[Congressional Record Volume 142, Number 47 (Monday, April 15, 1996)]
[Senate]
[Pages S3312-S3314]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KENNEDY:
  S. 1668. A bill to improve the job and income security and retirement 
security of the American worker, and for other purposes; to the 
Committee on Finance.


               THE AMERICAN WORKERS ECONOMIC SECURITY ACT

  Mr. KENNEDY. Mr. President, throughout the decades of the cold war, 
the paramount national concern was national security. Now with the end 
of the cold war, concern is growing rapidly over another type of 
security. This type of security has four aspects: job security, 
financial security, health security, and retirement security. For 
millions of individuals and families, the proper word in each of these 
aspects of their lives is ``insecurity,'' not ``security.'' No 
political party deserves to prevail if it fails to address these 
concerns and propose a plausible strategy to end them.
  The heart of the current crisis of economic insecurity is the growing 
realization that growth and prosperity no longer benefit all families 
fairly. The quarter century after World War II was a golden era. Hard 
work paid off as the economy grew and income rose for all. But no more.
  Superficial signs of prosperity abound. The stock market has soared. 
Inflation is consistently low and unemployment is down. But the 
prosperity is less than it seems. Americans are working harder and 
earning less. Their standard of living is stagnant or sinking. They are 
worried about losing their jobs, losing their health insurance, 
affording their children's education, caring for their elderly parents, 
and somehow still saving for their own retirement.
  The rich are still getting richer but more and more families are left 
out and left behind. The rising tide that once lifted all the boats is 
now lifting only the yachts.
  Mr. President, these two charts reflect, I think, in a dramatic way 
what has effectively been happening in the U.S. economy over the period 
of the recent years. From 1947 to 1979, virtually 30 years, we found 
that in each of the groups, the bottom 20 percent, second bottom 20 
percent, the middle 20 percent, the top 20 percent, the second top 20 
percent, and even the top 5 percent of Americans for almost 30 years--
30 years--effectively grew together, the real family income group. All 
Americans moved along and moved along together during periods of time 
when we had both recessions and inflation. Cumulatively over this 
period of time all Americans went along together.
  But from 1979 to 1993, in the most recent period of time, taken 
collectively, we will find out that those again at the bottom level, 
the next to the bottom level, and even in the middle have been 
virtually losing ground; that is, the bottom 60 percent, while the top 
40 percent have been moving well, and the top 5 percent has seen great 
growth, and the top 1 percent the largest growth. That reflects almost 
two-thirds of the American families over this period of time from 1979 
to 1993 have been, in most instances, working harder, struggling longer 
hours, and have been gradually falling behind in terms of the real 
family income growth during this period, while those at the top end 
have seen this extraordinary growth.
  Mr. President, once now profitable companies are even laying off good 
workers at unseemly rates for even fatter profits, even higher stock 
prices, and even more astronomical salaries and benefits for CEO's. And 
to add insult to injury, the fears on Main Street are met by cheers on 
Wall Street.
  We saw that in recent times when we saw the dramatic increase in the 
total number of jobs just a short while ago, 600,000 or 700,000 new 
jobs, and the stock market going down over 100 points. And we saw it 
conversely when we saw bank mergers that were taking place just several 
weeks ago, a couple months ago, that saw the announcement of the loss 
of some 20,000 jobs, and the stocks as a result of the mergers going 
right up through the roof.
  Mr. President, the Republican Contract With America is now largely 
defunct because it would have made these problems worse. Its massive 
cuts in Medicare, education, and other priorities would have 
exacerbated the security of most families, and the lavish tax breaks 
for the wealthy would have worsened the income gap. Clearly, the 
Republican strategy is to comfort the comfortable and afflict the 
afflicted.
  The Republican strategy is designed to exploit the income gap--but do 
nothing to solve it. In fact, half of all the spending cuts in the 
vetoed Republican budget came from programs benefiting the neediest 20 
percent of families. Less than a tenth came from the top 20 percent, 
while two-thirds of the Republicans' proposed tax breaks would flow to 
the top 20 percent, while the bottom 20 percent actually faced a tax 
increase.
  So we found even in the last proposal more was being demanded from 
the working families, less from the wealthiest individuals, and yet 
those families were going to be the ones who were going to benefit the 
greatest amount from those proposed cuts and benefits from the Tax 
Code. Practical steps, not demagoguery, are needed to deal with each of 
the four economic insecurities facing individuals and families.
  In other times, Congresses have enacted restraints on runaway free 
enterprise to end abuses and bolster the public interest. The most 
obvious precedents are the antitrust laws, civil rights laws, the child 
labor laws, minimum wage, Social Security, Medicare, Medicaid, and 
Federal aid to education.
  Today is April 15--tax day. Ordinary Americans across the country are 
filing their income taxes and wondering about their job security, their 
stagnant wages, their health care, their retirement, their ability to 
educate their

