Congressional Record, Volume 141 Issue 47 (Tuesday, March 14, 1995)

[Congressional Record Volume 141, Number 47 (Tuesday, March 14, 1995)]
[Senate]
[Pages S3855-S3859]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

TAX CUT FRENZY

Mr. FEINGOLD. Mr. President, I certainly thank the senior Senator
from Illinois for noticing the cartoon and for being one of the first
people in this body to come to me and say that we do need to prevent
this tax cut frenzy if we are going to be serious about balancing the
Federal budget.
I think, Mr. President, now is the time to put the tax cut proposals
out of their misery. Let us do it early on so the American people know
that there is something real to all this rhetoric in
[[Page S3856]] Washington about balancing the Federal budget.
It seems to me, ever since the tax cut frenzy started with the
November 8 election, that I have had a hard time finding anyone who is
really for it other than a few folks here in Washington.
I have chosen this cartoon from December at Christmastime to
illustrate how early the people of America were ahead of the
politicians on this issue. It is a very simple cartoon. It shows a
couple of parents holding a nice present, ``The tax cuts.'' But their
baby holds ``The bill.'' The parents are enjoying this nice present,
but passing its cost along to the next generation.
So even before the 104th Congress convened, I feel that the American
people were way ahead on this and felt that this just did not make
sense and that it did not add up.
I sort of felt as if maybe this issue would die pretty quickly, but I
was wrong. In a way, this frenzy for a tax cut, which nobody supports,
is the inevitable result of the November 8 election.
In the Milwaukee Sentinel just yesterday, there was an editorial
entitled ``Tax Cut Plans--Questions About Both Party Plans.''
Mr. President, I ask unanimous consent that this editorial from the
Milwaukee Sentinel be printed in the Record.
There being no objection, the editorial was ordered to be printed in
the Record, as follows:

[From the Milwaukee Sentinel, Mar. 13, 1995]

Tax Cuts Plans--Questions About Both Party Plans

Bill Archer, the new Republican chairman of the House Ways
and Means Committee, strode to the microphone in a basement
hearing room after being introduced by a young couple from
Virginia holding their year-old daughter.
It was just the common touch the Texas congressman was
seeking to announce the committee's plan to cut taxes by
nearly $200 billion over the next five years, or about $140
billion more than President Clinton has proposed in his plan.
Trouble is, both plans butt up against growing popular
discontent over the federal deficit, which still will grow by
$1 trillion over five years under Clinton's irresponsible
budget plan. There also is no indication that Republicans
have discovered the magic bullet that will slay the deficit
dragon.
The reality is that hardly anyone accepts the current
political nostrum that Congress and/or Clinton can cure what
ails the nation by advocating spending and tax cuts, all at
the same time.
That even includes prominent Republicans such as Bob
Packwood, of Oregon, chairman of the Senate Finance
Committee, and Pete V. Domenici, of New Mexico, who heads the
Budget Committee.
Both have voiced opposition to tax cuts while government
continues to spend more than it takes in. The simple truth is
that House Republicans have not yet indicated how they would
pay for tax cuts in the $200 billion range and still balance
the budget.
Still, the Republican plan has some attractive features.
A capital gains tax cut, harangued by Democrats as a payoff
to the rich, would benefit millions of middle-class investors
and, at least in the short term, increase federal revenue as
stockholders liquidate some of their holdings. That could
help lead to the creation of revenue-producing jobs.
Similarly, the suggestion that people could withdraw money,
free of penalty, from their individual retirement accounts
for buying a home or other purposes is another economy
booster. For local government, that's a future source of
property-tax revenue.
What's confounding about it all is that while Democrats
such as Rep. Sam M. Gibbons, of Florida, ranking Democrat on
Ways and Means, say it's ``the wrong time and the wrong tax
cut,'' you can bet that if it were Clinton and not Archer
making a tax cut proposal, Democrats would rush to his
banner.
The public, however, is far out in front on this issue and
can see through both parties' strategies.

