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Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Location: Washington, DC

BREAK IN TRANSCRIPT

Mr. WHITEHOUSE. Mr. President, I am going to be joined fairly soon by the distinguished chairman of the Armed Services Committee, Senator Levin, to discuss the upcoming sequester and the impact the sequester will have on this country if it is allowed to go forward. Chairman Levin has been pretty clear about this, as have our national security officials on the defense side. It is equally harsh on the nondefense side. But most important, it will be a real blow to the economy. The economists now are saying if we let the sequester kick in as scheduled, it will cost us 1 million jobs. One million Americans will lose their jobs because we let the sequester hit.

Other things--cuts to education; 70,000 young children kicked off of Head Start; 10,000 teacher jobs at risk; funding for up to 7,200 special education teachers and aides and staff could be cut. Food safety--2,100 fewer food inspectors. Research--several thousands of our researchers who are doing cutting-edge research in all sorts of areas from electronics to finding cures for diseases could lose their jobs. Up to 373,000 seriously mentally ill adults and seriously emotionally disturbed children could go untreated at a time when we are talking about the need for more treatment in the wake of the terrible tragedy in Newtown, CT. In law enforcement we could see a lowering of capacity equivalent to more than 1,000 Federal agents. Nutrition assistance--600,000 women and children would be dropped from the Department of Agriculture's nutrition programs. More than 100,000 formerly homeless people, including veterans, would be removed from their current housing and emergency shelter programs because they would no longer be funded under these cuts.

It is a deadly serious thing, the sequester that is coming at us. There are much better alternatives. What I am doing today is filing two pieces of legislation that would completely eliminate the sequester and pay for the elimination of the sequester, not by running up the debt or the deficit, but by repealing tax giveaways, giveaways in the Tax Code. One of the bills would put in enough tax giveaways that we could get rid of the sequester for about a year, which would allow the budget process we are embarked on now to conclude and then we would be ready to go with the new budget and go forward in the regular order that way, letting the budget process drive the decision.

The other way is simply to get rid of the sequester for the full 10 years, just get rid of it for once and for all; do it now and the other bill I proposed would do that. Both bills do this without raising taxes, by going after tax giveaways, and by avoiding these kinds of Draconian defense and nondefense cuts that have been now--I guess ``estimated'' is probably the right word but I think they are pretty confident would cost America a million jobs. A million American families would lose their paychecks because we did this.

The first point I want to make as I go about this is these tax expenditures are no small thing. Here is what we collect through the income tax every year from individuals: $1.09 trillion; round numbers, $1 trillion. Here is what we give away in tax deductions, loopholes, different expenditures and deductions: $1.02 trillion. So on the individual side what we pass through the Tax Code and back to people is almost as big as what we actually collect.

When you look at the corporate income tax revenue, the corporate income tax revenue is $181 billion in 2011. Here is what went back through to corporations in tax expenditures: $157 billion.

Another way to look at it is there is $2.1 trillion of tax liability in this country. One trillion dollars of it comes back to the government in the form of actual revenues and another trillion of it gets distributed through the gimmicks and loopholes and deductions and tricks and so forth in the Tax Code. On the corporate side there is a total of $338 billion in tax liability, of which only $181 billion actually appears as revenue to the government, and the other $157 billion gets distributed again because of tricks and gimmicks and loopholes and provisions in the Tax Code.

What some of our colleagues want us to do is say: Well, we raised tax rates once--just now. We raised them on only the wealthiest families in America. We only raised them back to where they were under President Clinton when the economy was booming, but we did that and we should look no further.

The problem with that analysis is that only looks at the revenue that is actually collected. It doesn't look at the loopholes. It doesn't look at the tax expenditures either on the individual side or on the corporate side.

It is also worth noting that if we add these two up and we get $2.1 trillion or, more likely on the corporate side, if we add these up and we get $338 billion, there is more money out there which that doesn't count. That is the money that never shows up for taxation in the first place because it has been hidden in offshore tax refuges. People have pretended their income is in funds in the Cayman Islands, and they have pretended their intellectual property is in a five-person office in Ireland. There are a lot of gimmicks by which a lot of the money never even gets into this calculation. When we look at the pain the sequester is going to cause, it makes a lot of sense to look at the tax expenditures, which amount to a total of $1.17 trillion, and use that to offset.

