Van Hollen Delivers Address at the Center for American Progress Action Fund to Discuss the FY 2012 Federal Budget

Today Maryland Congressman Chris Van Hollen, Ranking Member of the House Budget Committee, discussed the FY 2012 budget and the future of the federal budget at the Center for American Progress Action Fund. Below is a transcript of his remarks, and you can watch the video here:

"Thank you, John, very much for that introduction, and it is great to be with you here at the Center for American Progress, you and your terrific team. I apologize for being late. As I was driving in up Connecticut Avenue, I was muttering under my breath and saying I better call my Congressman to complain. But I'm glad that we're all here together, and I want to thank CAP for being an incubator of ideas to help meet our nation's challenges and public policy issues, as well as a constant resource. So, thank you, John, very much and your team.

"And John said in a short amount of words what I will take a little longer to say. I do believe that the American people are temporarily relieved that the government did not shut down on Friday. A government shutdown would have shaken the public's confidence at a time when our economy remains very fragile. And as the business community has told us, the dislocation of a government shutdown would have been felt far and wide, throughout our country.

"It should never have reached the eleventh hour. It is inexcusable to threaten a severe economic disruption through a government shutdown in order to pass a bill that doesn't create one job. In fact, we'll lose some jobs in the economy. And to use the budget as an effort and attempt to impose a right-wing, political agenda on the country, including withholding certain funds from health centers for women.

"Unfortunately, as John indicated, I fear that the continuing resolution was just a preview of things to come. House Republicans have already indicated they intend to play a game of political chicken with the debt ceiling and put the full faith in credit of the United States government at risk. That is like playing Russian roulette with a fully-loaded revolver. As the Chairman of the Federal Reserve, Ben Bernanke had said the default on the U.S. debt would be catastrophic for the U.S. economy, and threatening that outcome if you don't get what you want, is reckless. It is also more than a little bit hypocritical since even the House Republican budget that will come to the floor shortly will require that we raise the debt ceiling for years to come.

"I also fear that we're going to face a similar showdown, assuming we get past Thursday, if you fast forward to the end of this fiscal year, to the end of September as we head into next October. And that, which John described, is the main event. The 2012 budget is what I'm here to focus on. We're gathered here to consider that long-term budget plan at an especially consequential moment for our country. As a result of the extraordinary actions that were taken over the last few years, America avoided a second Great Depression and is slowly emerging from the ravages of the financial meltdown and near economic collapse. While the economy is improving, everyone in this room knows that millions of Americans remain out of work through no fault of their own. And thousands more are facing foreclosures because they have lost their jobs.

"Our top priority, our number one priority, must be to support a robust recovery and put America back to work. At the same time, we have to act now to lay the foundation for sustained, long-term economic growth. Even before the economic meltdown occurred, real wages for most Americans had been frozen for over the last eight years, and, for most Americans, they faced rising costs at the same time. Middle class families have been squeezed. We must implement a plan to support small business, grow the economy and ensure shared prosperity. That will require that we make strategic national investments, as President Obama has said, to out-educate, out-innovate and out-build the rest of the world. It will also require developing and implementing a disciplined plan to steadily and predictably reduce our deficits and debt so that we can establish a strong foundation for long-term growth.

"We all love America; everyone in this room loves America. We all believe America is a unique and special place and believe in American exceptionalism. The question is how do we keep America strong, dynamic and exceptional? And on that, we clearly have different views in the United States Congress and would make different choices. We do all agree that we must act now to put in place a plan to reduce our deficits over a period of time, as I said, in a steady, predictable manner. The question is not whether, but how, we do that?

"So today I'm going to talk about why the Republican plan is the wrong choice for America, and then I will sketch out, in a general way, areas where our House Democratic alternative will present a different choice, one which we think resonates with America's priorities and values.

"First, we ask every American to read the Republican budget. Read the budget. If you read it, no amount of spin can hide the fact that the Path to Prosperity is a wrong turn for America. It is a yellow brick road for the already prosperous and a dead end for the rest of the country. President Bush was quick to seek a taxpayer rescue of the financial industry for a meltdown that was caused by the financial industry's own malfeasance and misconduct. Republicans and Democrats, myself and the chairman of the Budget Committee, grudgingly joined President Bush to take emergency action. And today, big banks have rebounded along with big bonuses. But as the rest of the country still struggles economically, the Republican budget, if we implemented this, would disrupt the recovery and important strategic investments for long-term growth and tear apart the social contract.

