Hatch Calls President’s Speech a Missed Opportunity, Condemns Tax Increases That Won’t Solve Nation’s Spending Problem

Utah Senator says, “Today the President tried a do-over. He was going to give a really big speech. That seems to be his go-to move. And this time he was going to convince Americans that he is really, really serious about deficit reduction. Unfortunately, he bricked this shot as well. We are approaching a debt crisis, but the President seems willing to run the clock until the next election.”

WASHINGTON – In response to the President’s plan to reduce the deficit, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, which has jurisdiction over taxes, Medicare, Medicaid and Social Security, criticized the President for failing to put forth a concrete plan that will effectively address the nation’s debt crisis and reform the country’s debt broken entitlement programs during a speech on the Senate floor today.

Below are excerpts of Hatch’s speech:

ON THE PRESIDENT’S SPEECH:
“Today the President tried a do-over. He was going to give a really big speech. That seems to be his go-to move. And this time he was going to convince Americans that he is really, really serious about deficit reduction. Unfortunately, he bricked this shot as well. We are approaching a debt crisis, but the President seems willing to run the clock until the next election. This is a very dangerous game.

“The real news would have been if the President stood up to his political base and made meaningful recommendations for entitlement reform. The people of Utah, and taxpayers around the country, would have stood up and listened if the President backed a serious rollback of domestic non-defense discretionary spending, which has exploded on his watch. Instead, they got more of the same. Ultimately, this spending crisis cannot be ignored. And both voters and markets will respond to the leaders who take this issue on in a serious way. Mr. President, Americans are still waiting for that speech.”

ON THE JOB-DESTROYING TAX HIKES:
“But Americans know that for Democrats, tax increases are never off the table. Most Americans understand that they are the centerpiece of Democratic policy. America was waiting for the President to propose something new today. Instead, he dusted off his proposal to end the 2001 and 2003 tax cuts for households and businesses earning over $250,000 a year.

“David Plouffe, the President’s Senior Advisor and former campaign manager, had this to say about the President’s proposal. “People like him…who've been very fortunate in life, have the ability to pay a little bit more.” Well, that’s big of him. We hear this quite a bit from rich Democrats. Please tax us more.

“Well, as the Ranking Member on the Senate Finance Committee, I feel obligated to inform Mr. Plouffe that the President, and all of those rich liberal Democrats who are eager to pay higher taxes, can do just that. They can write a check to the IRS and make an extra payment on their tax returns to pay down the federal debt. The option is right there at the bottom of their tax return. America awaits these checks.

“This might be a good talking point. I am sure it has polled well. But I have yet to hear the economic or fiscal rationale for raising taxes on small business creators and American families. It is certainly not deficit reduction.

“Raising taxes might be politically necessary for Democrats. But it will do little to reduce the deficits and debt that are at their root spending problems.”

ON FAILED ATTEMPTS TO REFORM MEDICARE & MEDICAID TO REDUCE SPENDING:
“The White House is touting reforms to Medicare and Medicaid to get spending under control. But Obamacare is not Medicare reform. And real Medicare reform will entail repealing Obamacare. The health care bill took a half a trillion dollars out of Medicare to finance $2.6 trillion in new government spending. And instead of taking responsibility to ensure the long-term viability of Medicare, the President did what he seems to do best. He punted decision making to a board of unelected bureaucrats.

“Obamacare is not Medicaid reform either. States are already facing a crushing collective deficit of $175 billion. But instead of helping the states to lift this burden, the President’s health care bill larded on a $118 billion Medicaid expansion on the states.”

Below is the text of Hatch’s full speech delivered on the Senate floor this afternoon:

Mr. President, you would not know it from the weather in Washington, but Spring has finally arrived. Even though it is cold and rainy outside, there is no mistaking the change of seasons in Washington. Every Spring, the congressional office buildings are busy with people who want to visit with their representatives.

I look forward to many of these visits. I look forward to seeing families who have traveled all the way from Utah to see for themselves, and to show their children, the Capitol and the White House, the Declaration of Independence, and the monuments to many of our nation’s greatest heroes.

But you really know it is Spring in Washington because the halls of Congress are filled with people here for one purpose — to ask for money.

