[Congressional Record Volume 147, Number 24 (Tuesday, February 27, 2001)]
[Senate]
[Pages S1599-S1603]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX CUTS
Mr. WELLSTONE. Mr. President, I won't speak for the Presiding
Officer, the Senator from Kansas, or Republicans but I will speak for
myself and I hope many in my party.
First, I start with what I think people in Minnesota and people in
the country mean by civility. I don't think they mean there should be
no debate. I think people are all for passionate debate. They just want
to make sure it is civil debate. What I say on the floor of the Senate
is based upon what I honestly believe is good and right for Minnesota
and my country, but it is not at all directed at any of my colleagues
on the other side in any personal way, nor is it directed at the
President in any personal way.
Second, another operational definition before I go forward with my
comments: what do people mean by ``the center''? I think people want us
to govern at the center of their lives. I will say something I heard my
colleague from Wyoming mention and I agree. Part of what people are
focused on is education--no question. People are focused on health
security. People are very focused on affordable child care, which I
view as education. It is silly to define education as kindergarten
through 12. I think it is pre-K all the way to age 65. Elderly people
and other working families are focused on the cost of prescription
drugs. Many can't afford it. People are also focused, of course, on how
to have a small business or a family farm or have a job from which they
can support their family.
Those are issues that are terribly important to people, and there are
other issues as well. One we will deal with within the next month will
be reform and how we can really move to a political process which,
hopefully, will be less dependent on big money and more dependent on
big and little people.
I want to speak directly, given this introduction, to the President's
tax cut. We have heard from a number of Senators about specifics, so I
don't need to go over them. To make a very long story short, after we
take this $1.6 trillion tax cut and add additional costs, interest that
has to be paid, and after we look at what we have by way of surplus--
that is to say, non-Social Security, non-Medicare--basically, what we
have is a tax cut that represents a Robin-Hood-in-reverse approach to
public policy. That is what we have when, depending upon whose estimate
one believes, the top 1 percent of our population gets anywhere from 40
to 45 percent of the tax benefits of the Bush plan. Unbelievable. It is
similar to a subsidy in inverse relationship to need.
Now, again, understand--a Robin-Hood-in-reverse tax cut has the
wealthy benefitting. At the same time, let me take the President's
words in his inaugural speech about leaving no child behind. At the
same time, one-third of the children in America today live in families
who will not receive one dime from this tax cut; 50 percent of African
American children live in families in our country who will not receive
one dime from this tax cut; and about 57 percent of Latino, Latina
children live in families who will not receive one dime from this tax
cut because none of it is refundable.
If you live in a family with an income of less than $27,000 a year,
you receive no benefit.
The argument is, they don't pay any taxes. These families pay payroll
tax; they pay sales tax. You better believe they pay taxes. These are
some of the children who are most deserving in terms of being given a
chance to reach their full potential. It is not in this tax cut
proposal.
While on the one hand we have most of the benefits going to the top 1
percent, we have very few of the benefits going to those families and
those children most in need. It is outrageous.
One amendment I will prepare when we bring this reconciliation bill
to the floor will be an amendment to make the child credit refundable.
Then we can help a lot of children and a lot of families. For all
Senators who say, ``we are for children, we are for children, we are
for children, we are for the future, leave no child behind,'' I want to
give them a chance to vote on that.
Let me go on and make another point which I think is the second and,
to me, the most devastating critique of this tax cut proposal by
President Bush. It is not unlike 1981. If we do this, there will be
precious little for any investment in any other areas--I think by
design. I think this is an administration, in spite of its rhetoric
about leaving no child behind, which basically believes most citizens
should be on their own.
So there will not be the funding to make sure senior citizens can
afford prescription drug costs. No question about it. There will not be
the funding for expanding health care coverage for our citizens. No
question about it. And there certainly will not be the funding for
education and to leave no child behind.
Now, the President tried to argue the other day--it has already been
shot down--that there is a huge increase in the education budget. Mr.
President, some of it was forward funding from this past year. As it
turns out, over the last 5 or 6 years, this is the smallest percentage
increase we have seen except for one out of the last 5 years. That
hardly represents some dramatic, new investment in children.
