Floor Statements

Mr. President, I ask unanimous consent to speak for as much time as I might consume.

Mr. President, I rise today to urge my colleagues to support H.R. 1249, the Leahy-Smith America Invents Act. Some other responsibilities may take me from the Senate floor during this coming week when we will be debating the act and therefore I wanted to lay out my views at this time, strongly urging my colleagues to support the bill.

Although the present bill originates in the House of Representatives, it is actually based on and is substantially identical to the bill that passed the Senate in March by a vote of 95 to 5. Also, before Chairman Smith brought his bill to the House floor, he negotiated final changes to the bill with the lead supporters of the measure in the Senate Judiciary Committee. The House and Senate have now been working on patent reform for 6 years. The present bill is a good bill. It reflects a genuine compromise between the House and the Senate. It is a bill that will provide substantial benefits to the U.S. economy in the coming years, so I hope that, as I said, the Senate will adopt this legislation and be able to pass it on directly to the President for his signature.

The overarching purpose and effect of the present bill is to create a patent system that is clearer, fairer, more transparent, and more objective. It is a system that will ultimately reduce litigation costs and reduce the need to hire patent lawyers. The bill will make it simpler and easier to obtain valid patents and to enforce those patents, and it will cure some very clear litigation abuses that have arisen under the current rules, abuses that have done serious harm to American businesses.

By adopting the first-to-file system, for example, the bill creates a rule that is clear and easy to comply with and that avoids the need for expensive discovery and litigation over what a patent's priority date is. By adopting a simple definition of the term ``prior art,'' the bill will make it easier to assess whether a patent is valid and cheaper for an inventor to enforce his patent. By recognizing a limited prior user right, the bill creates a powerful incentive for manufacturers to build factories and create jobs in this country. By allowing post-grant review of patents, especially low quality, business method patents, the bill creates an inexpensive substitute for district court litigation and allows key issues to be addressed by experts in the field. By eliminating the recent surge of false-marking litigation, the bill effectively repeals what amounts to a litigation tax on American manufacturing.

Let me take a few moments to describe how the provisions of this bill will provide concrete benefits to American inventors, both large and small, and to the American manufacturing economy. First, prior commercial use defense.

A new provision of the present bill that was added by the House of Representatives will provide important advantages to U.S. manufacturers. Section 5 of the bill creates a new defense to patent infringement of prior commercial use. This new defense will ensure that the first inventor of a new process, or of a product used in a manufacturing process, can continue to use the invention in a commercial process even if a subsequent inventor later patents the idea. For many manufacturing processes the patent system presents a Catch-22. If the manufacturer patents the process, he effectively discloses it to the world. But patents for processes that are used in closed factories are difficult to police. It is all but impossible to know if someone in a factory in China, for example, is infringing such a patent. As a result, unscrupulous foreign and domestic inventors will simply use the invention in secret without paying licensing fees. Patenting such manufacturing processes effectively amounts to giving away the invention to foreign manufacturers.

On the other hand, if the U.S. manufacturer does not patent the process, a subsequent party may obtain a patent on it and the U.S. manufacturer will be forced to stop using a process that he was the first to invent and which he has been using for years.

The prior commercial use defense provides relief to U.S. manufacturers from this Catch-22, allowing them to continue to use a manufacturing process without having to give it away to competitors or running the risk that it will be patented out from under them. To establish a right to this defense, however, the America Invents Act requires the manufacturer to use the process in the United States. As a result, the AIA creates a powerful incentive for manufacturers to build their factories and plants in the United States. Currently, most foreign countries recognize some prior user rights that encourage manufacturers to build facilities in those countries. This bill corrects this imbalance and creates a strong incentive for businesses to create manufacturing jobs in this country.

Second, something called supplemental examination. A provision of this bill that will particularly benefit small and startup investors is section 12, which authorizes supplemental examination of patents. It is one of the reasons the bill has such strong support in the small business community. Currently, even minor and inadvertent errors in the patent application process can lead to expensive and very unpredictable and very inequitable conduct litigation. It is often the case that startup companies or university researchers cannot afford to hire the very best patent lawyers. Their patents are prosecuted by an in-house attorney who does a good enough job but who is unfamiliar with all of the sharp corners and pitfalls of the inequitable conduct doctrine, such as the need to present cumulative studies and prior art. Later, when more legally sophisticated investors evaluate the patent for potential investment or purchase, these minor flaws in prosecution can deter the investor from purchasing or funding the development of the invention. An investor would not risk spending hundreds of millions of dollars to develop a product if a potential inequitable conduct attack may wipe out the whole investment.

Parties on both sides of these exchanges report that investors routinely walk away from inventions because of their inability under current law to resolve uncertainties whether a flaw in prosecution was, in fact, inequitable conduct. These decisions not to invest in a new invention represent important new cures never tested and brought to market and other important inventions that are never developed.

The America Invents Act provides a solution to this problem by authorizing supplemental examination of patents. This new proceeding will allow inventors or patent purchasers to return to the Patent Office with additional material and have the Patent Office reevaluate the patent in light of that material. If the patent is invalid in light of the new material, the Patent Office will cancel the claims. But if the office finds that the patent is valid, the parties will have a patent that they can be legally certain will be upheld and enforced. The authorization of supplemental examination will result in path- breaking inventions being developed and brought to market that otherwise would have lingered on the shelf because of legal uncertainty over the patent. It will ensure that small and startup companies with important and valid patents will not be denied investment capital because of legal technicalities.

Let me talk about what I think is undoubtedly the most important among

the bill's changes to current law, and that is its transition to the first-to-file system. This long overdue reform will create a system for establishing a patent's priority date that is official, simple, transparent, and fair. Priority dates not only establish priorities between competing patent applications for the same invention but are also used to measure a patent against potentially invalidating prior art.

Currently, establishing a priority date requires expensive litigation and discovery into what the inventor's notebooks show and when they show it and whether the inventor diligently perfected his invention after he conceived of it.

Also, for businesses seeking legal certainty, our current system can be a nightmare. A company hoping to bring a new product to market in a particular field of technology has no way of knowing whether a competitor that belatedly sought the patent on its new product will succeed in securing a valid patent on the product. It all depends on the invention date the competitor will be able to prove relative to the company that the company developing the product can prove.