Mr. FEINGOLD. Mr. President, I just want to briefly suggest that this
editorial points out that there is still a problem with both parties
going after this tax cut idea.
The article says:

The editorial goes on to say, ``The reality is that hardly anyone
accepts the current political nostrum that Congress and/or Clinton can
cure what ails the Nation by advocating spending and tax cuts all at
the same time.''
So, Mr. President, what the public knew in December has apparently
not completely reached the Halls of Congress. Day after day I see
evidence, whether at a Wisconsin town meeting, or reading the major
national newspapers, that in general the American people and the
opinion makers outside of Washington do not want to do this, and thinks
it is a foolish way to handle our budgetary problems.
This last night I had a chance to see a few minutes of a C-SPAN
program on which two of our colleagues were appearing in front of the
National League of Cities, and what they pointed out was that they had
different views exactly on what should happen in the Federal budget.
I was intrigued by the different responses on what they said about
the tax cut issue. The junior Senator from New Hampshire, Senator
Gregg, indicated to the audience he was interested in a $500 billion
deficit reduction package, to be passed by the 104th Congress.
I was struck by that figure, because that is exactly what we have
already accomplished in the 103d Congress under President Clinton and
the Democratic leadership. I am glad to hear that kind of figure is
being thrown around. What the Senator from New Hampshire then said was
perhaps as a part of the $500 billion--he would not go with the overall
Republican contract idea of a $200 billion tax cut, I believe I am
correctly characterizing his statement that that was too much--but he
said, ``Maybe we would look at the President's $63 billion level, and
perhaps have that included in the $500 billion.''
That got applause. People seemed to feel that was more sensible that
a $200 billion tax cut. But then the Senator from Nebraska, the junior
Senator from Nebraska, Senator Kerrey, took the microphone and said to
Senator Gregg, ``Now, how much will it take to balance the budget by
the year 2002? What is the total figure?'' And the indication was that
it was well over $1 trillion.
So Senator Kerrey indicated that even if we do the $500 billion, we
are less than half the way there. Senator Kerrey said to this audience
of people involved in city government that he was against tax cuts in
any form.
I would think people would maybe nod or maybe even disagree. Instead
it got a rousing applause. Everyone in the audience gave him a similar
strong applause in saying he would fight any of the tax cuts, because
they are not consistent with the notion of dealing with the deficit and
caring about our children and our grandchildren.
So the common sense is out there. The common sense view that frankly
helped fuel the debate on the balanced budget amendment and had a lot
to do with that month-long debate. That common sense is out there.
If this institution is willing to listen, the first thing we will do
is say we cannot afford either the Clinton tax cut or the Republican
contract tax cut. Of course, I believe the American public would like
to have a tax cut if they possibly could. But what they are saying
clearly is, we cannot afford it until we get our house in order.
Mr. President, it is not easy to slay the tax cut dragon. I have
noticed the allure of a tax cut to politicians, just as the allure of
the balanced budget amendment has been very strong. I would have to
say, compared to the first time I had a chance to oppose this in
December, things look a lot better, especially here in the Senate.
Between November 8 and now I have gone from being the lone voice,
according to the Los Angeles Times, against this to being one of many
people who are criticizing the tax cut. In fact, I would call it now
sort of a healthy competition between a lot of the leading Senators who
are saying that they will oppose this.
I even think there is a good strong competition going on to see who
can be
[[Page S3857]] the toughest on opposing the tax cuts. I think that is
very healthy. We do not get anything done around here by being 1 out of
535. I am extremely happy that so many of the leading Senators,
especially on the Finance Committee, have openly stated their
opposition to either all or part of the tax cuts.
Mr. President, as Senators recall, we did have our test vote on this
issue during the balanced budget amendment. The proposition, that we
ought to put the tax cut below deficit reduction, got 32 votes,
including some of the leading Republicans in the Senate. That was
amazing, because it was 32 Senators saying up front they are not for a
tax cut.
A couple months ago, people would have said nobody would take that
position. It was also very striking because a number of Senators told
me they wanted to vote for the amendment, but they were not going to
support any amendments to the balanced budget amendment. My guess is we
are a lot closer to 50 or even higher than anyone would have imagined
at this point.
For example, Mr. President, if we take a look at the reaction, we see
in the Washington Post even today an editorial called ``Greasing the
Tax Cut Rules,'' and I ask unanimous consent that it be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Greasing the Tax Cut Rules

