[Congressional Record Volume 141, Number 164 (Monday, October 23, 1995)]
[Senate]
[Pages S15436-S15441]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         BUDGET RECONCILIATION

  Mr. CONRAD. Mr. President, I rise today to talk about the budget 
reconciliation process that is underway. I think this is most important 
because we have been told now that the Budget Committee is only going 
to spend an hour and a half on the debate on the budget reconciliation 
package that is going to affect every American, that is going to set 
the spending priorities for this country for the next 7 years, a budget 
reconciliation package that many of us believe, while it moves toward 
balancing the budget, does not actually balance the budget. And, also, 
it is done in a way that is unfair--fundamentally unfair in terms of 
who is asked to fight this budget battle.
  After being deeply involved in the budget reconciliation process, 
both in the Budget Committee and the Finance Committee and the Senate 
Agriculture Committee, as well, I believe very strongly that while it 
is critically important that we balance the budget and that we do it as 
rapidly as possible, the choices that have been made in the proposal 
that is before us do it in a way that asks the middle class and working 
families in this country to be in the front lines in the battle to 
balance the budget but says to the wealthiest among us, ``You are 
ushered to the sidelines.''
  Even worse than that, it says to the wealthiest among us, ``You are 
first in line for additional tax preferences, tax loopholes, and tax 
benefits because we are going to let the rest of America fight this 
fight, not the wealthiest among us. The wealthiest among us, 

[[Page S 15437]]
you can just stand by. You can be observers. You can be on the 
sidelines. And while you are on the sidelines, we are going to actually 
direct some of the resources that we are saving from this budget plan 
toward you.''
  Mr. President, I do not think that is what the American people have 
in mind in terms of balancing the budget. I think they want this job 
done. They want the job done fairly. Most of all, they want the job 
done.
  Unfortunately, the reconciliation package that is on its way to the 
floor does not even balance the budget. That is not just my opinion, 
that is the answer from the Congressional Budget Office in a letter 
that was sent to Senator Dorgan and myself on October 20, by June 
O'Neill, the Director, in which she says in the last line in the first 
paragraph, ``Excluding an estimated off-budget surplus of $115 billion 
in 2002 from the calculation, CBO would project an on-budget deficit of 
$105 billion in 2002.''
  What is June O'Neill talking about when she talks about an off-budget 
surplus of $115 billion in 2002? She is talking about the Social 
Security surplus in that year--the Social Security surplus. And the 
only way you can call this budget that is coming toward the Senate 
floor balanced is to use every penny of Social Security surpluses, 
every penny, over the next 7 years.
  The law does not permit that. If one looks at the Budget Enforcement 
Act--and I have a copy of it right here--on page 745 it says:

     EXCLUSION OF SOCIAL SECURITY FROM THE CONGRESSIONAL BUDGET

       Section 301(e) of the Congressional Budget Act of 1974 is 
     amended by adding at the end the following:
       The concurrent resolution shall not include the outlays and 
     revenue totals of the Old Age Survivors and Disability 
     Insurance program established under Title II of the Social 
     Security Act or the related provisions of the Internal 
     Revenue Code of 1986 in the surplus or deficit totals 
     required by this subsection, or in any other surplus or 
     deficit totals required by this title.

