[Congressional Record Volume 143, Number 48 (Tuesday, April 22, 1997)]
[Senate]
[Pages S3402-S3408]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
LABOR LAW CHANGES BY EXECUTIVE ORDER
Mr. COVERDELL. Mr. President, as many of us in the Congress and in
the country began to realize last week, the President and the
administration are endeavoring to change 60 years of labor law by edict
or decree. I spoke on the floor and reminded the administration we do
not govern by decree in America. We have three branches. A major and
fundamental change in labor law must be legislated. The President can
sign or veto it, but he cannot write law. That is not a function of the
Presidency.
I will probably visit some of these documents in a bit, but published
reports show that labor leaders and the administration wrote the law
that would essentially squeeze out all nonunion subcontractors and
employees from doing work on Federal contracts. It is a lot more
complicated than that, but that is the bottom line. So this law was
written somewhere in the offices of these labor leaders. It is the
fundamental construction of what the administration purports will be an
Executive order, bypassing the legislative branch and writing law in a
very narrow confine.
You know, our forefathers were very careful in the construction of
this Government to assure proper airing, thorough venting, debate on
all sides. It is not easy to pass laws in America. It is not meant to
be easy. The very thing for which this system was constructed was to
prevent the very thing we are seeing from the administration.
I would like to begin our discussion on this by sharing with the
Senate several letters that I have received from folks back home with
regard to this.
Here is a letter dated March 13, 1997, from Large & Gilbert,
certified public accountants. They are located in Macon, GA. It says:
Dear President Clinton: I am writing this letter to express
my outrage regarding comments made by Vice President Gore in
a speech to the AFL-CIO in Los Angeles on February 18, 1997.
Vice President Gore announced the Administration's plans to
change the nation's federal procurement policy through an
Executive Order that would encourage union-only project labor
agreements.
An Executive Order encouraging union-only PLAs would
immediately implement an anti-competitive, protectionist, and
discriminatory policy that goes against the basic principles
of free market, open competition, and equal opportunity upon
which the country was founded.
Greater use of union-only PLAs will threaten job
opportunities for the vast majority of America's workers.
Union-only agreements discourage bidding by open shop, or
merit shop, contractors and limit employment opportunities
for workers who do not wish to be represented by a union.
Union workers are less than 15 percent of America's work
force. This kind of union-favoring tactic discriminates
against the majority of American workers who choose not to
join a union.
PLAs add significantly to the cost of construction
projects, because union labor costs are generally 10 to 20
percent higher than merit shop. Competitive bidding on public
projects is in the best interest of all taxpayers because it
ensures contracts are awarded based on who will do the best
work at the best price, regardless of labor affiliation.
And I might add that Georgia is one of about half the States that is
a right-to-work State.
At a time of strict budgetary constraints, PLAs are
certainly a step in the wrong direction.
[[Page S3403]]
Vice President Gore stated, ``If you want to do business
with the federal government, you'd better. . .respect civil,
[no one would take offense with that] human [no one would be
offended by that] and [here is the kicker] union rights.''
In other words, if you want to do business with the Federal
Government, the Vice President said, you better be in a union, you
better point your direction toward a union or union membership or a
union contract.
Unions do not have the basic right to preferential
treatment.
That is what this gentlemen said. The union does not have the basic
right to preferential treatment. They have equal access, but they do
not have preferential access.
Every American has the right to make a living and have
equal access to federal work, regardless of organizational
membership.
How right he is.
No one's tax dollars should be spent to support
discriminatory federal policies [or Federal policies that
select who among the bidders would have the most opportunity
to get the work].
He goes on to say:
Americans should at a minimum be guaranteed federal
policies that support equal opportunity and free enterprises
at the most basic level. Every American deserves the
opportunity to compete, win and execute work based on merit--
not because of race, gender, union affiliation, or any other
discriminatory factor. It is not the role of the federal
government to put our taxpayer dollars toward guaranteeing
work for the unions or to help them increase their market
share and membership.
Vice President Gore's blanket statement promising a
presidential veto of any legislation the unions find
objectionable, without any consideration of improvements to
workplace opportunities, is an outrage. Americans would be
better served by an Administration that supports efforts to
improve fair, flexible and equal workplace opportunities that
will help make companies and workers more competitive.
America has always been a leader for the rest of the world
in the areas of a free market and equal opportunity, and this
has always been a point of pride for our country. Please take
the contents of this letter into account before making any
Executive Order that would jeopardize the American peoples
belief in our country, and the principles upon which it
stands.
That is Thomas K. Savage of Large & Gilbert, an accounting firm in
Macon, GA.
