The Fiscal Cliff
Floor Speech
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Ms. MOORE. Thank you so much, Mr. Scott.
I would start out by asking you to yield to a question, Mr. Scott, because we heard prior to our discussion here at the Congressional Black Caucus hour, we heard the majority leader and the minority whip discussing spending. I just wanted some clarification.
When we provide tax cuts to anyone, but especially to the top 2 percent, is that spending?
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Ms. MOORE. Mr. Scott, just for my understanding and for my constituents to appreciate the scope of this problem, if we were to cut WIC and Head Start and Meals on Wheels for elders and the low-income heating, we are made to believe that if we were to put all of these kinds of programs on the table that we could maintain the Bush-era tax cuts, that we could maintain most of the unequal treatment of dividends and corporate gains, and that we would be just fine, that we could find $4 trillion in Pell Grants and Head Start moneys.
Am I missing something here?
Mr. SCOTT of Virginia. If you look at the budget and if you take out Social Security, Medicare, Medicaid, and defense and if you just look at what's called the nondefense discretionary budget, that's about--I'd say in round figures--$400 billion. If you're trying to get $4 trillion in cuts in 10 years, that's $400 billion a year. You would have to eliminate government. There would be no Embassy security, no FBI agents, no food inspection, no Federal prisons, no Head Start, no education, no FEMA, no transportation. I mean, nothing, nothing.
Ms. MOORE. Except for tax cuts.
Mr. SCOTT of Virginia. You would have to eliminate everything in order to fund a total extension of the tax cuts. Now, obviously, that's not going to happen.
Obviously, if you extend the tax cuts without offsetting it with other revenues, you've got to go into Social Security and Medicare. When they talk about reducing the size of government, that's why they can't tell you what they're going to cut, because they can't cut that much. When they say they're going to close the corporate loopholes, they can't name them because the corporate loopholes don't add up to enough. When you start talking about Head Start and the legal aid and all those, you're talking about hundreds of millions of dollars. We're trying to get to trillions.
Ms. MOORE. Mr. Scott, I thank you for that background because I just wanted to set the record straight.
On the hype that the Grand Old Party is leading us to believe, which is that, number one, extending the Bush-era tax cuts is not spending. It is exactly spending, and that is on the faulty belief that our spending on safety net programs is driving our debt. Social Security does not drive the debt.
I think, Mr. Scott, you have really led us into a clear understanding of Grover Norquist's claim that they really want to do away with government. They want to shrink government down to a size so small that they could drown it in a bathtub. They don't want to recognize the important role of government. They don't want clean air, clean water, food inspection. They want laissez-faire and for-corporate activity.
Now, our debts and deficits have been driven by undeniable, obvious factors. We've had a deep and ongoing recession based on an unregulated Wall Street. We've had expensive and drawn-out wars--the longest war in the history of this country that we're still in the midst of. Then there are the unpaid-for Bush-era tax cuts that have benefited primarily the wealthiest Americans, and of course there is an unpaid-for entitlement program. While we do appreciate the prescription drug program for seniors, Mr. Scott, the greatest beneficiaries of that program are the pharmaceutical companies because they get undue profit from not negotiating on the critical mass that this population provides them, the savings from that program.
So, if they want to talk about entitlement reform, I think a good place to start would be in negotiating for prescription drugs provided through Medicare and also in the recapturing of billions of dollars of overpayments from the insurance premiums under Medicare Advantage. The advantage goes to those insurance companies.
Our debts and our deficits have not been driven by children attending Head Start. Our debts and deficits have not been driven by seniors receiving Meals on Wheels. Our debts and deficits have not been driven by students participating in the TRIO program or receiving Pell Grants, yet we continue to hear the Grand Old Party say that we've got to put these programs on the chopping block so that we can continue tax breaks for the top 2 percent of Americans.
Now, members of the Congressional Black Caucus, believe it or not, do not agree 100 percent on how to solve the so-called ``fiscal cliff'' situation, but there is 100 percent agreement among Congressional Black Caucus leaders that we do not want an austerity cliff, which will lead to increased poverty and exacerbate the hardship for low and middle class families. The wealthiest individuals and corporations should have to pay their fair share of taxes.
As a member of the Budget Committee and as the Democratic chair of the Congressional Caucus for Women's Issues, I have a lot of thoughts on the fiscal cliff negotiations. First of all, we must include a robust extension of Federal unemployment benefits for workers.
Mr. Scott, has there ever been a time when the unemployment rate--7.2 percent--has ever been this high and, on a bipartisan basis, this Congress has not provided extended unemployment benefits for workers?
Mr. SCOTT of Virginia. It is generally the practice that we would extend emergency unemployment compensation for longer than normal, which is every time the rate gets high and when it's an emergency, so it's not offset. That is the usual situation.
