Bring Jobs Home Act--Motion to Proceed

Floor Speech

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Mr. THUNE. Mr. President, one of the foremost threats to our economy is the fiscal cliff. This is an issue my Republican colleagues and I have been talking about for several months now, calling for more transparency in the sequestration that will occur at the end of the year, a replacement of the defense sequester, and actions to prevent a massive tax increase on the American people.

Senate Democrats--who have only recently acknowledged the looming fiscal cliff--are now threatening to go over the cliff unless Republicans agree to increasing taxes on America's small businesses during this difficult economic period.

Think about that. Senate Democrats are willing to put our economy at serious risk and our national security in jeopardy unless Republicans agree to a massive tax increase on America's small businesses.

The headline from a news story in the Washington Post from over the weekend says, ``Democrats Threaten To Go Over Fiscal Cliff If GOP Fails To Raise Taxes.'' They quote, ``Senior Democrats say they are prepared to weather a fiscal event that could plunge the nation back into recession,'' if the New Year arrives without an acceptable compromise--which they have defined to be a major tax increase on small businesses in this country.

Think about the impact of that and what that means to people across this country. We have had now, for the last 3 years, a complete failure in the Senate to produce a budget. We are now faced with this fiscal cliff which consists of the sequestration, the across-the-board cuts that would occur early next year if nothing is done to prevent them, the tax hikes, and we are going to reach the debt limit, all threatening our economy in an already anemic recovery.

It is hard to overstate the magnitude of the tax increases that are going to hit our economy starting next year if we don't act. Over the next 10 years, this tax increase would result in nearly $4.5 trillion in new taxes on American families and entrepreneurs. What does that mean to the average family in this country? The Heritage Foundation recently published a study that estimated the tax increase per tax return in every State. For example, for my State of South Dakota the Heritage Foundation estimates that the average tax increase per tax return would be $3,187 in the year 2013.

I would say to my colleagues on the other side of the aisle, many of whom I think generally believe in Keynesian economics, that the average family in South Dakota could do more to stimulate our economy and create new employment by keeping their $3,187 and spending it as they see fit, not as Washington sees fit to spend it on their behalf.

Taxmageddon is a very apt description that has been applied to this fiscal cliff when you consider the impact of these tax increases not just on individual families but on our entire economy. Until recently we could just speculate about the impact of these tax increases on our fragile economy, but the magnitude of the damage was in dispute. Not anymore. Last month, the Congressional Budget Office gave us the most definitive estimate yet of the impact of the nearly $ 1/2 trillion of tax increases that would hit in 2013 when combined with the more than $100 billion of spending cuts that would occur under the sequester I mentioned earlier.

The Congressional Budget Office projects the combination of the massive tax increases and the sequester will result in real GDP growth in calendar year 2013 of only one-half of 1 percent. Think about that, one-half of 1 percent. We are right now growing somewhere--they think--in the range of 1.9 percent or 2 percent this year. But next year, the real GDP growth would amount to only 1/2 percent. And the picture is even bleaker if you consider that CBO projects that the economy will actually have a decrease in GDP of 1.3 percent in the first half of 2013.

So you have the Congressional Budget Office saying that over the entire year of 2013, the likelihood is we will grow at one-half a percentage point if we don't address the fiscal cliff. But in the first half of next year, we actually see a decrease of 1.3 percent of economic growth. According to CBO, a reduction of 1.3 percent of economic growth in the first half of next year would ``probably be judged to be a recession.'' That is according to the Congressional Budget Office, which is the nonpartisan authoritative referee we use to evaluate the impact of the spending and debt tax issues.

This morning, the Chairman of the Federal Reserve Board of Governors, Ben Bernanke, testified before the Senate Banking Committee, and he said:

Fiscal decisions should take into account the fragility of the recovery. That recovery could be endangered by the confluence of tax increases and spending reductions that will take effect early next year if no legislative action is taken. The Congressional Budget Office has estimated that if the full range of tax increases and spending cuts were allowed to take effect--a scenario widely referred to as the fiscal cliff--a shallow recession would occur early next year. .....

That is according to the Chairman of the Federal Reserve Board of Governors Ben Bernanke in his testimony as recently as this morning. He talked about a shallow recession occurring next year and the endangerment of the recovery that is under way if we have this confluence of events happen at the end of the year.