Another thing worth looking at, just to remember where we are, is that in the last 2 years on this question of reducing the deficit, we have reduced the deficit by $2.4 trillion, and $1.7 trillion of that came in spending cuts and $700 billion came in the form of new revenues. In terms of a balanced approach to deficit reduction that looks at both spending cuts and revenues, we are not balanced yet. We are nearly $1 trillion ahead on the spending cut side. So when Republicans say we are only going to look at spending cuts going forward, they are not just saying that all those goodies in the Tax Code that go to wealthy individuals and corporations as tax deductions, loopholes, and expenditures are off limits, they are also saying that we are going to make it even more unbalanced than it is now.

By the way, the way I get to $1.7 trillion is by taking $1.46 trillion, which is the actual cuts, and then adding the interest savings that are associated with it. And I take the same interest savings on the revenue side, so it is even, the way we have allocated the interest.

I see Chairman Levin is here, so I am going to yield to him when he returns.

Let's look at one more graph while we are here. As we saw here, a lot of this is corporate tax expenditures. Every year there is $157 billion in corporate tax expenditures, which calls to mind, how are we doing in terms of a fair balance between individuals and corporations in the American tax system? Well, we have done some research, and it turns out that corporations are providing less and less of our revenues.

When we go back to 1935, this chart shows that for every $1 of revenue the U.S. Government got from an individual, it got $1 from corporations. It was 1 to 1--individuals $1, corporations $1. By 1948 it became 2 to 1. For every $1 that a corporation contributed to our Nation's revenues, individuals had to kick in $2. In 1971 we had 3 to 1--$1 from corporate America, $3 from individuals, regular Americans. By 1984 that was up to 4 to 1--$1 from corporate, $4 from individuals. The ratio as of 2011 is 6 to 1, which means the amount of tax burden individuals in this country bear has climbed sixfold compared to corporations meeting their responsibilities. One of the reasons is that so many American corporations are hiding money offshore and away from the taxman. Now, whether these are the kinds of accounts we heard about during the Presidential campaign, such as in the Cayman Islands and so forth, or whether it is locating intellectual property in some faraway country and using internal transactions to move revenue to avoid the taxman over and over, Chairman Levin and his committee on investigations have looked into this and over and over again, and they have shown this is a really strong area in which an enormous amount of money can be raised.

The problem with doing it the other way--going after Americans again and asking them to kick in even more in spending cuts rather than going after the corporate high jinks in the Tax Code--is that leads us down this path of austerity that Republicans have championed. The problem with that austerity path is that when we get into a recession--as we have been in--we should try to cut our way out of it. The problem with that is it has not worked. We argued against that theory from the beginning because it seems wrong, it doesn't make logical sense, and it runs against a lot of principles of economics.

Over and over again, our colleagues said: No, no, no. We just need to cut our way out of this, and that will be our solution. When we get in trouble with the economy, we cut spending.

That has proven to be a disaster. Where they have gone to austerity in Spain, the unemployment rate is 26.6 percent, and GDP growth is negative. Their economy is actually shrinking. Greece has an unemployment rate of 26.8 percent, and their GDP growth is negative 6 percent. Their economy is shrinking even more rapidly. In Portugal, the unemployment rate is 16.3 percent, and the GDP growth is negative 3 percent. By comparison, the United States, although things are not right yet, is doing much better.

I see that the distinguished chairman of the Armed Services Committee is here on the Senate floor, so I will yield at this point.

BREAK IN TRANSCRIPT

Mr. WHITEHOUSE. Mr. President, I thank the distinguished Senator from Michigan. I appreciate very much that he has signed on as a cosponsor of both my 1-year and full 10-year--9 now--sequestration alternatives that avoid a calamity for our economy, the potential crash of 1 million jobs, by looking exactly where Senator Levin suggests--at the tax loopholes.

As I showed a moment ago, it used to be, back in 1935, a ratio of 1 to 1 of dollars paid by individual Americans in taxes compared to dollars paid by corporations in taxes. Now it is 6 to 1--$6 out of a family's pocket for every $1. What has allowed America's corporate world to lower their tax liability by so much--down to one-sixth of what it used to be relative to what regular Americans pay? Well, the biggest chunk of it is all the money that flows out through the Tax Code. We have virtually the same amount flowing out through the Tax Code as we actually keep our hands on as revenue. So for $2 trillion in tax eligibility, half of that goes right back, on the personal side, and out here, it is $338 billion, and $157 billion that goes back. It never sees the tax man. It goes straight back through the Tax Code.

