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tv   U.S. Senate  CSPAN  April 13, 2011 9:00am-12:00pm EDT

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the futures market has grown to millions of transactions but has become a sophisticated electronic marketplace with a perfect audit trail. the cftc's but it should respect -- reflect technology and necessary regulatory obligations imposed by dodd frank. congress should encourage a full and fair cost and benefit analysis for every proposal. its extent dodd frank -- a realistic opportunity to comment otherwise we believe the regulated futures industry will be driven by regulations. this is inconsistent with the sound practices. furthermore it will make it more difficult to reach dodd frank's goal of increasing transparency and limiting risk. ..
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>> winkler interest rate, credit default, and energy swaps, bonds and repose, equities, medals and unlisted derivatives. we been clearing commodities for 120 years. and pioneered the development of swap clearing and 1999 of our swap their service. this operates under d.c. a license and has been subject to cftc regulation since 2001. swap clear clues over 50% of the global interest rates swap markets with over $276 trillion, and last year we cleared over 120,000 swaps, traits, u.s.
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counterparts within value of $64 trillion. we recently extended our swap was service to include a client clear service to u.s. and customers. 12 members have since joined up and provided a service to u.s. end-users and have cleared swaps through them. we have u.s. members and committees which meet monthly to discuss the development of our swap service. our working group includes mitch u.s. asset managers and hedge fund investors. our group played a critical role following the lehman brothers collapse. on its default the firm had $12 trillion in portfolio risk at lch, including a $9 trillion swap. this was liquidated with out loss or impact on surviving members. on completion, we returned $850 million of margin to u.s. bank administrators.
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we are strong supporters of dodd-frank tacticals, and believe the legislation will improve stability in the marketplace and greatly reduced systemic risk. in particular we welcome strong risk management and hardened financial service standards for clearinghouses. the great level of supervision for clearing houses is clearing obligations. we have followed the cftc and sec rulemaking process closely, and applaud the thoughtfulness of the agency and the task. we particularly participated in roundtables, attended open meetings and respond to the proposal of rulemaking, and met with our commission. it is key the legislation and rules to us emerging from the u.s. and europe are as closely aligned as possible. it would reduce arbitrage them insured risk standards internationally, and make certain that you 20 commitments are met. a lack of harmonization may impact the real economy, jobs
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and recovery. i will set out three of the greatest areas of concern as regard to the difference between the u.s. and europe in our international oversight. firstly, ownership and governance. we believe the congress correctly rejected voting caps for clearinghouses during passage, and the concerned agencies might introduce such caps. aggregate restrictions on clearinghouse ownership or governance may limit innovation, reduce competition, and increased costs. secondly, risk management and access rules for clearinghouse. the cftc risk management provision at present are a line to the future is clearing business, swaps need to be viewed as having different risk management techniques and processes. we expect teachers and swaps to converge over time, but it is inappropriate now to impose futures clearing criteria on swaps. we also believe access criteria to swap clearing members must be
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proportionate to the risk introduced an contingent on default management and risk underwriting participation. such, the clearinghouse is nondefault the members, and their clients are fully protected. and thirdly, customer protection. security is key. customers clearing swaps, many of them pension fund, another long-term saving institutions, must be -- safeguards that deliver such security would ensure that u.s. clients have the same protection as clients in your. and in conclusion, we believe the commission's final rules should afford individual customers the option of legal segregation. further any final rules on clearinghouse ownership or governance should be applied at an individual level. and, finally, access requirement should do nothing to compromise the integrity of clearinghouses. we look forward to extending our safeguards deeper into the u.s. market place and to for the going art u.s. staff and
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operations and support the act. thank you for inviting me here today. i'm happy to take any questions. >> thank you, mr. axe. ms. paquette, please proceed. >> thank you, chairman johnson and ranking member shelby for holding this important hearing. i'm jennifer paquette, chief investment officer of colorado pera. i would like to share with you a school teachers interest in derivatives and share some concerns on proposed rulemaking. the colorado teacher told me years ago about a problem she had in her classroom with a first grade boy. she required all the students to read aloud in front of the class and the little boy was shy and could not do it. she allow the student to sit in a chair with his back to the class and whisper to the blackboard instead. over the course of the year she took the chair and moved inch by inch so that by the end of the year it faced the class. the chair was empty at the end of the year. and his death the boy was standing in front of the class reading aloud with great pride. when she told me the story, it
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struck me how much i have in common with her. they care that she took with every student in her class was the same care that we give to every single investment that we oversee for her retirement plan. she would not know how to invest $39 million institutional portfolio. but i and my investment called indiana, we know how to do that on her behalf. she would not know how to execute a total return swap to mitigate risk, but we know how to do that. we know how to employ futures to mitigate risk when we're doing portfolio transitions. the investment vehicles that we use matter to all of our members. it is why i have come here for the honor of just a few minutes before you. derivatives are tools we use for mitigating risk. while derivatives are a modest portion of our total market value, they are very useful. you will find in my written testimony we have concerns about how public plans may be affected by cftc proposed rules.
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cftc proposed rules include public pension plans as a special entity. in order for us to in into a swap, the swap you would need to have a reasonable basis to believe we have a representative that meet certain requirements. we are concerned that there's a conflict of interest for one party in a transition to also be responsible for determining who is qualified to represent the other side of the transaction. we're also uncomfortable with how this could potentially impaired negotiations with a dealer, we fear higher costs for executing transactions, and are concerned that strong counterparties may not want to do business with us for reasons including potential liability. colorado pera and a number of public pension funds is assets total over $700 billion has suggested a voluntary alternative approach be created. i have included a letter in my written testimony signed by these pension funds which
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describes the approach. it would allow us to voluntary undergo a certification process to meet the independent representative requirement. this would include passing a proficiency exam. i think it supports the intent of protecting investors, while a voice of potential conflicts and unintended consequences. i have the utmost respect for the time and care you and others are expending on these matters. we would like to continue to assess the swaps market for the singapore for the reasons we have use them effectively four years. on behalf of almost half a million current and former employees, public employees of colorado pera, i ask that you at all those involved in this process consider our concerns. i owe it to all of our colorado pera members and to that particular teacher i told you about, to advocate on this
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issue. that little boy who was afraid to speak, who is not so little anymore, i see everyday. and he is my reminder to speak on issues that matter to the investors that are our members. take you for your time. >> thank you, ms. paquette. we will start off with a few questions. thank you for your testimony. i will remind my colleagues that we will keep the record open for statements, questions and any other material you would like to submit. as we begin questioning the witnesses, i will put five minutes on the clock for each members questions. mr. olesky, how would the proposed cftc rule on swap execution facilities require request for quotes impact market
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liquidity in potential earnings? what would be the impact in your company if the sec and cftc for rules are not reconciled? >> thank you. currently tradeweb trade interest rate swaps in the u.s. and europe, and we have processed and had about 75,000 swap transactions over the last several years. and one of our concerns is that as the rules have been proposed by the cftc, in this process which is an auction that customers such as the clients better at this table would run in or to get the best price, that the clients would be forced to send out inquiry to at least five different dealers. that's not the way the market operates today. in fact, that's not the way the u.s. government on market
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operates today in our u.s. government bond franchise the average in what goes out to just three banks. is a very good reasons for this. clients need to assess how they're going to get the best possible price in the marketplace. and at times that means going to just one or two dealers, not five. so that's an example of a rule that's been proposed that's not mindful of the way the market operates today and would require a change. i'm not sure what that change entirely would be, but we as a company that provides services to our clients are advocates for our client. we took large firms, public pension funds institutions that want to be able to access liquidity in a way that makes the most sense to them. >> mr. duffy and mr mr. axe, how would you -- with foreign counterparties impact the competitiveness of u.s. markets?
