Floor Statements

The following Senators are necessarily absent: the Senator from Utah (Mr. Hatch) and the Senator from Illinois (Mr. Kirk).

Mr. President, let's ask ourselves a question. What is the purpose of taxes? Do we tax people to punish them for their success or do we do it to raise revenue for the government? Well, the answer is, of course, at least up to now, the purpose of taxes is to raise the revenue the government needs to perform its duties and to do that in the least harmful way possible.

President Obama, however, has a different idea about the purpose of taxes. He thinks the government should take more from some people just because they are rich, even if the tax increases hurt the economy.

So this week the Senate will vote on what is called the Pay A Fair Share Act or, as described by President Obama, the Buffett tax. This legislation would create a new 30-percent alternative minimum tax for filers who make $1 million or more, which would include many successful small businesses. Unfortunately, the legislation would hurt small businesses more than it would raise revenue for the government.

Today I want to talk about why this legislation is fundamentally misguided and why it would be harmful to businesses, workers, and the economy. The Buffett tax may make for good politics for President Obama on the campaign trail, but it is bad policy. It is deeply flawed.

First, let's start with its premise. There is a key misconception about Warren Buffett's tax rate. The notion that Mr. Buffett pays a lower tax rate than his secretary is based on a fundamental misunderstanding of the Tax Code.

Mr. Buffett--and, I would add, many older Americans--obtains most of his income from investments. That income is taxed at the capital gains rate. Mr. Buffett and President Obama would have us believe capital gains income gets preferential treatment in the Tax Code, but that does not tell the real story.

Capital income is actually taxed twice. First, it is taxed at the 35- percent rate that corporations pay on their income--it is taxed; the money is paid to the government--and then it is taxed again when the distribution of capital gains or dividends is made to the investors, when it is passed on to shareholders as dividends or capital gains. That means the tax rate is already far higher than 30 percent. It is actually not exactly 30 plus 15 percent, but it is higher than 30 percent, and it is closer to 45 percent.

President Obama ignores these facts when he says Mr. Buffett pays a lower tax rate than his secretary. We have to count it twice, not just the second time.

That leads me to my second point: the fairness of the current Tax Code. Does it really favor the wealthy at the expense of others, as President Obama argues? Perhaps one could cherry-pick some random statistics to show that one person or another pays more or less, but the actual tax numbers show the real progressivity of the American Internal Revenue Code. Interestingly enough, among all the industrialized countries in the world ours is the most progressive.

In other words, the U.S. income-tax code has the wealthier people paying a far higher percentage of income taxes than any other country in the industrialized world--yes, even more than Sweden and even more than France and even more than the other countries in Europe.

According to Congressional Budget Office data, the average tax rate paid by middle-income Americans is 14.2 percent. In contrast, the average tax rate paid by a high-income American is 31.2 percent, more than twice as much. So the average tax the secretary or somebody else like that might pay is 14.2 percent. The average tax paid by high- income Americans is 31.2 percent.

Incidentally, President Obama's effective tax rate this year is 20.5 percent. Should he be paying more or is that enough? He has a tough job.

Here are some other interesting tax facts. The top 1 percent of taxpayers pays 38 percent of total income taxes--actually, I think these numbers are dated; it is now closer to 40 percent--and that top 1 percent of taxpayers only earns 20 percent of the total income.

So here is the question of fairness: We have the top 1 percent--they are the top 1 percent because they earn the top 20 percent of all income, the top fifth, but they pay almost twice as much in taxes, 38 percent in total income taxes.

How about the top 2 percent of taxpayers? Well, they pay 48.68 percent--nearly 50 percent, in other words--of income taxes, and they earn 27.95 percent of total income. So we have the top 2 percent paying almost half of all income taxes. Is that fair?

The top 5 percent pays 58.7 percent; earns 34.7 percent. The top 10 percent pays 69.9 percent--let's say 70 percent--so we have the top 10 percent of taxpayers paying 70 percent of all the taxes, earning 45 percent of the income.

Well, those are certainly the wealthy, and they are certainly paying a big share.

How about the less wealthy? Well, the bottom 95 percent--in other words, everybody but the top 5 percent--pays 41.3 percent of income taxes; earns 65 percent of the income. Is this fair? Maybe it is not fair that the top 2 percent pays almost half of all the income taxes. How much would be fair? Should they pay 90 percent, 95 percent?

How about the 50 percent of households that pay no taxes and yet receive the same or greater benefits than those who do? Is that fair?

