Service Members Home Ownership Tax Act Of 2009

Floor Speech

SERVICE MEMBERS HOME OWNERSHIP TAX ACT OF 2009 -- (Senate - December 23, 2009)

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Mr. THUNE. Mr. President, I appreciate the comments of both my colleagues from Louisiana and Oklahoma touching on an issue that I think is becoming increasingly important to a lot of Americans.

I was listening this morning to one of my colleagues on the other side as he came down here and talked about how all the spending problems and all these debt problems were all inherited from the previous administration. There is sort of a Bush-phobia or something around here among Members on the other side because they do not want to own up for the decisions they have made.

Granted, I would be the first one to admit that when Republicans were in control of the Congress, we didn't do it right all the time and we lost our way a little bit with regard to spending.

But having said that, we now have--since 2006--a Democratic Congress. I need to remind my colleagues that the President doesn't spend a dime under our Constitution. Congress has the power of the purse. Congress appropriates funds. So if you look at the last several years in terms of appropriations, going back to the last couple of years that the Republicans were in control of the Congress, the amount of spending in the nondefense part of the budget was a negative 1 percent in 2007, 5 percent in 2006, and 8 percent in 2005. That is nondefense discretionary spending in our annual appropriations. If you go to total growth, which includes defense, you are talking about 8 percent in 2005, 5 percent in 2006, and 2 percent in 2007--more than most people would argue we needed to be spending in annual appropriations bills.

But the Democrats took control of the Congress after the 2006 election, so they started writing the budgets. We have ownership for the 2007 budget, but the Democrats have ownership for 2008, 2009, and 2010. The 2008 budget grew at 9 percent total growth. Nondefense discretionary spending grew at 6 percent. If you look at nondefense discretionary spending in 2009, the last fiscal year, it was 12 percent. In this fiscal year, 2010, the estimate is that we will spend 17 percent over the previous year. So year-over-year spending in nondefense discretionary appropriations here in the Congress will have grown almost 30 percent in the last 2 years. That is not a problem that was created by the Bush administration. That is not a problem, obviously, for which the Republican majority was responsible. That is the Democrats, when they took control of the Congress after the 2006 elections, beginning in 2007. They write the budgets, they approve the appropriations bills. Obviously, as you can see, the numbers have gone up dramatically--12 percent in the 2009 budget year, and the 2010 estimate for which we are now funding appropriations bills--and we have funded most of them now with the omnibus or with the smaller appropriations bills, the six bills that were passed just a week or two ago--looking at 17 percent year-over-year spending in appropriations. So that is almost 30 percent in the last 2 budget years. That is not a problem the other side can hold the previous administration responsible for or attack them for.

I will also mention that the $1 trillion approved earlier this year in the stimulus funding was approved on almost party lines. There were a couple of Republicans who supported that, but for the most part that was something approved by the Democratic majority. It was proposed by the President of the United States. That is not spending for which the former President is responsible.

At some point around here, people have to own up and take responsibility for their own decisions. You cannot blame the past administration. You cannot blame inherited problems for all the spending that is going on right here, right now. The last year, as I said, appropriations spending--and this year again--was by any stretch way above anything we have seen or should see at a time when we have an economy in recession and most Americans are having to tighten their budgets--12 percent nondiscretionary increase in 2009 and 17 percent increase in spending in 2010.

With that and the stimulus spending, it brings us to where we are today, which is this massive expansion of the Federal Government--$2.5 trillion in new spending for a new entitlement program. That, too, is not something for which the previous administration is responsible. That is something this administration, the majority here in the Congress, has decided they want to push through. They want to finish it before the Christmas holiday. They want to get this in the rearview mirror before the American people have an opportunity to see what is in it, particularly in the last hurried rush here over the weekend where we got the 400-page amendment that included all the special last-minute deals that were made to try to get that elusive 60th vote. What we have seen is now the $2.5 trillion in new spending is filled with all kinds of goodies that are going to favor individual Senators and individual States.

The American people are starting to react.

The point I want to make about this is, the one thing that the President and a lot of our colleagues on the other side have been talking about is how this reduces the deficit. This saves $132 billion over the next 10 years. Just remember that is $132 billion over 10 years. If you look at what the deficit was for the month of October, if any of my colleagues know what the deficit was for the month of October, 1 month alone, this last October, it was $176 billion--in 1 month. They are crowing about $132 billion in savings over a 10-year period.

What is interesting about that $132 billion, if you take away all the gimmicks and you look at all the phony accounting that has been done to get to that number, it goes down in a real hurry.

For example, the SGR fix, the physician reimbursement issue is a $200 billion-plus item. Let's say they are saying they got $132 billion in savings over the next 10 years. But at some point you have to deal with that $200 billion SGR. If you take that away, you end up with a negative $68 billion already. Then you add in this CLASS Act, which everybody who has any sense, any actuary has absolutely denounced, including even the Washington Post. But if you look at what the CLASS Act does, they are using the revenues in the first early years that come from the premiums paid in. That money will be spent.