Some of these letters are very interesting and deserve a standing in
the Record.
This is a letter from W.S. Nielsen Co., Inc. Skylight Systems,
Alpharetta, GA, writing to the President. He says:
Dear Mr. President: Our small family owned business has
grown over the last sixteen years to where it directly
supports over 15 families.
That is not a big company. It is awful big to the 15 families, I
might point out, though.
We have worked hard to train all our staff to be the best
and safest in our field. Ours is a dangerous business. Our
staff has earned an excellent reputation with our customers,
many of whom work on federal and state construction projects.
Your signing an executive order to use union-only project
labor agreements is not fair to the families associated with
our company. You are depriving them of work that their tax
dollars are paying for and depriving fellow taxpayers of
highly skilled craftsmen.
Our employees believe that Americans should be guaranteed
federal policy that support equal opportunity and free
enterprise. They have earned the right to compete on a level
field for any work they are qualified for. A union-only
agreement has been earned in all the cheap ways to the
detriment of all involved.
All of us strongly urge you to cease your plans to issue
the proposed executive order.
Mr. President, we have been joined by the chairman of the Labor
Committee, Senator Jeffords of Vermont. I would like to yield up to 10
minutes to the Senator for comment on this matter.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. JEFFORDS. Mr. President, I rise to raise my concerns also as
expressed by the Senator from Georgia. I rise to express my continuing
and growing concerns regarding the efforts of President Clinton and his
administration to bypass Congress and impose the ultimate in top-down
union organizing--union organizing by the President of the United
States--on Federal construction projects. I am speaking, of course, of
the widely circulated draft of a proposed Executive order that would
result in most, if not all, federally funded construction being
performed under a union project labor agreement.
A project labor agreement would deter a major portion of the
contractor universe--open shop or nonunion contractors--from bidding on
construction work paid for by American taxpayers. Because the project
labor agreement adopted pursuant to the proposed Executive order would
require a contractor to enter into an agreement with a labor union as a
condition of bidding on the Federal project, most open shop
contractors, unwilling to impose a union on themselves and their
employees, simply would not submit a bid. Thus, the union-only project
labor agreement not only eliminates open competition for Federal
contracts, an anticompetitive effect that would result in increased
costs of Federal construction to the taxpayers, but also discourages
open shop contractors from bidding on work that they are paying for
with their own tax dollars.
In addition to its anticompetitive impact, the proposed Executive
order also would deprive nonunion workers of jobs in Federal
construction, again jobs paid for out of those workers' wallets. Union
agreements invariably require job seekers to obtain work through a
union hiring hall. Hiring hall referral traditions favor longstanding
union members. Others, such as the nonunion workers of the open shop
contractor, would find themselves at the end of the referral line. This
Executive order would penalize the overwhelming majority--majority--of
construction workers in this country, who have not chosen to be union
members.
The proposed Executive order clearly is an effort by the
administration to set national labor policy, a job that is delegated to
the Congress by the Constitution--by the Constitution--of the United
States and not to the President. The wisdom of this delegation of
policymaking to the legislative process by the drafters of the
Constitution is proven in the matter before us. The proposed Executive
order raises many more questions than it answers, questions, I note,
that, if subjected to the debate and factfinding of the legislative
process, could be resolved.
For example, what is the effect of the Employee Retirement Income
Security Act, the ERISA, on a project labor agreement's provision that
would require an open shop contractor to participate in a union pension
plan? The contractor likely covers its employees in another plan, and
the contractor's employees probably would receive no benefits from the
union pension plan because they would not be vested before the
completion of the federally funded project.
Another example of a question best addressed by congressional review
is whether the anticompetitive and overly restrictive provisions of the
proposed order violate the spirit, if not the letter, of the Federal
Acquisition Reform Act of 1996, just recently passed.
The proposed Executive order, however, raises even more fundamental
questions regarding the continued vitality of our national labor policy
that provides for Federal Government neutrality in matters of labor-
management relations, a longstanding policy. This neutrality has been
at the core of the national policy since the passage of the Wagner Act
back in 1935. The administration, without the benefit of studied review
and debate inherent in the legislative process, would reverse this
policy and ignore the over 60 years--over 60 years--of its fine tuning
by Congress and the courts. The administration's approach, that of
lawmaking by Executive fiat, would answer these, and other questions
posed by the Executive order, by litigation, not legislation.
I expressed my strong support for S. 606, a bill introduced by
Senator Hutchinson, that would prevent the exclusion of nonunion
contractors from federally funded construction. I note that I am a
cosponsor of this bill and look forward to its deliberation in the
manner established by the Constitution.
