Floor Statements

Mr. President, I would like to announce for the information of the Senate and the public that the Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs has scheduled a hearing entitled, ``Excessive Speculation and Compliance with the Dodd-Frank Act.'' The Subcommittee plans to hold a hearing on speculation in the commodities markets and implementation of the Dodd-Frank Act's provisions on speculative position limits for futures, options, and swap contracts for oil and other commodities. Hearing witnesses will include a panel of experts and the Chairman of the Commodity Futures Trading Commission.

The Subcommittee hearing has been scheduled for Thursday, October 6, 2011, at 9:30 a.m., in room 342 of the Dirksen Senate Office Building. For further information, please contact Elise Bean of the Permanent Subcommittee on Investigations at (202) 224-9505.

Mr. President, over the last week or so I have outlined, here and in a letter to the Joint Select Committee on Deficit Reduction, a seven-part plan to reduce the deficit in ways that do not overburden American working families or damage economic growth. In my letter and in three previous speeches on the Senate floor, I have pointed out that revenues, and not just spending cuts, are necessary if we are to achieve significant deficit reduction. And I have discussed four proposals for restoring revenues: combating offshore tax havens; ending the corporate stock option loophole; and ending loopholes for hedge fund managers and derivatives traders.

Today I want to discuss three additional changes to our tax system that will make it more efficient and more equitable. We should make two tax rate changes: ending the unsustainable Bush-era tax cuts for the wealthiest Americans, and restoring capital gains tax rates to something approaching the rates in place under President Reagan. Also, we should replace the IRS's antiquated tax lien system. These proposals, combined with the other points of my plan, could reduce the deficit on the order of $1 trillion over the next 10 years.

Now, some of my colleagues may balk at the notion of reversing years of tax breaks for the wealthiest Americans. But I believe if we take off our ideological blinders, if we look at facts--hard, stubborn facts--the need for these reforms is clear.

First, we should allow Bush-era tax cuts to end for those making more than $250,000. The case for this change is straightforward: It would restore a measure of fairness to the tax code that has been sadly lacking for more than a decade, and it would reduce the deficit by hundreds of billions of dollars.

Supporters of the tax cuts in 2001 and 2003 made a number of promises. President Bush said his cuts ``will bring real and immediate benefits to middle-income Americans.'' And yet in the decade since they began, the incomes of middle-class Americans have stagnated. According to the U.S. Census Bureau, the typical American household's income, when adjusted for inflation, actually fell more than 8 percent from 2001 to 2010. President Bush said his tax cuts would increase the pace of job creation. And yet during the Bush years, jobs grew at roughly one-third the rate that we enjoyed during the Clinton administration. President Bush said ``we can proceed with tax relief without fear of budget deficits, even if the economy softens.'' And yet just those tax cuts going to the wealthiest 1 percent of Americans have added hundreds of billions of dollars to the deficit since 2001. So, these tax cuts have failed to deliver the promised benefits, and they have driven us deeper and deeper into debt. Ending them will bring down the deficit; President Obama's proposal to end the cuts for high-income earners would reduce the deficit by an estimated $866 billion over 10 years.

What these tax cuts did deliver is a striking and continuing rise in income inequality. It's no coincidence that as we passed a series of tax cuts whose benefits overwhelmingly flow to the wealthiest Americans, those wealthy individuals have seen their fortunes rise. A few decades ago, the wealthiest 1 percent of Americans took home 10 percent of all income. Today, they get 24 percent of all income. As those at the top have prospered greatly, middle-class wages have stagnated--again, down more than 8 percent, for the median American household, since the Bush tax cuts took effect.

A second proposal also would bring down the deficit and bring more fairness to the tax code: restoring capital gains tax rates closer to those in place during the Reagan administration. Capital gains are income from the increase in value of an asset, such as a stock. Today, thanks to the Bush-era tax cuts, the top rate on capital gains is 15 percent. That's substantially lower than the 28 percent rate included

in President Reagan's Tax Reform Act of 1986.

The theory in slashing capital gains tax rates was that lower rates would encourage investment, job creation and economic growth. But as has been the case with slashing ordinary income tax rates for the wealthy, cutting capital gains taxes simply has not delivered what supporters promised. Given the stagnation in middle-class living standards that we have seen since the 1980s, it is difficult to argue to middle-class Americans that reducing capital gains rates made them better off.

Instead, this is another benefit that flows overwhelmingly to the wealthiest among us. According to the Tax Policy Center, more than 75 percent of the benefit from lower capital gains taxes goes to those with incomes over $1 million a year, and 94 percent of the benefit to those above $200,000.

This tax break for the most fortunate of our citizens also adds tens of billions of dollars each year to the deficit. The Congressional Budget Office earlier this year estimated that raising the capital gains rate by just 2 percentage points would reduce the deficit by about $50 billion over 10 years. Raising the top rate closer to Reagan- era levels would bring far more deficit reduction.

Those who fight to preserve these high-income tax cuts call attempts to end them ``class warfare.'' Ending these tax breaks won't start a class war. It will help end one--a war that, for more than a decade, has taken a devastating and immediate toll on the middle class, and created huge new deficits that damage their future prospects as well.

The simple fact is that if we are to ensure that the burden of deficit reduction falls equitably, and that all our citizens are asked to contribute toward this goal, we must address these upper income tax cuts that have helped balloon the deficit. Deficit reduction will require spending cuts, and some of those cuts will fall hard on working families. But we can't ask them to carry the entire burden. That would be contrary to common sense, because spending cuts alone cannot achieve real deficit reduction. And it would be contrary to any sense of fairness. We all have to contribute.