He went on to say:

These estimates do not incorporate the additional negative effects likely to result from public uncertainty about how these matters will be resolved.

In other words, the economic uncertainty that is associated with all these things happening at the end of the year are impacting the economy today as people are looking at how they are going to make investment decisions, and that our economy is likely to experience negative effects from that public uncertainty above and beyond the direct impacts that CBO has incorporated into its analysis.

So let's be very clear about what the fiscal cliff means. We are not talking about a slight slowdown of a few tenths of a percent. What we are facing is the difference between positive growth on the one hand--which will mean more jobs and higher incomes--and a potential recession on the other hand. We can, and must, provide Americans some certainty as to what their taxes are going to be next year.

The House of Representatives has already agreed to hold a vote to extend all of the existing tax rates before the August recess in order to avert the fiscal cliff. They are going to act on this sometime before we go out in August to extend all of the rates before the end of the year so there is certainty for those who are making economic decisions.

Unfortunately, thus far the Senate and the Senate Democratic leadership has only agreed to hold a vote on a plan to raise taxes on nearly 1 million small businesses. This tax increase on individuals earning more than $200,000 a year and families making more than $250,000 a year will raise taxes on more than half of all income in America earned by S corporations, sole proprietorships, LLCs, partnerships, and other passthrough businesses that pay their taxes at the individual rates.

A point of clarification: That applies to a lot of mom-and-pop businesses in this country. We are talking about that restaurant owner, that electrician, many of whom are organized in the fashion in which their income flows through their individual tax return and they pay at the individual tax rate. The Joint Committee on Taxation has estimated that the number of businesses that would be impacted by that is 940,000. So almost 1 million small businesses would see their taxes go up as a result of the fiscal cliff and tax rates expiring at the end of the year for those individuals who are making more Than $200,000 and families making more than $250,000 a year.

According to the National Federation of Independent Business, the small businesses most likely to be hit by the Democratic tax increase employ 25 percent of the total workforce. So we are talking not just about the small businesses that are going to be faced with higher taxes, but we are also talking about a huge portion of the American workforce in this country. Twenty-five percent of the employees in this country work for those small businesses that, according to the Joint Committee on Taxation, will see their taxes go up as a result of the President's proposal.

We essentially have in front of us three choices:

We can let all the tax rates expire, which we know is going to plunge our economy back into a recession; we can do what our Democratic colleagues want to do, which is to raise taxes on successful small businesses and entrepreneurs, slowing our economy even further and risking--according to the Congressional Budget Office and the Chairman of the Federal Reserve Board--a recession; or, we could do what the House of Representatives will soon pass and what I would suggest, and that is we can prevent a tax increase from hitting anyone and give the lackluster economic recovery at least a chance to gain some steam.

That is what we ought to do. We ought to do what the House of Representatives is going to do, and that is to extend the rates for a year so that people in this country have some certainty as to what their tax rate is going to be at the end of the year.

I hope my colleagues here in the Senate--and the Senate Democrats in particular--will realize the severity of the fiscal cliff, and come to the table to prevent this massive tax increase and the unbalanced and troubling cuts that will occur to our national security if we don't take steps to avert this fiscal cliff.

We have to prevent the dangerous cuts to our national defense that are scheduled to go into effect under sequestration by finding savings elsewhere in the budget. In order to do that, we need a detailed plan from the administration as to how they plan to implement the sequester.

Members of Congress on both sides of the aisle have called for more transparency on the sequester from this administration, but they have so far failed to produce a plan. That is simply unacceptable. I will continue to work to see that a requirement be enacted so the administration will finally be transparent with the American people and give all Members of Congress a clear idea as to where the cuts are going to be applied.

Our economy is weak. We know that growth in the first quarter was a mere 1.9 percent. Expectations for the second quarter have been downgraded. We have witnessed now for 41 straight months unemployment above 8 percent. We have 23 million Americans who are either unemployed or underemployed and 5.4 million Americans who have been unemployed for a long period of time.

We have a weak economy. The amazing thing about this debate is that 2 years ago the President of the United States said that raising taxes would strike a blow to the economy. That was at a time when we had 3.1 percent economic growth. We now have, as I said, according to the estimates, 1.9 percent economic growth for the first quarter of this year, and expectations for the second quarter have already been downgraded. So with 41 straight months of unemployment above 8 percent, 23 million Americans underemployed or unemployed, and the weakest recovery literally since the end of World War II, now is not the time to raise taxes.

