National Defense Authorization Act for Fiscal Year 2013 - Continued

Floor Speech

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Mr. PORTMAN. Mr. President, this amendment is intended to expand the opportunities for defense industry employees to attend or participate in Department of Defense educational institutions and programs.

Specifically, the amendment will broaden the existing statute that authorizes defense industry employees to obtain a master's degree at Defense Department schools, such as the Naval Postgraduate School, by also allowing them to obtain professional continuing educational certification.

Having key members of the defense industry exposed to the unique courses offered at these institutions is a win-win for the Federal Government. The industry pays the tuition and covers all costs associated with their attendance, and in the process our defense industry partners gain greater expertise in the military application of engineering and science, as well as acquisition and program management expertise.

Again, I believe this is a win-win for the government, and I ask for a voice vote of the pending amendment.

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Mr. PORTMAN. Mr. President, I am pleased to join my colleague from Connecticut in offering this amendment, which is modeled on the bipartisan legislation we introduced in March along with a number of Senators on both sides of the aisle.

We also recently joined to form a Senate caucus to end human trafficking, and I appreciate the chair and ranking member today for allowing this amendment to move forward.

The aim of this amendment is pretty simple. This amendment ensures that our contingency contracting dollars are spent in a manner that is consistent, as Senator Blumenthal said, with our deeply held values as a country. This is particularly important in the context of wartime contracting and reconstruction work.

This amendment comes from the work that both DOD and State Department IGs have done. The inspectors general have told us we lack sufficient monitoring to have the kind of visiblity we need under the labor practices by our contractors and subcontractors who rely on a lot of third-party nationals to do overseas work.

It also comes from the Wartime Contracting Commission, which has reported what is described as evidence of the recurrent problem of trafficking in persons by labor brokers or subcontractors of contingency contractors. The report concluded that existing prohibitions on such trafficking have failed to suppress it.

One of the commission members, a former Reagan and Bush administration defense official, testified before our committee, saying those findings were, in his assessment, just the tip of the iceberg. So I think this legislation is appropriate. It directly affects this issue that has been raised now by the IG and by the Wartime Contracting Commission. This is a commonsense approach to it.

Broadly defined, we believe this will help to deal with the human trafficking issue that has been identified. It deals with recruiting workers to leave their home countries based on fraudulent promises, confiscating passports, limiting the ability of workers to return home, charging workers so-called recruitment fees that consume more than a month's salary, just to name some of the abuses that have been identified.

I think it should be clear that the overwhelming majority of these contractors and subcontractors are law abiding, but we need to be sure these abusive labor practices are dealt with. This legislation will do so. I thank my colleague for raising it today. I am proud to join him in cosponsoring the legislation.

Madam President, I yield the floor.

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Mr. PORTMAN. Mr. President, this is a pretty simple amendment. It has to do with correcting a problem that we have found in Ohio and around the country. Amendment No. 2956 simply calls on the Secretary of Defense to work to standardize the educational transcripts of separating servicemembers. I appreciate Senator Akaka's leadership and cosponsorship of this amendment.

It is an important issue to a lot of our veterans as they are seeking to pursue their educational opportunities after being in the service. If they seek to use the GI bill or other benefits to further their education after taking off the uniform, they sometimes find they have an issue of getting credit for work they have done in the service.

Each servicemember is issued a transcript upon leaving Active Duty. The transcript equates military training and instruction to academic credits. Colleges and universities then use these transcripts to award transfer credit to veteran students.

Unfortunately, there is a significant difference in the types of transcripts issued by each of the military services. As a result, two veterans from different services who took the exact same military courses could receive significantly different academic credit at the same school. If we multiply that across all the services, all of our veteran students, and across all the colleges and universities in this country, we end up with some real issues. We end up with many veterans losing out on credit they deserve, as well as very well-intentioned colleges and universities spending a lot of time and resources trying to make sense of all these differences to help this process for veterans. It often falls on the Veterans Service Offices in these schools, and as my colleagues know, these Veterans Service Offices should be spending their time assisting veterans with their transition to academic life, which is sometimes a challenge.

Ohio has been leading on this issue and has organized public and private schools, our State board of regents, and even the Ohio National Guard to try to bring some sense to this. That has been helpful, but it would be far easier and far better to standardize the military transcripts themselves. It would avoid, again, a lot of the issues, a lot of the bureaucracy.

The Defense Department has recognized some of these issues, and I think they have started down the path of developing a joint services transcript. This is an important first step, and through this amendment we seek an understanding of those requirements and their implementation plan for this kind of initiative, should it be in place, in order to see it on a path to a swift and thorough resolution.

So I think this is one that, again, as the chairman was asking, could be voice-voted. I hope it will be.

So, Mr. President, I ask for a voice vote on the pending amendment.

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Mr. PORTMAN. Mr. President, I commend the chairman and ranking member for the way they are handling this bill. As we have seen on the floor today, Democrats and Republicans alike are able to offer amendments and have an honest debate on the issues, which is exactly how we ought to be operating.