  That is the law. Mr. President, 98 Senators voted for it; 98 Senators 
said we should not count Social Security surpluses in determining 
whether the budget of the United States is in surplus or deficit.
  Those Senators were right. They were right to cast that vote. They 
were right because it is absolutely wrong to count Social Security 
surpluses toward balancing the budget. That is just fundamental. You do 
not take trust funds and throw those into the pot to balance an 
operating budget. There is no accountant or accounting firm in America 
that would tell one of its clients to follow that policy. It is wrong.
  Some will say, ``But it is the practice we are following now.'' 
Absolutely, it is what we are doing now. That does not make it right. 
There are a lot of things being done now that are not right. It is not 
right to balance the budget using the Social Security surpluses. That 
is precisely the point. That is why 98 Senators voted to change it.
  Mr. President, 98 Senators said we ought not to continue this 
practice, we ought to make a change; we ought not to be raiding Social 
Security trust funds; we ought not to be looting in order to make the 
deficit look smaller.
  Mr. President, this has a very critical, practical impact, because it 
is true we have been doing it, but the consequences for keeping this 
practice in place are much more severe in the years ahead. Let me 
indicate why. These Social Security surpluses that we are running now 
are about to explode. They are going to explode because we have more 
and more baby-boom generation people paying payroll taxes. We are 
paying those taxes at a higher rate on a larger share of our wages and 
so the surpluses are going to build. They were designed to increase, 
and the reason they are exploding is because we are supposed to be 
getting ready for the time the baby-boom generation retires.
  But, instead of doing that, instead of saving these funds or paying 
down the rest of the debt with these funds--which would be a good 
strategy, a sound strategy for the future--instead, the Republican plan 
is to loot every penny of Social Security surplus over the next 7 years 
to call their budget balanced.
  This next chart shows that the conference report on the budget 
demonstrates this point very clearly. It shows deficits over the years 
covered by the budget resolution. And while our friends on the 
Republican side say over and over they have offered a balanced budget, 
their own conference report on the budget shows something quite 
different. This shows the deficits for the fiscal years 1996 through 
2002. If they were telling the American people the truth when they say 
they have balanced the budget in fiscal year 2002, their budget 
document would show no deficit. It would show a zero. That would be a 
balanced budget. But their own budget document does not show a zero.
  It shows a deficit in fiscal year 2002 of $108.4 billion. Boy, this 
is going to come as a big surprise to a lot of the media who keep 
reporting it is a balanced budget. And it is going to come as an even 
bigger surprise to the American people who have been told every day 
that they are getting a balanced budget. It is not a balanced budget. 
It is $108.4 billion in deficit. That is very close, by the way, to the 
number that the head of the Congressional Budget Office told us in her 
letter--that the deficit in the year 2002 would be $105 billion.
  Mr. President, how is this occurring? Well, very simply. This is the 
looting of the Social Security trust funds from the year 1996 to 2002. 
One can see the total Social Security surpluses, that are being raided 
or being looted, which are $636 billion. That is what is being thrown 
into the pot to call this a balanced budget. Do not anybody be misled. 
This is not a balanced budget. It is not a balanced budget in law. It 
is not a balanced budget in fact. Any accounting firm in America would 
tell you do not count the trust fund surpluses. You do not count the 
retirement funds in balancing a budget. That is precisely what is wrong 
around this town.
  That is why we are in so much trouble now because we keep saying 
things that are not true. It is not truthful to tell people you are 
balancing the budget when you are raiding the trust funds because those 
funds are going to have to be replaced. And the reason we are running 
surpluses now is to get ready for the time the baby-boom generation 
retires. Why is that so important? Because it is going to double the 
number of people eligible for Social Security. We are going to go from 
24 million people eligible for Social Security to 48 million people 
eligible for Social Security. That is why we are running surpluses now. 
And the thing we ought to be doing is either stockpiling that money or 
paying down the national debt so that we are better prepared to deal 
with the demographic time bomb represented by the baby-boom generation.
  I guess the thing that I have found most frustrating about Washington 
in the 9 years I have been in the U.S. Senate is that we say things 
that confuse people. We use words in a way that are not accurate, that 
do not really reveal what is actually happening. And to call it a 
balanced budget when you are taking every penny of Social Security 
surplus is not accurate. It is not honest. It misleads people.
  That is not the only problem with the reconciliation plan that is 
headed for this Senate floor. I think another fatal flaw is that we are 
increasing the debt under the Republican plan by $1.3 trillion--
increasing the debt over the next 7 years under the Republican plan by 
$1.3 trillion. The chart here shows that from 1996 to 2002 the national 
debt is actually increasing by $1.3 trillion. About half of that is the 
raiding of the Social Security trust funds that I have talked about. 
That is increasing the national debt. Yet, we are talking about 
providing a massive tax cut.
  I think if the American people were aware that the debt of America is 
increasing by $1.3 trillion over the next 7 years they would not be 
very interested in a tax cut. I just did a survey of the people in my 
State. Overwhelmingly they have said to me--I have asked them the 
question directly--get the budget balanced before any tax cut. Then we 
can have a tax cut after we get our problems taken care of.
  We are adding $1.3 trillion to the national debt, and a big chunk of 
that is a tax reduction. It reminds me a lot of kids eating their 
dessert before dinner. We have played this game before in this town. We 
always say, ``Gee. We are going to cut spending so we can have a tax 
cut now.''
  We did that before. Do you remember what happened? The debt exploded 
in 