Given that both the product developer and competitor can rely on their own secret documents that the other side will not see until litigation over the patent commences, neither of these two parties can gain a clear picture of whether a patent is valid without years of litigation and millions of dollars of discovery and other litigation costs. Under first to file, by contrast, inventors will file informal and inexpensive provisional applications. These applications need only disclose what the invention is and how to make it, information the inventor already needs to have in his possession anyway in order to establish a priority date under the current system. Under first to file, once the inventor files this information with the Patent Office, he has a priority date that is both secure and public. The application is a government document. There is no need to litigate over its priority date. We know that.

Other industry participants will be able to easily determine the patent's priority date, allowing them to measure the patent against prior art and determine if it is valid. There will be no opportunity to fraudulently backdate the priority date. That date will depend on a government document, not privately held files.

Most U.S. businesses already effectively operate under the first-to- file system. They file applications promptly because it is difficult and risky to rely on proof of invention dates to defeat a competing application that was filed earlier. Also, because the rest of the world uses first to file, U.S. investors need to secure first-to-file priority if they want their patents to be valid anywhere outside of this country.

For many U.S. businesses the America Invents Act does not change the system under which they operate. Rather, it simply allows American businesses to comply with just one set of rules rather than being forced to operate under two different systems.

Another one of the bill's clear improvements over current law is its streamlined definition of the term ``prior art.'' Public uses and sales of an invention will remain prior art, but only if they make the invention available to the public. An inventor's confidential sale of his invention, his demonstration of its use to a private group, or a third party's unrestricted but private use of the invention will no longer constitute private art. Only the sale or offer for sale of the invention to the relevant public or its use in a way that makes it publicly accessible will constitute prior art.

The main benefit of the AIA public availability standard of prior art is that it is relatively inexpensive to establish the existence of events that make an invention available to the public. Under current law, depositions and litigation discovery are required in order to identify all of the inventor's private dealings with third parties and determine whether those dealings constitute a secret offer for sale or third party use that invalidates the patent under the current law's forfeiture doctrines. The need for such discovery is eliminated once the definition of ``prior art'' is limited to those activities that make the intention accessible to the public. This will greatly reduce the time and cost of patent litigation and allow the courts and the PTO to operate much more efficiently.

Both of these last two changes--the first to file and the new definition of ``prior art''--will also protect American inventors against theft of their invention both at home and abroad. Under current law, if an American inventor sells or otherwise discloses his invention, there is a risk that an unscrupulous third party will steal the idea and file a U.S. patent for it. If the thief claims he himself made the invention before the U.S. inventor, then the U.S. inventor will need to prove the invention was stolen from him. Current law even allows activities that occur in a foreign country to establish a priority date for a U.S. patent. Thus, if a U.S. inventor who has been a victim of theft is unable to prove that activities alleged to have occurred in China or India, say, never actually took place, he not only loses his patent but the foreign thief can obtain a U.S. patent and block the U.S. inventor from practicing his own invention.

Finally, under current law, even if the U.S. inventor files a patent application right away, his rights still are not secure. Under current law, an early filing date can be defeated by another applicant's claim that he conceived of the invention earlier. Thus a foreign thief can claim he came up with the idea in his overseas laboratory, and the U.S. inventor would bear the burden of proving that a fraud had been perpetrated in a foreign country.

Under the America Invents Act, by contrast it will be much harder for thieves, both foreign and domestic, to steal a U.S. inventor's invention. Under this bill, if a U.S. inventor publicly discloses his invention, no third party's application filed after that date can be valid because the filing date is what will determine priority, not a purported date of conception. Nor can a third party easily contrive fake prior art to defeat the patent. Under the AIA, only those actions that made the invention publicly available will constitute prior art, and these are much harder to fake than are claims of having secretly made the invention in a private laboratory, again, say, in China. Under new section 102(b)(1)(B), once the U.S. inventor discloses his invention, no subsequent prior art can defeat the invention. The U.S. inventor does not need to prove that the third party disclosures following his own disclosures are derived from him. He can thus take full advantage of the grace period and disclose his invention in academic papers and at trade shows without worrying that such disclosures will lead to theft or fraudulent invalidation of his patent.

Similarly, under the America Invents Act, once the U.S. inventor files even a provisional application, his rights will be secured. Under this bill, no one can file a later application but claim an earlier priority date because the priority date is set by the filing date. The provisional application also constitutes section 103 prior art as of its filing date. As a result, a third party's patent for a trivial or obvious variation of the patent will be invalid and will not crowd out the original inventor's patent rights.

Finally, validating prior art will depend on publicly accessible information, not private activities that take place, for example, in a foreign land. As a result, it will be impossible for a third party who derived the invention from a U.S. inventor's public disclosure or patent application to steal the invention or sabotage the U.S. inventor's patent. The only way to obtain priority or invalidate the invention would be to file or publicly disclose the invention before the U.S. inventor has done so--something that will obviously be impossible for the deriver to do.

Finally, I would like to talk about false marking for a moment. I would like to describe the bill's important reforms to the false marking statute. The America Invents Act reins in abuses that are reflected in a recent surge in false marking litigation. It allows such suits to be brought only by those parties who have actually suffered a competitive injury as a result of false marking.

Currently, such suits are often brought by parties asserting no actual competitive injury from the marking--or who do not even patent or manufacture anything in a relevant industry. Many cases have been brought by patent lawyers themselves claiming the right to enforce a fine of $500 for every marked product. One manufacturer of plastic cups who stamped his patent number on his cups was recently sued by a lawyer for $500 for each disposable

cup that was sold, for a gargantuan total of $9 trillion.

In reality, the bulk of these suits settle for their nuisance value, the costs of continuing to litigate. They represent a tax that patent lawyers are imposing on domestic manufacturing--a shift in wealth to lawyers that comes at the expense of manufacturing jobs. Well, this bill prevents such abuses by repealing the statute's qui tam action while still allowing parties who have separate actual injury from false marking to sue and allowing the United States to enforce a $500-per- product fine where appropriate. Qui tam statues are a relic of the 19th century and generally produce far more litigation than is in the public interest. Almost all of these statutes have been repealed.