The Joint Committee on Taxation estimates that 51 percent of all households, which includes both filers and nonfilers, had either zero or negative income tax liability in 2009. People who do not share in the sacrifice of paying taxes have little direct incentive to care whether the government is spending and taxing too much. Maybe that is why the President has no problem with even more Americans getting a free ride.

Here are a few more statistics. The highest 1 percent of income earners have not seen the share of the income tax burden decline. In fact, their share of income is essentially the same as it was in 2000, but their share of taxes paid is higher. Collectively, only taxpayers with incomes greater than $100,000 a year pay a share of taxes that is greater than their share of income.

Actually, I think it is hard to argue that our current Tax Code that taxes the wealthy to such a high degree is

unfair. While the President says it is not fair, I find it interesting that his own Treasury Secretary seems to agree that the current system is fair.

Let me read a portion of the transcript from a Finance Committee hearing with Secretary Geithner earlier this year. I asked him: Do you think it is fair that the top 1 percent of earners in the United States pays just about 40 percent of the income taxes? Secretary Geithner's response: I do, because I do not see how the alternatives are more fair. Next, I asked him if he thought it was fair that the top 3 percent pays as much as the other 97 percent of taxpayers in income tax. Secretary Geithner responded, ``Again, I do.'' So if we want an income tax system that is fair according to the Obama administration's own standards, we already have it. The argument that top-tier earners are not doing enough just does not hold water.

The third problem with the Buffett tax is that it would harm many small businesses. According to the most recent Treasury Department data, 392,000 tax returns reported income of $1 million or more. Of those, 331,000 reported business income and 311,000 met the Treasury's definition of ``business owner.'' So this is a tax that would disproportionately affect small businesses and other job creators.

Four out of five tax filers that would be affected by the Buffett tax are the very businesses we are counting on to lead us back to an economic recovery. If enacted, these tax increases would have a negative effect on employers trying to create jobs. And this is not just my opinion. Take, for example, the International Franchise Association, which recently said this: Franchise business owners could be significantly challenged to grow and create new jobs as a result of the Buffett rule, a tax increase on individuals and small business owners.

It continues:

Taxing job creators will seriously impede the ability of

franchise businesses to expand their operations and to create

new jobs, particularly multi-unit franchise operators and the

majority of franchise businesses who file their business

income on their own personal tax return.

So these are the very folks the Treasury Department identified as paying taxes as individuals but who are, in fact, business owners.

Under current law, a massive tax increase on income, capital gains, and dividends is already set to occur on January 1 of next year. In addition, under ObamaCare, some Americans will be hit with a 3.8- percent investment surcharge beginning next year. Imagine what all of these taxes will do to small businesses and startup companies.

But that is not enough new taxing for President Obama in his war against investments and success. According to economist Stephen Entin, tax increases on capital are some of the most destructive to the economy. He estimates that tax hikes on capital gains, dividends, and the top two individual tax rates, which are already scheduled to occur in 2013, will shrink the economy by 6 percent, will lower wages by 5 percent, will decrease capital stock by almost 16 percent, and will lose the Federal Government almost $100 billion in tax revenue.

Adding an additional Buffett tax on capital will only decrease wages and economic growth even further. Why is this? Because high taxes on income, particularly investment income, depress capital formation. There are fewer investments, which damages the abilities of businesses to grow, to create jobs, or to pay higher wages.

I challenge my colleagues to ask a roomful of economists this question: Does increasing the cost of capital lead to higher or lower economic growth and job creation? Well, the answer is obvious. As President Kennedy said when he endorsed a capital gains tax cut, ``The tax on capital gains directly affects investment decisions, the mobility and the risk flow of capital, as well as the ease or difficulty experienced by new ventures in obtaining capital and thereby the strength and potential for growth in the economy.''

It is also important to remember that we are not making tax policy in a vacuum. We are competing for capital and investments with every other nation on Earth. The President has conceded that our high corporate tax rate harms our international competitiveness and has expressed tepid support for lowering it. But those benefits would be erased if capital gains taxes are increased dramatically.

As the Wall Street Journal points out, ``Lowering the corporate tax rate makes the U.S. more competitive, but the tax change is self- defeating if it's combined with an even larger rise in the investment income taxes on capital gains and dividends.''

According to a recent Ernst & Young study, the integrated tax rate on capital gains is already over 50 percent--50.8 percent to be exact. That is more than twice the rate in China, for example.