When budget season hits, interest groups descend on the Capitol with one-track minds. Like the Swallows to Capistrano, they return to the same spot each year to ask for more dough. The message is always the same. Their issue, or their program, is always critical, always essential. Liberals like to beat up businesses and demand their shared sacrifice. Translation — you better pony up.

But the interest groups that thrive on taxpayer dollars, always seem to be exempt from this required sacrifice. Somehow, I don’t think that this is what the Founders had in mind when they guaranteed individuals the right to petition the government.

Petitioning the government for more cash is somehow less inspiring than petitioning the government for redress of grievances. I appreciate the sentiment of the new member of the House of Representatives who hung a banner in his office that read: If you are here to ask for money, you are in the wrong place.

The fact is, Washington has an enormous spending problem. Washington is addicted to spending. And the first step toward recovery is acknowledging that you have a problem.

I suppose that we can take some solace in the fact that few persons in a position of responsibility now deny that our deficits and debt are a problem.

Facts have gotten in the way. This morning, the Financial Times had an above the fold headline that read: U.S. Lacks Credibility on Debt, IMF Says. No kidding. Our total debt is now over $14 trillion with no end in sight. The Administration is now asking for the Finance Committee, and Congress, to raise the debt ceiling by $2.2 trillion, just to get this country through next year.

The President’s first two budgets were a tragedy. But when the United States was staring down the barrel of a third straight trillion dollar plus deficit, his FY 2012 budget morphed into parody.
Recognizing the shellacking his party took over the issue of big spending, the White House had to talk a big game about deficit reduction. But their numbers never added up.

This is how the Washington Post described the impact of the President’s budget. After next year, the deficit will begin to fall, “settling around $600 billion a year through 2018, when it would once again begin to climb as a growing number of retirees tapped into Social Security and Medicare.”

Americans quickly saw this budget for what it was. Business as usual. Spending as usual.
So today the President tried a do-over. He was going to give a really big speech. That seems to be his go-to move. And this time he was going to convince Americans that he is really really serious about deficit reduction. Unfortunately, he bricked this shot as well.

We are approaching a debt crisis, but the President seems willing to run the clock until the next election. This is a very dangerous game. I think we need to be clear about how precarious our nation’s fiscal situation is. The fact is, we could be closer to a debt crisis than even the most pessimistic accounts.

Because of this Administration’s dramatic ramp-up in federal spending, Americans are deep in federal debt. Currently, federal debt held by the public equals a modern record of about 69 percent of the nation’s economy, known as gross domestic product. The Congressional Budget Office reports that current tax and spending law takes that figure to 76 percent of GDP over the next 10 years. To put that number in perspective, consider the following statistic. At the end of fiscal year 2008, as the George W. Bush Administration was winding down, the debt held by the public reached about 41 percent. That’s less than two and a half years ago.

As bad as the 76 percent figure is, it gets worse under the President’s fiscal policies. President Obama’s third budget was released on Valentine’s Day this year. If Americans were expecting some love and concern from our President they sure didn’t get it.

The Administration’s figures claimed that the President’s budget would raise debt held by the public to 87 percent of GDP. I have a chart that shows the growth in debt. On Friday, March 18, 2011, CBO released its estimates of the President’s budget. Those estimates showed that debt held by the public would grow to 87 percent of GDP in 10 years. That alarming figure is also on the chart.

Let me put this another way. According to the Congressional Budget Office, if we continue current tax policy, don’t raise rates, fix the AMT, provide estate tax relief, and provide for a fix to the physician payment system — policies supported by clear majorities of Americans — by 2021, debt held by the public will reach 97 percent of GDP.

For those watching CSPAN whose jaws just hit the floor, I hate to tell you, but the news might be even worse. As bad as these numbers are — and they are very bad — they could be dramatically understating the fiscal consequences of our current deficit spending policy.

This is because we face a hidden potential for even greater levels of additional federal debt. We may be in the middle of a debt bubble. The stated current level of debt may grow astronomically without any policy changes. Let me say that again. If we do nothing to our current policy and continue to spend, the debt we currently hold may prove disastrous.