Who in their right mind would think it would make any sense at all to raise taxes when you have an economy that is growing at such an anemic rate, particularly given the fact that 2 years ago, when we had more robust economic growth, the President said at that time that it would strike a blow to our economy if we raised taxes. Here we are with economic conditions that are much worse, circumstances that have deteriorated since then, and he is proposing a tax increase on 1 million small businesses that will have a ripple effect all across our economy and hurt job creation at a time we cannot afford that.

There was another study, an analysis that came out today done by Ernst & Young in which they analyzed the tax hikes that would occur on small business next year and came to the conclusion that it would cost 700,000 jobs in our economy, that it would cost us 1.3 percent of economic growth--which is again consistent with what the Congressional Budget Office has said--and that it would reduce wages to people in this country by 2 percent.

So you now have the Ernst & Young study out there which suggests that not only does this impact the small businesses out there that are going to see their taxes go up, but it puts at risk and in jeopardy jobs for hard-working Americans and a wage base that would actually shrink if, in fact, we drive the car over this fiscal cliff.

We cannot afford to do that. It is irresponsible to have people out there saying that they are so anxious to prove some point or to win some argument on raising taxes that they are willing to see this country run the risk of plunging into a recession and raising the number of people who are unemployed in this country. It really is.

I have to say that when I saw some of the remarks and some of these stories and some of the reporting about statements that are being made by our colleagues on the other side and Members of their staff with regard to the fiscal cliff and the willingness on the part of many of our colleagues to suggest that this country could go through and endure even more difficult economic times than what we are already experiencing, even higher unemployment than what we are already seeing, it was really pretty remarkable and truly unfortunate.

I hope folks will walk back from that position, walk back from those remarks, and enter into a discussion about how we might be able to provide the necessary economic certainty for our job creators and our small businesses, how we can get people back to work, how we can grow and expand this economy.

Frankly, extending the tax rate should only be the first part, the short-term solution. The long-term solution is to get tax reform, comprehensive tax reform. People on both sides of the aisle agree with that. If we could enter into a discussion about how we could reform our Tax Code in such a way that it broadens the tax base, lowers the rates, does away with loopholes and deductions, coupled with entitlement reform--that we all agree has to be dealt with or we are going to continue to see the country on a fiscal trajectory that is completely unsustainable over time, is going to lead to the situation we see many European countries dealing with today--that is what we ought to be focused on.

We ought to be providing certainty to our businesses, extending rates at least for now until such time hopefully next year when we all agree we need to sit down and solve this tax mess we have in this country, this Tax Code that has become way too complicated, and come up with something that is more simple, more clear, more fair, and something that makes us more competitive in the global marketplace. Right now, we are losing to a lot of countries around the world simply because we have a tax code that makes American businesses noncompetitive in the international marketplace.

Tax reform, entitlement reform, a comprehensive energy policy, regulatory reform--it is not that hard to fix this if we have the will, the political will to do it. But we cannot start by saying to small businesses in this country that we are going to raise your taxes next year, run the risk of plunging the country into a recession and increasing the number of people in this country who are unemployed.

That is the exact wrong prescription. We ought to be providing certainty, extending the rates, and getting into a discussion and hopefully action on legislation that would reform the American Tax Code to make us more competitive in the world, do away with the costly, overreaching, excessive, and burdensome regulations that are making it more difficult and more expensive to do business in this country; an energy plan that makes sense, that relies upon American sources of energy; and a spending plan, a budget--something the Senate has not done now for 3 years, an actual budget. Lo and behold, go figure that we could actually do a budget in this country that puts us on a more sustainable fiscal path by reforming entitlement programs, that will actually save Social Security and Medicare for future generations of Americans. That is the long-term prescription for what ails America. But certainly in the short term it makes matters much, much worse when we talk about piling a tax increase on the very people we are looking to, to create jobs and get this economy back on track.

I hope this Congress will come to its senses about this and that we will vote down any proposal that would raise taxes on hard-working small businesses and entrepreneurs in this country and instead give them the certainty they need for the months ahead, until such time as we can deal with the issue of tax reform.

I yield the floor. I suggest the absence of a quorum.

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