Our constituents are speaking, and speaking loudly, on this topic. And they are speaking eloquently. Let me tell you about an email I received from a constituent a few weeks ago about our deficit.

This Michigan resident and her husband consider themselves upper middle class--though she wrote that ``many would call us wealthy.'' She wrote to me that we need to cut spending, and to compromise to do it. ``I will like some cuts and hate others and that is OK with me!'' she wrote.

But she also wrote: ``I also strongly urge you to consider passing what many would call tax hikes. . . . We are willing to pay a bit more to help our country and safeguard our children's futures.'' Upper income Americans, she wrote, ``aren't paying taxes at a fair and just rate. Fix this.''

And we should fix it. This constituent of mine said she was part of a ``silent majority'' in favor of increasing revenue. I am not sure how silent they are, but she is certainly part of a majority. In a recent Washington Post-ABC News poll, 72 percent of Americans--and 54 percent of Republicans--said they favored increasing taxes on those who make more than $250,000 a year as part of our deficit reduction strategy. Americans are strongly in favor of a balanced approach to deficit reduction that protects working families. They are asking us to fight for the middle class, and it is time we did so.

Let me discuss briefly the tax lien proposal. Tax liens are a basic tool to collect unpaid taxes. Today, Federal law requires liens to be filed on paper in more than 4,000 locations around the country, determined by the location of the lien. The IRS maintains a service center that does nothing but monitor dozens of varying local requirements for lien filings, track filings, and release liens once they are paid.

I have introduced legislation, S. 1390, along with Senator Begich, to replace this antiquated system with an electronic federal tax lien registry available to the public on the Internet at no cost. The IRS estimates that this change would not only save millions of dollars in administrative costs, but also enable the IRS to release liens more quickly once they have been paid and free up employees and resources for other work. Equally important, a public electronic registry could help encourage those who owe taxes to settle their bills and take enormous pressure off taxpayers who have paid what they owe.

Let me come back to where I started last week. Congress faces a difficult task in the weeks ahead. We must agree to $1.2 trillion or more in deficit reduction over the next decade. Failure to agree on a plan means automatic budget cuts through the sequestration process-- including greatly damaging cuts to defense and other important Federal programs.

In my letter to the Joint Select Committee and here on the floor, I have outlined ways to avoid that outcome, proposing commonsense changes that bring equity to our Tax Code and restore lost revenue. If we reject that course, it almost certainly means damaging cuts in important programs--programs that keep our nation safe, that keep our faith with senior citizens and veterans, and that prepare our children for the future. Rejecting that course almost certainly means a failure to significantly reduce the deficit, because spending cuts alone are not enough to accomplish the deficit reduction we need.

The choice is ours. I hope we will not allow ideology to blind us to the reality of our budget situation, to the needs of middle-class families, or to the strong and consistent message from Americans who are demanding a balanced approach to reducing the deficit.

Madam President, I will vote in support of the amendment to renew and extend both the General System of Preferences and trade adjustment assistance. It is the correct approach for Congress to extend trade adjustment assistance, TAA, including an extension of the 2009 bipartisan reforms, before considering the pending trade agreements with South Korea, Colombia, and Panama.

TAA is not a substitute for fighting to keep jobs here in the United States. However, given the realities of a global economy we must provide a safety net so workers who lose their jobs as a result of expanded trade and globalization are able to transition to new jobs through retraining and that they have access to affordable health care coverage.

The 2002 TAA law covered only manufacturing workers who lost jobs as a result of imports or if those jobs shifted to FTA partner countries. In 2009, as part of the Recovery Act, the TAA Program was expanded through bipartisan efforts to increase training funding. It also expanded eligibility to include the service sector and farmers and to cover workers whose jobs were been moved anywhere offshore, not just to a FTA partner country. Finally, it expanded access to TAA's health coverage tax credit, which helps certified workers purchase private health insurance.

Those 2009 expansions expired on February 13, 2011 and are overdue for reauthorization. The bill the Senate is considering today is a bipartisan agreement to restore most of the 2009 provisions through December 31, 2013. It will also apply the benefits retroactively from February 12, 2011.

There is clearly a need for an expanded TAA Program. Since the 2009 reforms, almost 450,000 workers have been certified for TAA assistance: over 40 percent of whom were certified

under the expanded provisions and coming from every state in the union. As a leading manufacturing state and a significant contributor to global trade, Michigan has relied on the TAA Program to retrain workers for new careers and certified nearly 50,000 workers since the 2009 reforms.

Michigan also houses the Great Lakes Trade Adjustment Assistance Center. The Great Lakes TAA Center helps hundreds of firms in Michigan, Indiana and Ohio compete in the global economy. The TAA for firms program assists mostly small and medium-sized companies that experience loss of jobs and sales because of foreign imports. TAA for firms has helped to retain or create tens of thousands of jobs by saving companies and jobs imperiled by import competition. This TAA extension includes $16 million for this important program--TAA for firms.

Madam President, our Nation's veterans made enormous sacrifices in defense of our Nation through their military service. One of the many ways we recognize their service is through essential government programs that form the foundation of our Nation's promise to care for veterans. These programs are made stronger by the valuable contributions of volunteers. Volunteers who freely offer their time to improve the quality of life of American veterans provide a personal reminder that a grateful nation will always remember and value their sacrifice. This spirit of generosity and compassion is embodied at the Grand Rapids Home for Veterans in west Michigan. A banquet to honor the positive impact these volunteers have had over the past year will take place on September 27, 2011.

