut. I have taken all that in, and I have used that as part of my debate and discussion with the majority of the Budget Committee to figure out what the right approach is. I think this is the right approach. I think some might call it a big deal. In the Senate, this is the big deal. We are in the big place. This is where big deals happen. This is where it all has to happen. It is where we drive the economy in the sense of our certainty and our policies. If we cannot have a strong deficit reduction budget, we are not going to create the certainty the business community needs to invest, which will, in turn, employ more people and create a better economy for us here and obviously will have an impact around the world.

I want to say thank you for an opportunity to say a few words, again, commending the chairman, who was here earlier, for all of his work. It is a tough call. I will end on this comment, the story I told you about the librarians and the headline I had to have. That was in my first 6 months in office when I was mayor. Mr. President, 2\1/2\ years later, I won reelection with one of the largest margins in the city's history. So I would say this to anybody who is trying to figure out if they are going to win their primary, win their general election: Put that all aside. That is what I did when I was mayor. I had to make some tough calls. Did I know if I would win reelection? No. I didn't know. I knew I did the right thing because it was the city I lived in. It was the State I grew up in. It was important for us to make the right decision, which at the end of the day is usually the right political decision. That is what this body has to do. It is not fun because people face primaries. They face general elections. Some will win, some will lose. But if we are true public servants, truly it doesn't matter if we are sitting in this room or outside there; we are always public servants. We have to do what is right in this critical time for this country and in the global perspective. If we don't do the right deficit plan, it will ripple through this country and it will ripple through this world in the wrong direction.

Thank you for the opportunity. Thank you for the chance to say a few words, but also I implore my colleagues on the other side to think about today's opportunities for the generations in the future and not about today's elections. And I mean on both sides of the aisle. It is about the moment of what people do for this country.

I yield the floor.

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

Mr. President, last week, the House Speaker--Speaker Boehner--and President Obama and his administration were both calling for comprehensive tax reform as part of a large budget deal. Obviously, today, that seems to have lost some momentum, and I wanted to start this afternoon by saying tax reform is too important to abandon after 48 hours' worth of discussion.

To his credit, Chairman Conrad recognizes that, and certainly that is what I heard this weekend when, similar to the distinguished Presiding Officer, I was home and had the chance to travel across eastern Oregon, stopping in small towns. I think there is a keen awareness that it is not possible to cut our way out of this economic challenge; that we also have to grow. We have to grow. We have to make growth-oriented changes in tax law.

That is what the Conrad budget clearly offers a wide berth to do. In fact, I am of the view that progrowth tax reform, for example, is one of the few ways to generate revenue that both Democrats and Republicans will support. When you put people to work--and we have millions and millions of our fellow citizens out of work today--those are folks who can, in the private sector, start paying taxes again. That is what happened after the last major tax reform bill in 1986. In those 2 years--the 2 years after major tax reform--6.3 million new jobs were created in the private sector. We have an opportunity to do that again, and the Conrad budget offers a wide berth in which to do it.

So you generate revenue--revenue that both Democrats and Republicans can support--and create jobs in the private sector the way Democrats and Republicans have said they want to do. Certainly, it is pretty clear, as of today, there isn't anything as promising in the economic toolshed for long-term growth as tax reform. The fact is, a lot of other alternatives have been tried. Certainly, the Federal Reserve has done its share. We have the Recovery Act. There have been a variety of steps that have been taken.

My colleague from Oregon, in my view, has done yeomen's work on the effort to make sure homeowners--which is an enormous economic problem-- have additional time to work through the very challenging situations millions are facing in the housing market. So we have thrown a lot of economic tools at this huge challenge, but we obviously have a lot more to do. I don't see any more promising path--no more promising path-- than tax reform for the long-term economic growth this country needs. The Conrad budget offers a wide berth in order to tap that opportunity.

The fact is, we understand what needs to be done in terms of tax reform. The fundamental language--the principles of that kind of reform--are laid out in the Conrad budget. We ought to go in there, clean out a score of these special interest tax loopholes, use that money to hold down rates for everybody, and keep progressivity. Those are the three key principles.

