[Congressional Record Volume 142, Number 29 (Wednesday, March 6, 1996)]
[Senate]
[Pages S1540-S1542]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
AMERICA'S WORKING FAMILIES
Mr. BINGAMAN. Mr. President, I commend my colleague from Kentucky for
that eloquent statement about the problem, and also the Senator from
North Dakota for his eloquent statement about the extent of the problem
and our efforts to find at least some partial solutions to the problem.
As both of my colleagues have said this morning, there are millions
of American working families that are scrambling to pay the bills each
month. They are working longer hours. They are taking home less money
in real spendable money. Yet what they are having to pay for education
and for health care is going up, and many of these same families are
afraid of being laid off from their jobs.
So we do have a problem and the problem is twofold. The problem is
that our economy has grown too slowly in the last couple of decades.
And, second, the people who are doing the work in our economy, whether
they are working for large companies or small companies or nonprofit
organizations--the people who are really doing the work in our economy
are getting a smaller part of the benefit from the work that they do
and from the profit that is being realized.
Last spring I went to our Democratic leader, Senator Daschle, and
urged that he set up a working group of Senators to explore options for
dealing with this problem of stagnant wages. This is not, I should say,
a recent problem. This is a problem that has been with us, now, since
1973. I think all economists would agree that it is a new era in our
Nation's economy.
Senator Daschle, of course, agreed. He was enthusiastic about the
idea and appointed me to chair that group. We turned out a report
entitled ``Scrambling To Pay the Bills, Building Allies for America's
Working Families.'' Mr. President, I think this report summarizes very
well the recommendations that we found and that we came up with that we
believe seriously address the problem in a variety of areas. What I
want to do this morning is to first describe the problem in some detail
but then go on and describe at least the broad outlines of the
recommendations that we have made.
Many people deserve credit for participating in the preparation of
our report. My own chief of staff, Patrick Von Bargen, took a lead role
in it; Virginia White and Steve Clemons in my office deserves special
thanks, as well as Paul Brown, with the Democratic Policy Committee,
and many other Senators and staff people here in the Democratic side of
the Senate.
I also want to thank all the experts that we consulted with, many of
whom made major contributions to what we were doing.
First, let me talk about the problem. The economy in this country is
growing too slowly. It has been growing too slowly for at least 2
decades now. This issue, as I said before, has been recognized by
economists. But I believe the best summary of the problem was made by
Jeffrey Madrick in a recent book that he published called ``The End of
Affluence.'' That book has in it a chart which I have reproduced here
so we can make the point very readily.
It points out that the long-term annual rate of growth in this
country from 1870 until 1973 averaged 3.4 percent. That is a good rate
of growth, and it was one that is discounted for inflation. That is a
rate of growth that we had been able to maintain--at least that average
rate of growth--through wars, through depressions, and through a whole
variety of economic circumstances.
Since 1973, the rate of growth has slowed. That slowing of the rate
of growth is a major part of the problem that we face. There has not
been enough investment in productive capacity in the country. There has
not been enough job creation, nor good-paying, high-wage jobs in the
country. So the rate of growth of our economy has slowed to 2.3 percent
during the period from 1973 until the present. That slowing of the rate
of growth is a serious issue that we are trying to address with some of
these recommendations.
The second serious issue that we are trying to address is that the
people who are doing the work in this economy are sharing less in the
benefits from the growth that is occurring. Again, we have some charts
to try to make the point.
The first of these charts is a chart that shows what has happened to
real hourly earnings between 1967 and 1995. These hourly earnings, as
you can see, for a period from about 1967 to perhaps 1976 were going up
and were reasonably high. Since the early 1970's, or the mid-1970's,
they have been dropping. Clearly we are in a situation today where we
are almost back--not quite, but almost back--to the same real hourly
earnings that people in this country were realizing in 1967. This shows
part of the problem that American working families are struggling with.
Let me show another chart. This is the drop in real average income.
It is a slightly different measure, but, again, it makes the very same
point. This chart shows that from 1978 until 1995 there has been almost
a continuous decline in real average income for American workers.
The next chart shows the share of workers that have pension coverage
in the country. By ``pension coverage'' I am not talking about just
Social Security. I am talking about a pension in addition to Social
Security. In the period from 1979 to 1989--that is just the 10-year
period--you can see a dramatic dropoff in the total number or the total
percentage of workers with pension coverage which dropped from 50
percent in 1979 to 43 percent in 1989. When you break that down
according to the level of education of workers, you can see a much more
dramatic impact on people who have not had the education. For those
with less than a high school diploma, the number of those workers with
pension coverage was 44 percent in 1979. It dropped to 28 percent in
1989.