In operation since 1886, the Grand Rapids Home for Veterans is a 758- bed home for veterans in need of long-term care. Residents are cared for by a professional staff of doctors, nurses and social workers, all of whom tirelessly work to fulfill the home's mission of providing quality interdisciplinary care and helping residents ``achieve their highest potential of independence, self worth, wellness and dignity.'' Supporting the professional staff in these efforts is a capable and compassionate army of volunteers. In 2010 alone, almost 900 different volunteers served at the home, with approximately 200 volunteers putting in at least 100 hours of service. Some volunteers are veterans themselves; some are family members of current or past residents; others have no personal connection to the home other than the desire to help American heroes.

Volunteers provide a host of services for the veterans and hold events that improve the residents' quality of life. Perhaps the most essential service volunteers provide is something that most people take for granted: visiting with veterans individually, offering human companionship. For veterans in homes, especially the elderly or disabled, having someone read or play cards with them, or simply have a conversation with them can provide great comfort. In addition to providing a simple yet powerful human connection, volunteers ensure that veterans at the home live active lives by helping to run the home's woodshop, bowling alley and library, as well as escorting residents to painting and ceramics classes. Residents also enjoy the animal therapy

program where volunteers bring in their own pet dogs and cats.

Last year, volunteers organized a number of special events, including a Super Bowl Party, a Las Vegas Day, three fishing tournaments, a carnival, a fall harvest festival, and a Christmas celebration called the Veterans Star Christmas Project. As part of the project, volunteers distributed more than 700 donated gifts to residents on Christmas Day. According to one resident, the celebration was especially meaningful because ``this kind of brightens our year, to know that there are people thinking about you, that care about you.'' Surely, that kind of reaction is all the reward volunteers want for their efforts. Every day, these generous and dedicated men and women show the residents of the Grand Rapids Home for Veterans that the American people have not forgotten them or their service to our Nation.

It is in this spirit of generosity that I know my colleagues will join me in recognizing and thanking all those who volunteered at the Grand Rapids Home for Veterans. The positive impact they have had on the lives of Michigan veterans is tremendous, and I extend my deepest appreciation for their service.

Mr. President, for the Committee on Armed Services I report favorably the following nomination lists which were printed in the Records on the dates indicated, and ask unanimous consent, to save the expense of reprinting on the Executive Calendar that these nominations lie at the Secretary's desk for the information of Senators.

Mr. President, are we in morning business?

Mr. President, I wish today to discuss two more ways to reduce the budget deficit by eliminating tax loopholes and special tax breaks and restoring fairness to the Tax Code while protecting essential programs for American families.

Last week I sent a letter to members of the Joint Select Committee on Deficit Reduction outlining a 7-point plan that could lower the deficit by $1 trillion over 10 years through some restored revenues. I spoke last week on the floor about the necessity of addressing revenue, not just spending cuts, to achieve real deficit reduction. I discussed in some detail two of the proposals in my plan, which are combating offshore tax haven abuse and eliminating the tax loophole that forces taxpayers to subsidize stock option compensation for corporate executives.

Since I spoke last week, President Obama has outlined his ideas for deficit reduction. Significantly, the President has embraced the need to restore significant revenues to reduce the deficit. I believe the President's proposals are an important step toward serious deficit reduction. Indeed, some of his ideas parallel the proposals which I have made to the joint select committee.

Today I wish to outline and describe two more of my proposals, each dealing with a tax loophole that benefits Wall Street at the expense of working families and our fiscal well-being. One would end the carried interest loophole that allows hedge fund managers to pay the lower capital gains tax rate on their pay for managing investments. The second would end the blended rate loophole that gives preferential status

to income from derivatives trading even in the case of derivatives held for seconds or minutes. That preferred status is given over the kinds of long-term investments that are more important in helping put capital to work, growing the economy, and creating jobs.

Each of these two loopholes amounts to a subsidy. Working American families who pay their taxes every year end up carrying an extra burden because these provisions allowed Wall Street to pay a lower tax rate and the rate applied to average workers. I cannot see how anybody can explain to working Americans that they must bear a greater tax burden so hedge fund managers get a tax break on pay that often amounts to millions of dollars a year or so that speculative traders can pay a lower tax rate on so-called investments they might hold for just a few seconds.

Let's first talk about the carried interest loophole. Hedge fund managers generally make their money by charging their clients two fees. First, the manager gets a management fee, typically 2 percent of the assets. Second, the manager typically gets 20 percent of the profits from those investments above a certain level. That 20 percent is known as carried interest and, under current law, hedge fund managers can treat that income as a long-term capital gain taxed at a maximum rate of 15 percent and not at the higher ordinary income rates.

What is the blended rate loophole? Since 1981, those who trade in some financial products such as futures contracts and options have enjoyed a specially created tax loophole that allows them to pay a lower rate than, for example, traders who buy and sell stock. No matter how long a speculator holds on to a futures or options contract--again, even if it is a few seconds--their gains and losses are taxed at a lower so-called blended rate; that is, part at the capital gains rate and part as ordinary income. So a dealer who buys a stock and sells it within a year must pay taxes at the ordinary income rate, while that same dealer who buys an option and sells it 30 seconds later gets to pay the lower capital gains rate on most of that income.

These special tax breaks impose an unfair burden on American taxpayers, and they contribute significantly to the budget deficit. Based on estimates from the Joint Committee on Taxation, eliminating the carried interest loophole could reduce the deficit by $20 billion or more over 10 years. The Joint Committee has made no estimates of the cost to the Treasury of the blended rate loophole, but it is reasonable to assume that ending it would reduce the deficit by billions of dollars.

Beyond their fiscal impact, these proposals would help restore fairness to the Tax Code. These tax subsidies give preference to activities that do not contribute much to economic growth or job creation the way other activities that don't enjoy the same subsidies do. Instead, they subsidize hedge fund managers and derivative dealers.

