In Speech, Hatch Blasts President’s Call for Tax Hikes for Deficit Reduction
Utah Senator Says, “The President’s politically driven tax increases, in the context of trillions in deficits and debt, will do little to restore the nation’s fiscal footing.”
WASHINGTON –In a speech on the Senate floor today, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, blasted President Obama’s call last night for tax hikes on job creators and middle-class families to bring down the debt. Hatch explained that the President is the only one calling for these tax increases, when the cause of the over $14 trillion debt is spending.
Following are excerpts from Hatch’s speech:
On the President’s ‘Balanced Approach’:
“The President talked last night about the need for a balanced approach. Here’s what he means by that. To balance the budget his way, we will have to raise taxes by roughly $2 trillion. So what does he think of the plan of the Senate’s distinguished majority leader? After all, the Majority Leader has put forward a plan that does not contain tax increases. Presumably, the President would therefore oppose the Majority Leader’s plan as unbalanced. But that would assume the President is not playing politics with this debate.”
On Politically Opportunistic Red Herrings:
“All of the demagoguery on jets and yachts and oil companies, yields about one week of deficit reduction from the President’s ten year debt. Even throwing in a one-time confiscation of all the income for taxpayers above $1 million, you can only add 244 days. Add it all up and what the President is proposing amounts to less than one-tenth of deficit reduction from the debt President Obama will add over the next 10 years.”
On a Failure of Leadership:
“Instead of lead, he offered no solutions. Concerns about reelection were of greater priority than the imminent downgrading of the nation’s credit rating — a downgrade that will work as a tax increase on home owners, students, and the Treasury itself which is responsible for servicing the $14.3 trillion in existing debt.
“Unable to propose tax increases on the middle class, and unable to reform entitlements due to liberal dead-enders, he chose to offer up platitudes and class warfare that might play well with some constituencies but do nothing to address the fundamental problem this nation faces. This country cannot avoid the choices that are coming. We have to get our spending under control.”
On the Need for a Balanced Budget Amendment to the Constitution:
“The Balanced Budget Amendment that I introduced along with my colleague and friend from Utah — Senator Lee and all 47 Senate Republicans is absolutely essential. It would fix this problem once and for all. But the President opposes it. He talks a lot about empowering people. Well, the Founders of this country empowered the American people to make changes to the Constitution. Why not give them the opportunity to pass this amendment?”
Below is the text of Hatch’s full speech delivered on the Senate floor this afternoon:
Mr. President, last night we heard from President Obama in a prime-time address from the East Room of the White House. The topic was raising the federal debt limit. According to Treasury Secretary Geithner, the federal government may breach the statutory debt limit as early as August 2, 2011. That’s one week from today.
Remarkably, the President, in yet another prime time address, again hectored the American people about the need for politically charged tax hikes as a cure-all for our deficit and debt problems.
You have to hand it to the President. He is a true believer. For the President, there seems to be no problem in Washington that can’t be fixed with tax increases. Even his own party has moved beyond him on this.
To be certain, Democrats have not become the party of tax relief. For example, the plan offered by the Majority Leader does not address the ten year tax increase of $3.5 trillion that is set to kick in on January 1, 2013.
But last night on CNN, one reporter got it about right. This is how she put it.
Nobody is talking about tax increases except Barack Obama.
For weeks the President and his surrogates on and off Capitol Hill have been talking about tax increases as the solution to our debt crisis. But the President was on his own last night.
It was a speech very much divorced from the reality of our situation. Republicans are insistent. The solution to a spending crisis is not giving government more money to spend.
And here is the dirty secret — many members of the President’s own party are not keen on tax increases either. They know that the President’s politically driven tax increases, in the context of trillions in deficits and debt, will do little to restore the nation’s fiscal footing.
And they know that more significant tax increases will hit the middle class and small business job creators hard. But even as his troops have left him, President Obama soldiers on, leading the fight for higher taxes and spreading the wealth around.
The President talked last night about the need for a balanced approach. Here’s what he means by that. To balance the budget his way, we will have to raise taxes by roughly $2 trillion.
So what does he think of the plan of the Senate’s distinguished Majority Leader?
After all, the Majority Leader has put forward a plan that does not contain tax increases.
Presumably, the President would therefore oppose the Majority Leader’s plan as unbalanced.
But that would assume the President is not playing politics with this debate.
That would assume he is more concerned with solving our nation’s debt crisis than appealing to his base, getting his approval ratings up, and positioning himself for reelection.
Somehow, in spite of his absolute insistence on the need for tax increases in a balanced solution to the debt limit debate, the President supports the Majority Leader’s proposal.
The President like to present himself as the only reasonable man in Washington, but as he proved again with this latest politically driven inconsistency, he is as partisan as they come.