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>> i'd be happy to start things again. one of the ways, mr. chairman, that it would impact us is if the cne had a client that was in europe and he wanted to do a counterpart transaction with a party in the u.s. we would have to make sure that the cme clearing house was registered in the u.k. or in any other year jurisdiction that that clients trade was coming from. this is a very long burdensome process throughout the u.k. and u.s. it takes about six months to become a clearing member. so this is absolutely a very difficult thing for us to do. going forward. so that's one of the big competitive issues that we have, and i will let him make a comment. >> thank you, mr. chairman. we currently do clear trades, but the u.s. and in europe, and to refer to my oral testimony, i
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think the fear we would have in terms of regulatory arbitrage is to ensure that we do have consistent standards. appreciating the administration to be able to actually achieve your license status is one thing, but actually having different systems and different regulatory systems across the different geographies will actually create inconsistencies, and it wouldn't be advisable in the ideology of harmonization. >> mr. deas, from your perspective, how would the proposed definition of swap dealers impact end-users? >> chairman johnson, the definition for swap dealers, if it's not done properly, could pick up larger companies who are still engaged in hedging underlying business activities,
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and there is a fundamental difference between a financial institution acting as a swap dealer and a large us-based company that's doing that. end-users are always hedging underlying business activity. the derivative, when value together with that underlying business exposure, creates a neutral position. swap dealers are maintaining an open position. they are market makers. we believe it's appropriate for them to centrally clear and margin their trades, but because end-users are always balanced, if you impose margin on them because you defined them through this definition to be a swap dealer, then you take a balanced care of transactions that create a neutral position, and you ask impose a new and unwelcome risk at least for treasurers. that risk of having to fund terry goddard margin payments
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with all the unintended certainty of the. >> senator shelby? >> mr. deas come in your testimony today, you warned that regulators could impose costs on companies that would inhibit their ability to use goods and hire workers in the united states. chairman gensler has begrudgingly i was a agree to make some accommodations for companies that use derivatives to hedge their business risks like yourself. but he also argues that doing so, and i quote, only benefits wall street and doesn't benefit main street or the corporation that provides service to america. you agree with chairman gensler's assessment here? >> no, sir. i don't. as i've indicated in my testimony, we are manufacturing the goods that are consumed in the u.s. and we've been able to
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export successfully overseas, and we do that -- >> helps you can be, doesn't? >> yes, sir it does. and it helps us offset risks that we can't otherwise control. >> in the consequences i think you alluded to it earlier, what would be the consequences of imposing unnecessary regulatory burdens on companies like yourself, ability to hedge? a lot of these risks are tailored, are they not? >> yes, sir. one of the problems is, for instance, i talk about our ability to export. if as was questioned by the assistant secretary of the treasury, if the secretary of the treasury declares that foreign exchange transactions are swept up in this new mechanism, then it could force exporting companies like fmc to occur higher costs and one unfortunate way to lower those costs would be for us-based exporters to move their manufacturing facilities
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offshore to the countries where their customers are to achieve in that way a better match between their currency, their costs and the currencies in which their customers are paying them. i'd hate to see that happen to us-based manufacturers. >> would requiring companies to use standardized clear to products or forcing them to post a margin as we talked about, increase risk in the financial system, or decrease it? wouldn't increased risk for you because it costs more? >> senator, it would increase risk in two ways. first of all, as i described, the over-the-counter derivatives market grew to the size it is today because of its ability to respond and to provide customization. the fact that these hedges are effective speed dealing here with, are you not? >> yes, sir. and the fact that were able to achieve that customization means we have exactly offset the
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business risk. failure to make it match up exactly if we were to force to use a standardized derivative would mean there would be residual risk we would retain that could come home to manifest itself in higher costs for us. >> mr. dudley, governor tarullo, you were here, explained that central clearinghouses concentrate risks and thus have the potential to transmit shocks throughout the financial markets. what would happen for example, if the cme, we hope it never would, or another clearinghouse, and what type of contingency plans has the cme prepared to make sure that if it were to fail, one of, that one of more of its members does not threaten the empire financial system? >> senator, that's a great question and one of things we can start with is a record in 156 years, the cme has never had
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a customer had any default. that's the first thing. the second thing is the way we do cling at the cme group we settled twice a day, mark-to-market if the customer doesn't have the funds up in the market runs away from them, we did it take him out of the market if the money is not coming forward. we have the ability to do that on an hourly basis. we make sure that these transactions are protected, and so we have many, many safeguards and risk management is something that we spent a lot of our time on at the cme group and i think that's what's made us what we are today. >> that's good. i want to pronounce your name right i guess. is it i can't? how do you say it? >> to get. >> ms. paquette, the number of you on the other members funds submitted to the commodity futures trading commission noted that however well-intentioned the goal of quote protecting vulnerable or gullible parties in the swap market, might be, the cftc's proposed business
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conduct standards may be so onerous that pension plans are quote left to deal with less desirable counterparties if they could find any at all. if the cftc's proposal were adopted in its current form, would it make it harder to manage the nearly $40 billion of retirement money for which you are responsible for, to manage? >> thank you, ranking member shelby. if the proposed rules were -- >> adopted in its current form. >> adopted in the current form, we think it would be more challenging for us to manage our -- >> be more difficult to? >> it would be more difficult in certain areas of our portfolio, yes. >> thank you. thank you, mr. chairman. >> senator. >> thank you thank you. mr. duffy, earlier i ask chairman gensler questions about why he felt it was necessary to impose prescriptive rules that
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override core principle regime that we have had at cftc previously, or currently. and the chairman said it was because the instruments like swaps, and that's what d.c. does need a prescriptive rules, however in my notes there were no swap d.c. owes. the only clearing organizations pre-dodd-frank were regulated exchanges. clearing organizations seem to have reformed well in 2008, and furthermore, it seems the prescriptive regulations have gone beyond dcos and are actually part of the exchange, affecting, excuse me, impacting the exchanges as well. can you characterize more specifically how the cftc is dismantling the core principle regime and how it would negatively, let me be more unbiased. how it would impact cmes exchanges and clearing organizations? and also did any of the dcos fail in 2008 that would work
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chairman gensler is concerned that have led him to override core principles for dcos? >> no, sir. none of those detail. prior to 2008, 2007, cme cleared $1.2 quadrillion of value without one hiccup. so that's just for starters. and the way chairman gensler is trying to roll back some of the modernization act of 2000, for example, would be on product. we want to launch a new product where the ability to self certify that product. we innovated can have the ability seltzer fight so we can be first to market. some of these new rules call to days, weeks, months to put this out from public comment again and have everyone an opportunity to look at what seem he is trying to innovate. there would be no reason to innovate new products are another example would be products that we now currently make trade in a block trade or and otc fashion because there's very few participants in the
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transaction so we listed on a facility just for a handful of participants and we still a censure clinton. he is saying if you don't have 85% of that trade done, the volume down, you have to do this the, put it on an order that. so that would kill the project. when we listed that, if we went by the prescriptive rules, back then that they have in place today we would not have 0-dollar contract for folks to manage their risk today to protect the pension, mortgages and other things. those are a couple examples what i think the chairman is wrong on this. >> the cme is a significant financial institution. you've also may have heard my raising the concern that i've heard about the difficulties that the futures industry is having and keeping up with the ongoing proposed regulations running their business in responding. my guess is that it may be
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easier for the cme to meet the challenge than it is the small exchanges. am i missing something they're? i don't expect you to say it is easy for you but i would would also about in my case, kansas city, for example, the ability to keep up with the volume of activity at the cftc right now to actually make intelligent decisions about responses to proposed rules. >> we have a very large outside law firm. we have a very large inside law firm. we cannot keep up with the commentaries that are coming forward with all the new rules and do it in a very thoughtful way. i've talked to the chairman, the ceo of the kansas city board of trade. i know they're having similar issues there, we to do business with them so we have an interest in what their thoughts are on this also. it's almost impossible to keep up so when the cftc is proposing these rules, trying to do them in a very short period of time and for us to digest and see what the consequences are, we
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can't keep up with it and i'm concerned how others can. >> your response to my question about innovation, new product, with and create a disadvantage to being an american, a united states company, and the country's exchanges be better capable of innovating then the united states? >> if they can self-certify aipac throughout the world. you put the essays of american innovation in financial services right down the drain. >> mr. duffy, thank you very much. chairman johnson, thank you. >> thank you. as a rulemaking process moves forward, this committee will continue to provide robust oversight as they performed to the otc derivatives market. striking the right balance for how to best, for how to best regulate derivatives should not be a partisan issue.
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and i urge senators on both sides of the aisle to continue working with our regulators to build a stronger foundation for our financial markets. we did not reach a quorum today to vote on any nominations as was scheduled. we are going to look for time within the next two days to hold this vote off the senate floor after a "roll call" vote. my staff will send a notice when we called an appropriate time. thank you again to all of my colleagues and our panelists for being here today. this hearing is adjourned. [inaudible conversations] [inaudible conversations]
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[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]
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>> a few months ago i was able to sign a tax debt for american families because both parties worked through their differences and found common ground. now, the same cooperation has made it possible for us to move forward with the biggest annual spending cut in history. >> watch all the events of the current spending debate and a debate about next years budget as well from capitol hill and house and senate floor. to the white house and around washington your online with the c-span video library. search, watch, click and share with everything we've covered since 1987. it's what you want, when you want. >> on this wednesday, april 13, the u.s. senate is about to convene for general speeches
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until 3:00 eastern. majority leader harry reid this point saying he hoped to reach an agreement to finish a measure on small business technology and research programs before taking up the spending bill to finish out fiscal year 2011 which ends on september 30. and now to live coverage of the u.s. senate here on c-span2. the presiding officer: the senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray. almighty god, who made light to shine in darkness, shine now on capitol hill.
