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Service Members Home Ownership Tax Act Of 2009

Floor Speech

Location: Washington, DC

SERVICE MEMBERS HOME OWNERSHIP TAX ACT OF 2009 -- (Senate - December 23, 2009)


Mr. KYL. Madam President, I compliment my colleague who has raised a most important constitutional point. It is true, as Senators, we have an obligation not just to throw questions to the Supreme Court but to use our best judgment as to whether we would be violating the Constitution by adopting them.

I think the point of order he raises with respect to the 10th amendment is a very important question and should be carefully considered by our colleagues. I think you can only come to one conclusion. I support what he is trying to do.

I also want to make another point, which is that around the country people are calling in and raising questions about other aspects of the bill, also raising similar questions--the imposition of a supermajority rule, for example. Can one Congress bind another in that regard? We are only now learning of all of these things, and our constituents are only learning of them because the most recent amendment was filed just a few days ago.

As we read through it and begin to realize its implications, a lot of questions are being raised. The question I want to raise today goes right to the heart of the claim that supporters have made for this legislation; that is, that it reduces the Federal budget deficit. Many colleagues on the other side of the aisle have said: I could not vote for this bill if it did not reduce the Federal budget deficit, or at least if it were not deficit neutral.

It turns out that from information received today from the CBO, it is not deficit neutral. In fact, it adds at least $170 billion to the deficit, which, of course, is very important since tomorrow we are going to be asked to increase the temporary debt ceiling. This legislation will add to our Federal debt, not make the situation better, as many of our colleagues have claimed.

I will describe why that is so. I heard another colleague on the other side on a talk show this morning say that we are going to extend the fiscal life of Medicare by 9 years. That is a claim that directly conflicts with the claim that the bill is budget neutral.

What both the CMS Actuary and the CBO have now said is, no; both are not true. There is only one sum of money. You can either extend the life of Medicare with that money, or you can buy a new entitlement under the bill with that money. But you cannot do both.

So if that money is spent on the new entitlement, for example, it cannot extend the life of Medicare. It cannot show a budget surplus of $130 billion.

In effect, they are saying you can't sell the same pony twice. Here is exactly what the Congressional Budget Office had to say about it this morning. Incidentally, we were tipped off to this by a comment that was in the body of a letter from the CMS Actuary last week, or December 10, and as we read through it and tried to analyze the new amendment that was just filed, it became clear that, in effect, that is precisely what is being done by the other side.

I am not suggesting duplicity. What I am suggesting is that they, too, have been misled by the arcane accounting language, and until it became crystal clear with the language today, I can understand why there would be confusion--but no longer. You cannot vote for this bill this afternoon and claim not to have known that it both buys an extension of the trust fund for Medicare and claims to buy a surplus of $130 billion.

Here is what the CBO says today, December 23, which is posted on their Web site:

The key point is that the savings to the HI trust fund under this bill would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and at the same time pay for current spending on other parts of the legislation.

In other words, the new entitlements that are allegedly paid for under the bill. Here is the last sentence:

To describe the full amount of the HI trust fund savings as both improving the government's ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government's fiscal position.

It would essentially double-count the money. That is the point Senator Gregg and Senator Sessions and I tried to make earlier this morning.

This is new information, I grant you. But it is an illustration of why we should not try to force this bill to a vote before Christmas, when we haven't tried to figure out what this all means and the American people haven't had an opportunity to react to it.

I quoted to you from the CBO, the nonpartisan office that tells us what the fiscal impact is. Here is what tipped us off: Richard Foster, the CMS Chief Actuary, had sent a letter. This phrase caught our attention. He said:

In practice, the improved part A financing cannot be simultaneously used to finance other Federal outlays, such as the coverage expansion under this bill and to extend the trust fund. Despite the appearance of this result from the respective accounting conventions.

Despite the fact, in other words, that it appears you can do both because of the way the government accounting is, it is only one pot of money. You cannot use it to extend the life of Medicare on one hand and buy new entitlements and show a budget surplus on the other.

This is what happens when you try to rush a bill through like this too quickly. Many colleagues on the other side of the aisle have said: I will not vote for a bill that is not budget neutral or creates a budget deficit. Then they cannot vote for this legislation now that CBO has said what it has said. Some of them won't realize that. That is why I came to the floor.

I compliment Senator Sessions for talking to the Director of the Budget Office last night and confirming this, asking him if he would put it in writing, which he did.

