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Press Release: Klobuchar Calls For New Priorities, Outlines Deficit Reduction Plan

Location: Minneapolis, MN

Klobuchar Calls For New Priorities, Outlines Deficit Reduction Plan
Tuesday, 29 August 2006

University of Minnesota - Carlson School of Management

"Behind me is a ticker of the national debt. And I hope it's not bugging you guys too much. We'll turn it off so it's not too distracting. This is how much our government owes. And as you can see it's going up and up every minute. We're going to turn it off so that we can talk a little bit about this out of control spending and how much it is hurting middle class families and taking us far away from what we should be doing in this country.

"When I get around this state I can tell you what they're concerned about when you're at the gas stations, when you're at the lunch counters. People are talking about gas prices, they're talking about health care costs, they're talking about how they're going to send their kids to college.

"A small business owner stood up in Walker, Minnesota when we were up there just a few weeks ago at a beautiful event by a lake and he just said that he could barely afford to get health insurance for a new employee. And that it was getting harder and harder for him to do that and he didn't want to cut off his employees but it was getting harder and harder to do it.

"Why is that? Well the average Minnesotan is paying $11,000 a year in health costs. From health care to energy prices to student loans people are feeling pinched, it hits especially hard in our rural areas.

"I remember being up in Keith Langseth's dairy farm about a year ago and we were inside his kitchen. He is a state senator and sort of a stoic guy, not exactly an excitable guy. But he was swatting flies and every time he would start talking about some of the cuts and how they affected rural areas and how it was getting harder for his neighbors to send their kids to college he would swat another fly. And so that is a memory that I take with me as I go around the state. It reminds me always of how much harder it is for the middle class to get by.

"Then we had a living room forum - we did a series of these around the state - in Brooklyn Park. And we were talking with a group of people sitting around the room and one guy stood up and he said ‘I was always able to afford a house, it was always important for me. And now my son is graduating from college and it's getting harder and harder for him to be able to get a house and he's not getting a house.' And they were talking about how it's tough for people to fill up their cars with gas and how it's getting harder for businesses to afford gas for their cars.

"And I think you don't need to read in the New York Times - there was an article just yesterday - for the people of our state to know it. They know it because they're living it. But it is getting harder and harder for the middle class to get by.

"Why is this happening, when some people are doing so well and others are working so hard just to stay afloat? Well, I believe it's because our government's priorities are mixed up.

"We should be encouraging people to buy homes, not creating offshore havens for tax cheats.

"We should provide tax cuts for the middle class; not provide tax cuts in a way where the wealthiest people are getting $111 in tax cuts for every $1 that the middle class gets.

"We should be investing in our energy future instead of giving tax breaks to energy CEOs and oil companies.

"People in our country are working hard and they deserve policies that help them prosper - instead of wasting money on tax giveaways for wealthy companies and pork projects because Washington's values are wrong.

"Today, I am going to lay out a number of ways for us to strengthen our country and help the middle class. We need to start by reducing our deficit and setting new priorities. We can get there, but we can't keep going in the same direction that we've been going for the past six years.

"The longer you allow this deficit to plague our government - the more difficult it is to do something about it. You just can't keep waiting and waiting and waiting for a treatment if you're sick. You know that if you do something about it sooner you're better off. And we haven't been doing anything about it. I believe that to solve this problem we need new ideas and we need to send new people in Washington.

"As we say in our white collar cases, ‘follow the money, you'll find the bad guys.' You follow the money in Washington and it leads you to the oil companies, it leads you to the drug companies. It takes you to Bermuda and the Cayman Islands home to tax scams for billionaires that are costing us dearly.

"The influence of big money in Washington has left America with a health care policy that was written by the drug companies, an energy policy that was written behind closed doors with the pens of the energy industry and a tax policy that was written to benefit billionaires and not the middle class.

"Since 2000, the pharmaceutical industry has contributed almost 84 million dollars to candidates for public office. What did they get in return? Well they got a provision in place that says that we can't negotiate for prices for drugs in Medicare Part D.

"And if you don't believe me that this is problem, there was a study that recently came out that showed that people who were under care from the Veterans Affairs Administration - where they actually negotiate for prices - that for the top 22 drugs the prices of those drugs are 50 percent lower than they are for people who are getting their health care from Medicare Part D.