So my question is, How do you leave no child behind when only 2
percent of the children who could benefit from early Head Start--2
years of age and under, the most critical years for learning--right now
benefit? That is all the funding we have. And there are really no
additional resources for early Head Start. Only 50 percent of the
children who can benefit from Head Start--that is, to give a head start
to the children who come from disadvantaged backgrounds--and there is
going to be a pittance for any additional funding--when 11 percent of
the children who could benefit from affordable child care--that is just
low-income families, much less working families, much less moderate-
income, middle-income families--11 percent who are of the eligible
children right now are able to benefit because we so severely underfund
early childhood development.
So we have a President who says he is committed to education, we have
a President who says he will leave no child behind, and we have tax
cuts that go to the wealthy. But will they benefit the families--one-
third of the children who live in low- and moderate-income families,
half of the children who live in low- and moderate-income families? We
have a tax cut proposal that makes it impossible for us to invest in
the health and skills and intellect and character of our children.
Frankly, ``leave no child behind'' becomes just a slogan, and I express
indignation about this.
There will be a pittance to make sure our children are kindergarten
ready, and then when it comes to some of the K-through-12 programs, let
me be really clear. Right now, the Title 1 Program for low- and
moderate-income children is funded at the 30-percent level. There is,
again, a pittance in this budget for any increase in that funding.
The IDEA program for children with special needs is vastly
underfunded. In my State of Minnesota, from the Governor to Democrat to
Republicans, they say: Live up to your 40-percent funding commitment,
Federal Government. Then we would have some additional resources to do
other things for children.
Guess what. In this budget we will see a pittance when it comes to
any increase in funding for the IDEA program for children with special
needs.
We have an education program called Leave No Child Behind, which is
going to rely on testing, testing which makes it clear that we should
not rely on one single standardized multiple-choice test which everyone
who does testing says we should not do, which is educationally
deadening; it puts the kids in a straitjacket; it puts the teachers in
a straitjacket. We will not have that.
What we will do is take a lot of schools in this country that have
been underfunded because they are in districts that are property-tax
poor--not rich; they can't have the same resources; they don't have the
same resources as the most affluent of suburbs--schools where children
come from homes where English is the second language, children who come
from homes where families have to move two or three or four times a
year because of inadequate housing, children who come from homes where
they are hungry when they come to school, children who come from homes
where they
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haven't had the good developmental child care; they haven't been read
to; they don't know how to use the computer; they haven't had any of
those opportunities; they come to kindergarten way behind--this budget
does nothing to make sure these children will have the same chance as
other children to reach their full potential. Instead, we have tax
cuts, 40 percent plus of the benefits going to the top 1 percent of the
population.
We have testing. All we are going to do is set up these kids, these
schools, and these teachers for failure. We are providing none of the
resources and none of the tools to make sure these children can achieve
and do well, but we are going to have tests and we are going to test
kids starting as young as age 8, every single year, and then we are
going to say after 3 years: Schools, if you don't make the grade, we
will flunk you and we will move to vouchers.
I think the people who deserve an F grade are the White House and
those people in the House and the Senate who do not seem to be willing
to be held accountable for the health, skills, intellect, and character
of all the children in our country. That, to me, merits a failing
grade.
I hope my party does not join in this tax-cutting frenzy. I hope we
will focus on honest tax cuts that benefit working families, middle-
income families and moderate-income families. I hope we focus on a
child care credit for all families so we will be helping all children.
I hope we get the help where it is needed. I hope this is not just one
huge bonanza for wealthy people.
Frankly, I say to Democrats, this is our moment of truth. Above and
beyond tax cuts that work for citizens in this country, we want to make
sure there are resources for investment. We must be willing to draw the
line and say to President Bush and Republicans: You go with your tax
cut plan, 40 to 44 percent of the benefits going to the top 1 percent;
we go for investment in children and education. President Bush, you
go for a tax cut plan with 44 percent of the benefits going to the top
1 percent; we go for expanding health care coverage. President Bush,
Republicans: You go for a tax cut plan that is Robin Hood in reverse,
with most of the benefits going to wealthy people; we go for making
sure our parents and grandparents can afford prescription drug
coverage. President Bush, you go for your tax cut, Robin Hood in
reverse, going to wealthy people in this country; we go for affordable
housing--that is what we are about. We are supposed to be the party of
the people, so let's try to make sure the tax cuts, in combination with
the investment, benefit the vast majority of people in this country.
I think it is terribly important for Democrats to find their voice
and for us to be as strong as possible, both in opposition to President
Bush's tax cut proposal going mainly to the wealthy and in enunciation
of what we stand for. We stand for some tax cuts that are honest tax
cuts that benefit the majority of families and citizens in our country,
not leaving out those families who are most in need of help, and in
addition investment in our children, in education, in health care. That
is what we are about.
