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Public Statements

The Fiscal Cliff

Floor Speech

By:
Date:
Location: Washington, DC

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Mr. REED. Madam President, I rise today to speak about the real-world consequences of failing to achieve a fair and balanced solution to avert the automatic tax hikes and spending cuts that would otherwise occur at the end of December--the end of this month.

Failing to continue unemployment insurance, allowing taxes to rise on middle-income Americans, and cutting Federal spending too much and too soon during a struggling economic recovery could, as the nonpartisan Congressional Budget Office has estimated, cause a new recession.

This is a fate we can and should avoid for people in my State and across the country. Indeed, families in Rhode Island are still getting their economic footing and cannot afford another economic setback. An economic downturn will erase the strides we have made so far to strengthen our economy and exacerbate the widening income inequality, which Americans sense and recognize in an economy that all too often seems stacked against them. Instead, we must work toward a compromise that is fair, helps the middle class, creates jobs, and strengthens and accelerates our economic recovery.

As I see it, widening income inequality and the sense that future generations will not see the same kind of economic security as my generation is one of the most pressing challenges facing our Nation. Over the past several decades, top earners have taken a bigger and bigger chunk of income while wages have stagnated for far too many Americans.

From 2000 to 2007, incomes for 90 percent of workers rose by about 4 percent, while the top one-tenth of 1 percent of Americans saw income gains of 94 percent. The vast majority of Americans have seen wage gains that are barely enough to keep their heads above water, while a very small number of top-income earners have seen an extraordinary growth in income.

In 2010 alone, about 20 percent of all income went to the top 1 percent. We are now back to income inequality levels similar to just before the Great Depression. Such wide disparities are unsustainable, create economic instability and threaten our social fabric.

In the past, when income inequality has reached these kinds of levels, Democrats and Republicans have both recognized its destabilizing impact and worked together to reward success while providing meaningful opportunities and a sense of fairness for all Americans.

I believe there are straightforward ways we can begin to reverse this escalating income inequality--ways which are true to the founding principles of our Nation. After all, we have done it before. From the end of World War II and well into the 1970s, incomes grew rapidly across the United States and economic prosperity was broadly shared. As our economy grew, every level of America shared in that growth.

By making education affordable, fostering innovation and job creation, and providing economic security to retirees through Medicare and Social Security, our country went from a paralyzing Great Depression to an economic superpower. We were able to accomplish such a drastic transformation because we were willing to consider revenue as a way to invest in the future and promise economic security to our seniors.

Focusing spending on policies that work and balancing revenue is at the core of this debate. I have made tough choices in the 1990s that balanced the budget, generated a surplus, and supported robust job creation. In January of 1993, the unemployment rate stood at 7.3 percent, and by January of 2001 that rate had been reduced down to 3.9 percent. That period of record growth also saw a substantial decline in the poverty rate. In 1993, 15.1 percent of Americans were in poverty, but thanks to job growth and an expanding economy based upon a balanced approach to deficit reduction--including revenue and reduction in expenditures--poverty fell to 11.3 percent in 2000.

But the unpaid wars of the Bush administration, excess tax cuts for the wealthy, and a financial crisis brought on by lax regulation under the Bush Presidency erased those hard-fought gains of the 1990s. As a result, we have seen education become more expensive, Federal investments that support economic prosperity for all have been reduced, and economic gains have been concentrated at the top. Meanwhile, in spite of repeated claims, lower tax rates for the wealthiest haven't driven job creation and economic growth. We have had record low income tax rates; yet now we are struggling with one of the worst unemployment crises we have seen since the Great Depression.

I believe the election has shown Americans want us to return to the principles that work for the benefit of everyone, not just a select few. With that in mind, the path forward should be clear.

We should continue tax cuts for income up to one-quarter of a million dollars and reduce the deficit by nearly $1 trillion. We should continue extended unemployment insurance for 2 million people who will lose it otherwise. We should prevent further immediate cuts to Federal investments in things that keep us safe, grow our economy, and enhance the lives of Americans, whether it be infrastructure, workforce training or research and development.