Here’s what I mean by a bubble. I’ll use an example we are all too familiar with.

An economic bubble can be described as significant trade volume in different products or assets with inflated values. Interest rates affect everything in our economy, from the monthly payments we make on a new car or home to the amount we are able to save at a local bank.
Interest rates during both the dot-com bubble and the housing bubble were driven by policies at the Federal Reserve. During 2001, the Federal Reserve lowered the federal funds rate from 6.25 percent to 1.75 percent. The Fed further reduced the rate in 2002 and 2003 to around 1 percent.

These low rates had a substantial effect on the growth of mortgage lending between 2001 and 2004. The share of new mortgages with adjustable rates, which was around 20 percent in 2001 was more than 40 percent by 2004.

Currently, just like at the beginning of the last decade, interest rates are very low. Ten year Treasury rates are currently around 3.5 percent. During the past two years this administration has spent recklessly, raising the total debt from $10.6 trillion to over $14.2 trillion. We are currently spending 40 cents of every dollar on interest, paying China and others who hold our debt.

But what will happen when interest rates rise? Under projections from the CBO, 10-year Treasury note rates are expected to rise from current levels to 5.3 percent in 2016.

What happens if interest rates rise to levels seen during the 1980s or the 1990s. During the 80s, rates on 3 month Treasury bills and 10-year notes rose to over 8 percent and 10 percent respectively. During the 90s, rates on 3 month and 10-year notes rose to 5 percent and 6.6 percent respectively.

Exactly like the housing bubble, as a nation, we’re falling into a national debt bubble. We continue to spend on our national credit card while interest rates are low. Just as many purchased homes with adjustable rate mortgages, eventually the adjustment kicked in, the low-rate bubble popped, and many Americans found themselves facing higher mortgage payment that were unaffordable.

We’re exposing ourselves to more debt than we should. The cost of that decision is severely understated.

That cost as laid out by CBO could be astronomical. Under President Obama’s 2012 current budget, the CBO projects deficits for each of the next 10 years, resulting in an estimated $10 trillion being added to the public debt, a 100 percent increase. Under the scenario where interest rates rise to the historical average of the 1990s, the public debt is projected to grow an additional $8 trillion, or a 77 percent increase. Under the scenario where interest rates rise to the historical average of the 1980s the public debt would grow $12.1 trillion, doubling in size.
Its right here on this chart. If interest rates return to levels of the 90s without any policy changes, the debt grows significantly. If interest rates return to 1980 levels, boy are we in trouble.

Those who argue against spending restraints now, are akin to the bubble inflators of the housing industry, encouraging more and more spending and consumption, never considering what will happen when the rates adjust.

This is why it is urgent, I would say imperative, that we cut spending now. Not after the next presidential election. Not next year. Not next month. Immediately. We cannot afford either the short or the long term effects of this dangerous spending addiction.

American taxpayers understand what Washington has to do. It’s time to cut the national credit card and stop this reckless spending. Unfortunately, my colleagues on the other side of the aisle, and their liberal progressive base, keep urging for more taxes. I don’t get this.

I don’t think Americans have been sitting at home thinking you known what this debate over government spending has been missing? A proposal for a giant tax increase. But to borrow from Bruce Dickinson, Democrats have a fever. And the only prescription is more taxation. When it comes to dealing with our budget deficits, and our exploding debt, Democrats have a one-track mind.

They claim that they are serious about spending. The White House is touting reforms to Medicare and Medicaid to get spending under control. But Obamacare is not Medicare reform.
And real Medicare reform will entail repealing Obamacare. The health care bill took a half a trillion dollars out of Medicare to finance $2.6 trillion in new government spending. And instead of taking responsibility to ensure the long-term viability of Medicare, the President did what he seems to do best. He punted decision making to a board of unelected bureaucrats.

Obamacare is not Medicaid reform either. States are already facing a crushing collective deficit of $175 billion. But instead of helping the states to lift this burden, the President’s health care bill larded on a $118 billion Medicaid expansion on the states. The White House has circulated a fact-sheet on the President’s attempt at deficit reduction.