I am lucky enough to be friends with Marian Wright Edelman, director
of the Children's Defense Fund, and her husband Peter, two wonderful
people of justice. The theme of the Children's Defense Fund has been
``Leave no child behind.'' That is what they are all about. President
Bush is now talking about, ``Leave no child behind.''
``Leave no child behind'' I take seriously. ``Leave no child behind''
is a beautiful way of calling on all of us in the United States of
America to be our own best selves. But if ``Leave no child behind'' is
just an empty slogan and we do not back up the rhetoric with resources,
and we don't put our money where our mouth is, and we don't make the
true investment, which is not in this tax cut proposal or in the budget
we are getting from this President, then, frankly, we will have engaged
in just symbolic politics. We will not have done well for children, all
the children in our country. That will be a profound mistake, and I
think we will not be the better for it.
Without trying to sound pseudo-anything, I look forward to this
debate. I am going to have a lot of amendments that are going to focus
on leaving no child behind. Education, leave no child behind; health
care, leave no child behind; housing, leave no child behind; violence,
leave no child behind. We are going to have votes on all of these. If
my colleagues have a better proposal for how not to leave any child
behind, I am all for it. I certainly do not see it in the proposal of
the President.
Mr. President, I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Enzi). The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. DURBIN. 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. DURBIN. Mr. President, I listened with great interest to the
speeches this morning on the Republican side of the aisle about the
President's State of the Union Address this evening. It is clear the
focal point of the President's speech will be his proposed tax cut.
It is interesting when I read the newspapers across Illinois and here
in Washington, DC, that the President is having a difficult time
convincing the American people that his tax cut is the right thing to
do. I have been around politics and politicians for decades. I cannot
think of an easier task than to sell people on the idea of cutting
their taxes. But it appears the President is having a tough time making
the sale even though he has suggested this is good for the economy and
that it will provide additional spending power for people in America.
Folks are a little skeptical. I think they have a right to be
skeptical. If you take a look at the President's proposed tax cut, you
will find that Americans like the idea of a tax cut until you suggest
to them that we really make choices here on Capitol Hill and in
Washington, DC--that you have to make a choice between a tax cut and
something else. Frankly, when it gets down to those choices, the
support of the American people for the President's proposed tax cut
starts to dwindle dramatically because I think the American people
understand the whole notion of a tax cut is based on an educated guess
of what our economy and our Government will look like--not just next
year but 5, 6, 7, 8, 9, and 10 years from now.
To say these projections are inaccurate is to be kind because,
frankly, they are not much more reliable than a weather report. Imagine
a weather forecast for a month from now. Would you take the umbrella or
not based on such a forecast? I doubt if many families would not. Yet
the President would have us basically say we will now chart the course
of America's Government spending for the next 10 years based on these
projections and guesses from economists in Washington.
Former President Harry Truman used to say he was looking throughout
his professional career for a one-armed economist because he said then
they wouldn't be able to say, ``on the other hand.'' He knew, as we
know, that even the best economists disagree. Even the best economists
are frequently wrong.
Most of the surplus the President is using as a basis for his tax cut
doesn't even arrive on Capitol Hill under their projections until 5
years from now. Almost 75 percent of it starts to arrive in the last 5
years of the 10-year period.
So it is reasonable to ask if we are thinking about projections in
our economy 5 years from now, how good were these same economists 5
years ago when they had to make an educated guess about what America
would look like today. There are a lot of factors that go into that
guess. You have to try to assume what the growth of the economy is
going to be, the number of people employed. You have to take
productivity and inflation into account.
Five years ago, the very best economists sat down with the very best
computers and then said this fiscal year we would experience a $320
billion deficit. That was their best guess 5 years ago. What do we
find? Right now we are experiencing a $270 billion surplus. They missed
it by $590 billion 5 years ago.
This evening the President will begin his speech with the assumption
that the economists are right; that we should really base all of our
plans and our policies based on economic projections 5 to 10 years from
now. I think people are genuinely skeptical; they
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understand we have had similar messages from previous Presidents. It
wasn't that many years ago that President Ronald Reagan arrived in
town. He suggested when he was elected in 1989 that a massive tax cut
was the best thing for America. He proceeded to convince a bipartisan
group in Congress to vote for that tax cut. The net result of that tax
cut was, frankly, a rocky road for the economy throughout his
Presidency.