The America Invents Act continues this trend. By repealing the false marking qui tam statute, the AIA will allow American companies to spend money hiring new workers rather than fighting off frivolous false marking suits.

In conclusion, the America Invents Act will provide important benefits to U.S. inventors of all sizes, to startup companies, to domestic manufacturing, and to the U.S. economy generally. I look forward to its passage by the Senate and its enactment into law.

As the majority leader stated in his remarks in leader time, I hope those who may have amendments will immediately file those amendments so the Senate can take them up in good order, have plenty of time to debate them, and dispose of them in the appropriate way. It would be my hope the Senate will end up passing the bill adopted by the House of Representatives so our action can result in sending the bill directly to the President for his signature. That is an accomplishment that could be achieved with cooperation between the House and the Senate, between Democrats and Republicans, between the legislative and executive branches, and I think it would certainly begin to mark the time when the American people could see their legislative representatives begin to work together on their behalf.

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

The following Senator is necessarily absent: the Senator from Florida (Mr. Rubio).

The following Senator is necessarily absent: the Senator from Florida (Mr. Rubio).

Mr. President, I will support this legislation but with very serious reservations.

I start with the premise that this debt limit extension is not the one piece of legislation that will change everything wrong in Washington. It is, at best, a reversal of previous tax-and-spend policies, with some movement down the road to fiscal responsibility.

The bill sets us on a course that, if we adhere to it, will eventually enable us to balance our budget, draw down our debt, put entitlement programs on a sustainable path, and create the conditions for strong economic growth. That it could have been better is absolutely true as a substantive matter, but politically, the White House and the tax-and-spend Democrats in Congress would not agree to more. They control this Chamber and the executive branch of government.

A second premise of Republican leadership was that the U.S. Government must pay its bills, not just to investors in U.S. bonds but to fulfill its commitments to the American people. From Social Security to national defense, we have obligations that Republicans insist must be met. So default was not an option. That meant agreeing to terms for a debt extension that satisfied neither party.

Another premise is to focus on job creation and restoring a healthy economy. That meant not only constraining Washington spending through greater accountability but preventing job-killing tax hikes. In this, we succeeded. Contrary to some public talk, there is nothing in this legislation that would cause future tax increases. If there were, I would not support this legislation.

With this legislation, we have prevented tax increases demanded by the President, cut spending over the next 10 years, and created a mechanism to address additional savings, especially in programs such as Medicare, Medicaid, and Social Security, all of which will eventually default on their commitments without reform, and we averted a credit crisis for the U.S. Government.

Here is why I have such serious reservations about the legislation. In an effort to extract a pound of flesh from Republicans, the White House, frustrated that it could not raise taxes, insisted on massive cuts in defense spending--some $350 billion, by White House reckoning, over the next 10 years, potentially $18 billion less than the President's own budget just for next year. Moreover, the White House insisted that defense suffer an additional $492 billion in cuts over the same period if the select committee set up by this bill fails to produce or Congress refuses to adopt recommendations on how to cut overall government spending to meet the goals of the bill.

Mind you, these cuts in defense were not the result of careful planning and analysis. They were just arbitrary percentages thrown out in negotiations, totally unconnected to actual defense requirements. Worse, the cuts that

would be triggered if the select committee recommendations fail were intentionally designed to be so large, so unimaginable, so irresponsible that Congress would be incented to approve the select committee's recommendations. The word ``Armageddon'' was used to characterize this scheme. Can you imagine anything more irresponsible, for the Commander in Chief of the military to promote--not just promote but insist on the knowing destruction of the U.S. military as a means to threaten Congress?

The theory was that the consequences of inaction by the Congress must be so severe that no responsible Senator or Representative could dare allow the result that we would be forced to accept the select committee recommendations on pain of seeing the U.S. military decimated. This should never have been agreed to by Members of Congress but most of all never promoted by the President. To me, it comes close to violating our oath of office and the President's responsibilities as Commander in Chief. But it is done. My vote will not change it.

The best way for me to avoid this Armageddon is to stay in the fight and, if necessary, urge my colleagues to disregard this provision. Sixty Senators would have to agree. But I cannot imagine Senators, and even the President, when faced with the actual versus the hypothetical choice of knowingly destroying our military capacity to protect the United States, would allow it to happen when we would have the ability to prevent it. As reckless as this President is to even contemplate, much less threaten, to incapacitate our military, I cannot imagine the American people would countenance such action.

As I evaluate the work of the committee, if anyone says to me, remember, the trigger is Armageddon for the U.S. military, my response will be, let's take that debate to the American people and let them decide. The thought that this trigger would force Senators to make unwise concessions underestimates the American people's commitment to their own security. The White House is miscalculating. It is so Draconian that it will not work. Even this President could not implement it.

So because we cannot default in our commitments, because we have to start somewhere on our new journey toward fiscal sanity--and this is a good start--because we have to focus on job creation, not more taxes that will kill job creation, we should adopt this legislation. But because of its irresponsible and dangerous, even cavalier treatment of national defense, we will need to work very hard to restore spending necessary for our national security and commit to reject the threat of Armageddon inserted into this bill by the White House.

(Mr. DURBIN assumed the Chair.)

Joint Select Committee

The following Senator is necessarily absent: the Senator from Oklahoma (Mr. Inhofe).

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

Mr. President, I would like to begin by speaking for just a moment about some comments the distinguished majority leader gave this afternoon in his opening comments and then talk a little bit about the general issue we are faced with--frankly, in an effort to see if we can come to common ground.

Let me start with a couple comments the majority leader made this afternoon. He has talked more than once about the fact that in his view, the Republican leaders have wasted time by pursuing a proposal they knew the Senate would not pass. I think there are two things to say about that.

One could say the same about the majority leader's proposal. He hopes the Senate will not pass that either. So we have two proposals, one by Speaker Boehner that passed the House of Representatives but Senator Reid declared dead on arrival, and indeed it was tabled last night; the other, the Reid proposal, which is also dead on arrival in the Senate. As Leader McConnell noted this morning, there is a letter that has sufficient signatures on it to defeat it, and, in addition to that, I can tell you I have talked to my colleagues--all my Republican colleagues--and it will be defeated. I think the majority leader knows that.

