CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2008 -- (Senate - March 22, 2007)
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Mr. HATCH. Mr. President, I would like to take a few minutes to talk about an amendment I will offer tomorrow to ensure that as the budget debate continues, Congress works to protect Medicare beneficiaries' coverage choices, especially coverage choices for those beneficiaries living in rural areas and low-income Medicare beneficiaries.
My amendment is simple. It would establish a budget-neutral reserve fund so that if Congress implements improvements to Medicare, Medicaid, or CHIP, it may not do so in a way that leads to fewer coverage choices for Medicare beneficiaries. It also may not reduce the benefits of those beneficiaries who are enrolled in Medicare Advantage plans.
Let me give my colleagues a little bit of history on the Medicare Advantage program which was established by the 2003 Medicare law.
Under Medicare Advantage, health plans receive a monthly payment to provide beneficiaries all of the benefits covered by traditional Medicare.
But Medicare Advantage plans provide a lot more to beneficiaries.
Medicare Advantage plans provide a range of additional benefits not available in traditional Medicare--benefits such as vision and dental care, physical exams, and hearing aids.
Mdicare Advantage plans also have chronic care management programs to help beneficiaries with chronic illnesses such as diabetes or congestive heart failure better manage their conditions and stay healthy.
Now, health plans participating in Medicare is not a new thing.
They've served Medicare beneficiaries for many years going all the way back to the 1970s through programs authorized by Congress.
For the most part though, up through the late 90s, Medicare health plans were largely available only in urban areas.
Going back now for a decade, back to the Balanced Budget Act of 1997, the fact that beneficiaries in rural areas had few, if any , choices, led Congress to take actions to promote plan availability in those areas.
Yes, these actions included increasing payment rates to address the fact that Medicare payments in urban areas were higher--in some cases a lot higher--than payments in rural areas.
I know my home Sate of Utah had difficulty keeping Medicare+Choice plans in the state primarily because payment rates were too low.
Ironically, many Utahns wanted to participate in these plans because they were the only ones offering supplement benefits such as vision care, preventive benefits and prescription drugs to Medicare beneficiaries at the time.
But due to low payments and adverse selection, both Medicare+Choice plans dropped Utah beneficiaries and as a result, my constituents had limited choices for Medicare coverage until the Medicare Modernization Act created the Medicare Advantage program.
So let me show you what beneficiary choices look like today.
The top map shows where plans were available in 2003.
The white space means that only traditional Medicare was available.
In 2007, beneficiaries--whether they live in an urban area or rural area--could chose from different Medicare Advantage plans, and all beneficiaries have more choices.
All beneficiaries can now choose a Medicare Advantage plan that offers them important additional benefits and lower out-of-pocket costs.
Now here is a good example of the benefits of Medicare Advantage--all beneficiaries may choose a plan that has no cost-sharing for breast cancer screening.
We all know the importance of breast cancer screening.
Beneficiaries with diabetes can choose a plan that offers them diabetes self-management services without any cost-sharing.
On cost sharing, according to CMS, millions of beneficiaries can enroll in a plan that limits their out-of-pocket costs to $1,000 a year.
For low-income beneficiaries, protection from high out-of-pocket costs, which they don't have in fee-for-service, is a valuable benefit.
We know that many low income beneficiaries rely on their plans for this protection.
According to CMS, 57 percent of Medicare Advantage beneficiaries have incomes between $10,000 and $30,000 compared to 46 percent of fee-for-service beneficiaries.
Another area I want to talk about is quality. Data from the Medicare Current Beneficiary Survey show that Medicare Advantage beneficiaries are more likely to obtain preventive services, including flu and pneumonia shots and cancer screenings.
Surveys also show that beneficiaries are satisfied with their plans.
So let me conclude by urging my colleagues to keep in mind the following:
Beneficiaries across the nation--whether they live in a rural state like Utah or an urban area like New York City--now have more coverage choices.
These choices offer beneficiaries more benefits and lower out-of-pocket costs.
Beneficiaries are satisfied.