Lobbyists have been here for years working on those loopholes and making sure different industries and interests get those benefits. That is where it all goes. That is why we are in a situation in which we have what the distinguished Senator from Michigan has talked about--all of these disgraceful loopholes.

I echo his point of view. Now is an important time to do this because the alternative, which is more spending cuts, pushes us down the austerity path that has failed in Europe and that is projected by the Bipartisan Policy Center to cost us 1 million jobs. There is an alternative: to go after all of these tax loopholes which, as the chairman said--as Senator Levin said--we should be going after those anyway. They are just plain wrong on their own.

If we had a balanced budget, we should be going after them. It is simply not fair. These are relics of power and lobbying and special influence and special pleading in the Tax Code, and we need to be rid of them. Now is a very good time to be rid of them to avoid pitching the economy into recession.

I know my two pieces of legislation are not going to pass. We are not going to pass a bill that has the sequester 100 percent paid for by new revenues from closing tax loopholes. I wish we would, but I know we are not going to. My point in filing the legislation is to prove that it could be done. It could readily be done. It could be done with pieces of legislation that Senators in this body have supported over and over and over again. So it is not necessary to walk into the fiscal band saw of sequestration: to have our national defense take the hit it is going to take; to have regular American families take the hit they are going to take; to have the economy, with 1 million jobs lost, take the hit it is going to take, all for what? To protect the big oil companies so they can keep getting subsidies from the American people? Is that the choice we want to make? So that a billionaire who puts his name on a museum gets more charitable tax bang for his charitable buck than a regular family when they just give money to their church every week? Is that the stuff we want to protect at that cost?

That is the question we will have to answer. I am very grateful to the chairman, Senator Levin. He has been working on this for years. His Subcommittee on Investigations has been looking into this in detail. His legislation is a part of what I am proposing as one of the pay-fors. I look forward to continuing to work with him.

The American people have our back on this one. This is a starker contrast between where the American people want to go and how to protect them and our economy versus special interest politics in this town that has carved out all of these loopholes that allow corporations to effectively cheat on their taxes. Effectively. It is not technically cheating because they have gotten the law written so it allows that practice. But if a person is a regular American who doesn't have a lobbyist to get them that same sort of treatment, it looks an awful lot like cheating.

Let me close by saying if we go the other path--if we follow this austerity route we have seen to be so calamitous in Europe--here are some quotes:

If the full sequester takes place as scheduled, 1 million jobs may be lost.

That is the Bipartisan Policy Center.

Paraphrasing: Growth in real GDP would be about 1 1/4 percentage points different, depending on which path we choose.

We lose 1.25 percentage points GDP growth by hitting this sequester. That is from the Congressional Budget Office.

If we look at the American Enterprise Institute, hardly a leftwing group:

An abrupt spending sequester at a rate of about $110 billion per year--

Which is what we are looking at--

scheduled to begin March 1 could cause a U.S. recession.

Robert Frank, a very well regarded economics professor at Cornell, has said:

The cuts scheduled are not a way to run a rational government. Cuts of any kind at this time are not a good idea. It is recessionary. It would slow growth for sure and put people out of work.

Another organization not known for its leftwing views, the Wall Street Journal, says this austerity method ``threatens to create a vicious cycle, as mass layoffs to meet budget targets spark a deeper contraction, reducing tax revenue and increasing welfare costs as well as damping consumption.''

That is exactly what has happened in other places.

Look at what they say in England where they have done this. The conservative Daily Telegraph's Jeremy Warner describes what is going on over there. ``This is a truly desperate state of affairs. ..... We seem to have the worst of all possible worlds, with nil growth, some very obvious cuts in the quantity and quality of public services, but pretty much zero progress in getting on top of the country's debts.''

That is not the way we want to go. That is the wrong way to go. There is another way, and it is to look at that vast part of the Tax Code both for corporations and, primarily, for wealthy individuals that allows literally nearly half of what would be tax revenue to flow back through the loopholes. That is where we should be doing our work. That is where we should be looking. I applaud and appreciate Senator Levin for his long and expert leadership in this area.

With that, I yield the floor.


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