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restore our lawmakers to the light of your glory, as we have seen revealed in your sacred word. may they permit your sacred scriptures to provide a lamp for their feet and a light for their path. refusing to lean upon human wisdom alone, help them to seek your guidance and to follow where you lead. like a shepherd, guide them and our nation through the darkness and dangers of these challenging times. we glorify you, gracious god. we praise you for all your blessings.
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amen. the presiding officer: please join me in reciting the pledge of allegiance. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. the presiding officer: the clerk will read a communication to the senate. the clerk: washington, d.c, april 13, 2011. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable kirsten e. gillibrand, a senator from the state of new york, to perform the duties of the chair. signed: daniel k. inouye, president pro tempore. reid madam president? the presiding officer: the
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majority leader. mr. reid: following any leader remarks, the senate will be in morning business until 3:00 p.m. today. senators dhiewrg period of time will be allowed to speak for up to ten minutes. the republicans will control the time from 11:30 a.m. until 12:30 p.m., and the majority will control the time from 1:00 p.m. to 2:00 p.m. we are working on an agreement to complete action on the small business bill. madam president, its rea it's ba difficult thing to do. we have a number of amendments that are pending. some senators will allow an agreement on those amendments -- won't allow an agreement on those amendments unless they get their amounts. there's lots and lots of amendments, and we're traig to work or way through these. at the top of the list there's one by senator cornyn, one by senator hutchison and one by senator sanders and we just haven't been ail to work through
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this legislative morass. we've spent more than enough time on this bill. i am going to continue working on that with the time here not being so overly used. certainly yesterday was a case in point. everyone is looking forward to the final conclusion of this fiscal year 2011 budget. we're going to have a vote this week to complete that. so everyone is, i guess, anxious to get that done. but we need to get the small business jobs bill done. additionally, the long-term c.r. have been filed in the house and is available for review. we expect to receive it from the house sometime tomorrow. from my perspective, the earlier the better. so i would ask senators to come and talk about this resolution. if they have any problems -- they like or dislike -- they can come and talk about this bill. this would be the time to do
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that because we're really cramped for bill whe time when l gets here. s.j. res. 37 is at the desk and ready for its second reading. the presiding officer: the clerk will read the title for the second time. the clerk: h.j. res. 37, joint resolution disapproving the rules submitted by the federal communication commission with respect to regulating the internet and broadband industry practices. mr. reid: i would o object to any further proceedings with respect to this joint resolution at this time. the presiding officer: the joint resolution will be placed on the calendar. mr. reid: would the char chair announce morning business. the presiding officer: under the previous order, the leadership time is reserved. under the previous order, the senate will be in a period of mooring morning business for debate only until 3:00 p.m. with senators permitted to speak therein for up to ten minutes each with the republicans controlling the time from 11:30 a.m. until 12:30 p.m. for
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the purpose of a colloquy and the majority controlling the time from 1:00 p.m. t 2 to 2:00. mr. reid: i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:
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mr. mcconnell: madam president? the presiding officer: the republican leader. mr. mcconnell: i ask consent that a quorum call be dispensed with. the presiding officer: without objection. mr. mcconnell: all across the country this morning americans are struggling and they're not getting much in the way of help or hope from washington. those who are unemployed or eager to hire are frustrated by a mountain of burdensome new rules and regulations democrats have imposed on them in the last two years, and the by the uncertainty that comes with every proposal to create another one, they're shoblgd at a white house which doesn't even try to balance its checkbook would repeatedly propose to raise taxes and more and more they're worried about the consequences of our debt and the president's reluctance to do anything about
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it. but even more upsetting to many americans is the white house's repeated attempts to seem as if it's doing something about these things when it isn't. that's just what the president has sought to do in talking about the need to reform entitlements and lower the debt but refusing to lift a finger to do either. and that's just what i fear he'll do again this afternoon in outlining his vision for tackling these programs withoutseeches presenting a single new -- without so much as presenting a single new program to get us there. the truth is the president is only entering this debate at all because he can no longer ignore the growing bipartisan calls for action. if he were serious, he'd be talking about a detailed road map for action, not just grabbing headlines by announcing another speech. of course, we can hope that the president presents more than
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just his vision for the future this afternoon. but those who hope for that from this president have been disappointed many times before. what we're really likely to get instead is a broad-brush notion of what the president wants to know, a vision that includes calls for strengthening entitlement programs that few people would disagree with but which will never come about absent presidential leadership; a partisan call for tax hikes on struggling job creators; and i fear a call for tax hikes on energy producers when gas prices are already creating heavy burdens for so many. no doubt we'll also get a fair share of finger-pointing and an attempt to cast republicans in the worst possible light for actually laying out a serious plan to address the crisis we face while others merely talk about their vision. but we can still hope that the president leaves the
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scapegoating aside for a change and finally admits the obviously: that we can only solve this fiscal crisis if we do so together. so either the president agrees today that republicans have a point bh it comes to the sear yesness of our fiscal problems and admits that the old approach of admitting that they don't exist doesn't work anymore. either he pretends that old programs unlike everything else in life don't need to adapt to survive or he joins us in acknowledging those programs will no longer be there for the people who are counting on them if we don't take serious action right now. we need to keep our promises to seniors and to a rising generation of americans. and we will. but we can no longer afford to make program promises to younges that we know we can't afford to keep. if big government created jobs and opportunity, we'd be in the
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middle of a boom right now. the experiment has failed. that's why the national conversation has shifted from how much democrats want to expand the scope of government to how much both parties should rein it in. the fiscal party contest won'ting solved by freezing u unsustainable government spend or raising taxes on very small businesses we're count on to create jobs and the programs we cherish as americans won't be preserved through speeches alone. americans zoo want to hear the president's vision today. he's had two years to lay that out. the americans don't want to hear the president criticize or distort the serious efforts of those in our party who want to solve our problems head on. they want to hear a detailed counterproposal of his own. and they don't want to hear that the price of gas at the pump is going to get even higher or that their opportunities to find or create jobs will shrink. now is not a time for more --
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now is not a time for mere speeches or political attacks. it's time for action. that's what the american people want from this president. that's what they're failing to get. and i hope that changes today. madam president, i yield the floor. the presiding officer: the clerk will call the roll. quorum call:
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mr. coons: i ask that proceedings under the quorum calls be dispensed with. officer without objection. mr. coons: i ask unanimous consent that floor privileges be granted to ian coskey for the duration of the day. the presiding officer: without objection. mr. coons: i rise to mark national volunteer week and delaware volunteer week. americans and delawareans will be engaged in volunteer services. volunteer fiewntses include helping the homeless, tending to the environment and working to keep our communities safer and stronger and free from fires and accidents and injuries. here in the senate, one can't talk about community service or national service or volunteerism without thanking and recognizing our colleague, senator barbara mikulski from my neighboring
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state of delaware. she has has been a leader on volunteers, most of them alongside the late-senator ted kennedy. and i am proud to be working with her to fight to save our national service programs. when delaware's tireless governor was sworn no office in 2009 he decided to forego the traditional governor's inaugural ball and he along with his wonderful wife instead organized a week of service projects across our state. today that week of service continues and has become a tremendous opportunity for nonprofit organizations, community service organizations across our state to connect with delawareans excited about teaching our children the value of volunteerism, connecting with our neighbors and helping improve and strengthen our community. i've long believed that those who engage in volunteerism and service to others in fact get more out of it than they put into it. volunteerism is a fundamental part of what it means to be american. it is a great, some would say
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the greatest part of america and its cultural traditions. however, volunteerism need not be congress fined to my state or to this week. it is something from which every american can benefit. in my view, one of the most effective volunteerism efforts is one with which i was first engaged when i was a resident briefly of your state, when i was working for the national "i have a dream foundation" in new york city many years ago. the national americorps program, a partnership between the federal government and local nonprofit communitied was launched with bipartisan support, initially on idea proposed by president bush and then enacted by president clinton. the americorps program is now one which has had a tremendous impact. it enables 75,000 americans annually to serve via americorps with a very wide range of programs, programs where the funding is raised and its focus is directed by state-by-state
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commissions of volunteers, community leaders, who help identify the best and most appropriate, most effective partners for this federally funded program that is also matched one to one from dollars from the local community. so far more than 60 million hours of community service annually has been provided by americorps members. we will, -- while in delaware the volunteer fire service is one of the strongest parts of that long and proud history of our state, there are more than 88 volunteer fire companies in our state. they provide the vast majority of fire suppression service for our communities. and they faced a real problem when i became county executive. a steady loss in membership, as working-class families were under more and more pressure, more folks, both parents are working, they're under more stresses, more demands, it became more and more difficult for people to dedicate the time and the energy needed to be trained and serve as volunteer firefighters. and in particular, to deliver
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ambulance service, one of the most important aspects of our volunteer fire service. so in partnership with our new castle county volunteer firefighters association and with the ymca and with americorps, i worked tirelessly to launch a new americorps program called the emergency services corps. the emergency services corps helps recruit volunteer firefighters, conduct c.p.r. and first aid training and provides fire awareness training for schoolchildren across our count. so far they've recruited more than 220 new volunteer firefighters and logged more than 100,000 hours of service to our community in the five years since it was created as a partnership between all these different entities. i just thought, madam president, i would draw attention to that one example today of the hundreds of americorps programs across our country that are a shining example, i think, of how the young people of this country, people of all ages across this country, bring their gifts, their talent and their spirit to volunteering. in every generation of americans, heating the --
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heeding the call to service has been the answer to our greatest challenge. and with so many out of work, suffering from hunger or facing homelessness right here in our own country, i think it's critical we all pitch in to help. it's an affirmation of our bonds to citizenship and compassion to fellow citizens. i'd like to encourage everyone in my state to visit the volunteer delaware web site to find volunteer opportunities this week. i'm putting a link to it on my web site at and participate in this national volunteerism week. i suggest the absence of a quorum, madam president. the presiding officer: the clerk will call the roll. quorum call:
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may i be recognized to speak as if in morning business? the presiding officer: without objection. the senate still is in morning
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business. mr. nelson: madam president, the house of representatives paul ryan tea party budget privatizes medicare. let me repeat that. medicare, the program of medical care for senior citizens that our seniors have come to depend on, the house of representatives paul ryan tea party budget privatizes medicare. now, this is not an empty threat. it's not this senator's or many other senators' political interpretation. the house republican budget committee chairman's budget would end medicare as we know it.