I urge my colleagues to take note of what is going on. This is a
gross example of the abuse of the authority of the President through
the Executive order. He tried this before. The courts knocked it down
with respect to striker replacement. Here they come again with another
proposal.
This is extremely important for contractors, for the Nation, and for
the taxpayer. I yield the floor.
Mr. COVERDELL. Mr. President, I thank Senator Jeffords for his
comments and extensive work in this
[[Page S3404]]
arena. I want to compliment him on the statement he made last week, a
very thorough description and outline of this circumstance. I think the
Senator has done the debate a great service. The letter of you and your
colleagues on the Labor and Human Resources Committee that was sent to
the President was a noteworthy contribution to the debate.
I will read one more letter for the Record, Peachtree Interior
Builders, another letter dated March 27, to the President:
The purpose of this letter is to voice my opposition to
your proposed Executive order to require Federal agencies to
use union-only project labor agreements on Federal
construction projects. This order would eliminate the
possibility of thousands of contractors like myself from
bidding on Federal projects. As a contractor and a taxpayer I
would expect a level playing field on government contracts so
everyone would have the opportunity to compete, win, and
execute work based on merit. The 50 families that derive all
or part of their livelihood from this company should be given
the opportunity to compete on any government project,
regardless of their union affiliation, race, gender, or any
other discriminatory factor.
Mr. President, I think it is somewhat useful to try to put this
debate in context. I go back to Tuesday, February 18, of this year,
when the Office of the Vice President issued a press release. It says:
``For immediate release, Tuesday, February 18, 1997.''
Vice President Gore Sends Message to Businesses.
``Record of Labor Relations and Employment Practice Counts in
Contracting.
``In remarks to the AFL-CIO Executive Council, Vice President Gore
today pledged that the Federal Government will change its rules''--now
that is a key sentence--``will change its rules on Federal contracting
to take into account businesses' record of labor relations on
employment practices and policies.''
So, the Vice President, speaking to the AFL-CIO Council says, ``The
Federal Government is going to change its rules.'' What he did not say
was the President is going to change the rules arbitrarily, by decree,
by edict, by fiat, as the Senator from Vermont said. To change the
labor rules, which have been a condition of law for the last 60 years,
requires a legislative act and not a decree.
He goes on to say, ``How you treat your employees and how you treat
unions counts with us. If you want to do business with the Federal
Government you'd better maintain a safe workplace,''--everyone would
agree with that--``respect civil, human''--everybody agrees with
that,--``and union rights.''
Well, that is not the law. You are not obligated to join a union in
the United States.
``The Vice President said the old rules,'' what he means is the old
law ``allowed Federal contractors to get reimbursed for the costs of
trying to persuade employees not to join unions and fighting unfair
labor practices allegations. `But today we are going to start changing
the rules because they're just plain wrong.' ''
They may be, they may not be. But the way you change the law is in
the legislative branch. You do not do it because of your own opinion.
Shortly thereafter, on March 10, about 4 weeks later, lo and behold,
John Sweeney, president of the AFL-CIO, issues a press statement that
says ``Sweeney Blasts Avondale''--that is a shipbuilding company.
In the four years since Avondale Shipyard workers won a
union election, management has waged a . . . campaign of
firings, discriminatory layoffs and legal challenges.
In other words, they have been in a battle.
Today, AFL-CIO President John Sweeney met with the workers
at the New Orleans shipyard and calls on Avondale management
to end its attack. He will remind Avondale, which receives
Federal funds, that two weeks ago Vice President Gore said
companies doing business with the government must respect . .
. union rights.
So the Vice President makes his statement. They have said they will
change the rules. I am here to tell you, ``You better pay attention to
me'' is what John Sweeney is saying.
We have been joined by the senior Senator from Texas who wants to
speak on this matter. I yield up to 10 minutes to the Senator from
Texas.
Mr. GRAMM. Mr. President, let me first congratulate our distinguished
colleague from Georgia for his leadership on this issue. I came over
today to speak on this subject because I think this is a very serious
matter. It behooves us, and it is in the interests of the American
people on issues like this, to speak before the President acts, rather
than to wait for the action to occur and then complain about it.
I want to be very emphatic today on this issue because I think this
is a fundamentally important issue. First of all, the Constitution is
very clear in article 1 that Congress shall have the power to make law.
Now, granted, within the parameters prescribed by law, the President
has the ability, through Executive power, to implement those laws, and
has from time to time used Executive orders to implement the laws
passed by Congress and enacted by the President's signature.
Many of you will recall that 2 years ago the President attempted to
put into operation by Executive order a provision that had already been
rejected by Congress. Though it is a very important issue, the
principle is what I want to deal with today.
