Toomey Questions Witnesses on Sequester

Member Group : U.S. Senator Pat Toomey


Contact: E.R. Anderson (202) 224-8609
or Bill Rivers (202) 228-6837


Sen. Toomey Urges Flexibility To Allow Departments To Identify Waste

Click on the picture above to watch video of Sen. Toomey’s questioning.

WASHINGTON, D.C. – At a Senate Budget Committee hearing today, U.S. Senator Pat Toomey (R-Pa.) questioned witnesses on the scope and effects of sequestration.

Sen. Toomey invited one of the witnesses, Steve Ferguson, chairman of the board of the Cook Group Inc., to testify specifically about the harmful economic effects of the medical device tax. The Cook Group Inc. is the parent of Cook Medical which has two facilities in Pennsylvania – Cook Vascular, located in Westmoreland County, and a Pittsburgh facility. Together, they employ 180 people.

Other witnesses were David Malpass, President of Encima Global LLC, and Dr. Hunter Rawlings, President of the American Association of Universities.

A full transcript of Sen. Toomey’s remarks is below:

SEN. TOOMEY: Thank you very much Madam Chairman. Just to follow up on this, my own perspective on the question that Sen. King posed is that the optimal size of government depends in part on how much growth you want to have. I think the evidence is overwhelmingly clear. Societies that have government expenditures smaller as a percentage of their economy have higher standard of living. They have higher growth, higher income, higher wages and greater wealth. And countries that have the government occupying a larger segment of the economy they have slower growth, fewer jobs, lower standard of living and lower income. So a big part of this comes down to how much prosperity do we want? If we want more we’ll spend less, and it makes sense not only because the government spends money through a political process that’s not following the kind of incentives the markets use, but also that has to be paid for.

The spending always ultimately gets paid for by confiscating it from the more productive private sector- which brings me to the sequester, which I just want to stress for the record, that despite the description, the apocalyptic description about this, this is really small in the context of the total spending and the economy. The federal government has doubled its spending in the last ten years and we’re talking about a 2.5 percent reduction in spending from that 100 percent growth and, by the way, that’s budget authority. The actual outlays for this year are about a 1.25 percent. That’s one quarter of one percent of GDP. This is not some sort of severe austerity plan.

Now, I think it could be done more wisely and I wanted to see if there was any disagreement on the idea that, since the current law forces this across the board cut with no opportunity to exercise any discretion, with respect to those spending areas that have more merit and those that have less, do you- could you comment on whether it makes sense for us, in the event that the sequester goes forward, to grant to OMB and the Defense Department in their respective areas the flexibility to make these cuts in a more thoughtful fashion? Does that make sense to anybody?

MALPASS: I’ll- short answer is "yes very much so" and I think the private sector response would be huge because it would show Washington, trying – rather than trying to maximize the damage from the sequester it would be trying to reduce the damage or make it less onerous than they’ve made it out to be.

SEN. TOOMEY: Any thoughts on that?

RAWLINGS: Yes. I’d disagree on that because while it sounds better to make flexibility, in fact if what it means is that we are going to stick with the level of the cuts of the sequester and leave it up there to NIH and NSF to make the cuts in a slightly better fashion they can do that, but if that becomes the new baseline, all you’ve done is succeed in cutting NIH and NSF letting them figure out –

SEN. TOOMEY: Let me interrupt because it’s not, depending on how you formulate this- it’s not necessarily the case that NIH per se has to take the cut. If the administration has the discretion across all non-defense categories, they might decide that building taxiways, new taxiways on a seldom-used airport somewhere should be a lower priority than NIH.

RAWLINGS: The problem is that it is going to look like a good solution- everyone is going to say ‘great now they can make their own decisions,’ but the bottom line is going to be cuts in the areas where we need investment because our competitors are investing and we’re reducing.

SEN. TOOMEY: Okay but that sounds like an argument that we can’t cut anywhere and when we’ve had a government that has doubled in size in the last 10 years. To think that we can’t find, you know, a little over one penny on the dollar anywhere throughout this government strikes me as not very appropriate. Let me ask a specific question if I could of Mr. Ferguson, because I know you touched on the medical device facts and as you may know, there is a bipartisan concern that this is a really egregiously badly-designed tax. That happens to be my view in part because it applies to sales, irrespective of whether a company is making any money, and, if I understood your testimony correctly, am I right in understanding that because of the medical device tax and if it stays in effect, you will forego expanding production in the United States of medical device manufacturing?

FERGUSON: Yes. Our future growth will have to be in Denmark or Australia.

SEN. TOOMEY: So this medical device tax, in your view, is this a pretty direct incentive to go overseas, go offshore, create jobs somewhere else?

FERGUSON: When combined with other issues the answer is "yes" and this is sort of the straw that broke the camel’s back. But the other thing is that it falls directly on R & D because when you look at the size of this type of tax and it’s an expense and knowing places you got other employees or R & D or you got to go look for cost savings someplace else.

SEN. TOOMEY: Thank you very much.


William Rivers
Press Assistant
Senator Pat Toomey
Office: 202-228-6837
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