[Congressional Record Volume 147, Number 29 (Wednesday, March 7, 2001)]
[Senate]
[Pages S1988-S1992]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAHAM (for himself and Mr. Corzine):
  S. 481. A bill to amend the Internal Revenue Code of 1986 to provide 
for a 10-percent income tax rate bracket, and for other purposes; to 
the Committee on Finance.
  Mr. GRAHAM. Mr. President, with my colleague, I rise today to 
introduce the Economic Insurance Tax Cut of 2001.
  In his 1862 message to Congress, President Abraham Lincoln surveyed 
our fractured national horizon and concluded that:

       The occasion is piled high with difficulty and we must rise 
     to the occasion. As our case is new, so we must think anew 
     and act anew.

  The same could be said about our current circumstances. The United 
States has not experienced a recession since the one that occurred in 
1990-1991. At that time, the old economic assumptions were shattered 
and new ones born. Over the past 5 years, it seemed as if nothing could 
stop the American economy from roaring on.
  It was during this comparatively serene time that then-candidate 
George W. Bush, in the debates leading up to the Iowa caucus in the 
winter of 1999-2000, announced his plan to cut taxes by $1.6 trillion 
over the next 10 years.
  The landscape has shifted dramatically since the winter of 1999 to 
the spring of 2001. That shift in the landscape did not just occur in 
Seattle. Today's headlines are filled with ominous news. Economic 
activity in the manufacturing sector declined in February for the 
seventh consecutive month. DaimlerChrysler has laid off 26,000 workers. 
Whirlpool has slashed the estimates of its earnings and plans 6,000 job 
cuts. Gateway is dismissing 3,000 workers, 12.5 percent of its 
workforce. Over the past 2 months, layoffs totaling more than 275,000 
jobs have been announced.
  This bad news has had, as would be expected, a negative effect on 
consumers' confidence. Consumers' confidence has plunged 35 points from 
an all-time high of 142.5 in September of 1999.
  When their confidence is shaken, consumers stop spending. When 
consumers stop spending, the economy gets worse. When the economy gets 
worse, consumer confidence falls further. The cycle feeds on itself.
  In an attempt to staunch the bleeding, the Federal Reserve has twice 
lowered interest rates in January. Monetary policy, the adjustment of 
short-term interest rates, is a trusted and often effective tool in 
stimulating the economy. I am confident that the Federal Reserve will 
continue to exercise wise judgment.
  But there is a growing consensus that more must be done, that fiscal 
policy can also play an important role in boosting the economy, if not 
immediately then certainly in the second half of this year. In his 
testimony before the Senate Budget Committee in January, Chairman Alan 
Greenspan of the Federal Reserve Board stated:

       Should the current economic weakness spread beyond what now 
     appears likely, having a tax cut in place may in fact do 
     noticeable good.

  On February 13, Treasury Secretary O'Neill told the House Ways and 
Means Committee that he, too, supports the use of fiscal policy as a 
tool to boost the economy. Mr. O'Neill said:

       To the extent that getting it [the surplus] back to them 
     [the American people] sooner can help stave off a worsening 
     of the economic slowdown, we should move forward immediately.

  Finally, during the President's speech to the Nation a week ago, he 
stated:

       Tax relief is right and tax relief is urgent. The long 
     economic expansion that began almost 10 years ago is 
     faltering. Lower interest rates will eventually help, but 
we cannot assure that they will do the job all by themselves.

  Senator Corzine and I agree. We think there are several perspectives 
from which this issue must be viewed. The first is the contextual 
perspective: How large a tax cut can the American economy and the 
Federal fiscal system sustain? We share the belief that we are facing a 
serious demographic challenge in the next 10 to 15 years, as large 
numbers of persons born immediately after World War II will retire and 
place unique strains on our Nation's Social Security and Medicare 
system. That is but one example of the kinds of steps that we need to 
be cognizant to take and prepare for which will utilize a portion of 
our current surplus.
  After we have determined how large a tax cut is prudent in the 
context of these other responsibilities, the next step is crafting a 
plan that can, in fact, be helpful in averting a prolonged economic 
slowdown. According to economists, a tax cut aimed at stimulating the 
economy should have four characteristics.
  First, the tax relief should be simple enough to be enacted quickly. 
One of the principal criticisms of the attempts to use fiscal policy to 
stimulate the economy on a short-term basis is that, historically, 
Congress and the President have been sufficiently slow in reaching 
agreement for enactment of such tax cuts that by the time the tax 
relief is available, the problem has passed. The longer Congress 
deliberates, the less likely tax relief will get to the American public 
in time to do some good. Therefore, a simple, straightforward approach 
is absolutely essential to getting a bill passed quickly.
  The more components this tax relief includes, the more debate, 
discussion, deliberation, and the likelihood of procrastination.
  The second characteristic is the tax relief must be significant 
enough to have a measurable effect on the economy. The economists we 
have consulted suggest that tax relief in the amount of $60 billion to 
$65 billion would boost the gross domestic product by one-half to 
three-quarters of a percentage point. At a time when the economy is at 
virtually zero growth, that would be a welcome improvement.
  Third, the tax relief must be conspicuous. The more transparent the 
tax cut, the more positive effect it will have on consumer confidence.
  Finally, the tax relief must be directed at those who will spend it. 
Two-thirds of the Nation's economic output is based on consumer 
spending. Recessions are largely a result of a letup in that consumer 
demand. Common sense suggests that broad-based tax cuts, the bulk of 
which are directed at low- and middle-income American families, are 
much more likely to be the tax cuts that will stimulate consumption. 
Any