Let's not forget that it was through policy decisions supported by Members on both sides of the aisle that helped achieve those results, and those results, in my opinion, are worth protecting for beneficiaries' sake.
I urge my colleagues to support my amendment.
Mr. President, today we are debating the size and composition of the Federal budget for fiscal year 2008.
This is a critical debate. And it is one that future generations will look to in order to determine where we went wrong or where we went right. Just as adherence to a budget can make or break a family or small business, so too can Congress's development of and adherence to a budget make or break our economy.
Whether it is a family budget, or the congressional budget, it must be based on an honest assessment of the facts. The budget must make reasonable projections about what money is coming in and what money is going out.
A budget must face hard facts, not hide from them.
When I hear from my constituents in Utah, they talk about the need for tax cuts that benefit families and small businesses.
They talk about fixing Social Security and Medicare.
The 2006 annual reports for those programs showed their unfunded liabilities to be $84 trillion in today's dollars. That was up $7 trillion over the previous year.
With 77 million baby boomers about to retire, this is a serious problem.
We need a budget that is serious about the challenges we face, the revenues we can anticipate, and the expectations of the American people.
We need a budget that swings for the fences, but this budget is playing small ball.
It is big spending, without any big ideas, and the result will be big tax hikes on the American people.
After reviewing the bill before us today, I must candidly admit this budget falls short of realistic spending and revenue projections. You could even go so far as to say it's filled with deception and fantasy.
Simply put, this budget is not honest. It spends more than is brought in. And a lot of the revenues it projects are not really there.
If my constituents in Utah budgeted like this, they would have a serious problem making ends meet.
The proponents of this budget claim that it is the cure to everything that ails us.
But Americans know snake-oil when they see it.
This miracle cure will lead to one of two maladies--over time, it will greatly increase the deficit or it will require massive tax increases.
Consideration of this budget would not be possible without the good fortune of our booming economy. Perversely, however, this budget provides a recipe for destroying the extraordinary growth created by this economy.
I don't believe it is an exaggeration to say--the economy is booming and revenues are up. In fact, revenues are up substantially.
They are up because of sound fiscal policy.
They are up because of progrowth tax cuts that have increased productivity and wages.
It is easy to forget and sometimes our memories are short. But, in the autumn of 2001, our economy was in shambles.
We were hit with a one-two punch, and we were down on the mat.
The booming economy of the late 1990s went bust. When the dot-com bubble burst, billions of dollars in equity were lost, and millions of people began looking for work.
And then in the midst of that recession, our Nation was attacked.
It was not a foregone conclusion that a nation at war, already suffering a considerable economic downturn, would emerge with its head held high and an economy on the rebound.
But we did.
And we did so because President Bush and Congress held strong in pushing through tax cuts and stimulus tax incentive bills that have benefited each and every American.
I know that some of my colleagues want to maintain the illusion that our economy is two-tiered; they say that it is great for the rich who are making out like bandits, and terrible for everyone else. And the 2001 and 2003 tax cuts have the lead roles in this melodrama.
However, the numbers tell a much different story.
Americans are paying taxes--a lot of taxes.
Between 2004 and 2006, we saw an inflation-adjusted 20 percent tax revenue increase. This was the largest 2-year revenue increase since 1965.
Tax revenues, at 18.4 percent of gross domestic product, are above the 20, 40, and even 60 year historical averages. That is not enough for Democrats, however, who want to soak the rich, but will wind up drenching the middle class.
The real devil to them is the tax cut for capital gains and dividends.
Supposedly, these capital gains and dividends tax cuts were skewed toward the rich.
These class warriors need to take a vacation in the reality-based community.
Here's the real deal.
First off, stock ownership is not something just for the wealthy.
Sometimes I think that my colleagues are using talking points written in 1933.
Today, stock ownership is for the middle class.
When you turn on college basketball this weekend, you will see commercials enticing people to hire companies to manage their stock portfolios.
They are not being marketed to monocle-wearing, sports car driving, plutocrats.
They are not being marketed on ``Masterpiece Theatre.''
They are being marketed to average families. You will see people at work, people making burgers on the backyard grill, and people with families living in the suburbs buying stocks and bonds, generating capital gains and dividends to save for their children's college educations.