[[Page S 15438]]
the 1980's when we played this game with the American people and told 
them we are going to cut spending. We promised. We really are so we can 
have a tax cut now. We did that in 1981. What happened? The deficits 
went from $50 billion a year to $200 billion a year because guess what 
happened? We took the tax cuts but we never did the spending cuts, or 
certainly not of the magnitude necessary to keep the deficit from 
exploding. The result is we went from being less than $1 trillion in 
debt to being $5 trillion in debt in the space of 12 years. This is not 
smart. This is not responsible fiscal policy.
  This chart shows the debt increases under the Republican balanced 
budget plan year by year, the amounts that are contributed by the 
budget deficits--that is, the spending over what we take in--and the 
amounts that come from the tax cuts that are added to the debt. You can 
see for every year here we are adding money to the debt of the country. 
And there are large sums added, $240 billion, $125 billion, $220 
billion.
  You can see the light orange part of each of these bars shows how 
much of that is being contributed by a tax cut. I just say to my 
colleagues, and I say to the American people. This is not wise--to be 
adding to the national debt in order to take a tax cut at this time. It 
especially is unwise given who benefits and who loses under this 
Republican tax plan.
  We have now a series of estimates that were done by the Joint 
Committee on Taxation--this is a bipartisan group--and an analysis done 
by the U.S. Treasury Department. That shows who benefits, and who loses 
under the Republican tax plan. It is very interesting.
  What we find, as this chart shows, is how the Senate GOP tax plan 
affects America's families. Half get hit with a tax increase. It is not 
a tax cut. Half the people in this country are going to get a tax 
increase. That is according to the Joint Committee on Taxation and the 
U.S. Treasury Department.
  I ask unanimous consent that each of these charts be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 DISTRIBUTIONAL EFFECTS OF REVENUE RECONCILIATION PROVISIONS OF THE CHAIRMAN'S MARK SCHEDULED FOR MARKUP IN THE FINANCE COMMITTEE ON OCTOBER 18, 1995 AND PREVIOUSLY ADOPTED CHANGES IN THE EITC
                                                                                               \1\                                                                                              
                                                                                      [Calendar Year 2000]                                                                                      
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Change in Federal taxes \3\       Federal taxes \3\ under         Federal taxes \3\ under         Effective tax rate \4\    
                                                                 --------------------------------           present law                      proposal            -------------------------------
                       Income category \2\                                                       ----------------------------------------------------------------   Present law      Proposal   
                                                                     Millions         Percent        Billions         Percent        Billions         Percent         Percent         percent   
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000...............................................            $879             9.6              $9             0.7             $10             0.7             8.6             9.4
$10,000 to $20,000..............................................             922             2.2              42             3.0              43             3.1             9.0             9.2
$20,000 to $30,000..............................................             417             0.5              86             6.1              87             6.3            13.6            13.6
$30,000 to $40,000..............................................          -4,221            -3.4             125             8.9             121             8.8            16.7            16.2
$40,000 to $50,000..............................................          -5,347            -4.0             132             9.4             127             9.2            18.4            17.6
$50,000 to $75,000..............................................         -11,740            -4.2             280            19.9             269            19.5            20.5            19.5
$75,000 to $100,000.............................................          -5,814            -2.8             209            14.8             203            14.8            22.9            22.1
$100,000 to $200,000............................................          -3,850            -1.6             246            17.5             242            17.6            24.1            23.4
$200,000 and over...............................................          -2,792            -1.0             277            19.7             274            19.9            29.8            28.8
                                                                 -------------------------------------------------------------------------------------------------------------------------------
      Total, all taxpayers......................................         -31,546            -2.2           1,407           100.0           1,375           100.0            20.4            19.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes the tax credit for children under age 18, student loan interest credit, marriage penalty relief, IRA changes, long term care, capital gains deduction, treatment of adoption       
  expense, aviation fuel exemption, and repeal of the wine and flavors credit as well as EITC changes previously adopted by the Senate Finance Committee.                                       
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: [1] tax-exempt interest, [2] employer contributions for health plans and life      
  insurance, [3] employer share of FICA tax, [4] worker's compensation, [5] nontaxable social security benefits, [6] insurance value of Medicare benefits, [7] alternative minimum tax          
  preference items, and [8] excluded income of U.S. citizens living abroad. Categories are measured at 1995 levels.                                                                             
\3\ Federal taxes are equal to individual income tax (including the outlay portion of the EITC), employment tax (attributed to employees), and excise taxes (attributed to consumers). Corporate
  income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who are dependents of other taxpayers and taxpayers with negative income are excluded from the 
  analysis.                                                                                                                                                                                     
\4\ The effective tax rate is equal to Federal taxes described in footnote (3) divided by: income described in footnote (2) plus additional income attributable to the proposal.                
                                                                                                                                                                                                
