The Fiscal Cliffby Senator Richard J. Durbin
Posted on 2013-01-01
DURBIN. Madam President, it was after 2 a.m. this morning when
the Senate finally passed this historic measure which puts the fiscal
cliff behind us, if--if--the House of Representatives follows through
and passes it as well. I hope they take it up today or as quickly as
possible and pass it with the same bipartisan spirit and vote we saw on
the floor of the Senate last night. If
I am not mistaken, the final vote was 89 to 8, which was a significant
It was a moment of high emotion in the Senate for several reasons. First, on a personal level, many of our colleagues were casting their final vote as Senators. Those who are leaving the Senate gathered in the well and we wished them the best. It was also a moment of high emotion because I cannot think of another vote in recent times the American people followed so closely. I couldn't sit down on an airplane or at a restaurant in Chicago without having somebody come up to me and say: What is going to happen? They were very concerned, as they should have been, because the so-called fiscal cliff is a threat to our economic recovery and one that, I believe, finally mobilized the majority necessary to pass this measure in the Senate on a bipartisan basis.
The President showed extraordinary leadership on this matter. I know he was personally invested in it. He thought about it long and hard. He left his family vacation, which he looks forward to, and even more so after the campaign, to come back to Washington and try to put together a solution to this fiscal crisis. He was successful in the Senate, and I hope he will be in the House as well.
The President also had the able efforts of his Vice President, Joe Biden, to help in this effort. Last night, Vice President Biden came back to his home, the Senate, where he served for 36 years, and spoke to the Senate Democrats about the importance of this vote. It was for almost an hour and a half on New Year's Eve, somewhat surreal, as we gathered--some away from their spouses for the first time in decades-- for this important vote, and for an hour and a half we spoke and asked questions of the Vice President and expressed our feelings. We could sense during the course of that meeting an emerging consensus among the Democratic Senators. In the end, all but three of the Democratic Senators voted in favor of this measure.
There are parts of the bill many of us disagree with even today, but we understand it is the nature of compromise that part of what we have to accept may not be popular, but we have to be willing to compromise to solve problems. When we look at the issues before us, I think we made some significant progress. The most significant progress was to protect 98 percent of American families from any tax increase. If the Senate measure is approved in the House, we will see 98 percent of American families spared a tax increase today.
The vast majority of working families, middle-income families, struggle. They live paycheck to paycheck. The Pew Institute did a survey within the last year or two asking working families a very basic question: If an emergency came up, could you find $2,000, borrow or find $2,000 to meet an emergency need? Two thousand dollars is not an extraordinary amount of money until we consider that a simple trip to the emergency room or urgent care clinic could result in a $2,000 medical bill. They asked working families, and barely half of American families had access to $2,000. That tells us how close to the edge so many families live.
Had we not acted on this measure early this morning, these middle- income families would have faced an increase in their taxes of more than $2,000 a year. That is not only in Illinois and California but across the Nation. So we had to come together to protect those families.
That was the starting point for the President's position on this issue and the starting point for the Democrats. We passed, 6 months ago in this Chamber, a measure which would have protected these families. We sent it to the House. They never called it, and we had to renew our efforts last night, and successfully we were able to achieve that by the end of the evening.
We had to bargain, as usual, in the political atmosphere and had to raise the exemption from $250,000 of family income to $450,000 of family income. But, in so doing, we have protected working families from this tax increase which otherwise would have taken place. These families need the resources to not only meet the bills they face each month but to try to save a little bit for the future, for their families, and for some of their own dreams about a better life.
So that was the important first step in this package that was passed early this morning.
The other thing that was part of it was a 5-year extension--I wish it had been permanent--but a 5-year extension on the Recovery Act expansion of the earned-income tax credit. The earned-income tax credit is a measure passed during the Reagan administration which said we would give working families a tax benefit for working: the earned- income tax credit. That is probably, as President Reagan described it, the best way to eliminate and reduce poverty in our Nation. So the Recovery Act expansion of the earned-income tax credit has been extended for 5 years.
The child tax credit, which does exactly what it says--it says to families with children: We will give you a tax credit to help you raise those children--that, too, was renewed for another 5 years at the enhanced Recovery Act level. And a provision in the law, which was added by Senator Schumer of New York years ago, which helps working families to pay for college education, that, too, was included in this measure.
So from a working family perspective, there were many good and important elements that were included in this measure.
We also considered a lot of other tax measures, some of which I liked and some I did not like. One of them in particular, the estate tax, is a tax that is widely misunderstood. This is a tax which applies to a very small fraction of a percentage of American families that when the breadwinner passes away have a valuable estate that can be subject to Federal taxation. It is a very small percentage. Some 3 percent might be affected by an estate tax. At the higher levels that we have discussed in our debate on this issue, less than 1 percent of estates end up paying any tax whatsoever to the Federal Government.
