The Budget

Floor Speech

Mrs. SHAHEEN. Mr. President, I come to the floor this afternoon to lend my voice to the others who have been here--my colleagues--to talk about the need to come to the table and come up with an agreement around how we are going to deal with raising the debt limit by the August 2 deadline and include some sort of package to address our debt and our deficits.

I listened carefully to my colleague and friend from Indiana, and I think we agree on a lot of what he said. I certainly agree that both sides of the aisle have been working hard to look at ways we can address this issue. I agree we need Presidential leadership to address this challenge we are facing. That is why I was so pleased to see the President come out yesterday and say, very strongly, that in order to address this, we are going to have to put revenues on the table, make sure they are in the mix, because we cannot get there without looking at revenues, with just looking at cuts to the budget.

So I think there is a lot of agreement. But every negotiation I have been part of means that every side has to give a little. So drawing a line in the sand and saying: We are not going to look at revenues at the same time we are looking at spending cuts is not the way for us to solve this challenge.

Now, we all know that negotiations are ongoing between the President and leadership in both the House and the Senate. They are looking at all kinds of measures to reduce the deficit and raise the legal debt limit. There is no doubt we have to address the long-term debt and deficits. I repeatedly called for a bipartisan package that includes reforms to everything that is deficit related. So that means domestic, defense, and mandatory spending, as well as looking at revenues. I support including deficit-reduction measures in the vote to raise the debt limit. I believe that reducing the deficit is important to strengthening the long-term health of our economy.

But 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 the history of the United States of America, we would not pay our creditors, and that disruption would cause the worldwide economy to have devastating consequences--consequences that would be incredibly expensive to American taxpayers.

I think Warren Buffett said it very well when he said: If Congress did that, it would be the ``most asinine act ever.''

Fed Chairman Ben Bernanke said it would cause severe disruptions in the financial markets, it would slow our economic recovery, and make the deficit problem worse.

The U.S. Chamber of Commerce said it absolutely must be done, the debt limit must be raised.

Economist and former Reagan adviser Larry Kudlow said default would be ``catastrophic.''

All 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, which would result in higher borrowing costs for the government, and that would ultimately be 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 nonpartisan Congressional Research Service estimated that if we do not raise the debt limit, the Federal Government would have to eliminate all spending on discretionary programs, cut nearly 70 percent of spending for programs such as Social Security and Medicare, or increase taxes by more than 60 percent. That is not just speculation. That is what will happen if we fail to raise the debt limit.

We should not be playing politics with this issue. We all have a stake in making sure this gets done. That is why it makes no sense to me that the leadership on the other side of the aisle is refusing to entertain any discussion about eliminating any tax loopholes.

I think it is important to highlight some of those tax loopholes, and there are two I want to talk about that have been mentioned on the floor in the last couple of days. I would think we could all agree that these are the kinds of tax loopholes we ought to be closing.

First, we have a special deduction for yacht owners. If the yacht is big enough, like the yacht shown in this picture I have in the Chamber--so if it has beds and a bathroom and a kitchen--then yacht owners can claim it as a second home, and they can get the same mortgage interest deduction on their taxes that we give to middle-class homeowners.

I think this is a clear abuse of the Tax Code. The mortgage deduction provision is meant to increase home ownership, not yacht ownership. There are as many as a half million yachts in the United States that qualify for this exemption, and the yacht industry actually includes this tax loophole in their marketing.

Now, the second loophole that, again, has been mentioned before on the Senate floor is a tax break for racehorse owners. The current Tax Code allows racehorse owners to depreciate the cost of their horses at an accelerated rate.

Yachts and racehorses, these are tax breaks that just do not 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. Our Tax Code is riddled with hundreds of arbitrary tax breaks just like the one for racehorses and the one for yachts. In fact, we give away more in tax breaks in a year than we take in through individual and corporate income taxes. These tax breaks are, too often, granted based on who has the most clout in Congress rather than based on what is best for the economy or what is fair for people in this country.

So the result is that some businesses are paying nearly the full corporate tax rate while others are paying almost nothing. 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 racehorses? If we want to eliminate waste in government, isn't this exactly the kind of spending we should be targeting?

Lastly, we must consider the price of refusing to deal with these tax breaks, of refusing to say we are going to look at these kinds of tax breaks because we know that meaningful deficit reform will mean trillions of dollars in changes. In avoiding revenues, Republicans have, instead, proposed steep cuts that are dangerous both to the health of the American people and to the strength of our 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 help 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 racehorses.

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 also know that finding a compromise on the debt limit is critical if we want to avoid plunging our economy back into chaos. We know that many of these tax breaks just do not make sense.

So I urge my colleagues, let's look at the facts. Let's work together for what we all know needs to happen--reduce the deficit, raise the debt limit, and keep America working.

I ask unanimous consent that Senator Jack Reed from Rhode Island be the next speaker on our side.

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