[Congressional Record Volume 143, Number 56 (Monday, May 5, 1997)]
[House]
[Pages H2163-H2166]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MOST-FAVORED-NATION STATUS FOR CHINA
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 7, 1997, the gentleman from Virginia [Mr. Wolf] is recognized
for 60 minutes as the designee of the majority leader.
(1430)
Mr. WOLF. Mr. Speaker, President Ronald Reagan was a champion for
human rights in the Soviet Union and Eastern Europe. He spoke up in
defense of freedom and democracy. He raised the cases of dissidents
during the high-level meetings with Soviet officials. He made
passionate and eloquent speeches outlining America's values, but he
engaged forthrightly and he backed up engagement with action.
We all remember his famous 1983 speech to the National Association of
Evangelicals in Orlando, FL. It was then that he called the Soviet
Union the Evil Empire. That courageous speech, ridiculed by some as too
belligerent, was a decisive moment in American history and a decisive
moment in the cold war.
In that speech, President Reagan says, and I quote, he said, it was
C.S. Lewis, who, in his unforgettable Screwtape Letters wrote, ``the
greatest evil is not done now in those sordid `dens of crime' that
Dickens loved to paint. It is not even done in concentration camps and
labor camps. In those we see its final result. But it is conceived and
ordered, moved, seconded, carried and minuted, in clear, carpeted,
warmed and well-lighted offices, by quiet men with white collars and
cut fingernails and smooth-shaven cheeks who do not need to raise their
voice.''
He went on to say that, well, because these quiet men do not raise
their voices, because they sometimes speak in soothing tones of
brotherhood and peace, because, like other dictators before them, they
are always making, quote, their final territorial demand. So some would
have us accept them at their word and accommodate ourselves to their
aggressive impulses. But if history teaches anything, it teaches that
simpleminded appeasement, where wishful thinking about our adversaries
is folly, it means the betrayal of our past and the squandering of our
freedom.
Mr. Reagan went on to say, while America's military strength is
important, let me adhere that I have always maintained that the
struggle now going on for the world will never be decided by bombs or
rockets, by armies or military might; the real crisis we face today is
a spiritual one. At its root it is a test of moral will and faith. I
believe we shall rise to the challenge, he said. I believe that
communism is another sad, bizarre chapter in human history whose last
pages even now are being written.
``I believe this because our source of strength in the quest for
human freedom is not material but spiritual, and because it knows no
limitations, it must terrify and ultimately triumph over those who
would enslave their fellow men.''
{time} 1445
I do not know and it would be unfair for me to say how President
Reagan would have voted today on most favored nation trading status for
China. I
[[Page H2164]]
do know, however, that he opposed MFN for the Soviet Union while people
of faith were being persecuted and human rights were being grossly
violated and the Soviet Union was a military threat to the United
States. President Reagan engaged with Soviet leaders, but he did not
grant them MFN.
Today in China people of faith, particularly those who choose to
worship outside government control, are now being persecuted. Catholic
priests are in jail, Catholic bishops are in jail, Protestant pastors
are in jail, Buddhist monks and nuns are in jail, churches are raided,
monasteries in Tibet are raided, and all the key leaders of the
democracy movement are jailed, and many others are harassed and closely
watched by the Chinese Government.
President Reagan also opposed MFN for the Romanian Ceausescu-led
Communist government in Romania, and as we know, he signed the
legislation taking away the most-favored-nation trading status, MFN,
for Romania in 1987.
These acts, acts like President Reagan took, these acts do not go
unnoticed by the world. The Soviet people knew and the Romanian people
heard the evil empire speech and the news of revocation of Romania's
MFN on the Voice of America, and they knew that someone cared.
In 1989, the gentleman from New Jersey, Mr. Chris Smith, and myself
visited Perm Camp 35, the last gulag in the Soviet Union, which was in
the Ural Mountains. Many of the political prisoners whom we met with
told us they knew of President Reagan's efforts and it gave them hope.