The Republicans insisted on a provision which Senator Kyl of Arizona had been championing for years, which would raise the exemption for estates to over $5 million, which means a $5.1 million estate would not be subject to any taxation, and over that amount would be subject to a 40-percent tax responsibility.
I personally think it should have been a lower figure. We are dealing with the wealthiest people in America, again, and many of them make plans, estate planning, to avoid this tax throughout their lives, and it turns out that fewer than one-half of 1 percent of those who use this benefit are actually small businesses or farmers. Most of them are very wealthy people who have done well.
I can think of a friend of mine in central Illinois. Her father was a farmer and started with very modest means, bought some land, and over time the land has mushroomed in value to the point where his estate is worth multimillions of dollars. She will have an estate that is huge far beyond what she could imagine, and she would be subject to this tax. She is not a farmer. I do not think she has ever been on a tractor, unless she did as a child, and it is an asset which would be subject to the estate tax.
So we have reached an agreement, albeit a reluctant agreement, to establish this estate tax exemption of $5.1 million, subject to a tax beyond that of 40 percent.
There were many other provisions related to the Tax Code, some of them very esoteric, but that was an important starting point, protecting working families, protecting the deductions and credits they need the most, and making certain we have revenue coming in from this. We anticipate some $600 billion in new revenue coming in to help reduce our deficit as a result of this.
We also have something in law which the Acting President pro tempore and I talked about for a moment: the alternative minimum tax. There was a time when they took a look at America and said: How can this possibly be that some of the wealthiest people pay no taxes? So we established something called an alternative minimum tax, which said: If under the regular Tax Code you escape all tax liability, you are going to be subject to the alternative minimum tax, where you will pay something.
Well, it was not a bad idea 30 or 40 years ago when the debate started. But [[Page S8613]] because we did not index the income that was associated with it, over the years, this alternative minimum tax hit not only the wealthy, but it started hitting those in middle-income categories. So each year we had to kind of postpone the impact of this tax on middle-income families--let's say, families in the $100,000 to $200,000 range. This has been vexing us for decades.
Last night, in the Senate--or this morning, in the Senate--with the passage of this legislation, we have dealt with the problem once and for all. We have a permanent fix on the alternative minimum tax. It is something I am sure most American families are probably puzzled over, but it is an important element in getting this behind us which was critically important as well.
We also managed to extend the doc fix. What is that all about? Over 10 years ago, we said we are going to save some money in Medicare. We are just going to take a little percentage cut each year in how much we would pay doctors and hospitals who treat Medicare patients; therefore, we will reduce the cost of Medicare and be done with it.
Well, guess what. We had a great idea, but when it came to imposing the law, the doctors and hospitals pushed back and said: Wait a minute. We need this compensation for our care of Medicare patients. Therefore, we postponed it. Every year we postponed it, what we were supposed to save we had to come up with from other sources. The so-called doc fix, SGR, is another one like the alternative minimum tax, which has haunted us as we have done these budgets year in and year out. We did not solve this problem permanently.
We solved it for 1 year. Otherwise, what would have happened is, starting today, doctors and hospitals would have seen a reduction of over 25 percent in their government reimbursement for treating patients. The net result would have been, in Springfield and Chicago, IL, and across the Nation--in Ohio and California--many doctors and hospitals would have said: We can no longer afford to treat these patients, and the people--the 50 million-plus Americans who depend on Medicare--would have had fewer choices for treatment. So we have resolved that issue. In the early morning hours, with this vote, for 1 year we have solved that problem.
Another thing we have done, which is critically important, is extend unemployment benefits for 1 year. Two million Americans--2 million-- would have lost their unemployment benefits this morning as a result of this so-called fiscal cliff if we had not taken action.
I can tell you that it means an awful lot in my State of Illinois. As I mentioned, 2 million on a nationwide basis, but we also have 88,000 in my own State who face the same basic problem. These are people who have been out of work for a long time. Some of them are in school. Some are taking courses for retraining. All are trying to keep their family together, not lose their home while they are unemployed.
So the extension of these unemployment benefits was the President's second highest priority, after protecting middle-income Americans, and it was included in this package. It is an important element.
One last point. When you ask the Congressional Budget Office: If you had to spend one tax dollar to help the economy, where would you spend it, they will tell you over and over again, it is clear: Unemployment benefits. The $1 you spend on unemployment benefits goes directly back into the economy. These people are not salting it away for a rainy day. They are not investing it. They are spending it on goods and services to get by--utility bills and rent and mortgage payments and food and clothing, the basics of life.