If Congress does nothing, capital gains rates will rise again to 56.7 percent next year. That is the second highest in the world. If the Buffett tax increase is layered on top, taxes will consume almost two- thirds of capital gains, and we will have the highest integrated rate by far of any of our international competitors. We have to remember that in a mobile world economy, capital is highly mobile. Does anyone believe that such a confiscatory capital gains rate imposed by the Buffett tax would not lead to less investment in the United States and more in other countries? As somebody said, this is not just shooting ourselves in the foot, it is shooting ourselves in the head.

Let me address President Obama's suggestions that the Buffett tax somehow constitutes fundamental tax reform and that President Reagan would have supported it. I think I can imagine President Reagan responding: Well, there you go again.

The Washington Post has a Fact Checker op-ed, and here is how they set the record straight on President Obama's claim that he was pushing the same concept--his words--as President Reagan:

Contrary to Obama's suggestion that President Reagan was

specifically arguing for a new tax provision aimed at the

superwealthy, Reagan was barnstorming the country in an

effort to reduce taxes for all Americans, mainly by cutting

rates, simplifying the tax system, and eliminating tax

shelters that allowed some people to avoid paying any

taxes at all. In other words, Reagan was pushing for a tax

cut for everyone, not just an increase on a few.

Obama and Reagan did use similar anecdotes--and even the

phrase ``fair share''--but in service of different goals.

President Reagan's tax reform should never be confused with a harmful political gimmick such as the Buffett tax.

I would like to show how higher capital gains taxes have a negative effect on revenue.

Ever since the bipartisan capital gains cut in 1978, a pattern has repeated itself over and over: Raising the capital gains rate reduces revenues. Lowering it has led to revenue increases. That is partially because capital gains taxes are an elective tax. The tax is only paid when investors sell their assets. And frequently they wait to sell their assets for the rates to go down when it will cost them less to sell those assets.

The Wall Street Journal recently produced a chart to this effect, and I am just going to summarize it.

In 1978 President Carter signed an amendment into law that cut the capital gains rate from 40 to 28 percent. What was the result? Less revenue? No. Revenue from capital gains increased by nearly $3 billion, and yet the rate was reduced.

Congress cut the capital gains rate again to 20 percent in 1981 as part of the Reagan tax cuts. As the Journal notes, revenue did not fall in 1982. By 1983 capital gains revenues soared to $18.7 billion: Lower rate, higher revenue.

In 1986 the capital gains tax rate was returned to 28 percent as part of the tax reform package. Guess what. Revenues soared as investors cashed in their gains before the tax increases hit and then plunged in 1987.

The point is investors get to play. They get to decide. When the rate goes down, they can sell their property with less cost. When the rate goes up, they hang on to their property. They do not sell it because they will have to pay more when they do.

In 1997 President Clinton and congressional Republicans cut the rate back to 20 percent, and revenues from capital gains doubled by the year 2000 to $127.63 billion.

The Journal notes:

Congress shouldn't be fooled by government forecasters who

predict a revenue boost

from a higher capital gains rate. They've blown this call

every time.

My last point addresses what the Buffett tax would do for the Federal debt. The answer is next to nothing.

Let's examine the nonpartisan Joint Committee on Taxation's estimate of the revenue that would be raised from the Buffett tax. Bear in mind that these estimates do not include the effect on economic growth, which could dramatically reduce rather than raise Federal revenues, as history has shown. But let's take the score at face value. Even without counting the negative impact on the economy, the Buffett tax would raise a mere pittance in the scope of Federal budgets.

When President Obama first proposed the tax, he declared that ``it could raise enough money to stabilize our debt and deficits for the next decade.'' He said, ``This is not politics, it's math.'' Well, let's look at the math. The Joint Committee on Taxation estimate shows that the Buffett tax would raise only about $1 billion this year. So instead of a deficit this year of $1.079 trillion, we would have a deficit of $1.078 trillion. That does not exactly raise enough money to stabilize our debt and deficits for the next decade, as the President said.

Over the first 5 years, the Joint Tax Committee shows that the Buffett tax would collect about $14.7 billion. To put it in perspective, that will amount to less than. 08 percent of the projected national debt in 5 years. And in the year 2014 the proposal is estimated to actually lose over $6 billion in revenue. Why is this? Again, because capital gains taxes are largely voluntary. The investors targeted by the Buffett tax are generally able to decide when to sell an asset. They can manipulate their sale to stay below the triggering threshold of $1 million in the bill. This produces a lock, in effect, on capital as investments stay stagnant. So what is the end result? Little if any revenue is actually raised. Business investments decline. In turn, wages and hiring decline.