[[Page S1989]]

tax cut that claims to provide an economic stimulus must be measured 
against these four standards.
  When scrutinized this way, both the President's proposal and the plan 
which was reported last week by the House Ways and Means Committee, and 
may, in fact, be voted on by the full House as early as tomorrow, 
display significant weaknesses.
  One, context: At $1.6 trillion, the Bush plan would consume nearly 75 
percent of the non-Social Security, non-Medicare surplus, when interest 
costs are included. That leaves precious few resources for other 
important initiatives like desperately needed prescription drugs for 
our seniors, modernization of our armed forces, improving our schools.
  No funds would be left to add to the debt reduction that can come 
through the application of the surpluses coming into Social Security 
and Medicaid. The Ways and Means proposal is a more expensive down-
payment of the Bush plan in that its implementation is pushed forward 
by a year.
  Two, simplicity: The President's tax cut plan contains several 
complicated proposals that will require Congress to carefully consider 
their ramifications. This deliberation is likely to delay enactment of 
the President's plan until it is too late to stimulate the economy.
  Three, sufficiency: The president's budget tallies the total tax 
relief for 2001 at $183 million. For 2002, the total is $30 billion. 
Tax relief at that low level will do little to boost the economy. The 
President's tax relief is so small because it is phased in over a five-
year period. Phasing in tax relief is exactly the opposite policy to 
adopt if your goal is economic stimulus. Even the Ways and Means 
package, despite applying retroactively to 2001, falls far short of 
injecting tax cuts into the economy during the second half of this 
year. That plan provides only $10 billion of ``stimulus'' during this 
period.
  Four, propensity to Spend: Economic stimulus occurs when consumers 
are encouraged to spend. Only one of the proposals in the President's 
plan meets this standard. Eighty percent of all taxpayers are affected 
by changes to the 15 percent tax bracket. Therefore, the President's 
idea for creating a new 10 percent bracket--which has the effect of 
lowering the 15 percent tax rate--will apply quite broadly across those 
paying income taxes. In contrast, three-quarters of all taxpayers are 
unaffected by changes to the remaining four tax brackets. Yet, nearly 
60 percent of the total cost of both the President's and the Ways and 
Means' tax cut packages are devoted to these upper rate cuts.
  Earlier this year, noted economist Robert Samuelson wrote in the 
Washington Post that the time had come for tax cuts whose purpose was 
to stimulate the economy. He too, criticized the President's tax plan 
as being poorly designed for this purpose. Specifically, he argued that 
the President should make his tax cuts retroactive to the beginning of 
this year and focus more toward the bottom income brackets.
  Samuelson also argued that other proposals, whatever their merit--
marriage penalty relief, estate tax repeal, new incentives for 
charitable giving--should wait their place in line; that the first 
place in this line of America in the year 2001 should be economic 
stimulation to keep this economy from falling into a deep ditch.
  Mr. President, I ask unanimous consent that the columns by Robert 
Samuelson be printed in the Record immediately after my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See Exhibit 1.)
  Mr. GRAHAM. Mr. President, Senator Corzine and I have an alternative 
that makes the improvements to the President's tax cut plan suggested 
by Mr. Samuelson, and makes it consistent with the characterization 
which I have outlined. Senator Corzine and I have an alternative that 
builds upon a proposal included in the President's tax cut plan.
  President Bush has proposed the creation of a new 10-percent rate 
bracket. His proposal is that for incomes up to $6,000 for an 
individual and $12,000 for a couple, that the first $6,000 or $12,000 
would be taxed at 10 percent rather than the current 15 percent. The 
problem with his proposal is that he proposes to implement this change 
over 5 years. It is not until the year 2006 that this plan is fully in 
place.
  Senator Corzine and I propose to fully implement this 10-percent 
bracket retroactive to January of this year. In addition, we suggest 
the bracket needs to be expanded so the incomes on which it would apply 
would be $9,500 for an individual, and $19,000 for a married couple.
  There are several reasons why we believe their proposal makes sense.
  First, it provides tax relief to a broad range of taxpayers. Every 
American income tax payer would participate in this plan. All couples 
with income tax liabilities would save $950 annually, or have their tax 
liability eliminated entirely.
  Second, our proposal provides significant tax relief to middle-income 
families who are more likely to spend their additional money, and, 
therefore, create demand within our economy.
  Our plan would be more effective in stimulating our economy, 
particularly at this time of concern about our economic future.

