Hatch Blasts Senate Democrats’ Tax Hike Strategy, Calls for Real Spending Cuts to Replace Sequester

Utah Senator Says, “There are numerous other places where we can cut spending immediately. Instead of pursuing the Democrats’ tax hike strategy or the President’s indiscriminate sequester, we should instead sensibly restrain spending.”

WASHINGTON –Today, Senate Finance Committee Ranking Member Orrin Hatch (R-Utah) blasted Senate Democrats’ legislation (S. 388) to replace the President’s sequester with more tax hikes on the American people and called  for a vote on his Motion to Commit which would direct the Finance Committee to replace the tax increases in the legislation with a series of reasonable, spending cuts.

“The President and the Democratic Leadership’s solution to this problem is more tax hikes, which makes these claims about the impact of sequestration all the more transparent. Indeed, it appears that the President’s current campaign on the sequester is less about reaching an agreement to replace the sequester than it is about satisfying his drive to once again raise Americans’ taxes while also serving his desire to vilify Republicans, no matter what the costs to the American people,” said Hatch. “I don’t want to minimize the negative impact the sequester may have in some areas. But, there are numerous other places where we can cut spending immediately.  Instead of pursuing the Democrats’ tax hike strategy or the President’s indiscriminate sequester, we should instead sensibly restrain spending.”

Yesterday, Hatch filed a Motion to Commit S. 388, the Democrats’ Sequester replacement bill, back to the Finance Committee to strike the bill’s tax increases and replace that revenue with spending cuts.  Hatch pointed to a series of reasonable spending reductions totaling $142.2 billion drawn from U.S. Senator Tom Coburn’s report, Back in Black: A Deficit Reduction Plan, July 2011 that could be used to replace the sequester for more than a year.  

Senate Democrats blocked consideration of Hatch’s legislation. If Congress does not act, the President’s across-the-board sequester spending cuts will take place on Friday.

Below are Hatch’s full remarks delivered on the Senate floor this afternoon:

Mr. President, today, as we debate proposals for avoiding the so-called sequester, we find ourselves in a uniquely awkward position.  Not only is there general disagreement about what has brought us here – who is responsible, who is to blame, etc. – we also disagree about where here is to begin with.

President Obama has been touring the country, giving speeches describing just how bad the sequester will be and why Republicans are to blame for it.

This is, of course, par for the course with this President, whose motto seems to be: Why solve a problem when you can campaign on it?  

You’d think that, after having won the election, the President would be the first to acknowledge that the election is over.  But, nearly four months after Election Day, the President’s campaign roadshow continues.

The problem with the President’s sequestration campaign is that, once again, his claims are at odds with the facts.  Everyone in Washington knows that despite the President’s efforts to pin the blame on Republicans, the sequester was his idea to begin with.

The record is clear and is not in dispute.  The idea for the sequester was pitched by the President’s then-OMB Director Jack Lew as a negotiating tactic to get Republicans to vote in favor of raising the debt ceiling.  

And, not only did the idea originate in the White House, the President threatened to veto House-passed legislation designed to replace the sequester.  Moreover, in these final weeks leading up to the March 1 deadline, the President has spent more time on his national sequestration campaign than he has in sitting down with Republicans to reach an agreement on a replacement package.

So, if the sequester goes into effect – and, at this point, it appears that it will – the American people shouldn’t blame Republicans in Congress who have been working in earnest to replace it.  No, the blame should fall squarely on President Obama who proposed the idea in the first place and has refused to work toward a passable solution.  

So, Mr. President, that’s how we got here.  

The bigger, more complicated problem is determining where here actually is.  The President and his allies have spent a lot of time misleading the American people on that as well.

If you describe the sequester using the worst possible numbers, it is an $85 billion reduction from $3.5 trillion of yearly federal outlays — yes, that’s $85 billion out of $3,500 billion.  When all is said and done, it is a reduction of less than two and a half percent from overall federal spending.   And, as the Congressional Budget Office has made clear, not all of the $85 billion reduction will even take the form of reduced spending this year.  And even if it did, keep in mind that $85 billion would represent less than nine days of federal spending, based on the rate of spending last year.

Once again, that’s if you describe it in the worst possible terms.  For a moment, let’s go with those numbers.  