It claims $340 billion in savings over ten years – “an amount sufficient to fully pay to reform the Medicare Sustainable Growth Rate (SGR) physician payment formula while still reducing the deficit.” However, the President’s budget estimated the cost of a ten-year doc fix at $380 billion. Assuming Congress utilizes the President’s proposed savings to fund a doc fix, the net deficit increase from the White House’s health proposals will be $40 billion.

With due respect, when the Medicare Hospital Insurance Trust Fund, which our seniors depend on, is scheduled to be insolvent in nine short years, that is totally inadequate.

So what are we really looking at in this vaunted deficit reduction plan.

Yesterday, in anticipation of the President’s remarks on deficit reduction, his spokesperson gave it away when he said, "[t]he president believes there has to be a balanced approach."
Translation — you better check your wallet. The Wall Street Journal said that tax increases are on the table. But Americans know that for Democrats, tax increases are never off the table. Most Americans understand that they are the centerpiece of Democratic policy. America was waiting for the President to propose something new today.

Instead, he dusted off his proposal to end the 2001 and 2003 tax cuts for households and businesses earning over $250,000 a year. Citizens wanted something innovative — maybe a little hope and change. But instead they got the fiscal policy of Walter Mondale and Michael Dukakis.

Under the President’s proposed failsafe for deficit reduction, taxpayers who use their own dollars to deduct mortgage interest, make contributions to charities, save for education, or save in a pension plan, will be treated the same as spending for Nevada’s Cowboy Poetry Festival.
To me they are not the same. But to the President they are. David Plouffe, the President’s Senior Advisor and former campaign manager, had this to say about the President’s proposal. “People like him…who've been very fortunate in life, have the ability to pay a little bit more.” Well, that’s big of him. We hear this quite a bit from rich Democrats. Please tax us more.
Well, as the Ranking Member on the Senate Finance Committee, I feel obligated to inform Mr. Plouffe that the President, and all of those rich liberal Democrats who are eager to pay higher taxes, can do just that. They can write a check to the IRS and make an extra payment on their tax returns to pay down the federal debt.

The option is right there at the bottom of their tax return. America awaits these checks.

This might be a good talking point. I am sure it has polled well. But I have yet to hear the economic or fiscal rationale for raising taxes on small business creators and American families. It is certainly not deficit reduction.

Raising taxes might be politically necessary for Democrats. But it will do little to reduce the deficits and debt that are at their root spending problems. An article from the Tax Policy Center shows just how delusional it is to try and balance the budget through tax increases.

In an article titled, Desperately Seeking Revenue, the authors laid out what types of tax increases would be necessary, absent spending changes, to reduce federal deficits to 2 percent of GDP for the 2015 to 2019 period. This is a remarkable article.

Its authors concluded that tax increases consistent with the President’s campaign pledge not to raise taxes on individuals making less than $200,000 or families making less than $250,000, would require the top two rates to go from 33 percent to 85.7 percent and 35 percent to 90.9 percent. This article makes clear, yet again, that we have a spending problem, not a revenue problem.

We are not going to make meaningful deficit reduction —we are not going to get the debt under control — by taxing the so-called rich. Taxing citizens and businesses more is not going to fix what is essentially a spending problem.

Consider this chart. You can see here that under the President’s budget plans, under the CBO baseline, and under the Republican position, individual income tax revenues as a percentage of GDP are going up.Taxes revenues are already going up, and they are not getting us where we need to be as a nation.

Yet in his remarks today, the President’s landmark proposal is little more than tax increases. I suppose we shouldn’t be surprised. When the Drudge Report announced yesterday that the President was going to recommend tax increases, it did not even merit a flashing red light. Drudge just pushed it to the side, because it is really no longer news to anyone that Democrats want to raise taxes.

The real news would have been if the President stood up to his political base and made meaningful recommendations for entitlement reform. The people of Utah, and taxpayers around the country, would have stood up and listened if the President backed a serious rollback of domestic non-defense discretionary spending, which has exploded on his watch. Instead, they got the economic philosophy of President Carter.

Ultimately, this spending crisis cannot be ignored. And both voters and markets will respond to the leaders who take this issue on in a serious way. Mr. President, Americans are still waiting for that speech.

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