Basically, Congress had refused to pass a law that said that if
workers refuse to work, the employer could not hire other workers to
take their place. I never viewed that issue as a labor-management
issue. I always viewed it as a freedom issue, as I believe most
Americans do. Simply stated, I have a right, if I do not want to work
for you, to quit. If I want to stop supplying my labor, or in concert
with others, stop supplying my labor, I have a right to strike. But you
have rights, too. One of those rights is hiring somebody else who is
willing to work.
After an extended debate, the Congress refused to enact a law denying
employers the right to hire other people when their current workers
refuse to work and a strike drags on and on. The President, by
Executive order, tried to do what Congress had refused to do, by
mandating that companies not be permitted to replace striking workers.
The courts properly stepped in and said that the President had
overstepped his bounds and had no authority to make such law by
Executive order. In fact, Congress had already refused on exactly that
same subject to take legislative action.
If we can believe what the Vice President has said in a speech before
the AFL-CIO, it appears that the President is about to do the same
thing again. Now, he is going to try to do it a little bit differently.
He is going to allow the individual Federal departments and agencies to
take action if they choose. The net result is that through Executive
order, the President is going to be violating the constitutional powers
of Congress. This Executive order has been alluded to before, but what
it boils down to is this: If the President goes ahead with his
Executive order, he is going to be saying that in order to bid on a
contract, a company is going to have to hire union workers.
Now, 89.1 percent of all private workers in America are not members
of unions. So what this Executive order would do is say to almost 90
percent of American workers in the private sector of the economy, ``You
can't work on a Federal Government contract. You are precluded because
you are not part of a privileged group empowered by the President to
have rights beyond anybody else's rights. That is, you are not a member
of a labor union.''
Now, Mr. President, if the President's Executive order and
new regulations went forward we would mandate union representation of
all workers on all Government projects. We would mandate that all
workers on all Government construction projects be hired out of union
halls. We would require that all workers on Government construction
projects pay union dues. We would eliminate competition. Mr. President,
89.1 percent of all American workers would be precluded from working on
contracts funded by their tax dollars. Finally, we would impose on
contractors doing work for the Federal Government union rules,
including restrictive rules that limit the ability of workers to carry
out their functions officially. So the first thing the President's
order would do is say to 89 percent of all workers in America, ``You
can't do work for the Federal Government on contracts.''
Second, if the current contractors switched and required mandatory
union membership by their workers, the President's proposed Executive
[[Page S3405]]
order, in one swoop, would increase the number of people who are
members of unions by at least 13 million members. Let me repeat that:
If the President's Executive order is put into place and it stands, and
if existing contractors, rather than lose their livelihoods and
businesses, employers would be forced to say OK, we will pay tribute
and force our workers to join unions whether they want to join and pay
dues for services they do not want or not. That one action alone would
mandate at least 13 million people to pay tribute and earnings to
organizations they have chosen not to join.
That does not sound like America to me. I have a right to join a
union. I have always supported that right. But I also have a right not
to join a union. And I ought to have a right not to join a union and
still do contract work for the Federal Government, which is run in
small part by my taxes.
As my final point, if the President puts this Executive order and new
regulations into effect, and we are then forced to pay union scale on
every construction project undertaken on behalf of the taxpayers, it
will add 17 to 21 percent to the cost of Federal projects, according to
the General Accounting Office, which is the accounting arm of the
Congress and the Federal Government. The President's Executive order
and new regulations would add $42 billion of additional expenses on the
backs of the American taxpayers.
So what the President proposes to do by Executive order, in summary,
is deem 89.8 percent of Americans ineligible to work on Government
contracts. And at least 13 million Americans, if they choose to work on
Government contracts, would be forced into involuntary union
membership. Finally, the taxpayer would be forced to pay union wage
levels higher than the level typically paid in the private sector and
often above the level paid to many people who are paying the taxes that
fund the project.
Now, I wanted to make two points today, and then I will yield the
floor. First, this is a terrible Executive order. This seems to be
little more than political payoff. Those are strong words to say on the
floor of the U.S. Senate, but it is hard to find any other
justification or any other rationalization for barring almost 90
percent of American workers from working on contracts for their
Government, mandating that at least 13 million people join a union they
do no want to join, and paying an additional $42 billion per year in
new labor costs. If that does not give the appearance of a political
payoff, I would like to know what does. It is hard to think of any
other explanation.