Take the carried interest loophole again for a moment. We tax income that investors receive from hedge funds and other investments at the lower capital gains rate because, in theory at least, those investments help put capital to work, creating jobs and growing the economy. But the hedge fund manager isn't putting his own capital at risk; he is just doing his job, the same as his employees or the janitor who cleans his office at night. This tax break doesn't reward risk taking or job creation; it rewards what is already an extremely lucrative profession. According to a survey by a magazine covering the hedge fund industry, the top 10 hedge fund managers last year each made at least $440 million. Six made more than $1 billion in 1 year. It is hard to imagine that we need to offer a tax break to encourage people to become hedge fund managers.

Similarly, the derivatives blended-rate loophole doesn't just add to the deficit, it is plainly unfair. It is unfair not only to working Americans who have to pay higher tax rates than these derivative traders, it is also unfair to investors who risk their capital and long-term stock and other investments that are more important to job creation but don't enjoy that same tax break. This loophole gives preferential treatment to short-term, speculative trades over long- term, patient capital, and that is exactly the wrong message to send.

We should end these Wall Street loopholes. I have encouraged the members of the joint select committee to end them. We should end them because they add to the deficit, because they subsidize activity that does not need a subsidy and that does not add much to economic growth, and because they are unfair to the millions of American taxpayers who do not enjoy the same tax breaks and have to pay more in taxes to make up for these unfair subsidies. Eliminating them would be good for our economy. It would enable us to reduce the deficit by billions of dollars a year. It would help us fund important programs that protect seniors and children, programs that make our Nation stronger.

So I hope the joint select committee will look hard at these and other proposals in my plan as they carry out their difficult task. I will be back again in the next few days to discuss three more ideas that can reduce the deficit, protect the middle class, and avoid Draconian cuts in vital programs.

I thank the Acting President pro tempore and yield the floor.

I suggest the absence of a quorum.

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

Mr. President, yesterday I spoke on the floor about the need to restore revenue as part of our deficit reduction efforts. I explained that I have sent a letter to the members of the Joint Select Committee, now crafting a deficit reduction plan, with seven ideas on how to address our revenue shortfall in ways that reduce the deficit, protect economic growth, and ensure that the sacrifices which are necessary to achieve our budget goals are shared broadly among the American people. Together, these proposals would reduce deficits on the order of $1 trillion over 10 years.

Today I want to go into greater detail on two of those ideas to address loopholes and tax breaks that are as damaging to our budget as they are unfair to working families. One proposal would stop corporations and individuals from using offshore tax gimmicks to dodge the taxes they owe. The other proposal would close a loophole that gives corporations a huge tax break when they award stock options to their executives, effectively using the hard-earned tax dollars of American families to subsidize the paychecks of CEOs and other top executives.

Let's begin with the goal here, deficit reduction. Budget experts tell us we cannot close our budget gap with spending cuts alone. Revenue must play a role. These two proposals can help. The Permanent Subcommittee on Investigations, which I chair, has estimated that the use of offshore tax havens by wealthy U.S. taxpayers costs our Treasury around $100 billion a year. I believe the legislation to address that issue can recover a significant portion of that loss. The Joint Committee on Taxation estimated that a previous version of the legislation would recover nearly $30 billion over 10 years, but new provisions that we have included should raise that figure significantly. Closing the stock option loophole would save $25 billion over 10 years, according to the Joint Committee on Taxation. This revenue would help the Joint Committee in its difficult task of achieving at least $1.2 trillion in deficit reduction and it would help restore fairness to the Tax Code without penalizing activities that contribute to economic growth or raising taxes on middle-income Americans.

Our work on the Permanent Subcommittee on Investigations has, for more than a decade, exposed the ugly truths of tax haven abuse. A single building in the Cayman Islands called the Ugland House serves as the mail drop for nearly 19,000 companies incorporated there for tax- dodging purposes. Of the 100 largest publicly traded corporations in America, 83 have subsidiaries in tax havens. Hedge funds, whose employees live right here in the United States, pretend to be based in tax havens to dodge U.S. taxes. An army of lawyers, bankers, and accountants helps U.S. taxpayers use offshore abuses to avoid taxes. All of this shifts the tax burden of these tax dodgers onto the backs of honest taxpayers.

Yesterday, the Internal Revenue Service announced that they have recently completed an offshore program where they give a degree of amnesty to people who are willing to come in and pay their taxes. Thirty thousand such people have come in since 2009, and that is the tip of the iceberg, as our Permanent Subcommittee on Investigations disclosed.

How do we combat this? Several colleagues and I have introduced legislation called the ``Stop Tax Haven Abuse Act,'' S. 1346. Our bill will authorize the Treasury Secretary to take special measures against foreign jurisdictions or foreign financial institutions that impede U.S. tax enforcement by prohibiting U.S. financial institutions from doing business with those foreign financial institutions in uncooperative jurisdictions. It will help the IRS identify ownership and control of offshore entities. It would stop corporations whose management and control are located primarily in the United States from claiming foreign status to dodge taxes. It would prevent businesses from dodging taxes by claiming that assets physically held in the United States should be treated as offshore assets for tax purposes. And it would treat derivatives payments sent from the United States to offshore entities as taxable income. Enacting this legislation and ending these offshore abuses would penalize tax dodging, not legitimate economic activity, and it will help to bring down the deficit.

Similarly, closing the stock option loophole would not penalize productive economic activity. It would, instead, end an unaffordable Federal subsidy for corporate executive pay. Today, under tax rules for reporting stock options, corporations report stock option expenses on their books when those stock options are granted, but they use another method to claim a different--and

usually a much higher--expense on their tax returns when the stock options are exercised. The result is that corporations can usually claim far larger tax deductions for stock options pay on their tax returns than the actual expense they show on their books for those same options. They get a much bigger tax deduction for exactly the same tax option expense as they show on their books. Stock options are the only type of compensation for which the Tax Code allows a corporation to deduct as an expense for tax purposes more than what they show on their books for that same expense. IRS data shows that from 2005 to 2009, this loophole allowed companies to claim between $11 billion and $52 billion each year in excess tax deductions.