Even in one of the darkest places in the Soviet totalitarian system,
these prisoners knew of President Reagan's support for human rights and
religious freedom. It gave them hope that someone was brave enough to
stand up to the dictators. It gave them hope that someone was brave
enough to stand up for freedom.
Today, what kind of message are we sending to the men and women in
China who are longing and hoping that someone will speak up for them?
Bringing democracy to China must start with supporting those who are
working for a democratic form, and I believe revoking MFN is the first
but not the only step in that process.
I want, as a Republican Member of the House, I want the Republican
Party to be faithful to the principles of Lincoln and Reagan and stand
up for more than just trade. The GOP should stand up for the rights of
people instead of only the rights of business. I support free trade. I
have been a voter in this Congress for free trade. But I am concerned
that trade has become the sole focus of our foreign policy in China and
the quest for dollars stifles all other considerations or attempts to
influence change.
The losers are those suffering at the hands of the dictators. The
Catholic priests, the Catholic bishops, the Buddhist monks, the
evangelical pastors, the people in the house church, the Muslims who
are being persecuted in the northwest portion of China, these are the
losers suffering at the hands of dictators.
I want today's victims of authoritarianism to hear on Voice of
America and Radio Free Asia that the United States is still standing by
those principles. Should I ever get the opportunity to visit the prison
or the laogai where Wei Jingsheng and Bao Tong and Wang Dan and others
who have been arrested, and Bishop Su Chimin, who was beaten by police
with a board until it broke in splinters, or Pastor Liu Zhenyiang,
nicknamed the ``heavenly man'' for surviving a 70-day fast in protest
for his persecution, where they are being held, if I ever get into
those prisons I want them to say, ``We knew, we knew that the United
States stood for us.''
The words of freedom and democracy inherently fly in the face of
dictators and cause them to brand all its adherents as nationalist or
imperialists, but the words ``freedom'' and ``democracy'' are the words
that bring hope to the thousands around the world who do not enjoy
these precious liberties. We must use every means at our disposal to
make them a reality.
Mr. Speaker, I saw a portion of a poll that was taken by the Wall
Street Journal and NBC, by the two pollsters Hart and Teeter, one a
Democrat and one a Republican. In the May 1 poll that was reported in
the Wall Street Journal, this is what the question was. The question
was: Should China improve human rights status or lose current trade
status?
This, Mr. Speaker, is what the American people said. The American
people said, on the question maintain good trade relations, 27 percent;
demand human rights policy changes, 67 percent. So 67 to 27 percent,
the American people stand on behalf of being tough on human rights.
I knew the American people would stand that way. The question is will
the Congress stand that way, and will this administration stand that
way. Even if the administration does not stand that way, and the
indications are that this administration will not stand that way, the
Congress should stand that way. The House of Representatives should
stand that way. Unconditional MFN is not working. There is more
repression in China today than 3 years ago when President Clinton
delinked trade from human rights. Let us cease our wishful thinking
that this is the best course.
Let us let the Chinese people who are suffering at the hands of
dictators--democracy activists, Christians, Tibetans, Muslims,
Buddhists, and others--let them know that the United States stands with
them, and let us send a strong message by voting to revoke MFN in the
House of Representatives.
MIDDLE-INCOME AMERICANS NEED A CAPITAL GAINS TAX CUT
The SPEAKER pro tempore (Mr. Nethercutt]. Under the Speaker's
announced policy of January 7, 1997, the gentleman from California [Mr.
Dreier] is recognized for 50 minutes, the balance of the time, as the
designee of the majority leader.
Mr. DREIER. Mr. Speaker, I have taken this time out to talk about the
historic budget agreement which was completed just this past week and
to say that I have some grave concerns about it.
I, of course, wish very much that we had been able to take on the
issue of entitlements. I wish we could have taken on the proposal to
eliminate some Cabinet-level agencies. Of course, I wish that we could
have brought about broader tax cuts to stimulate job creation and
economic growth. As my friend, the gentleman from Missouri, said in his
remarks a few minutes ago, I wish we could have had better numbers in
the area of our national security.