The President and Congressional Republicans keep saying
that to get control of the deficit they have to cut the cost
of entitlements. They're right, but even as they've been
making the speeches again this year, they're also preparing
to change the budget rules to let entitlements partly off the
hook.
The president and Republicans both want to cut taxes. It's
a terrible competition for them to be engaged in; the
government is in no position to give up the revenue. As a way
of driving home the cost of tax cuts and creating a political
barrier to their enactment, the budget rules used to provide
that they be paid for either by offsetting tax increases or
by entitlement cuts.
The administration relished neither alternative, and in its
budget suggested a third. It proposed a change--it would say
careful rereading--of the rules under which tax cuts could
also be paid for by cuts in non-entitlement spending or
appropriations. The House Republicans, far from objecting,
have adopted the idea with enthusiasm. It sounds as if only
accountants should care. If the dollars all come from the
same Treasury, as they do, what difference does it make which
category of programs is trimmed to produce them? A dollar
saved one way is surely as good as another.
That's true, and an evasion at the same time. The easing of
pressure on the entitlement side of the budget, where cuts
are hardest to make because so many people are affected,
represented a weakening of budget discipline. The tax cuts
the House Republicans propose would cost about $200 billion
their first five years and $500 billion the five after that.
The Republicans would have found it hard to extract that much
from entitlements without getting into the giant programs for
the middle class, Social Security and Medicare. As it is,
they'll propose to pay half the first-year cost by lowering--
again--the caps that the budget rules also impose on
appropriations.
The pressure will fall on domestic appropriations only, not
defense. Most of the programs the government runs fall into
this category--everything from Head Start and highway grants
to the costs of operating the national parks and
administering the Immigration and Naturalization Service--but
together they make up only about a sixth of the budget and as
a group have already been much cut in recent years. It's
relatively easy, of course, to lower appropriations caps.
They're an abstraction. The effect will be felt only later
and be spread across enough programs so as to leave few clear
political fingerprints. The Republicans say not to worry,
that sooner or later they're going to have to cut the major
entitlements too in order to balance the budget, as they've
also promised. But the old rules would have forced the tax
and entitlement cuts to be made at the same time. The new
ones make it easier to blur the cost of an irresponsible
policy.

Mr. FEINGOLD. Mr. President, the point of that editorial is that
although there is this opposition growing in the Senate, there is an
effort going on to change the budget rules in such a way that would
allow these tax cuts in a way that would immunize, in effect, both
entitlements and the defense budget, causing any cuts that might be
made to pay for the tax cuts to come, essentially, out of the
appropriations areas, out of discretionary funding.
The Washington Post does a good job of criticizing this move,
pointing out that it does not bode well for the future of deficit
reduction. They commented on what it would mean, given the need for
further cuts in discretionary spending, on top of the fair amount we
did in the 103d Congress. And they noted that not all of those cuts are
going to be applied to reducing the Federal deficit, but instead would
be used to promote this tax cut that I am having a hard time finding
anyone favoring other than those in Washington.
So, Mr. President, despite the growing criticism of the tax cut
around the country and in this body, the skids are being greased for a
have-your-cake-and-eat-it-too approach, when it comes to balancing the
budget and fixing the tax cut problem.
Mr. President, I turn again to a cartoon that I think describes the
problem we have here in Washington. This cartoon refers to a new
illness called deficit attention disorder. We talk about the balanced
budget amendment, run around the country saying that a balanced budget
is the top priority, and we come out here every day and say bringing
the deficit under control is our top priority. But this cartoon shows
the contrast of those words with the possible actions here. It shows
folks running in and out of offices saying, ``$50 billion tax cut, $60
billion tax cut, $75 billion tax cut, $100 billion tax cut, $120
billion tax cut.''
The cartoon suggests a serious illness in this place. That is, the
deficit attention disorder from which institution suffers. Mr.
President, I think the worst example of this deficit attention disorder
is the very document that the Republican Party says they campaigned and
won on--the Republican contract, which calls for increased defense
spending, balancing the budget, and tax cuts that dwarf what this
cartoon suggests. Notice all the little people in the cartoon talking
about tax cuts from $50 billion to $120 billion.
What the Republican contract calls for over the next 10 years is a
$700 billion tax cut. What Congressman Archer proposed last week would
cost $200 billion over the next 5 years. This includes the $500 tax
credit for families making up to $200,000 per year, including changes
in IRA's and a variety of other provisions.
Mr. President, this is a very serious example of how, even today,
despite all the criticism and all the concern in the other House, the
other body especially is continuing to move forward as if not only we
do not have a deficit problem, but that we have a giant surplus that
can be used for all these cuts.
Mr. President, on March 10, the Washington Post commented on these
proposals in an editorial entitled ``The Tax Cuts and the Deficit,''
and I ask unanimous consent that it be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