So the only question with regard to the Senate majority leader's proposal is, Why would we waste additional time debating a proposal we know is going to fail? Why have that vote at 1 a.m. tomorrow morning? Let's get it done, get it over with, and move forward. I think that is the best way to try to reach a conclusion.

I would also note the reason the majority leader declared the Boehner proposal dead was for two reasons; one, because it had a balanced budgeted amendment attached to it. I just wish to make the point that I know most of my Democratic colleagues do not support a balanced budget amendment. But I do think it is worth noting that depending upon which poll, 70, 80, more than 80 percent of the American people support a balanced budget amendment.

I do not think we can blame Speaker Boehner for including a balanced budget amendment in the Boehner legislation that was sent over here. It is pretty logical that if the American people say they support something with that degree of support, that we would include it in legislation to try to balance the budget.

But the majority leader here said no. That means it is dead on arrival in the Senate. That should tell us something about the Senate Democrats. President Obama talks about the need for a balanced approach. Speaker Boehner says: How about a balanced budget? Leader Reid says no. That is the first point.

It seems to me the second point is there is a difference of opinion about how long this debt ceiling extension should last. Speaker Boehner has always said there should be at least a dollar-for-dollar reduction in spending for every $1 the debt ceiling is increased. I think that makes sense. If we are going to increase the debt ceiling $2.4 trillion, then we ought to have $2.4 trillion in savings; otherwise, we are going to have to keep on raising the debt ceiling over and over. I would note the savings are savings that occur over a 10-year period of time. So it is not as though we are cutting that immediately, although the debt ceiling

extension would be $2.4 trillion for just the next 16 months. That is how much debt we are going to accumulate, just to the end of President Obama's term in office.

There is not enough savings to do that, that has been agreed to. Republicans have all kinds of ideas about savings that could get to $2.5 trillion. Democrats have said no. The only thing we can agree on is about $1.2 trillion. So the Republican leader said: Fine, let's do a debt extension equal to $1.2 trillion. That takes us at least through the end of the year, and then we will have a committee--both sides agree we need to have a select committee that will make recommendations for how to get the remainder of the savings and potentially more. That is a good idea.

But the President has said he does not want to rely on that process because maybe it will not result in actual savings he can count on. He might have to veto it. For whatever reason, he is not confident it would occur, and he does not want to have to face this issue again at the time he is campaigning for election. I do not blame him for that. He might well view it as a distraction. It certainly is unsettling to the markets.

But I would argue that as much it is a result that we would like to avoid, by the same token, it does focus the public's attention on what we need to do around here, which is reduce spending. We did not get into this mess for any other reason other than the fact that we have spent too much money.

We have had annual spending of about $1.2 trillion since President Obama became President. We have had annual deficits of about $1.4 trillion. Do we see any connection there? Obviously, our problem is spending. So we need to get a handle on that. That is why I think the Boehner proposal made sense, but the leader says it was dead on arrival. He was right. The Reid proposal is also dead on arrival. Let's get it over with and move on to a solution we can agree with.

The second thing I wanted to mention, the majority leader has been very critical of what he calls tea party extremists, people who do not want to vote to increase the debt ceiling under any circumstances. It kind of reminds me of Senator Barack Obama, who voted against extending the debt ceiling, and the language is eerily similar. It is ``failed leadership'' he pronounced. Tea party folks say this represents failed leadership, so we are not going to vote for a debt extension.

The President did not vote for the debt ceiling extension when he was a Member of this body. I do not say that to criticize the President but rather just to suggest to my colleagues that we ought to have the same standard applied to all. If they think it is wrong for the tea party people to stand on principle and say we are not going to raise the debt ceiling, then they can say the same about President Obama when he was a Senator. But if they are going to criticize the tea party folks for standing on principle, criticizing leadership, saying they do not want to raise the debt ceiling, they might want to think about what their colleague, then-Senator Obama, did.

The fact is, name calling does not help. Let's stop talking about extremist tea party folks. I would not call the President an extremist when he voted against the debt ceiling extension. He has already admitted he made a mistake. Republicans in the leadership in both the House and Senate have made it clear we believe the debt ceiling should be extended. We want to be able to do that, for a variety of reasons we have discussed.

We do not want to put the American economy in jeopardy. We do not want to jeopardize the savings of people who could see those savings dissipate if the stock market continues to go down, and so we do need to get this issue behind us.

The majority leader complained this morning that Republicans need to come talk to him. The minority leader needs to come and talk to him. He said I would have hoped someone would come to us, come to the table, and he specifically referred to Senator McConnell.

My response is, Why do the Republicans always have to come up with the ideas? Three times the House of Representatives has passed a proposal only to be criticized each time by the Democrats who invite them to come up with proposals. Remember, the first was the Ryan budget--savaged by my Democratic colleagues and by the President.

House Republicans said yes; Senate Democrats said no. Then, they came up with cut, cap, and balance, something that is pretty popular around the country. It would cut spending, would cap it, and would ultimately have a balanced budget amendment that would keep it capped. Democrats roundly criticized that. In the Senate, they voted it down.

Finally, John Boehner came up with his last proposal, and it also included a balanced budget amendment--declared dead on arrival. The third time Democrats said no. I think Republican leaders are getting a little tired of being invited by our Democratic friends to come up with ideas, only to have them voted down and criticized. Where is the Democratic proposal? Where is the proposal by the President? I think it is time for Democrats to come up with an idea and maybe Republicans can take a look at it to see whether we like it.

Finally, the majority leader said we have another filibuster in our path. ``They,'' meaning Republicans stall and delay. Last night, Leader McConnell said: Let's have the vote tonight, right now. We do not need to stall or delay another minute.

The majority leader said: No, I do not want to vote on my proposal yet. I want to vote on it at 1 a.m. on Sunday morning. Leader McConnell said today: We are ready to vote on it today without delay--now, at 3 o'clock, at 6 o'clock, whatever. Let's vote on it. We do not need to continue to waste time. The majority leader said: No, we will vote on it at 1 a.m, Sunday morning. OK. I will be here. But I wonder what the American people think of such a dysfunctional body that we cannot even, by unanimous consent, bring a matter to the Senate floor, vote on this motion to invoke cloture to proceed to the leader's bill.