I think this is a game changer, my friends. If, now that you have this knowledge, you still go forward and vote for the legislation, those of you who have made the pledge not to do so will be violating that pledge. You can't use the same pot of money to do two separate things, as the CBO said. They describe it this way: You can't do both of these things. You would essentially double-count a large share of that savings and thus overstate the situation.

Mr. SESSIONS. Will the Senator yield for a question?

Mr. KYL. Yes.

Mr. SESSIONS. The earlier statement from CBO was that the legislation would result in reducing the deficit by $132 billion, which was cited several times. Well, that was obviously before the statement that was issued today. In boiling it down--and the Senator is an accomplished lawyer--doesn't this say there is a misimpression created by that previous statement and that this statement today clarifies it, making absolutely clear that it is not creating a surplus or reducing the debt but, in fact, increasing the debt?

Mr. KYL. Madam President, that is exactly right. The title of the document is ``Effects of the Patient Protection and Affordable Care Act on the Federal Budget and the Balance in the Hospital Insurance Trust Fund.'' He starts out by saying CBO has been----

Mr. BAUCUS. Will the Senator yield for a question?

Mr. KYL. Madam President, I will be happy to in a moment. I ask unanimous consent that the CMS report, dated December 10, be printed in the Record following the colloquy so that people can follow what we have done.

There being no objection, the material was ordered to be printed in the Record, as follows:


Mr. KYL. I am now happy to yield.

Mr. BAUCUS. I ask my good friend from Arizona, is it not true that the last statement from CBO, on the degree to which the underlying legislation does or does not reduce the deficit, stated that the legislation reduces the deficit by $132 billion--that is the last statement after addressing the deficit--and also stating that at the end of the decade, the deficit will be reduced between $630 billion and $1.3 trillion? Isn't that the last statement from CBO addressing the question on whether this legislation reduces or increases the deficit. Isn't that true?

Mr. KYL. Madam President, I don't know the document that my friend is referring to as ``the last document.'' I think that document, dated December 23, today, is the last document.

Mr. BAUCUS. This is from a day or two ago. It is the CBO letter commenting on the modification.

Mr. KYL. I don't know. I am not aware of that. My point is this: The document released today, in order to clarify the situation again, said the key point is that you can't do both. The government only gets the money once. Therefore, they say, to describe the full amount as both providing a savings to Medicare and providing a surplus essentially double-counts the money and thus overstates the improvement in the government's position.

Mr. BAUCUS. Will the Senator further yield?

Mr. KYL. I will not yield now. I have a unanimous consent request.

I ask unanimous consent that a Washington Post op-ed by Michael Gerson, dated December 23, be printed in the Record.

There being no objection, the material was ordered to be printed in the RECORD, as follows:


Mr. SESSIONS. I ask Senator Kyl this: The CBO report this morning essentially says you cannot count the same money twice; correct?

Mr. KYL. Madam President, it doesn't say you cannot. It just says that is what would happen if you attempted to apply the money both to the trust fund and to the additional spending. It says it ``would essentially double count and thus overstate.''

What I am saying is that it doesn't say you can't do it, but they are saying you only have one pot of money to pay for two things and, obviously, you cannot do that and be honest about the accounting. That is my interpretation of what it says.

Mr. SESSIONS. I think that is correct. The Senator may not know this. I understand that at the request of our Democratic colleagues, they have returned to CBO and gotten another statement this morning, perhaps so they can continue to make the argument that somehow this creates a surplus. But staff having examined that, I am informed that it in no way refutes this morning's statement that this cannot simultaneously fund a new program and strengthen Medicare at the same time.

I think it is a matter, will Senator Kyl not agree--I am not afraid to talk about it--if we need to slow down before we vote, so be it. First of all, is the Senator convinced, as Senator Gregg indicated this morning and CBO does, that we are, in fact, passing a bill that would, if it passes, add to the debt approximately $170 billion, as staff has calculated based on this letter, and would not reduce the debt by $132 billion?

Mr. KYL. Mr. President, I am absolutely convinced of that, yes.

Mr. SESSIONS. I do not think there is any dispute about it. I think that is the fact. It has been exposed. The President looked us in the eye in a joint session of Congress, did he not, and said this legislation would not add one dime or one dollar to the debt of the United States?

Mr. KYL. Mr. President, it is my recollection that is pretty close to what the President said. I guess maybe this would not be such a big deal unless you are trying to do two things with the same pot of money. As long as the other side is also claiming we are actually extending the life of Medicare, which I heard one of my colleagues do on television this morning, then you cannot make this other claim. You can claim one or the other but you cannot claim both. That is precisely what the head of CBO said:

To describe the full amount of HI trust fund savings as both improving the government's ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government's fiscal position.