[From the Washington Post, Mar. 10, 1995]

The Tax Cuts and the Deficit

The tax cuts from the House Republican ``Contract With
America'' have been reduced to legislative form. The process
hasn't improved them a bit. They remain a bad idea, the
revenue loss from which would be more than the sponsors have
acknowledged, and more than a government running a deficit of
a fifth of a trillion dollars a year can afford to give up.
The cuts would make it harder to reduce the deficit even if
the Republicans do come up with a way to pay for them, which
despite their pledges they haven't yet. The stated purpose of
several of them is to increase savings and investment, but by
leaving the deficit larger than otherwise they would reduce
the national savings rate. They are also poorly targeted, and
the long-term effect of their enactment would likely be to
widen the income gap between the better-off and the rest of
society.
The last time the Republicans cut taxes, in 1981, they
failed to make the spending cuts to match, and the deficit
soared. This time they've said the spending cuts will come
first; they're still saying that. But the only specific
spending cuts of any size that they've advanced thus far have
been in welfare and other programs for the poor; that's not
the way to finance tax cuts. It is said they may next propose
some generalized entitlement and appropriations cuts, lump
sums that they will commit themselves to saving over time
without spelling out how. That's not the way to do it either,
the more so because they've promised that in cutting they
won't touch defense or Social Security and can't touch
interest on the debt. They've left themselves less than half
the budget in which to work. Nor is it just their tax cuts
that they have to finance. They've said they'll balance the
budget as well. But the more spending cuts they dedicate to
the first purpose, the fewer they'll have left for the
second. That's the problem.
[[Page S3858]] The Republicans keep saying they want to get
at the cost of entitlements. The last Congress, at the
administration's behest, did put a dent in the net cost of
the largest entitlement, Social Security, by subjecting a
larger share of benefits to the income tax. The bill that the
House Ways and Means Committee will begin marking up next
week would repeal that modest step in the right direction. In
the name of capital formation, it would also cut the capital
gains tax, create a new stream of wholly tax exempt
investment income by expanding the individual retirement
account or IRA provisions in current law, and enact a
roundabout cut of as much as a third in the corporate income
tax by liberalizing depreciation rules. All three of these
provisions would be late bloomers. Two are set up in such a
way that they look as if they would even raise revenue in the
first years. That masks the full effect that they would have
in terms of revenue lost; it wouldn't be felt until after the
five-year estimating period. Who will pay for that?
These are damaging proposals--and unfortunately, the
administration has already weakly concurred in some of them.
We suppose they're likely to pass the House. In the Senate,
however, some Republicans as well as some Democrats are
saying that spending and the deficit should be cut first.
They're right.

Mr. FEINGOLD. Mr. President, that article commented on the Contract
With America, and specifically the Archer proposal, by saying the
following:

The editorial also goes into a bit of a history:

The last time the Republicans cut taxes, in 1981, they
failed to make the spending cuts to match, and the deficit
soared. This time they've said the spending cuts will come
first; they're still saying that. But the only specific
spending cuts of any size that they've advanced thus far have
been in welfare and other programs for the poor; that's not
the way to finance tax cuts. It is said they next proposed
some generalized entitlement and appropriations cuts, lump
sums they will commit themselves to saving over time without
spelling out how. That's not how to do it either, the more so
because they've promised that in cutting they won't touch
defense or Social Security and can't touch interest on the
debt. They've left themselves less than half the budget in
which to work. Nor is it just their tax cuts that they have
to finance. They've said they'll balance the budget as well.
But the more spending cuts they dedicate to the first
purpose, the fewer they'll have left for the second. That's
the problem.