As they spend it back into the economy, it is respent. So each $1 has kind of a multiplier effect behind it of $1.60, ultimately, into the economy. So not only is it the humane and right thing to do for those who are out of work and struggling, but it is also a good thing for boosting economic growth. That is an important part.
One of the real disappointments last night--and I have to tell you, it really is sad that it has come to this--relates to the farm bill. We have a chairman of the Agriculture Committee in the Senate, Senator Debbie Stabenow of Michigan. Past chairmen who are serving here all acknowledge, as we do, she has done such an extraordinary job. Her leadership in constructing a farm bill this year was masterful.
I have been around Congress for 30 years--the House and Senate. You can pick out the real legislators, and Debbie Stabenow is a real legislator. She sat down and crafted a farm bill.
Now, you may not think of Michigan as a farm State; it is. And she looked at this bill in terms of its entirety. In its entirety, the farm bill is about more than farmers and ranchers. It is also about nutrition and food programs and school lunch and food stamps. They are all included in this bill.
She tackled it with the ranking Republican member, Pat Roberts of Kansas, and came up with an amazing work product. She had over 63 votes in the Senate for this farm bill--bipartisan support for this farm bill.
Let me tell you what it did. We not only ended up with a bill that had the support of every major farm organization, which is no mean feat, it saved over $23 billion in deficit reduction in 5 years. She went after some of the indefensible programs, such as the direct payment program to farmers, which they readily acknowledged needed to go away, took those programs aside and put the money to deficit reduction.
She went to the nutrition programs, which are critically important in a struggling economy, with families facing income inequality, and she protected those. Those are important to me, and I have worked with her, and I think we came up with an honest, balanced approach when it came to nutrition programs.
We passed the bill. We passed it months ago in the Senate, and we sent it to the House of Representatives. They not only could not pass their own farm bill--never did--but they would not even consider calling the bipartisan Senate bill. The farm organizations were begging them: Call it. We need a 5-year program on farming. They would not do it. They never did it.
So there was a lot of frustration over here that we did good work on a bill, the House could not put a bill on the floor, and would not take up our bill.
The thing that brought it together, incidentally, at the last minute--why it was included in this emergency package--it turns out that under the law, if we do not pass a new farm bill, we revert to the 1949 farm bill. Talk about going back in history and picking up a law which has little application to today's world, that is what happens. One particular issue jumped off the page: dairy support.
Now, last night I bid farewell to Senator Herb Kohl of Wisconsin. I am going to miss him more than most people can imagine because Herb Kohl spent the time and understood America's dairy program.
Madam President, I confess, I do not understand this program. Vaguely, yes; but if it was on the final, I would flunk. So I used to go, on dairy issues, to Senator Kohl. Wisconsin dairy farmers and Illinois dairy farmers always saw eye to eye.
I said: Herb, you are my dairy expert. You tell me. You are my adviser. Well, Herb is retiring. I will need a new adviser. But we found out that if we had not passed a new farm bill, and reverted to the 1949 dairy program, the price of milk would double to $10 a gallon. That, to me, was unacceptable. It was unacceptable to the White House. As a result, we had to come through with an emergency measure to avoid that possibility.
We should have taken the bipartisan Senate farm bill. Senator Stabenow begged for us to do this, could not get that into the negotiation.
I will say one thing that really disappointed me last night. At the last minute, they had one aspect of the dairy program they needed to take care of. It costs $60 million to $100 million.
We needed to find a pay-for and, unfortunately, the other side of the aisle insisted that the pay-for for this dairy support come from the Federal Food Stamp Program. That is just--that is sad. We had so much waste in our agriculture programs that we identified in our farm bill. The fact that they would turn to the Federal Food Stamp Program, the SNAP program, to come up with this money, to me, is difficult to understand, explain or defend. I am saddened by that. I guarantee we will return to that.
[[Page S8614]] What we did in the early morning hours is important for us. It isn't the end of the story. There is more we will face. In 60 days, if we don't take care, we are going to face another cliff of our own making because in 60 days three things come together.
The debt ceiling, what is the debt ceiling? America's mortgage. When we spend money for a war, for the Department of Agriculture, whatever it happens to be, ultimately, we borrow 40 cents for every $1 we spend. So every President is forced to renew the mortgage, the debt ceiling of the United States.
I think of President Ronald Reagan. It was done over and over again many times without even a record vote. But now it has become a political hot potato, and in a matter of 60 days or so we will be facing another need to renew America's mortgage. In other words, this is the full faith and credit of the U.S. Government, and that is going to be contentious, a matter of debate.
At the same time, the continuing resolution, our temporary spending bill, expires. At the same time, the sequestration kicks in, which is automatic spending cuts. So we will have, in 60 days, if the House follows the Senate lead on the fiscal cliff, another challenge. Let us hope we have learned a lesson from this one.