Those are some things I just wanted to comment on that the leader had to say. Finally, what I would like to do is ask unanimous consent to have printed in the Record, at the close of my remarks, a Wall Street Journal editorial entitled ``The Road to a Downgrade,'' dated July 28.

Mr. President, let me quote from a piece of this. The editorial starts by noting that the President:

. . . inherited a recession and responded by blowing up the

U.S. balance sheet. Spending as a share of GDP in the last

three years is higher than at any time since 1946. In three

years the debt has increased by more than $4 trillion thanks

to stimulus, cash for clunkers, mortgage modification

programs, 99 weeks of jobless benefits, record expansions in

Medicaid, and more.

The forecast is for $8 trillion to $10 trillion more in red

ink through 2021. Mr. Obama hinted in the press conference

earlier this month that if it weren't for Republicans, he'd

want another stimulus.

Wall Street Journal says:

Scary thought: None of this includes the ObamaCare

entitlement that will place 30 million more Americans on

government health rolls.

Then they conclude:

This is the road to fiscal perdition. The looming debt

downgrade only confirms what everyone knows: Congress has

made so many promises to so many Americans that there is no

conceivable way those promises can be kept. Tax rates might

have to rise to 60 percent, 70 percent, even 80 percent to

raise the revenues to finance these promises, but that would

be economically ruinous.

It concludes:

This insistence on no reform reinforces the notion that our

entitlement state is too big to afford but also too big to

change politically. This is how a AAA country becomes AA, the

first step on the march to Greece.

Charles Krauthammer, a terrific observer of the political scene, in his column Friday in the Washington Post, concluded with the following words:

Obama faces two massive problems--jobs and debt. They're

both the result of his spectacularly failed Keynesian gamble:

massive spending that left us a stagnant economy with high

and chronic unemployment--and a staggering debt burden.

That is the problem, a staggering debt burden that requires us to increase our debt ceiling, and Republicans are saying: In order to stop this cycle of more promises and more spending, we have to apply some accountability, some common sense, some good judgment. And that means,

first and foremost, stop the spending. I note, as I said before, that under President Obama annual spending has gone up $1.2 trillion in each of the years and the deficit by $1.4 trillion. I ask again, do you notice any correlation there? That is the problem.

I know my Democratic colleagues love to complain about President Bush. I note that in the year 2007--a year before the recession--the deficit under President Bush was just $161 billion--a 10th of what the deficit is today.

Mr. President, my colleagues and I all need to focus on the issue before us, which is to begin to reduce spending, to insert some accountability into the process, and to include some system changes so that we can't continue this unwieldy government spending we never seem to be able to stop. The evidence of how difficult it is is the fact that for the last 4 weeks now we have been arguing with each other about how we are going to effect $2.4 trillion in savings in order to extend the debt ceiling by $2.4 trillion. We can't figure out a way to do it. That should show you what is wrong with our system and why we need to put in some accountability.

I am confident that over the next 48 hours or so, the White House and legislative leaders are going to find a way to both extend the debt ceiling and come up with savings that begin to create a downpayment on this incredible debt as well as system reforms that will give not just the markets but American businesses and families some sense of assurance that we will be able, in the future, to avoid the problem some European countries are going through right now. But that will mean we have to forget about this business of tax increases--which is the worst medicine possible in a time of recession, as the President himself noted--find ways to reduce spending we can agree upon, provide accountability in our government in the future, and in that way assure everyone that we can continue to grow, that growth will produce prosperity and, ironically, more revenues to the Federal Treasury but, more importantly, the standard of living Americans have become accustomed to and have every right to expect.

I yield the floor.

Exhibit 1

[From the Wall Street Journal, July 28, 2011]

The Road to a Downgrade

Even without a debt default, it looks increasingly possible

that the world's credit rating agencies will soon downgrade

U.S. debt from the AAA standing it has enjoyed for decades.

A downgrade isn't catastrophic because global financial

markets decide the creditworthiness of U.S. securities, not

Moody's and Standard & Poor's. The good news is that

investors still regard Treasury bonds, which carry the full

faith and credit of the U.S. government, as a near zero-risk

investment. But a downgrade will raise the cost of credit,

especially for states and institutions whose debt is pegged

to Treasurys. Above all a downgrade is a symbol of fiscal

mismanagement and an omen of worse to come if we continue the

same habits.

President Obama will deserve much of the blame for the

spending blowout of his first two years (see the nearby

chart). But the origins of this downgrade go back decades,

and so this is a good time to review the policies that

brought us to this sad chapter and $14.3 trillion of debt.

FDR began the entitlement era with the New Deal and Social

Security, but for decades it remained relatively limited.

Spending fell dramatically after the end of World War II and

the U.S. debt burden fell rapidly from 100% of GDP. That

changed in the mid-1960s with LBJ's Great Society and the

dawn of the health-care state. Medicare and Medicaid were

launched in 1965 with fairy tale estimates of future costs.

Medicare, the program for the elderly, was supposed to cost

$12 billion by 1990 but instead spent $110 billion. The costs

of Medicaid, the program for the poor, have exploded as

politicians like California Democrat Henry Waxman expanded

eligibility and coverage. In inflation-adjusted dollars,

Medicaid cost $4 billion in 1966, $41 billion in 1986 and

$243 billion last year.

Rather than bending the cost curve down, the government as

third-party payer led to a medical price spiral.

LBJ launched other welfare programs--public housing, food

stamps and many more--that have also grown over time. Last

year, the panoply of welfare programs spent about $20,000 for

every man, woman and child in poverty, according to Robert

Rector of the Heritage Foundation.

Social Security's fiscal trouble began in earnest in 1972

with bills that increased benefits immediately by 20%, added

an annual cost of living adjustment, and created a benefit

escalator requiring payments to rise with wages, not

inflation. This and other tweaks by Democrat Wilbur Mills

added trillions of dollars to the program's unfunded

liabilities. Believe it or not, these 1972 amendments were

added to a debt-ceiling bill.

None of these benefit expansions were subject to annual

budget review and thus they grew by automatic pilot. They are

sometimes called ``mandatory spending'' because Congress is

required by law to make payments to those who meet

eligibility standards, regardless of other spending needs or

tax revenues.

