[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.

                          ____________________