A number of my colleagues have spoken. I know my friend from Arizona, with whom I serve on the Finance Committee, Senator Kyl, in a very fine op-ed piece he wrote in the Wall Street Journal not too long ago, talked about tax reform built around exactly those principles--cleaning out the loopholes, holding down the rates, and, to his credit, Senator Kyl specifically talked about the need to ensure progressivity in the Tax Code.

Senator Coats and I have introduced legislation that picks up on those key principles of the 1986 tax reform legislation. In fact, we modernize the code in line with that kind of thinking--certainly important to do because there have been thousands and thousands of tax changes made since 1986. So it is certainly time to go in there and trim out all those unnecessary special interest tax breaks, and we can do it in a way that will create jobs.

For example, right now, in the Federal Tax Code, there are actually incentives to export jobs out of the United States. Say that to yourself--export jobs out of the United States. What we want to do is export goods out of the United States. In rural Oregon this weekend, the farmers were telling me about how they want to get their agricultural products into Asia and other markets around the world. So we can grow things here, make things here, add value to them here and ship them somewhere. That is what we would like to be exporting. Instead, under the tax law, there is actually an incentive to export jobs.

When you set up shop overseas and you are doing business overseas, you get to defer your American taxes. So what Senator Coats and I seek to do--and this is something I think is even more important today than it was a quarter century ago because of the global economic challenge-- is to take that incentive that now goes for exporting jobs out of the United States and we would use those very same dollars to dramatically slash rates for companies that offer what I call red, white, and blue jobs--jobs in this country. The Conrad budget offers a very substantial berth for taking that kind of approach in tax reform, where he specifically calls for lowering tax rates for American businesses. I particularly wish to see that done because of the message I heard this last weekend, where folks specifically, without my even mentioning tax reform, talked about the need to keep jobs here at home.

We are going to, over the next few days, see, of course, the negotiations with the President and the Congressional leadership go forward. Chairman Conrad and other members of the Budget Committee will be out discussing these issues as well. But I just hope, No. 1, the cause of tax reform is seen as far too important to give up on after only a 48-hour flurry of interest and everybody then saying: Well, I guess we will have to do it another time. The time to make sure it is done is now.

Senator Coats and I said earlier this month that what we ought to do--recognizing that you can't write a complete tax reform bill between now and August 2--is to get a commitment, lock in a strategy, to do comprehensive tax reform in the fall and early next year. That alone would send, in my view, a positive and bipartisan message to the financial markets of this country that there are going to be some changes. So what we need is a roadmap for economic growth.

There are other features of the Conrad budget I think make a lot of sense. I am particularly pleased about the opportunities for investment in infrastructure--roads and bridges. Certainly, that would provide an opportunity for something that has worked in the past--the Build America Bonds program, which has been so successful in our State. I think Senator Kerry's ideas for an infrastructure bank are excellent ones. I support those as well. The best thing about that approach is we know we have to find a way in our consumer-driven society to start stimulating demand--demand for goods and services.

There are few economic multipliers in our country for the short term, such as transportation. So the Conrad budget that puts a premium on those kinds of approaches in the short-term makes a lot of sense for me as we look to the longer term, which I would define as the opportunity to set this country on a progrowth economic strategy, with tax reform in the forefront in a way that helps our economy to be both fairer and more efficient. We will also see a lot of other benefits.

It was brought up to me over the weekend at home, in eastern Oregon, matters we have talked about before, such as the alternative minimum tax. Talk about something that just defies common sense: the idea that the alternative minimum tax would force middle-class people, people making $60,000, $70,000, $80,000 a year, to fill out their taxes twice using two separate systems just defies any semblance of sanity.

So referring, again, to what happened this weekend, are we really going to tell American taxpayers getting clobbered by the alternative minimum tax that after 2 days' worth of discussion about tax reform we are just going to walk away and pursue some other topic? That doesn't make any sense to me. Certainly, Chairman Conrad's budget, which does, as I have indicated, provide a broad berth for tax reform, makes it clear that he shares our view.