[[Page S3313]]

children, while our Republican colleagues are proposing tax breaks for 
the wealthiest individuals and corporations in America.
  Let us work together to increase economic security for all families. 
We can find ways to align the interest of individuals and industries 
and allow them to grow together so that corporations and shareholders 
can still reap profits, but not at the expense of the wages and 
standards of living of their employees.
  We should provide incentives to make it more profitable for employers 
to create jobs than eliminate them, share gains with employees rather 
than channel them solely to the CEO's and shareholders, and provide 
reasonable job training, health, and retirement benefits. We can pay 
for all those incentives by closing perverse incentives in the Tax Code 
that encourage firms to move jobs overseas and treat workers as 
disposable.
  Action on several fronts is already underway. The Kassebaum-Kennedy 
bill to guarantee health insurance for workers has bipartisan support 
and will be taken up this week in the Senate. It will deal with two 
flagrant problems in health insurance today--the excessive use of 
exclusions, the preexisting conditions, and the loss of insurance 
coverage when employees lose their job or change their job.
  The lesson of the health reform debate of 1994 is that a sharply 
divided Congress cannot make far-reaching changes in election years. 
Instead of repeating that mistake, we should enact the reforms that 
have broad bipartisan support and that are achievable this year, if 
both sides in the ongoing health reform debate refrain from piling on 
controversial additional provisions.
  Second, it is time to raise the minimum wage, which will soon reach 
its lowest level in 40 years. April 1 marked the fifth anniversary of 
the last increase in the minimum wage. Raising it from $4.25 an hour to 
$5.15 an hour, in two steps this year and next year, as President 
Clinton has proposed, will increase the wages of 13 million 
Americans. It will be interesting to see whether Senator Dole and other 
Republicans are prepared to join us as the debate goes on.