Mr. SESSIONS. To follow up on that, is it not true--and President Obama Monday flatly stated in one press conference that it would reduce our deficit over 10 years by $130 billion and extend the Medicare Program by 9 years, which is patently false, it would appear. I am not sure he understood the complexities of all this accounting, but, in fact, I think he misspoke at that point. Would the Senator from Arizona not agree?

Mr. KYL. Mr. President, I obviously cannot get into the President's mind, but I must say that all of us had missed this point. I said before I ascribe no ill will to anybody on the other side. This is hard to understand. Accounting can be arcane. That is why this statement from the CMS was a little troubling to us when we first read it. They said:

Despite the appearance of this result from the respective accounting conventions--which is a fancy way of saying accountants have their way of showing things and that might have confused you--in practice, improved party financing cannot be simultaneously used to finance other Federal outlays.

You cannot use the same pot of money of $10 to buy two different $10 benefits. You can buy one or the other or half of each, but you cannot buy both. As the old saying goes, you cannot sell the same pony twice.

Mr. SESSIONS. It said, did it not, in that CMS letter that was a fact ``despite the appearance of this result from the respective accounting conventions''? Were they not warning us that it might appear this way but it cannot be that way?

Mr. KYL. Mr. President, our colleague Senator Gregg, a respected member of the Budget Committee, pointed out this morning why that is so, and my colleague from Alabama can do that as well.

There are two different systems of accounting by two different parts of the government. The only way they can do this is by sending an IOU back to the Social Security trust fund, but, of course, the IOU comes out of the pocket of the taxpayers where we have to borrow it and it is still an obligation even though it shows up on accounting books as obligation satisfied.

Mr. BAUCUS. Will the Senator yield for a simple question?

Mr. KYL. Sure.

Mr. BAUCUS. I wonder if the Senator is aware that CBO this morning at 9:57 sent an e-mail to all relevant staff that its estimates with regard to budget deficit reduction still stand, still hold. CBO still estimates this legislation results in a $132 billion deficit reduction. That was an e-mail sent today. Is the Senator aware of that e-mail?

Mr. KYL. I did not see that e-mail. I assume that is the same communique about which the Senator from Alabama is talking. It shows you exactly why this is so confusing and why I am a little bit concerned about the politicization of the CBO.

Last night and again this morning, we have a memo that says you cannot pay twice. If after that he says I still show that as a surplus, then what he has to also be saying is, and therefore it does not extend the life of the Social Security trust fund. As I said, you can do one or the other, or roughly half of each, but you cannot do both. If he is choosing to say it is applied to one, then our colleagues cannot continue to say that it applies to the other.

Mr. President, Americans' biggest complaint about the current healthcare system is the increasing cost of health insurance premiums.

President Obama promised that his healthcare reform bill would address this problem. As he said during his campaign, ``I have made a solemn pledge that I will sign a universal healthcare bill into law ..... that will ..... cut the cost of a typical family's premium by up to $2,500 a year.''

By the President's own yardstick, this bill is a failure, since it actually increases premiums for many Americans and fails to restrain growths for the rest.''

Recently, the nonpartisan Congressional Budget Office (CBO) concluded that, under this bill, those in the individual market--that is, those without employer-sponsored insurance--will face premium increases between 10 and 13 percent. That's approximately $2,100 per family by 2016.

A second study, from the actuarial firm Oliver Wyman, also concluded premiums will rise under this legislation, thanks to burdensome new Federal mandates and requirements and several new taxes.

In the individual market, this study predicts, premiums will rise by $3,300 per year for family coverage and $1,500 for individuals. In my home State of Arizona premiums could rise by as much as 72 percent in the individual market.

This study also tells us that the small group market would see premium
increases. Small employers purchasing new policies in the reformed market would experience premiums up to 20 percent higher in 2019 than they would under current law.

Oliver Wyman also estimates that, if this bill is enacted, 2.9 million fewer Americans would have insurance through small-employer policies.

So what this bill does is raise the cost of insurance for many Americans and then force everyone to buy a policy--and not just any policy, one that is been approved by Washington!

Our friends on the other side of the aisle argue that many families will receive government subsidies to help with the increased cost of insurance brought on by new mandates, taxes, and Federal requirements.

There are a few problems with this argument.

First, not every family will qualify for such subsidies. Indeed, 14 million Americans who buy their own coverage would earn too much to get a subsidy, according to the Congressional Budget Office.