Legislation I have introduced with Senator Sherrod Brown and Senator McCaskill would end these excess deductions by requiring corporate stock option tax deductions to equal the stock option expense shown on the corporate books for those same options. It would not affect the taxes paid by individuals who receive the stock options--their taxes would not be affected, as now they pay for the actual sales price minus their cost. It would not affect so-called incentive stock options, often used by startup companies. It would make stock option pay subject to the same $1 million cap on corporate tax deductions that applies to other forms of executive pay. These proposals alone will put a major dent in the deficit. They would ensure that multinational corporations and wealthy individuals pay the taxes they owe, just like working Americans. If we are to seriously reduce the deficit, these kinds of tax reforms and the resulting added tax revenues must be part of the discussion. I urge my colleagues, especially those on the Joint Select Committee, to embrace these ideas.

Again, I sent a letter yesterday to the members of the joint committee, all the members, laying out these seven ideas which together will raise over $1 trillion in 10 years.

I am going to return to the floor in the days ahead to discuss additional reforms, with the resulting revenues, that were set out in my letter to the Joint Select Committee. These changes, these reforms, this loophole closing, will help to close the gap between spending and revenues that all of us I know want to close.

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

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

Madam President, I understand that a couple of our colleagues are on their way, and I will yield to them if they get here as expected.

In the meantime, I wish to share some thoughts with the Senate about the very complex and difficult duty we all now face, which is to agree to legislation that will reduce the deficit by at least $1.2 billion over the next decade. And, if we fail to do that, by the end of the year, huge automatic budgets in vital national programs, including in security, will take effect to meet the deficit reduction goal. Those automatic cuts would take an unacceptable toll on vital programs. I believe every Member of Congress must do their best to avoid that outcome, and that begins with the 12 members of the Joint Select Committee who have been given the assignment of crafting a plan for us to consider.

Despite the difficulty, the task is achievable. We can reach our deficit reduction targets and help ensure fiscal stability while avoiding not only the damaging automatic cuts but also avoiding devastating cuts to defense, health, education, and other programs vital to America and to its families. Achieving this goal will require sacrifices. Everyone is going to have to contribute. But if all of us, every American, will make the sacrifices necessary, we can get this done.

How can we do it? Well, we could pretend we can resolve this problem by ignoring why we got here to try to balance the budget by simply cutting more spending or we can take a realistic look at both spending and revenues. We need to take a realistic look at both spending and revenue. A little historical perspective might be helpful.

Federal revenues today are at the lowest share of gross domestic product in generations, just 14.9 percent. For the past 60 years, that number has averaged about 18 percent, and during that period we have balanced the budget five times, and each time revenues totaled 19 percent of gross domestic product or higher.

Past efforts to reduce high deficits have made new revenue a significant part of the equation. President Reagan presided over three deficit reduction plans that achieved more than three-quarters of their deficit reduction through revenue increases. That was President Reagan. Revenue increases were a major part of his deficit reduction plan. The deficit reduction legislation that we passed in 1990 under the first President Bush achieved about one-third of its deficit cuts through added revenue. President Clinton's 1993 deficit reduction plan was roughly 55 percent new revenue and 45 percent spending cuts and yielded our most recent balanced budgets.

Apart from history, the mathematical reality simply is that we must generate additional revenues. If we are going to reduce the deficit and do so while avoiding unacceptable cuts to programs that provide for the common defense and general welfare, revenue must be part of the discussion.

Many of our Republican colleagues have focused solely on nondefense discretionary programs for deficit reduction. The simple fact is those programs are not big enough to allow real deficit reduction. They make up only about 12 percent of the Federal budget. If we eliminated all those programs, zeroed them out, we would have done grave harm to millions of American families, but we still would have huge deficits as far as the eye can see.

So as the Concord Coalition, a nonpartisan group, said: For a grand bargain on deficit reduction, finding a way to bring in some revenue is a crucial piece of the puzzle.

The nonpartisan Committee for Responsible Federal Budget said that putting the deficit on a downward path requires looking at ways to generate additional revenues.

In the balance of my remarks I set out seven different loopholes which need to be closed. It is only fair that these loopholes be closed. They are loopholes which cannot be justified. They are loopholes which I think almost every American would say should not be in our Tax Code. If we simply will change our Tax Code and reform it and close these loopholes, we can raise about $1 trillion over 10 years. That is a huge part of what this Joint Select Committee is required to do.

We have to protect middle-class families from tax increases. We have to protect them from losing critically important programs, such as education. We can do that. I have sent a letter to the members-- including my dear friend from Massachusetts--of our select committee laying out the seven loopholes which can, and should, be closed which will have an equitable impact. It is only fair these loopholes be closed, and I have laid out including the use of offshore tax havens to avoid paying taxes. In this letter that went to all the members of this Joint Select Committee, I have set forth what these loopholes are.

So revenue needs to be part of the joint select committee's agenda. Our deficit reduction plans will require sacrifice not just from middle-class families but from the corporations and upper income Americans who have done very well in recent years even as middle-class incomes have stagnated. In fact, from 1980 to 2008, the share of all U.S. income going to the top 1 percent of Americans more than doubled, from 10 percent to 24 percent. I make my proposals with that troubling fact in mind. Mr. President, I ask unanimous consent that my letter to the members of the Joint Special Committee be included in the Record after my remarks.