So, finally, if we have in front of us, as we will with progrowth tax reform, the opportunity to create jobs in the private sector, generate revenue in a way that Democrats and Republicans can agree on, make ourselves more competitive in tough global markets, and do it in a way that brings the political parties together, I think it is clear that has the fundamentals of what can take this country's economy in a better and healthier direction.

I want it understood that in spite of what happened this weekend, in spite of the sense that maybe tax reform is going to be put off yet again, I am not going to give up for a minute. We are going to have another hearing that is going to be very important this week--Chairman Baucus, Chairman Camp, the Finance Committee, the Ways and Means Committee getting together to talk about tax reform. So we know what needs to be done. Now it is a question of having the political will to go forward.

I simply want to say to the President, and I think I can say to the Senate today--Senator Coats and I--despite the idea that this is too hard to do, that it can't be done now, let's put it off for another time, we are going to come back to this floor and say again and again: It has been done. We need to do it now when there are so few other tools in the economic toolshed. It would be wrong to walk away after this brief flurry of interest in something that is so fundamental to the economic well-being of millions of our people.

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

Mr. President, I commend the Budget Committee chairman on his contribution to this debate and his contribution to our country. I enjoy listening to his remarks and appreciate many of the ideas he has offered today.

I rise to talk about an anniversary today--no, it is not my anniversary or his but the anniversary of Dodd-Frank, which passed a year ago today.

This morning at a press conference, Barney Frank, then-chairman of the House Banking Committee and the Frank portion of the Dodd-Frank legislation, gave a speech before the National Press Club. In it he made some comments that are very important, and I wanted to share my agreement and support for some of the things Chairman Frank said.

I did not vote for Dodd-Frank when it passed 1 year ago, but I did, along with Senator Hagan and Senator Landrieu, offer an amendment which was adopted by the Senate and ultimately agreed to by the House in the conference committee. It was an amendment known as QRM, qualifying residential mortgage, an amendment to carve out an exemption from risk retention for a well-underwritten mortgage loan.

The Dodd-Frank bill, as many in this room will remember, originally called for a total 5-percent risk retention on every residential mortgage made, which would have eliminated many people from making any residential mortgages at all. Ranking Member Frank today in his comments said: Well, we had a 100-risk retention prior to 1994.

He is right. That is when savings and loans made loans, and that is when the Federal Government insured the others, and savings and loans had preferential interest rate treatment so they could make preferential payments to people to save in their institution versus the bank. But the Federal Government took away the one-quarter percent differential that savings and loans had and the banks became competitive with savings and loans for short-term and long-term deposits of savings and all the savings money flowed to the banks that offered other products. So savings and loans went out of business. When they did, there was no residential mortgage money, at least no conventional money, available in America.

So what happened? The securitized market began. Freddie and Fannie began to play a significant role in providing conventional residential mortgage money. Until the collapse, which began in 2006 and culminated in 2009 and we still are suffering from today--until that collapse, securitization was a very reasonable and safe way of raising capital for mortgages.

What happened in the mortgage collapse was not a failure of equity or skin in the game by the borrower; it was the collapse of underwriting. Mortgage lenders got into loosey-goosey underwriting--subprime credit. They made loans to people who were higher risk in order to price it at a higher rate, and they blurred qualifying requirements to where, all of a sudden, if you walked in and fogged up a mirror with your breath, you could probably get a mortgage loan and they could probably securitize it.

Dodd-Frank was designed to see to it that didn't happen again, and I commend them for it. But as government often does, sometimes it goes too far when the pendulum swings back the other way.

Thus is the dilemma we are in today, as the rule being proposed by the FDIC, the Federal Reserve, Comptroller of the Currency on the QRM rule is going to require, in addition to quality underwriting, a minimum 20-percent downpayment.

For years in this country we have had 90 percent and 95 percent conventional financing or, in terms of FHA, 3.5 percent downpayment and VA none at all. There have been various varieties of downpayments that have been allowed based on the loan and its insurance. But with this rule of requiring risk retention on any loan with a downpayment of less than 20 percent, except for an FHA or VA loan, it is going to literally destroy what is left of the residential housing market because it will extract what is probably 40 to 45, maybe 50 percent, of the current market today.