The American people are sick and tired of incompetence, political posturing, and failure of Congress to come together on a bipartisan basis to solve a problem and they want us to get the problem solved and get this Nation moving forward.
In the early morning hours in the Senate, we finally achieved it. It should have been done long ago, I understand, but we achieved it. Now I hope the House will do the same, follow the Senate example, and 60 days from now we can approach this problem in a sober, honest, mature way instead of a partisan fashion. That is what the American people expect.
I took a look, incidentally, at the specific impact of this morning's vote on my State of Illinois. For the record, over 5 million Illinois families will be spared a tax increase under the agreement we passed in the early morning hours. Many of them, almost all of them, the working families whom I described earlier, without an agreement, the average family in Illinois would have faced an increase in taxes of more than $2,000.
Half a million families in my State will continue to receive college tuition tax credits, making it easier to send their kids to college. This could be as much as $1,000 of assistance each year, which I am sure is a helping hand.
Also, 1.5 million Illinois families raising children will continue to benefit from the child tax credit, a yearly savings of about $1,000, on average, for each of these Illinois families with kids. Working families in Illinois will continue to receive the earned-income tax credit. Over 230,000 Illinois families benefited from that tax credit last year.
More than 1 million Illinois taxpayers are protected from an increase in taxes under the alternative minimum tax, which I mentioned earlier. Thousands of Illinois children will continue to have access to school readiness programs such as Head Start. Low-income families will continue to benefit from low-income home energy programs, LIHEAP.
The deal, the agreement, protects funding for nutrition assistance for women, infants, and children and prenatal care, so we can have more healthy babies and healthy moms. The elderly, disabled, low-income families and veterans will continue to receive housing assistance. Over 88,000 Illinoisans will continue to receive the unemployment benefits I mentioned earlier, and Illinois businesses will benefit from more than $8.5 billion in consumer spending by middle-class families, families spending more on goods and services at a time when we desperately need this in our economy.
Let me say one last word. I have been involved in this deficit discussion for a long period of time. This is not a deficit-reduction measure, period. It does reduce it in some aspects, but the arcane scoring by the Congressional Budget Office will not give us any credit for reducing the deficit. We do have more revenue coming in toward deficit reduction, but some of the other measures I mentioned would be scored as expenditures.
Having said that, we still have a deficit issue. We still have a deficit problem.
What we tried to establish this morning in this vote is revenue has to be part of every solution on deficit reduction. The other side of the aisle reluctantly, after years of resisting, came to our side in the early morning hours. That is No. 1.
No. 2, we need to take an honest look at entitlements. Here are what the facts are. Social Security untouched, unamended, unchanged will make every promised payment for 20 years. We can't say that about any other Federal program, 20 years of payments, with cost-of-living adjustments every single year. But on the 21st year there will be a dropoff of 30 percent in terms of Social Security benefits. We have 20 years. We can wait. We can wait 5, 10 or 15 years to do something or we can do it soon, maybe even this year, 2013. That is what I would like to see.
I am preparing legislation to be introduced shortly, which will call for the creation of a commission with a very simple assignment, come up with a plan for 75-year solvency of Social Security. When they have it, and it has been certified to be a valid plan, report it to Congress to be considered, without debate--I shouldn't say without debate--without filibuster, without delay. When it comes to the floor, any Member who can offer a substitute amendment that achieves 75 years' solvency may also call their measure at the same time. Let us have a chance to have this debate and make sure we have solvency for Social Security that will affect not only all our lives but the lives of our children and beyond. That, to me, is the responsible thing to do.
Medicare is much tougher. Medicare goes broke in 12 years--12 years. Why? Because, lo and behold, today, 10,000 Americans reached the age of 65, and 10,000 reached that age yesterday and will tomorrow and for the next 10 or 15 years. The baby boomers have arrived.
We knew it was coming. But as they show up, their demands for services that they have paid for and invested in throughout their working lives are going to continue to grow. Those people who say: There is too much government spending; we have to stop the government spending, I want to ask them: So are you going to say to the millions of Americans who paid into Social Security for a lifetime, paid into Medicare for a lifetime, that we are going to walk away from our obligations? Of course not.
What we have to do on Medicare is find a way to meet this growing population with demands and the mushrooming costs of health care. We can do it. There are ways to save money, humane ways to save money and protect the integrity and the future of Social Security, Medicare, and Medicaid. I think the President's ObamaCare, as it has been characterized, or Affordable Care Act, is a step in that direction, but we need to do more when it comes to Medicare.
I see my friend and colleague from Ohio on the floor. I yield to him and thank him for his friendship and his leadership on these important issues.
I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Ohio.