As the fiscal cliff approaches we should not only be working together across the aisle to address issues like we are today with the Defense authorization bill, but we should also be working to address other critical issues, including tax issues and spending issues. That is what I wanted to address.

We have a lot of challenges. Instead of pulling together we seem to be pulling apart, and I am specifically referring to some of the suggestions by some in the majority that we consider a controversial and partisan rule change that would marginalize minority Members and in a way that breaks the current rules to change the rules.

What I mean by that is it takes 67 votes to change a rule in the Senate. That is a rule, by the way, that dates back to 1917. The reason that is in place is because, obviously, folks wanted to force the majority and minority to work together to make those rule changes. We don't get a two-thirds vote without that. I think it is important that the basic rules are ones that are agreed on.

The party in the majority tends to change a lot around here. In fact, we have shifted back and forth between Republicans and Democrats 7 times in the past 30 years. So at one point we are in the majority, one point in the minority, and that is why having these basic rules in place make sense.

There are some proposing we get around the 67-vote majority by some procedure where, instead of having a two-thirds vote, we would just have a majority vote to change a rule. Regardless of what rule that might be--some would say it would be on the motion to proceed and other aspects of the filibuster. Of course it would set a precedent that could change the rules for other things as well. I think that would prove counterproductive in the short term. I also think it would prove counterproductive in the long run for the Senate.

All of us are focused, I hope, on the serious economic challenges that we face with the fiscal cliff impending. I think this would be the wrong time for us to put this body into an even more partisan environment by changing these rules.

Again, I commend the chairman and ranking member for what we are doing today because this is an example of how the Senate can work and has worked on several bills in my short time here. But in other cases we have not been able to do that. I think that involves both parties, again, working together to solve these problems.

The issue before us is the fiscal cliff, and I also want to address briefly, if I may, the ongoing discussion about taxes and what we should do regarding taxes. I want to take this opportunity to talk a little about why some of us believe that raising tax rates would be counterproductive at a time when our economy is so weak, and that there is another opportunity, and that is for tax reform.

The jobs crisis and the debt crisis are linked, and the President has made that point. He has said his priority in the grand bargain discussions, the fiscal cliff discussions, is to ensure that we encourage economic growth and jobs. So we should use this as an opportunity to address the underlying problems that are holding back our economy, an economy that is in tough shape today. Unemployment is still stuck just below 8 percent. The projections CBO has given us for the next year, by the way, are continued anemic growth in the economy and, in fact, unemployment going up, not down.

The economic case against imposing higher taxes is overwhelming. We all know if we tax something, people tend to do less of it and that is one reason why smoking is taxed, to get people to quit smoking. So why do we want to raise taxes on working, saving, and investing? Instead, we should encourage policies that create jobs, not discourage them through higher taxes.

Don't take it from me. There are others who have commented on this on both sides of the aisle. Christina Romer, President Obama's former Chief Economic Adviser, has written that in most circumstances, a tax increase that equals about 1 percent of GDP actually lowers GDP by about 3 percent. Harvard economist Marty Feldstein has written that a $1 increase in tax rates tends to cost the economy about 76 cents of growth.

There is a global perspective on this as well because other countries have gone through these fiscal problems and they have chosen to cut spending in some cases and raise taxes in other cases. There is a Harvard economist, Alberto Alesina, who has recently studied the experience of 17 countries in the developed world, such as the United States. Over the past 25 years, he has looked at how they have attempted to reduce their budget deficits. Based on IMF data, which is the International Monetary Fund, he concluded that ``tax-based deficit reduction'' was, in his words, ``always recessionary.'' By contrast, reducing deficits by cutting spending and enacting pro-growth reforms, including tax reform, actually spurred economic growth, according to the same study.

I think that this is consistent with our own economic history. Between 1948 and 1961, a period when the highest income tax rate rose from 82 to 91 percent, we went through some tough times. We had four recessions. Thankfully, our exports that helped rebuild Europe following World War II helped keep the economy moving. Reducing the top tax rate to 70 percent also helped, but the 1970s were still a period of stagnation, recession, double-digit unemployment, double-digit interest rates, double-digit inflation. It was when Ronald Reagan reduced rates to 28 percent that we saw this impressive period of growth, maybe the most impressive ever.

It is something we saw again in 1997 when capital gains taxes that were cut under President Clinton and the Republican leadership in Congress were followed by a surge of investment and growth into the late 1990s. Again, after the 2003 tax rate cuts, we saw another example of the power of low tax rates. This was the 2003 tax cuts. In the six quarters before those rate cuts, the economy lost 1 million jobs. In the six quarters after those tax rate reductions, in 2003, economic growth nearly doubled and 2.3 million jobs were added.