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it ends medicare. it hands seniors health care over to insurance companies. it would break a sacred contract between workers who paid into the system thinking it would be for them when they retired, but under this new scheme, senior citizens won't have a medicare program any more. they would have to pick an insurance plan and a voucher would be given directly to the insurance company. under the proposal -- i'm not making this up -- a voucher paid for by the federal government would be given not to the senior citizen to go shopping. it would be given to the insurance company that they
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chose. medicare for senior citizens would be turned over to insurance companies. if this sounds incredible, it is. because under that plan, insurers would decide what doctors seniors get to see and what health benefits get covered. now, why do i say this? well, that's what an h.m.o. is. an h.m.o. is a health maintenance organization. that is an insurance company. they have a panel of doctors. they have a panel of hospitals. they determine what is in the coverage that a senior citizen gets. contrast that to medicare now,
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that medicare fee-for-service, the senior citizen makes the choice of their doctor, of what are the things that they look for in their total medical care paid for because they are senior citizens and are eligible to medicare, of which they have been paying in all of their life through a medicare tax. and so now this proposal is to privatize medicare, take it out of being a government fee-for-service plan and instead insert it into a privatized insurance company. do senior citizens want to change their medicare and turn it over to insurance companies? i don't think so. if insurance plans raise their
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cost, which we know they do, seniors then would have to pick up the bill. seniors would have to pay more out of their pocket for this voucher program. and according to the congressional budget office, out-of-pocket cost -- this is according to to c.b.o., the nonpartisan actuarial accounting organization. according to c.b.o., out-of-pocket cost would more than double for seniors. this voucher program proposed by the chairman of the budget committee in the house, congressman ryan, it isn't like medicare advantage. medicare advantage has been a tkpwhraeut program for senior citizens -- has been a great program for senior citizens.
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and in our state of florida, we have more signed up for medicare advantage than any other state because what it does, it provides benefits at low cost to senior citizens because the federal government directly negotiates with the insurance company's plans. that's different from what congressman ryan and the tea party is proposing. so, insurance companies, under medicare advantage, have to provide guaranteed health benefits at a low price that is negotiated. and, you know, as a result of the new health care reform law, medicare advantage premiums have actually gone down. these are the premiums that are paid by senior citizens.
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so don't let folks confuse you between what is proposed by the budget chairman in the house and the existing medicare advantage program. the ryan tea party budget leaves these decisions up to the insurance plan. in other words, insurance companies will be in charge of seniors' health care. i don't think that's what our senior citizens intend to have happen. the tea party wants to end medicare. that's the bottom line. yet, the house budget does little, interestingly, little, if anything, to actually reduce the federal budget, which is what they say that budget is for to, reduce the federal budget. well, look at it. the house budget chairman claims
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his budget includes $5.8 trillion in spending cuts. but when you look at it closer, we learn that this claim was an accounting gimmick. and we've seen these gimmicks over and over and over in budgeting in the federal government. for example, first we learned that his staff had made a $200 billion mathematical calculating error in calculating interest savings. and then second we learned that $1.3 trillion of the savings is artificially derived from a misleading assumption that the wars in iraq and afghanistan would continue indefinitely. and, third, and most importantly, of his savings,
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$4.2 trillion of the savings came from the spending cuts that fly out the back door in the form of tax cuts for millionaires. at the end of the day, those $5.8 trillion in spending cuts in their budget translates into less than $200 billion in real deficit reduction over those years, or one that, less than 1% of the total debt held by the public. so the congressman ryan tea party budget does little to address the deficit while making every single senior citizen in
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this country get their health care from an insurance company. so that's why senator baucus, our chairman of the finance committee, and i have introduced a resolution. this senate resolution calls on the senate to oppose this radical voucher program. medicare has been providing affordable health care for seniors and disabled floridians and americans for decades and decades. it is a very popular program with our seniors. medicare should not be dismantled. it should not be turned over in a voucher program to insurance companies that will eliminate choices. it should not be turned over to insurance companies that will increase cost.