Again, if the purpose of taxes is to raise needed revenue rather than punish people, this bill completely flunks the test. So while this proposed tax increase might make some people feel good, it will not solve any of our budget problems. It will likely destroy jobs and growth, and, as history has shown, depressed economic growth from a tax increase will make our budget problems even worse than they are now.

In conclusion, the economy, as we know, is limping along at an anemic growth rate. Gas is $4 a gallon or more, and 20 million Americans are unemployed or underemployed. The economic downturn has taken a huge toll on American families. They want Washington to focus on legislation that will have an impact on jobs and gas prices. Instead, we are debating a show bill that has no chance of passing and would not create a single American job. What happened to jobs, jobs, jobs? Remember that four-letter word, ``jobs''?

The President claims to be focused like a laser on the economy. Instead, it appears that there is only one job that he is focused on with this political proposal. I submit that here in the Senate we should be focused on jobs and energy legislation that can pass, not tax hikes through show votes that are designed to fail.

The following Senators are necessarily absent: the Senator from Wyoming (Mr. Enzi), the Senator from Utah (Mr. Hatch), and the Senator from Illinois (Mr. Kirk).

Further, if present and voting, the Senator from Utah (Mr. Hatch) would have voted ``yea.''

Madam President, everyone knows this is not going to pass. This is a political exercise. I urge my colleagues to vote no. The fact is on average the people in the upper two brackets pay more than twice as much in their income tax rates as the people we call the middle- class taxpayers.

So the basis, the factual basis upon which this is allegedly founded is incorrect. The truth is this legislation will do nothing with regard to job creation, with regard to gas prices, with regard to economic recovery, or any of the other matters the American people care about. As a result, to focus attention on something like this is to try to draw attention away from the issues about which the American people are most concerned.

I urge my colleagues to vote no.

Cloture Motion

The following Senators are necessarily absent: the Senator from Utah (Mr. Hatch) and the Senator from Illinois (Mr. Kirk).

Further, if present and voting, the Senator from Utah (Mr. Hatch) would have voted ``nay.''

The following Senators are necessarily absent: the Senator from Utah (Mr. Hatch) and the Senator from Illinois (Mr. Kirk).

Further, if present and voting, the Senator from Utah (Mr. Hatch) would have voted: ``nay.''

The following Senators are necessarily absent: the Senator from Utah (Mr. Hatch) and the Senator from Illinois (Mr. Kirk).

Further, if present and voting, the Senator from Utah (Mr. Hatch) would have voted: ``nay.''

The following Senators are necessarily absent: the Senator from Utah (Mr. Hatch), the Senator from Illinois (Mr. Kirk), and the Senator from Utah (Mr. Lee).

Further, if present and voting, the Senator from Utah (Mr. Hatch) would have voted: ``yea.''

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

I ask unanimous consent to speak in morning business for up to 10 minutes.

Mr. President, I will address the bill that will be before us later today.

The title of the bill is ``Repeal Big Oil Tax Subsidies Act.'' I think that title begs the question: What is a tax subsidy? Most Americans would define a tax subsidy as a payment of cash, such as through a tax credit, from the government to a particular industry. Does this bill address subsidies? The answer is, absolutely. But instead of repealing tax subsidies, it actually creates more of them.

Under this bill, the government would subsidize particular industries or activities through a host of tax credits. These subsidies range from tax credits for energy-efficient homes, alternative fuel vehicles, plug-in electric vehicles, cellulosic biofuels, wind energy production, biodiesel and renewable diesel, and the list goes on and on. In other words, the Tax Code would be providing special tax breaks for specific industries, and the one thing that is common to all these is that they are the so-called green energies. They are the ones that would receive the special tax treatment, to the tune of $12 billion. There are even direct cash grants from the Treasury Department for industries that invest in green energy so companies don't have to worry about whether they have a tax liability to take advantage--direct cash grants. These are clearly subsidies aimed at particular industries, the very thing the President himself has said we should avoid if we want a simpler Tax Code with lower rates that doesn't pick winners and losers.

So, yes, this bill deals with tax subsidies. It creates a bunch of them, and they are in a very specific area--$12 billion worth.

What about oil and gas? It turns out there are no special tax provisions for oil and gas. There is no special oil and gas loophole or giveaway, as somebody called it. Oil and gas companies use the same IRS Code other kinds of companies use. They pay taxes under those provisions. They get deductions or credits under some other of those provisions but nothing that doesn't apply to other industries the same way. In fact, what this bill does is to take away the rights of oil and gas companies under some of these provisions and leave those provisions intact for others. In other words, it discriminates against specific companies within a specific industry.