The next chart is full-time male workers with health insurance. We
spend a lot of time around here talking about health insurance coverage
and the importance of that. Again, taking the period from 1979--this
chart goes from 1979 to 1992--it shows that the total figures are that
87.3 percent of full-time male workers had health insurance in 1979.
That 87.3 percent dropped to 70 percent by 1992.
Again, just to show the way that breaks out by education level, for
people with less than a high school diploma, 87.7 percent of those
people had some type of health insurance in 1979. That had dropped in
1987 to 53.8 percent, a mere 14 years later.
The next chart shows the job insecurity in the 1970's and 1980's.
This is a very interesting chart, in my view, because it shows what is
happening to a lot of families. This shows the percentage of workers
that are age 24 to 58 who changed employers at least four times during
the decade. That is a lot of change. In the 1970's, you can see that
something around 13 percent of all workers aged 24 to 58 had to change
jobs four times in that decade. When you look in the 1980's, that
number, the percentage of workers who had to change jobs four times,
doubled and is nearly at 30 percent. This is twice as many workers
changed employers at least four times during the 1980's as changed
employers during the 1970's.
The final one of these charts that I want to show on the problem is
trying to point out what is called ``the mean time to financial
failure.'' By ``financial failure,'' we essentially mean if a person
loses their job, how long will it be until they have exhausted their
financial resources? This is broken down by fifths, or quintiles,
according to family income. For the lowest fifth of all families as far
as their income level, of course, they have no time. If they lose their
job, they are facing financial failure immediately. For the second
fifth, it is half of 1 month until they face financial failure; the
middle fifth, 3.6 months; the fourth fifth, 4.66; and even the top
fifth is only a little over 18 months from financial failure. On
average--that is this final column--it is 3.64 months from loss of job
to total financial failure for American families.
Mr. President, I think this makes the case that there is a problem.
This is not a manufactured problem. This is not a rhetorical problem.
This is a real life problem that many working Americans are faced with.
[[Page S1541]]
The debate, unfortunately, about this problem has not been
particularly productive. The debate which the public hears on the issue
sort of veers from those who are surprised to discover that there is a
problem on the one hand to those who recognize that there is a problem
but have no plan to deal with it other than giving speeches, attacking
corporate management, or attacking foreign companies or foreign
countries for unfair trade practices.
There is no set of proposals that has been put forward so far in the
public debate to try to come to grips with this very real problem. What
we tried to do in the report that I referred to earlier was to come up
with that set of recommendations and get this debate on to a serious
plain.
In putting these recommendations together, we have tried to move the
debate past the blame game and name calling and on to thoughtful
consideration and policy options.
First, what can we do to stimulate the growth, going back to the
first chart I referred to. And second, what can we do to ensure that
America's working families fairly benefit from the growth that does
occur? In the report that I referred to, we have some 80 specific
recommendations. I am sure that no single Senator supports each, but
each is a proposal that deserves to be seriously considered on its
merits. I hope that this debate we are beginning now will result in
that.
Let me describe the three broad areas in which we have made
recommendations. First, we have made recommendations to encourage
businesses to become better allies of American families, because they
have a tremendous impact. And that is in this column here on the left.
Second, we have made some recommendations to make financial markets
better allies for America's working families, and that is the center
column.
And third, we have made recommendations on how Government can become
a better ally for America's working families. Let me just describe
briefly the major recommendations in each area.
Businesses, how do we help businesses to be better allies with
America's working families? We concluded fairly early in our discussion
that the present corporate income tax is a jumble of complexity that
does not serve the best interests of any of us. In our view, we should
repeal the present corporate income tax and replace it with something
like the business activities tax that was proposed by Senators Boren
and Danforth in the last Congress. We believe that would be a major
improvement in many respects.
Let me cite some of the ways that would improve the situation. First,
it would eliminate the existing preference in the tax law for debt over
equity.
Second, it would incentivize investment in this country rather than
overseas, an issue that the Senator from North Dakota spoke about
several times.
Third, it would apply the tax as other countries apply their taxes,
on imports and not on exports, so that it would encourage more exports
and it would see to it that imports coming into this country pay their
fair share of tax.
Fourth, it would impose the tax more equitably across all types of
firms than the present income tax does.
Fifth, it would dramatically simplify the Federal corporate tax.