Again, it is the harsh reality that the numbers cannot possibly add
up, it cannot possibly be true that we can do all of these things laid
out in the Archer proposal and then come up with a balanced budget,
even in the long term, let alone doing it in the short term.
So, Mr. President, not only do we have a deficit attention disorder
with regard to the Archer plan and the Republican contract, but time
and again, whether it be the President's plan, the plan of the minority
leader in the House, the plan of the senior Senator from Texas, in each
case we have a plan for tax cuts that is not paid for.
I realize that there will be many opportunities to speak on this
issue on the floor. I will not take the time today to outline all the
opposition from different places in the country, whether it be
editorials or polls or statements of economists. All I can say is that,
although the news is troubling to me, although the tax cut keeps coming
back and coming back, I see reason for optimism in the U.S. Senate. It
appears that it is going to be up to the U.S. Senate to stop this
fiscal irresponsibility.
I was very heartened to see the article in the Washington Post of
last week on March 9 entitled ``Tax Cutters Lose Steam in Senate.''
I ask unanimous consent that article be printed in the Record.
There being no objection, the article was ordered to be printed in
the Record, as follows:

[From the Washington Post, Mar. 9, 1995]

Tax Cutters Lose Steam In Senate; House Panel To Unveil GOP Revenue
Plan

(By Eric Pianin)

Republican and Democratic opposition in the Senate to major
tax cut legislation stiffened yesterday, while Ways and Means
Committee Chairman Bill Archer (R-Tex.) prepared to unveil
the details of a House GOP tax plan that could cost as much
as $700 billion over 10 years.
Archer's plan, modeled after proposals within the House GOP
``Contract With America,'' includes a $500-per-child tax
credit for families earning up to $200,000 a year, a 50
percent reduction in the capital gains tax, massive write-
offs and tax breaks for businesses and a new Individual
Retirement Account (IRA) for middle- and upper-income
families.
The Ways and Means Committee is scheduled to vote on the
proposal early next week. House leaders have pledged to make
offsetting cuts in the 1995 budget and to alter welfare
programs and Medicare to pay for the package. But in the wake
of the defeat of the constitutional balanced budget
amendment, Senate Finance Committee Chairman Bob Packwood
(Ore.) and other deficit-conscious Republican tax writers
warned yesterday that the tax package would take a back seat
to further efforts to reduce the deficit.
``Almost every witness we've had has indicated the deficit
is the biggest problem we face,'' Packwood said, ``and if we
want to do more for the economy, then reducing the deficit is
the most important thing to do.''
Sen. John H. Chafee (R-R.I.), a Finance Committee member,
declared: ``Basically, I'm opposed to tax cuts * * * as much
as we love to parcel them out.''
Sen. Alfonse M. D'Amato (R-N.Y.), another committee member,
said the House GOP tax cut proposals ``all sound good,'' but
Congress would accomplish far more by reducing the deficit
and indirectly helping to lower interest rates and spur
economic activity.
``Cut spending and get the deficit under control that's
number one,'' D'Amato said. ``That's what people want.
Otherwise, [the economy will falter and] we're going to end
up Mexico II.''
President Clinton and liberal House Democrats also have
proposed middle-class tax relief, including tax credits for
families and other breaks to help cover educational costs.
But the tax-cut fever that swept Washington shortly after the
Republican takeover of Congress last November has begun to
dissipate, as GOP leaders confront the harsh realities of
trying to simultaneously eliminate the deficit and make good
on their promise of generous tax cuts.
For their part, Senate Democratic leaders feel obliged to
emphasize deficit reduction over tax relief after helping to
defeat the popular balanced budget amendment last week.
Senate Minority Leader Thomas A. Daschle (D-S.D.) told
reporters yesterday he would not rule out passage of some
type of tax reform this year, but members had little
enthusiasm for proposed tax cuts that ``would compound our
problems'' in reducing the deficit.
``It's apparent to all of us we have a big job ahead of us
in deficit reduction, and we want to make everyone understand
that that's our first priority,'' Daschle said.
House Republican leaders have cited little empirical
evidence that a major tax cut is needed at a time when the
economy is strongly rebounding, inflation is under control
and the deficit is declining for the third year in a row.
Earlier this week, three prominent economists--Roger E.
Brinner, Stephen S. Roach and Barry Bosworth--told the House
Budget Committee that Congress would do little for the
economy while complicating its deficit-reduction efforts if
it cuts taxes.
Brinner, the chief economist for DRI/McGraw-Hill, described
the $500-a-child tax credit, the most expensive measure in
the Republican tax package, as ``possibly mediocre politics
but definitely bad economics.''
House GOP leaders concede that the tax credit would do
little, if anything, to stimulate the economy. But they
insist the tax credit for children 18 and younger is
important to providing relief to the middle class and
``strengthening'' the family unit.
Archer is scheduled to announce the details of the GOP tax
plan this morning in an address to the conservative Family
Research Council. According to committee sources, the package
will approximate the Contract With America plan, which
according to the Joint Committee on Taxation would cost $200
billion over five years but then balloon to $704.4 billion
over a decade.
House GOP leaders, including Archer, have said the Contract
With America plan was not ``written in stone'' and
acknowledge that it may undergo substantial changes once it
reaches the Senate. However, House leaders are more concerned
about honoring the terms of the contract than developing a
plan that is palatable to the Senate.
``We're committed to the contract,'' Archer told the
Associated Press. ``We ran on it, we all signed it, and we'll
do what we said we were going to do.''
Rep. Bill Thomas (R-Calif.), a senior member of the Ways
and Means Committee, said that it doesn't make sense for the
committee to put together a package that might pass muster in
the Senate ``but that can't get out of the House.''