"Erskine Bowles and Alan Simpson, the co-chairs of the President's bipartisan Fiscal Commission, stated that the Republicans budget, and I quote, "falls short of the balanced, comprehensive approach needed for a responsible plan.' They are absolutely right. It is not balanced; it is totally a one-sided approach to deficit reduction. The bipartisan Fiscal Commission called upon all Americans to pay their fair share to support our country. Its blueprint calls for the revenue generated by having the top 2 percent income earners pay the same tax rate they paid during the economically booming years of the Clinton administration. Thank you to John Podesta and all who were part of that team. The Fiscal Commission plan also generates, on top of that, over a trillion dollars in revenue over 10 years by reforming the tax code to close special interest loopholes and limit tax expenditures. And I have with me a little chart that just shows you the difference in terms of revenues in the Fiscal Commission's plan versus the House Republican budget: $2.5 trillion.

"So the question is if you're going to achieve the kind of deficit targets that the Fiscal Commission did without the revenue that was in their balanced plan, how do you do it? And the answer is, the only way to do it is to whack the rest of the budget that provides investments to keep our country strong, guarantees to our seniors, and the only other way to do it is to continue to shred the social safety net. And that is what the republican budget does. Indeed, when you strip away all the soothing, sweet-sounding talk of reform, at its core, the Republican budget is the same, tired formula of extending tax breaks to the very wealthy and powerful at the expense of the rest of the country. Except this time, it's on steroids.

"To govern is to choose. And the choices made in the Republican budget are wrong for America. It is not courageous -- it is not courageous -- to protect tax giveaways to big oil companies and executive board rooms while slashing investments in our kids' classrooms, in scientific research and critical infrastructure. It is not bold to provide tax breaks to millionaires while ending the Medicare guarantee for seniors and sticking seniors with the bill for rising healthcare costs. It is not visionary to reward corporations that ship American jobs overseas while we terminate affordable healthcare for tens of millions of Americans here at home. And it is not brave to give governors a blank check for pet initiatives and a license to cut support for seniors in nursing homes, individuals with disabilities, and low-income kids on Medicaid. And it is not fair to raise taxes on middle-income Americans to provide yet another tax break to the folks at the very top.

"Yet, if you read the Republican budget, those are the choices they make. Where is the shared sacrifice? We have American men and women putting their lives on the line as we speak in Iraq and Afghanistan, while others hide their income in the Cayman Islands and Switzerland and refuse to pay their fair share to support our nation. That is not right, and the Republican budget, at its heart, represents a huge transfer of wealth from middle and lower-income families to the well off. As the Center on Budget and Policy Priorities has calculated, the Republican plan would "generate at least two-thirds, about 2.9 trillion of its 4.3 trillion in budget cuts over 10 years for programs for people of modest means.'

"David Stockman, who we all remember was head of the CBO--excuse me under OMB--under the Reagan administration had this to say when he looked at the Republican budget:

"It doesn't address in any serious or courageous way the issue of the near and medium term deficit. I think the biggest problem is revenues. It is simply unrealistic to say that raising revenue isn't part of the solution. It's a measure of how far off the deep end Republicans have gone with this religious catechism about taxes.'

"The pattern is pretty clear, right? First, you cut taxes for special interests and the wealthy. Mathematically, what happens? You drive up the deficit. Then you drive up the deficit and you say we've got to cut investments for working families and violate commitments to seniors and others. Grover Norquist told us what the strategy was a long time ago when he infamously said that their goal is to "shrink government to the size that you can drown it in the bathtub", and that's what this is all about. And the truth is that until Republicans are more afraid of the deficit than they are of Grover Norquist, we will not be able to put together a responsible, balanced plan.

"The Democrats have a different vision for the country. We believe our strength springs not only from the undisputed benefits of a free people pursuing their ambitions and dreams, but also from sometimes harnessing those talents for important national purposes. We believe that America's greatness is rooted not only from a collection of individuals acting alone, but from our capacity to work together for the common good. We believe that is a patriotic vision of America. We do not see the government as the enemy, but as the imperfect instrument by which we can accomplish together as a people what no individual or corporation can do alone.

"Every American family, including all the parents in this room, understands that giving our children a good education expands their opportunities for success. Small business owners recognize that they must make certain investments to build a successful enterprise. Similarly, the United States of America must make the strategic national investments necessary to keep our country strong in an increasingly competitive global marketplace. Especially at a time when our competitors, our economic competitors like China and India, have been copying the same formulas that the United States applied in the past to help make us an economic powerhouse today. That is why the Democratic budget that we submit in the House will make room for the essential investments that President Obama has outlined in his budget in the areas of education, innovation, and infrastructure. We believe that reducing our deficits in a steady, predictable way is also important to achieving long-term economic growth. And that is why tomorrow we will present a balanced approach to accomplish that goal. We believe that sustaining cuts in certain areas must be part of that plan, but those cuts must be made in a targeted, smart way, not with an axe.