The problem with this recession is that a disproportionately high portion of the unemployed or long-term unemployed--the people who have been unemployed for a long time--are experiencing even insult to injury because a lot of employers are discriminating against people who do not have jobs. If you apply and don't have a job, they will not consider your application. If you have a job, then they will consider you. So, if you've been without a job for a long time and are still trying to get a job, it's even harder for you to get a job. Now, those people have traditionally worked. They're hardworking Americans who want a job, are looking for a job. Unfortunately, the economy is such that you've got three or four people looking for every job that's out there. So, whatever happens, a lot of people are going to be left out.
And meanwhile, the question is: What happens? If you provide unemployment compensation for them, one of the things that happens is they spend that money into the economy as soon as they get it.
Ms. MOORE. Absolutely.
Mr. SCOTT of Virginia. So it is one of the most effective things. If you put $1 into unemployment compensation, economic activity is about $1.55. If you give a $1 tax cut on dividends, the economic activity is about 15 cents because the people getting that benefit will just spend what they ordinarily spend. They may pay off a credit card, they may save some money, but they're not going to spend the money. You want the money in the hands of people who will actually spend it if you want the economy stimulated.
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Ms. MOORE. Let me ask you something about preserving the tax cuts. The President campaigned for a couple of years, but particularly in the last year, on cutting tax cuts for income over $250,000. So am I to understand, Mr. Scott, that that means that millionaires and billionaires will still be getting a tax cut were they to agree to this framework?
Mr. SCOTT of Virginia. They would get a tax cut on their income up to $250,000. Their income over $250,000, they would not enjoy the Bush-era tax cuts. They would be paying the same taxes they were paying when the stock market was--during the Clinton administration, when the stock market almost quadrupled. The Dow Jones Industrial Average almost quadrupled. Under the lower tax rates under the Bush administration, the Dow Jones Industrial Average was incredibly worse at the end of his 8 years than it was in the beginning. Quadrupling under Clinton; worse under Bush than it was in the beginning. Of course, job creation, record under the Clinton administration when you had the higher rate; under the Bush administration, the only measure you're looking at it, is it or is it not the worst since the Great Depression.
Obviously, those who are paying the high rate actually have more of a financial interest in the stock market, because the little bit of tax increase we're talking about, they will more than offset that by the stock market going up like it did under the Clinton administration. If you look at the taxes they saved under Bush, if they could have gotten the returns in the stock market like they did under Clinton, they would have gotten 10 to 20 times more returns in the stock market than they paid in little taxes.
Ms. MOORE. So we have heard some people panicking, saying, boy, between me and my husband, our household, we
make $252,000 a year. What do we say to someone, a family earning $252,000 a year, that you're going to pay the higher tax rate on $2,000 of your income?
Mr. SCOTT of Virginia. You're exactly right. It probably would not result in any change in the withholding because of that little bit of money, and they would have all of the tax cuts up to the first $250,000, and they would pay a slightly additional tax on the additional $2,000.
One of the things that we need to point out is that with the stagnant economy, most workers haven't gotten a cost-of-living increase in a long time. If we can improve the economy, if we had a little more money and could create jobs and improve the economy such that employers think that people might actually walk off the job and go get another job, they are more likely to get a cost-of-living increase. That cost-of-living increase is more than the additional taxes that we're talking about in most cases.
Ms. MOORE. Thank you, Mr. Scott.
I have many, many more questions for you about what the options are, about what we can do. And I know that the Congressional Black Caucus doesn't agree on everything, but it seems to me that the Congressional Black Caucus is very concerned about the math adding up.
Mr. SCOTT of Virginia. That's exactly the problem. When you start talking about reducing the size of government with unspecified cuts or revenue increases, not rate increases but revenue increases, whatever that means, without specifying, we don't even know whether it is arithmetically possible. But if it is arithmetically possible, what we suspect is that it is going into things like the deduction you get on health care. You don't have to pay--if you get health care insurance, you don't have to pay income tax on that. The mortgage deduction, charitable deductions, the kinds of things that we probably wouldn't want to cut in order to fund some tax cuts, but the Congressional Black Caucus did talk about deferral of overseas corporate profits. If you eliminate that exemption, that's about half a trillion. A 5 percent surcharge on millionaires, that's about half a trillion. The financial speculation tax, when you buy stocks and trade stocks and bonds, you pay a little one-quarter of 1 percent charge on that. Now, before the discount brokers, people would be paying 1 or 2 percent, not just a little quarter of a percent. So that is certainly something that could be done. Limit the deductibility of corporate debt interest. That's about three-quarters of a trillion. Treating investment income like regular income, that's almost a trillion.
I mean, there are a lot of things that we can do to add up to get to the little bit of money we need left. Negotiating prices on pharmaceuticals under Medicare.
Ms. MOORE. That's exactly where I want to go. People are very nervous about this discussion, and the Republicans continue to say that we need to put Medicare on the table. And I know that during the campaign they talked about creating a voucher, premium support under Medicare, which would have cost seniors an average of $6,000 more.