"The oil companies contributed 95 million dollars to federal candidates this year. And what did they get? In April, they gave billions of dollars in accounting loopholes to these companies, while we are all suffer at the pump.

"Washington's misguided spending priorities go beyond tax giveaways for the ultra rich. Washington is wasting billions of dollars on earmarks each year. As Peter Peterson, the Secretary of Commerce under Nixon has said, this nation is ‘running on empty' when it comes to the budget deficit. Runaway discretionary spending is taking money away from student loans and towards pork pet projects.

"The Cato Institute estimates that discretionary spending has gone up 50 percent in just the past few years. Last year Congress earmarked 53 billion dollars on 16,000 projects promoted by special interest earmarks.

"That's money that should have been spent on Head Start to give students a chance to succeed, it should have been spent on first time home owners and fully funding price supports and conservation programs for our farmers.

"All of this out-of-control spending is adding to our ballooning national budget. This problem may have been created by the folks in Washington, but it is now a problem that is yours, mine and ours, we pay for it everyday.

"Let's talk a minute about what we owe in America:

"We pay $900 million a day in interest on the debt. That is $352 billion dollars annually that is being invested in other countries, not our own. 50% of the privately held federal debt is owned by foreign investors.

"Since this event has started today - the debt has gone up $12.1 million. And I have much more to say so I can't promise you how much more it's going up before the end of this talk.

"Minnesotans are tired of a Congress that has turned a $200 billion dollar surplus into a $300 billion dollar deficit.

"When most of us look at the total national debt our eyes glaze over. The number of racing zeros is so huge that it is almost hard to comprehend. We want to look away and think about our own bills that we have to pay, not the ones our government owes. But the fact is the price of our national debt is very high for middle class families. This isn't just some Ross Perot chart on a wall. It matters to people.

"Why does it matter? First, it matters because we are wasting money on interest that we're paying that could go to other vital investments like education and energy and health care. One out of every twelve federal dollars that is spent by the government goes toward interest payments. So if you think about it your own life, of the $5,500 that a typical middle-class taxpayer pays in federal taxes each year, $454 of that amount is wasted on paying interest on the national debt.

"It also matters because we are not investing this money in our economy, we are paying our debts to foreign entities. We have become the world's most highly indebted nation, with foreign holdings of U.S. government securities reaching $2.4 trillion last year.

"The high level of foreign holdings of U.S. securities could have a debilitating impact on our economy and our foreign policy. A former official at the People's Bank of China, the country's central bank was recently quoted in The Washington Post as saying, ‘The U.S. dollar is now at the mercy of Asian governments.'

"Finally, we are seeing an increase in interest rates as a result of the national debt. That is costing us as much as $1,700 a year in unnecessary interest for consumer debt and home mortgages. I'm talking about with our own interest that we pay as opposed to the interest that we pay to the federal debt.

"The increasing deficit has a direct impact on interest rates. A study by former Federal Reserve Chairman Alan Greenspan concluded that there was a direct link between the increasing proportion of the deficit as a part of the gross national product and long term interest rates.

"Congress's reckless spending spree is costing us more on our home mortgages, auto loans, student loans, credit card rates and small business loans.

"Today, I am releasing an analysis of the consequences and cost of the deficit to individual households. The report spells out that when we run a deficit, interest rates rise. Even the one point hike in interest rates, that we have seen this year, translates into an increase of $2,000 a year per family budget. I am releasing this report to highlight the penalty each of us pays with our own checkbook for the national deficit.

"We are heading down the wrong fiscal path. Our mounting debt threatens middle class families, increases our dependency on foreign powers, and undermines our basic values. Think about how crazy it is: Washington isn't doing what it ought to be doing for middle class families because Washington is spending so much money on interest payments from their previous spending. And that's not all.

"Right now, Washington is financing its spending spree with money borrowed from countries like China and Japan effectively using the Social Security Trust Fund as collateral. Like so many other things in Washington these days, they have it backwards.