  This proposal will lower taxes by $60 billion in both 2001 and 2002.
  I point out this contrast with the President's plan with the lower 
taxes in 2001 by less than $200 million, and the plan of the House Ways 
and Means Committee which will lower taxes in 2001 by approximately $10 
billion.
  We believe this infusion of energy into the economy--$60 billion in 
this and the next year--is the first portion of tax relief which will 
be strong enough to be able to have a meaningful effect on the economy.
  We would propose that a large portion of the first year's tax relief 
be reflected in workers' paychecks during the second half of the year, 
precisely the time that would be needed to forestall a prolonged 
economic downturn.
  The 10-year cost of this proposal is $693 billion. This is less than 
half of the President's total plan, and it could be reduced further if 
the Congress were to decide it wished to sunset any portion of this tax 
cut before the end of the 10-year period.
  Fourth, this proposal is simple. There is no reason this proposal 
could not be enacted by July 4. The Treasury would be directed to 
adjust its withholding tables as quickly as possible. Families could 
expect to see an increase in their paychecks by a reduction in the 
amount withheld for income tax in time for their August vacations. 
Instead of staying home that week, they could take their children to 
the beach or take themselves out to dinner. They could use the money to 
fix the car and head for the mountains, or fix up the backyard and 
celebrate with a barbecue.
  In doing so, they could begin to reverse the cycle--to put money back 
into the economy, to feed expansion, to stimulate growth, to create 
jobs, to increase Americans' confidence in their economic future.
  This tax cut would truly be the gift that keeps on giving.
  There is one additional benefit to proceeding in the manner that 
Senator Corzine and I are suggesting. Enacting this stimulative tax cut 
first and waiting until later to address other tax matters will give 
Congress time to evaluate the seriousness of the economic downturn and 
to evaluate how effective this economic insurance policy has been in 
putting a foundation under that downturn.
  In particular, this time will give us a better idea of whether the 
slowing economy will adversely affect the surplus projections on which 
additional tax cuts are predicated.
  Again, I return to President Lincoln's suggestion during one of the 
most trying times of his service as President of the United States.

       This is not the time for timidity and hand-wringing. This 
     is the time for swift, bold action. The occasion is piled 
     high with difficulty, and we must rise with the occasion.

                               Exhibit 1

                [From the Washington Post, Jan. 9, 2001]

                           Time for a Tax Cut

                        (By Robert J. Samuelson)

       For some time, I have loudly and monotonously objected to 
     large federal tax cuts. The arguments against them seemed 
     overwhelming: The booming economy didn't need further 
     stimulating; the best use of rising budget surpluses was to 
     pay down the federal debt. But I regularly attached a large 
     asterisk to this opposition. A looming economic slowdown or 
     recession might justify a big tax cut. Well, the asterisk is 
     hereby activated.
       By now, it's clear that most commentators missed the 
     economy's emerging weakness.

[[Page S1990]]

