[Congressional Record Volume 147, Number 112 (Friday, August 3, 2001)]
[Senate]
[Pages S8870-S8871]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    TREASURY BORROWING AND TAX CUTS

  Mr. CORZINE. Mr. President, I rise to discuss a recent report by the 
Treasury Department that has received very little attention in 
Washington, but it is sending a very significant signal, message, about 
the recently approved tax bill to the financial analysts around the 
world and market participants around the globe.
  On July 30, the Treasury Department announced that it expects to 
borrow from the public $51 billion during the quarter ending in 
September. This was a whopping reversal from an estimate in a similar 
Treasury report issued just 3 months earlier.
  Back in April, Treasury said that it expected to pay down a total of 
$57 billion in debt in this very quarter--a negative cashflow swing of 
an incredible $108 billion.
  Let me repeat that. For this quarter, we have gone from an estimate 
showing that we would reduce our debt by $57 billion, to an estimate 
that we will increase our debt by $51 billion--again, a $108 billion 
swing in just 3 months.
  I used to serve on the Treasury Department's Debt Advisory Committee 
as a private citizen, so perhaps this report by the Treasury struck me 
as a little more troubling than it did many of my colleagues. It is a 
serious reversal and worthy of a few minutes to discuss its 
implications because it is a precursor of things to come.

  The first and perhaps most important point to make is this: We are 
financing the tax rebates that are so much ballyhooed by borrowing, 
something about which the American people would be more troubled if 
they knew it were happening. We are going into debt in order to finance 
these tax cuts. That is not a function of any accounting tricks. It has 
nothing to do with trust fund accounting. My comments are not 
political. It is a simple undeniable statement of fact--a fact that is 
a precursor of things to come, the end result of this flawed and 
overreaching tax cut program.
  The tax rebates will cost $40 billion this fiscal year. But we don't 
have $40 billion lying around, as many advocates expected. As a result, 
the Treasury Department says it will now have to borrow every dollar 
that will then be sent out in a check from the Treasury. In addition, 
we will have to pay out $500 million in additional interest this year 
just to finance these tax rebates.
  It may be the right thing to do for stimulating the economy, but it 
comes at a real cost. And that is before we unfold all the other 
elements of this tax cut over the years.
  To be fair, it is true that in the previous quarter the Government 
ran a surplus. If you consider the fiscal year as a whole, there is 
still a chance we will see an on-budget surplus. But it is undeniable 
that in this quarter we will be in deficit, not just an on-budget 
deficit but a unified deficit, meaning we enter Medicare trust fund 
moneys and maybe even potentially Social Security trust funds.
  Thus, every tax cut check that goes out is being financed by 
borrowing, with its accompanying interest costs. That is not what we 
told the American people when we passed this tax cut. We said we were 
just giving back their money; that is, excess revenues. We didn't say 
we would go out and borrow to finance that tax cut. We did not say we 
would increase our debt to finance the tax cut. We said we had the 
money.
  Now the truth is out. We don't. That is one truth that was 
conveniently left out when the administration sent out its $34 million 
notice taking credit for the tax cut.
  Beyond the need to finance the tax rebates, Treasury was also forced 
to build up its cash balance because of a gimmick--one of many 
gimmicks--that was built into this recently enacted tax bill. This is 
one that really bothers me, actually more than the rebates, as you 
could make an argument that we need that as a slowing economy occurs.
  That legislation shifted the due date for corporate taxes from 
September 17 of this year to October 1. This was nothing more than 
accounting magic to allow us to spend more money next year without 
showing a raid on the Medicare surplus. But this particular gimmick has 
come at a real cost. By delaying the receipt of those revenues,

[[Page S8871]]

the Treasury will pay, at a minimum, an additional $40 million in 
interest. That is actually $40 million that comes out of the Treasury's 
pocket and goes into individual corporations that benefit from the 
delay in payment of their taxes.
  Think about that. To finance an accounting gimmick to provide 
political cover in fiscal year 2002, taxpayers are going to pay an 
extra $40 million. I guess in our budget that sounds like not too much. 
Where I come from, it is a lot. And seeing some of the things we argue 
for, whether it is our apple growers or other folks who are in need of 
emergency aid, it is a lot of money--$40 million that could have been 
used to improve education, protect our environment, strengthen our 
national defense. In my view, that is just plain wrong. Unfortunately, 
it is only the beginning of a number of the magic tricks we have going 
on with regard to this tax cut.

  Unfortunately, this $40 million gimmick was one but maybe the 
smallest. Some of the tax cuts don't become effective for several 
years. Others phase out before a 10-year timeframe, as we talked about. 
A number of extenders, which we know are going to be there, are left 
out. The AMT is ignored. And in what has to be the most egregious 
gimmick in the history of tax policy, the whole tax cut will expire 
after 9 years.
  I am new to government. I am new to politics. But I find this 
gimmickry outrageous. It is intellectually dishonest, and it would 
never have been tolerated in most of the financial transactions in 
which I participated in my private life. In fact, if I ever tried to 
use such gimmickry when I was back on the street, I would have been 
called to task by the SEC or the U.S. attorney, and for good reason.
  Having said all this, I recognize that despite my personal concerns 
about the premises of the tax bill and its many gimmicks, we don't have 
the votes to fix the problem now. It is inevitable that we will have to 
fix it eventually if we want to address the needs of America, to invest 
in America the way we talked about with regard to education, with 
regard to agriculture, with regard to the health care system and our 
military. Otherwise, we will just find ourselves further in debt and 
without the resources to fix Social Security and Medicare, to provide a 
meaningful prescription drug benefit, or these things that we need to 
do in our national defense.
  For those who continue to insist that there is plenty of money for 
the tax cut, just read the latest statement from the Treasury 
Department. I suspect it is only the beginning.
  I ask unanimous consent that a copy of the Treasury Department 
statement be printed in the Record.
  There being no objection, the statement was ordered to be printed in 
the Record, as follows:

             Treasury Announces Market Financing Estimates

       The Treasury Department announced today that it expects to 
     borrow $51 billion in marketable debt during the July-
     September 2001 quarter and to target a cash balance of $55 
     billion on September 30. This includes a borrowing of $61 
     billion in marketable Treasury securities and the buyback of 
     an estimated $9\1/2\ billion in outstanding marketable 
     Treasury securities. In the quarterly announcement on April 
     30, 2001, Treasury announced that it expected to pay down a 
     total of $57 billion in marketable debt and to target an end-
     of-quarter cash balance of $60 billion. The change in 
     borrowing reflects a number of factors, most significantly 
     the shift in the September 15 corporate tax due date to 
     October 1 and the need to finance in this quarter the tax 
     rebates.
       The Treasury also announced that it expects to pay down $36 
     billion in marketable debt during the October-December 2001 
     quarter and to target a cash balance of $30 billion on 
     December 31.
       During the April-June 2001 quarter, the Treasury paid down 
     $163 billion in marketable debt, including the buyback of 
     $9\1/4\ billion in outstanding marketable securities, and 
     ended with a cash balance of $44 billion on June 30. On April 
     30, the Treasury announced that it expected to pay down $187 
     billion in marketable debt and to target an end-of-quarter 
     cash balance of $60 billion. The increase in the borrowing 
     was the result of a shortfall in receipts and lower issues of 
     State and Local Government Series securities.

  Mr. CORZINE. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  (Mr. CORZINE assumed the Chair.)
  Mr. DORGAN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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