Having said that, Mr. Speaker, I have concluded that this agreement
is historic. It is very important for us to proceed with it. Obviously,
if we had reelected a Republican Congress and elected a Republican, Bob
Dole, as President of the United States, the agreement would look much
different than it does today. From my perspective it would look much
better than it does today. But it is important that we face the reality
of governing.
Last November the American people chose to reelect a Republican
Congress for the first time in 68 years, and they also chose to reelect
Bill Clinton as President of the United States. So that obviously
created the situation where we had to do what we could to come to some
sort of consensus. It is for that reason that I believe that while not
perfect, and I do not like every aspect of it, this is probably the
best agreement that could be struck.
Why? Because it does focus on our principal goals of trying to gain
control of this behemoth, the Federal Government, heading us down the
road toward a balanced budget and at the same time reducing the tax
burden on working Americans. So if we take all those things into
consideration, while not enough, they clearly are steps in the right
direction.
I am most pleased that an item which I have been focusing on for a
number of years and which I introduced on the opening day of the 105th
Congress is, I hope, going to be part of the basis from which we move
ahead with this budget agreement. I am talking, of course, about
reducing the top rate on capital gains.
On the opening day of the 105th Congress, I and several of my
colleagues, in fact three Democrats and one other Republican, joined
with me introducing H.R. 14. We selected the number H.R. 14 because
what we do is we take the top rate that now exists of 28 percent on
capital gains and we reduce that to a top rate of 14 percent.
I was joined by Democrats, the gentlewoman from Missouri, Karen
[[Page H2165]]
McCarthy, the gentleman from Virginia, Jim Moran, and the gentleman
from Texas, Ralph Hall, and my Republican colleague who sits on the
Committee on Ways and Means, the gentleman from Pennsylvania, Phil
English, and the five of us introduced this measure on the opening day.
I am very happy to report, Mr. Speaker, that with the cosponsorship
of my chief colleague, the gentleman from California, Matthew ``Marty''
Martinez, who represents the same region as I in southern California,
we now have over 140 Democrats and Republicans who have joined as
cosponsors of H.R. 14.
We have heard lots of figures over the last few days as to exactly
where we can go on this reduction of capital gains, and we still have a
few naysayers out there who will continue to argue that reducing the
top rate on capital is nothing but a tax cut for the rich. But every
shred of empirical evidence that we have, Mr. Speaker, proves to the
contrary.
In fact, 40 percent of the capital gains realized in this country are
realized by Americans who earn less than $50,000 a year. We continue in
our office to get letter after letter from people all over the country
who are middle-income wage earners writing to us about how important it
is to reduce that top rate on capital.
I would like to share just a couple of those letters with my
colleagues, Mr. Speaker. First, this letter came from a middle-income
family that needs capital gains tax cuts to use the proceeds from the
sale of farm property to restore savings that largely had been lost to
farm losses.
Let me read parts of this letter, Mr. Speaker:
``We will soon be married 35 years. We have three grown children and
a 5-year-old. After 20 years of marriage we had saved enough money to
be able to buy a dairy farm we bought for a total of $270,000, and we
still had a little over $100,000 in the bank for a rainy day.
``Fifteen years later we owe $160,000 and have $1,500 in the bank. We
have used everything that we had saved trying to make that farm work.
We have an opportunity now to sell our farm,'' and I will go through
the figures that are here: selling price, $275,000; $25,000 for
equipment; $60,000 for 85 head of cattle; and the total of the sale
proceeds would be $360,0000.
That debt which they referred to in the letter of $160,000 obviously
would have to come off the top, and the estimated capital gains tax is
$75,000.
``We can't even pay off our bills and have any left over to buy a
place to live with the $125,000 remaining. $75,000 in taxes,'' this
family writes, ``that is so unfair. If you can get the rate for capital
gains'' down to your proposed level, H.R. 14's 14 percent, ``at least
we would have an additional $37,500 of our hard-earned money back. We
need to start again to try and save enough for our golden years and our
5-year-old.''