So when it comes time to pay out benefits, there isn't going to be any money there. But they are showing a $72 billion savings or addition to their so-called savings in that first 10 years from the CLASS Act. The chairman of the Budget Committee has called the CLASS Act a Ponzi scheme of the first order, something that Bernie Madoff would be proud of.

You take that $72 billion out, which the Congressional Budget Office says is going to add huge deficits in the outyears, you take out that $72 billion, and you are already at a $130 billion deficit. We haven't even dealt with the fact that because of the way they have set this up, by front end loading the tax increases and back end loading spending, that understates the total cost.

In the first 10 years, if you take those first 4 years when you have $56 billion of revenue coming in and only $9 billion of spending going out, that is another $47 billion that you could add to the deficit. So you have gone from $132 billion in savings to a $177 billion deficit. That is before you even get to the more important issue, which is what the CBO came out with today in response to a question by the Senator from Alabama asking: How can you count money that is going to come from these Medicare cuts, count that as revenue that will save and extend the life of Medicare, and still spend it for a new entitlement program on health care?

The CBO basically said that is double counting. In fact, I want to read what they said:

To describe the full amount of HI trust fund savings as both improving the government's ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a share of those savings and thus overstate the improvement in the government's fiscal position.

Every American knows you can't spend the same money twice. That is what this does. They are going to cut $1 trillion over 10 years, when fully implemented, out of Medicare, but they will spend that money on a new entitlement program and still count the savings in Medicare. You can't have it both ways. The American people have figured out this shell game.

When you take a $177 billion deficit after you take out all these accounting gimmicks, you are already running a significant deficit. Then when you add in the fact that what the CBO now says, what most of us have believed to be true and have been arguing, that you can't spend the same money twice, you cannot double-count that revenue, the Medicare trust fund is going to take a significantly big hit. I know the Senator from Alabama is going to talk more extensively about that. I want to point that out because we are going into a big debate about raising the debt limit. Everybody, now that the horse is out of the barn, wants to shut the gate. But you can't spend $2.5 trillion on a new entitlement program and then claim to be fiscally responsible or say that you are doing something to reduce the deficit.

Interestingly enough, the CMS Actuary said these Medicare cuts are unlikely to be sustainable on a permanent basis. We all know we are not
going to cut $1 trillion out of Medicare over the first 10 years. That just doesn't happen here. All that money is going to get borrowed and put on the debt or they will have to raise taxes to pay for it. You can't have it both ways.

As we get into the debate about the debt limit, it is important to put things into context. I want to say again that $132 billion in savings, which is what they are saying they get by this health care reform bill with all the tax increases and the Medicare cuts, is suspicious in the first place, given the fact that the SGR, the $200 billion is not included, the $72 billion CLASS Act, and the $47 billion that they achieve by front end loading tax increases and back end loading spending brings you to a $177 billion deficit in the first 10 years. That does not even include the funky accounting being used with regard to the Medicare trust fund. We will get into this debate about the debt limit, but nothing bears on that more heavily than what we do with health care.

We need to defeat this. I hope we will still see some courage by a few of my colleagues to help us take this health care bill down, to go back to the drawing board, to do it right and to actually put in place solutions that will meaningfully reduce the cost of health care for people in this country, not increase their premiums, and not add to the deficit and saddle future generations with an enormous debt they don't deserve. Remember, $176 billion was the deficit in the month of October alone. We are talking about, under their numbers, $132 billion in savings over 10 years which, when you sit down and figure it out, it just doesn't add up.

I yield the floor.

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Mr. THUNE. Mr. President, I think our side has another 10 minutes or so, with which I would perhaps enter into a colloquy with the Senator from Alabama.

I would ask the Senator, on the point he made--and I give the Senator great credit for raising that question to the CBO--because I think it is intuitive to most people that you cannot spend money twice; that you cannot somehow double-count it. That is essentially what the CBO said in their letter. I think the Senator quoted from it.

They went on to say--CBO has written ``that the savings to the HI trust fund ..... would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs.''

That is the argument we have been making all along. I guess finally it dawned on the CBO, evidently, and it took the Senator's question, I think, to get them to respond this way.

But the way the Senator explained the interaction between government trust funds, the unified budget, and the IOUs the government writes to itself, perhaps gives some explanation to how they came up with this actually achieving a savings. But the Senator made it very clear: $170 billion actually to the deficit. As I mentioned earlier, the accounting gimmicks that have been used have understated the 10-year cost of this. By the way, my staff corrected me. The off-the-top-of-my-head calculation was $177 billion in deficit; it is actually $187 billion. So you add that to what you mentioned, pretty soon you have what they are claiming is a $170 billion savings turns into a very sizable deficit.

So I would ask the Senator from Alabama--again, I give him great credit for bringing this to light, raising this issue with the CBO--what does that mean for this piece of legislation we are going to be voting on tomorrow, a $2 1/2 trillion expansion of the government financed through tax increases and Medicare cuts. Yet even with all that, the assumption is, this is not going to meet the requirement the President set out; that is, that it doesn't add a single dime to the deficit.