The letter identifies seven possible steps to eliminate wasteful tax expenditures and loopholes so as to share the burden of deficit reduction more broadly. As I say in the letter, ``Those measures would not only reduce the deficit, but also render the federal tax system more fair to the millions of honest Americans who pay their taxes.'' Each is practical and doable, each achieves real deficit reduction, and each protects the programs that defend our nation and support middle- class families without increasing the tax burden on the investments that help our economy grow.

I plan in the coming days to lay out these ideas in more detail, but to explain them briefly.

The first two proposals would close two kinds of unjustified loopholes that benefit corporations and wealthy individuals at the expense of working families: offshore tax shelter abuses that cost American taxpayers billions of dollars a year and a loophole that forces American taxpayers to subsidize the stock options that corporations grant to their executives.

The third and fourth would close two Wall Street tax loopholes, the ``carried interest'' loophole that forces Americans to subsidize the paychecks of hedge fund managers, and a derivatives blended tax rate loophole that promotes speculation in futures and options, favoring derivatives over long-term investments that boost economic growth.

The fifth and six would promote tax fairness and ensure shared sacrifice in reducing the deficit by restoring upper bracket income tax rates and capital gains tax rates to rates closer to historic norms.

The seventh is an administrative change, eliminating the use of paper tax liens and creating an electronic database of those liens.

I will discuss these changes in more detail in the days ahead, but let me emphasize today the role they can play in deficit reduction. Combined, these common-sense changes could reduce our deficits by $1 trillion over the next 10 years--a sum that would make the committee's difficult goal, one the Congress and the entire government share, much more achievable.

For Republicans, adopting some of these ideas will be difficult. I would say, in empathy and not in anger: Welcome to the club. The spending cuts that will be necessary for significant deficit reduction will be difficult as well. They will hurt real American families, in real ways, and they will damage programs that are at the core of my own party's philosophy about the important role of government in helping to create shared prosperity. Democrats will have to compromise on these cuts. Republicans will also have to compromise, and accept the reality that revenue must be part of the equation, if we are to do our duty.

The ideas I have proposed, and will discuss in more detail in the days ahead, outline a path toward such a compromise. It is a fair path. If Republicans are willing to embrace compromise, we can reduce our deficit while helping to protect middle-class families from further economic harm. If Republicans are not willing to compromise, the automatic cuts involved in sequestration that would be forced upon the American people will make our country less safe and the livelihoods of our families less secure. I hope my proposals will help us work together to avoid that tragic outcome.

Madam President, I ask unanimous consent to have printed in the Record a copy of the letter which I sent to the members of that Joint Committee.

I thank my friend.

Amendment No. 613

Madam President, we soon will vote on a measure that includes two significant pieces of legislation. I support passage of both--one that upholds our duty to assist Americans coping with natural disasters, and one that upholds our duty as Americans to speak out against oppression and abuse around the world.

The first measure provides emergency supplemental funding for disaster relief and recovery efforts. Congress must do its job to appropriate emergency funding for disaster response and recovery quickly and thoughtfully, as we have done numerous times in the past. I will vote for this measure because the $6.9 billion in emergency supplemental funding for disaster relief and recovery is necessary to help families and businesses bounce back from catastrophic loss, to rebuild damaged infrastructure, to respond to emergencies, to restore forests and watersheds damaged by disaster, and to improve flood control structures. Importantly, this legislation does not set the bad precedent of requiring an offset in order to help communities and families when disaster strikes.

The second measure would renew sanctions against Burma by extending the import restrictions put in place under the Burmese Freedom and Democracy Act of 2003.

While the Burmese government has shown some recent signs of a willingness to implement meaningful reforms, legitimate questions regarding its commitment to these reforms as well as continuing concerns about the ongoing detention of political prisoners and about serious human rights violations justify the renewal of these sanctions.

I urge my colleagues to approve this important measure as a reaffirmation of our concern for those here at home who are struck by disaster, and for those abroad who suffer under oppression.

Amendment No. 602

Mr. President, I will vote for passage of H.R. 2887, a combined FAA and surface transportation extension bill.

This legislation averts a damaging shutdown of either program. If we fail to extend these programs, it will mean layoffs and the loss of significant revenue to fund airport and road programs.

The current FAA extension expires tomorrow and the current surface transportation extension expires at the end of the month, along with the authority to collect the Federal gas taxes that fund the Highway Trust Fund. Passing this bill quickly and extending the FAA reauthorization for 4 months and the surface transportation bill for 6 months allows Congress more time to work out the issues that are holding up completing long-term reauthorizations.

Just as important, it keeps thousands of workers on the job, supporting their families.

Mr. President, today, I honor a son of Michigan, Mr. Wolfgang ``Wolf'' Mattes, a loving husband, dedicated father, caring friend, and stalwart patriot. Mr. Mattes will celebrate his 80th birthday on Sunday, September 18.

Mr. Mattes is a dedicated public servant who has selflessly served his country, State and community in various capacities for nearly six decades. Known as an honest, warm, and generous man, Mr. Mattes chose a career as a public servant and worked for the city of Detroit for many years, where he retired as the supervising naturalist at the Belle Isle Nature Center. Wolf is a wildlife conservationist at heart and spent countless hours rehabilitating wild animals and protecting their habitat. Additionally, when his country called, he did not hesitate to respond and proudly served in the U.S. Army during the Korean war.

An avid sports fan and athlete, Wolf worked as an usher at Tiger and Olympia Stadiums. At Olympia Stadium, he was the guard for the Red Wing's locker room and bench and was known as ``Wolfie on the bench'' by the players. After Olympia Stadium closed, the Detroit Red Wings brought him with them to Joe Louis Arena, where he worked in the press box.

