[Congressional Record Volume 147, Number 26 (Thursday, March 1, 2001)]
[Senate]
[Pages S1735-S1736]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           THE PRESIDENT'S BUDGET AND TAX REDUCTION PROPOSAL

  Mr. BOND. Mr. President, one of the very lucky things we have around 
here is the opportunity to listen to some very intelligent people 
giving us their ideas on a lot of important subjects. Recently, I have 
had the pleasure of listening to Chairman Alan Greenspan, who spoke 
before the Budget Committee a couple weeks ago. Yesterday, we had our 
budget director, David Walker, speaking to the Centrist Coalition and 
also had an opportunity to listen to Larry Lindsey, the President's 
economic adviser, who used to serve on the Federal Reserve. I have 
learned a good number of things from them that I think are very 
important for the discussions we have about the budget and how we deal 
with the tax surplus that is confronting our country. As previous 
speakers have said, we are no longer in a cold-war world; we are no 
longer trying to get out of the budget deficit problem.
  I think a couple things need to be clarified about some remarks I 
heard earlier. No. 1, it was not the tax increase of 1993 that got us 
out of the budget deficit situation. I served on the Budget Committee 
during those, what I would say were very frustrating years--1993, 1994, 
1995. We went back and checked. Do you know something very interesting? 
In spite of the fact that President Clinton and the then-majority 
Democrats passed the largest tax increase in history, it did not do 
anything to lessen the deficits.
  We went back and checked because the President's budget proposal, I 
think for four straight budgets, proposed deficits of $200 billion a 
year, roughly, as far as the eye could see.
  There was no decrease in the deficit because they proposed to spend 
the money. We raised taxes to deal with the deficit, but then they 
raised spending to cover up the tax increases.
  So it was not until we got into those battles in 1995--and those were 
difficult battles; I don't want to relive those days--but those were 
important battles because we finally made the point--with a Republican 
Congress and a Democratic President--that we had to start getting 
spending under control to get out of this deficit spiral that was 
driving us further and further into debt. And we did it.
  And we did something else, again, without the support of the 
President initially, and with some, but not a lot of, support from the 
other side of the aisle. We cut the capital gains tax rate. At the 
time, CBO and others were saying: Oh, the capital gains cut is going to 
cost revenue to the Federal Government.
  Some of us believe that when you cut taxes, particularly on an 
optional activity, such as selling property--which triggers capital 
gains--you can actually get more sales of property; that we could 
unlock some of the locked-in gains. We did, and capital gains revenues 
went up significantly.
  But lo and behold, something else very important happened. As we took 
away the disincentive to roll over old investments and put them into 
new investments, we started investing them in something new called 
information technology, which enabled us to develop much more 
productive ways of doing things. Lo and behold, the productivity of 
this economy grew. When the productivity grows, that means we can get 
more goods and more services--a better quality--without paying more, 
and we can pay better wages.

  We also had welfare reform, which took significant portions of the 
people off welfare and put them to work. Again, I am proud that the 
Republican Congress was able to pass a bill three times--two vetoes--
and then it was finally signed, and we got more people working.
  So we were really generating things with our economy. We had good 
jobs, and productivity was up. Our lucky streak ran out, probably back 
in September, as the indicators turned down. We are seeing signs that 
are not encouraging, that the business cycle may be going into a 
downturn. But we believe that for the long term, this country is going 
to continue to grow. The budget projections of the CBO, and the blue 
chip indicators, suggest that even if we do have these budget 
downturns, we still are probably going to have about a $5.6 trillion 
tax surplus over the next 10 years. It might be lower; it might be 
higher.
  Most likely, if we can continue to invest in productivity--the rate 
of productivity growth we have had in recent years--it will be higher. 
So the question becomes, What do we do with that $5.7 trillion tax 
surplus? David Walker says we ought to pay down all the debt as quickly 
as we can.
  Chairman Greenspan used to say that, but now he has said: Wait a

[[Page S1736]]

