Text of Sen. Susan Collins’ speech:

I want to talk this morning about our debt crisis, the prospect for tax reform, and then some of  bipartisan proposals to get our economy moving again.

Our national debt is now a staggering 16.7 trillion dollars.  The tab for every man, woman, and child exceeds $53,000 and is our legacy to future generations.

Debt, of course, is the result of years of borrowing and with borrowing comes interest. Each month, we spend about $18 billion on interest payments, more than the entire annual budget for Navy shipbuilding. That’s more each day – in excess of $600 million – than the annual value of Maine’s fishing industry. That’s a lot of clams – and lobster, mussels, and haddock.

Excessive government borrowing crowds out the private sector, stifles business investment, depresses wages, and slows economic growth.  In May, the nonpartisan Congressional Budget Office offered a chilling warning that when interest rates return to more typical levels, federal interest payments will increase substantially.

This chart titled “Major Components of the Budget,” shows that the columns, tallying federal outlays from 1980 through 2020, increase at an alarming rate. I’ll talk about the dominant orange section – which represents entitlement programs – a bit later. First, I’d like to draw your attention to the red section, which grows from a small portion of each column to, by 2020, the third-largest spending component. Those are interest payments, and their increasing size will become a roadblock to economic growth.

The chart of federal outlays demonstrates where federal revenues go. In 2012, nearly 64 percent of the $3.5 trillion in total federal outlays went to obligations for some very worthwhile programs: primarily Social Security, Medicare, Medicaid, civil service and military retirement benefits, as well as interest on the national debt. Now, consider that we can spend that $3.5 trillion only because we borrow $1 trillion on top of $2.5 trillion in revenue.

In fact, spending on mandatory programs eats up 83 cents of every dollar we collect in federal revenue. Add interest costs, and 92 cents of every revenue dollar is spoken for before we even consider “discretionary spending.” And just because it’s called discretionary doesn’t mean it’s not vital to our nation’s security and our future. This category includes such important missions as defense, education, transportation, and biomedical research. Transportation funding, for example, helps rebuild our crumbling roads and deteriorating bridges. It allows products and raw materials to be transported efficiently, people to travel safely, and jobs to be created in the private sector.

We need to strengthen and preserve Social Security, Medicare, and Medicaid. If we do not reform these unsustainable programs in thoughtful ways that keep the promises we have made to those in need and our seniors, the programs will run out of money. A quick look at the chart tells the tale. The orange section – entitlements – grows so large you can almost feel its crushing weight on our nation’s future.

An alarm has been sounded in the most recent Social Security and Medicare trustees report. The trustees project that the Medicare Part A trust fund, which covers hospital stays, skilled nursing care, post-acute home health care, and hospice benefits, will be unable to pay benefits in full or on time in just 13 years. Even more urgent is the fact that the disability component of the Social Security trust fund will be exhausted in 2016 – just three short years from now – and unable to pay full benefits. Yet, Social Security Disability Insurance is an essential component of our nation’s social safety net.

As the Ranking Member of the Special Committee on Aging, serving the state with the oldest median age, I believe it is crucial that our country have a serious debate about how to secure these vital programs. There are difficult choices to be made but also some common sense actions we should take now. For example, I have introduced bipartisan legislation that could save Medicare billions of dollars by allowing millions of beneficiaries to take part in a proven diabetes-prevention program. We currently spend nearly one out of three Medicare dollars caring for people with diabetes.

We could also save $40 billion over 10 years with liability reforms to reduce the costs of defensive medicine. That is another reform we certainly should adopt.

Let me move on to discretionary spending, which has already been subjected to across-the-board cuts known as sequestration, a very poor way to legislate because it treats every program as if it were of equal worth. We should be setting priorities. Here are just a few cuts we can and should make. Eliminating what are known as Department of Agriculture “direct payments,” which over the years have provided financial benefits to hundreds of individuals not involved in farming, would save nearly $5 billion each year.  The Senate Farm Bill includes that reform and others. Overall, this bill cuts $24 billion in spending but has failed to pass in the House.

Improved management and common sense would also save billions. Last year, federal agencies paid $108 billion to the wrong person, for the wrong amount, or for the wrong reason. The government also spends $1.7 billion every year to maintain some 55,000 taxpayer-owned buildings that are underutilized or entirely vacant.