So 14 million Americans will be required, by Washington, to purchase unsubsidized insurance that is more expensive than they could get under current law. And this is being called reform?

Second, those who do receive a subsidy may find the subsidy does not begin to cover the total cost of the increase. So, those families, too, will actually be worse off.

And, finally, the heart of this debate is a basic question: What is the point of raising the price of insurance and then subsidizing a portion of the increase? You are still raising premiums and someone has to pay for subsidies.

Americans have asked us to lower healthcare costs, not raise them and then provide subsidies to those who qualify. And they certainly don't want to pay more in taxes to subsidize their own insurance--but that is what the Democrats' bill would have them do.

As the Wall Street Journal recently editorialized, ``The [Reid] bill will increase costs, but it will then disguise those costs by transferring them to taxpayers from individuals:''

Not surprisingly, small business associations, whose members would be overwhelmingly impacted by this legislation, are disappointed.

The Small Business Coalition for Affordable Healthcare, for one, opposes this bill.

Their name says it all. This organization believes, as all of us do here in the Senate, that the status quo is not acceptable and not sustainable. But they disapprove of this legislation because, as they wrote in a letter to Congress, ``it costs too much and delivers too little.''

Here are just a few of the dozens of businesses represented by this organization: The Americans Hotel and Lodging Association; American Bakers Association; the Independent Electrical Contractors; the National Association of Convenience Stores; the National Automobile Dealers Association; Printing Industries of America; the Society of American Florists. The list goes on and on.

These businesses wrote a letter to Congress expressing disapproval of the bill's huge costs and failure to bring down premiums, among other provisions that hurt small businesses. They believe that increased premiums have a domino effect, hurting both the employer and the employee, resulting in fewer jobs, depressed wages, and fewer choices.

I will share some excerpts from their letter, with regard to increased premiums and costs:

They write:

The bill does little to make insurance more affordable and the [small business] tax credit is so limited, few will be able to obtain affordable insurance.

They go on:

The impact on non-group premiums is ..... devastating, as they are expected to increase an average of 10-13 percent per person. Those estimates, in addition to the financing provisions in the bill, slam the ``savings'' door shut.

Another organization, the National Federation of Independent Business, has also raised major objections to this bill with regard to increased premiums.

Here is a telling excerpt from a letter they wrote to the two Senate party leaders:

H.R. 3590 fails the small business test, and, therefore, fails small business. The most recent CBO study detailing the effect [this bill] will have on insurance premiums reinforces that, despite claims by its supporters, the bill will not deliver the widely-promised help to the small business community.

Bruce Josten of the U.S. Chamber of Commerce concurs. He recently said:

The fundamental failure of the Senate bill is its failure to address cost containment. We have a bill that raises taxes on pretty much everything that moves in the healthcare space. And successful cost containment practices that are in the marketplace, like health savings accounts or flexible spending accounts, are dramatically weakened in this ..... Healthcare cost increases are going to crowd out the compensation pool.

The majority leader recently disagreed with the notion that this bill increases costs, citing a prediction by the President's Council of Economic Advisers that the bill before us would bring down costs.

This is the same council that told us unemployment would peak at 8 percent if only Congress would pass the stimulus. As Americans know, Congress passed the stimulus, and we are now at 10 percent unemployment.

Moreover, if the Council of Economic Advisors is supposed to be the Bible of economic analysis and administration officials know best, why is it that on the same day the President's top economic advisor Larry Summers declared on This Week, ``the recession is over,'' the Council's chair, Christina Romer, told Meet the Press viewers that ``of course'' the recession is not over? So, who should we believe on costs?

I submit that small business owners and their representatives have the most intimate knowledge of which policies will benefit them and which stand to hurt them. They are telling us this bill will hurt them.

Finally, I would like to point out that this bill does not even guarantee that all Americans have insurance. This bill leaves 24 million Americans uninsured.

We are going to spend $2.5 trillion to raise the price of insurance for millions of Americans and keep affordable insurance out of reach for millions more.

There are much better ways to give access to affordable healthcare to all Americans.

We should start with serious medical liability reform, which has been proven in Texas, Arizona, and Missouri to bring down costs for patients and doctors.

We need to allow Americans to buy insurance across State lines. This is one of the most commonsense reforms out there. Why should Americans be denied access to lower-cost policies just because they are being sold in other states?

We should also allow small businesses to band together to pool their risk and purchase insurance at the same rates large corporations get.

Enacting these simple reforms would cost little, if anything, and would be sure to bring down costs. That is the kind of reform Americans would be sure to support.