Mr. SCOTT of Virginia. About $500 a month more for health care than they're paying now. That was the plan.
Ms. MOORE. And how does that differ from possibilities that are available under the Affordable Care Act?
Under the Affordable Care Act, which it's really ironic, because if you want to derive some savings under Medicare, and I have no reason to believe that Republicans don't want to do that, why would they continue to be talking about, Governors all over the country talking about, not putting the exchanges together in their States, still some sort of agenda to repeal Medicare?
What savings can be derived out of Medicare from full implementation of the Affordable Care Act, so-called ObamaCare?
Mr. SCOTT of Virginia. Well, one of the things that ObamaCare did was to provide, for those on Medicare, you get your annual checkups with no copay and cancer screening, no copays and deductibles. We're closing the doughnut hole.
Under the Romney plan, because they're paying providers more, your copay part of that provider fee is more, so your copays and deductible would be more. That's for people over 55. People already on Medicare would pay more under the alternative than they're paying today.
If you're under 55, you're at your $500 a month, every month, trying to make your health care, because the thing is that if Medicare is saving money, and the health care costs do not go down, then somebody's got to pay the difference. Adding insult to injury to that, you have corporate profits, dividends and commissions and everything else being siphoned off. So you not only have to pay the health care costs; you have to pay enough to cover the corporate profits. And so that's where senior citizens would be paying $500 a month, $6,000 a year more.
Ms. MOORE. So, Mr. Scott, let me see if I've got this straight. Under the Affordable Care Act, we are asking that, instead of having seniors pay more, you know, find themselves in the doughnut hole, that we ask pharmaceutical companies to ask to negotiate drug prices. Over 10 years, that might be $156 billion, $157 billion.
Mr. SCOTT of Virginia. There's a provision in the prescriptive drug benefit that passed about a decade ago that prohibits HHS from negotiating drug prices with pharmaceuticals. Now, the VA can negotiate prices; Medicaid can negotiate prices. But somehow, somebody, I don't know who, nobody's taking credit for it, it just kind of ended up in there, prohibits HHS from negotiating drug prices. So when a company says this is what we want, it is illegal for HHS to point out that you're charging everybody less, you charge in Canada less--how about giving us a little savings--that's illegal. Whatever they want, that's what they get.
Ms. MOORE. That would be a great reform under entitlement. Another entitlement reform I would just like for you to address that's in the Affordable Care Act would be this so-called Medicare Advantage program. Medicare Advantage, I mean, who doesn't want an advantage?
But the actual delivery of the service, where, to whom does the advantage inure?
Mr. SCOTT of Virginia. Well, the Medicare Advantage gives you slightly enhanced benefits under Medicare, and it was provided by Medicare. And what the private sector says is: we could provide those same services for a lower cost; and if you let us get in at 95 percent of what you're paying, everybody wins, because we're saving money. That's a phantom saving, but that was the original deal.
By the time--in the prescriptive drug benefit, we're paying about 115 percent more than the average. And all we're doing is saying, well, let's just pay the average.
The insurance companies do have an advantage in their costs because there are ways of attracting a healthier clientele, so their costs would be lower, not because of efficiency, but because they skewed a better, healthier clientele and that's how they save money.
But what we did was reduced their profit margin to the point where they have to be at least as efficient as Medicare, not getting a bonus, which didn't help anybody.
Ms. MOORE. So I see, Mr. Scott, that Representative Sheila Jackson Lee has joined us, and so I just want to close out by asking this last question, just to wrap this up. So when the President talks about putting $480 billion of cuts on the table for Medicare, without knowing all of those details, a lot of that depends on not reducing benefits to the elderly, but to make sure that pharmaceutical companies and insurance companies and hospitals deliver services in a more efficient way, that people--that the delivery--that we change the way health care is delivered in a way that is efficient, more humane, cost effective and deliver the same level of quality and benefits to the elderly. Is that right?
Mr. SCOTT of Virginia. And that is exactly what we did. Much has been made of the $716 billion that was saved in Medicare. The corporate subsidies was part of it, efficiencies were part of it, but not a dime in benefits was adversely affected. In doing that, we also extended the solvency. Medicare goes broke, was going broke, in 4 years. Now it's 12 years.
Under the alternative plan, during the campaign, it would be back to 4 years. So seniors would be paying--seniors on Medicare now would be paying more. Seniors, younger people when they get to Medicare would pay a lot more, and it goes broke quicker. That was what we were fighting. And the President was reelected, and so Medicare will not be attacked.
But, again, when you talk about additional Medicare cuts, we're just not cutting in the abstract. Those cuts are necessary because people want to extend the Bush-era tax cuts. If you do not extend the tax cuts, you do not have to discuss any cuts in Medicare.
These savings are designed to help pay for tax cuts; and people need to make the choice, recognize the choice. Do you want to cut Medicare in order to preserve some tax
cuts? I think a lot of people would say leave Medicare alone.
Ms. MOORE. Leave my Medicare alone.
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