"We also believe that the timing of cuts is important. We all know the principle of physicians. First, do no harm. And the Fiscal Commission, as well as the Rivlin-Domenici Commission, made very clear that the timing and sequencing of the cuts is important so as not to hurt our fragile economic recovery. We also agree with the Fiscal Commission that discretionary security spending should not be immune from our effort to reduce the deficit. Admiral Mullen, the Chairman of the Joint Chiefs of Staff, has stated that, and I quote, "that the most significant threat to our national security is our national debt.' And there is growing bipartisan consensus that security agencies themselves must be part of the effort to strengthen our national security by reducing our deficits.

"The Obama Administration and the Fiscal Commission use spending by the Defense Department, the State Department, and the Homeland Security Department as part of the integrated effort to strengthen our security. We do too. The Republican budget, the House Republican budget, cuts $257 billion from this overall category. All of it from the State Department, even though Republican senators, like Senator McCain and Senator Lindsay Graham, have made it clear that they believe that that funding is an important part of the overall national security strategy. The Fiscal Commission criticized the Republican budget because it "largely exempts defense spending from reduction.' Last month, Governor Haley Barbour said, and I quote, "we can save money on defense, and if we Republicans don't propose saving money on defense we will have no credibility on anything else.' And in the one amendment that passed the Budget Committee the other night on a bipartisan vote and recorded vote the Committee, again on a bipartisan basis, said that it was important to look at everywhere, including the defense budget, as part of the effort to tackle our deficit issue.

"We also believe that we can make savings by reforms to some of the non-health mandatory programs in the budget. I will talk about the health programs in a minute but we believe we can make savings by reforming some of the non-mandatory health programs. In addition, as I indicated earlier, a balanced approach to the deficit must include both spending cuts and revenues, and our budget will include a return to the Clinton era tax rates for the very top income earners. And anybody who wants to look at a chart of economic growth during those years, compared to economic growth during the Bush years with a lower tax rate, will see very quickly that relatively small differences in marginal tax rates are not the main drives of our economy -- not by a long shot. The Republican plan, and this is something I want to emphasize -- John referenced it -- the Republican plan would cut the top tax rate by almost 30 percent. For millionaires, you get a big tax cut right off the bat. Then they say they are going to do this -- this piece of it -- in a revenue neutral way. Well you do the math. You do the math. This is inevitably a transfer of income for middle class tax payers to the wealthiest tax payers. On average if you are a millionaire, that's a hundred thousand dollar tax cut off the bat. Now you are going to have some deductions, but you are going to have a lot less than middle income tax payers relative to your income. So that is clearly a formula for raising revenues from the middle class to the wealthy. In fact, we have an amendment on that the other day in the Budget Committee to say let's not do that, and our amendment to prevent that from happening failed on a party line vote. Now Democrats support tax reform, but not in the way that shifts the burden from the wealthy to middle income tax payers.

"Let me turn to the Republican plan on Medicare and Medicaid. The rising costs of health care are not unique to Medicare and Medicaid. They are endemic to the entire health care system. In fact, for 30 years, the per-beneficiary spending in Medicare and Medicaid has grown at virtually the same rate as those of the overall health system and over the last decade the per-beneficiary cost in Medicaid grew much more slowly than the rate of health care costs. In the rest of the system, by contrast, in the private market for individual coverage, premiums more than doubled between the years 2000 and 2008 as insurance industry profits quadrupled. Clearly bringing down the rising cost of health care throughout the system will also reduce the cost to some of the biggest participants -- Medicare and Medicaid.

"Last year, just a little more than a year ago, President Obama signed the Affordable Care Act to begin to tackle the challenge of rising costs throughout the health care system as we provide more coverage to more Americans brining everybody into the pool and reducing the costs of per-capita health care and slowing the rise of health care costs. It includes virtually every cost containment provision recommended by health care experts. And in her testimony before the Budget Committee., the former head of the OMB, Dr. Alice Rivlin, who has been much quoted by some of our friends on the Republican side, stated that it would be a huge mistake to repeal the Affordable Care Act and that the Affordable Care Act would help bend the health care cost curve and that the repeal would set back efforts to create a more disciplined and effective health care system.

"Yet the Republican budget eliminated the health reform act and all the system wide reforms that will reduce costs for all participants including Medicare and Medicaid. By junking the health care act they go back to the status quo--they have no answer to bringing down the rising health care costs throughout the system. Now, interestingly, and this hasn't gotten a lot of attention - the Republican budget does keep in place some of the reforms that we made to the Medicare system as part of the Affordable Care Act. You may recall we eliminated the over-payments to some of the Medicare Advantage plans, the Medicare Managed Care Plans, they were being reimbursed at 114 percent of fee-for-service so that the people in the fee-for-service plan were in fact cross-subsidizing the folks in the private plan. So we got savings from eliminating that extra tax payer subsidy and we made some other changes in Medicare to achieve savings.