Source.--Joint Committee on Taxation. Detail may not add to total due to rounding.                                                                                                              


     TAX PROVISIONS IN THE SENATE FINANCE COMMITTEE CHAIRMAN'S MARK FOR REVENUE RECONCILIATION AND THE EITC     
                               PROVISIONS PREVIOUSLY ADOPTED BY THE COMMITTEE \1\                               
                                              [1996 income levels]                                              
----------------------------------------------------------------------------------------------------------------
                                                                  Total tax change                    Tax change
                                                            ---------------------------  Tax change      as a   
 Family economic income class \2\   Number of   Average tax                                 as a      percent of
              ($000)                 families      change     Amount \3\     Percent     percent of    current  
                                    (millions)   (dollars)    (millions)  distribution     income      Federal  
                                                                                                        taxes   
----------------------------------------------------------------------------------------------------------------
0-10.............................         12.5          $19         $239          -0.5         0.34         4.20
10-20............................         16.2           48          773          -1.7         0.32         3.60
20-30............................         15.1           88        1,319          -2.9         0.35         2.63
30-50............................         22.7         -249       -5,668          12.4        -0.63        -3.63
50-75............................         18.3         -565      -10,363          22.6        -0.92        -4.63
75-100...........................         10.8         -927      -10,011          21.9        -1.08        -5.11
100-200..........................         10.6       -1,183      -12,505          27.3        -0.91         4.13
200 and over.....................          2.8       -3,416       -9,496          20.7        -0.71        -3.00
                                  ------------------------------------------------------------------------------
      Total \4\..................        109.4         -418      -45,786         100.0        -0.72        -3.59
----------------------------------------------------------------------------------------------------------------
\1\ This table distributes the estimated change in tax burdens due to the tax provisions in the Senate Finance  
  Committee Chairman's Mark (JCX-44-95, September 16, 1995), and the EITC provisions adopted by the Committee on
  September 30, 1995.                                                                                           
\2\ Family Economic Income (FEI) is a broad-based income concept. FEI is constructed by adding to AGI unreported
  and underreported income; IRA and Keogh deductions; nontaxable transfer payments such as Social Security and  
  AFDC; employer-provided fringe benefits; inside build-up on pensions, IRAs, Keoghs, and life insurance; tax-  
  exempt interest; and imputed rent on owner-occupied housing. Capital gains are computed on an accrual basis,  
  adjusted for inflation to the extent reliable data allow. Inflationary losses of lenders are subtracted and   
  gains of borrowers are added. There is also an adjustment for accelerated depreciation of noncorporate        
  businesses. FEI is shown on a family rather than a tax-return basis. The economic incomes of all members of a 
  family unit are added to arrive at the family's economic income used in the distributions.                    
\3\ The change in Federal taxes is estimated at 1996 income levels but assuming fully phased in law and long-run
  behavior. The effect of the IRA proposal is measured as the present value of tax savings on one year's        
  contributions. The effect on tax burdens of the proposed capital gains exclusion is based on the level of     
  capital gains realizations under current law. Provisions which expire before the end of the budget period and 
  provisions which affect the timing of tax payments but not liabilities are not distributed. The incidence     
  assumptions for tax changes is the same as for current law taxes.                                             
\4\ Families with negative incomes are included in the total line but not shown separately.                     
                                                                                                                
Source--Department of the Treasury, Office of Tax Analysis, October 18, 1995.                                   