Second, and probably the most important point that I want to make, is
that sometimes things occur between branches of Government that create
ill feeling and hinder the ability to engage in bipartisanship. They
make it more difficult for us to do our job. If the President follows
through with his Executive order, it will seriously jeopardize
bipartisanship cooperation in this Congress. There is no way we could
let this stand and little possibility that we could act as if nothing
had changed when our very powers prescribed in article I of the
Constitution are being usurped by the President. It difficult to
imagine us acting as though we simply disagree with each other and then
go on working together hand-in-hand doing whatever we might be doing.
There is little chance of that happening.
Our message today is a warning to the President: Mr. President, don't
do this. This is wrong for America. If you do this, it is going to be
very difficult for us to work together.
I yield the floor.
Mr. COVERDELL. Mr. President, I thank the Senator from Texas, Mr.
President. I am going to yield to the Senator from North Carolina for
up to 10 minutes. I thank him personally for his extended work and
contributions in the formulation of the Right to Work Act, which has
now been introduced. He has a long, long record in this arena. I
welcome him to the floor.
The PRESIDING OFFICER. The Senator from North Carolina is recognized.
Mr. FAIRCLOTH. Mr. President, I am here today to join the Senator
from Georgia in letting the American people know what a costly and
dangerous paragraph the President of this country has proposed on
behalf of the labor unions, its bosses. What I am referring to is the
President's Executive order, first announced to great applause by Vice
President Gore before a recent gathering of union bosses. It would
force all contractors doing business with the Federal Government to be
unionized. To be specific, Clinton has issued an Executive order in
draft form--he hasn't issued the order--which would require that
anybody that sells goods to the Federal Government become a party to a
labor agreement--in plain language, become a unionized closed-shop
company. These agreements are nothing more than a clever device
proposed and written by the union bosses that all contractors would
have to be unionized if you do business with the Federal Government.
Now, this is a union-only mandate for anyone who sells to the Federal
Government. But that isn't as far as it goes--not by a long way. These
agreements would force the contractor to have a union, but, in turn, it
would force anybody he buys from to have a union. Anybody that sold him
a pencil would have to be a union contractor, if it were going to be
used in Government business. So 13 million people, as Senator Gramm
said, would be forced to join unions. But I think it would run a lot
more than that because this thing goes to the ultimate end of who would
have to join the union. Big fleas have little fleas upon their backs to
bite them, and little fleas have lesser fleas. So this would go down to
the ultimate end of who would have to join a union to comply with this
proposed order.
Now, Sweeney, president of the AFL-CIO, said, ``In any given year,
Federal contracts total as much as $200 billion, and Federal
contractors employ one-fifth of the Nation's work force.'' And with
great glee, he says, ``If properly implemented . . .''--referring to
President Clinton's order--``. . . it would affect hundreds of billions
of dollars every year.'' What he could have said and didn't say, but
was thinking, is: Think of the money that it will bring into the unions
and how much more money we will have to play with.
What we are talking about is the President, by the stroke of a pen,
changing the laws of this country. Government contracts have always
been awarded on the basis of the low bidder and the company that was
capable of doing the job. Unions have never held a special claim to
Government contracts. But, under this, everybody else would be excluded
and the unions would be totally in charge.
What we are saying is that all of the $200 billion the Federal
Government spends would go to 20 percent of the work force, or probably
a much smaller percentage than that; probably closer to 10 percent of
the work force in this country is unionized. And to the other 85 to 90
percent, we would say: Tough luck, you simply don't qualify. You pay
the taxes and keep working, but any Government contracts will go to
union members only.
Now, the General Accounting Office has said that union labor will run
the price of a contract up 20 percent or more. I think they, very
simply, underestimated the amount. That is certainly a low figure, that
20 percent of the cost will be added to every Federal contract because
of this requirement.
I am troubled by the fact that no committee of Congress has had the
opportunity to review proposed language. There have been no hearings.
None of the millions and millions--13 million-plus--of American workers
who are going to be affected by this mandate have had an opportunity--
or their representatives--to be heard on it. The President has shown no
interest in the American people or in what they think. He is simply
putting a proposal up as a payback to the unions. It is just simply
that. He has not submitted it to Congress, and from what it would
appear, he doesn't plan to. If he wants to do it, this is the place he
needs to do it--bring it before the Congress and then see what happens
to it. It would pass through the normal checks and balances between the
Congress and the administration. The Congress is bypassed and this
would impose unions on businesses across the country, without the
American people or the Congress having anything to say about it.
As the Senator from Georgia has so eloquently stated, in America, we
didn't elect a President to rule by decree. My State of North Carolina
is a right-to-work State. I am sure that nonunion employees in North
Carolina would be forced to become unionized
[[Page S3406]]
because of what the President has done. They would have to join a
union. I understand that the checks and balances may be inconvenient to
the President. He would rather do it by decree. But that system has
served us well--the system of checks and balances--for over 200 years.