There are four particular areas. The first is section 199 of the Tax Code. This is the basic code under which all producers--people who manufacture things, who produce things--are allowed to take what is called a manufacturing deduction of 9 percent, except we have already discriminated against the oil companies. They can only take a deduction of 6 percent, but it is the same for the other industries; otherwise, it is 9 percent. But this bill would eliminate that deduction altogether for the larger oil and gas companies--the so-called integrated companies--but not for other domestic producers. So it is discriminatory twice over. Remarkably, therefore, companies such as the Venezuelan company, CITGO--a large oil and gas producer--could continue to take the deduction, but U.S.-based companies could not.

How is that for double discrimination. First, all other companies in the country get to deduct 9 percent, big oil companies only get to deduct 6 percent, and this bill would eliminate that deduction for some of the American oil producers.

How about intangible drilling costs. This is part of the so-called R&D--or research and development--tax treatment. Research and development is something many businesses do, and when they do it, they get to deduct those costs as against their tax liability. For the oil and gas industry, the research and development is called intangible drilling costs. Those are part of the R&D exploration for energy.

Again, the oil companies are actually already discriminated against; whereas, other businesses can expense 100 percent of these R&D costs; large oil and gas companies, as I have said, can only expense 70 percent. So they are already being discriminated against, to some extent. This bill would further discriminate against them by eliminating the expensing altogether. In other words, whereas most companies can expense 100 percent and smaller oil and gas companies could still expense 100 percent, these larger companies could no longer expense any of it. Their current-year deduction would be gone.

The third area is for businesses that have operations abroad that pay both taxes and royalties. They are called dual capacity companies. There are a lot of dual capacity kinds of businesses. Oil and gas is one of them because they pay both taxes and royalties; casino operators are another, to give another example. In order to prevent double taxation for American companies that pay both foreign taxes and American taxes--and obviously they are competing against companies that only pay taxes once--in order to mitigate that, every American company, whether it is an oil company or any other kind of company, is allowed to take a foreign tax credit for foreign taxes paid. So whatever their American tax liability is, they get to take a credit against that for what they have already paid to another country in tax liability there.

If they owe $100 in taxes and they have already paid Great Britain $70 in taxes, then they get to take a credit of that $70 against the $100 American liability. That is the way it works for all businesses abroad, including the dual capacity taxpayers.

This bill would eliminate part of the foreign tax credit for the large integrated oil and gas companies; therefore, putting our companies at a severe disadvantage with other oil and gas

companies doing business around the world. Of course, oil and gas business is all around the world. They go where the oil or the gas is and extract it and then ship it to the user. Why would we deliberately give foreign competitors an even greater advantage in foreign markets than they already enjoy? As I said, this bill singles out oil and gas companies and would not extend the same discriminatory treatment to other dual capacity taxpayers such as, as I mentioned before, casinos. Again, it is a double discrimination against oil and gas companies.

Finally, we have what is called percentage depletion. Every company, including oil and gas companies, that extracts minerals from the Earth or other substances from the Earth is allowed to use the percentage depletion method for calculating their taxes. But, again, for the last 30 years, the large integrated oil and gas companies can't do it. So they are already prohibited from using this method. This bill repeals it again, so we are going to repeal something that has already been repealed. I guess that is OK. It is not necessary. I guess it is a way to further kick somebody in the rear end if we don't like them.

The question is, therefore, why should we be doing this to oil and gas companies? The Wall Street Journal pointed out in a recent editorial--by the way, the title is ``Big Oil, Bigger Taxes''--that the oil and gas industry is subsidizing the government, not the other way around. Because of the amount of taxes oil companies pay--far more than other companies--they are actually subsidizing the U.S. Government. Oil and gas companies paid almost $36 billion in taxes in 2009 alone. That is just one industry--the oil and gas companies--$36 billion. According to American Petroleum Institute figures, oil and gas companies had an average effective tax rate of 41 percent in 2010 and paid more in total taxes than any other industry.

For those folks who somehow suggest oil and gas is getting some big break, that they are not paying their fair share in taxes, this evidence clearly refutes that. We will remember the President's Buffet rule: Everybody should pay at least 30 percent in taxes. Oil and gas companies already pay at the rate of 41 percent, so it is not as if they are getting off with some kind of special break.