"While some of you may remember -- I remember it all too well -- last fall our Republican friends ran TV ad after TV ad against House members -- aimed at seniors -- "Medi-scare Ads' saying your member is going to take away your Medicare. Then they turned around and used those savings as an important part of their overall budget as they got rid of other provisions in the health care act. But here's another interesting point: we used some of those savings to provide important benefits to seniors: like closing the doughnut hole over period of time, like providing greater access to preventive care upfront. So what did our Republican friends do? They took the savings that they demagogued but then they didn't provide the benefits to seniors that we used the savings to pay for. And this will happen immediately. This isn't 10 years from now or 9 years from now. Immediately, if this budget passes, seniors will lose that benefit of closing the doughnut hole and other benefits they achieved. What is in the bill, what is very new in the Republican plan, is, as you have heard, the termination of the Medicare guarantee for seniors.

"This does not reform Medicare; this deforms and dismantles Medicare. It forces seniors off of Medicare into the private insurance Medicare. It does nothing to rein those rising costs throughout the health care system. So what are the consequences? Seniors will have to eat those rising costs. All the payroll taxes people put in now to Medicare and the premiums that seniors pay will now all go to the health insurance industry. The demands for the health insurance industry -- they are big winners here. But seniors will be left on their own as the rising health care costs exceed the value of the voucher they are given. Now there has been much back-and-forth about whatever you call this -- a voucher, a premium support -- I recommend you read an article Ezra Klein had the other day. He talked to Henry Aaron -- the father of premium support. Henry Aaron pointed out that what they are talking about is not premium support because it does not support the premium! Right? The cost of health care is going up and the premium support is pretty much like spending so that's not premium support.

"The other thing to note, because our Republican colleagues have tried to sell their plan on this basis, is that this is not like the Federal Employee Health Benefit plan that Members of Congress are on. They're going around telling people -- it's one of their big talking points -- "seniors we are giving you the same thing Members of Congress have. Don't worry.' Only problem? Not true. The Federal Employee Health Benefit plan that Members of Congress are on has something called the fair share formula. You share equally in the risk of rising health care costs. There is a fixed percentage. It is premium support. As the cost of premiums go up the share between the employer and the employee remains the same. It's the exact opposite on the Medicare situation. The way they make money is to take advantage of the gap between what they're going to provide seniors and the rising health care costs. So it is absolutely true to that seniors will eat that cost and they're giving seniors a raw deal and they're not giving seniors the same deal they give themselves as Members of Congress.

"Let me turn to Medicaid and I am going to wrap it up and take questions. The Republican budget rips apart the safety net for seniors in nursing homes and assisted living facilities as well as low income kids and individuals with disabilities who rely on Medicaid. There is nothing courageous about targeting the most vulnerable in our society. Frankly, apparently on the Republican side of the aisle, over time that has not been a politically bold thing to do. It's easy for them to pick on the most vulnerable and that's what they do in this budget again at the same time they are providing the very wealthy with tax breaks. Block granting Medicaid is simply code for deep, arbitrary cuts in support for those hoops that I have mentioned. And giving governors that so called flexibility just allows them to use federal tax payer money for their own purposes without accountability. And as I mentioned earlier, the Medicaid program has actually grown at a much slower rate than health care costs in the rest of the system. In fact, anyone who follows this program well, knows that it is already very stretched. So to block grant it and cut it is like throwing an anchor to a drowning person. And Alice Rivlin, and I have quoted her again because she has been much quoted before, who by the way has indicated that the Medicare approach taken by the Republican party is not one she endorses because it does not leave open the option to stay in Medicare, had this to say: "A major feature of the Ryan plan is a drastic reform of Medicare and Medicaid. But reform with deep cuts and deeper than I think many of us would feel are realistic or humane.'

"Dismantling the Medicare guarantee and block granting Medicaid, to say that you are saving us from a collapse is Orwellian. It reminds me of that phrase you have to destroy the village in order to save it. Democrats welcome an honest debate about how we can build upon the reforms in the Affordable Care Act to strengthen and sustain Medicare and Medicaid. But we will vigorously oppose any effort to undermine the integrity of these essential supports for seniors and vulnerable individuals. You don't have to be a history buff to know that Republicans in earlier Congresses fought the establishment of Medicare and Social Security just as fiercely as they're fighting the Affordable Care Act today. The Republican budget is the wrong choice for America because we do not believe it reflects the values and priories of our nation.

"Which is why Democrats will offer our own budget and present a clear choice. Our budget will reduce the deficit and remain true to our values. It will reduce the deficit in a steady predictable way, reaching primary balance by the year 2018, and remaining there throughout the budget period. It is a sensible and balanced approach. The Republican budget dismisses much of the American experience. It recognized the importance of individual self-reliance that is a valuable part of the American character. But it fails to recognize the truth emblazed on the great seal of the Untied States: that out of many, we unite as one behind shared values and principles to advance the common good and make America strong and exceptional.

"Thank you very much for your attention."

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