The proposed Executive order is a payback to the labor union bosses,
who spent hundreds of millions of dollars on behalf of the President in
last year's election, and who do not want to subject their plans for
American workers and employers to congressional scrutiny. They know it
would lose in the Congress.
I am opposed to compulsory unionism. No worker should be forced to
join a union, and no employer should be forced by the Federal
Government to be unionized as a condition of doing business with the
Federal Government--particularly, not by an Executive decree that has
never seen the light of day in the Congress of the United States, or
given the Members of the Congress an opportunity to oppose it or to
speak on it.
Mr. President, I yield the floor.
Mr. COATS addressed the Chair.
The PRESIDING OFFICER. The Senator from Indiana is recognized.
Mr. COATS. Mr. President, I yield myself 10 minutes from the time
controlled by the Senator from Georgia.
The PRESIDING OFFICER. The Senator is recognized.
Mr. COATS. Mr. President, I appreciate the efforts of the Senator
from Georgia in bringing to light an important issue that this Congress
clearly needs to examine and examine quickly.
Two basic problems exist with the President's attempt to unilaterally
overturn a 50-year-old law. The first is that it usurps the very
function of the legislative branch, and appears to be a payoff, a
payoff to a special interest group--big labor.
The President, knowing that he can't secure the support of a majority
of the Congress, simply decides to bypass the Congress. I think it is a
pure usurpation of the role of the legislative branch. Second, it will
cost the taxpayers hundreds of millions of dollars, if not billions, in
additional expenses. To mandate that each agency seeking to contract
with the Government needs to get big labor's seal of approval before
making a contract award clearly is going to add substantial cost to
Federal construction and to Federal contracting.
If the Clinton administration wants to change the laws governing the
awards of Federal contracts, it ought to have the courage to send the
legislative changes to this Congress for consideration. If then it can
make the case to the American people that the changes are justified, so
be it. But it is simply unacceptable for the President to cut a deal
with a special interest group that has been supportive of him
politically, with such a deal having tremendous ramifications for the
American economy and, arguably, circumventing the law. We simply cannot
allow this kind of power grab to go unchecked.
inheritance tax
Mr. President, I also want to bring to the attention of the Senate an
item that I found this morning in the Washington Post. I got up
thinking it was going to be a good morning, poured myself a cup of
coffee, got out the Post and the Washington Times, and was thumbing
through and happened to come across a headline that certainly grabbed
my attention. The Post article, written by Clay Chandler says,
``Treasury Official Slams Estate Tax Rollback Effort. Changes Sought as
Part of Budget Pact.'' Deputy Treasury Secretary Larry Summers, senior
member of the Clinton administration, and someone whom the Post says is
clearly becoming one of the key players in the President's economic
agenda, and certainly in the budget discussions, has indicated that the
efforts to roll back the inheritance tax as part of this year's budget
agreement is ``motivated by selfishness.'' He goes on to say, ``When it
comes to the estate tax, there is no case other than selfishness'' for
providing relief to families from this death tax. Further, he asserts
that the evidence put forth in support of repealing the burdensome tax
``is about as bad as it gets.''
Mr. President, I would like to review for the Senate the evidence
that currently exists about the effect of this so-called inheritance or
death tax and let the Members of the Senate and the public decide
whether or not this is ``as bad as it gets'' or is ``selfishness'' on
the part of the American people.
Currently the death tax would take as much as 55 to 60 percent of a
small business owner's assets at death. Whether you are a farmer who
has worked for years to build an estate, a small businessman, or an
individual who has worked successfully and achieved some success and
self-reliance and prudence in terms of how you use your money, or are
someone who has planned for the future, upon death the family will find
itself in a very unseemly situation, one that requires, immediately
after the funeral, that the family move right on down to the IRS office
to try to figure out how to deal with the extraordinarily difficult
problem; that is, the Federal inheritance tax, or the so-called death
tax.
It is particularly difficult for those who have run a farm, those who
have run a small business, those individuals who have paid a great
price, and at great sacrifice, to accumulate some degree of wealth, to
pass it on to the family. Clearly, the situation that exists today is
that in many cases the farm or the business has to be sold instead of
passed on through the family from generation after generation just to
garner the funds necessary to pay the estate tax. When you are paying a
55 percent to 60 percent rate, it usually forces the sale of a
particular business.