Some tax increase advocates may assert a willingness to accept slower economic growth in the cause of deficit reduction and that is a legitimate point of view, that we need to have slower economic growth because deficit reduction is so important. But I would also point out some statistics. Slow growth also means less tax revenue. The White House's own data suggests that even a .26-percent reduction in economic growth--which is likely with big tax hikes--would wipe out the entire $800 billion in promised deficit reduction from higher tax rates. Growth is so incredibly important to reducing our debt and deficit and getting in control of our fiscal situation. So tax rate increases are not only bad economic policy, but they tend to be bad budget policy.

Tax reform is needed, and through tax reform we could have higher revenues. But both theory and practice make a convincing case that keeping rates low is better for the economy and jobs. Structural spending reforms combined with pro-growth tax reform, in my view, are the right approach and I think historically that has proven to be true. I will speak for myself as one Republican, although other Republicans as well are willing to accept new revenues, but the right way to do it is through reforming our outdated Tax Code and having these structural reforms that everybody feels are necessary.

Both the corporate and individual sides of the Code are marked by relatively high marginal rates and a complex maze of tax preferences that distort economic decisions, misallocate capital, and allow some taxpayers to avoid paying their share. Tax reform can kill two birds with one stone. By capping or eliminating inefficient tax preferences, we can avoid raising corporate and individual rates, without adding a dime to the deficit, by the way. In fact, if done right, tax reform will increase revenues by spurring growth, job creation and, therefore, bigger tax receipts.

Tax reform is both a fiscal and competitive necessity for our country. It has been more than 25 years since we substantially reformed the Tax Code and twice as long--about 50 years--since we did a bottom-up review of our international tax laws. The world has changed a lot in that time period, yet America has not kept up. The underlying assumptions in our Tax Code are, frankly, out of step with today's complex global economy. This is especially evident in our corporate Tax Code. The United States is now the highest corporate tax country among all the developed countries in the developed world. Canada has lowered its federal corporate rate from 16.5 percent to 15 percent, bringing its combined rate to 25 percent--nearly 15 points lower than the U.S. combined rate. Our rate is 39.2 percent when we combine the State and Federal burden. The Federal burden is 35 percent and the State burden is closer to 36 percent. So right now the average among all of the developed countries in the world is 25.1 percent, and the U.S. rate stands at 39.2 percent when we combine the State and Federal burdens.

A similar trend, by the way, has played out with respect to international tax rules, as our trading partners, including Japan and Britain, have moved to a more competitive, territorial-like tax regime over the past 10 years, which encourages movement of investment, capital, and jobs overseas. So there is a simple point here which is, by standing still, the United States is falling behind. The resulting drag on American competitiveness and job creation is real and substantial.

The solution is tax reform that broadens the tax base by scaling back tax preferences and cutting the corporate rate. We could cut it to 25 percent and scale back the deductions, credits, and exemptions, and have a competitive, territorial system and have it all be revenue neutral. There is such a proposal by the Joint Committee on Taxation here in Congress.

I am not saying it is easy. Some of these preferences, of course, and loopholes are ones that are very difficult to reduce or eliminate, but it would be the right thing to do for our economy. I think we have seen some signs of developing bipartisan consensus on this issue and I am hopeful we will see the same movement for pro-growth individual tax reform, because reforming the entire Tax Code is critical to regaining competitiveness, spurring growth, and producing the revenues we need to pay for important public priorities.

The smart way to raise revenue is not through tax hikes that will shrink our economy, but rather through tax reform designed to help grow the economy and help make American workers and businesses more competitive so we can compete and win in the global economy.

Again, today as we are approaching the fiscal cliff I hope this Senate works together on a bipartisan basis to work toward tax reform in a way to increase revenues and grow our economy while we look at the important structural reforms we have to make in order to solve the fiscal crisis we face.

Thank you, Mr. President.

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Mr. PORTMAN. I thank my colleague from Oklahoma. I wish to follow up briefly on that and say that in 1997, when we decided to move toward a balanced budget agreement when President Clinton was President, there was also an agreement to cut the capital gains rate. We sometimes forget the capital gains rate cut produced a lot of revenue that was not expected. As a result, we got to a unified balanced budget on a unified basis more rapidly than anybody thought we would. It came 2 or 3 years sooner than projected, in part because there was about $100 billion of new revenue that showed up the next year from the fact that we did reduce the capital gains rates.

I understand the need for us to deal with the deficit and to have revenue. There is no question that this is necessary, but to do it by raising rates alone, which is what is being proposed by some people, is going to result in lower economic growth, it is going to result in job loss, and it is not going to have the intended benefit on the revenue side. The alternative is clear, which is, for the first time in a couple of decades, we need to get busy on reforming this Tax Code as Ronald Reagan did with Democratic help, including Democratic Senators such as Phil Bradley here in the U.S. Senate, to encourage growth and to encourage the kind of economic growth that is going to result in more revenue coming in. We should not miss this opportunity to do that.

As I said earlier, I believe there is a building consensus around that. We saw it in the Simpson-Bowles Commission. We have seen it in the Rivlin-Domenici work, and other outside groups have looked at this, at our Tax Code. And by broadening the base, we can be more competitive and through growth have additional revenues coming in.

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