The Senator delivered the following remarks today on the Senate floor.
As prepared for delivery:
As we all know, negotiations are ongoing between leadership in both chambers and the President regarding measures to reduce the deficit and raise the legal debt limit.
There’s no doubt we have to address the long-term debt and deficits. I have repeatedly called for a bipartisan package that includes reforms to everything deficit related – domestic, defense, and mandatory spending, as well as revenues. I support including deficit reduction measures in the vote to raise the debt limit. And I believe reducing the deficit is important to strengthening the long-term health of the economy.
That being said, failure to increase the debt limit would do exactly the opposite. It would devastate the economy.
To be clear, raising the debt limit does not mean spending more. It means meeting our existing obligations, obligations made by both parties over many years. Failure to raise the debt limit means default. It means, for the first time in its history, the United States would not pay its creditors. And the disruption that would cause to the world wide economy would be incredibly expensive to American taxpayers.
Warren Buffett said it would be Congress’ quote, “most asinine act ever.”
Fed Chairman Ben Bernanke said it would cause severe disruptions in financial markets, slow our economic recovery, and make the deficit problem worse.
The U.S. Chamber of Commerce says it absolutely must be done.
Economist and former Reagan advisor Larry Kudlow said default would be, quote “catastrophe.”
All of these experts have pointed out that the disruption to world financial markets would plunge us into another financial crisis. And America would lose the trust of world investors, resulting in higher borrowing costs for the government, ultimately borne by taxpayers. It would also mean higher interest rates for consumers, making it more expensive to buy a house, pay for college, or even pay your credit card bill.
In a recent report, the non-partisan Congressional Research Service estimated that if we don’t raise the debt limit, the federal government would have to eliminate all spending on discretionary programs, cut nearly 70 percent of spending for mandatory programs like Social Security and Medicare, or increase taxes by more than 60 percent.
We should not be playing politics with this issue. We all have a stake in making sure this gets done.
And that’s why it makes no sense to me that the Republican leadership is refusing to entertain any discussion about eliminating any tax loopholes.
I want to highlight just two examples of tax loopholes I would think we could all agree should be closed.
First, we have a special deduction for yacht owners. If the yacht is big enough -- with beds, and a bathroom, and a kitchen -- then yacht owners can claim it as a second home and get the same mortgage interest deduction on their taxes that we give to middle class homeowners. This is a clear abuse of the tax code. This provision is meant to increase homeownership, not yacht ownership. There are as many as half a million yachts in the U.S. that qualify for this exemption. And the yacht industry actually includes this tax loophole in their marketing.
Second is a tax break for race horse owners. The current tax code allows race horse owners to depreciate the cost of their horses at an accelerated rate. Yachts and race horses. These are tax breaks that just don’t make sense. We all know we are grappling with a truly historic long-term deficit. To continue to ignore the revenue side of that deficit is irresponsible.
The tax code is riddled with hundreds of arbitrary tax breaks. We give away more in tax breaks than we take in through individual and corporate income taxes. I asked the Budget committee for a list of all tax breaks in current law. The table of contents alone, in small print, was nine pages long.
These tax breaks are too often granted based on who has the most clout in Congress, instead of what’s best for the economy. The result is that some businesses are paying near the full corporate tax rate, while others are paying almost nothing at all. We need a fairer system. We need a tax system that drives innovation and keeps our economy competitive on the global stage.
Do we really want to continue supporting tax breaks for yachts and race horses? If we want to eliminate waste in government, isn’t this exactly the kind of spending that we should be targeting?
Lastly, we must consider the price of refusing to deal with these tax breaks.
We know that meaningful deficit reform will mean trillions of dollars of changes. And in avoiding revenues, Republicans have instead proposed steep cuts, dangerous to both the health of the American people and the strength of the economy. Eliminating funding for basic women’s health care. Ending Medicare as we know it. Dangerous cuts to nursing home care. Slashing Pell grants that will train the next generation of engineers. Stopping the development of new energy technologies. And halting efforts to retool the economy to compete in the 21st Century. These are the alternatives that Republicans are proposing to save tax breaks for yachts and race horses.
We know we need to continue these kinds of basic services and investments in the economy. The president’s bipartisan commission has said it, the business community has said it, and Americans know it. We know also that finding a compromise on the debt limit is critical if we want to avoid plunging back into economic chaos. And we know that many of these tax breaks just don’t make sense. I urge my colleagues to look at the facts and work with us for what we all know needs to happen – reduce the deficit, raise the debt limit, and keep America working.
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