[Congressional Record Volume 147, Number 20 (Tuesday, February 13, 2001)]
[Senate]
[Pages S1244-S1246]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ECONOMIC POLICY AND TAX CUTS
Mr. DORGAN. Mr. President, there is now a great deal of debate about
economic policy, about tax cuts, and a range of issues surrounding
President Bush's proposal for a $1.6 trillion tax cut that he sent to
the Congress last week.
I would like to speak for a bit on that subject and talk specifically
about what I think we are facing. I know it is running down hill to be
talking about tax cuts and politics. It is not exactly a tough
political position to say I support tax cuts; in fact, the larger the
better. But I think it is also important for us to understand what we
need to do to make sure we retain a strong and growing economy, one
that provide jobs and economic opportunities for American families. We
have had times in the past in this country where tax cuts have been
proposed that are so large that we then see significant Federal
deficits occur, increases to the Federal debt, the slowdown in the
economy, and increases in interest rates that are very
counterproductive to the interests of American families.
There have been a number of things written about tax cuts recently
that I wanted to share with my colleagues.
The Wall Street Journal article dated February 8, entitled ``A Tax
Cut That Redistributes to the Rich,'' by Albert Hunt:
The gist of the Bush tax plan to be formally presented
today is analogous to a familiar baseball riddle: Which
brothers hold the Major League record for the most home runs?
Answer: Hank Aaron, who hit 755, and his brother Tommy, who
hit 13.
The wealthy are the Henry Aarons of the Bush tax plan,
while working-class taxpayers are the Tommys. But the
president packages the cut as equally generous to all.
* * * * *
Most appalling in the Bush plan, however, is who's left
out. The president talks about helping the $25,000-a-year
waitress with two kids, but the Center on Budget and Policy
Priorities, a liberal advocacy group that conducts widely
respected research, reported yesterday that under the Bush
plan, 12 million lower- and moderate-income families,
supporting 24 million children, would get nothing. Over half
of African-American and Hispanic kids wouldn't benefit from
the Bush initiative.
Let me show you another piece by the Wall Street Journal,
written by Jackie Calmes, published yesterday:
As president Bush promotes his $1.6 trillion, 10-year
income-tax cuts here, back in Texas, state legislators are so
pinched after two tax-cut plans he won as governor that they
are talking of tapping a state rainy-day fund or even raising
taxes.
* * * * *
``He got elected president, yet we were left holding the
bag here,'' state Sen. Carlos Truan said last week as the
Senate Finance Committee began grappling with the fiscal
needs.
Mr. Truan is a Democrat, so what was more attention-
grabbing was the comment of a Republican, Senate Finance
Committee
[[Page S1245]]
Vice Chairman Chris Harris. ``We made tax cuts because we
thought we had this huge surplus,'' he said, adding, ``I
might have voted a little differently on all those tax cuts''
had he realized just the Medicaid pressures ahead.
* * * * *
``It will work,'' Mr. Junell says of the budget-balancing.
But Mr. Coleman, watching the tax-cut bidding in Washington,
suggests the Texas experience ``should give people pause.''
Next, the Washington Post:
The bigger problem for middle-income Americans since the
Reagan tax cuts in the 1980s has been the payroll tax for
Social Security and Medicare, which actually eats up much
more of a worker's paycheck. Payroll taxes are not addressed
by Bush's 10-year $1.6 trillion tax cut.
* * * * *
Bush hasn't emphasized that the benefit from his plan ends
when a worker no longer owes income tax. So, because the
single mom making $25,000 pays only at most a few hundred
dollars in federal income tax, that would be the extent of
her tax cut. The lawyer, now at the 36 percent rate, would
benefit from the drop to 33 percent, and from most of the
other rate cuts.
You get the picture.
The point is this is a very interesting tax cut proposal that
suggests everybody is going to benefit when, in fact, not everybody is
going to benefit.
If I might provide another chart that I read last week that also
addresses a part of this question for the Congress, this is written by
Alan Sloan of the Washington Post:
There are weeks when you have to wonder whether the
American economic attention span is longer than a sand
flea's. Consider last week's two big economic stories: The
Congressional Budget Office increased the projected 10-year
budget surplus by $1 trillion, and the Federal Reserve Board
cut short-term interest rates another half-percentage point
to try to keep the economy from tanking.
To me, the real story isn't either of these events; it's
their connection. The Fed is cutting rates like a doctor
trying to revive a cardiac patient because as recently as
last fall, Fed Chairman Alan Greenspan didn't foresee what
today's economy would be like. Meanwhile, although it's now
clear that even the smart, savvy, data-inhaling Greenspan
couldn't see four months ahead, people are treating the 10-
year numbers from the Congressional Budget Office as holy
writ.
Why is this important? Because we are now somewhere in the process of
the longest economic expansion in the history of this country, with an
economy that is weakening sufficiently so that the Federal Reserve
Board is very nervous and is taking quick action to try to stem this
weakening economy. In fact, 7 months ago, Alan Greenspan felt so
strongly that our economy was growing too fast that he increased
interest rates 50 basis points. Seven months ago, he felt the American
economy was out of control and was growing too rapidly. ``We need to
slow it down,'' he said. He couldn't see 7 months ahead.