The White House Conference on Small Business indicated that 70
percent of all family businesses do not survive through the second
generation, and 87 percent do not make it to a third generation. The
reason for this is pretty simple. The primary cause of the demise of
family farms and businesses after the death of a founder and the
founder's spouse is the death tax.
When a tax can take more than half of the current valuation of the
assets--many of these assets are invested in machinery, in buildings,
in land, and in farm equipment, and the tax is more than half of that
total valuation--very few families have the liquid assets available to
pay the immediate tax and, therefore, have to liquidate the farm, have
to sell off acreage, sell the entire farm, sell off the business, or
sell ownership in the business, and it can't be passed on to the
family.
Recently the U.S. Department of Agriculture estimated that between
the years 1992 and 2002, more than 500,000 farmers will retire and that
95 percent of these farms are sole proprietorships, or family
partnerships, and that every one of these estates, unless they are
under a very low threshold, are subject to death taxes.
On average, 75 percent of the farms in America today consist of
nonliquid assets, such as I mentioned--real estate and farm equipment--
making payment of the death tax extraordinarily difficult to achieve
without liquidating capital.
For small business owners, 33 percent report that they expect all or
part of their businesses will be liquidated when death taxes come due.
Among a survey of black-owner enterprises, nearly one-third say their
heirs will have to sell the business to pay the death tax, and more
than 80 percent report that they do not have sufficient assets to pay
the death tax.
If that wasn't bad enough, look at the average cost of just paying
those taxes. The average family business spends nearly $20,000 in legal
fees, $12,000 in accounting fees, and $11,000 for other advisers in
order to do the paperwork and the processing to compute the tax and to
sell the necessary assets to pay the death tax.
Mr. President, the point here is not how many examples we can give of
``bad and selfish'' evidence that Mr. Summers cited. I don't think any
of this could be categorized as ``bad and selfish'' evidence. That
doesn't serve the point to castigate Mr. Summers. The bottom line is
that the Congress owes it to all Americans, and particularly the
American farmer and the American small business men and women and their
families, to get relief from the current estate tax, which is a
perverse tax that goes against the very things that we want Americans
to strive for. We want Americans to be self-reliant. We want them to
save and to invest. We want them to build up their businesses and their
farms. We want them to be prudent. We want
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them to be self-reliant. And we want them to have the ability to pass
that farm on to the next generation and the next generation.
I have a very close friend who runs a farm in western Kansas. It is a
typical farm that you find in the West with thousands and thousands of
acres because of the sparse amount of rainfall--raising hogs and
cattle, a great investment in equipment and land, barely making it from
year to year, depending on the weather. Some years are better than
others. When this individual dies--and their farm has been in the
family now for two generations--his son's dream has been to continue
the farm within the family. Yet, my friend is faced with what farmers
and business men and women all across this country are faced with: The
reality that, upon the death of he and his spouse, most of the farm
will have to be sold or liquidated in order to pay the taxes. It is a
double form of taxation because the earnings from that farm have been
taxed on a year-to-year basis.
So it is a governmental grab.
Is it selfish to want hard-working Americans to be able to keep the
assets they have accumulated through their ability or good fortune,
hard work and dedication? Is it selfish to say that they can't pass
that on to their family but they are better off giving it to the
Government so that Government can make better use of that money than
the family to continue the business or continue the farm?
I think we have all heard the horror stories about how $1 comes into
Washington, comes into the Government, and suddenly disappears. We
can't trace where it goes. Of the money which goes into fighting
poverty, 65 percent never makes it to the people who are the
recipients, who are at or below the poverty line. It gets eaten up in
bureaucracy. It gets eaten up in other special designations.
So, Mr. President, the American dream is not to die and pass
everything you have worked so hard--Mr. President, I ask unanimous
consent for 3 additional minutes.
Mr. COVERDELL. Mr. President, I yield 3 additional minutes to the
Senator from Indiana.
Mr. COATS. Mr. President, I thank the distinguished Senator.
The PRESIDING OFFICER. The Senator is recognized for 3 additional
minutes.
Mr. COATS. Mr. President, the American dream has been to be prudent,
to save, to try to make life better for your children and your
grandchildren than it has been for you. The current inheritance tax
system takes away that American dream--the dream that one generation
can build upon the success of another to build a better life for
themselves and their children.
The current tax sends a message that the Government will take away
what you have earned and not allow you to pass it on. That is a
disincentive to work hard. It is a disincentive to be successful, a
disincentive to pursue the American dream because when you die the
fruits of your labors will be taken away from you and away from your
family and given to the Government. This is selfish?
Mr. Summers, who speaks for the President and the Vice President,
says this ``is about as bad as it gets;'' that it is about as selfish
as it gets; that it is selfish to want to retain the fruits of your
labors; that it is unselfish to give it to the Government, which in
many instances wastes the money that you have worked so hard for.