Generally, our Tax Code allows companies to recover their expenses. It allows businesses, including oil and gas businesses, to recover their costs of doing business. As I said before, the oil and gas industry is already discriminated against. They can't recover all their costs. Under section 199, for example, other companies get to deduct 9 percent; they can only deduct 6 percent. This bill would also remove provisions that allow them to expense. So the code which already treats them the same or worse than other industries would now treat them substantially worse.

Yes, of course, oil and gas companies have profits and, in some cases, they are large profits. But they are large in scale--their businesses are large in scale--because they have to be in order to compete. It costs billions of dollars just to invest in one oil rig out in the Gulf of Mexico, for example. According to industry estimates, it costs between $1.3 billion and $5.7 billion to produce oil in one deepwater platform in the Gulf of Mexico. Think about it: If someone is making $200 a year, obviously, they can't do that. It takes companies that make an enormous amount of money to spend $5 billion on one oil platform to try to find oil and gas. Don't we want companies such as that to find oil and gas so we can get more of it on the market so we don't have to pay as much when we try to fill our car at the pump?

What would happen if we used the Tax Code to further penalize oil and gas companies with these massive tax increases? Does anybody think the costs aren't going to be passed on?

According to the Congressional Research Service, tax increases such as the ones in the bill ``would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence.''

Everybody talks about reducing the price of gas at the pump and reducing U.S. dependence. What these tax increases would do is to further that dependence and increase the prices at the pump. This isn't like shooting ourselves in the foot; it is like shooting ourselves in the head. Why would we do this? We would have less domestic energy production. Obviously, taxing an activity more means we will get less of it.

How about jobs? The oil and gas industry supports more than 9 million American jobs. The American Petroleum Institute estimates that 1 million new jobs could be created in the next 7 years if punitive new tax increases and unnecessary new regulations are avoided. We desperately need to create jobs. These are good American jobs. Why would we want to destroy jobs by imposing an unfair tax on an industry which is producing something we desperately need?

Foreign oil companies, such as those based in Russia and China and Venezuela, would have an even greater competitive advantage over American companies in these overseas markets if we impose these taxes on American companies.

Finally, we would hurt tens of millions of Americans who invest in these companies through pension funds, retirement accounts, and mutual funds. In other words, this bill would eliminate tax provisions that are not giveaways or subsidies to producers in the United States in order to pay for tax subsidies that would be given to specially chosen industries--so-called green industries. In the process, we would get higher fuel prices for consumers, less domestic oil and gas production, more dependence on foreign oil, fewer jobs, less American competitiveness, and less retirement saving. This does not sound like a deal worth making.

I yield the floor.

The following Senators are necessarily absent: the Senator from Utah (Mr. Hatch), the Senator from Illinois (Mr. Kirk), and the Senator from Alabama (Mr. Sessions).

Further, if present and voting, the Senator from Utah (Mr. Hatch) would have voted ``nay.''

Mr. President, first I would like to take a moment to wish Vice President Cheney well as he recovers from his big-time heart transplant surgery. My wife Caryll and I have him in our thoughts and prayers, and we send our best wishes to him and to his entire family. I am sure ``the Angler,'' as he was called, would rather be out fishing in Wyoming on the Snake River, where I know he has been very happy. I hope he can get back out West soon. In the meantime, I know he is fortified by his wonderful family, his wife Lynn, his two daughters, and his grandchildren. We wish him all the best.

In a recent column in the Arizona Republic, my friend Bob Robb laid out a very thoughtful contrast between President Obama's budget and the alternative put forth by House Budget Committee chairman Paul Ryan, which the House of Representatives will be acting on this week. In his column Robb notes that the Ryan budget would get the Federal deficit below 3 percent of GDP by 2015 and after a decade would reduce our debt-to-GDP ratio from today's 100 percent to about 87 percent or just under the share many economists believe affects private sector economic performance and casts doubt on the government's ability to even repay its obligations. Robb explains that ``despite the caterwauling of critics, Ryan doesn't achieve this through brutal budget cuts. Quite the contrary.'' He explains why the Ryan budget would allow spending to increase about 3 percent each year, compared to the Obama budget's about 5 percent annual increases, and he concludes that low interest rates are currently muting the effects of our growing debt on the economy, but it could change overnight. ``And if it changes, the federal government will have to take action much more drastic and quicker than the relatively gentle and gradual pathway provided by the Ryan budget.''

I hope Senators will take a few moments to review this column in its entirety. I ask unanimous consent that it be printed in the Record.