Senator Landrieu, Senator Hagan, and myself in QRM proposed that people have a qualifying ratio of debt to income that is sufficient to amortize the debt, a third-party verification they have a job, a credit score that indicates they are willing to pay their payments, an appraisal that indicates the house is worth what they are paying for, and a downpayment with mortgage insurance required if the downpayment was less than 20 percent.

Today, I wish to quote Ranking Member Frank. When talking about risk retention, he said: I am troubled because there is an assault now on risk retention--Barney Frank--adding that even though he believes the 20 percent requirement in the QRM rule being circulated is too high. When asked further what would be a good downpayment, he said at least 4 or 5, something above FHA.

I wish to commend the ranking member because he is precisely right. Although he in his original intent with Dodd-Frank did not want to bifurcate residential qualifying mortgages by some having risk retention and some not, he recognized the importance of doing some of that bifurcation and having some exception to risk retention. They would have realized that anyway, if you recognize they exempted Freddie Mac, Fannie Mae, and FHA from the requirements of Dodd-Frank and left them solely on the conventional market.

So I wish to thank Congressman Frank today for his comments as they

related to QRM and his identifying the downpayment requirement currently being circulated is entirely too high. It is entirely too high, and it is very important that we get the final rule, which will be published on August 1, to have a reasonable downpayment of 5 percent or more, rather than 20 percent or more. Five percent or more will ensure there is skin in the game; and with the other qualifying and underwriting provisions in QRM, it will ensure that quality residential mortgages are being made.

I am not one to offer advice often to the President. He is the President. He can do as he wishes. But today in Politico there is an article about the President is now returning to revisit the residential housing market because he understands employment is not coming back until housing comes back; he understands the American dream is, for some people, now the American nightmare; and he understands what has been done so far has not been working.

I wish to suggest to the President that if he thinks what is happening now is a nightmare, you just wait until this QRM rule that is being circulated now actually goes into effect. Without it being changed and a continued requirement of a 20-percent downpayment, you will have a further lack of demand in the housing market, which already is almost at least anemic, if not feeble, because most Americans who want to buy a home can afford 5 percent or maybe 10 percent down, but they can't afford 20, and that is middle America. If you pull them out of what is already an anemic housing market, you would have no housing market at all.

So as this Dodd-Frank rule is being circulated in the next 2\1/2\ to 3 weeks before it is finalized, I hope we can all keep up the drumbeat for the regulators to be reasonable in their approach--understand risk retention is important but also understand home ownership is important and understand we had a collapse that was not downpayment related. We had a collapse that was underwriting related.

So if you have strong underwriting and minimal skin in the game of at least 5 percent, you have a qualified residential mortgage that does not have to have risk retention; therefore, you will have enough capital raised in the mortgage markets to fund a housing demand which hopefully is going to continue to grow.

In the absence of securitization, in the absence of an exemption of risk retention for a qualified residential mortgage, there will be no housing market in the United States of America.

FHA is already under so much stress and duress, it is awful and it is frightful. The Veterans' Administration is a privileged loan for those who have served and made the ultimate sacrifice for our country, and they deserve it. Freddie and Fannie are exempted because we have them in conservatorship. But they are not going to be a source of money for long. Something will have to replace them, a new entity, probably something with securitization. But if the QRM rule being circulated now does, in fact, go into place as it is written, with a minimum 20- percent downpayment, it will be the last nail in the coffin of the American housing market. The unintended consequence of reaching too far to react to the terrible crisis which we had will put the death knell of the housing market squarely on the shoulders of this Congress, this administration, and these regulators who are currently carrying out those rules.

I wish to commend Ranking Member Frank on his comments today, his recognition that the QRM rule being circulated asks too much, recognizing that a 5-percent or greater downpayment is a reasonable approach and recognizing that underwriting is the important key to see to it that we have a housing market.

I commend the gentleman from Massachusetts. I thank him for adding that comment today to the National Press Club. I hope the regulators, the FDIC, the Federal Reserve, the Comptroller of the Currency, and the Treasury heard it too. If they didn't hear it and they remain silent and continue with 20 percent, they will be doing exactly the opposite of what the President of the United States stated he wants to do; that is, bring the housing market back in America.

I yield back.