The President campaigned on repeal of the exemption for the estate
tax, and Senator Dole when he was running for President on his proposal
to lower the estate tax. Now that we are debating this in the budget,
Mr. Summers comes along and says it is a selfish thing to want to do. I
don't think it selfish, Mr. President, to allow the American taxpayers
to keep the fruits of their hard-earned labors and not to have it taxed
away to the point where they have to sell their farms, to sell their
businesses, or to sell their assets just to pay the tax to the
Government.
Mr. President, I am a proud a cosponsor of legislation--in fact, four
pieces of legislation--that call for repeal or at least reduction in
the amount of estate tax to counter the efforts that are currently
underway to eliminate even the exemption. I am pleased, and I hope that
the Congress will hold firm on this issue as we go through our budget
negotiations.
I would like to, in closing, invite Mr. Summers to visit some mom and
pop businesses in Indiana that are hard hit by this devastating tax. I
would like them to visit some farms of some friends of mine who want to
pass it on to their children and grandchildren but have to liquidate
the farm in order to pay the estate tax. Come out to Indiana and tell
the family that is forced to sell the farm or the business that has
been in the family for more than 100 years that they are being selfish
for wanting to keep that farm in the family and not to turn that money
over to the Government.
Mr. President, the Federal Tax Code is the only part of this debate
that can truly be labeled selfish. The Government has no right to take
unjustly the fruits of its citizens' labors.
I hope the President and the Vice President will quickly disavow the
statement made today, or reported today in the Washington Post, by Mr.
Summers when he calls it selfish on the part of the American people to
try to retain the business of a farm that they have worked so hard to
acquire.
Mr. President, I yield the floor. I thank the Senator from Georgia.
The PRESIDING OFFICER. The Senator from Georgia.
Mr. COVERDELL. Mr. President, I yield the remainder of my time to the
Senator from Oklahoma, the assistant majority leader.
The PRESIDING OFFICER. The Senator from Oklahoma is recognized.
Mr. NICKLES. Mr. President, I want to compliment my colleague from
Georgia for his managing this past hour. I hope that my colleagues have
had a chance to listen very clearly.
I would also like to compliment my colleague from Indiana on his very
forceful statement denouncing the statement that was in the paper
today, reported to be made by Mr. Summers, Deputy Assistant Secretary
of the Treasury, when he said that those who want to cut inheritance
taxes are wanting to do so for greedy individuals. I just totally
disagree. I am one of those individuals who wants to reduce the
inheritance tax, and I don't think I am trying to do it for greedy
individuals. I think the tax is unfair. It is too high.
The Senator from Indiana mentioned the fact that farmers and ranchers
worked hard in their lifetime to build up a ranch, farm, or estate, and
find that Uncle Sam is taking 39 percent, maybe 45 percent, or 55
percent of that estate. I think it is too high. It is higher even than
the income tax.
If you have a taxable estate of $1 million and you are at the 39
percent tax bracket, that is too much. Why should the Government be
entitled to take 39 percent of a farm or ranch that has a value of $1.6
million--there is a $600,000 exemption and a $1 million estate--why
should Uncle Sam be entitled to take 40 percent, or, if you have a
taxable estate of $3 million, maybe two or three restaurants or
businesses that you put together and the taxable estate is $3 million,
why should Uncle Sam be entitled to take over half?
Mr. Summers may think you are being greedy because you don't want to
lose half of what you have built and worked all your life to
accumulate, and you want to pass it on to your children. He thinks
maybe you are trying to be greedy because you want to keep it in the
family. Mr. Summers is wrong.
I concur with my colleague from Indiana. I hope that the
administration will denounce, renounce, or disassociate themselves from
his remarks because trying to reduce the inheritance tax is not being
greedy.
I tell my colleagues that this is one Senator who is going to be very
energetic in trying to make sure, when that tax bill comes up this
year, that we are going to have estate tax relief.
I hope we will cut estate taxes for everybody. I hope we will
increase the exemption because I do not think the Federal Government
should be entitled to take part of the property that people have worked
their lifetime to pass on to their children. I do not think Uncle Sam
should be entitled to take 40 or 50 or 55 percent.
Mr. President, I am not sure what time remains of Senator Coverdell's
time, but I ask unanimous consent to speak as if in morning business
for 10 minutes.
The PRESIDING OFFICER (Mr. Coats). Is there objection? The Chair
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hears none, and it is so ordered. The Senator from Oklahoma is
recognized to speak as if in morning business for 10 minutes.
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