What we should absolutely not do is make changes, hasty changes, to Social Security and Medicare that would undermine the promise of economic security to seniors, not just this generation of seniors but succeeding generations of seniors. Fairness, opportunity, respect for the rules, and a sense of security in retirement, those are the priorities that can't be lost as we debate the budget.

So I am disheartened to hear that Republicans are holding the middle class and the entire economy hostage in order to preserve nearly $1 trillion in additional tax cuts for the top 2 percent of Americans, while at the same time proposing detrimental changes to Social Security, Medicare and Medicaid. I believe this is an untenable position and one I hope my colleagues on the other side will soon abandon.

Moreover, the Republican proposal does not provide immediate, short-term aid to 2 million Americans out of work and looking for employment. These were men and women who were working, and as a consequence of the economic difficulties over the last few years have lost their jobs. Their proposal would not, as the President's plan does, put Americans back to work, not just by continuing benefits in terms of unemployment insurance but by putting Americans back to work improving our roads, bridges, and transportation infrastructure.

Unfortunately, in the past, too many on the other side of the aisle have stymied efforts to accelerate the recovery like blocking jobs legislation that was paid for by asking millionaires to pay Clinton-era rates on income over $1 million. They have endorsed proposals that would transform Medicare into a voucher program and Medicaid into a block grant, which would merely shift health care costs to seniors and States rather than address underlying cost drivers and inefficiencies.

So it is not surprising Speaker Boehner has put forth a significantly flawed proposal, in my view, that would jeopardize our economic recovery, undermine the middle class by not providing immediate support for our recovery, and do very little to achieve real deficit reduction.

While the President, in contrast, has put forward a clear and specific plan, the Speaker's proposal is light on details related to deficit reduction. It is, I sense, another sign that the Republican Party is out of touch with the majority of Americans who favor the President's approach. We have had an election in which voters made it clear that if we are going to propose major policy changes, then those proposals must be real and credible. Americans want us to be candid and honest with them as we make these difficult decisions.

We can disagree about policy--we do that all the time--but it is hard to disagree about simple arithmetic. The Speaker, for example, has proposed $800 billion in taxes through ``limiting deductions and lowering rates,'' also known as ``lowering rates and broadening the base.'' But as many nonpartisan analysts have shown, the numbers don't add up. ``Lowering the rates and broadening the base'' just means tax cuts for the wealthy and higher taxes for the middle class because deductions for home ownership, charity, State and local taxes would have to be severely limited for most Americans in order to pay for the top rates and avoid further growing the deficit.

It is not only the math that doesn't add up, but it is also their assumption about job creation and the economy. Historical data shows reductions in top tax rates have had little impact when it comes to creating jobs and boosting growth. But tax cuts do, according to the data, increase income inequality.

In contrast, the President and Democrats have been clear with the American people that we can't afford nearly $1 trillion in additional tax breaks for the top 2 percent--which do little for job creation and exacerbate income inequality. We should let the top two marginal tax rates expire. Democrats have already passed legislation in the Senate to do that. And again, to be clear, letting the top marginal tax rates on income over a quarter of a million dollars expire would still mean all Americans get a tax cut for income below that level.

Moreover, Speaker Boehner, in his proposal, again raises the specter of increasing the Medicare eligibility age and reducing Social Security benefits. While raising the Medicare eligibility age from 65 to 67 beginning in 2014 would result in $125 billion in Federal savings, it would basically shift all those costs onto State governments and the private sector.

To help illustrate this cost shift, the Kaiser Family Foundation examined what would happen during the first year the policy would take effect, 2014. In that year, individuals would not qualify for Medicare until age 65 and 2 months. This change would trigger $5.7 billion in Federal savings. However, spending on the part of State governments, employers, beneficiaries and individuals and families slated to purchase health insurance through new health insurance exchanges would double--to the tune of $11.4 billion. Indeed, increasing the Medicare eligibility age is a shell game that will just shift costs and do nothing to bend the proverbial cost curve.