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and certainly, seniors' health care should not be turned over to insurance companies. madam president, i yield the floor. mr. grassley: i ask that the calling of the -- no a quorum has not been called. i would ask unanimous consent that adam r0ollof of my staff be allowed on the floor during this period of time. the presiding officer: without objection. mr. grassley: madam president, we're all in kind of pins and needles wondering what the president is going to say today
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in his speech on the budget at george washington university. i hope he comes with a strong program to get the budget deficit down because presidential leadership will really help us get the job done. but congress can do it on its own. it's going to be a lot easier if we know we're working with the president instead of against the president. and i hope the president's remarks today reflect the fact that elections have consequences, and the consequence of the last election was a very strong message to washington that we ought to get spending down and government ought to be smaller. and anticipating what he says, i want to make some remarks. and my anticipation is based upon things that have already been said from the white house
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by staff of the direction the president's speech is taking. if we learned anything during the last two years, it's that america can't tax and spend its way back to prosperity. the voters understood that and sent a powerful message for washington last november: stop -- stop piling debt on the next generation. stop the overspending that mortgages our children's future and jeopardizes job creation. now, thanks to the gravitational pull of the republican majority in the house of representatives, responding to the results of the last election, the compass is starting to point in the right direction. despite the two-against-one lineup of the debate -- meaning the president and the democratic senate on one side and the hou
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house, under the control of the republicans, on the other side -- that two-to-one lineup, we have a continuing resolution of what must be a long haul committed effort. the continuing resolution that we'll pass this week is just the beginning, because the hard work has only just begun. that's reflected in the leadership demonstrated by the house of representatives's budget committee chairman paul ryan. he did what the president failed to do in his budget proposal: get serious. now, today i hope we have evidence that the president is getting serious. but up till now, the president ducked, even ignoring his own deficit reduction commission
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report fresh off the printer. he hasn't said "yes" or "no," whether he supports the recommendations of the bowles-simpson commission. in sharp contrast, house chairman ryan stepped up and put ideas on the table for fiscal responsibility. today, in response to this effort to show the voters that we got it in the last election, that it's time to reduce spending in washington, the president is giving his speech on reducing the debt. after reluctantly coming to the table for very modest reductions in this -- in spending that's going to be in this continuing resolution that we hopefully pass this week, the president has quickly moved past any focus on getting spending under control and seems to be going back to that same old saw that
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we've got to have tax increases to reduce the deficit. but history proves that tax increases do not bring an additional dollar to the bottom line. tax increases are a license to spend even more than the $1 that might come in from a tax increase, and we also know that increasing taxes are not going to reduce the deficit; only growing the economy is going to reduce the deficit. and tax increases can have a detrimental impact on growing the economy, because government consumes wealth, it doesn't create wealth. only workers and investors and people that invent and people that create create wealth. now, there's always been a tug of war in washington between tax
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cutters and big spend h big spe. there are those of us who believe that taxpayers have a right to keep more of their money and decide best how to spend and save and and invest e dollars. some work relentlessly to divert more private resources into the tax coffers. doing more of that just doesn't make sense, if you want recovery. consider the work of two u.s. presidents from opposite sides of the political spectrum. study the history of john kennedy on one hand and ronald reagan on the other. they understood that raising taxes bore negative consequences
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for job creation and economic growth. you may remember that during world war ii and afterwards we had 93% marginal tax rates. who decreased that? not some republican president, but a democrat president reduced it because it was not raising revenue and it was hindering the economy. and you a situation when corporate and personal income tax rates climbed during the great depression, we have proof that unemployment kept climbing as we will. in fact, if there's two things you want to remember from hoover that we shouldn't ever make mistakes again, he raised taxes tremendously high, and he put -- he signed the smoot-hawley tariff bill, creating -- leading us into the great depression. as america struggles today to shake off the biggest economic
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downturn in decades, we can't afford to repeat the same mistakes. we should learn from history. in an economy where consumer spending accounts for nearly 70% of the nation's gross domestic product and small businesses account for 70% of the new jobs, it would be foolish to divert even more of america's taxpayer money into the federal treasury. with a smaller tax liability, small business owners can expand their operations, upgrade their equipment, hire, more workers in their hometown -- hire more workers in their hometown communities. but tax policies designed to increase revenue for hometown spending won't help to create new jobs that can attract to retain talent and vitality in those smaller towns. what's more, raising federal tax rates would stunt the positive
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ripple effect that occurs in the local economy and the local tax base when small businesses are able to grow and expand their sales, output, and profits. raising taxes sets the stage for paralyzing setbacks for small business, so we should not forget that many small business owners are subject to the highest marginal tax rates and federal estate taxes. i've worked for a long time for tax policies that give small business owners the freedom and opportunity to hire, expand, and grow their businesses without having profit-burning taxes and overly burdensome regulations get in their way of getting ahead and living the american dream and creating those jobs. marginal tax rate increases are especially harmful to small businesses because small businesses are typically organized as flow-through
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entities, since small businesses create 70% of the new jobs and unemployment at 8.8% remains historically high, it doesn't make sense to raise taxes on small businesses. supporters of the tax increases for those earning $250,000 a year would like to camouflage the tax hit on small businesses, but their attempts to mislead cannot withstand an honest examination. the marginal tax rate hikes would directly target flow-through businesses that employ 20 million american workers. it's a waste of resources for washington to recycle tax dollars through the public sector when small businesses can do more good and get more bang for their own buck. and taxpayers in general deserve more bang for their buck.
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madam president, i have a chart here that shows you an analysis by the congressional budget office, the official nonpartisan score keeping forecongress. in its january 2011 budget and economic outlook report, c.b.o. reports -- c.b.o. reports that taxes have averaged 18% of the gross domestic product from 1971 to the year 2010. so this is an historical average. and what i think is very significant about an average going back to 1-9 1971 is it ses to be a level of taxation that the people of this country have not revolted against, and it is a level of taxation that has not
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been harmful to the u.s. economy as we have seen great growth during this period of time. so here's where we are: beyond the very negative impact of tax increases, there's no evidence that tax increases lead to deficit reduction. in fact, if history is any guide, washington will simply spend the money. i often quote a professor vedder of ohio university who has studied tax increases and spending for more than two decades and this is the very same study i was referring to as i started my remarks today. quote -- "over the entire pos
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post-world war ii era through 2009, each dollar of new tax revenue was associated with $1.17 in new spending. so it's like a dog chasing its tail. it's never going to catch it. and if we raise a dollar and it doesn't go to the bottom line and professor vedder says it doesn't go to the bottom line, it is a license to spend $1.17. now, how do you ever get ahead? now we have people that want to increase taxes because another dollar coming in is going to lead to $1.17 of spending. well, it would be one thing for me to vote for a tax increase and it went to the bottom line. it's another thing to vote for a tax increase that just allows more spending and raises the deficit instead of getting the deficit down. people in my state of iowa don't tell me that they're undertaxed.
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they know all too well that the problem is that washington overspends. i have another -- before this chart is taken down, just so you can understand here that there's no reason to raise taxes above this historical average to bring in more revenue because you can see the projection out here by c.b.o. that the existing tax rates are going to bring in more revenue without increasing tax rates just because of the economy growing. and we're going to get back to income coming from existing tax rates, where they were at the time that we had the tax bill of 2001, and reduce taxes -- the biggest tax increase in the history of our country, the biggest tax decrease in the
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history of our country we raised and we brought more -- raised down and even got some additional revenue with reduced rates. but it is going to bring in just a health car heck of a lot mored that ought to be calculated, and you shouldn't do anything that's going to destroy this situation. i have a -- there is this suggestion for eliminating the cap on wages, as some are proposing, would result in a huge tax increase of 6.2% on incomes of over $106,800. both employees and employers pay those taxes. those in favor of this will argue that it's needed to protect benefits for beneficiaries. now we've been down that road before. we've raised the tax rate in the
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1980's. this was spoefsedly also -- supposedly also to help benefits but look where we are now. there's no guarantee that raising taxes in that way will guarantee benefits any more. this chart, once again referring to this chart, c.b.o., to be specific on this growth out here, c.b.o. projects that taxes will average 19.9% of gross national product from 2010, and then they're going to rise to 20.8% of g.d.p. by 2021. and if we increase taxes, i think it's going to put that economic growth in jeopardy. i request -- i request unanimous consent to insert into the
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record an article from "investors business daily." according to this article, if the government confiscated all of the income of people earning $250,000 a year, the money would fund the federal government today for a mere 140 days. statistics tell us that the top 5% of the households earn 29% of the income and pay 43% of the income tax collected by the federal government. the presiding officer: without objection. mr. grassley: i am -- i'll put the rest of my statement in the record. if there's nobody else here. the presiding officer: you can continue. i was saying you could add it to the record without objection. mr. grassley: i'm sorry. i misunderstood you, madam president. thank you. we're in a situation where people are talking about increasing taxes on
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higher-income people because supposedly they can afford it, and probably they can afford it. but what i get sick and tired about in this jargon that goes on here in washington is the demagoguery of taxing higher-income people when this group of people are already paying 4 3% of all the income coming into the federal government and 47% of the people in this country don't pay any income tax whatsoever. how high do taxes have to go generally to satisfy the appetite of people in this congress to spend money? and particularly, how high do they have to go on marginal tax rates to satisfy the people that the wealthiest in this country are paying enough money? i often quote instead of this 5% figure, i think it's 1% of the
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wealthiest people, 27% of the income pay 40% of the income tax. now, if it be 41% or 42%, maybe we'd look at it. but i never get the opinion from anybody that's proposing these higher marginal tax rates on upper-income people that they're ever going to be satisfied that those people are paying enough taxes. so to get back to what i just said, you could confiscate not just tax, but confiscate all the income that people make over $250,000 a year, and you're only going to run the government for 140 days. so what do you do about the rest of the year if you want the healthy to pay all the taxes? -- want the wealthy to pay all the taxes? we ought to have some principles of taxation that we're abiding by. and so i abide by the principle
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of 18% of the gross national product of this country coming to us to spend, leaving the 82% in the pockets of the taxpayers, because if 535 of us decide how to divide up the resources of this country, it doesn't do us much economic good if the money is left in the pockets of the 137 million taxpayers to decide whether to spend or to save it and how to save it or what to spend it on. it responds to the dynamics of our economy, of the american free enterprise system in a way that 535 members of congress don't know enough how to do. and if we relied upon the 535 of us to decide how to spend more resources of this country, we wouldn't have the economic growth we have.