     Indeed, a recession may already have started. Industrial 
     production has declined slightly since September. Christmas 
     retail sales were miserable; at Wal-Mart, same-store sales 
     were up a meager 0.3 percent from a year earlier. The story 
     is the same for autos; sales declined 8 percent in December. 
     Montgomery Ward is going out of business. Last week's 
     surprise interest-rate cut by the Federal Reserve confirms 
     the large miscalculation.
       A tax cut is now common sense. It would make it easier for 
     consumers to handle their heavy debts and, to some extent, 
     bolster their purchasing power. The fact that President-elect 
     George W. Bush supports a major tax cut is fortuitous. But 
     his proposal is poorly designed to combat recession. Although 
     the estimated costs--$1.3 trillion from 2001 to 2010--are 
     large, they are ``back-loaded.'' That is, the biggest tax 
     cuts occur in the later years. In 2002, the tax cut would 
     amount to $21 billion, a trivial 0.2 percent of gross 
     domestic product (national income). This would barely affect 
     the economy.
       What Bush needs to do is accelerate the immediate benefits 
     (to resist a slump) while limiting the long-term costs (to 
     protect against new deficits). This would improve a tax 
     plan's economic impact and political appeal. The required 
     surgery is easier than it sounds:
       Bush's across-the-board tax-rate cuts should be compressed 
     into two years--making them retroactive to Jan. 1, 2001--
     instead of being phased in from 2002 to 2006. The idea is to 
     increase people's disposable incomes, quickly. (Under the 
     campaign proposal, today's rates of 39.6, 36, 31 and 28 
     percent would be reduced to 33 and 25 percent. The present 15 
     percent rate would remain, but a new 10 percent rate would be 
     created on the first $6,000 of taxable income for singles and 
     $12,000 for couples.) Similarly, the proposed increase in the 
     child tax-credit, from $500 to $1,000, should occur over two 
     years, not four.
       The distribution of the tax cut should be tilted more 
     toward the bottom and less toward the top. One criticism of 
     the original plan is that it's skewed toward the richest 
     taxpayers, who pay most of the taxes. (In 1998 the 1.6 
     percent of tax returns with incomes above $200,000 paid 40 
     percent of the income tax.) The criticism could--and should--
     be blunted by reducing the top rate to only 35 percent, while 
     expanding tax cuts for the lower brackets. This would 
     concentrate tax relief among middle-class families, whose 
     debt burdens are highest.
       Bush should defer most other proposals: the gradual phase-
     out of the estate tax, new tax breaks for charitable 
     contributions and tax relief from the so-called marriage 
     penalty. Together, these items would cost an estimated $400 
     billion from 2001 to 2010. They are the most politically 
     charged parts of the package and the least related to 
     stimulating the economy. Proposing them now would muddle what 
     ought to be Bush's central message: a middle-class tax cut to 
     help the economy.
       The case for this tax cut rests on a critical assumption. 
     It is that the slowdown (or recession) could be long, deep or 
     both. If it's just a blip--as some economists think--the 
     economic argument for a tax cut disappears. The economy will 
     revive quickly, aided by the Fed's lower interest rates. Then 
     the debate over a tax cut should return to political 
     preferences. Do we want more spending, lower taxes or debt 
     reduction? My preference would remain debt reduction. But I 
     doubt that the economic outlook is so charmed.
       Just as the boom--the longest in U.S. history--was 
     unprecedented, so may be its aftermath. The boom's great 
     propellant was a buying binge by consumers and businesses. 
     Both spent beyond their means. They went deep into debt. Put 
     another way, the private sector as a whole has been running 
     an ever-widening ``deficit,'' says Wynne Godley of the Jerome 
     Levy Economics Institute of Bard College. By his calculation, 
     the deficit began in 1997 and reached a record 8 percent of 
     disposable income in late 2000. Household debt hit 100 
     percent of personal disposable income, up from 82 percent in 
     1990.
       What may loom is a protracted readjustment. ``An increase 
     in private debt relative to income can go on for a long time, 
     but it cannot go on forever,'' writes Godley. People and 
     companies reduce their debt burdens by borrowing less and 
     using some of their income to repay existing loans. The 
     private-sector ``deficit'' would shrink. But this process of 
     retrenchment would hurt consumer spending and business 
     investment, which constitute about 85 percent of the economy.
       It's self-defeating for government to exert a further drag 
     through growing budget surpluses. Of course, government could 
     spend more. But politically, that isn't likely--and spending 
     increases take time to filter into the economy. A tax cut 
     could be enacted quickly and enables people to keep more of 
     what they've earned. Roughly speaking, the Bush tax cuts 
     could raise disposable incomes of middle-income households 
     (those between $35,000 and $75,000) by $1,000 to $2,500. This 
     would make it easier for consumers to manage their debts and 
     maintain spending. It's also an illusion to think that lower 
     interest rates (through Fed cuts and government-debt 
     repayment) can instantly and single-handedly stimulate 
     recovery.
       ``The danger of a severe and prolonged recession is being 
     seriously underestimated,'' writes Godley. If you believe 
     that--and I do--then a tax cut that made no sense six months 
     ago makes eminent sense now.
                                  ____


               [From the Washington Post, Feb. 14, 2001]

                        Who Deserves a Tax Cut?

                        (By Robert J. Samuelson)