minute, you can only pay down so much of the debt because a lot of it 
is in bonds and other long-term instruments that people are not going 
to want to sell because a lot of us have given savings bonds, and other 
things, to our kids or people who have made long-term commitments to 
saving. So we cannot get them all back.
  So Alan Greenspan, when he testified before the Budget Committee, 
said it is time that we start reducing taxes. We need to continue to 
pay down the debt in a steady, consistent, prompt manner, but do not 
try to get rid of all of it, and start now with some tax relief.
  So the President has come up with a proposal for that $5.6 trillion: 
To use $2.9 trillion of it for Social Security and Medicare; to use 
$1.6 trillion to reduce the tax burden of those who are paying taxes; 
and set aside another $1 trillion for needed investments--actually, 
expenditures that may come along, and that is after we have the 
ordinary inflationary growth. So that is even after Government grows 
by, say, 4 percent in discretionary spending.
  The one thing that everybody agrees we should not do with that 
surplus is lock it in totally to more mandatory spending, entitlements, 
because that is what, according to David Walker, is going to break this 
country 20, 30, 40 years down the road, if we do not do something about 
it. We cannot continue to lock in automatic spending because you never 
can get out of it; it is too difficult.
  So the President said he wants to give a $1.6 trillion tax reduction. 
Our Democratic friends say: We want only $900 billion in tax reduction. 
The President said: We are going to increase spending some. But 
apparently--my guess is--my colleagues on the other side of the aisle 
would want to spend the $700 billion difference between what they want 
as a tax reduction and what we want as a tax reduction.
  Frankly, I think that is a bad way to go because our economy is 
suffering right now under the highest income tax rates we have ever had 
in peacetime. Mr. President, 21.6 percent is what we pay in taxes now. 
The only time it was higher was in 1944, at the height of World War II. 
That tax rate is too high. It threatens to choke off the money flowing 
into productivity, to businesses, to families, to make their own 
decisions, to make their own investments. So I believe $1.6 trillion is 
a reasonable figure. A portion of that must go to reduce marginal 
income tax rates.
  Just a few years ago, the top marginal rate was 28 percent. A lot of 
people, if you poll them, will say: Yes, the Federal Government could 
take 28 to 30 percent of a rich person's income, take it in taxes.
  The President is only lowering the top rate to 33 percent, but he is 
giving across-the-board tax relief to all Americans paying income tax. 
Six million people, the lowest income people paying income tax, could 
be dropped off the rolls. For a family of four making $35,000 a year 
now paying income tax, they would pay none. For a family of four making 
$50,000 a year, their income tax burden would be cut in half.
  A question has been raised in this Chamber about progressivity. Are 
you continuing to tax the wealthy more? The answer to that is yes. You 
drop 6 million people off at the bottom; then you have the wealthy. 
Anybody who makes over $100,000 a year--we could say that is relatively 
high income--right now those people making over $100,000 a year pay 
61.9 percent of the total income taxes collected. After the Bush plan 
is fully implemented, they would pay 64.1 percent. They would be paying 
a larger share, more than 2 percent more of the taxes. If we want 
progressivity, President Bush's plan is important.
  Why is it important? Because only with that tax reduction can we make 
available the continuing investment in productivity that keeps the 
economy growing. Individuals, small businesses are making investments 
in other companies and in their own companies. There are some 20.7 
million small businesses in America taxed at personal rates. They are 
proprietorships, personal operations--a farm, a small store, a computer 
consultant--or they are partnerships or sub S corporations. That means 
the individual tax rate affects the business.
  A few years ago, after the 1985-86 tax cut, they only had to pay 28 
percent as a top rate on their income. They used that money to invest 
in new equipment, in new employees, to expand their business. Now some 
of them at some rates pay as much as 44 percent as a top rate in their 
business. That is a significant cut in the amount of money that is 
available to invest in business and expand productivity.
  I asked Alan Greenspan: Why is it that marginal tax rate cuts are the 
best thing we can do for the economy?
  He said: For the long-term, the best thing you can do for the economy 
is to reduce marginal rates because reducing marginal rates puts more 
money into the investments we need--into technology, equipment that 
improves productivity, provides better wages and better economic 
opportunity and more jobs.
  That is basically the reason why the Bush tax plan makes a great deal 
of sense.
  There are a lot of other ideas around here. I am sure we will have an 
opportunity to work on them. For the long term, if we want to keep our 
economy growing--and I think we certainly do--we need a balanced 
approach that does as the President said: No. 1, reduces the debt as 
far as it can; provides tax reductions that will be put into productive 
investment; and puts money into high priority items, items such as 
education, items where we can see a real need.
  We also need to reform Medicare, including prescription drug options 
for seniors in assisting low-income seniors. We ought to get about 
working to reform Social Security as well. As we do those things, 
leaving money in the private sector is the best way to make sure our 
country can progress.
  There are those on the other side who say we are giving tax money 
back to the wealthy to purchase a Lexus. Frankly, we make a lot of cars 
in Missouri; we don't make the Lexus. If they have earned the money, 
the question is, How much of that do you tax away? If they buy a Ford 
or a Chevy or a Dodge minivan, they are putting a Missourian to work. 
That is not all bad. We could have that if we adopt a sound economic 
plan, a sound budget, and a responsible tax reform proposal. I believe 
the President's proposal is sound.
  We have heard statements made, a lot of statements, that the top 1 
percent of the income earners only pay 20 percent or 21 percent of the 
income tax. That is not true. They pay 34 percent of the income tax. 
They would wind up paying more under the Bush plan. It does keep 
progressivity as well as providing relief up and down the line.
  I hope the American people will take the time to find out the truth 
about the economics of the budget and this tax relief plan. I believe 
if they do, they will find that this is a plan that makes sense. It is 
balanced. It meets the priority needs of the American people, and it is 
the best recipe we have to see continued economic growth, good jobs, 
increasing productivity, and a better way of life for all Americans.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Smith of Oregon). The clerk will call the 
roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent the order for the 
quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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