And to the disappointment of his campaign advisors, it is clear that the American people are demanding a leader who will be straight with them rather than focus on election year positioning.
If the President and his party came clean with the American people, this is what they would acknowledge. Non-defense discretionary spending is at historic highs. The nation’s biggest spending programs are completely out of control and set for bankruptcy. Over the next ten years, this President’s budget would drive this country into debt by an additional $13 trillion.
Most importantly, they would acknowledge that the nation’s problem is principally too much spending, not too little in taxes. I don’t envy my friends on the other side of the aisle.
They are in a tough place.
On the one hand, their liberal base refuses any structural reforms to the spending programs that are driving the country’s debt to the brink. On the other hand, absent these structural reforms, the middle class and job creators will have to be hit with historic tax increases.
Obviously, they cannot be open about this second point, or they risk the ire of American voters. Those who represent San Francisco and the Upper West Side might be able to go home and sell these tax increases. But for Democrats responsible to entire states, not just small liberal enclaves, such tax increases are a much tougher pitch.
So what is a Democrat to do?
You can’t propose meaningful spending reductions, but you can’t support job killing tax increases. So this is what they do.
They choose to ignore the real problem. They offer up no plan. They refuse to present a budget for more than 800 days. They dodge and weave. One minute the President is for real reforms to Medicare. The next minute he is accusing Republicans of trying to destroy Medicare for recommending reforms.
And they hope that their friends in the media ignore the failure to offer up a real solution. As you can see from this chart, the problem is spending, and we need a solution commensurate with that problem.
Spending as a percentage of GDP is much higher than the historical average. The average level of spending has been around 18 percent since World War II. Since President Obama took office in 2008, spending has surged to over 24 percent of our economy — way above the 20 percent norm. Tax receipts have dipped, but are expected to come back. CBO estimates, however, that spending is currently set to stay at around 24 percent.
And as you can see from the chart, President Obama’s 2012 budget does not help one bit in reducing this level of spending. The president’s budget is not balanced by any means.
Again, the problem for the President is this.
Even while he was explaining to Joe the Plumber the moral and civic imperative of spreading the wealth around, he was promising not to raise taxes on individuals making less than $200,000 or families making less than $250,000.
But if he is going to balance the budget by attempting to pay for current levels of discretionary spending that Lyndon Johnson only dreamed of and spending programs that are permanently in the red, he is going to have to hit the middle class hard.
He is going to have to break his promise. Not exactly a political winner.
Even as he talked about moving the Democratic party to the left, and abandoning the comparative moderation of the Clinton Administration, he remembers well the fate of Walter Mondale.
When accepting his party’s nomination for President in San Francisco in 1984, Walter Mondale promised Americans that he was going to raise their taxes. President Reagan went on to win in a 49 state landslide.
President Obama does not want to suffer the same fate as Walter Mondale. So he avoids discussion of the tax increases on the middle class that he believes in.
Instead, in this debate, he has focused on a number of politically opportunistic red herrings that will have minimal impact on the nation’s debt crisis.
The purpose of these red herrings is to distract Americans from the real driver of our deficits and debt, and the real choices that Democrats have to, but are refusing to, make.
Let’s look at a few of these examples. The President has been talking incessantly about the need to tax corporate jets. Well, if we were to raise the depreciable life on corporate jets from 5 years to 7 years, as the Democrats propose, it would yield $3.1 billion over 10 years.
Just to be clear, as we are discussing these paltry numbers — numbers which the President would have you believe are key to restoring the markets’ confidence in the American economy and our ability to manage our debt — the United States will run a budget deficit this year of $1.6 trillion. Our national debt is $14.3 trillion. The President’s budget assumes an additional $13 trillion in debt.
And the President is talking about the tax treatment of corporate jets, which if he got his way would raise $3.1 billion.
This is about as effective as one of my fellow Utahns standing in his driveway in Little Cottonwood Canyon during a blizzard, flicking a snowflake of his shoulder, and claiming that he was finished shoveling for the day.
To hear the President talk, you would think that this proposal is absolutely critical to balancing our budget. Well, to put it in perspective, over the next ten years of debt that this nation is set to take on, it would equate to roughly twenty hours and twenty-three minutes of deficit reduction.
And let’s not forget about the essential matter of cutting back the mortgage interest deduction for yachts used as second homes.
Again, the President acts as if this is one of a handful of policies that will restore America’s prosperity.
But if Congress enacted this change, we would cover the ten years of debt from the Obama budget for all of fifteen hours and forty-seven minutes. Of course, the set of Democratic talking points would not be complete without an attack on oil companies. The President has talked about making American oil companies pay their fair share by reducing or eliminating domestic energy incentives.