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we agree to be europeanizing our economy, and we know that that's bad. so this principle of 18% is good. but also, you got this principle of this amount coming in here pretty regularly. i mean it's not a straight line here, but pretty even over a 50-year average. i think it averages out about 18.2%. now you've got the marginal tax rates going back to 93% in world war ii and staying pretty much 93% until, as i said, senator kennedy becomes president. and then he decides that the marginal tax rate is too high for the good of the economy, and he reduces it. i'm not sure exactly, i suppose because of the vietnam war it went up a little bit here. then it stayed pretty steady at 70 until there's a president reagan. then it goes down to 50 marginal tax rates. then it stays there awhile. then in 1986, it goes down to
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28%. and then we have the promise of no new taxes, no new tax when president bush reneged on that promise, it went back up to almost 40%. and then they went up again here and stayed here until we had the tax decrease of 2001. but you know what this shows here? everybody's got an idea. you raise the marginal tax rate, you're going to bring in more revenue. but you know the taxpayers of this country, the workers of this country, the investors of this country are smarter than we are. we think we're smart. we're going to raise marginal tax rates, we're going to bring in more revenue. but you have 93% marriage national tax rate, 70% marginal tax rate, 35% marginal tax rates right now, but you get the same amount of revenue because people
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have decide that had they're going to give us bums in washington just so much of their money to spend. tanned works out to be about 18 -- and it works out to be about 18%. so we've got a president probably giving a speech today saying that you're going to raise taxes on higher-income people because, like him, they ought to pay more money. well, what do you get out of it? you can mess with these marginal tax rates all you want to, but you bring in about the same amount of revenue because people have decided that if we're going to tax them to death, they're going to take more leisure, they're going to invest in nonproductive investments. and what you've got to do is you've got to keep marginal tax rates low so you expand this economy, as we have seen when taxes go down, unemployment goes down. when taxes go up, unemployment,
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the incentive to employ is gone. and so here we are, i hope we have a president that is willing to look at history and learn from history in his speech today. i yield the floor, madam chairman -- madam president. i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:
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a senator: madam president? the presiding officer: the senator from wyoming. a senator: thank you, madam president. madam president, i ask unanimous consent to speak until 11:30 as if in morning business. the presiding officer: the senate is in a quorum call. mr. barrasso: madam president, i ask unanimous consent that the call of the quorum be vitiated. the presiding officer: without objection. mr. barrasso: i ask unanimous consent that i be allowed to speak until 11:30 as if in morning business. the presiding officer: without objection. mr. barrasso: thank you, madam president. last week america's government was brought to the brink of a shutdown, and the shutdown was avoided literally at the 11th hour just last friday. that same day the president called speaker boehner to try to
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advance the talks. according to "politico," the president told speaker boehner that he said -- quote -- "we are the two most consequential leaders in the united states government." well, madam president, the president was right. so why was only one of those two leaders actively trying to lead on the issue of the day? speaker boehner was trying to put together a deal that could serve the american people for weeks, but right up until the end the president was missing in action. even senator manchin, a member of the president's own party, said that the president had -- quote -- "failed to lead this debate." well, now the president is finally saying he wants to talk about what steps our country need to take to get our fiscal house in order. now, i really do hope the president is serious, but i have my doubts. this is a line that we've heard from the president before. back in february of 2009 the
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president called experts to the white house for what he called a -- quote -- "fiscal responsibility summit." in his opening remarks, the president said this: he said "contrary to the prevailing wisdom in washington these past few years," he said, "we cannot simply spend as we please and defer the consequences to the next budget, the next administration, or the next generation." so, madam president, that was february 2009. for the last two years of this administration all the president did was add trillions of dollars to that debt. late last year the president's debt commission released their report on america's fiscal situation, and the findings were sobering. according to report, they said the problem is real, the solution will be painful, there is no easy way out, everything must be on the table, and he said washington must lead.
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the president ignored the report. america is done waiting for him to take this issue seriously. last week the house budget committee chairman paul ryan put forward the first concrete plan to address our debt crisis. now the president has suddenly decided that crisis needs to be addressed. the president has a national address scheduled for today, and maybe that will be the moment of truth. i hope it will not be another one of the president's recycled speeches. empty words cannot fill america's pockets. last november the american people told us they wanted the truth. they wanted to know their representatives could make tough decisions. that's what we heard on election day. they wanted to make sure that there would be a future for their families and for their children. i think the american people deserve results. the president has paid them back
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with excuses, with delays, and with business as usual. now, republicans have been the leaders on trying to reduce the spending. the president's party has only criticized, complained, or in the final moments tried to take credit. refused to lead and have refused to act. now the president's party wants to us raise the debt ceiling in what they call a clean bill. well, that's a fancy way of saying that they want us to borrow more money with no strings attached. the president opposed doing the same thing back in 2006 when he was a senator. this is what he said then. the president on the floor of the senate said, "the fact that we are here today to debate raising america's debt limit, he said, is a sign of leadership failure." he went on to say "it is a sign that the u.s. government can't pay its own bills." he continued, "it is a sign that we now depend on ongoing financial assistance from
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foreign countries to finance our government's reckless fiscal policies." well, madam president, i will just say if president obama thought raising the debt ceiling at a $9 trillion level was a sign of leadership level, why then is president obama asking us to raise it beyond the $14 trillion now? facts are stubborn things. the numbers don't lie. every day, every day this government borrows over $4 billion. it did it yesterday, will do it today and tomorrow. and over 40 cents of every dollar washington spends is borrowed money. much of it from china. now, every american child born today and tomorrow and the next day owes over 41 -- i'm sorry -- over $45,000. next year washington will spend 68 cents of every tax dollar on social security, on medicare, on medicaid or interest on the
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debt. if we as a nation continue on the president's path, washington will spend all of what it takes in on these items alone. everything else, from defense to education, will be paid for on a budget of borrowed money. well, where's the money going to come from? a lot of it from other countries, countries who do not always have america's best interest at heart. john f. kennedy once said "ask not what your country will do for you. ask what you can do for your country." well, in a few years that could change to ask not what your country can do for you. ask what your country must do for china. so consider this: when john f. kennedy was president, america only owed 4% of its debt to foreign countries. today we owe half of our debt to foreign countries. and debt isn't just a disaster for our future. the amount of debt that we owe
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right now today so high that it is hurting our employment at hoefpl. experts tell -- at home. experts tell us our debt is costing us a million jobs. a million jobs, and the evidence is clear, our debt disastrous in the present as well as for the future. now, a debt like this makes it harder for american families to buy cars and homes, to pay tuition for their kids to go to college. and then it makes it harder to create jobs for those kids who will be graduating this year and next year and every year until we get the spending under control. the president's party simply offers more of the same old failed policies that produce the problems in the first place. some in the president's party have suggested raising taxes to make up for the debt, and i expect the president to do that this very day in his speech. well, the president's speech today comes just a few months after he submitted his budget. well, after seeing that budget, it's hard to take the president
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seriously. and don't take my word for it. one writer in "the washington post" said it already -- quote -- "president obama's budget was irresponsible, failing to take on entitlements and relying on rosy assumptions." the international magazine "the economist" called the budget dishonest. america needs a president who shows real leadership and a concrete plan. that's what the american people are expecting. i will tell you, madam president, i will not vote to raise the debt ceiling unless some very specific steps are taken. it is time that we passed a balanced budget amendment to the constitution. many states have to balance their budgets. families have to balance their budgets, live within their means. washington needs to do the same. it's also time for us to place actual legal limits on what we do spend. a statutory limit on total government spending will force washington to make the hard decisions each year to get us
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back on track. a hard cap on government spending will start us on the path toward fiscal balance and sustained growth. ronald reagan used to talk about starving the beast. that's what we need. since president obama took office, the beast has only grown fatter. the president's party likes to accuse their opponents of being antigovernment, so why didn't the president's party bother to pass a budget or fund the government last year when they should have? and why are they driving our government further into debt, hurting america's standing and our credit on the world stage? you know, the president's party likes to pretend that they're standing up for the little guy. well, they should have listened to ronald reagan when he said you can't be for big government and big spending and big taxes and still be for the little guy. the president and his party are for big government, big spending and big taxes, and they are not
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for the little guy. the fact is that the president and his party aren't that interested in solutions. instead of solutions, the president's party has hidden behind nasty words, words like extreme and draconian. many american families are living within this same budget that they had in 2008, and republicans believe that government should do the same. so is spending no more -- no more than you did in 2008 extreme? or is it extreme to support trillions more in wasteful washington spending? is tightening our belts like families do draconian? or is it draconian to spend money that we don't have and force our children to pay it back? some members of the president's party have gone even further. one leader of the president's party said that republicans wanted to starve six million seniors. that's a pretty disturbing claim. the problem is "the washington post" said that she made it up. this same person called the ryan plan a path to poverty.