       The economic case for a tax cut seems compelling. The U.S. 
     economy is unwinding from an unstable boom. ``Animal 
     spirits''--the immortal phrase of economist John Maynard 
     Keynes--took hold. Consumers overborrowed or, dazzled by 
     rising stock prices, overspent. Businesses overinvested 
     thanks to strong profits and cheap capital. Both consumers 
     and businesses will now curb spending: consumers made 
     cautious by high debts, stagnant (or falling) stocks and 
     fewer new jobs; businesses deterred by surplus capacity and 
     scarcer capital. A tax cut would cushion the spending 
     slowdown.
       Of course, we don't yet know the slump's seriousness. In 
     the final quarter of 2000, business investment dropped at an 
     annual rate of 1.5 percent; in the first quarter of 2000, it 
     rose at a rate of 21 percent. Consumer spending rose at a 2.9 
     percent rate in the last quarter, but within that, spending 
     on ``durables'' (cars, appliances, computers) dropped 3.4 
     percent, again at annual rates. These were both large 
     declines from earlier in the year. In the first quarter, the 
     gains had been 7.6 percent and 23.6 percent.
       Consumer spending (68 percent of gross domestic product) 
     and business investment (14 percent) constitute four-fifths 
     of the economy. If they are in retreat, the economy is--
     almost by definition--in trouble. (Housing, exports and 
     government represent the rest.) The case against a tax cut is 
     that the spending slowdown will be mild; it will be checked 
     by the Federal Reserve's cut in interest rates. Perhaps. But 
     I'm skeptical. If businesses have idle capacity and consumers 
     have excess debts, lower interest rates may not stimulate 
     much new borrowing.
       Nor will large budget surpluses automatically preserve 
     prosperity. This argument is (to put it charitably) absurd. 
     The surpluses are the consequence--not the cause--of the 
     economic boom and stock market frenzy, which created a tidal 
     wave of new tax revenues. The big surpluses were a pleasant 
     dividend. But now they may depress the economy by removing 
     purchasing power.
       This is easy to grasp. Suppose the budget surplus were a 
     huge sum: say, $1 trillion or about 10 percent of GDP. Would 
     anyone deny the drag on economic growth? Personal and 
     corporate income would be reduced by the amount of the 
     surplus. This drag could be offset only if the resulting drop 
     in interest rates and repayment of federal debt created an 
     equal stimulus. Though conceivable, this is hardly certain 
     and--in my view--unlikely. Today's surplus is only $200 
     billion to $300 billion, or about 2 to 3 percent of GDP. But 
     the same reasoning applies. The surplus doesn't mechanically 
     create demand or spending and, quite probably, does the 
     opposite.
       A year ago, a tax cut would have been folly. Private 
     spending was booming. But a tax cut now is not an effort to 
     ``fine tune'' the economy. It's the logical response to the 
     end of the private boom--an attempt to prevent a ``bust'' by 
     restoring some of people's incomes. Whose incomes? Who 
     deserves tax cuts? These (to me) are the harder questions.
       President Bush's across-the-board rate cuts would give the 
     largest dollar tax cuts to the wealthiest Americans, because 
     they pay most taxes. In 2000, the richest 10 percent of 
     Americans--whose incomes begin at about $100,000--paid 66 
     percent of the federal income tax and 50 percent of all 
     federal personal taxes (including payroll and excise taxes), 
     estimates the Congressional Joint Committee on Taxation.
       Within this group, the wealthiest one percent--with incomes 
     above $300,000--paid 34 percent of income taxes and 19 
     percent of all taxes. Over time, these shares have increased. 
     In 1977 the richest 10 percent paid 50 percent of income 
     taxes and 43 percent of all federal taxes. There are two 
     reasons for this trend: (a) the rich's incomes grew faster 
     than everyone else's; and (b) tax relief went more toward the 
     lower half of the income spectrum.
       If you like income redistribution for its own sake, this is 
     wonderful. But the growing gap between those who pay for 
     government and those who receive its benefits creates a 
     dangerous temptation. It is to tax the few and distribute 
     to the many. Though politically expedient, expanded 
     government programs may have little to do with the broader 
     national interest. They may simply make more people and 
     institutions dependent on Washington and the political 
     process. Taxes must be fairly broad-based if the public is 
     to weigh the pleasure of new government programs against 
     the pain of higher taxes.
       As originally proposed, Bush's plan was avowedly political. 
     It aimed to restrain government spending by depriving 
     government of some money to spend. But Bush is now selling 
     his program as an antidote to economic slump. Ironically, 
     this strengthens the case for skewing the tax cut toward 
     middle- and lower-income households. Almost certainly, their 
     debt burdens are higher than upscale America's. they may also 
     spend more of any tax cut than the rich, providing greater 
     support to the economy.
       Finally, it's true that an excessive tax cut would invite 
     future deficits. How to balance these competing pressures is 
     what we will debate. My preference is to accelerate the 
     introduction of Bush's across-the-board rate cuts, with one 
     exception; I would cut the top rate of 39.6 percent to 35 
     percent, instead of Bush's 33 percent, and use the savings to 
     broaden tax cuts at lower income levels.
       I would also accelerate the increase in the child tax 
     credit--from $500 to $1,000--but

[[Page S1991]]

     defer Bush's other proposals (ending the estate tax, bigger 
     charitable deductions). This would raise the overall tax 
     cut's immediate economic impact and reduce the long-term 
     budget costs.
       As we debate, we should not idealize budget surpluses. They 
     are simply paper projections, based on various assumptions, 
     including strong economic growth. If the growth doesn't 
     materialize, neither will the surpluses. A slavish effort to 
     preserve the surpluses could perversely destroy them.
                                  ____


                [From the Washington Post, Mar. 7, 2001]

                        Tax Cuts: The True Issue

                        (By Robert J. Samuelson)