The President would have the American people believe that a 2.4 percent reduction in federal spending will cripple our government and irreparably damage our economy, even an economy that the President must have felt was strong enough to absorb a $600 billion tax hike back on New Year’s Day.  The ramifications of the 2.4 percent spending reduction are so great, according to the President and his allies here in Congress, that the only alternative is to raise taxes yet again.

Now, I’ll be the first to admit that there are better, more responsible ways to reduce the deficit than the President’s indiscriminate sequester.  But, these scare tactics don’t even pass the laugh test.

Does the President really expect the American people to believe that our government is so fragile that it can’t absorb a 2.4 percent spending cut—less than nine days’ worth of federal spending—without inflicting massive damage on the American people and our economy?  

Apparently so.

Once again, I’m describing the sequester in the worst possible terms just to demonstrate the outlandish nature of the President’s arguments.   However, when you look at whether the sequester even represents a reduction in spending, you find that the claims are even more absurd.  In fact, when you look at whether we are cutting spending at all relative to past periods, you can easily see that we are not.  

The so-called spending cuts in the sequester are measured against 2010 spending levels.  Now, we should all remember that, in Fiscal Year 2010, spending levels were highly elevated as a result of the President’s stimulus and other temporary spending measures passed in response to the financial crisis and recession.  

So, in other words, the sequester reduces spending only if you’re measuring against an extremely high baseline that was, at the time, supposed to be temporary.

Whether something is an increase or decrease depends on what you are measuring against.  If you measure relative to a big number – like the Democrat-fueled spending of 2010 – then proposed spending looks like a cut.  But, if you look at spending levels relative to more reasonable spending baselines, you’ll find that future spending will actually be up even with the sequester in place.  

For example, if you look at this chart, you’ll see what post-sequestration spending looks like relative to a more reasonable baseline.  

According to the Congressional Budget Office, baseline estimates for post-sequester discretionary budget authority totals $978 billion for Fiscal Year 2013.  The average during the Bush years, in inflation-adjusted FY 2013 dollars, was $957 billion.  Neither of these figures includes spending on wars or emergencies, so this is an apples-to-apples comparison.

In adjusted, current dollar terms, post-sequester spending this year will be more than $20 billion higher than the average during the Bush years.  

Someone may have to refresh my memory, but I don’t believe the government ceased to function during the Bush years.  I certainly don’t remember hearing anyone express concerns about the elimination of basic government services.  

In fact, I don’t think anyone remembers the Bush years as being a time of spending restraint here in Washington.  Indeed, we’ve all heard President Obama claim that it was the extravagant spending of the Bush Administration that, in part, caused our current budget woes.

Yet, now, the President is telling the American people that a return to those spending levels will devastate our country, leaving children hungry and our border unprotected.  

Not surprisingly, the President and the Democratic Leadership’s solution to this problem is more tax hikes, which makes these claims about the impact of sequestration all the more transparent.  Indeed, it appears that the President’s current campaign on the sequester is less about reaching an agreement to replace the sequester than it is about satisfying his drive to once again raise Americans’ taxes while also serving his desire to vilify Republicans, no matter what the costs to the American people.   

Mr. President, I don’t want to minimize the negative impact the sequester may have in some areas. I think there are very few of us that would not like to see the President’s indiscriminate sequester replaced with more responsible spending reduction alternatives.

There are alternatives to the approach we’re debating today.  But, whatever we do, we should do it through regular order.   

Today, we are, yet again, debating a bill that has bypassed the relevant committees of jurisdiction.  

Regular order has become the exception rather than the rule around here, which is extremely frustrating.  

There are consequences to skipping the established committee process.  If legislation does not go through the relevant committee, it is not studied and vetted.  It simply shows up out of the Majority Leader’s office before anyone has a chance to look it over.  

Bypassing regular order is simply short-sighted.  Yes, short-circuiting the committee process prevents members from having to take tough votes in committee.  But, taking tough votes to enact legislation is part of being in the Senate, or at least it used to be.  

These days, no one in the majority has to take a difficult vote. The Majority Leader has made sure of that.

I have a chart that has the title, “Honest Leadership and Open Government.”  

My friends on the other side of the aisle won the Senate majority in the 2006 elections by campaigning on this theme.  Unfortunately, in the six years since they’ve been running things here in the Senate, things have gone the other way.  