It is not just folks in affluent areas of the country who benefit from lower capital gains rates.
A policeman in Salt Lake City, a lineman at an auto plant in Michigan or a schoolteacher in California--all have pensions that are invested in the stock market.
And they all benefit from capital freed by these tax cuts.
In 2003, our capital gains tax rates were set at 20 percent and 10 percent.
Congress reduced these rates to 15 percent and 5 percent.
And what were the revenue estimates?
The Congressional Budget Office expected that revenues would expand somewhat--from $50 billion to $68 billion.
It turns out CBO was a bit off.
Capital gains revenues doubled.
Let me repeat that.
Capital gains receipts jumped from $50 billion to $103 billion.
So here is the final take on these tax cuts: They turbocharged the economy. They created jobs. Good jobs. They have led to increased revenues. And they will continue to do so, as long as we do not choke them off with the tax increases contemplated by this budget.
But this budget is a recipe for undoing our economic expansion and growth.
Some people have characterized this budget as smoke and mirrors.
That is too generous.
Smoke and mirrors suggests that the supporters of this budget are at least embarrassed about its future implications.
It suggests that they are trying to pull the wool over the eyes of hardworking Americans.
But there is no subtext to this budget. It is not an esoteric document. The tax and spend message is right there on the surface.
It is not exactly the same as Democratic presidential candidate Walter Mondale going to San Francisco and gleefully promising to raise our taxes.
But it comes close.
It certainly looks like we are going to get another dose of this San Francisco treat from the Democratic majority. I guess some things never change.
This is a big spending budget.
And it is a big taxing budget.
Tax and spend.
Where have we heard that before?
Make no mistake about it.
The fact that the Senate adopted Senate amendment No. 492, sponsored by the chairman of the Finance Committee, Senator Baucus, does not change the character of this budget.
It was an important amendment. But in the end, by omission it actually emphasized the high taxing assumptions embedded in this budget.
It did nothing to help alleviate the substantial tax hikes that most middle class Americans will face under this budget.
It did nothing to protect the capital gains rates that are so critical for retirement savings and continued economic growth.
I know that the criticism of this budget as more tax and spend politics must have bothered some of my colleagues because it prompted them to offer and vote for this amendment.
Just a few months ago, many of us were campaigning on a promise of fiscal responsibility.
The authors of this budget seemed to have lost their appetite for fiscal responsibility the minute they stepped off the campaign bus.
And so here they are reverting to instinct.
Next year, the Senate appropriators will be able to spend $16 billion more than the President recommended. And over 5 years, that number grows to $146 billion.
We are going to see discretionary spending rise to 4.2 percent--higher than the inflation rate. And trust me. They will spend every penny.
We are about to get some sense of Democratic fiscal discipline, when the House of Representatives takes up the national security supplemental spending bill.
Among the national security priorities in that bill will be: $25 million going to spinach growers. $74 million going to peanut storage.
And the list goes on and on.
All told, the House supplemental appropriations bill will be larded up with $21 billion in spending unrelated to national security.
This is certainly an unusual way to go about fiscal responsibility and taking care of our troops.
And it is just a taste of things to come.
The increases in spending contemplated in this budget might all be great news for civil engineers in West Virginia. But for future generations who will have to pay the bill associated with this budget, it is not great news.
Now, concerning the AMT. This budget also gives us a 2-year AMT patch.
Earlier this year, a number of my Democratic colleagues criticized the President for failing to provide a permanent solution to the AMT. Yet this budget does nothing to fix the underlying problem.
As inadequate as this fix is, there is a more nagging question. How are we going to pay for all of this?
Do you remember that campaign promise?
A Democratic Congress will restore fiscal responsibility by restoring pay-go. It will require offsets for any new spending or tax cuts.
OK. So where are those offsets coming from?
Here is where this budget leaves the land of wishful thinking and enters the realm of unfortunate delusion.
We are going to pay for it with--drumroll please--the tax gap. Yes, the magical, wonderful, tax gap. The difference between the amount of money collected by the Government and the amount of money owed. The solution to all of life's problems.