Perhaps the greatest irony of all is that there are 56 different programs, housed in 20 federal agencies, all redundantly trying to improve the financial literacy of the American people. The American people can teach the government a thing or two about financial literacy: pay for something once, not dozens of times.

We must look carefully at the Department of Defense budget but ensure that we do not undermine the readiness of our troops. Congress did save nearly $3 billion by preventing the funding for an extra F-35 jet engine that the military did not want and that I had long opposed. We could save $250 million over 10 years by reducing “rank inflation” in the military.  Since the war in Afghanistan began, the Pentagon has added 99 general and flag officers, a growth rate that tops all other military personnel groups.

The federal workforce must follow the same good management principles that guide the private sector.  Last year, the Senate passed my bill to reform the workers’ compensation program for federal and postal employees. The Postal Service alone pays a billion dollars annually in workers’ comp costs.  More than 10,000 former federal employees age 70 or older remain on workers’ compensation rather than transitioning to the pension program. Of those 10,000, 200 are 90 or older and six are older than 100! Clearly, these people are not coming back to work.  We need to reform the federal system to require periodic medical reviews, to provide better rehabilitation, and to encourage a return to work.  I’m working to get these reforms signed into law this year.

Now for the revenue side of the fiscal equation. Since this year marks the 100th anniversary of the ratification of the 16th Amendment that established the federal income tax, let me discuss tax reform.

Someone once said that what America needs is a tax code that looks like it was designed on purpose. According to the IRS’s National Taxpayer Advocate, our tax code is now nearly four million words long.  Taxpayers spend 6.1 billion hours a year complying with income tax filing requirements, at a cost of $168 billion. It is extraordinarily difficult to keep up with such complexity – it hobbles our economy and exasperates taxpayers.

I am in favor of a complete overhaul of our tax system to make it simpler, fairer, and more pro-growth.   Indeed, there is bipartisan agreement that the tax code in need of a complete overhaul. That’s the easy part. Consensus breaks down quickly, however, when it comes to the specifics. First, what is the fundamental purpose of reform? Is it to produce more revenue? More growth? Or a combination of the two?

Second, tax deductions, credits, and the like represent foregone revenues to the federal government – “tax expenditures” in Washington-speak. These tax expenditures add complexity to the tax code and decrease revenues, but – from saving for retirement to buying a home to charitable giving – they can promote behavior that benefits our society.

For example, the deduction for charitable contributions is projected to cost $238 billion over the next five years. Will charitable contributions decline sharply among those who itemize – large donors – if their deductibility is either eliminated or capped? Taxpayers with incomes above $200,000 account for about 32 percent of these deductions. It is estimated that charitable giving would decline by $5.6 billion per year if a cap were put on itemized deductions. Is reducing or even eliminating the charitable deduction compatible with reducing the size and scope of government? Who will step in to fill the void left by a shrinking government?

These are but a few of the issues that must be addressed to bring about comprehensive changes to our tax code. It’s why everyone in Washington embraces tax reform in the abstract, but consensus quickly evaporates when we start discussing the specifics.

Putting our nation back on the right fiscal path requires more than just taming our spending and reforming our tax code – we must also encourage economic growth. When I ask small business owners throughout Maine what they most need from the federal government to encourage growth and job creation, the overwhelming answer is certainty in the tax code and regulatory policy. We cannot expect our entrepreneurs to take on the risk of investment when Washington constantly changes the rules.

That is why in June I introduced the bipartisan Small Business Tax Certainty and Growth Act with Democratic Sen. Bob Casey of Pennsylvania. Our bill would provide small businesses the certainty they need to make long-range plans by making permanent the maximum allowable deduction under Section 179 of the tax code, which allows companies to more quickly deduct the cost of acquiring certain assets. This deduction has changed three times in the last six years, virtually defining uncertainty.

Our bill also would spur capital investment by extending provisions that benefit businesses of all sizes: “bonus depreciation” and 15-year depreciation for improvements to restaurants and retail facilities. In addition, our bill would allow more companies to use the simpler cash method of accounting by doubling the threshold level for accrual accounting, and simplifies inventory accounting, reducing complexity for small businesses. Finally, the Collins-Casey bill helps companies that are just starting out by doubling the maximum allowable deduction for start-up expenses.

When I introduced this bill on the Senate floor, I told my colleagues about a conversation I had with one of your members, Rob Tod of Allagash Brewing Company. From a one-man local operation in 1995 to some 65 employees and national distribution today, Allagash is a true Maine success story.