According to the most recent government data, today some

50.5 million Americans are on Medicaid, 46.5 million are on

Medicare, 52 million on Social Security, five million on SSI,

7.5 million on unemployment insurance, and 44.6 million on

food stamps and other nutrition programs. Some 24 million get

the earned-income tax credit, a cash income supplement.

By 2010 such payments to individuals were 66% of the

federal budget, up from 28% in 1965. (See the second chart.)

We now spend $2.1 trillion a year on these redistribution

programs, and the 75 million baby boomers are only starting

to retire.

We suspect that in the 1960s as now--with ObamaCare--

liberals knew they had created fiscal time-bombs. They simply

assumed that taxes would keep rising to pay for it all, as

they have in Europe.

On Monday night Mr. Obama blamed President George W. Bush's

``two wars'' for the debt buildup. But national defense

spending was 7.4% of GDP and 42.8% of outlays in 1965, and

only 4.8% of GDP and 20.1% of federal outlays in 2010.

Defense has not caused the debt crisis.

Many on the left still blame Ronald Reagan, but the debt

increase in the 1980s financed a robust economic expansion

and victory in the Cold War. Debt held by the public at the

end of the Reagan years was much lower as a share of GDP (41%

in 1988 and still only 40.3% in 2008) compared to the

estimated 72% in fiscal 2011. That Cold War victory made

possible the peace dividend that allowed Bill Clinton to

balance the budget in the 1990s by cutting defense spending

to 3% of GDP from nearly 6% in 1988.

Mr. Bush and Republicans did prove after 9/11 that the

Washington urge to spend and borrow is bipartisan.

Republicans launched a Medicare drug benefit, record outlays

on education, the most expensive transportation bill in

history, and home ownership aid that contributed to the

housing bubble. The GOP's blunder was refusing to cut

domestic spending to finance the war on terrorism. Guns and

butter blowouts never last.

Then came Mr. Obama, arguably the most spendthrift

president in history. He inherited a recession and responded

by blowing up the U.S. balance sheet. Spending as a share of

GDP in the last three years is higher than at any time since

1946. In three years the debt has increased by more than $4

trillion thanks to stimulus, cash for clunkers, mortgage

modification programs, 99 weeks of jobless benefits, record

expansions in Medicaid, and more.

The forecast is for $8 trillion to $10 trillion more in red

ink through 2021. Mr. Obama hinted in a press conference

earlier this month that if it weren't for Republicans, he'd

want another stimulus. Scary thought: None of this includes

the ObamaCare entitlement that will place 30 million more

Americans on government health rolls.

This is the road to fiscal perdition. The looming debt

downgrade only confirms what everyone knows: Congress has

made so many promises to so many Americans that there is no

conceivable way those promises can be kept. Tax rates might

have to rise to 60%, 70%, even 80% to raise the revenues to

finance these promises, but that would be economically

ruinous.

Yet Mr. Obama and most Democrats still oppose any serious

reform of Medicare, Medicaid and Social Security. This

insistence on no reform reinforces the notion that our

entitlement state is too big to afford but also too big to

change politically. This is how a AAA country becomes AA, the

first step on the march to Greece.

The following Senators are necessarily absent: the Senator from

South Carolina (Mr. DeMint), the Senator from Texas (Mrs. Hutchison), and the Senator from Oklahoma (Mr. Inhofe).

The following Senator is necessarily absent: the Senator from Mississippi (Mr. Wicker).

The following Senator is necessarily absent: the Senator from Oklahoma (Mr. Inhofe).

Mr. President, I ask unanimous consent to have printed in the Record an editorial from the July 21 edition of the Washington Post. I completely agree with this editorial.

The metric is not how many long overdue individual sanctions are made. We must instead be focused on our goal: preventing the acquisition of a nuclear weapons capability by the Islamic Republic of Iran.

I fear we are spiraling at an accelerating speed to the point when we have but one option left to stop the Islamic Republic of Iran's illegal nuclear weapons ambitions. If that happens, history will judge that we were put into this position by our own failure to avail ourselves of other options while we still had them.

Mr. President, I ask unanimous consent to have printed in the Record a piece from Politico by my colleagues in the House, Chairman Forbes, Chairman Turner, Congressman Bishop, and Congressman Conaway.

I fundamentally disagree with the President when he said in a recent interview with NPR:

A lot of the spending cuts that we're making should be

around areas like defense spending as opposed to food stamps.

I wish the President would listen to the advice of Secretary Gates, who said in his AEI speech this May:

I revisit this history because it leads to an important

point for the future: when it comes to our military

modernization accounts, the proverbial ``low hanging

fruit''--those weapons and other programs considered most

questionable--have not only been plucked, they have been

stomped on and crushed. What remains are much-needed

capabilities--relating to air superiority and mobility, long-

range strike, nuclear deterrence, maritime access, space and

cyber warfare, ground forces, intelligence, surveillance and

reconnaissance--that our nation's civilian and military

leadership deem absolutely critical.

My colleagues in the House are absolutely right when they wrote:

The time to draw a line in the sand, and go on the offense

to support national security must be now.

Mr. President, let me associate myself with the remarks of the Senator from Minnesota. My wife and I traveled to Oslo, Norway, a few years ago and were deeply touched by the hospitality of the people there and the peacefulness of the country. It is almost too much to bear to think about what they have gone through as a result of this recent tragedy. I appreciate her remarks.

Mr. President, the majority and minority leaders talked about the sacrifice of two of our Capitol police officers who died in the line of duty protecting people here at the Capitol and our remembrance of them on this day. The Chaplain also prayed that we remember their sacrifice.

I think it is important for us to pause in circumstances such as this, especially when we are involved in such deeply divided discussions about the issues of the day that confront us.

Mr. President, I also thought it interesting that, regarding the issues we are debating that so deeply divide us, a Wall Street Journal op-ed today appeared, which is one of those rare times when the author puts into a much larger perspective, a more cosmic perspective, what we are talking about and puts it in moral terms--long-term moral terms--rather than just Democrats versus Republicans and the fight of the day.

Mr. President, I ask unanimous consent that this article be printed in the Record after my remarks. It is written by Arthur C. Brooks and is called ``The Debt Ceiling and the Pursuit of Happiness.''