     TAX PROVISIONS IN THE SENATE FINANCE COMMITTEE CHAIRMAN'S MARK FOR REVENUE RECONCILIATION AND THE EITC     
                               PROVISIONS PREVIOUSLY ADOPTED BY THE COMMITTEE \1\                               
                                              [1996 income levels]                                              
----------------------------------------------------------------------------------------------------------------
                                                                  Total tax change                    Tax change
                                                            ---------------------------  Tax change      as a   
 Family economic income quintile    Number of   Average tax                                 as a      percent of
               \2\                   families      change                    Percent     percent of    current  
                                    (millions)   (dollars)    Amount \3\  distribution     income      Federal  
                                                                                                        taxes   
----------------------------------------------------------------------------------------------------------------
Lowest \4\.......................         21.4          $26         $562          -1.2         0.30         3.97
Second...........................         21.9           77        1,688          -3.7         0.34         2.76
Third............................         21.9         -233       -5,110          11.2        -0.61        -3.49
Fourth...........................         21.9         -578      -12,658          27.6        -0.93        -4.66
Highest..........................         21.9       -1,380      -30,195          65.9        -0.87        -3.87
                                  ------------------------------------------------------------------------------

[[Page S 15439]]                                                    ____
                                                                                                                
      Total \4\..................        109.4         -418      -45,786         100.0        -0.72        -3.87
                                  ==============================================================================
Top 10 percent...................         10.9        1,771      -19,375          42.3        -0.79        -3.59
Top 5 percent....................          5.5       -2,416      -13,220          28.9        -0.74        -3.18
Top 1 percent....................          1.1       -5,626       -6,155          13.4        -0.68        -2.77
----------------------------------------------------------------------------------------------------------------
\1\ This table distributes the estimated change in tax burdens due to the tax provisions in the Senate Finance  
  Committee Chairman's Mark (JCX-44-95, September 16, 1995), and the EITC provisions adopted by the Committee on
  September 30, 1995.                                                                                           
\2\ Family Economic Income (FEI) is a broad-based income concept. FEI is constructed by adding to AGI unreported
  and underreported income; IRA and Keogh deductions; nontaxable transfer payments such as Social Security and  
  AFDC; employer-provided fringe benefits; inside build-up on pensions, IRAs, Keoghs, and life insurance; tax-  
  exempt interest; and imputed rent on owner-occupied housing. Capital gains are computed on an accrual basis,  
  adjusted for inflation to the extent reliable data allow. Inflationary losses of lenders are subtracted and   
  gains of borrowers are added. There is also an adjustment for accelerated depreciation of noncorporate        
  businesses. FEI is show on a family rather than a tax-return basis. The economic incomes of all members of a  
  family unit are added to arrive at the family's economic income used in the distributions.                    
\3\ The change in Federal taxes is estimated at 1996 income levels but assuming fully phased in law and long-run
  behavior. The effect of the IRA proposal is measured as the present value of tax savings on one year's        
  contributions. The effect on tax burdens of the proposed capital gains exclusion is based on the level of     
  capital gains realizations under current law. Provisions which expire before the end of the budget period and 
  provisions which affect the timing of tax payments but not liabilities are not distributed. The incidence     
  assumptions for tax changes is the same as for current law taxes.                                             
\4\ Families with negative incomes are excluded from the lowest quintile but included in the total line.        
                                                                                                                
 Note.--Quintiles begin at FEI of: Second $15,604; Third $29,717; Fourth $48,660; Highest $79,056; Top 10%      
  $108,704; Top 5% $145,412; Top 1% $349,438.                                                                   
                                                                                                                
Source.--Department of the Treasury, Office of Tax Analysis, October 18, 1995.                                  