The bonus depreciation and Section 179 provisions allowed Rob to acquire the equipment he needed to expand his business. He reinvested the tax savings in his business, thus creating jobs. The economic benefit is multiplied when you consider the effect of Allagash’s investment on equipment and material suppliers, transportation companies, and other support industries. Small businesses are the job creators, here in Maine and across America. Our bill would make a real difference in the ability of small businesses to survive, thrive, and continue creating good jobs.

Employers also confront the challenge of complying with the Affordable Health Care Act, known as “Obamacare.” This new law is actually discouraging small businesses from creating jobs and hiring new employees. It also has perverse incentives for employers to reduce the number of hours that their employees can work.

While most small business owners want to provide health insurance for their employees, many simply cannot afford to under Obamacare. Yet, even struggling businesses with 50 or more “full-time” employees will be required to provide health insurance or face huge fines for each employee. If you employ 49 workers, there are no fines. But, if you add just one more employee, you’re hit with penalties.

These enormous penalties are a real threat to employers who want to add jobs. They are a powerful incentive for employers to refrain from hiring additional workers. Even worse, under Obamacare, anyone working an average of just 30 hours a week is considered “full-time.” This will only cause businesses to reluctantly reduce the hours of their workers to fewer than 30 hours per week.

And, it’s not just the private sector that is affected.  Let me give you an example.  A school system here in Maine is already preparing to track and cap the number of hours that substitute teachers can work to ensure that they don’t work more than 29 hours a week.  Fewer hours means less money in the teachers’ paychecks and more disruption for their students.

Recently, labor leaders, led by Teamsters President James Hoffa, warned that Obamacare will – quote – “destroy the foundation of the 40-hour work week that is the backbone of the American middle class” – end quote.

They are right to be worried:  In the past, most new jobs were full-time. But, this year, the overwhelming majority of new jobs are part-time. Under this troubling trend, more workers will find their hours and their earnings reduced. Jobs will be lost. This is especially disturbing as our country is still battling high unemployment.

A study published by the Labor Center at the University of California, Berkeley, underscores the danger. That study found that 10 million American workers are vulnerable to having their hours cut as a direct result of Obamacare.  And the most vulnerable are lower-income workers.

It concerns me that good employers who care deeply about the well-being of their employees are being put in a position that they would have to cut hours just to meet a Federal regulation. Small businesses are the backbone of our nation’s economy. The last thing we need is yet another obstacle to helping them grow and create much-needed jobs.

In an effort to protect these millions of workers, I have introduced a bipartisan bill with Democratic Sen. Joe Donnelly of Indiana called the “Forty Hours is Full Time Act.” My bill would change the definition of “full-time employee” in Obamacare to apply to people working 40 hours a week. A 40-hour work week is full-time; we all know that. This bill is just common sense.

The Obama Administration has announced that it is delaying enforcement of the employer mandate until 2015. But, the fact is, the law remains in place and continues to discourage new jobs and full-time work.

Fixing this one issue won’t solve all the problems caused by Obamacare. But it would help ensure that millions of American workers do not have their hours, and their paychecks, reduced.

Of course, there are some good provisions in Obamacare that should be retained. For example, there should be bipartisan agreement on insurance market reforms that would prevent insurance companies from imposing pre-existing condition exclusions on children or individuals who have maintained continuous coverage and that permit children to remain on their parents’ policies until age 26. We should also be able to agree on delivery system reforms, such as accountable care organizations, that reward value rather than volume and quality rather than quantity. There should also be bipartisan support for renewed efforts to combat health care fraud and abuse, and for demonstration projects testing new models of care, such as a community-based approach to reduce unnecessary hospital readmissions by improving the transition from hospital to home.

Tackling the problems we face by delivering common-sense, competent government worthy of the American people requires all of us in Washington to work together. Too often in today’s poisonous atmosphere, those of us who reach across the aisle to work with colleagues of a different party end up vilified by both the far left and the far right. The problems we face are far too serious for them to be labeled as “Democratic” or “Republican.” As one constituent said to me, “why can’t you all be Americans first?”
We’ve exhausted all the alternatives – excessive borrowing, budgetary gimmicks, printing money, the blame game. Now, we are left with that quality of our national character that has seen us through crises throughout our history – our resolve, and our willingness to pull together as we tackle the challenges facing our nation.

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