Arthur Brooks is the head of AEI, American Enterprise Institute, and he has written on the subject of happiness in our country and how we get there. His most recent book is called ``The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America's Future.''

His theme in this article was similar to the one in the book, which is that

we have the system we have because Americans have found that it is a system which most leads us to the pursuit of happiness, the achievement of success, and things that are important in our lives. He talks about the fight we are engaged in now about extending the debt ceiling as being a fight against 50-year trends toward statism, which he identifies as a state that would be very disappointing to Americans, where we would not have the ability to pursue our dreams or the same opportunity we have today to be successful if we take risks and to utilize the full potential of the free market system.

He says, ``Consider a few facts,'' and this is the one thing I will quote from his article:

The Bureau of Economic Analysis tells us that total

government spending at all levels has risen to 37 percent of

the gross domestic product today from 27 percent in 1960--and

is set to reach 50 percent by 2038. The Tax Foundation

reports that between 1986 and 2008, the share of Federal

income taxes paid by the top 5 percent of earners has risen

to 59 percent from 43 percent. Between 1986 and 2009, the

percentage of Americans who paid zero or negative Federal

income taxes has increased to 51 percent from 18.5 percent.

And all this is accompanied by an increase in our national

debt to 100 percent of gross domestic product today from 42

percent in 1980.

All of these, obviously, portend a trend toward statism, toward the funding of the state through increased taxation by fewer and fewer people but at a greater and greater amount of money. In his view and in mine, it will ultimately reduce the kinds of incentives that the free market system provides for Americans to be able to earn and hire others and to assist our economy to grow and, in the process, to increase our standard of living.

This is one of the reasons why Republicans have been so focused on reducing spending as the solution to the problem we face in Washington today. Our problem is not that we don't tax Americans enough; our problem is that we spend too much here in Washington. That is manifested by the statistic that now we are spending almost 25 percent of the GDP. We were up to 25, and we are headed back up there. Yet just 3 short years ago, we were at the average level of spending in our country of about 20 percent of GDP. So spending has skyrocketed in the last 3 years.

If a physician is wanting to treat a patient's condition, the physician diagnoses the patient for what is wrong and then treats that illness. What is wrong with us today is that Washington spending is out of control. That is the diagnosis. What is the treatment? The treatment is not to pile more taxes onto an already sick economy. The treatment is to reduce the amount of government spending.

That is what Republicans have urged us to do. The American people, fortunately, are in the same place.

I will cite three surveys that make the point. One of them is a Rasmussen survey, just reported July 22, of likely voters in the country. It asks the question: Would you fear that the debt deal would raise taxes too much or too little? Would you fear that the debt deal will cut spending too little or cut spending too much?

The answer was interesting. Among likely voters, the answer is this: 62 percent of voters believe the deal will raise taxes too much. Only 26 percent think we will raise taxes too little.

On the spending side, 56 percent are afraid it will cut spending too little. Only 25 percent think it will cut spending too much.

We can see the American people are with us here. They understand our problem is spending, not taxes. They are worried we are not going to reduce spending enough and that, in fact, we are going to increase taxes too much. Rasmussen had already done a survey a week before of likely voters. It asked: Do you favor including a tax hike in the deal?

This was interesting. Fifty-five percent of voters said no. Only 34 percent of likely voters said yes. So the majority, by far, is saying don't include a tax hike in the deal. Again, they understand what the problem is: It is not taxes, it is spending.

CNN had a poll a few days before that, and the question--there were several questions in the poll, but the one that struck my eye asked about raising the debt ceiling only if we also cut spending, cap it at certain levels, and pass a balanced budget amendment. That is the so- called cut, cap, and balance proposal that passed the House of Representatives but was tabled by our Democratic colleagues here in the Senate last week. CNN reports that by a 2-to-1 margin the American people thought we should cut, cap, and balance--66 percent favored, only 33 percent opposed.

It is interesting to me the American people have internalized the same thing as we Republicans; and probably the reason Republicans are expressing this is because we have been listening to our constituents who have been telling us this. Our concern is not that we should raise taxes; our concern is that we should cut spending. That is why we have been saying what we have been saying here.

I find it interesting even the President himself--in an earlier time--shared the same sentiment. In August of 2009 he made a similar point. In December of last year, when the tax rates that have been in existence for decades were extended for another 2 years, he said: You don't raise taxes in a recession. He is exactly right. And, by the way, at the time he said that, growth in the quarter was at about 6 percent of GDP. Today, growth is less than 2 percent of GDP. So our economic situation has gotten worse since then. We are up to 9.2 percent unemployment. Obviously, you don't raise taxes in a recession. When you have a bad economic condition, the worst medicine is to raise taxes.

Another point Republicans have been trying to make with regard to this difference between raising taxes or reducing spending is that usually a couple of things happen when Congress sets out to do this. You get the permanent increases in taxes, but you never get the same dollar for dollar or $2 or $3 for $1 that you are promised in reductions in spending. Moreover, when you aim at hitting the millionaires and billionaires--which is usually the excuse for raising taxes--you end up hitting a lot of other folks.

One of the things we are concerned about is exactly what happened with the alternative minimum tax. We tried to make sure 128 specific millionaires didn't get out of paying taxes because of deductions and credits they could take, and so we put into effect the alternative minimum tax. Today, the alternative minimum tax affects 25 million Americans. So when you aim at the millionaires, you hit everybody else. In fact, that is exactly what would happen under the proposal of the President today.

The President says we need to hit the millionaires and billionaires. Well, there are 319,000 American households that report incomes of over $1 million a year, but there are 3.6 million other households that would be affected in the same way by the President's tax increase because they are also in the top two income tax brackets. So when you raise the top two brackets, you are not just going to hit the millionaires and billionaires, you are also going to hit a lot of other Americans who don't report incomes of over $1 million a year.

Probably the primary reason Republicans have argued we should not be raising taxes in this bad economic time is that it is a job killer. This is illustrated by many things, one of which is the President's own Small Business Administration. One of the taxes the President has proposed hiking would hit small businesses especially hard. According to the Office of Advocacy of the Obama Small Business Administration, this tax ``could ultimately force many small businesses to close.'' Why would you impose a tax on small businesses that could ultimately force many of them to close? It is the wrong medicine for a sick economy.