This proposal would raise $21 billion in revenue. That would cover a whopping five days, eighteen hours, and forty-seven minutes of debt that the President is prepared to take on over the next ten years. And then there are the rich. Tax the rich.
Make them pay their fair share. This class warfare might be appropriate in Europe, and countries with a feudal history, but in the United States, a nation conceived in liberty and the proposition that all men are created equal, families and entrepreneurs just don’t buy it. And for good reason. Taxing the rich hits job creators and undermines economic growth.
But as deficit reduction policy it falls short as well.
In the name of bipartisanship, I am going to use data from the Tax Policy Center — or TPC — to demonstrate my point. According to TPC models and estimates, for 2011 American households earning more than $1 million account for 12 percent of the nation’s pre-tax income, pay 19 percent of federal taxes, and carry an average tax rate of 29 percent.
Even more critical from my perspective, these taxpayers also account for 38 percent of all flow-through income. Flow-through income is predominately earnings from ownership of small businesses. So raising rates on the rich will hit squarely on those who create and expand the small businesses that need to be the engine of our economic recovery.
But let’s be clear about something. Higher taxes on these wealthy individuals will not only have adverse economic consequences. It will not even provide the deficit and debt reduction suggested by the left. Even if all the income of those earning more than $1 million were confiscated with a 100 percent rate — with the unlikely assumption of no taxpayer behavioral response — for the year of confiscation, these higher taxes would yield about $893 billion.
And this is a one-shot opportunity. If you confiscated this wealth, those individuals would no longer work, save, create more wealth, and generate more tax revenue. And confiscating all the income from those earning over $1 million does not even fix one year of the ten years of projected Obama debt. It would cover 244 days, sixteen hours, and thirty-four minutes.
All of the demagoguery on jets and yachts and oil companies yields about one week of deficit reduction from the President’s ten year debt.
Even throwing in a one-time confiscation of all the income for taxpayers above $1 million, you can only add 244 days. Add it all up and what the President is proposing amounts to less than one-tenth of deficit reduction from the debt President Obama will add over the next 10 years. Last night, the President tossed some more class warfare into the mix.
He mentioned taxing hedge fund managers. Here’s how he put it. “How can we ask a student to pay more for college before we ask hedge fund managers to stop paying taxes at a lower rate than their secretaries?” The proposal he is talking about would tax carried interest as ordinary income. The Joint Tax Committee has provided an estimate on this and over 10 years this change in the tax code would generate another $21.4 billion. That’s about as much as the oil company tax Obama is proposing of $21.1 billion. This would cover approximately 5 days and 21 hours of the President’s ten year debt.
This morning someone on television was bemoaning the fact that Democrats are not going to the mat for tax increases the way that the President has. He suggested that congressional Democrats did not have the courage to support tax increases.
With due respect, the person lacking in courage is the current occupant of the Oval Office. The President had an opportunity this summer. Was he going to lead on the debt crisis, or would it be more of the same — red herrings piled on top of straw men in an effort to distract the American people from his own complicity in this debt crisis?
Yet the President chose not to own up to the American people. The quarterback punted. He offered no solutions. Concerns about reelection were of greater priority than the imminent downgrading of the nation’s credit rating — a downgrade that will work as a tax increase on home owners, students, and the Treasury itself which is responsible for servicing the $14.3 trillion in existing debt.
Unable to propose tax increases on the middle class, and unable to reform entitlements due to liberal dead-enders, he chose to offer up platitudes and class warfare that might play well with some constituencies but do nothing to address the fundamental problem this nation faces.
This country cannot avoid the choices that are coming. We have to get our spending under control. That is why I supported Cut, Cap, and Balance.
And that is why I think S.J. Res. 10 — the Balanced Budget Amendment that I introduced along with my colleague and friend from Utah, Senator Lee and all 47 Senate Republicans — is absolutely essential.
It would fix this problem once and for all. But the President opposes it. He talks a lot about empowering people. Well, the Founders of this country empowered the American people to make changes to the Constitution. Why not give them the opportunity to pass this amendment?
Let me offer an answer — because Democrats are terrified that the American people would ratify it. The American people are sick and tired of spending. Mothers and fathers understand that the federal government is going to bankrupt their children, and leave them an America that is less free and less prosperous.
The American people are frustrated. They might not have the data at their fingertips, but they understand what I just laid out here quite well.
We are not going to solve our problems by raising taxes. Increasingly, the President is an island in his call for more tax increases. Republicans don’t support him. Independents don’t support him. And now even Democrats don’t support him. It is time to move on. We need to rein in our debt, and we need to act boldly in doing so. So far the President has failed to lead on this issue, choosing instead politically convenient talking points. But I would remind him that it is never too late to mend.
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