[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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