What does that mean to that commitment made by the President and to this legislation's sort of fiscal situation as we move forward and to these negotiations or discussions, if this passes tomorrow, with the House of Representatives?

Mr. SESSIONS. This is a huge issue. I remember a few months ago, in a joint session of Congress, President Obama spoke to us. He looked out at the crowd and said: This bill will not add one dollar--or one dime--to the national debt. It was a firm commitment to all the American people who were listening, all the Congressmen and Senators in that room--it will not add to the debt. So what we now know is that this bill is going to add to the debt. There is no doubt about it. The debt of the United States will increase. It is a dangerous trend that happens in a lot of different ways that has put us onto this course.

I think he recognized you shouldn't increase the debt. He recognized, if he is going to create an entirely new health care program over here, it ought to be paid for, and he promised to do that. We have Members of this body, Members of the House who supported the bill, based on the promise it would not increase the debt. But we have now, conclusive proof, in any number of different ways but particularly with the CBO score, that it will increase the debt. It is a decisive issue as far as I can see.

Mr. THUNE. If the Senator will further yield, in addition to this revelation from the CBO, which I think does change the game and the whole debate about whether this is a budget buster, which it has been described as, in spite of the fact that our colleagues on the other side have been arguing it extends the life of Medicare, I think this statement by the CBO certainly shreds the notion that you can have it both ways; that you can double count this money; that you can spend it twice. You can't do that. I think the American people get that, which is why they believe it will add to the deficit as well.

But there are other things in this bill----

Mr. SESSIONS. I would just say my understanding, having looked at this at some length and given it thought, is the legislation will extend Medicare because it increases the Medicare tax, and that will bring in more money. It pretends we will slash provider payments on health care and others and save money that way. So, on paper, it definitely should extend the life of Medicare.

What do we do with the money? Well, the money that is saved is not staying in Medicare. It is being borrowed by the U.S. Treasury to spend on a new program, and the U.S. Treasury owes it to Medicare. We can see in the trends in Medicare it will not be too many years before Medicare is going to want that money. That is going to leave us over here, and that is why we have a debt. It increases our debt, and we are going to have to pay that back--our children, our grandchildren--sooner than that. Hopefully, we will be around to pay some of that back.

So that is the problem we have. It is a misrepresentation to say this creates money that can fund a program on a permanent basis. It does not. It is just an internal debt situation.

Mr. THUNE. If the Senator will further yield, a couple other items that are being used to get us to where this argument can be made, which is that there are savings from this, this $132 billion savings and deficit reduction the majority has talked about also includes the creation of an entirely new program called this CLASS Act.

There were eight Democratic Senators who wrote a letter, basically, asking that the CLASS Act not be included in this bill, recognizing what many have; that is, that the CBO has recognized that while it may show some savings in the early years, when people are paying premiums, it is similar to everything else. That money, when it gets spent on other things, isn't there to pay out benefits when the time comes to pay out benefits. So we get this artificial $72 billion infusion of cash in the early years, which is being used to, again, understate the cost of this and to demonstrate--or to make the argument that there is, in fact, $132 billion in savings here or deficit reduction.

There is $72 billion that this CLASS Act represents in that first 10-year window which, as I described earlier, our colleague on the other side has described it as a Ponzi scheme. But it does create an entirely new program, not unlike some of the entitlement programs that already exist, where payments are coming in now that are being used to spend for other purposes that someday, when the chickens come home to roost, there is going to be another reckoning. Again, I think it is another example of a program of a way in which this financial picture, with regard to this health care bill, is understating its true costs and its impact on deficits in the long run.

I would ask my colleague from Alabama, having looked at that particular program, if he would agree that too is something that is going to cost us significantly in the outyears and whether that is something that ought to be included as counted toward the whole calculation on deficit reduction in this legislation.

Mr. SESSIONS. I thank Senator Thune for his leadership in exposing this. The way I believe this operates--and you correct me if I am wrong--but the way I believe it operates is it requires a certain number of premiums now, and the actuaries who score these things say that in the years to come, there will be claims on those policies and people will claim more and more as they get older and the years go by and it becomes actuarially unsound. But in the first few years, on paper--on paper--for the first 2 years, it looks good because you have more coming in than going out. So they are scoring this short-term surplus--correct me if I am wrong--they are scoring this as an asset, as income to the Treasury, when the contracts people have when they start paying this money in protects them for years and years to come, and in the future they will be making more claims than are paid out.

That is why it is actuarially unsound and will increase the debt in the long run. Would the Senator describe it that way?

Mr. THUNE. Well, I think that is exactly how it would work. Again, it is another gimmick, if you will; another accounting tool.

Mr. SESSIONS. So it is dishonest. When you know a program is not actuarially sound and it is going to take additional Federal Government revenue to honor the contracts in the years to come, to count that today as an asset is wrong. It is improper to do that. We ought not to propose a plan that has a Ponzi scheme-type nature to it.

Mr. THUNE. Well, I don't disagree, and I think the American people agree with that.

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