(Mr. ABRAHAM assumed the chair.)
Mr. FEINGOLD. Mr. President, as we move into the period where we
actually take up issues such as the line-item veto and then the budget
resolution and then the reconciliation package, there will be the
opportunities to actually make this happen, to actually
[[Page S3859]] force this institution through the work of the U.S.
Senate to not waste the funds that could be used for deficit reduction.
I suggest that as we move into the budget resolution, either at the
committee level or at the level of the entire Senate, if necessary,
that an amendment be offered to the fiscal year 1996 budget resolution
to change the revenue assumption to exclude or reject a major tax cut
and instead to explicitly allocate the spending cuts that would offset
such a tax cut to deficit reduction, to make sure that every dollar
that was identified for spending cuts be immediately transferred into
an account to reduce the Federal deficit.
I think that is the only way we avoid the kind of losses and deficit
reduction that are the inevitable result of the President's plan and
especially the result of the Republican contract and the Archer plan.
So I hope we can return to the wisdom that was indicated by the
American people ever since the proposals were made, and I return to
what is my favorite cartoon on the issue, which is the somewhat bizarre
but rather effective portrayal of a giant deficit monster that is
constantly calling out for more and more, in this case more fruit cake
in the form of ``Tax Cuts R Us.'' The American people are onto the
foolishness of this. They are onto it in the form of cartoons that
ridicule a Congress that stands up and talks about fiscal
responsibility but cannot resist the temptation to get some quick
political gain by handing out a tax cut that will both hurt the economy
and severely damage, if not permanently ruin, the possibility of ever
having a balanced budget, whether it be in the next few years or by the
year 2002.
Mr. President, we will be coming back to this, but I notice in this
institution, if you do not keep bringing something up like this, it has
a way of getting resolved in the middle of the night and, all of a
sudden, you have an up-or-down vote on the whole package. Somehow,
whether it be $10 billion or $100 billion or $700 billion, it could be
lost instead of actually being used to almost eliminate the Federal
deficit. I think that is the opportunity we have. Instead of feeding
this monster, reject the tax cuts and take the next big step to
eliminate the Federal deficit.
So, Mr. President, as I yield the floor, I urge my colleagues to
cosponsor the sense-of-the-Senate resolution which Senator Bumpers, of
Arkansas, and I have offered to specifically go on record as a body
saying the tax cuts have to take second place to this historic
opportunity to eliminate the Federal deficit.
I thank the Chair, and I yield the floor.
Mr. THOMAS addressed the Chair.
The PRESIDING OFFICER. The Senator from Wyoming is recognized.

____________________