Frankly, I never would have been elected to the House of
Representatives had the economy not been so bad in central Illinois in
1982, the second year of the Reagan Presidency. And equally, if not
more important, those tax cuts on top of his spending program led to
record deficits. We started accumulating more red ink and debt in
Washington than ever in our history after President Reagan had
convinced the Congress that a tax cut was the best medicine for
America.
Fortunately, in the last 8 years we have seen a turnaround. We have
seen a fiscally responsible approach. We have seen not only a reduction
in Federal spending, a reduction in the size of Government, but an
unprecedented era of prosperity. I think the American people value that
prosperity more than the promise of a tax cut. They understand that
like most free market economies, you will have your downturns. And we
are in one of them. I hope it is short lived and shallow. No one can
say.
But we want to do the right things here in Washington at this moment
with this President to make certain we get back on that track we were
on for 8 years under the previous administration.
I can recall in 1993 when the issue came to this Senate floor and to
the House of Representatives where I served, and President Clinton
suggested we had to take the deficit seriously. We had to put in a
combination of spending cuts and tax increases to finally get rid of
the deficit. Not a single Republican supported that proposal--not one.
It passed in the Senate because Vice President Gore cast the tie-
breaking vote.
We have layers of Republican quotes projecting that this idea of
giving, I guess, strong medicine to the American economy would be a
disaster; that it would really put an end to any prospect of economic
growth. Yet we found exactly the opposite occurred.
It is curious to me that President Clinton could come forward as he
did in 1993 with a projection for our economy that worked, give us the
hard news, face the lumps in the next election, and really come up with
a plan to help America. Most families and businesses agreed. For the
last 8 years, we have seen 22 million new jobs created in America, more
home ownership than ever in our history, inflation under control, the
welfare rolls coming down, violent crime coming down, and an expansion
across the board in the economy in virtually everything but the
agricultural sector.
We want to return to that. But many of us believe a President's
responsibility when it comes to leadership is not just to say what is
popular. Being for a tax cut is a popular thing to say. Yet the
President is having a tough time selling it.
One of the reasons he is having a tough time selling it is when you
take a look at the tax cut, you find out the top 1 percent of wage
earners in America under President Bush's tax cut receive 42.6 percent
of all of the tax benefits. The bottom 90 percent--people below about
$64,900 in income--receive 29 percent of the benefits.
The President's response is that is not fair to say because the
people in the top 1 percent pay all the taxes; they should get a bigger
cut. Not so. The people in the top 1 percent in America pay 21 percent
of the Federal income taxes. They get 42.6 percent of President Bush's
tax cut.
Who are these people? These are folks with an income above $319,000 a
year. These are people with an average income of $900,000. These are
the big winners tonight.
So when you hear the applause after the President says we need a tax
cut for America, you are going to hear it the loudest from the top 1
percent. They are the big winners. The folks in the bottom 80 percent
are not. These people in the top 1 percent will receive an average of
$46,000 in tax cuts under President Bush's tax plan, while the people
in the lower 60 percent, for example, will receive an average tax cut
of $227 a year.
So the President would have us risk the future of our economy by
basing a tax cut on projections 5, 6, 7, 8, 9, and 10 years from now;
and then he would turn around and, with those projections, have us
enact a tax cut not for the average working person, not for middle-
income families, not for people in Illinois struggling to pay heating
bills and tuition costs but, no, for people who make at least $25,000 a
month. They are the big winners.
Frankly, what it does, in putting all of this money into the tax cut,
is it ties our hands when it comes to important priorities for America.
Let me give you an example, for just a minute. The national debt is
$5.7 trillion. That is our mortgage. We have accumulated most of it in
the last 14 or 15 years. It is a mortgage that costs us every single
day in interest payments. How much is the interest payment on our old
mortgage? It is $1 billion a day--$1 billion in Federal taxes collected
every day to pay interest on old debt in America.
What could we do with $1 billion a day in America? Boy, I can think
of some things. Education, health care, investment in America's
infrastructure, medical research--these are items which I think most
American families value. But we take that amount of money from families
and businesses and individuals each day--$1 billion--to pay interest on
old debt.
Frankly, if we want to leave our children a great legacy, it is not a
legacy of giving a fat tax break to the wealthiest people in America.