Mr. KYL. Mr. President, when the recession hit last fall, many Americans had been living beyond their means and had to quickly scale back. Families all across America have been tightening their belts. They have been forgoing vacations, meals in restaurants, extra Christmas presents, cutting back wherever they can. The government needs to take a lesson from those families. It is time that Congress and the administration get serious about cutting spending in a meaningful way. Spending during President Obama's first year in office, to put it charitably, has not been what most would describe as responsible. Government spending grew by $705 billion in fiscal year 2009, an increase of 24 percent. Appropriations legislation enacted this year will increase spending by another 8 percent in the year 2010. All of this spending, of course, has an impact on both the Federal deficit and the Federal debt.

Let me clarify the difference between those two numbers. The deficit is the amount of total spending not covered by revenues in a given year. The debt is the sum of all of the Nation's yearly deficits. The 2009 deficit made history and not in a good way. It exceeded $1.4 trillion in the last fiscal year. That is the highest amount in history and more than three times as much as the highest deficit during the last administration. The budget President Obama submitted to Congress doubles the deficit in 5 years and triples it in 10. It also creates more debt than the combined debt under every President since George Washington. That seems almost impossible, but it is true.

The President's budget creates more debt than all of the debt ever combined throughout the history of the country, from George Washington all the way up through George Bush, more debt under President Obama's budget than all of that combined.

Even Management and Budget Director Peter Orszag has said that is not sustainable. The debt has reached an almost unimaginable sum of $12 trillion. To pay the Federal Government's bills for the next 2 months, tomorrow we are going to consider passing a roughly $300 billion increase in the allowable U.S. national debt known as the debt ceiling. That means our debt ceiling, now $12.1 trillion, will be $12.4 trillion. After those 2 months, we will need to add another $1.5 trillion to the debt ceiling to pay for the remaining spending in the year 2010.

Early next year our debt ceiling will be a whopping $13.9 trillion. Of the massive national debt, a paper by the Heritage Foundation tells us:

The recession and excessive spending have caused the debt held by the public to grow sharply to 56 percent of the economy, topping the historic average of 36 percent. To make matters worse, entitlement programs will double in size over the next few decades and cause the national debt to reach 320 percent of the economy.

That is so obviously unsustainable that it has to be of great concern to us. It is like the size of a credit card being several times more than our income, such that we can never pay the debt on the credit card. That is even to ignore the interest payments. Let's not forget about that. That is another tab we have to pick up. I have only been talking about the principle. But in 2009 alone, interest payments were $209 billion. By the year 2019, interest payments are expected to reach $800 billion a year. That is just the interest on the debt.

How are we going to afford that? By the way, who do we pay that to? We pay it to all the people we borrow money from, one of which is the nation of China. Chinese officials have indicated that they are very nervous about the amount of debt the United States is taking on.

In mid-March, Chinese Premier Wen Jiabao voiced concerns about U.S. Government bond holdings:

We have lent huge amounts of money to the United States. Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried, and I would like to ..... call on the United States to honor its word and remain a credible nation and ensure the safety of Chinese assets.

What can a lender do when he or a nation becomes concerned that the borrower is going to have trouble paying back, when the borrower keeps coming back for more and more lending? What you do is you raise the interest rate to reflect the greater risk in the lending of the money. That is what is going to happen to us. That greater interest rate is going to be manifest in payments that we have to make by our productivity and the taxes we pay. That will decrease our standard of living and create an additional obligation on the American people.

President Obama has acknowledged the problem. He said:

We can't keep on just borrowing from China. We have to pay interest on that debt, and that means we are mortgaging our children's future with more and more debt.

He is right. So why does he propose more spending and more borrowing and more than any other President in the history of the world?

It is time for words and actions to match. It is time for Congress and the President to start reining in this out-of-control spending and debt. I stand with my colleague from Alabama in support of his amendment to reinstate statutory spending caps. While this is not a panacea for solving the fiscal problems the Nation faces, it is a good way to start on the path to responsibility. I will bet that most of our colleagues on the other side of the aisle will vote against it. It is wrong for them to expect Republicans to extend the debt ceiling as long as they are unwilling to do anything to get spending under control.

Americans expect us to get this spending and debt under control. When we return to the Senate in January, our first item of business will be a long-term debt ceiling extension, including consideration of the Sessions amendment and others. After pushing the stimulus, the auto bailout, cash for clunkers, the massive $2.5 trillion health care bill, and others, I would hope our Democratic colleagues are ready to take a breather from their big spending and support a more reasonable course so that we don't have to continue to extend the Nation's debt ceiling.


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