Mr. President, as we know, today the Supreme Court began hearing arguments about the constitutionality of the affordable care act. It is one of the most critically important Supreme Court cases of our time. A Wall Street Journal editorial noted last Friday:

Few legal cases in the modern era are as consequential, or

as defining, as the challenges to [this law]. . . . The

powers that the Obama administration is claiming change the

structure of the American government as it has existed for

225 years. . . . The Constitutional questions the Affordable

Care Act poses are great, novel, and grave.

The editorial, entitled ``Liberty and ObamaCare,'' lays out the constitutional problems with the affordable health care act and focuses on the bill's centerpiece: the individual mandate to purchase health insurance. As the editorial notes, the case against this provision is anchored in ample constitutional precedent, and I quote their conclusion:

The Commerce Clause that the government invokes to defend

such regulation has always applied to commercial and economic

transactions, not to individuals as members of society. . . .

The Court has never held that the Commerce Clause is an ad

hoc license for anything the government wants to do.

I urge my colleagues to read this article, and I ask unanimous consent that it be printed in the Record.

Finally, continuing on the point about the argument on ObamaCare and referring to a different piece that appeared in the Wall Street Journal, I wanted to talk just a little bit in more detail about the justification of this mandate to purchase health insurance, the requirement that every individual in the United States be the recipient of a specifically defined policy by the U.S. Government.

The rationale the government has provided is that if we do not do this, then free riders or people who do not have insurance but might get sick will end up shifting all of the burden of their care onto the rest of us, and therefore the government needs to regulate that by forcing everybody to buy insurance. On March 20 the Journal published a piece by Douglas Holtz-Eakin and Vernon Smith, a former CBO Director and an economics professor, respectively, which I think really debunks this argument on the merits. It explains the real reason this mandate, as well as a dramatic expansion of Medicaid, is unconstitutional. I just wanted to highlight the points they make.

First, Holtz-Eakin and Smith address this individual mandate question. States, of course, have general police power to regulate the conduct of their citizens, but Federal power, by contrast, is very limited over individuals.

The authors make the important point that heath care policy has traditionally been a State function. Health

care needs relate to individuals and vary from person to person and region to region. As a policy matter, States have a better understanding of what kind of improvements to health care access are needed.

Here is what they wrote:

The administration's attempt to fashion a singular,

universal solution is not necessary to deal with the

variegated issues arising in these markets. States have taken

the lead in past reform efforts. They should be an integral

part of improving the functioning of health-care and health-

insurance markets.

If the States have the legal power to address health issues and are better equipped to do so, then where does the justification for Federal jurisdiction come from? The authors note that the administration's argument is that the Federal Government mandate is needed to address the cost-shifting, the thing I talked about before. But they note that this is a red herring. ``In reality,'' the authors write, ``the mandate has almost nothing to do with cost-shifting.'' That is because, in actuality, the young and the healthy--the people who are not buying health insurance--aren't imposing much of a burden on the system because they do not get sick that often. They do not need as much insurance because they do not need as much health care. The authors say that ``the insurance mandate cannot reasonably be justified on the ground that it remedies costs imposed on the system by the voluntarily uninsured.'' In other words, as I said, there is not that much free- riding going on.

The authors conclude that the real purpose of the mandate is not to decrease the costs of uncompensated care, it is meant to force the young and the healthy to buy health insurance at rates far above the amount and scope of coverage they actually need because they are generally healthy individuals. But this extra money will help fund health insurance companies and therefore offset the huge increased costs imposed upon them by ObamaCare's many new regulations. This is the real reason for the individual mandate. In fact, as an amicus brief by over 100 economists points out, ``The [Affordable Care] Act is projected to impose total net costs of $360 billion on health insurance companies from 2012 to 2021.'' With the mandates, however, ``insurance companies can be expected to essentially break even.'' This is no coincidence.

If this is the real justification for the mandate to purchase health care, I submit it should have been done through an enumerated power-- perhaps under the tax power of the Federal Government, which is at least one of the powers the Constitution explicitly provides.

In any event, this individual mandate cannot be justified to regulate interstate commerce. The supporters of the mandate have therefore introduced a second argument. They say health care is just different from all other commerce. It is bigger. Everybody has to have health care--as if they did not have to have food on the table or shelter over their head or clothes on their back and so on. In any event, they say health care is different and somehow this difference gives Congress the right to force people to buy government-mandated health insurance under its power to regulate interstate commerce. But the argument that ``this particular market is just different'' is beside the point even if it were true because it does not articulate a constitutional limitation that is judicially enforceable.