The best legacy for our kids is to pay down this debt.
Let's burn the mortgage. Let's get it over with. If we are in a time
of surplus, let's balance the books once and for all. Shouldn't that be
our first priority?
If we go with the President's tax cut, let me tell you what it means.
Maybe not in the first year, but in the next several years we are going
to find our hands tied when it comes to investing in America.
I doubt there is anybody in this country who would argue with the
following statement: The future of America is going to be found in our
classrooms. If we do not have good teachers, quality schools, and
students learning, can we hope the 21st century will be an American
century? I do not think so. The President has put that in as a priority
but a much lower priority. The first priority is a big tax cut for the
top 1 percent of wage earners in America.
I wish to mention one other thing. I see my colleague from
Connecticut. I am going to defer to him in a moment.
Senator Mikulski of Maryland came up with a term today which I think
is important to think about. She said: We not only have a mortgage, we
have a balloon payment coming. Do you know what a balloon payment is?
When the baby boomers reach Social Security age and when they decide
they need Social Security and Medicare--guess what--the current system
is going to be truly taxed, and many of us are going to have to answer
as to whether or not, when we had a surplus, we prepared for that
balloon payment.
If you have a home and you know a balloon payment is coming, you
better get ready for it because then you are going to have to refinance
the home if you don't have the amount to pay. We are not going to have
the money to pay into Social Security and into Medicare if the
President's tax cut goes through as proposed. He will take the money
out of education. He is going to make a proposal, I understand, to
privatize Social Security, by taking money out of the Social Security
trust fund. He already raids the Medicare trust fund to pay for this
tax cut, primarily for the wealthiest people in America.
So you say to yourself, now I understand why the President is having
a tough time selling what seems on its surface to be such a popular
idea--the tax cut. If a politician can't sell a tax cut, how is he
going to sell the American people on a tough decision, something that
is painful? The President is not having good luck selling it because
the American people are skeptical. They think it is far more important
to empower families across America to get this economy moving again.
They think it is far more important to make
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necessary improvements in our future--in education, in health care, and
a prescription drug benefit under Social Security, Medicare.
Important, as well, is to pay down the national debt. You will not
hear much said about that tonight. It will be mentioned in passing that
we are going to take care of all these things--not to worry. But the
bottom line is, we know that is not the case. We need to be concerned
about it. We need to accept fiscal responsibility, as we did 7 or 8
years ago, in the hopes we can return to the prosperity of our economy
which we saw a few months ago.
I will listen carefully to the President's speech tonight. I am sure
my colleague from Connecticut will, as well.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Chair recognizes the Senator from
Connecticut.
Mr. LIEBERMAN. I thank the Chair and thank my friend and colleague
from Illinois for yielding the floor but also for his very astute and
targeted comments.
This is an important day. I rise to speak, with my colleagues, about
exactly the same matters that Senator Durbin addressed because they are
at the heart of our prosperity as a nation and the future of every
single American; and that is the state of our economy, the tax cuts
that President Bush will be advocating tonight, and the strategies that
we must adopt if we are to create the widest opportunities for the
largest number of our fellow Americans.
The President and all of us with him are facing a moment of truth
tonight. This is an important evening because the lives of every
American will be affected for years to come by how Congress and the
administration resolve the important fiscal and economic questions that
our Nation faces.
I am afraid, as the President prepares to address Congress and the
Nation tonight, that he is reaching for the wrong medicine. The
American economy appears to have a slight head cold right now. If we
take the medicine President Bush is offering, I am afraid we are going
to have a bad case of pneumonia.
I have spoken before about my opposition to the size and substance of
the President's proposed tax cut. It is a tax cut we can ill afford,
based on money that has not yet materialized, and it gives the most to
those who need it the least.
But the trouble with the President's plan is not just a matter of
numbers; the trouble is also with the values that it represents, such
as the value of work and rewarding work. Because instead of helping
those who are working hard around our country to become wealthy,
President Bush's tax proposal rewards those who already are wealthy and
do not need the tax cut he is going to give them. Instead of expanding
opportunity, and other great American values, the Bush tax cut
threatens our prosperity. Instead of honoring our obligations to our
parents and our children, the Bush tax cut leaves America unprepared to
adequately invest in education, health care, retirement security, and
national security.