"We should start paying down the debt instead of running it up. Then we should then resume using part of the surplus to protect Social Security. In fact, paying down the debt actually has a benefit nobody talks about much these days: it allows us to protect social security without the need for tax increases, raising wage caps or cutting benefits. If that's not a good reason to changing course, I don't know what is.

Paying Down the Deficit - How We Get It Done

"Some of you were there last March when I spoke about the initial steps that I'd take towards paying down the deficit. Unlike the folks in Washington, I believe that deficits matter.

"I don't think there is any reason that one out of every twelve federal tax dollars spent by government should be wasted on interest payments on the national debt. Congress should not be able to do what Americans can't - spend and spend without any plan to pay for it. Here is what we ought to do to reduce the deficit:

1. Restore Pay-As-You-Go Budgeting -$18 billion a year

"First we need to return to pay-as-you-go budgeting. The pay-as-you-go rule requires anyone proposing new tax cuts or additional spending to come up with either a way for paying for them without enlarging the deficit or to get 60 votes in the Senate to bypass the rule.

"If Congress wants to do more spending, that is fine or if they want to do more tax cuts, that is fine. But, they need to have a plan for how they are going to pay for it. House Republicans and the White House have blocked pay-as-you-go amendments every year since 2002.

"We need to get serious about this. Discretionary government spending is out of control. I believe we shouldn't be spending or handing out tax cuts we can't pay for. Pay-as-you-go rules brought us record surpluses during the Clinton Administration. We've done it before, we can do it again.

2. Cut Wasteful Spending - $60 billion a year

"The next thing we need to do is to cut wasteful spending. Congress has been on the wrong course and engaged in wasteful spending. Here are a few examples of things that we can do to cut wasteful spending there are many more but I'm going to give you a few examples today.

Stand by Your Pork:

"First as I've talked about before, stand by your pork. Normally, budget items that benefit all Americans are subject to debate and disclosure and are reviewed through the appropriations process in Congress. Pork-spending evades that process and allows members of Congress to obtain funding for a special pet project - often late in the evening -like the bridge to nowhere in Alaska, a rain forest in Iowa, or a waterless urinal in Michigan. We need to end earmarking and dismantle the hiding places for secret discretionary spending.

"If they want funding for special projects, then members of Congress should be required to justify in front of the American people during a public debate in the halls of Congress. We should require an on-the-record vote for any spending over fifty million dollars.

"In addition, another way to cut wasteful spending is by ending no-bid contracts. Current law requires an open competitive bidding process for most government contracts. But there are enormous loopholes that are being exploited every day. We need to close these loopholes to ensure that there is real competitive bidding.

"Independent studies have concluded that Halliburton charged as much as nine times more than it should have for delivering gasoline to Iraq. And we could have used that money to pay for body armor for our troops or health care for our veterans. Instead, Halliburton was allowed to charge taxpayers, 45 dollars for a case of soda, 100 dollars for a bag of laundry, 10,000 dollars per day to house its employees in a Kuwaiti hotel, and 7,500 dollars a month to lease SUVs and trucks.

"We also need to end to the financial mismanagement. We need to cut the waste and mismanagement in the federal agencies. Just a week or so when I gave a speech on homeland security with the police and firefighters of Minnesota we talked about how we can save money in the area of homeland security and make sure we're spending it on first responders and other things that we need. The Department of Homeland Security has wasted more than $30 billion, including expenditures for a beer brewing kit - there might be few people here that would like that - and trainings at golf and tennis resorts.

"We need to audit these agencies like we do public corporations. If every public company in America is expected to pass an audit, why shouldn't we hold government to the same standards?

"Finally, we need to cut federal consultants. The number of federal consultants and contractors has exploded to more than five million people under this administration. Cutting 100,000 unnecessary federal consultants and contractors would save $50 billion over 10 years. It's time to put these wasted dollars toward our priorities, not waste it on government contract bureaucracy.

3. Tax Giveaways and Loopholes: $154 billion a year ($325 billion with health care savings)

"The third way to reduce the deficit is by ending tax giveaways and loopholes. Washington has given nearly $30 billion in tax breaks to energy companies that are reaping record profits. And when they found out that Exxon had a record profit year and brought in $36 billion - with their retiring CEO making $400 million last year - they couldn't even take back some of those oil giveaways.