  Mr. CONRAD. Mr. President, how can it be? We heard all of this talk 
about a tax cut. Yes; in overall terms, in dollar terms, there is a tax 
cut; about $245 billion. But not everybody gets a tax cut. Half the 
people in the country are going to get a tax increase. That is what 
these charts show from the Joint Committee on Taxation and from the 
U.S. Treasury Department. Fifty-one percent of Americans, those earning 
up to $30,000 a year, 44 million American families, are going to get a 
tax increase. On the other side of the ledger, higher income people are 
going to get a tax reduction. Forty-nine percent of the American people 
are going to get a tax reduction. But 48 percent of the benefit is 
going to go to those earning over $100,000 a year.
  Let us just see. This is the top 5 percent. What do they get? The top 
5 percent. The 2.8 million families making over $200,000 a year get a 
$3,400 tax break. The top 5 percent get a $3,400 tax break.
  How about the top 1 percent? Those are the 1.1 million American 
families that earn over $350,000 a year. They get a $5,600 tax break. 
Gee. You might wonder. How about my family? How about my family? We are 
earning $25,000 a year, a family of four. Do you know what is going to 
happen to you? You are going to get a tax increase. How about a family 
of four earning from $30,000 to $50,000 a year? What happens to them? 
They are going to get a slight tax cut of $249.
  Compare that to the people getting over $350,000 a year. They are 
going to get $5,600--20 times as much, 20 times as much if you are 
earning over $350,000 than if you are earning between $30,000 and 
$50,000. And, of course, the dirty little secret of this tax plan is 
that Americans earning less than $30,000 a year--51 percent of the 
American people, 44 million American families--are going to have a tax 
increase. And then you look at the spread among those who are going to 
get a tax reduction, and it is unfair. A family earning between $30,000 
and $50,000. They get only $250.
  This small tax cut is going to be completely overwhelmed by the other 
effects of this overall package because those folks are going to find 
things that help them being cut, and they are going to wind up in a 
negative. If you look at how spending programs are being reduced and 
how the tax cuts affect them, you are going to find that people in the 
$30,000 to $50,000 category lose under this plan. The same will be true 
of $50,000 to $75,000. While they get a $565 tax cut, when you take 
into account the Medicare-Medicaid changes, the college loan changes 
and all the other Government programs that affect them, you find out 
their tax cut is going to be completely overwhelmed by the spending 
cuts that affect them.
  So what you have here is an overall program that is an enormous 
transfer of wealth program. It transfers wealth from those who are on 
the low end of the totem pole and the middle of the totem pole to those 
who are on top. That is what the overall effect of this Republican plan 
is. And you know, that is what has been going on in this country for a 
long time.
  This chart shows the share of wealth held by the top 10 percent of 
households in America. It shows in 1969, the top 1 percent had 20 
percent of the wealth in this country. By 1979, the top 1 percent held 
30 percent of the wealth in this country. And by 1989, they were up to 
39 percent of the wealth. The top 1 percent, in 1989, held 39 percent 
of the wealth in this country.
  I just say to my Republican colleagues, they accuse the Democrats of 
being for redistributing the wealth of America. Let me just say they 
have been the champions of redistribution of wealth, but instead of 
redistributing wealth from the wealthy down to those who are middle 
income and lower income, the Republicans have transferred wealth up to 
the top 1 percent, from the top 1 percent holding 20 percent of the 
wealth to the top 1 percent now holding 39 percent of the wealth of the 
Nation.
  If anything is clear from history, it is that if wealth is 
concentrated in the hands of fewer and fewer people, that leads to 
political instability and that leads to deep trouble in the future.
  Mr. DORGAN. I wonder if the Senator will yield.
  Mr. CONRAD. I would be happy to yield.
  Mr. DORGAN. I noticed a comment the Senator made about the fact that 
this reconciliation proposal will increase taxes for nearly 50 percent 
of the American families. Some say that is not a tax increase. If you 
limit or scale back the earned income tax credit, that is not a tax 
increase. And I was noticing that Jack Kemp, noted national Republican 
figure, former Congressman, former Cabinet official, said last week 
when he testified before the Senate Small Business Committee:

       I hope you guys do not go too far on removing the earned-
     income tax credit because that is a tax increase on low-
     income workers and the poor which is unconscionable.

  So at least Jack Kemp thinks that when you scale back the earned 
income tax credit, what you have is a tax increase on low income and 
poor people. Is the Senator saying that the combination of those 
changes means that 50 percent of the working families in this country 
will have a tax increase?
  Mr. CONRAD. These are not my estimates, I might add. These are the 
estimates of the Joint Committee on Taxation, these are the estimates 
of the U.S. Treasury Department, that do, as the Senator from North 
Dakota knows, distribution tables. And the distribution tables they 
provided the Finance Committee show that everybody earning up to 
$30,000 a year is going to get a tax increase. That is 51 percent of 
American families. Of the others who are going to get a tax reduction, 
interestingly enough, 48 percent of the benefit goes to those earning 
over $100,000 a year.
  Let me just make one other point on the question the Senator asks 
with respect to the notion that the earned income tax credit is a 
welfare program. We heard that in the Finance Committee, that the 
earned income tax credit is really a transfer payment to people, at 
least in part. It is interesting because President Ronald Reagan said 
the earned income tax credit is the best profamily, prowork, 
antiwelfare measure ever to come out of Congress. 