To balance this budget, there is an assumption of 3 percent more revenue over 5 years than the President assumed. And where is that revenue coming from?
The tax gap! Of course! Why didn't we think of that?
You see, this budget does not contain even $1 of mandatory savings. Yet we are going to provide AMT relief, and we are going to increase Federal spending.
And we will pay for it by closing some tax loopholes and putting an IRS agent in every small business in the country to make certain that not one dime of potential revenue goes uncollected.
Some people have called the tax gap the pot of gold at the end of the rainbow. Well, it is a pot at least.
Here is our best estimate--in 2001 the net tax gap was about $290 billion. Over 5 years, the tax gap is $2 trillion. Wouldn't that be nice? The tax gap is the deus ex machina that will come in and save this budget mess.
But everyone admits those are very unreliable numbers. Could we be doing better when it comes to collecting taxes? Certainly. We should be collecting more revenue.
But what is a realistic estimate?
Our tax collection system, imperfect as it is, already is the envy of the rest of the world.
So what is a reasonable estimate of how much we can expect from the tax gap?
The President proposed in his budget 16 different options for closing the tax gap. And they would raise $29 billion over 10 years.
That's it. And not one person in this body seriously believes that we can collect anything near the amount needed to balance this budget.
So we have a $110 billion AMT fix. Fifty billion dollars of this falls in the first year. I cannot even conceive of a tax gap revenue offset that would cover $50 billion in 1 year, unless Congress raises the tax rates.
We have $146 billion more in spending over 5 years. We have no reductions in spending. And the tax gap is not paying for it. So who is? Let me be absolutely clear. You will be paying for it. I will be paying for it. We all will be paying for it. Each and every American is going to pay for this budget. We are going to pay for it through higher taxes. We are going to pay for it by working more hours for less money.
And ultimately, we will pay for it as economic growth and productivity sag under increased spending, higher taxes, and declining economic growth.
There is only one way for this budget to work. It has to assume that we will not extend the 2001 and 2003 tax cuts.
Make no mistake about it. This means a tax increase on every middle class American.
This plan will not just kill the goose laying the golden eggs. It is going to wring its neck, stamp on it, and throw its limp lifeless body in the river.
If we in Congress do eventually get our act together and balance the Federal budget over the next few years, it will be despite this budget, not because of this budget. It will be because our economy continues to grow. Because of sound fiscal policy, because of the tax cuts, because businesses will continue to open, jobs will continue to be created, and tax revenue will continue to go up.
We have seen this pattern repeated decade after decade in this country.
Unfortunately, this budget relies on assumptions that have proven to be false time after time. It assumes that we will balance the Federal budget through massive tax increase. It sets aside no room to extend the 2001 and 2003 tax cuts.
In President Clinton's first term, he raised taxes by $241 billion. That was quite an achievement.
For those of you who have forgotten, and I know that my constituents in Utah definitely have not, it was the single biggest tax increase in American history.
And 1 year later the party responsible for this fiscal lunacy was tossed unceremoniously out of Congress.
Yet this Congress is set to run circles around President Clinton.
This budget assumes a $916 billion tax hike over 5 years. That is real money. And I imagine it will be unacceptable to many of my colleagues. This is fiscal irresponsibility of the highest magnitude. We need to be straight with the American people.
I know that the majority is in a bit of a jam. In some ways, I feel sorry for them. They promised to fix AMT. They made promises to special interest groups to hike spending. They made promises about fiscal responsibility and budget balancing.
And what did they say about taxes? You could hear crickets chirping when that subject came up. And today they are still sitting awkwardly, avoiding the obvious. Yet it is ordinary Americans who are going to be left holding the bag.
This budget is writing checks that the majority cannot cash without asking the American people to pay higher taxes. The most offensive part of this plan is that they know it, and are just hoping to skate by.
Call it what you want--a caper, a swindle, fiddling while Rome is burning, Wizard of Oz budget, robbing Peter to pay Paul. The fact is, this budget is a boondoggle. The people of Utah deserve better, future generations deserve better, and the American people deserve better.
