Floor Statement by U.S. Senator Chuck Grassley
regarding sequestration
Thursday, February 28, 2013
Click here for the video.
Mr. President,
In August 2011, a deal was reached to grant President Obama’s request to raise the debt ceiling by $2.1 trillion.
In exchange for the debt ceiling increase, Republicans in Congress demanded spending cuts. The result was the Budget Control Act.
The Budget Control Act included budget caps to cut about $900 billion in spending, and a super committee was created to find at least $1.2 in additional deficit reduction.
The failure of that super committee led to the sequestration we’re now facing, which is the automatic spending reduction of $1.2 trillion over the next ten years.
I didn’t support the Budget Control Act. I knew at the time the super committee was likely destined to fail, and would ultimately only further delay difficult fiscal decisions that needed to be made.
But, at the end of the day, a bipartisan majority in the Senate and House passed, and President Obama signed, a bill to bring about $2.1 trillion in spending cuts.
Most believe that the sequestration is a terrible way to reduce spending. I agree. There are surely better ways to reduce spending by $85 billion.
The Republican-led House of Representatives recognized this. They passed two bills last year to reorganize the cuts.
Did the Senate consider those two bills? No. Has the Democrat-led Senate produced or considered a bill prior to today to avert the sequester? No.
The Democrat Senate has been missing in action.
Now, we have all these crocodile tears flowing from the majority here in the Senate because of the terrible hardship that this sequester may cause.
Well, where have they been for the past 18 months? Why have they not proposed a single piece of legislation to avert sequestration until at the very last minute?
Why has the Senate avoided regular order with such vigor?
Under regular order, the Senate could have considered an alternative, asked for a conference with the House, and convened a committee to work out the details and come to a compromise.
But, the Senate failed to act. It’s waited until the 11th hour to consider an alternative.
Just like the inability to produce a budget in nearly four years, this Senate majority has again failed to act.
The President is engaged in a travelling road show in an attempt to generate mass hysteria.
Where has he been for the past 18 months?
I’d remind my colleagues that not only was the sequester a product of President Obama and his staff, he explicitly pledged to veto proposals to replace the cuts.
He stated in November of 2011: “Some in Congress are trying to undo these automatic spending cuts. My message to them is simple. No. I will veto any effort to get rid of those automatic spending cuts to domestic and defense spending. There will be no easy off ramps on this one.”
Now the President and the Democrats here in the Senate want us to agree to more tax hikes on the American people rather than cut the $3.6 trillion budget by 2.4 percent, which they agreed to as part of the 2011 deal.
Tax hikes were not included in that deal. They weren’t included because we know that spending is the problem, not revenues.
The President must be absolutely frustrated. He apparently can’t manage a meager 2.5 percent reduction.
Even though, just a few years ago, he stated: “I want to go line by line through every item in the federal budget and eliminate programs that don't work and make sure that those that do work, work better and cheaper.”
He must not have had any success, because once again he’s asking for a tax hike to reduce deficits, rather than address the real cause of the problem – spending.
Over the past several years we have heard a lot from the other side about increasing taxes on the so called wealthy. The President and my Democratic colleagues argued this was necessary to make the rich pay their fair share.
Well on January 1 the other side got its wish. The top statutory tax rate increased from 35 percent to 39.6 percent.
When this statutory rate increase is coupled with the hidden rate increase from reinstituting the personal exemptions phase-out and the limitation on itemized deductions, the top marginal effective tax rate now tops 41 percent.
Not only did we see an increase in the income tax on January 1, but we also saw a significant tax hike on capital gains and dividends. The fiscal cliff bill instituted a top 20 percent tax rate on capital gains and dividends.
However, that is not the whole story. A provision from Obamacare that imposes a 3.8 percent surtax on investment income also went into effect at the start of the year.
Thus the top tax rate has jumped not from 15 percent to 20 percent, but to 23.8 percent. That is nearly a 60 percent rate hike.
You would think after securing these tax hikes on the so-called wealthy, the other side would claim victory and move on.