       The tax and budget debate is essentially a quarrel about 
     political philosophy. President Bush wants to limit the size 
     of government by depriving it of more money to spend. His 
     Democratic critics want government to keep as much in taxes 
     as possible, because they want to spend it. In fiscal 2000 
     federal taxes represented a post-World War II record of 20.6 
     percent of gross domestic product (national income). Over a 
     decade, Bush wants to nudge that below 19 percent of GDP, 
     while Democrats prefer to keep it above 20 percent. That's 
     the central issue between them--and they're trying to obscure 
     it.
       We have diehard liberals preaching the virtues of reducing 
     the federal debt, not because they believe in smaller 
     government but because this makes them seem frugal, cautious 
     and even conservative. Meanwhile, President Bush flaunts his 
     proposed spending increases for education and Medicare, not 
     because he believes in bigger government but because they 
     make him seem humane, sensitive and even liberal. Both sides 
     are fleeing their traditional stereotypes: liberals as 
     extravagant spenders, conservatives as cruel cheapskates.
       The result is calculated confusion. The antagonists 
     informally deemphasize their central dispute--the size of 
     government--and shift the debate to side issues (they hope) 
     will disarm their opponents. For example:
     Does a faltering economy need a tax cut?
       This is Bush's ace. Consumer confidence has dropped for 
     five straight months; in January existing-home sales fell 6.6 
     percent. The more the economy weakens, the harder it is for 
     Democrats to resist tax cuts. There's a certain common-sense 
     appeal to bolstering people's purchasing power by reducing 
     their taxes. A year ago President Clinton proposed only $350 
     billion in tax cuts over a decade. Now many Democrats talk in 
     the $700 billion to $1 trillion range--much closer to Bush's 
     $1.6 trillion.
     Do Bush's budget numbers add up?
       No, say critics. His budget skimps on paying down the 
     federal debt--all the Treasury bonds and bills issued to 
     cover past budget deficits. Worse, the tax cut might create 
     future deficits when combined with programs not in the 
     present budget: an anti-missile defense and private accounts 
     for Social Security, for instance. All this is possible, 
     especially if the surplus forecasts turn out (as they might) 
     to be too optimistic. Still, the critics' case is wildly 
     overstated.
       Between 2002 and 2011, Bush projects budget surpluses of 
     $5.6 trillion. This is defensible; the Congressional Budget 
     Office made a similar estimate. The tax cut would reduce the 
     surplus by $1.6 trillion and require an extra $400 billion in 
     interest payments. This leaves a surplus of $3.6 trillion. Of 
     that, Bush would use $2 trillion for debt reduction. (From 
     2001 to 2011, the debt would drop from $3.2 trillion to $1.2 
     trillion. Interest payments would decline to below 3 percent 
     of federal spending, down from 15 percent in 1997.)
       Now we're at $1.6 trillion. Bush proposes almost $200 
     billion in new spending--mainly for changes in Medicare, 
     including a drug benefit. Bush labels the remaining $1.4 
     trillion in surplus a ``reserve'' against faulty estimates, 
     further debt reduction or more spending. All the possible 
     claims on the reserve (the missile defense, private accounts 
     for Social Security) could exhaust it. But if you're trying 
     to make Congress set spending priorities--as Bush is--his 
     approach isn't unreasonable.
     If there's a tax cut, who should get it?
       Politically, this is Bush's Achilles' heel. He says that 
     taxes belong to the people who earned them--not the 
     government. Okay. The political problem is that most federal 
     taxes are paid by a small constituency of the well-to-do and 
     wealthy. In 2001 the richest 10 percent of Americans--
     those with incomes above $107,000--will pay 68 percent of 
     the income tax and 52 percent of all federal taxes, 
     estimates the Congressional Joint Committee on Taxation. 
     With its across-the-board rate reductions, Bush's plan 
     give them the largest dollar cuts. Citizens for Tax 
     Justice, a liberal advocacy group, estimates that the 
     richest one percent get 31 percent of the income-tax cuts 
     (slightly below their share of income taxes, 36 percent). 
     Democrats are aghast; they want smaller tax cuts to 
     concentrate benefits on households under $100,000.
       To handicap the tax debate, watch these issues. If the 
     economy weakens further, pressure for tax relief will 
     intensify. But so will pressure to redirect the benefits down 
     the income ladder. My view--stated in earlier columns--is 
     that the economy needs a tax cut. I would accelerate Bush's 
     across-the-board rate cuts and the doubling of the child 
     credit (from $500 to $1,000). But I would cut today's top 
     rate of 39.6 percent only to 35 percent, not 33 percent, as 
     Bush proposes. All this would maximize the tax cut's 
     immediate effect on the economy.
       Like Bush's critics, I think the long-term budget 
     projections are too uncertain to enact his full tax package 
     now; so I would defer action on his other proposals 
     (abolishing the estate tax, marriage-penalty relief, new 
     charitable deductions). But unlike his critics, I think Bush 
     is correct on the central issue of government's size. The 
     real choice now is not between cutting taxes and paying down 
     the debt. If immense surpluses emerge, Congress--Democrats 
     and Republicans--will spend them. Even last year's modest 
     surplus spurred Congress to a spending spree.
       It's the wrong time for huge spending increases. The 
     retirement of the baby boom generation, beginning in a 
     decade, will expand government commitments. Retirement 
     benefits will inevitably increase, exerting pressure for 
     higher taxes. If we raise spending now, we will begin this 
     process from a higher base of spending and taxes--that will 
     ultimately have to be paid by today's children and young 
     adults. This would be a dubious legacy.
  Mr. GRAHAM. Mr. President, I ask unanimous consent to have printed in 
the Record the text of the bill.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 481

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Economic 
     Insurance Tax Cut of 2001''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.

     SEC. 2. 10-PERCENT INCOME TAX RATE BRACKET FOR INDIVIDUALS.