[[Page S 15440]]
That is what Ronald Reagan thought about the earned income tax credit.
  What these folks want people to believe is that the earned income tax 
credit only relates to the income tax, because it is true; some of the 
folks who get the benefit of the earned income tax credit do not have 
an income-tax liability, but guess what. They have a payroll tax 
liability that is huge. In fact, 73 percent of the American people pay 
more in payroll taxes than they pay in income taxes, and the earned 
income tax credit was devised not only to provide relief on income tax 
but also on payroll taxes for working families. These are not people on 
welfare. These are people who are working, working families who get a 
break on their taxes, on their payroll taxes and their income taxes.
  Mr. DORGAN. I wonder if the Senator would yield for another question.
  I am interested in this proposition of the three letters from the 
Congressional Budget Office. The Senator and I jointly wrote a letter 
to the Director of the Congressional Budget Office.
  It is not a secret; I have said on the floor of the Senate here when 
the Director of the Congressional Budget Office was appointed, the 
chairman of the House Budget Committee said, ``I want to appoint this 
person because I think we will get the answers that we want from this 
person.'' This is a person who believes in the kind of an estimating 
process that is going to make them comfortable.
  So I came to the floor and said I was pretty concerned about that. I 
want the CBO to be the referee, the one that is wearing the striped 
shirt, that is unbiased at the signal calling, or at least calling the 
issues as they see them.
  And June O'Neill, the Director of CBO, in scoring this proposal, 
provided a letter on October 18, and the majority party brought it to 
the floor and they held it up and they were proud as new parents, 
blushing and showing all of us, gushing with pride, gee, we have now 
reached with this plan of ours a budget surplus in the year 2002. They 
did not claim that everyone would bear the same burden of lifting in 
order to reach the surplus, but nonetheless we have now reached a 
budget surplus in the year 2002.
  Then the Senator and I wrote a letter to the Director of the CBO and 
said, well, that would be using the Social Security trust funds as 
operating revenues, would it not? The law will not allow us to do that, 
so will you provide us with a letter telling us what the year 2002 
would look like if you cannot do what the law says you cannot do, that 
is, misuse the Social Security trust funds? Then what would the answer 
be?
  The next day, October 19, we received a letter. And I noticed nobody 
from the other side has come and talked about this letter. But this 
letter says if you are going to count it that way, then in the year 
2002 the budget deficit is $98 billion.
  Then my understanding is they made a mistake in the computation of 
this. So the next day we got a third letter. And the third letter says, 
well, if you are going to count it that way with Social Security, we 
have made another adjustment and the deficit in the year 2002 is $105 
billion.
  So we went from a small surplus to a $98 billion deficit, now to a 
$105 billion deficit in 2002.
  I raised the question last week about using the Social Security trust 
funds, and someone from the other side stood up and huffed and puffed 
and then gave me the answer kind of mumbled, like their mouth was full 
of tobacco or something. I could not quite hear what they said, but I 
got the gist of it. And the gist of it was that this is income.
  You know, you do this like a business. You count all your income. I 
am thinking to myself, I wonder what they would say if the business 
counted as their operating income the pension money? I suspect the 
business man or woman would be somewhere on the road to 2 years of hard 
tennis in some Pennsylvania facility. Right.
  You cannot do that. It does not work. It is dishonest. You cannot 
take Social Security trust funds that are dedicated to taxes, only to 
be used for that purpose, bring them to the operating budget, and say, 
``By the way, we have taken all this money out of the Social Security 
trust funds. We now have a budget surplus.''
  And because you cannot do that, cannot do it honestly, we asked the 
Congressional Budget Office Director to tell us, what is the deficit, 
if you are prevented from doing what is dishonest? The answer--$105 
billion in 2002.
  Can the Senator comment on these three letters?
  Mr. CONRAD. First of all, when we talk about how it is counted, what 
the Senator and I asked for is, how about if you do it according to 
what the law is? The law is very clear. I read the law.
  The law says you cannot count Social Security surpluses in 
determining whether the budget is in surplus or deficit. That is what 
the law says. Ninety-eight Senators voted for that law. They thought it 
was a good idea to protect Social Security then. They thought it was a 
good idea not to count surpluses, Social Security surpluses, in 
establishing whether the budget is in deficit or surplus then. They 
recognized when they cast that vote that it is absolutely wrong to take 
Social Security trust fund surpluses and use those to make the deficit 
look smaller.
  Now, obviously I think that is right. And then when we asked the 
question of CBO, here is the final answer we got. There were three 
answers. The first answer, as the Senator noted, said we are going to 
have a slight surplus. When we said, ``Yeah. But follow the law, obey 
the law. What happens when you exclude Social Security trust fund 
surpluses that are off-budget by law?'' Then she came back and said--
her final answer was, you have a $105 billion deficit in the year 2002, 
if you obey the law and you do not take Social Security trust fund 
surpluses.
  Obviously, that is what we must do. That is what the law requires us 
to do. And what is the reason for that? The reason is, no place in 
America would any institution take the retirement funds of its 
employees, throw those into the pot and say they balanced the budget. 
Obviously you have got to run surpluses in your retirement accounts if 
you are going to have money for when your folks retire. It does not 
take any rocket science to figure that out.
  If you spend all of the money, what happens when the folks retire? 
Their retirement funds are gone. That is what is at the heart of this 
issue.
  I asked my accountant back in North Dakota, called him up one day, 
and I said, ``Larry, what would you say to a client, business client, 
who came to you, and said, you know, he was having some rough economic 
times, and his company was running in the red. And if this business 
owner figured out a way to balance was to take the retirement funds of 
his employees and throw those into the pot and call the budget 
balanced,'' what would his advice be to a client who came to him with 
that question?
  My accountant said, ``I would tell him, `You are on your way to 
Federal jail because that is a violation of Federal law.' ''
  And that is precisely what this Republican budget plan contemplates.
  Mr. DORGAN. I wonder if the Senator would yield for one additional 
question.
  The reason this is an important issue is either there is a surplus 
with this plan--despite the fact that you might or might not think this 
plan is well done; you might think the plan takes from the poor and the 
middle-income families and gives to the wealthy--that is neither here 
nor there; we will have that debate, and have had that debate--but 
either it produces a surplus or it does not.
  Some came to the floor of the Senate boasting. They had this new 
letter. They said, ``Look. We did all the heavy lifting, and we have a 
surplus in 2002.'' The reason they say that is germane is that it 
allows us to proceed with a tax cut. That triggers the ability to do 
tax cuts.
  Well, if part of the triggering of the tax cuts is to use the Social 
Security trust funds, then what you have is a circumstance where, in my 
State, at least two-thirds of the senior citizens are living on $15,000 
a year or less. You are saying to those people, ``Your trust funds in 
Social Security, we're going to use those to provide a tax break to 
some Wall Street bankers or some others in this country who don't need 
a tax break.''
  So there is this tremendous transfer going on. That is why this 
question is important. And, again, I would say, Director O'Neill is, by 
all accounts, smart, capable. I have no reason to be 