And finally, it would allow us to reduce by half the payroll taxes
that are paid by businesses. That is a very major expense to U.S.
business today, and the shift to a business activities tax would allow
us to dramatically reduce the payroll tax. We would make up any lost
revenue to the Social Security trust fund from revenue that we received
through the business activities tax. But we believe that would be a
major step forward.
One other major advantage to adopting this proposed business
activities tax is it would allow us to give better tax treatment to
corporations that invest in their workers and invest in America. We
designated such businesses as ``A-Corps,'' suggesting that they were
allied with America's working families, and we provide that the
business activities tax would be imposed at two different rates, one
rate for any business with receipts over $100,000, which does not
qualify as an A-Corp, a second rate for a business that does self-
qualify as an A-Corp.
Let me briefly describe what we intend as the criteria for
determining qualifications as an A-Corp. To qualify as an A-Corp and
thereby qualify for a lower tax rate, a business would self-certify
that it is, first of all, investing in its workers, that it is
investing in pensions and profit sharing, investing in training and
education, investing in their health care, making some contribution to
help them acquire health coverage; second, that they are investing in
plant and equipment in the United States, and that a reasonable
proportion of their new employment created for meeting the demands of
this market is in fact made and produced here in this country; third,
that they are doing at least 50 percent of their research and
development in this country.
Then there are several other items. Let me mention one. We do have a
provision in there indicating that there should be some multiple of the
compensation of top management as compared to the salary of the lowest
paid worker. Now, this is controversial, Mr. President, and I do not
know that the specifics of what we recommended will be embraced by
everybody, but I think it is an issue that needs to be discussed.
What we basically said was that to qualify as an A-Corp, a company
would demonstrate that the compensation of its top executives did not
exceed the salary of the lowest paid full-time worker by more than 50
times. That may not be the right figure. I will tell you how we arrived
at that. It is somewhat arbitrary. We basically said that if you are
paying the lowest paid worker in your company, say, $15,000, which I
think may be a low figure for most corporations, but if you are paying
the lowest paid worker $15,000, if you want to pay your top CEO 50
times that, you can pay him $750,000 a year. That did not seem like an
unreasonably low number to me at the time we were putting the report
together. Since then, the new information out makes me doubt whether
that is the right number. As the Senator from North Dakota referred to
it, this article in the Washington Post of March 5 says CEO's at major
corporations got a 23 percent raise in 1995. It says that the average
compensation for chief executives of major companies is now $4.37
million. Obviously, 50 times the lowest paid worker does not get you up
to $4.37 million. So maybe it should not be 50 times. Maybe it should
be 100 times. At some point, however, I do think it is appropriate for
the taxpayers of this country to say we want to give the best tax
treatment to corporations that have some sense of equity and some
reasonable commitment to help their own workers and do not just pay top
executives exorbitant salaries at the same time that they are refusing
to share any of the profit with the people who are doing the work down
in the trenches. So that is another part of the issue which needs to be
discussed.
Let me go on to the second column in our earlier chart which was how
do we make financial markets become allies of working families as well?
The concept here is very simple. Much of the action that corporate
management has to take these days which adversely affects the workers
in that corporation is brought about by pressures imposed from
financial markets. There is a constant pressure to look at the short-
term profitability of the company. There is an inability to invest
adequately in research and development, an inability to invest
adequately in investments of various kinds that will have a long-term
payoff. So what we are trying to do is to get something in the law to
discourage the short-term focus and encourage the long-term focus.
So what we have done here is to come up with some recommendations to
reduce the financial market pressure for short-term decisionmaking, to
reduce financial market pressure for short-term speculation in
securities by imposing a security transfer excise tax on sale of
securities that occurs within 2 years of the purchase of the securities
at issue.
That is the recommendation. This excise tax, this transfer tax would
be similar to the ones that are now imposed in Japan and Switzerland,
in Sweden, in Hong Kong, in Taiwan, and various other countries, with
one
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major exception, that the tax goes away at the end of 2 years.
We are not discouraging investment in securities. We are discouraging
speculation in short-term trading in the securities. In our view, the
country will be benefited, working families will be benefited,
corporate management will be benefited if the owners of the
corporations have a community of interests with the corporate
management and want to help them by focusing more on the long term.
We would use the revenue from the transfer tax on short-term
speculation to create an A fund to create long-term investments in
working families. The A fund would be dedicated, first, to funding
deductions for higher education and work-skill training. Those higher
education deductions--that is the $10,000 deduction the President has
talked about--would be used, the resources would be used, to fund a tax
credit for dependent children. They would be used to fund programs to
accomplish work force training, school-to-work, efforts to achieve
education goals, technology research and development, and export
promotion. All of these activities, we believe, do help promote more
job creation and more high-wage job creation in this country.