Here is an example, Mr. Speaker, of a family that may be, in the eyes
of some, very rich. They are dairy farmers who have struggled, and yet
the capital gains tax is going to jeopardize the future of their 5-
year-old child and this family's plan for retirement.
Another example of a middle-income family that needs a capital gains
tax cut is for a family that is looking to sell rental property to
support an 85-year-old mother.
{time} 1500
This letter, Mr. Speaker, goes as follows:
My wife and I, both retired, are responsible for the care
and well-being of my 85-year-old mother-in-law. She is a
widow, suffers from Alzheimer's disease, needs round-the-
clock care and pays a substantial tax on her Social Security
income. She has been living on the income from some very
modest residential rentals. We are no longer able to operate
those rentals profitably and have to sell. If capital gains
taxes were indexed and left at the rate they were when the
property was purchased, right around 15 percent, she could
just barely continue in her current situation. Now, the
difference between whether my mother-in-law will be able to
get along on the proceeds from her previously purchased
assets or be obligated to rely on Medicaid or some other
forms of Government assistance will be determined by how much
will be taken away from her by the capital gains tax. This is
not a rich versus poor proposition. The amount of tax taken
from the proceeds of her hard-earned rental property will
affect her lifestyle, will affect what other taxpayers will
have to contribute to her care, will affect the quality of
her retirement years and the retirement years for my wife and
for me and my daughter's college options.
So once again, Mr. Speaker, here is a clear example of this not being
the rich versus poor or us versus them, class warfare argument.
Reducing the top rate on capital gains will in fact have a beneficial
impact for middle income wage earners.
But let us look even further than that. As we look at the stated
goals of a capital gains tax cut, we know that not just middle income
wage earners but top Government officials, including the Chairman of
the Federal Reserve Board, have stated that the ideal tax on capital
would be zero, not 14 percent, the middle ground that we are offering
with H.R. 14, but in fact it would be zero.
In fact, before the Senate Committee on Banking, Housing, and Urban
Affairs, Alan Greenspan, Chairman of the Federal Reserve Board, said,
I think while all taxes impede economic growth to one
extent or another, the capital gains tax, in my judgment, is
at the far end of the scale and so I argue that the
appropriate capital gains tax rate was zero and short of that
any cuts, and especially indexing, would, in my judgment, be
an act that would be appropriate policy for this Congress to
follow.
Mr. Speaker, H.R. 14 not only takes that top rate on capital gains
from 28 to 14 percent, but it also does index to ensure that working
Americans are not forced into higher income tax brackets as they
realize some kind of appreciation on their capital investment because
of inflation.
Also I should state that if we look at the priorities that we have in
dealing with this issue of capital gains, what is it that we want to
do? We want to encourage economic growth. We want to do everything that
we possibly can to increase the take-home pay of working Americans,
and, of course, we want to balance the Federal budget.
There are some in this Congress and some out there who say you cannot
talk about reducing the tax on capital and at the same time be serious
about your quest for a balanced budget. We also, as we looked at this
balanced budget agreement that has come out over the past several days,
have looked at the cost of cutting the top rate on capital gains taxes.
Well, according to the Congressional Budget Office, the projection of
the cost, which I do not buy by any means, is about $44 billion. Now,
if we look at every bit of empirical evidence that we have had
throughout this entire century, every time we have reduced the tax rate
on capital what has happened? It has not cost the Treasury anything. It
has not cost $44 billion, as the CBO has estimated.
What has happened? We have seen a dramatic increase in the flow of
revenues to the Federal Treasury, going all the way back to 1921, when
Treasury Secretary Andrew Mellon, in the Warren G. Harding
administration, brought about a reduction of the tax on capital.