       (a) Rates for 2001.--Section 1 (relating to tax imposed) is 
     amended by striking subsections (a) through (d) and inserting 
     the following:
       ``(a) Married Individuals Filing Joint Returns and 
     Surviving Spouses.--There is hereby imposed on the taxable 
     income of--
       ``(1) every married individual (as defined in section 7703) 
     who makes a single return jointly with his spouse under 
     section 6013, and
       ``(2) every surviving spouse (as defined in section 2(a)),

     a tax determined in accordance with the following table:

The tax is:e income is:
10% of taxable income..................................................
$1,900, plus 15% of the excess over $19,000............................
$5,830, plus 28% of the excess over $45,200............................
$23,764, plus 31% of the excess over $109,250..........................
$41,511.50, plus 36% of the excess over $166,500.......................
$88,617.50, plus 39.6% of the excess over $297,350.....................
       ``(b) Heads of Households.--There is hereby imposed on the 
     taxable income of every head of a household (as defined in 
     section 2(b)) a tax determined in accordance with the 
     following table:

The tax is:e income is:
10% of taxable income..................................................
$1,425, plus 15% of the excess over $14,250............................
$4,725, plus 28% of the excess over $36,250............................
$20,797, plus 31% of the excess over $93,650...........................
$38,777, plus 36% of the excess over $151,650..........................
$91,229, plus 39.6% of the excess over $297,350........................
       ``(c) Unmarried Individuals (Other Than Surviving Spouses 
     and Heads of Households).--There is hereby imposed on the 
     taxable income of every individual (other than a surviving 
     spouse as defined in section 2(a) or the head of a household 
     as defined in section 2(b)) who is not a married individual 
     (as defined in section 7703) a tax determined in accordance 
     with the following table:

The tax is:e income is:
10% of taxable income..................................................
$950, plus 15% of the excess over $9,500...............................
$3,582.50, plus 28% of the excess over $27,050.........................
$14,362.50, plus 31% of the excess over $65,550........................
$36,434.50, plus 36% of the excess over $136,750.......................
$94,250.50, plus 39.6% of the excess over $297,350.....................
       ``(d) Married Individuals Filing Separate Returns.--There 
     is hereby imposed on the taxable income of every married 
     individual (as defined in section 7703) who does not make a 
     single return jointly with his spouse under section 6013, a 
     tax determined in accordance with the following table:

The tax is:e income is:
10% of taxable income..................................................
$950, plus 15% of the excess over $9,500...............................
$2,915, plus 28% of the excess over $22,600............................
$11,882, plus 31% of the excess over $54,625...........................
$20,755.75, plus 36% of the excess over $83,250........................

[[Page S1992]]

$44,308.75, plus 39.6% of the excess over $148,675.''..................
       (b) Inflation Adjustment To Apply in Determining Rates for 
     2002.--Subsection (f) of section 1 is amended--
       (1) by striking ``1993'' in paragraph (1) and inserting 
     ``2001'',
       (2) by striking ``1992'' in paragraph (3)(B) and inserting 
     ``2000'', and
       (3) by striking paragraph (7).
       (c) Conforming Amendments.--
       (1) The following provisions are each amended by striking 
     ``1992'' and inserting ``2000'' each place it appears:
       (A) Section 25A(h).
       (B) Section 32(j)(1)(B).
       (C) Section 41(e)(5)(C).
       (D) Section 42(h)(3)(H)(i)(II).
       (E) Section 59(j)(2)(B).
       (F) Section 63(c)(4)(B).
       (G) Section 68(b)(2)(B).
       (H) Section 132(f)(6)(A)(ii).
       (I) Section 135(b)(2)(B)(ii).
       (J) Section 146(d)(2)(B).
       (K) Section 151(d)(4).
       (L) Section 220(g)(2).
       (M) Section 221(g)(1)(B).
       (N) Section 512(d)(2)(B).
       (O) Section 513(h)(2)(C)(ii).
       (P) Section 685(c)(3)(B).
       (Q) Section 877(a)(2).
       (R) Section 911(b)(2)(D)(ii)(II).
       (S) Section 2032A(a)(3)(B).
       (T) Section 2503(b)(2)(B).
       (U) Section 2631(c)(2).
       (V) Section 4001(e)(1)(B).
       (W) Section 4261(e)(4)(A)(ii).
       (X) Section 6039F(d).
       (Y) Section 6323(i)(4)(B).
       (Z) Section 6334(g)(1)(B).
       (AA) Section 6601(j)(3)(B).
       (BB) Section 7430(c)(1).
       (2) Subclause (II) of section 42(h)(6)(G)(i) is amended by 
     striking ``1987'' and inserting ``2000''.
       (d) Additional Conforming Amendments.--
       (1) Section 1(g)(7)(B)(ii)(II) is amended by striking ``15 
     percent'' and inserting ``10 percent''.
       (2) Section 1(h) is amended by striking paragraph (13).
       (3) Section 3402(p)(1)(B) is amended by striking ``7, 15, 
     28, or 31 percent'' and inserting ``5, 10, 15, 28, or 31 
     percent''.
       (4) Section 3402(p)(2) is amended by striking ``15 
     percent'' and inserting ``10 percent''.
       (e) Determination of Withholding Tables.--Section 3402(a) 
     (relating to requirement of withholding) is amended by adding 
     at the following new paragraph:
       ``(3) Changes made by section 2 of the economic insurance 
     tax cut of 2001.--Notwithstanding the provisions of this 
     subsection, the Secretary shall modify the tables and 
     procedures under paragraph (1) through the reduction of the 
     amount of withholding required with respect to taxable years 
     beginning in calendar year 2001 to reflect the effective date 
     of the amendments made by section 2 of the Economic Insurance 
     Tax Cut of 2001, and such modification shall take effect on 
     the first day of the first month beginning after the date of 
     the enactment of such Act.
       (f) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2000.
       (2) Amendments to withholding provisions.--The amendments 
     made by paragraphs (3) and (4) of subsection (d) shall apply 
     to amounts paid after December 31, 2000.