We are told, however, that we can see 10 years ahead. President Bush
says let's lock in a permanent tax cut the cost of which in 10 years,
he says, is $1.6 trillion. But, in fact, the cost is much more than
that--about $2.6 trillion. Then he says despite the fact that the top 1
percent only pay 21 percent of the federal tax burden--the burden of
income taxes, payroll and other taxes--they will get 43 percent of the
tax cut that is proposed. This President says let's have a tax cut but
only take one portion of the tax system and measure our burden by that.
And in that circumstance he says let's provide 43 percent of my tax cut
to the top 1 percent.
One final chart: This is the income tax to show what is happening
with this tax cut proposal. Eighty percent of the population would get
29 percent of the benefit, and the top 1 percent would get over 40
percent of the benefit.
There are a couple of things wrong here. One, it would be very unwise
to risk this country's economy, risk jobs and opportunity that comes
from it, risk Social Security and Medicare, risk education and health
care investments that are needed by believing we can see 5 or 7 or 10
years out, and that we ought to lock in a large tax cut, the bulk of
which is going to go to the very highest income people.
Mr. DURBIN. Mr. President, will the Senator yield for a question?
I thank the Senator for his presentation. Now that we are in the
national debate over tax cuts, and the question of projections, I heard
a statistic last week which I think the Senator might also have heard.
Five years ago, the economists were trying to predict what would
happen this year. This whole tax cut is based on our projections into
the future of 5 years and 10 years. Five years ago, economists--the
same people to whom we are turning--suggested that--I believe these
numbers are correct--we would face a $320 billion deficit this year;
five years ago, a $320 billion deficit. It is my understanding that
instead we have a $270 billion surplus.
The same economists that we are basing our projections on for 5 and
10 years missed it by $590 billion in this year.
If that is the fact, when we project where we might be going with
this tax cut, I think the Senator makes a good point.
Let us be conservative. Let us be sensible. Let us be prudent to make
sure we don't overspend any surplus in the future.
Mr. DORGAN. The year before the last recession, 35 of the 40 leading
economists in this country said next year will be a year of economic
growth. The point is the same point the Senator from Illinois made. We
don't know what is going to happen in the future. The field of
economics is a little psychology pumped up with a lot of helium. I say
that having taught economics. We don't know what is going to happen in
the future.
Alan Greenspan, who is canonized in a book, couldn't tell 7 months in
advance what was going to happen to this economy. So we don't know what
is going to happen in the future, and we would be very wise to be
cautious.
There is room to provide a tax cut, and we should do that. At the
same time, we ought to be cautious enough to understand that while we
provide a tax cut, and one that is fair to working families in this
country, we ought not lock ourselves into a situation that could cut
off economic growth and opportunity in the future. How would we cut it
off? By sinking right back into the same deficit ditch we were in
before.
What will happen if we do that? We will see higher interest rates,
economic growth slowing, fewer opportunities, and fewer jobs. In the
last 8 years, we have had over 22 million new jobs created. The 4 years
previous to that, when we had growing deficits, higher interest rates,
and economic trouble all around us, we saw one of the worst periods of
job growth in history.
This is a very important economic decision we are making. The debate
about it ought not be partisan. It is just a debate in which we have
different ideas about how to proceed. My feeling is, proceed
cautiously. Let us provide a tax cut. Let us do it in a way that is
fair to working families. Let us have a trigger so that in the event
the economy goes sour, we will not sink back into big deficits.
Let us also be concerned about the other things we must do. We ought
not dip into Social Security or Medicare trust funds. We ought to have
enough money available to provide a prescription drug benefit through
the Medicare program. We ought to invest in schools that are crumbling
and reduce classroom size. We ought to pass a Patients' Bill of Rights
and help people who are dealing with health care needs. There are a
series of things we can and should do that represent a set of
priorities that are also important to us.
Mr. DURBIN. If the Senator will yield for another question, I know in
the Senator's home State of North Dakota there are many areas that are
conservative, as there are in downstate Illinois. I speak to a lot of
business groups with generally conservative people when it comes to
politics. I ask the Senator from North Dakota what kind of reaction he
finds from these same conservative businessmen when talking about the
surpluses and the tax cut.
Mr. DORGAN. The first reaction is, we ought to pay down the Federal
debt. That ought to be part of the original priority. If you run up the
debt during tough times, then you ought to pay it down during good
times.
Second, they feel very strongly that most important is we ought to
keep this economic expansion going. We don't want to sink back into
budget deficits once again. Almost all of them would say we can't see
2, 3, or 5 years ahead.
The PRESIDING OFFICER (Mr. Enzi). The time of the Senator from North
Dakota has expired.
[[Page S1246]]
The Senator from Illinois.
Mr. DURBIN. May I inquire if there is a unanimous consent on the
order of speakers?
The PRESIDING OFFICER. There is a unanimous consent. The time from 11
until 12:30 is under the control of the Senator from Alaska or his
designee.
Mr. DURBIN. I thank the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from Idaho.
(The remarks of Mr. Craig pertaining to the submission of S. Con.
Res. 10 are printed in today's Record under ``Submission of Concurrent
and Senate Resolutions.'')
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