[Congressional Record Volume 144, Number 13 (Monday, February 23, 1998)]
[Senate]
[Pages S852-S853]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  A BUDGET THAT SLAMS THE MIDDLE CLASS

 Mr. KYL. Mr. President, in his State of the Union Address last 
month, President Clinton urged Congress to approve his request to pump 
billions of dollars into the International Monetary Fund (IMF) to help 
stabilize Asian economies. He justified his request by saying that 
``preparing for a far off storm that may reach our shores is far wiser 
than ignoring the thunder 'til the clouds are just overhead.''
  There is something to be said for trying to deal with problems before 
they grow too large--before they engulf us. We will have a debate about 
the propriety of the IMF request in the weeks ahead. But I would 
suggest that it is not just the IMF that is attempting to deal with an 
approaching storm.
  Mr. President, millions of Americans are also looking ahead to be 
sure they can cope with unforeseen threats to their own family's future 
financial security. Some people are trying to create a nest egg for 
their retirement years. Some take out a life-insurance policy or buy an 
annuity to ensure that a spouse or child is taken care of when they are 
gone. Others are looking for a way to pay death taxes without creating 
too much hardship for their families. Whatever the coming storm might 
be, they are trying to find a way to prepare. And most of us would 
consider that to be good planning--something the federal government 
would want to encourage.
  Unfortunately, while the Clinton administration eagerly argues the 
benefits of pouring billions of dollars into the IMF to help other 
countries, it cannot seem to see a benefit in helping our

[[Page S853]]

own citizens to ward off their own personal storm clouds. I am 
referring to the provisions in the President's proposed budget that 
would impose significant tax increases on people who try to save and 
invest for the future, including people who take out life insurance or 
buy annuities to protect themselves and their families.
  President Clinton's budget calls the existing tax treatment of life 
insurance and annuities ``unwarranted.'' But the Washington Post has 
identified the President's proposed changes as an effort to ``slam 
[the] middle class.''
  Let us put this issue in context. Personal savings rates in our 
country have been on the decline since 1981, when they stood at 9.4 
percent. Some say that was respectable by international standards. By 
1992, the savings rate had declined to 6.2 percent, and it has plunged 
during the Clinton years. As of last November, the personal savings 
rate stood at 3.8 percent--the lowest since the Great Depression. In 
other words, people are not setting much aside for their future needs, 
including retirement.
  Add to that the problems we all know are coming in the Social 
Security system. The experts are telling us that Social Security 
recipients currently receive, on average, benefits equal to 43 percent 
of their pre-retirement earnings. But then they point out that only 70 
percent of that amount is fully funded for future retirees, which means 
that unless taxes are raised substantially or additional funding is 
found, retirees in the future will only get a benefit that amounts to 
less than 30 percent of their pre-retirement income.
  In other words, retirees in the future are likely to experience a 
significant decline in their standard of living unless they find some 
way to supplement their Social Security benefits. That means saving and 
investing more, contributing to an IRA, buying an annuity, or taking 
out a good life insurance policy. We ought to make it as easy as 
possible for people to do that.
  However, the Clinton budget means to take us in the opposite 
direction. For example, it would impose new taxes on individuals who 
substitute one insurance policy for another policy that better meets 
their needs. We are talking here about new taxes, primarily on 
households with incomes under $75,000. Many people in this group work 
for employers who do not offer, or who have terminated, a retirement 
plan. So unless they find some other way to protect themselves, they 
could be out in the cold when they retire.
  The proposed budget would make it harder for businesses to protect 
themselves with business life insurance. It seems to me entirely 
reasonable that a business would want--and need--insurance to minimize 
the costs that would result from the death of a key employee. That is 
particularly true of small businesses, whose size means that so much of 
its success depends upon a few individuals.
  The Clinton budget would overturn so-called Crummey powers, making it 
harder for moderate income families to even pay death taxes. That alone 
sets up a major confrontation with many of us in Congress who believe 
that death taxes ought to be eliminated altogether.
  These substantive problems with the Clinton plan come on top of what 
many of us consider a reneging by the President on last year's budget 
agreement. Only seven months after entering into that agreement, which 
provided for very modest tax relief--relief amounting to $95.3 billion 
over five years--the President is proposing a net tax increase of $98.1 
billion. In other words, the entire amount of tax relief approved just 
seven months ago would be reclaimed in one fell swoop.
  Not only does that back track on the promise to provide tax relief, 
but it comes at the same time that the President is proposing to bust 
the spending limits that were established in last year's agreement. 
Spending levels would exceed the agreed-upon limits by more than $37 
billion.
  Mr. President, the federal government is collecting record amounts of 
tax revenue, primarily as a result of robust economic growth. We do not 
need another tax increase, let alone a tax increase that singles out 
the very tools people need to protect themselves against threats to 
their personal security. We must reject the unwarranted tax increases 
proposed in this budget, and instead consider tax policies that will 
make it easier for people to save and invest. Families need tax relief, 
not new burdens.

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