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a path to poverty, she said, for america's seniors and children. you know, the ryan plan doesn't affect anyone over the age of 55. it saves medicare for those who haven't gotten there yet. and it stops the spending that puts every american on the path to permanent poverty. meanwhile the president says he doesn't want to point fingers, so far his white house responded to the ryan plan by doing nothing but point fingers. they went back to their bag of tricks and tried to scare our seniors and their families. the president accused congress of playing games, yet his first budget was nothing but a giant game of kick the can. and his address today looks more likely to be just another campaign speech than a legitimate plan for the future. madam president, the time has come to lead, not sit on the sidelines. the time has come for the president to act, not just to talk. as a doctor and a senator, i believe our economy is in need
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of critical care. our budget is hemorrhaging. there is not a quick or easy fix. a band-aid will not help this patient. treatment cannot be delayed. the time to act is now. thank you, madam president, and i yield the floor. and i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:
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quorum call: ion session madam p?
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the presiding officer: the senator from -- mr. sessions: madam president? the presiding officer: the senator from alabama. mr. sessions: i would ask that the quorum call be dispensed with. the presiding officer: without objection. mr. sessions: as ranking member of the budget committee, i am concerned about where we are as a nation as we struggle to get our house in order. the chairman -- co-chairman of the debt commission, erskine
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bowles and senator alan simpson have told us we're facing the most predictable financial crisis in our nation's history. and when asked when we could have a financial crisis, which we're talking about another recession, a double dip, or maybe worse, maybe a worldwide cataclysm from excessive debt. hopefully not. but that's what they told us we're facing the most predictable crisis in history. we've gone 714 days in this congress without passing a budget as we're required to do. the budget act requires congress to pass a budget by april 15th and we've not achieved that. and that's particularly problematic at a time of national crisis. i see my colleague, senator corker from tennessee, here. he's worked very, very hard with
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some constructive bipartisan efforts to do something about the debt trajectory we're on. but i guess i -- i want to first ask him as a highly successful mayor of chattanooga, received great applause around the country and in the state for his leadership, he had to deal with the real numbers, real expenditures and real budget. an as a very successful businessman, he's had the same challenge. so i guess i would ask him for his perspective having been in the senate now several years. what he thinks if we have a corporation, a mayor, or a nation facing the most severe debt crisis perhaps in its history that we haven't had a budget and don't have a plan. i guess my first question,
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senator corker is: from a businessman, a former mayor who had to run a city, balance a budget, what's your perspective? mr. corker: thank you, senator. i -- i was on the floor last week as weeg talked about the continuing -- last week as egg talked about the continuing -- lass week as we talked about the continuing resolution. and the most important thing is we never know where we're going. it's an maigz thing to have 435 people serving in congress and there's no road map as to what we're going to do. i think it's pretty evident by the time we have this debt ceiling vote that most people see as the real line of demark indication. i think it's evident we're not going to have a budget passed even for that. i've been working with you and people on the other side of the aisle. one thing i can say on -- on
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this issue and candidly on every issue, i have no desire to message. i want to solve this problem like you do. i know you've been a leader on this issue as has senator isakson and senator barrasso and others. i want to solve this problem. i think if you haven't even had a hearing yet on the budget it's likely we won't have a budget this year, which is pretty amazing. so what i'm trying to do is put in place something called the cap act. i've worked with a number of you on that where what we'll do is take where we are spending, federal spending relative to our economy and we'll take it down to the 40-year average of 20.6%, the post entitlement period. and if we do that, we can save our country $7.6 trillion versus existing policy over the next decade, which goes a long way toward solving the problem. totally revs. the -- reverseus the amount of indebtedness we're
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accumulating as a country. i'm working -- since i don't think we're going to have a budget, which is pretty amazing, working on another route so that we actually know where we're going. and, again, to the american people, they have to watch us and think what in the world is going on with this dysfunctional body. we've got a $3.7 trillion being spent, $2.2 trillion coming in. there's no plan whatsoever to deal with that. and so we're going to have to create other vehicles to deal with that. and so, again, working with people on both sides of the aisle to come to that. and i thank you for your efforts on the budget, but i would just say to you and say to the american people, as i've said many times, i've never been in a place that is more dysfunctional. and no matter what the american people think about the way we handle their money, i promise you it's even worse and i do hope -- i'm glad the president, by the way, is going to address this issue at 1:35 today. i know that paul ryan has put
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forth a budget, which is a road map, and i appreciate so much his efforts. but as a country, i think we all know we have to deal with this issue in a serious way. spending is at all-time highs. we haven't been here since 1945 and federal spending relative to our economy. and i know i want to speak and have other appointments, so i'll stop. i thank you for your leadership. this is the number one swish for americans -- issue for americans. it threatens our national security. between now and the time we vote on the debt ceiling increase, it's my hope that we will solve this problem and move into a different direction. thank you. mr. sessions: thank you for your work. i think the legislative cap on spending is something that i worked with senator mccaskill on, you worked with her on, and has potential to help us deal with the crisis we're in. i would just agree with you and i truly feel that the american
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people have a a right to be angry with congress because congress has run up the largest deficits in history. we're on a trajectory that every witness we've had before the budget committee, and some fabulous witnesses outside the government, all of them say it's an unsustainable path that places our nation at risk. and we have no real plan to deal with it and we should never have been in such a deep hole. so i think people have a right to be upset with us. senator isakson, i know you're one of georgia's most successful and effective businessman, and you've been involved in -- in running the education department of the state of georgia. i guess i would ask you as a businessman and as a -- just an american citizen, how do you feel about where we are and do you think that we are in a
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serious crisis that requires us to alter our business as usual approach? do we have to take tough decisions or is it something that we can sort of just hold off and maybe things will get better in the future? mr. isakson: i thank the gentleman from alabama for the question. i'll tell you this, i was in the real estate business for 33 years. leverage is essential in real estate. you have to borrow money and put in equity as well to make a real estate transaction to work. you can't do it for all cash. too much leverage will destroy you. america's been through a period where many american homeowners were destroyed with too much leverage. they borrowed more than they could afford to pay. america is at the point where we have too much leverage and too much debt. i try -- when i thought about what i would say this morning, i didn't know you would ask the question you asked, but it's appropriate that you did.