In addition to the fact we always end up hitting a lot more than the millionaires and billionaires, and that taxes are forever but the savings never quite seem to materialize, the most important point here is that raising taxes is a job killer. Two-thirds of all the jobs coming out of a recession are in the small business sector. Fifty-four percent of all jobs in the country are created by small business.

Republicans are going to continue to push for reductions in spending as the way forward here, and I hope during this next week we will be able to get together with our House colleagues, and Republicans and Democrats alike will be able to at least rally around one thing we can all agree on: spending has to be reduced. If later on we need to have discussions about tax reform, that

is a debate I think all of us wish to have. Our Tax Code needs reforming. But let's do that not in the context of raising revenues but rather in the context of making it a Tax Code that would enable us to grow more. At the end of the day, that is what we should all be for. Because a growing pie means there is more for everyone--rich and poor alike--the families of America as well as the governments. I hope my colleagues will focus on what the American people are telling us through these surveys: Let's reduce spending, not increase taxes.

Exhibit 1

[From the Wall Street Journal, July 25, 2011]

The Debt Ceiling and the Pursuit of Happiness

(By Arthur C. Brooks)

The battle over the debt ceiling is only the latest

skirmish in what promises to be an ongoing, exhausting war

over budget issues. Americans can be forgiven for seeing the

whole business as petty, selfish and tiresome. Conservatives

in particular are beginning to worry that public patience

will wear thin over their insistence that our nation's

government-spending problem must be remedied through spending

cuts, not by raising more revenues.

But before they succumb to too much caution, budget

reformers need to remember three things. First, this is not a

political fight between Republicans and Democrats; it is a

fight against 50-year trends toward statism. Second, it is a

moral fight, not an economic one. Third, this is not a fight

that anyone can win in the 15 months from now to the

presidential election. It will take hard work for at least a

decade.

Consider a few facts. The Bureau of Economic Analysis tells

us that total government spending at all levels has risen to

37% of gross domestic product today from 27% in 1960--and is

set to reach 50% by 2038. The Tax Foundation reports that

between 1986 and 2008, the share of federal income taxes paid

by the top 5% of earners has risen to 59% from 43%. Between

1986 and 2009, the percentage of Americans who pay zero or

negative federal income taxes has increased to 51% from

18.5%. And all this is accompanied by an increase in our

national debt to 100% of GDP today from 42% in 1980.

Where will it all lead? Some despairing souls have

concluded there are really only two scenarios. In one, we

finally hit a tipping point where so few people actually pay

for their share of the growing government that a majority

become completely invested in the social welfare state, which

stabilizes at some very high level of taxation and government

social spending. (Think Sweden.)

In the other scenario, our welfare state slowly collapses

under its weight, and we get some kind of permanent austerity

after the rest of the world finally comprehends the depth of

our national spending disorder and stops lending us money at

low interest rates. (Think Greece.)

In other words: Heads, the statists win; tails, we all

lose.

Anyone who seeks to provide serious national political

leadership today--those elected in 2010 or who seek national

office in 2012--owe Americans a plan to escape having to make

this choice. We need tectonic changes, not minor fiddling.

Rep. Paul Ryan's (R., Wis.) budget plan is the kind of

model necessary. But structural change will only succeed if

it's accompanied by a moral argument--an unabashed cultural

defense of the free enterprise system that helps Americans

remember why they love their country and its exceptional

culture.

America's Founders knew the importance of moral language,

which is why they asserted our unalienable right to the

pursuit of happiness, not to the possession of property.

Similarly, Adam Smith, the father of free-market economics,

had a philosophy that transcended the mere wealth of nations.

His greatest book was ``The Theory of Moral Sentiments,'' a

defense of a culture that could support true freedom and

provide the greatest life satisfaction.

Yet today, it is progressives, not free marketeers, who use

the language of morality. President Obama was not elected

because of his plans about the taxation of repatriated

profits, or even his ambition to reform health care. He was

elected largely on the basis of language about hope and

change, and a ``fairer'' America.

The irony is that statists have a more materialistic

philosophy than free-enterprise advocates. Progressive

solutions to cultural problems always involve the tools of

income redistribution, and call it ``social justice.''

Free-enterprise advocates, on the other hand, speak

privately about freedom and opportunity for everybody--

including the poor. Most support a limited safety net, but

also believe that succeeding on our merits, doing something

meaningful, and having responsibility for our own affairs are

what give us the best life. Sadly, in public, they always

seem stuck in the language of economic efficiency.

The result is that year after year we slip further down the

redistributionist road, dissatisfied with the growing welfare

state, but with no morally satisfying arguments to make a

change that entails any personal sacrifice.

Examples are all around us. It is hard to find anyone who

likes our nation's current health-care policies. But do you

seriously expect grandma to sit idly by and let Republicans

experiment with her Medicare coverage so her great-

grandchildren can get better treatment for carried interest?

Not a chance.

If reformers want Americans to embrace real change, every

policy proposal must be framed in terms of self-realization,

meritocratic fairness and the promise of a better future. Why

do we want to lower taxes for entrepreneurs? Because we

believe in earned success. Why do we care about economic

growth? To make individual opportunity possible, not simply

to increase wealth. Why do we need entitlement reform?

Because it is wrong to steal from our children.

History shows that big moral struggles can be won, but only

when they are seen as decade-long fights and not just as a

way to prevail in the next election. Welfare reform was first

proposed in 1984 and regarded popularly as a nonstarter.

Twelve years of hard work by scholars at my own institution

and others helped make it a mainstream idea (signed into law

by a Democratic president) and perhaps the best policy for

helping the poor to escape poverty in our nation's history.

Political consultants would have abandoned welfare reform as

unworkably audacious and politically suicidal. Real leaders

understood that its moral importance transcended short-term

politics.

No one deserves our political support today unless he or

she is willing to work for as long as it takes to win the

moral fight to steer our nation back toward enterprise and

self-governance. This fight will not be easy or politically

safe. But it will be a happy one: to share the values that

make us proud to be Americans.

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

The following Senator is necessarily absent: the Senator from Arizona (Mr. McCain).