At least one would think they would move on from the tired old rhetoric that the wealthy do not pay their fair share.
Even before the most recent tax hikes, this claim was dubious at best.
According to the Congressional Budget Office, the top 1 percent already had an average federal tax rate of 29 percent compared to 11 percent for the middle 20 percent of households.
Yet, the other side continues their politics of division. They continue to pit American against American and single out politically unpopular industries for tax hikes.
While this may make for good politics, it does not make good policy.
The other side has resurrected as part of this package the so-called “Buffet Rule”, which would phase-in a minimum 30 percent tax rate for taxpayers earning more than $1 million.
This is despite the fact this proposal was voted down by this body less than a year ago and they know it has no chance of passing now.
Moreover, their argument for this provision makes even less sense now given the tax increases that went into effect on January 1.
It also is not clear to me why, when we are talking about reforming the tax code, we are now seeking to add an additional layer of complexity onto a tax code we all agree is too complicated.
At the end of the day all the “Buffet Rule” will accomplish is siphoning away job-creating capital and investment for Main Street so we can spend more here in Washington.
In addition to the “Buffet Rule,” the other side has resurrected another proposal voted down by this body less than a year ago. This proposal has to do with businesses deducting ordinary and necessary business expenses.
The rhetoric of the other side is that their proposal would close a loophole that incentivizes companies to ship job overseas. The problem is no such provision exists.
The deduction for ordinary and necessary business expenses is a mainstay of our tax code. It is an income defining provision that accounts for the costs of doing business.
What the proposal before us actually does is target companies doing business on a worldwide scale for a tax hike.
This will not create jobs in America. It will not bring jobs that have relocated offshore back home.
What it will do is punish businesses that are seeking to expand in international markets, which in turn could actually cost us jobs here at home.
The final tax increases included in the other side’s proposal is more of a budget gimmick than serious proposal to help pay for the delay in sequester.
This proposal would subject oil from tar sands to taxes that support the oil spill liability trust fund.
However, if the revenue raised from this proposal is really dedicated to this trust fund, how can it at the same time be dedicated to deficit reduction?
If we are going to get serious about deficit reduction we need to put an end to this double counting charade.
The only spending the other side is willing to cut is farm subsidies. Using farm subsidies to help pay for a sequester replacement puts the agriculture committee in quite a conundrum.
There is broad support for the farm bill here in the Senate, from Democrats and Republicans. And there is broad support for doing away with direct payments.
But for Democrats to include cutting subsidies outside of the context of the farm bill will make it difficult for us to write a farm bill.
As we all know, there’s been a long history of rural and urban legislators working together on farm and nutrition issues in the farm bill.
By cutting farm subsidies in this sequestration replacement, my Democratic colleagues are undermining the ability of the agriculture committee to craft a bill that will gain the needed support to move through this chamber.
This Democratic proposal will hurt farmers, plain and simple. And the nation’s farmers oppose it.
Don’t get me wrong. At the end of the day, direct payments are going away, and they should go away. But the farm bill is about more than direct payments, and we need to use regular order in crafting farm legislation.
If given that opportunity, we can provide savings from farm bill programs. We showed the ability to do that during the 2012 farm bill debate.
We all know the farm bill faced big challenges in the House last year. The challenges probably still exist in that chamber.
But we shouldn’t put ourselves in a position where we cannot even get the bill through the Senate. What chance does the farm bill have then?
For those of us who support the farm bill, we should be very concerned that this plan democrats are putting forward to avoid sequestration could seriously undermine the ability to pass a farm bill in either chamber this time around.
We just had an opportunity to vote on the Democrats tax increase. This was the first vote in the Senate on an alternative to sequestration, and the first alternative offered by the Senate majority.
We also had the opportunity to vote on one alternative from our side. But these votes were purely for show.
I hope that we can now get to work, in a bipartisan way in regular order to make sensible spending cuts.
It’s time to end the incessant talk of more tax hikes on Americans when we know the problem is runaway spending.
It’s time to end the constant campaigning and do the work the American people expect us to do.