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i was trying to think of an example we could put forward of a leader in the private sector who addressed a tremendous problem america faced and solved it. you know who that leader was? lee iaococca. cars were broke, they had too much debt. they brought him up from the ranks and said, lee, we need to fix this company or we're going broke. lee eye coca put -- iaococca put everything on the table, he brought everybody to the table, the labor unions, the workers, the advisers, economists, board of directors and said we don't care who takes the credit we need to fix the chrysler motor corporation. chrysler went from the worst rated consumer satisfaction to the best. they raised the guarantee on their product. they reduced their debt by efficiency and became the most productive automaker of their
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time in the 1970's. america has the ability to return to our productive time but only through leadership. i'm looking forward to the president's remarks. i hope he'll be a lee iaococca. i hope he won't play politics. all of us have got to decide to put everything on the table and make sure we prioritize america's future and debt our debt and deficit under control. i just had the georgia hospital association leave my office. i'll tell you the last thing i told them. they were talking about please make sure we don't cut this, that, and the other. i said, you know, medicine is 17% of gross domestic product, but it's 80% of our challenge in terms of medicare and medicaid with future years in terms of the deficit. we're going to have to put everything in on the table. we're going to have to rein in our debt. i fear the administration, through the health care bill that passed in december of 2009 and was signed last year in march is a bill that's overly per descriptive, -- per
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descriptive and disincentivizes competition. i hope that the president will be open in terms of bringing about competition, making our citizens consumers, making sure that we have the best delivery of health care in the world, not a government that tries to manage everything. we have a serious problem but we're a great country. we're as great country where republicans and democrats need to sit down. they need to make decisions that are in the best interests of their future. i close with this, and i commend senator corker tremendously on the cap act. it is the right way to go. but i also want to bring up the biennial budget. i know you're the budget ranking member and the budget chairman. i have talked to the budget chairman, chairman conrad, about this. but we have an example that works, and that's to change the way we do our business. in the last three years, we have had four hours of debate on spending $10 trillion. i want to repeat that. in the last three years, we have
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debated four hours the expenditure of $10 trillion. that is not the way to run a railroad. we need to change our process from an annual appropriation to a by annual appropriation, where we appropriate money in odd-numbered years and we need to spend the even-numbered years -- which by coindense are the election years -- looking for savings, waste, and reprioritizing the way we spent our money. i know you on the budget committee, i know senator conrad, i know myself. if i'm given the time and the task of finding savings or overexpenditures, if i'm given the charge of doing so, i can do it. but if i'm told come if in january, raise your hand, get sworn in, and by october pass the spending and next year we'll do it all over again, what happens? you spend too much money. it's human nature. the american people ask of us only to do what they have had to do. they don't have the luxury of too much leverage. if they borrow too much, they go bankrupt. we need to empower the american people by the congress doing what the american people do. i think the budget, senator
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hatch, and a number of senators have introduced the balanced budget amendment. those are three components that change the paradigm, change the process and i guarantee will change the result. mr. sessions: thank you. i couldn't agree more. senator isakson, i have been a long supporter of the by -- biannual two-year budget. i think it has a lot of support in congress. i think it can help us, i really do. i guess i see senators blunt and barrasso here. i'm not sure who was first, but i believe senator blunt was. he has been involved in the leadership in the house of representatives for many years. he is already showing himself to be a very wise and valuable contributor to our debate and discussion in the senate. i guess first i would like to ask you, senator blunt, do you think that the american people
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have a right to be unhappy with their leadership when they wake up and find that we have had trillion dollar deficits for three years in a row and will virtually average a trillion dollar deficit for the next ten years? and there's no plan except -- in the senate except the president's budget that he submitted to us that has the deficits increasing in years seven, eight, nine, ten to to $1.2 trillion in the tenth year? is this an unsustainable path? and don't the american people have a right to be upset with us and demand that we stop business as usual? a senator: thank you, senator. mr. blunt: they have every right to be mad and every right to be frustrated, as you are, as you're so involved in as the leading republican on the budget committee just hasn't been able to produce a result. we're unlikely to have a budget
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again this year. i was just asked by a reporter on the way walking over here -- you mentioned i was in the house for some time, and i was, before i came to the senate. then the question was well, for somebody like you who has been in washington, wasn't the tea party a big challenge? and i said no, the tea party was not a big challenge. they were a great opportunity for us to have someone out there talking about the imperative that we get this spending under control. and i visited with them about a struggle that you and i and senator isakson were involved in before our good friend, senator barrasso, got to the senate where we actually took on entitlement spending in 2005. and as i recall that effort, i got lots of calls on entitlement spending reforms where we cut entitlement spending the only time in a decade by $40 billion. i got lots of calls, and not one of them was supportive of cutting spending. every single call -- as far as i
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know, every phone i had rang everywhere i had a phone for 100 days. as far as i know all the time, no matter how early we came in or how late we were leaving, those phones were all ringing, and every call was don't cut my program. and as senator isakson said, as he was talking to the friends we're seeing today from hospitals around the country, the ones from georgia, you know, we have to look at everything and we have to look at ways to produce better results. the government is the last place left in america, and this relates to government, i believe, at almost every level and almost every government at every level where we measure how much we care about something based on how much we spend on it instead of the results we get. everybody else in america 20 years ago made the decision if they were going to be competitive, they had to produce a better product, a better result and spend less money producing that better result. only the government still thinks the other way, and we do this without a plan, apparently.
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you can correct me if i'm wrong because you're a student of the budget in ways that aren't exceeded by anybody in the senate, in my view, but i think last year the work we're still trying to finish, last year's work, i think the only time in the history of the budget act where neither house of the congress passed a budget. there have been times when both of them passed them and couldn't agree on them. there have probably been times when somebody didn't pass one, but never a time when nobody passed a budget, nobody passed a single one of the 12 appropriations bills it takes to run the government. i mean, how irresponsible can you be? and now we have got this situation where we're spending so much more money than we're taking in and the numbers are so big that we're not -- they're so big, it's hard to be as afraid of them as we should be because who knows how much money money $3.8 trillion is? it's not just senators and house members. i don't think the secretary of the treasury really knows how much money that is, but we're
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spending way more than we're taking in. and have we ever -- senator, have we ever had a time before when neither house of the congress passed a budget, that you're aware of? mr. sessions: i'm not aware of it, and we are now 700 i think in 15 days -- we are now 715 days i think without a budget. this is particularly problematic since we're facing such a knowledge debt crisis. secretary treasury geithner came before the budget committee. i asked him a number of questions. i asked him about the rogoff and reinhart study that says when your debt reaches over 90% of your economy, 90% of g.d.p., that it causes the economy to slow down, be dragged down by that debt, 1% of g.d.p. so if it was going to increase at 3%, it would increase at 2%. and this amounts to another study says a million jobs. 1% of g.d.p. growth is a million
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new jobs added, so it's very serious. and i asked him was that true. by the way, i think my colleagues are aware that we passed 95% of g.d.p. today, we are over the 90% mark, and by september 30 are projected to be 100%. so we're well above the number. and this was the answer. the true number is not the public debt but the gross debt, and the gross debt would be 100% by the end of september. mr. geithner says yes, he agrees with the study that shows it pulls down growth and added it's in many ways more serious than that because it could lead to a debt crisis, the kind of thing erskine bowles, the president has charged to head the debt commission, has warned could happen. so we have a responsibility to
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lead the nation that avoids us undertaking a crisis that we can see coming. i mean, we have a clear and present danger to the american republic, this debt. and mr. bowles, a businessman, president clinton's chief of staff, that charged to head the debt commission by president obama, said we are facing the most predictable debt crisis within our history, and it can happen within two years, he testified. so i think this is really serious. i see my -- so i think we have got to change the business, and i think the momentum from the american people in this past election was basically a statement that you guys, we don't know what the problem is because it's all convoluted, but i just believe as you indicated at the beginning that the american people have a right to say get it together and fix this
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problem. mr. blunt: and if the gentleman would yield for just another moment, i would say that while we have a hard time dealing with these big numbers -- i think they approach $3.8 trillion in spending and $2.2 trillion in money coming in, so we're adding -- we're at $44 billion a day. we're borrowing $4 billion a day. so in the time when we had a continuing resolution for ten days to try to decide how we cut spending, we borrowed more money in that ten days than we saved in that ten days. and then people say well, that's draconian, it's terrible. we can't spend this much money and continue to do it. and if we don't know what -- if your family was bringing in in $22,000 a year and spending spending $38,000 a year and you had already borrowed way more money than any bank should lend you, as you just suggested, you would know that that was a problem you couldn't sustain very long. if your business was bringing in
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in $2.2 million a year and spending $3.8 million a year, you know you're not going to be in business very long. and those are the kind of real-world situations we have multiplied by thousands of times, but it has to be solved, and the blueprint to solve that is the budget. we don't have one. your significant responsibility for the country is to be in that budget fight, and i know you're there and i know you're frustrated that we don't have the blueprint. but we need the blueprint and then we need to spend lots of time on this floor and in committees figuring out how do we produce a better result and spend less money, and what is the federal government doing that just simply isn't well done and shouldn't be done and constitutionally there's no authorization to do and stop doing that. and i'm pleased to be in this fight with you and with our friend, the senator from wyoming.
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mr. sessions: thank you. it's a very serious crisis. the president has submitted a budget to the congress two months ago. i'm hoping that -- and expect, really, that if he makes big changes in his plan for the future of our country, we'll see that in real numbers and not just a vague vision. a vision gets too close to just being a dream. it gets too close to being vapors. we're in a real situation with real money. and i would just say this: i have been a very, very aggressive critic of the president's budget. i believe it's the most irresponsible budget ever presented to congress. we are facing a systemic, deep, long-term crisis. everybody knows it. his budget raised taxes taxes $1.7 trillion, but his spending was even more. in net projection over ten years, he would increase the
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debt of america $3 trillion more than the current trend we're on. instead of taking us off the trend, it accelerates the trend. it was a stunning development. just, for example, at a time when inflation is 2%, what, or so, according to the experts at least, low inflation, he is proposing education next year. the budget he submitted have a 10% increase. state department, a 10.5% increase -- excuse me, 11% increase for education. 9.5% increase for the energy department. and a 60% increase in the transportation department to fund high-speed rail and things, with no money to back that up. so i guess it's stunning to me that we would have those kind of increases proposed in a former,
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written document, four volumes that the president is required to submit that i have on my desk back in the office. so i hope when he apparently -- and he makes no projection in that document to change any of the unsustainable problems we have with medicare, social security, medicaid, zero reform, so now i understand he may talk about that this afternoon -- i hope he will -- but i believe he should go further if he is going to propose changes in that. we need a new budget. we need to see what the numbers are. that's what senator -- congressman ryan in the house republican budget committee have done. they have produced a real budget that can be analyzed and scored, as we call it, by the congressional budget office. and so if he's going to make changes in his plans for the future, i truly believe the president should talk more than about vision


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