Mr. Mattes understands the value and importance of community service, and his many efforts have been fittingly honored through his selection as a volunteer and firefighter of the year, Kiwanis volunteer of the year, and Elk volunteer of the year.

On Sunday, we will all look back and see the hallmarks of a life well lived. He is beloved not for a litany of accomplishments, but simply for who he is. Beneath a humble exterior lies a generous and kind soul. His quiet determination, unfailing kindness, and unyielding spirit have made him a pillar not only of a proud and loving family, but of all who have come to know him.

He remains the dedicated husband to his lovely bride Barb, whom he met at Michigan State on a blind date over 52 years ago, and he has been a wonderful father to his adoring daughters Erika Lynn Mattes Rebbe, Heidi Leigh Mattes Mason, Brigitte Beth Mattes Cooper, and Inger Ann Mattes Griffin.

Today, we offer heartfelt congratulations to Wolf as he celebrates his 80th birthday. This is truly a joyous occasion. His unending love of family, friends, and country, as well as his devotion to those who have had the privilege of knowing him serve as inspiration to all.

Happy birthday, Wolf. May you enjoy happiness, good fortune, and good health for many years to come.

Madam President, I support the America Invents Act.

Right now, as our economy struggles to recover, this legislation is needed to help create jobs and keep our manufacturers competitive. It will further strengthen and expand the ability of our universities to conduct research and turn that research into innovative products and processes that benefit Michigan and our Nation.

Because of this legislation, we will be able to see that boost up close in my home State of Michigan, where a new satellite Patent and Trademark Office will be established in Detroit. This office will help modernize the patent system and improve the efficiency of patent review and the hiring of patent examiners.

In addition, in an important victory after years of effort to address the problem, section 14 of the act finally

bans tax patents, ending the troubling practice of persons seeking patents for tax avoidance strategies.

Issuing such patents abuses the Tax Code by granting what some could see as a government imprimatur of approval for dubious tax strategies, while at the same time penalizing taxpayers seeking to use legitimate strategies. The section makes it clear that patents can still be issued for software that helps taxpayers prepare their tax returns, but that provision is intended to be narrowly construed and is not intended to authorize patents for business methods or financial management software.

The bill will put a halt to both new and pending tax patent applications. Although it does not apply on its face to the 130-plus tax patents already granted, if someone tries to enforce one of those patents in court by demanding that a taxpayer provide a fee before using it to reduce their taxes, I hope a court will consider this bill's language and policy determination when deciding whether such efforts are consistent with public policy.

This legislation is an important step forward and I urge my colleagues to support it.

Madam President, I move to reconsider the vote.

Mr. President, I come to the floor today to pay tribute to the life and the public service of Mark Hatfield.

Mark Hatfield began his lifelong career of public service in the U.S. Navy during World War II. After the war he returned to Oregon where he served in the State house of representatives, in the State senate, as the Oregon secretary of state, and eventually as Governor of the State. Fortunately for us--for the Senate and for the country--Mark Hatfield did continue his career of public service and went on to serve five terms in the U.S. Senate.

During his time in the Senate, Mark Hatfield repeatedly demonstrated he possessed the courage of his convictions. We have heard that word ``courage'' used this afternoon by Oregon Senators and others as it relates to Mark Hatfield, and there are so many examples of that courage, including an unpopular position he took relative to the Vietnam war. But in 1995 he opposed the balanced budget constitutional amendment, which was then under consideration by the Senate. It was a difficult position then to take as it is today. But he followed the courage of his convictions, and this is what he said about the constitutional amendment they were debating in the Senate back in 1995:

A balanced budget can come only through leadership and

compromise. This compromise must come from each one of us. .

. . In the end there is no easy answer, and there never will

be. Regardless of the procedural restraint in place, where

there is political will to create a balanced budget we will

create one. Where there is a will to avoid one, we will avoid

it. . . . A vote for this balanced budget constitutional

amendment is not a vote for a balanced budget, it is a vote

for a fig leaf.

Mark Hatfield said it as he believed it, straight from the shoulder-- courageously and direct. He did so in regard to many other issues.

From the vantage point of the Appropriations Committee, Senator Hatfield was able to champion causes near and dear not only to his heart but near and dear to the hearts of so many Americans. Among these causes was medical

research. Senator Hatfield was such an effective supporter of medical research that in 2005--8 years after his retirement from the Senate-- the National Institutes of Health opened the Mark Hatfield Clinical Research Center in honor of his career-long support of medical research.

How well I personally remember, as a member of the FDR Memorial Commission, how Mark Hatfield joined Danny Inouye, his cochairman, to finally lead us to build the long overdue memorial to one of America's greatest Presidents.

Today, the Senate mourns the passing of Senator Hatfield. How vividly those of us who had the pleasure of serving with him remember him. My wife Barbara and my deepest sympathies go out to Mark's wife Antoinette, to their family, and to their friends. As the Senate honors his extraordinary career, we can all take inspiration from his willingness to join with colleagues of both parties to achieve enduring goals.

Madam President, I understand we are alternating?

I would request, after the Senator from Kentucky, who is here to speak--

In that case, I believe I was here on the floor before the Senator from Kentucky, so I will proceed.

Madam President, to say the legislation before us is not ideal is truly an understatement. The notion that our deficit problem can be solved solely by cutting spending flies in the face of our experience, when in fact unwise tax cuts for the wealthy and egregious tax loopholes are significant culprits in our fiscal crisis. I believe too many Republicans are influenced by an ideology so extreme that it promised to wreak economic havoc if they did not get their way. ``No additional revenues'' became the battle cry--an approach that prevents the balanced deficit reduction the American people rightly support. The result is that this legislation incorporates some policies that are profoundly unfair to middle-income Americans.