If my colleagues on the other side of the aisle wish to reduce the deficit by $125 billion, there are better ways to do it. We can start by closing egregious loopholes that benefit companies that shift jobs overseas or benefit oil and gas companies.

And there are ways to reform Medicare and Medicaid without shifting costs to beneficiaries and making the goal of a secure retirement harder to achieve. Indeed, the Affordable Care Act makes a downpayment on deficit reduction with a sensible and thoughtful approach to addressing the underlying drivers of health care costs. And we can do more in this regard. We can eliminate overpayments to Medicare Advantage plans. We can allow the Secretary of Health and Human Services to negotiate directly with companies on the cost of prescription drugs in Medicare--or, at the very least, increase rebates in programs such as Medicare and Medicaid.

We should not look to Social Security to solve our fiscal deficit either. Social Security will continue to spend less than it takes in until 2033. And even if we don't do anything to address this very long-term issue, beneficiaries would still receive 75 percent of their expected benefits, according to the law. Moreover, Social Security is not a driver of the deficit. If we make any changes to the program, they must be done, I believe, outside the debate on the deficit and directed at extending the life and solvency of the Social Security trust fund in order to keep our commitment, not only to this generation of seniors, but to succeeding generations of seniors.

Shoring up Social Security can be achieved in several ways, for example, by broadening the taxable wage base. The last time Social Security was reformed in 1983, the cap on taxable income covered 90 percent of earnings. Now the cap only covers 85 percent of income and is steadily decreasing. The first thing we can do is begin to restore the original intent of the program and we can do that by lifting the cap on wages over $250,000.

I hope my colleagues on the other side would hear the same message with respect to some of their proposals regarding Medicaid. Medicaid is already a rather efficient program. Medicaid actually costs less per beneficiary than private insurers to cover similar people with similar health issues. Medicaid spending has grown at a slower rate for beneficiaries than private insurance. Changing the financing structure of Medicaid is just another example to score a political victory at the expense of some of the most vulnerable people in our society.

I hope to work with all my colleagues, on both sides, to strengthen Medicare, Medicaid, and Social Security. But now, with only 3 weeks left, it is not the time to make hasty and drastic alterations to the foundation of economic security for seniors and for their families. Because when we talk about seniors, we are also talking about their sons and daughters who would have to step up and fill the gap if we made unwarranted changes to Medicare and to Social Security.

Many of these Republican proposals don't sound particularly serious. The revenue and deficit reduction targets are deceptive and, worst of all, it seems to be more sloganeering, not problem solving. Our goal should be improving the economy and reversing the stark trend of income inequality that has been exacerbated by this great recession and prolonged unemployment.

We should not cut the deficit on the backs of the middle class and seniors. We only have a few weeks before various provisions of the law will begin to cut into our economic growth. The loss of unemployment insurance, for example, will be immediately harrowing for the 2 million on unemployment insurance; middle-income families will be squeezed more and more as their taxes rise and government spending in critical programs is slashed, all because some on the other side are more concerned with protecting tax breaks for the wealthiest.

Economists believe this kind of economic contraction could lead to another recession, where once again low- and middle-income families will feel the brunt of the downturn and have the hardest time making up lost ground during the ensuing recovery.

I hope my Republican colleagues drop their attempts to cut the deficit on the backs of 98 percent of Americans and 97 percent of small businesses in order to provide additional tax cuts to the wealthiest 2 percent of Americans. I hope my Republican colleagues drop their demands to make drastic and hasty changes to Medicare, Medicaid and Social Security. I urge them to pass the Middle Class Tax Cut Act, continue unemployment insurance, and work with us to develop a rational alternative to sequestration. This approach is fair to the middle class, will grow our economy and create jobs, and will help turn around income inequality in our country.

With that, Madam President, I yield the floor, and I suggest the absence of a quorum.

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