Backroom deals are the rule.  Regular order is the exception.  Open government is the casualty.

I have and will continue to urge my colleagues to support the restoration of regular order here in the Senate, because, in the end, it yields better legislative results.

Despite the fact that the President and Congressional Democrats just got over $600 billion in tax increases out of the fiscal cliff deal, the Democratic Leadership’s bill that we are debating today contains even more tax increases.  

The Congressional Budget Office wrote earlier this month that, over the next ten years, revenues as a percent of GDP will average 18.9 percent over the next 10 years.  Over the last 40 years, according to CBO, revenues have averaged 17.9 percent of GDP.  So, over the next ten years, federal revenues are set to exceed the historical average.    

At the same time, government spending, which is projected by CBO to reach about 23 percent of GDP in 2023, will be on an upward trajectory and will remain far in excess of the 40-year average of 21 percent.  

So the problem is not that the American people are under-taxed, it’s that Washington is overspending.

Given this basic point, I have filed a motion to commit the Democratic Leadership’s bill to the Finance Committee to strike all the revenue increases and replace them with spending cuts.  

And to help further the process, I’ve prepared a menu of spending cut options to select from.  These proposals come from Dr. Tom Coburn’s book, Back in Black: A Deficit Reduction Plan.  

During the 2008 campaign, the President promised to find spending cuts by going through the budget line-by-line.  Dr. Coburn has done what the President promised, but failed to do.  Today, I’m drawing from a small body of Dr. Coburn’s hard work.

For instance, instead of the latest incarnation of the Buffett Tax, we could, according to Back in Black, save $71 billion over ten years by instituting a five-year freeze on locality pay adjustments for federal workers.  Or, we could reduce travel budgets of federal agencies.  That would save just over $43 billion over ten years.    

Another revenue increase in the Majority Leader’s bill that could be replaced with a spending cut is the elimination of what some Democrats have described as “a tax break for shipping jobs overseas.”  

Indeed, we’ve seen this proposal pop up several times over the last few years.

However, as some may recall, the Chief of Staff of the Joint Committee on Taxation wrote a letter to Senator Stabenow and Representative Pascrell, the authors of a bill to close this so-called loophole, that stated, “Under present law, there are no specific tax credits or disallowances of deductions solely for locating jobs in the United States or overseas.”  

I previously challenged my colleagues to come and point out to me if they thought that was incorrect.  To date, no one has tried to meet that challenge.  Yet, efforts continue to raise a tax under the guise of closing a loophole where no loophole exists.  

One spending cut from Dr. Coburn’s book that could be used as a substitute for closing the Democrats’ phantom loophole is to reduce the federal limousine fleet back to the level it was at in 2008.  According to Dr. Coburn’s book, the government owned 238 limousines in 2008.  By 2010, that number had grown to 412.  

What changed in government between 2008 and 2010 that required an increase of over 73 percent in the number of limousines needed to shuttle bureaucrats?  If anyone knows, please let the American people know.  

Going back to the 2008 level of federal limousines would save the government $115.5 million dollars over ten years.  

There are numerous other places where we can cut spending immediately.  Instead of pursuing the Democrats’ tax hike strategy or the President’s indiscriminate sequester, we should instead sensibly restrain spending through proposals such as these.     

Now, I anticipate that some of my friends on the other side will argue that we should pursue these spending cuts in addition to passing more tax hikes.  My response is that we should be saving all these revenue raisers for future tax reform efforts.  

There is a growing, bipartisan consensus here in Congress in favor of comprehensive tax reform.  The leaders in both the tax-writing committees are committed to this effort and I believe that we have a real opportunity to accomplish something on tax reform this year.

However, if we start closing loopholes and eliminating preferences now in order to raise revenue to avoid the sequester, they won’t be there to help us lower marginal tax rates later on when we’re working on tax reform, which will make an already difficult process that much harder.  
Ultimately, if we follow the path my Democratic colleagues want us to take, we’ll be raising taxes on the American people while, at the same time, hampering future tax reform efforts.  

Mr. President, this is simply not the way to go, particularly when there are perfectly reasonable spending cuts available to replace the President’s sequester.

Like I said, whatever we do, we ought to do it through regular order.  That is why I’ve filed this motion to commit and why I hope my colleagues will support it.   

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