Seen in isolation, Madam President, this is not a good bill. But no public policy exists in a vacuum. Despite its many flaws, this legislation must pass. Let me explain why.

While there will be a number of negative consequences as a result of this bill's passage, there will be more dire consequences if it fails to pass. The choice here is between a faulty piece of legislation on the one hand and severe damage to our economy and even greater joblessness on the other. The choice we face with this vote today is whether to accept a flawed bill or to watch the United States--the globe's preeminent economic power--default on its obligations to senior citizens, students, and veterans, as well as to

those who have invested in our country by the purchase of our bonds and our Treasury notes. We have taken many steps in the past 3 years to try to restart job creation in this country. Those efforts would come undone in the crisis that would follow our failure to pass this bill.

One of the things that is right about this legislation is that it avoids a misguided demand that we have another round of crisis and negotiation over this issue in a few short months. A short-term increase in the debt limit, as House Republicans demanded, would surely have led to a damaging downgrade of the government's credit rating. It would have frozen financing for businesses and consumers. We simply cannot put the American people and the American economy through that again.

Despite this bill's imbalance in focusing solely on spending cuts, it does contain a mechanism that can force acceptance of what our Republican colleagues have refused to accept--the reality that revenue must be a part of real deficit reduction and that fair and effective deficit reduction efforts require shared sacrifice. The year 2011 is the year of unbalanced spending cuts, and 2012 must be a year of shared sacrifice, one in which the President uses the bully pulpit to lead the Nation to accept the notion that everyone--including, surely, the wealthy--must play a role in reducing deficits.

Democrats have repeatedly emphasized this point. It is a simple fact that among the largest factors contributing to our deficits is the Bush tax cuts--tax cuts that greatly increased the growth of the gap between the wealthiest among us and working families. Today, median household income--the income of the typical American household--is lower than it was in the mid-1990s, and yet the wealthiest Americans not only do extremely well, they are doing better and better all the time. A few decades ago, the wealthiest 1 percent of all Americans took in 10 percent of all income. Today it is 24 percent.

These numbers are not aberrations or actions of a free market. They reflect policy choices. Too often the choice has been to pay lip service to the middle class while driving income inequality to levels not seen in 80 years in this country. The failure to ask all Americans to join in the sacrifices required to reduce our deficit flies in the face of logic and fairness and threatens to increase the growing gap between upper income and middle-income families.

Democrats have proposed commonsense steps to address the failure to include more revenue and to promote shared sacrifice. We have proposed restoration of the 39.6-percent tax bracket for the wealthiest Americans who make nearly $400,000 a year or more. Most Democrats support the end of tax breaks for the massively profitable oil companies. We seek to close loopholes that now allow tax dodgers to hide income and assets in overseas tax havens to avoid the taxes they rightly owe and to end tax breaks that let highly-paid hedge fund managers enjoy a lower income tax rate than the rate their employees pay.

So far, too many have denied the need for these changes. But there is a chance at least that this legislation may finally force consideration of added revenues, added fairness in the Tax Code, and the shared sacrifice that is so missing from the cuts in the legislation before us.

Why is that? Under this legislation, we will face a stark choice. We must agree before the end of this year to deficit reduction of at least $1.2 trillion over 10 years, or stand by as an automatic budget cut kicks in to accomplish that goal. A bipartisan joint committee of 12 Members of Congress will meet and develop a deficit reduction plan that avoids those automatic cuts. That joint committee will have broad powers to review and propose changes to spending and to the Tax Code, and to add revenue. Revenues will finally be back on the table where they have always belonged.

Meeting that $1.2 trillion goal will not be easy, but it will be achievable--achievable, that is, if those who so far have been unwilling to compromise will recognize that revenue must be part of the equation. Nobody should be eager for the automatic cuts that would otherwise take effect. Many of those cuts would be unacceptably painful and damaging. But the very idea of those automatic cuts is that they are so unacceptable that few of us will want to see them enacted and most of us will be willing to compromise in order to avoid them.

Congress used this approach once before. In 1985 we passed Gramm- Rudman-Hollings, which set forth specific deficit targets and required cuts if those targets were not met. The framework for today's legislation is based on that model. As one of the authors of the Gramm- Rudman-Hollings act, Senator Gramm put it:

It was never the objective of Gramm-Rudman to trigger the

sequester; the objective of Gramm-Rudman was to have the

threat of the sequester force compromise and action.

And it did. For example, in 1990, when facing the possibility of unacceptable cuts in defense and other important programs, President Bush and bipartisan leaders in Congress adopted a balanced deficit reduction plan that included significant new revenues. The Damocles sword of the Gramm-Rudman-Hollings deficit reduction act was the reason for that outcome. I believe that any plan from the bipartisan committee that fails the test of balance will have no chance of passage in the Senate. That means members of the committee must truly be willing to lead, to put aside partisanship and rigid ideology, if we are to avoid triggering unacceptable cuts. Success also is going to require Presidential leadership and stronger use of his bully pulpit.

Democrats have demonstrated that we are willing to put forward serious deficit reduction proposals, plans that include painful cuts to important priorities. With a vote to approve this bill, which we must, it is my hope that we have reached the high tide of an ideological movement that has sought to hold tax cuts for the wealthy sacred while imposing increasingly Draconian cuts on programs for American families and threatened economic calamity if that movement did not get its way. The era of slashing programs that help middle-class Americans, with no shared sacrifice by the wealthiest among us, must end and give way to an era in which fairness and balance guide our efforts. Passing this legislation today hopefully will drive us to make that transition.

I yield the floor.