The question before the Court is whether there is any limit to Congress's power to regulate commerce. Obviously, the Framers would never have countenanced a Federal requirement to purchase a product so that the government could then regulate it. So what limit on constitutional power is suggested by the health care market? None. That is precisely the point. The government cannot draw a line, and, as a result, it would have to argue that there is no limit to its powers, and that, of course, would run counter to the reason the Framers put limitations into the Constitution.

The individual mandate is not the only provision in ObamaCare that is constitutionally impermissible. The Medicaid expansion is also violative. While Congress has well-established power to use its purse strings to encourage the States to adopt certain Federal policies, it cannot force them or compel them to do so. ObamaCare's Medicaid expansion essentially coerces the States into complying with new Medicaid policies.

This occurs in two different ways. First, if a State does not comply with the ObamaCare eligibility expansion, it would lose all of its Federal Medicaid funds--even for patient populations that the State had already covered long before ObamaCare was passed. Few if any States would be able to continue their existing Medicaid Programs if they lost all of this Federal funding.

An amicus brief signed by over 100 economists examined Medicaid data to determine the economic impact of States losing all of their Medicaid funds, and it found that if States were forced to absorb Federal Medicaid expenditures into their own State budgets, ``the State's total budgetary expenditures would jump by 22.5 percent.'' In other words, there is no real choice. The options for States are to do as the Federal Government says or leave Medicaid, which by now is so engrained in the care for the indigent that unwinding it, in effect, disentangling it from existing Federal-State relationships, would be virtually impossible and would obviously jeopardize care for the population without other health coverage. This is coercion, plain and simple. It is unconstitutional.

Second, ObamaCare expands Medicaid eligibility to everyone under 138 percent of the Federal poverty level. For individuals who make less than 138 percent of the poverty level, ObamaCare provides no means for complying with the individual mandate other than enrolling in Medicaid. In their brief to the Supreme Court, the States suing over the Medicaid expansion said it best:

When Congress mandates that Medicaid-eligible individuals

maintain insurance, but provides no alternative means for

them to obtain it, it is impossible to label the States'

participation in Medicaid voluntary.

If it is the only way someone can get it, it is not voluntary.

Well, ObamaCare, as a whole, cannot survive without these unconstitutional provisions, and these are the reasons I believe it will and can be struck down as unconstitutional.

Mr. President, the last subject I would like to comment on is an unrelated subject. It has to do with comments the President was overheard making in a meeting he was holding with Russian President Dmitri Medvedev at the Nuclear Security Summit in South Korea. He had a hot mike which captured comments he was making privately to President Medvedev. He requested a little space, as he put it, in negotiations over missile defense issues until after the election when he said he would have more flexibility.

Well, obviously, this presents a problem that is going to have to be discussed with the Congress because if the President is, in effect, saying he would like to make a deal to limit U.S. missile defenses now, but he would be accountable to the American public if they became aware of it before his reelection bid, it would be very difficult for him to make the kind of concessions that President Medvedev wants. But if the Russian President would just wait until after the next election, then the President will have more flexibility to work with the Russians on what they want.

Well, President Medvedev very helpfully said: I will pass this on to Vladimir.

Here are a few things we know: We know President Obama canceled plans to station antiballistic defense systems in Poland and the Czech Republic. We know the President supported language in a new START treaty to link missile defense to nuclear reduction. We know the administration is sharing information with Russia, including plans to deploy missile defenses in Europe. We know the President has significantly reduced funding for and curtailed development of the U.S. national missile defense system, undermining our ability to effectively intercept long-range ballistic missiles, and we know the President has doubled down on efforts to reduce our nuclear arsenal while failing to honor his promises to modernize the aging nuclear weapon complex.

What we don't know is what President Obama has in mind for working

with the Russians after his reelection when he would--as he put it-- have some flexibility in negotiating with them. Perhaps the Russians in whom the President confided could shed some light on missile defense plans. Then perhaps the President should shed that light on these negotiations with the American people before discussing them with the Russians.

I yield the floor.

The following Senators are necessarily absent: the Senator from Utah (Mr. Hatch), the Senator from Utah (Mr. Lee), and the Senator from Illinois (Mr. Kirk).

I yield back.

The following Senator is necessarily absent: the Senator from Illinois (Mr. Kirk).

The following Senator is necessarily absent: the Senator from Illinois (Mr. Kirk).