I am not opposed to tax cuts. I know my friend from Illinois, and our
other colleagues, are not opposed to tax cuts either. I am for tax cuts
that honor America's values and prolong America's prosperity. I am for
tax cuts that are prowork, profamily, and progrowth. I am for tax cuts
that fit into the context of an overall sound budget framework because
our hard-won prosperity will surely wither if we do not balance tax
cuts with significant debt reduction and targeted investments that
benefit the greatest number of our citizens.
For 8 years, we have enjoyed a steady and remarkable level of growth
that actually has revolutionized longstanding assumptions about
economic expansion. After two decades of low growth, low productivity,
and high unemployment in the 1970s and the 1980s, technological
innovations--remarkable technological innovations--dramatically
improved the economy and have brought us the closest I have ever seen
in my lifetime to true full employment.
Now we are experiencing an economic downturn. It is not a recession,
as some, including some in the Bush administration, have called it. But
it is a slowdown in our rate of growth. We have a number of tools at
our disposal to keep the growth going.
I want to sound the alarm today that unless we deal wisely with the
bounteous growth we have had, we risk throwing it all away. Then the
current temporary slowdown will, in reality, become a recession. That
is what is on the line as we gather to hear President Bush's State of
the Union tonight.
The fact is that a new economy has emerged. Yet the administration's
policies seem rooted in the old economy. When you count interest costs
and other revenue expenses, the Bush tax cut plan weighs in at $2.3
trillion over the next 10 years. It would consume 96 percent of the
entire non-Social Security and non-Medicare surplus, leaving, by my
reckoning, just $100 billion for all other investments that we need to
make in national security, retirement security, education, prescription
drug benefits, and worker training. The money left over, therefore, is
clearly not enough.
What if the surpluses do not materialize? Remember, although we have
had 3 good years, all this talk of the trillions of dollars we are
arguing about spending is talk about projections; it is not money in
the bank. What if those surpluses don't materialize? Well, then, I
don't see how the administration, based on its budget plan and bloated
tax plan, would have any other options but to either raid the Social
Security and Medicare trust funds or to radically slash Government
spending. Indeed, I say that President Bush's tax cut threatens to
return us to the failed economic experiments of an earlier era of
ballooning deficits, high interest rates, high unemployment, and high
capital costs for business as well.
There is another serious shortcoming to the administration's plan. I
want to talk about it in a bit of detail for a few moments this
morning. President Bush's tax cut plan contains no business and growth
incentives which actually could help the economy lift itself out of the
slowdown it is in now and regain the extraordinary high levels of
growth we have enjoyed for years. With apologies to Gertrude Stein,
there is no ``there'' there when it comes to spurring on the New
Economy or innovation or productivity that have been the central
driving forces of it for America and America's families over the last
several years.
Let's look at some of the tax cut proposals President Bush is going
to recommend and see how they relate to the central question of how do
we get our economy growing vigorously again.
The estate tax. I am leaving aside whether you are for or against it
but trying to gauge the impact on the question of economic growth. The
estate tax changes create no economic or investment incentives. The
marriage penalty reform corrects a fairness problem. The broad rate
changes being described largely benefit an economic elite, as Senator
Durbin's chart showed. At least a third--depending on your reckoning,
as much as 43 percent--is going to people whose average income is
$900,000. That won't stimulate the economy.
It is hard to find very many economists, including those who are for
the Bush tax cut, who say it will have the effect of getting us out of
the economic slowdown we are in that has dropped the markets and begun
to lead to some layoffs. You can be for the Bush tax cut on various
grounds, and you can be against it on various grounds, but I don't hear
very many people arguing that it is the way to stimulate the economy.
Why? Because it won't move through the economy rapidly enough to have
an effect where it would count.
The fact is that the economic downturn that we have now is primarily
focused on the technology sector of the economy. That is why I think we
need to think about incentives for growth in that very same technology
sector which has driven the growth we have had over the last 8 years.
So what are the tools or how might we use a tax cut better?
First, let me address what I think would be the most equitable way to
return some of the dividends of our hard-won prosperity to those who
need it most. It is just fairness to help those families reward those
who are working hard to raise themselves up in America as a matter of
equity. For most Americans, the most crushing tax burden is not the
income tax. The tax that they
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pay most to Washington is not the income tax; it is the payroll tax,
the money taken out of their paychecks. It is a regressive tax. It is,
in fact, a tax on work.