What happened? We saw a dramatic increase in the flow of revenues to
the Treasury through the roaring twenties. We also have to look back at
the Kennedy tax cuts. In 1961, there was not a cost to reducing the top
rate on capital. What happened was, we saw an increase in the flow of
revenues to the Treasury.
More recently, in 1978, the famous Steiger capital gains tax rate
reduction, we saw, for the years between 1979, when that rate reduction
went into effect, and 1987, when we saw an increase in the capital
gains tax, we saw a 500-percent increase in the flow of revenues to the
Federal Treasury, from $9 to $50 billion coming in from that period of
time. And then we saw, in 1987, a concurrent drop in the flow of
revenues to the Treasury when the tax rate on capital gains was
increased.
We also have to look at studies that have been done most recently of
our package. The Institute for Policy Innovation did a study just a few
years ago showing that a rate cut like that that we have in H.R. 14
would bring about a very dramatic increase in the flow of revenues to
the Treasury.
In fact, they have stated that they would increase by $211 billion.
That obviously is not going to cost anything.
The reason for that increase, Mr. Speaker, is that we have today
between $7 and $8 trillion of locked-up capital. There are so many
people, like the retirees who wrote me these letters and
[[Page H2166]]
others, who have said, gosh, with a 28-percent rate on capital gains, I
cannot afford to sell this item.
So what happens? There is this lock-in effect. It is projected today
that there is between $7 and $8 trillion that is locked in because that
tax is so punitive. Once again, 40 percent of those are held by people
with incomes of less than $50,000 a year.
We also have to look at the argument that has been going on over the
past several days about the need for a broad-based family tax cut. We
hear talk regularly about how we have got to help families.
Well, Mr. Speaker, I argue that H.R. 14, putting that top rate at 14
percent, would do more to boost the wages of the average working family
than virtually any of the so-called family tax cuts that have already
been proposed. Yes, I am not opposing those, but I believe that the
capital gains tax cut, which would be permanent, would increase it. In
fact, that same study done by the Institute for Policy Innovation found
that going to a 14-percent rate on the capital gains tax would boost
the average family's take-home pay by $1,500 a year over a 7-year
period.
So if we recognize again that what we are trying to do here is
increase economic growth, boost the take-home pay of working Americans
and at the same time balance the Federal budget, we can in fact, with a
capital gains tax rate reduction, do those things.
I mentioned the Federal Reserve Board in that statement. Some have
said that tax proposals would, in fact, be received, tax cut proposals
would be received less than favorably by the Federal Reserve. Well,
those words from the chairman demonstrate that H.R. 14 would be a Fed-
friendly tax cut and would not send anything other than a very positive
signal.
So as we look at where we are headed now in these budget
negotiations, it seems to me, Mr. Speaker, that the fair, the balanced,
the middle-road position for us to take would be a top rate of 14
percent on capital gains.
I will say that I am very encouraged by the words that have come from
the gentleman from Texas [Mr. Archer], chairman of the Committee on
Ways and Means, the fact that we have so many Democrats and Republicans
joining in this Congress to cosponsor H.R. 14, it signals to me that we
can, in fact, have a tremendous benefit, a great win for the American
people if, as we proceed with these talks and the final details that
the Committee on Ways and Means will report out, that we have a tax
that is no higher than 14 percent.
I do not claim that cutting the capital gains tax rate will be a
cure-all for all the ailments of society. One might conclude from what
I have said that I believe that it is a panacea for every problem that
we face. I do not think it is. But if we do look at the goals of
ensuring that our children and grandchildren are not going to be
saddled with horrendous debt in the future, if we look at our desire to
increase the take-home wages for working Americans and if we look at
our goal of boosting economic growth to ensure that the United States
of America will be able to remain competitive internationally, it seems
to me that going from 28 to 14 percent is the right thing to do.
And for my colleagues who have yet to cosponsor H.R. 14, I hope very
much that they will respond to the many letters that my Democratic and
Republican colleagues and I have sent around and join in cosponsoring
this very important legislation.
____________________