[Congressional Record Volume 146, Number 38 (Thursday, March 30, 2000)]
[Senate]
[Pages S1941-S1942]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         MINIMUM WAGE AMENDMENT

  Mr. KENNEDY. Mr. President, in morning business, I send an amendment 
to the desk to S. 2285.
  The PRESIDING OFFICER. The amendment will be received and numbered.
  Mr. KENNEDY. Mr. President, soon the Senate will have an opportunity 
to consider legislation to lower the Federal gasoline tax. The 
amendment I submit intends to at least consider on that particular 
measure an increase in the minimum wage in two phases--50 cents this 
year and 50 cents next year.
  If the idea of repealing the gasoline tax is to provide some relief 
for hard-working Americans, it seems to me the best way we can provide 
some relief to the 11 million Americans who are earning the minimum 
wage is to provide a modest increase--50 cents this year and 50 cents 
next year--so they have less of an adverse impact, whether they are 
paying for gas to go to work at the present time or otherwise dealing 
with increased costs with which they are faced every single day.
  I am mindful of some of the recent reports about whether this 
gasoline reduction will have much of an impact, in any event, for 
consumers and working families in this country. All one has to do is 
read what a Republican leader in the House of Representatives said 
about this particular issue when he pointed out in the New York Times--
this is J.C. Watts:

       If that were not chilling enough to Republicans eager to 
     maintain their tenuous control of the House this fall, other 
     party leaders voiced skepticism over the repeal's impact on 
     consumers.
       ``I don't know if the tax has any effect on fuel costs,'' 
     says Rep. J.C. Watts. ``Supply and demand is driving prices 
     right now.''

  That is an interesting and, I think, a pretty accurate statement. As 
a matter of fact, included in the fundamental legislation is a study as 
to whether lowering the cost of gasoline will have any positive impact 
on consumers.
  On Wednesday, March 15, in the New York Times, there was a very 
interesting article by Paul Krugman of MIT talking about ``Gasoline Tax 
Follies.'' I will reference part of the article.
  I ask unanimous consent the article be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               [From the New York Times, March 15, 2000]

                          Gasoline Tax Follies

                           (By Paul Krugman)

       Teachers of economics cherish bad policies. For example, if 
     New York ever ends rent control, we will lose a prime example 
     of what happens when you try to defy the law of supply and 
     demand. And so we should always be thankful when an important 
     politician makes a really bad policy proposal.
       Last week George W. Bush graciously obliged, by advocating 
     a reduction in gasoline taxes to offset the current spike in 
     prices. This proposal is a perfect illustration of why we 
     need economic analysis to figure out the true ``incidence'' 
     of taxes: The people who really pay for a tax increase, or 
     benefit from a tax cut, are often not those who ostensibly 
     fork over the cash. In this case, cutting gasoline taxes 
     would do little if anything to reduce the price motorists pay 
     at the pump. It would, however, provide a windfall both to 
     U.S. oil refiners and to the Organization of Petroleum 
     Exporting Countries.
       Let's start with why the oil cartel should love this 
     proposal. Put yourself in the position of an OPEC minister: 
     What sets the limits to how high you want to push oil prices?

[[Page S1942]]