"Congress could have given them back to us, to the people who are paying these record bills. They could have invested them in energy independence. But instead they decided to keep them and to give them to the people who are reaping those record profits. We should be rolling back the tax giveaways to the oil companies and not raising federal regressive taxes like the gas tax which hurts middle class families.

"In addition, we need to lift the ban on negotiations with prescription drug companies and require our health care system to implement electronic medical records. According to some estimates, we could save as much as 90 billion dollars a year if we lifted the ban alone. Medicare Part D was a Christmas present to the prescription drug companies.

"We need to start putting people first in Washington - not corporate special interests like the drug companies and big oil - we need to use those health care savings to invest in affordable health care and give those breaks to the people that deserve them and not tax breaks for big oil.

"To end these tax rip-offs we also need to start reporting capital gains as regular income. According to Tax Notes, the U.S. is losing billions of dollars in revenue from underreported capital gains. Misreporting of capital gains is estimated to cost $17 billion a year in lost tax revenue. Now this capital gains part probably sounded pretty boring to people unless you think of $17 billion and how much that could help for those of you paying off student loans.

"We need to require brokerage houses and mutual fund companies to track and report the original purchase price when they sell a stock, bond, or mutual fund. By ensuring that the IRS receives an independent verification of individuals' investment value, as currently occurs with wages, we can crack down on taxpayers who are not paying their fair share of their taxes.

"We need to close tax loopholes that let U.S. companies set up paper corporations in the Cayman Islands to avoid paying taxes. A report issued earlier this month showed that nearly 70 billion dollars in tax revenue is lost each year to offshore, sham tax havens. Most corporations are law-abiding, responsible, and willing to pay taxes to keep this country strong. But even when one corporation shifts its profits overseas and avoids paying taxes, everyone else has to pick-up the tab in lost revenues.

"Finally, we need to roll back the tax cuts for the wealthiest. We need to return to the tax levels on the wealthiest Americans that were in place during the Clinton Administration, when we had a budget surplus and our economy prospered. We need to roll back the Bush tax cuts for the wealthiest among us.

"If we rolled back the tax cuts for the wealthiest one percent of people - this is the tax bracket that starts at $336,000 - we could raise $63 billion each year that we could put toward deficit reduction, and big bold challenges like affordable health care and energy independence.

"If we did the things that I've outlined above, we could raise as much as 400 billion dollars a year - and all but eliminate the deficit - now that's not the debt, it's the deficit, so that would eliminate the deficit so we could start paying down the debt - and invest in the things that will have a direct impact on middle class families.

"When I go to Washington I am going to do what I have done here as County Attorney, and that is to do my job without fear or favor. I think we need more people in Washington who will do that.

"There is a story told about Franklin D. Roosevelt's funeral. The president had made a request before he died. He didn't want a nation at war to spend money on an elaborate state funeral. His body was taken by train from Georgia to Washington and finally to his home New York, where he was laid to rest.

"People lined the train tracks to mourn his death. One mourner was asked by a reporter, ‘Why are you here? Did you know Franklin Roosevelt?' The mourner replied, ‘No, I didn't know President Roosevelt, but he knew me.'

"I am not sure how many families around this state would say that our leaders in Washington ‘know them.' It is time we put an end to this runaway spending and to stop pretending that we're going to keep going the way we're going when we know it is costing average people in our state that it's making it harder for them to pay for gas and it's making it harder for them to send their kids to college and its making it harder for them to afford health care.

"I don't think what I put up here is anything that intellectual, it is simple math. But what it says is that if we're going to get this done we have to send someone who is willing to take on these special interests who have been dominating things in Washington for too long. The politicians out there think that they can just sell you a bill of goods, that they can just make a bunch of promises and they get in there and they say they can't pay for them or they say ‘so and so is the problem, that's why we have this debt, it's so and so's fault.' Well we know that it's all of our problems. And what I've laid out here is a simple solution.

"I'm willing to admit that we're going to have to make some changes to pay for it. But if we want to truly get back on track and bring change to Washington and help the middle class, we're going to have to be honest with ourselves. We're going to have to do these things. And believe me, if we do them we're going to get this country back on track.

"Thank you very much."

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