  Third, Congress should reform the immigration laws to end antiworker 
abuses. Republicans and Democrats speak with one voice in urging the 
strongest possible crackdown on illegal immigration. But reforms and 
legal immigration are needed, too, in order to give American workers 
the protection they need and deserve.
  We should make it illegal for U.S. firms to lay off American workers 
and replace them with cheap imported foreign labor. Before U.S. firms 
hire foreign workers they should make a good-faith effort to hire 
qualified American workers. If we refuse to enact reasonable 
restrictions to protect U.S. jobs, we will fuel the drive for extreme 
restrictions that will slam the door unfairly against all immigrants.
  Other steps are also needed to assist the American workers. Today, I 
am introducing a bill to create a two-tier tax rate for companies and 
encourage firms to act more responsibly toward their employees. If a 
company invests in education and training for its workers, provides 
adequate health care and retirement benefits, shares its profits with 
its workers, increases the wages of its work force at or above the 
Consumer Price Index, and makes child care available for all workers, 
it will receive a 25-percent reduction in the income tax rate it pays 
on profits distributed as dividends to shareholders on this portion of 
its income.
  The corporate tax rate will be reduced to 26 percent for corporations 
now taxed at 35 percent, and corporate reductions will be available to 
corporations now taxed at other rates. Under this plan, CEO's who 
resist measures to treat workers fairly will feel the wrath of 
shareholders, whose dividends will be lower because the corporations 
fail to act responsibly.
  This is a two-tier tax rate for most-favored companies. I will show 
the difference between company A and a most-favored company, using this 
chart. What we find out is that if they have the profits, they retain 
the profits--in this case, they distribute them. They pay the $35. It 
will amount to $70 in this illustration if it is a most-favored 
company. If they retained $100, but distributed to shareholders the 
$100 distribution, this would be a $25 tax reduction on the shares 
distributed to the shareholders, which would mean there would be $26 on 
this segment, meaning there would be $61 rather than the $70.
  So, the drive for this kind of reduction will be the shareholders 
that will be involved in this decision. This will rely on their 
interest, their involvement, their pressure, rather than a governmental 
institution or a State institution to be able to move this process 
forward. They will see, with the distribution, that their taxes on that 
distribution will be reduced.
  We reward other countries with tariff benefits if they qualify as 
most favored nations. We should create a category of most-favored 
companies and reward them when they treat their employees as assets.
  In addition, the bill I am introducing today provides that the 
Federal Government, with its billions of dollars in Government 
procurement and contracting, will give preference to these companies 
that treat their employees well and qualify for the tax benefits--about 
$85 billion, $85 to $100 billion in various contracts. Those most-
favored companies would have the preference when competing with a 
nonfavorite for a particular contract. That would be true, as well as 
extended loan provisions that come through the various loaning agencies 
of the Federal Government. That is a smaller figure, about $20 billion, 
but it is still very, very important, particularly for smaller 
companies, and smaller companies would be very much encouraged to 
participate.
  The bill also places new restraints on corporate mergers and 
acquisitions, which are causing enormous job insecurity for workers and 
substantial layoffs and serious dislocations for entire communities. 
This provision strengthens the antitrust laws by requiring a review of 
the impact of these mergers on workers.
  The Federal Trade Commission, the Justice Department, the Labor 
Department, and the Securities and Exchange Commission will give 
greater scrutiny to the corporate transactions likely to result in the 
closing or downsizing of company, facilities, or plants that are part 
of the lifeblood of local communities.

  Now, Mr. President, what we are talking about are the mergers and 
acquisitions, the amendments to the antitrust law. These two companies 
want to merge, so they go through a review. Then there is a judgment 
that is made that they will be able to go through and the merger will 
take place. As part of the remedy process, the commissions will 
consider not just competition considered at the present time but also 
consider the impact on workers and communities. They will consider both 
of those.
  We are not assigning percentages to each of them but we are taking 
note that we believe that if we have established the antitrust laws to 
consider competition between the various companies, that we also ought 
to encourage them to take a look at what the impact is going to be on 
working families. Not to say that has to override, but just that it has 
to be considered as they are making the remedies, to go forward with 
any of the new mergers or with any of the divestitures. That is the 
place this will go on through. We see the total number of mergers--
2,800 last year. They have been escalating dramatically. About 20 
percent of those are reviewed carefully by the Federal Trade Commission 
and DOJ. Only a small amount of them ever get into this kind of a 
process, but that is an extremely important item and can make a very, 
very important difference.
  Mr. President, in addition, the bill eliminates the tax deductions 
that encourage mergers and acquisitions and leveraged buyouts that cost 
American jobs and line the pockets of the financiers of the deals. 
Another major section protects retirement security by encouraging 
companies to provide greater pension coverage for employees.
  Last Thursday, President Clinton proposed a series of needed reforms 
in the current laws applicable to workers who now participate in 
pension plans. These reforms will encourage new pension plans for small 
businesses, expands IRA eligibility, increases pension portability and 
prevents pension raiding.