We also recommend a whole range of proposals to reform the securities
regulation and accounting area to promote greater attention to long-
term investment and performance of business by those who do invest in
corporations.
Finally, one of these areas I want to talk about just briefly, Mr.
President, is the issue of how we make Government a better ally of
America's working families. We propose, as part of this overall package
of recommendations, to reduce the tax burden on working families in
several very specific ways--to cut in half the payroll tax paid by
employees.
I referred earlier to the fact that the adoption of the business
activities tax would allow us to cut in half the payroll tax paid by
employers. We believe we should also cut in half and can also cut in
half the portion of the payroll tax paid by employees. I point out to
people that this is not a small item. Something over 70 percent of all
taxpayers in this country pay more tax under the payroll tax than they
do under the income tax. We are suggesting that the payroll tax, which
is the biggest tax burden on most working Americans today, be reduced
in half.
Second, we are recommending that we reduce individual income tax by
increasing the standard deduction very substantially.
Third, we are suggesting--and I referred to this before--we permit
the deduction of up to $10,000 for investment in postsecondary
education and training--this is the President's proposal--and that we
provide a $500 tax credit--a $500 tax credit--for each dependent child.
We believe that all of these actions can be taken. All of them will
benefit working families.
In addition to that, we can use some of the funds raised by the shift
to the business activities tax and by the establishment of the A fund
that will be established with the use of revenues from the securities
transfer tax to increase efforts to improve education and training. We
would support skill standards and academic standards for students. We
would support school-to-work transition. We would support more work
force training.
Let me finally say that Government, we also believe, needs to be a
better ally for the self-employed worker and for small business. As
part of what we recommend here, we would reduce in half the self-
employment workers' payroll tax, which is presently 12.4 percent. We
reduce that to 6.2 percent. We would exempt all small businesses with
less than $100,000 in annual receipts from Federal business tax.
Corporate tax returns today indicate that there are about 24 million
people filing some type of corporate tax return.
With this change, with this single change of exempting all businesses
with less than $100,000 in annual receipts, we would reduce the number
of people who have to file a business return from 24 million down to 9
million. So there are 15 million businesses that today file business
returns that will be exempt from filing such a return or paying a
business tax after this set of recommendations are adopted.
Mr. President, let me just step back from the specific
recommendations. I have gone through some of the major ones. I have not
tried to give an exhaustive description of all of the recommendations
in our report. But the important goal is to begin this national debate.
The important goal is to recognize the centrality of this issue of how
we stimulate economic growth and to recognize that we all benefit from
those Americans who do the work in this country, we share in the
benefits from the growth that occurs.
It is not enough to continue to give speeches about the problem. It
is not enough to continue to ignore the problem. In my opinion, Mr.
President, those of us in the Government need to participate in a very
real and important debate at this time in our Nation's history.
Our report ``Scrambling to Pay the Bills'' is an effort to move that
debate forward and to get us down to some concrete steps that can be
taken to help working families in America to do better in the years
ahead. I hope very much that the report has that effect. I hope very
much that the report does stimulate this debate. I hope that, during
the remaining days and weeks and months of this Congress, we can get
off of some of the things that, unfortunately, take up too much of our
time here.
Today, I understand we are going to spend a substantial amount of
time debating the Whitewater Committee again. We debated the Cuban
shootdown yesterday. We have a whole range of things that we debate
around here that are not directly impacting upon the welfare of the
people we are sent here to represent.
These recommendations try to bring that debate back to the issues
that matter to people in our home States. I hope very much that we will
seriously debate these issues between now and the end of this Congress.
I hope very much that we can adopt some of the recommendations in here
so that we begin providing some relief to those who are in fact doing
the work in this country.
Mr. President, I thank my colleagues for their attention, and I yield
the floor.
The PRESIDING OFFICER (Mr. Inhofe). The Senator's time has expired.
Mrs. MURRAY addressed the Chair.
The PRESIDING OFFICER. The Senator from Washington.
Mrs. MURRAY. Mr. President, I ask unanimous consent to speak as in
morning business for 15 minutes.
The PRESIDING OFFICER. The Senator is advised we are currently in
morning business, with Senators permitted to speak for up to 5 minutes
each. This unanimous-consent request--is there objection?
Mr. THOMAS. Mr. President, we reserved the last half-hour for three
Members. If the Senator can take a little less than 15, we would
appreciate it.
Mrs. MURRAY. I thank my colleague. I will attempt to do that.
The PRESIDING OFFICER. The Senator from Washington.
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