Many of us here have been putting together proposals that we think
would reduce the work penalty by giving every working American a
refundable tax credit. That means it would go to people who don't pay
income taxes because their income is so low. Unlike the Bush tax cut,
which would bestow at least one-third of its benefits on the top 1
percent, whose average is income is $900,000, the payroll tax credit we
are talking about would provide real tax relief to middle-class working
families and to the lower income workers--not people who are not
working, but workers, those I have talked about who pay payroll taxes
or have it taken out of their paychecks but have no income tax
liability. Beyond that is fairness in sharing our growth with those who
need it most.
I think we have to act on business tax incentives that will target
the drivers of economic growth in our time in the new economy: Capital
investment, a skilled workforce, and productivity. While large
businesses have been driving our productivity gains by implementing
information technology, small firms, which still account for 98 percent
of employers, have been moving more slowly into the new economy simply
because they can't afford its entry fees. A potential fix here would
give small companies tax credits to invest--and invest now--in
information technology. This is like servers and network hardware,
broadband hookups, computers, and e-business software. Small business,
after all, accounts for 40 percent of our economy and 60 percent of the
new jobs; but fewer than one-third of small businesses are wired to the
Internet today.
This is a stunning statistic: Those that are wired--the small
businesses wired to the Internet--have grown 46 percent faster than
their counterparts that are unplugged. If we encouraged small business
owners to strive for information technology efficiency now, and phased
a credit out in a few years--if we couldn't afford it anymore--we could
keep productivity growing and help us grow out of the current economic
downturn.
Let me talk about a second potential business tax incentive tool, and
that would be one that would zero out--eliminate--capital gains taxes
for long-term investments in entrepreneurial firms.
I have long supported, since I came to the Senate in 1989, cuts in
capital gains to spur growth and encourage a strong venture capital
market. I remember being one of six members of my party who stood to
support the capital gains tax cut proposal that then- President Bush
proposed. Capital gains have been purged, in my opinion. We finally
adopted a broad-based capital gains cut in 1997, and I think that cut,
and earlier more targeted forms of it, have encouraged the boom in
entrepreneurship and startups that have institutionalized innovation in
the United States.
This country's entrepreneurial depth is an asset we must nurture, and
we can do so by cutting the capital gains rate to zero for long-term
investments in startups, small entrepreneurial firms.
In the new economy, finally, employers need a knowledgeable labor
force that adds value to the new technology. Right now, employers are
investing too heavily in remedial education to make up for failures in
the performance of our K-12 school system. Employers who are making
these remedial education investments to bring our workforce into the
new economy should be encouraged to do so with a new education tax
credit system--a business education tax credit system.
For the same reason, I am supportive of tax relief for low- and
middle-income families struggling to pay the cost of their children's
college education. We are talking about a tax deduction for up to
$10,000 a year that is spent by families in this country to educate
their children or themselves.
Those are three proposals where business tax cuts would have a direct
effect on sustaining economic growth and getting us back to the boom in
the American economy that we seem to temporarily have left.
At the end of the debate which President Bush will begin tonight, the
best approach, of course, is the responsible approach; the approach
that embraces the highest values and most far-reaching and broadly
shared goals of the American people.
The goal of any tax cut and prosperity plan cannot be short-term
politics. It has to be the long-term economic interests and values of
the American people.
We are poised at a crossroads: After 8 years of economic good
fortune, we can go forward and continue to pay down the debt, offer
sensible, broad-based tax cuts that are both personal and business, and
begin paying the IOUs we already owe for retirement benefits for baby
boomers; or we can turn back, choosing policies that will undermine our
productivity, reward the few, and leave education, health, retirement
security, and our national defenses underfunded.
That is a big choice with serious consequences for each and every
family and each and every individual in our country. I know the
American people want to move forward toward expanded opportunities and
continued prosperity. That is the heart of what it means to be an
American. I hope we, their representatives, in Congress and in the
administration, from both parties, will have the common sense in good
times we had when they were bad to build on 8 years of success with
fiscal discipline and sound economic policies and humane investments in
our future.
That is what is on the line tonight as all of us in both Chambers and
the American people listen to President Bush deliver his first State of
the Union. I thank the Chair. I thank my colleagues. I yield the floor,
and I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. REED. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REED. I understand the time is controlled by the Democrats until
noon.
The PRESIDING OFFICER. Until the hour of noon, yes.
Mr. REED. Mr. President, I ask unanimous consent to speak as in
morning business for 20 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REED. I thank the Chair.
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