     The answer is that you are afraid that too high a price will 
     lead people to use less gasoline, heating oil and so on, 
     cutting into your exports. Suppose, however, that you can 
     count on the U.S. government to reduce gasoline taxes 
     whenever the price of crude oil rises. Then Americans are 
     less likely to reduce their oil consumption if you conspire 
     to drive prices up--which makes such a conspiracy a 
     considerably more attractive proposition.
       Anyway, in the short run--and what we have right now is a 
     short-run gasoline shortage--cutting gas taxes probably won't 
     even temporarily reduce prices at the pump. The quantity of 
     oil available for U.S. consumption over the near future is 
     pretty much a fixed number: the inventories on hand plus the 
     supplies already en route from the Middle East. Even if OPEC 
     increases its output next month, supplies are likely to be 
     limited for a couple more months. The rising price of 
     gasoline to consumers is in effect the market's way of 
     rationing that limited supply of oil.
       Now suppose that we were to cut gasoline taxes. If the 
     price of gas at the pump were to fall, motorists would buy 
     more gas. But there isn't any more gas, so the price at the 
     pump, inclusive of the lowered tax, would quickly be bid 
     right back up to the pre-tax-cut level. And that means that 
     any cut in taxes would show up not in a lower price at the 
     pump, but in a higher price paid to distributors. In other 
     words, the benefits of the tax cut would flow not to 
     consumers but to other parties, mainly the domestic oil 
     refining industry. (As the taxtbooks will tell you, reducing 
     the tax rate on an inelastically supplied good benefits the 
     sellers, not the buyers.)
       A cynic might suggest that that is the point. But I'd 
     rather think that Mr. Bush isn't deliberately trying to throw 
     his friends in the oil industry a few extra billions; I 
     prefer to believe that the candidate, or whichever adviser 
     decided to make gasoline taxes an issue, was playing a 
     political rather than a financial game.
       There still remains the argument that the only good tax is 
     a dead tax. This leads us into the whole question of whether 
     those huge federal surplus projections are realistic (they 
     aren't), whether the budget is loaded with fat (it isn't), 
     and so on. But anyway, the gasoline tax is dedicated revenue, 
     used for maintaining and improving the nation's highways. 
     This is one case in which a tax cut would lead directly to 
     cutbacks in a necessary and popular government service. You 
     could say that I am making too much of a mere political 
     gambit. Gasoline prices have increased more than 50 cents per 
     gallon over the past year; Mr. Bush only proposes rolling 
     back 1993's 4.3-cent tax increase.
       But the gas tax proposal is nonetheless revealing. Mr. Bush 
     numbers some of the world's leading experts on tax incidence 
     among his advisers. I cannot believe that they think cutting 
     gasoline taxes is a good economic policy in the face of an 
     OPEC power play. So this suggests a certain degree of cynical 
     political opportunism. (I'm shocked, shocked!) And it also 
     illustrates the candidate's attachment to a sort of knee-jerk 
     conservatism, according to which tax cuts are the answer to 
     every problem.
       As a citizen, then, I deplore this proposal. As a college 
     lecturer, however, I am delighted.

  Mr. KENNEDY. Mr. Krugman writes:

       Anyway, in the short run--and what we have right now is a 
     short-run gasoline shortage--cutting gas taxes probably won't 
     even temporarily reduce prices at the pump. The quantity of 
     oil available for U.S. consumption over the near future is 
     pretty much a fixed number; the inventories on hand plus the 
     supplies en route from the Middle East. Even if OPEC 
     increases its output next month--

  Which they did, as we heard from the announcements in the last couple 
of days--

     supplies are likely to be limited for a couple more months. 
     The rising price of gasoline to consumers is in effect the 
     market's way of rationing that limited supply of oil.
       Now suppose that we were to cut gasoline taxes. If the 
     price of gas at the pump were to fall, motorists would buy 
     more gas. But there isn't any more gas, so the price at the 
     pump, inclusive of the lower tax, would quickly be bid right 
     back up to the pre-tax-cut level. And that means that any cut 
     in taxes would show up not in lower price at the pump, but in 
     a higher price paid to distributors. In other words, the 
     benefits of the tax cut would flow not to consumers but to 
     the other parties, mainly the domestic oil refining industry.

  There is a very substantial body of opinion that agrees with that. If 
we are talking about enhancements of profits of the domestic oil 
refining industry--and that is going to be the result of legislation--
we ought to give consideration to men and women in this country making 
the minimum wage, trying to make ends meet, playing by the rules, 
working hard 40 hours a week, 52 weeks of the year trying to keep their 
families together.
  There is a more compelling public interest for a modest increase in 
the minimum wage than in lowering the gas tax. If we are talking about 
providing some relief to the American consumers, it seems to me among 
the American consumers, the ones who are the most hard-pressed in our 
society, are those who are earning the minimum wage. If we are 
interested in providing such relief, we ought to at least address their 
particular needs.
  That is what this amendment will do, and that is the reason I have 
filed it.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. SPECTER. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SPECTER. I ask unanimous consent that I may speak for up to 10 
minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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