[[Page S 15441]]
critical of CBO, except we now have three different answers, the last 
of which is apparently correct.
  And my sense is that it tells us what you and I have been talking 
about for some long while. The only way this adds up is if you add it 
wrong. It is the only way this adds up. Add it wrong, you get the right 
answer. Add it right, you get the wrong answer.
  Mr. CONRAD. The Senator is exactly right. This is a fundamental 
question. And let me just say those who defend it by saying it is what 
we have been doing, that is no defense at all. That is just no defense 
at all.
  What we have been doing is wrong. We have been doing it since 1983. 
For most of the time it has not made that much difference because the 
Social Security surpluses have been very small. But now the Social 
Security surpluses are growing dramatically. And they are going to 
continue to grow dramatically. There is a reason for it. The reason was 
to get ready for the time the baby-boom generation retires. That is why 
Congress acted in the early 1980's to change the Social Security fund, 
to design it to run surpluses. And what have we done? We have raided 
them. We have looted them. And now we will continue that practice to 
the tune of $636 billion over the next 7 years and call it a balanced 
budget. That is a fraud. That is an absolute fraud.
  There is no one who would consider taking trust funds, throwing those 
into the pot to balance an operating budget as the correct way to do 
business. It is maybe the Washington way to do business; it is not the 
right way to do business. And we should stop it. We should stop it now.
  I thank the Chair. I yield the floor and I note the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. KYL. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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