While I am here, I would like to express my support for the Sessions amendment No. 473, which would refocus alternative minimum tax relief toward families.
Unlike the situation we had a few years ago when a majority of this body supported the alternative minimum tax, I doubt if we could now find a single member of the Senate who supports the AMT as it currently exists. In fact, this insidious tax has so encroached upon our tax system, and threatens to do so much more damage to the American taxpayer, that I would be surprised if we could find even one Senator who would not support total repeal or major reform of this flawed tax.
Despite widespread contempt for the alternative minimum tax, it is clear that the AMT already has gotten a vice-like grip on our fiscal system. Unfortunately, we are already so reliant on the massive revenue the AMT generates and is expected to bring in over the next few years, that making major changes to this tax seems out of reach, absent major tax reform.
Therefore, recent budgets considered by the Senate have included provision for legislation only to help mitigate the effect of the AMT on most American taxpayers, and not to repeal it. This lessening effect has been brought about by temporary laws that raised the thresholds of the tax for 1 year in order to limit the reach of the alternative minimum tax on middle class taxpayers.
For example, the so-called ``AMT patch'' that is in effect for calendar year 2006 raised the threshold for married taxpayers filing joint returns to $62,550 from $45,000. The thresholds for taxpayers in other filing brackets were also increased accordingly, but again for only 1 year.
According to the staff of the Joint Committee on Taxation, the 2006 AMT patch has kept the AMT at bay for nearly 20 million taxpayers. However, this relief ran out at the end of 2006. For the current tax year, we now need to pass legislation to hold off the alternative minimum tax for millions of middle-class taxpayers.
While the budget resolution before us ostensibly provides for a 2-year AMT patch, the details are fuzzy about how we will pay for this relief. For now, however, I will set aside my concerns about that issue and focus on another important one, and that is the issue brought up by the amendment of the Senator from Alabama.
The Sessions amendment would change the focus of how we approach relief from the alternative minimum tax. I strongly support this change, for if we cannot repeal the AMT immediately, our relief efforts should be focused first on the most egregious causes of alternative minimum tax liability.
Tax liability under the AMT can arise for a number of different reasons. However, one of the most common reasons why taxpayers find themselves
subject to AMT is because they have children. As hard as it might be to believe, dependency exemptions are not allowed against the alternative minimum tax.
Another leading cause of taxpayers being thrown in to the alternative minimum tax is the fact that State and local taxes are not deductible under the AMT. There seems to be a common misconception that the State and local tax deduction problem is the biggest factor in determining AMT liability.
In fact, according to the staff of the Joint Committee on Taxation, more taxpayers face the ravages of the AMT because of their personal exemptions being denied than for any other reason. JCT projects that for 2007, absent relief, more than 23 million tax returns will be thrown into AMT because of the personal exemption preference, where less than 20 million will be hit by AMT because of State and local taxes. In subsequent years, the difference is even more pronounced.
The Sessions amendment is a simple one. It essentially says that since we do not have the resources to repeal the AMT all at once, we should prioritize our relief by first fixing the problem that causes families with children to face the alternative minimum tax before we attack other problems, such as the one caused by the lack of deductibility of State and local taxes.
Many families in my home State of Utah find themselves increasingly at risk of the alternative minimum tax. In fact, unless we act soon, an increasingly high percentage of married families with children--not just in Utah, but all over the Nation--will find themselves in the clutches of the AMT.
And many of these are not high income families. Seventy-one percent of all married taxpayers with children earning between $75,000 and $100,000 will be AMT taxpayers this year, in the absence of relief. For those families with children making between $100,000 and $200,000, the amount is 97 percent. The rate of AMT paying for single taxpayers is much lower, only 9 percent for those making between $75,000 and $100,000, and 36 percent for those making between $100,000 and $200,000.
Although I am the first to agree that we should repeal the entire alternative minimum tax, that is probably not possible this year. Given that we must choose partial relief, it makes sense to me that we should first give the relief to families with children. Let's first remove the personal exemption as an AMT tax preference item. This amendment is profamily, and I urge my colleagues to join me in supporting it.
I yield the floor.