[[Page S3314]]

  In addition, I am proposing several other reforms to facilitate 
coverage for employees who do not have access to pension plans through 
their current employment plan. The bill establishes an individual 
pension plan mechanism for all individuals without access to employer-
based plans. Workers will no longer be dependent upon their employer 
for retirement planning and savings. The bill will provide portability 
to all these workers who could never before gain access to a pension 
plan. They will be able to take these plans with them from job to job. 
The employer's sole responsibility is the payroll deduction of the 
employees' savings.
  Less than 50 percent of the private work force is now covered by 
private pension plans. More than 68 million Americans have no pension 
coverage. Ironically, most of them work in smaller businesses, which 
are the driving force of the future economy. Yet their retirement needs 
are neglected. These are the workers who are the backbone of the 
economy during their working lives. They constitute more than half of 
the work force. We cannot ignore their retirement needs. Like health 
care, good pension coverage should be accessible, affordable, and 
portable.
  This chart demonstrates the alternative pension plan which is 
employer based. Here we have the IRA's. The proposal that I am 
introducing today, the individual pension plan which is the more 
acceptable, what this does, it says the employer will permit the 
contribution by the employee into a pension system, that that pension 
system is going to have to live up to fiduciary and ERISA standards, 
which will give greater protections for the individual pension plans 
and the advantage of portability over the IRA's. Individuals will be 
able to take, though, their portable pension plans with them.
  As we all know, most of the new jobs in the country are produced by 
the small businesses. Pension plans will serve the retirement needs of 
millions of existing and future small business workers with no pension 
options.
  Finally, the bill I am introducing expands educational opportunities 
for workers by offering them the tax benefits for employers and 
families. This is an issue that is familiar to most Members of this 
body. What we find out once again, to learn what is the level of income 
from those that both do not finish high school compared to those that 
complete various segments of their education. This chart is the average 
annual earnings by level of education. We see that those that do not 
finish high school and are employed earn $12,800; those that have 
professional degrees, earn $74,000. We know the stories of World War 
II. Every dollar invested was returned eight times to the Federal 
Treasury. The more incentives that we can provide to increase 
opportunities for education, the better off our economy and our ability 
to compete. We have incentives for both the training programs as well 
as tuition of programs spelled out.
  The bill pays for these provisions with revenues generated from the 
repeal of the incentives in the current tax law that encourage 
companies to close U.S. plants, uproot jobs in the United States, and 
transfer them to foreign countries abroad.
  We can save $40 billion or more over the next 7 years by repealing 
tax breaks for profits earned in foreign countries, tax exemptions for 
companies that transfer title to goods on the high seas to avoid U.S. 
taxes; price rigging by multinational corporations that minimize U.S. 
income and maximize income in foreign tax havens; sham corporations 
that generate huge tax deductions for moving plants and jobs overseas, 
and loopholes that allow billionaires to thumb their noses at Uncle Sam 
and renounce their American citizenship and move to a foreign tax haven 
to evade taxes on the massive wealth they have accumulated in America.
  The Members are familiar with this list because many of these have 
been offered by other Members of the Chamber at different times. We 
have already voted on the billionaires' tax loophole, which benefits a 
handful of Americans who have made substantial amounts of money--in 
some instances, billionaires. By renouncing their citizenship and 
moving overseas, they effectively escape all of the taxes on that money 
that was earned in the United States, and they avoid paying any of 
their tax obligations by just escaping and renouncing American 
citizenship. This is called the ``Benedict Arnold tax loophole.'' It is 
an appropriate name for it. The others are matters which raise some $40 
billion, and this is not even a complete list.
  We are, obviously, open to other recommendations, suggestions, or 
add-ons for this. But it does indicate that we do have an opportunity 
to reduce these kinds of incentives that, today, are impacting working 
families. We will hear that we should not use the Tax Code to achieve 
social outcomes. The fact of the matter is that these tax provisions, 
which exist in the Internal Revenue Code today, are all impacting and 
affecting adversely working families. We are saying, let us stop that. 
We cover the revenues here and provide the incentives for the American 
workers.
  The ``quiet depression'' facing American workers is the central 
economic, social, and political issue of 1996. When the economy is 
wrong, nothing else is right. Progress and opportunity for all is a 
fundamental American value. We know the problem. We know its urgency. 
The only thing that is unacceptable is to do nothing.
                                 ______