  Mr. CORZINE. Mr. President, I am pleased to join with my 
distinguished colleague from Florida, Senator Graham, in introducing 
the legislation to establish a new 10-percent tax bracket.
  This bill would provide a simple, fair, and fiscally responsible tax 
cut that can be enacted quickly, and that can provide an important 
insurance policy against the risk of an economic slowdown, a slowdown 
that to most observers appears to be more real and potentially deeper 
than perceived even as early as in January of this year.
  To me, there is little question that our economy needs stimulus, 
fiscally as well as monetarily, to return to a moderate growth path. 
The question for policymakers is how to make that happen.
  Some, including Fed Chairman Alan Greenspan, have questioned whether 
Congress is capable of enacting a tax cut quickly enough to prevent a 
recession or even help lift us out of one on a timely basis. I think we 
can. In any case, as many other economists, Chairman Greenspan has 
argued that tax cuts would be helpful once an economic downturn is upon 
us, if a tax cut were implemented expeditiously.
  To make any tax cut effective as an economic insurance policy, 
Congress and the President need to reach agreement quickly. To 
facilitate such an agreement, we are proposing that Congress defer 
consideration of the long list of worthy, and maybe some less worthy, 
tax cut proposals currently under debate, and, for now, adopt a very 
straightforward, simple approach.
  President Bush has already proposed the creation of a new 10-percent 
rate bracket for income of up to $12,000 for couples who are currently 
taxed at 15 percent. The corresponding level for single taxpayers, 
under the President's proposal, would be $6,000. However, as originally 
proposed, the Bush rate cut would not be fully effective until 2006.

  Senator Graham and I are proposing to immediately--and retroactively 
for this year--create a 10-percent rate bracket and increase the 
threshold of that bracket to $19,000 for married taxpayers and $9,500 
for individuals.
  There are several reasons why this 10-percent compromise makes sense 
to us. First, it provides equitable relief to taxpayers at all 
different income levels. All couples with income tax liabilities would 
save $950 annually or have their tax liability eliminated entirely.
  Second, middle-class families are more likely to spend a tax cut than 
the wealthier families favored under some aspects of the President's 
plan. Our proposal would be more effective in boosting the economy now.
  Third, our proposal would put roughly $60 billion of the annual non-
Social Security surplus into a retroactive tax cut. This is the amount 
that economists tell us is needed to achieve a noticeable economic 
impact this year. At this level, we would expect that tax cut to boost 
GDP by one-half to three-quarters of a percentage point.
  Fourth, because of its simplicity, the proposal could be debated, 
enacted, and implemented very quickly. I think the latter is very 
important. In fact, if the President and the bipartisan congressional 
leadership were to come to an agreement, announce an agreement on this 
package, business and consumer confidence in private spending could be 
bolstered almost immediately. Later, once the proposal is signed into 
law, withholding tables could be adjusted in a matter of weeks. That is 
where the simplicity comes in. By contrast, many of the President's and 
Congress's proposals are not only controversial and would draw lengthy 
debate, but would take much longer to be able to be implemented into 
law.
  Finally, while providing a real economic stimulus up front, the cost 
of our proposal is something that is doable within the current context 
of our budget. The cost of our proposal is roughly $700 billion. This 
would not preclude further debt reduction, tax cuts, or spending 
priorities, such as improvements in education, as the President has 
suggested, and prescription drug coverage, or increases in defense 
spending.
  By contrast, the President's original proposal provides very limited 
stimulus up front--only $21 billion in 2001--yet threatens to starve 
the Government of needed resources in later years, especially when our 
obligations to Social Security and Medicare begin to grow 
substantially.
  Our 10-percent compromise asks both parties to temporarily give up 
their favorite tax cut proposals in the interests of a quick compromise 
which would benefit the country, which would apply the principle that a 
rising tide lifts all boats. We do not accept the common wisdom that 
Washington is incapable of acting quickly. There is a need. When it 
really matters, we know we can keep things simple, and we can get 
things done, and make them happen.
  I congratulate Senator Graham. And I very much appreciate the 
opportunity to introduce this legislation. We look forward to working 
with the Congress to try to get a quick and stimulative and simple 
proposal through the Congress.
                                 ______