[Congressional Record Volume 147, Number 129 (Monday, October 1, 2001)]
[Senate]
[Pages S9942-S9943]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   IMMEDIATE ECONOMIC STIMULUS THROUGH THE EDUCATION OPPORTUNITY TAX 
                                 CREDIT

  Mr. ALLEN. Mr. President, I rise to share with my colleagues my 
concern about our economy, the loss of jobs, and the economic stimulus 
package being considered by Members of the House, the Senate, and the 
White House. Mr. Thomas, the Senator from Wyoming, mentioned some of 
the economic stimulus package. In my view, an education opportunity tax 
credit should be included in any economic stimulus package put together 
in the coming weeks.
  We know our economy is in serious trouble. The economy grew just 0.2 
of 1 percent in the second quarter of this year, compared to 4.1-
percent average growth in the year 2000. The most important thing we 
can do at this point is increase consumer spending, especially on 
durable goods. Orders for durable goods dropped in August, as reported 
by the Commerce Department, all of which was due to the technology and 
transportation sectors. We have addressed the transportation industry 
partially, with the airline industry stabilization bill, but the 
technology sector still remains unaddressed.
  Consumer confidence is dropping like a stone. The University of 
Michigan Consumer Sentiment Index released last week, September 28, 
indicated that consumer confidence dropped 21 percent. Although the 
correlation between consumer confidence and spending is not strong in 
the short term, it is strong in the mid-to-long term. The No. 1 reason 
for this precipitous drop in consumer confidence is because of where 
consumers thought they would be in their own lives 6 months out. One 
financial market analyst was recently quoted in the Washington Post as 
saying that the size of this decline in consumer confidence will 
translate into reduced spending in the next 6 months. That confidence 
decline is not over. Consumers, clearly, are on a very cautious 
mindset. That is why we must take measures to improve consumer 
confidence and spending again.
  There is a debate currently underway in our country over which types 
of tax cuts are the answer to providing immediate economic growth. In 
my judgment, we must focus on individual tax cuts that will immediately 
lift consumer confidence and result in greater consumer spending--the 
idea that we need to increase corporate savings and investment 
necessities, that those companies have revenues in the first place, 
revenues that come from consumer spending.
  Instead, what is needed, as the Wall Street Journal editorialized 
today, is ``temporary, not permanent tax breaks--and preferably for 
consumers, not business.''
  The Wall Street Journal article was very clear as to the 
ineffectiveness of corporate tax cuts in order to spur the economy, 
citing Gregory Mankiw, an economist at Harvard, who favors permanently 
abolishing the corporate income tax, but states that doing so now would 
not result in immediate investment. He is quoted as saying:

       The problem now is there's a lot of uncertainty, which is 
     inducing people to wait, which depresses aggregate demand, 
     which in turn exacerbates the economic slowdown.

  The Wall Street Journal further opines that:


[[Page S9943]]


       . . . stimulating spending and making members feel secure 
     would be more effective than reducing corporate tax rates as 
     a way to boost economic growth.

  In fact, we all know our economy, this free market, is all about the 
consumer. If consumers do not buy, companies will not have revenue. If 
companies do not have revenue, they will not be able to invest, nor 
will companies need employees to be in those jobs to produce. If they 
do not invest, if they are not creating jobs, our economy will not grow 
out of this economic sluggishness.

  The technology sector, which was once the leading force behind 
economic growth and productivity, is now the most significant 
detractor, getting hit the hardest by the contractions in spending and 
investment. There has been a 19-percent drop in technology spending, 
including a 45-percent drop in personal computer orders and a 14.5-
percent drop in software and equipment spending.
  Other sources of capital and growth have dried up as well. Banks 
continue to limit their exposure to the high-technology sector and 
tighten lending standards, cutting off resources at a time when money 
is already scarce. Venture capital has all but disappeared from this 
sector. First-round venture capital funding has already fallen $1.84 
billion, down 87 percent from the previous year during the second 
quarter of 2001.
  This has all led to widespread layoffs within the tech sector over 
this past year. Job cuts in the high-tech industries of 
telecommunications, computers and electronics--those job cuts are up 13 
times over what they were last year.
  Through the end of August, high tech accounted for nearly 40 percent 
of the 1.1 million job cuts so far in 2001.
  Just to put that in perspective, that is 4 times more, 4 times 
greater than the entire post-attack airline industry layoffs--over 
400,000 jobs lost in the tech sector versus, obviously, a great concern 
over 100,000 jobs lost in the airline industry sector. The total tech 
job sector cuts in August alone exceeded all of the cuts for the year 
2000.
  This technology sluggishness is clearly harmful for our future. 
Technological advancements are how America and our economy will compete 
and succeed internationally, and technological sector growth and rapid 
advances in productivity have been the base of our economic growth in 
the past and will be a vital key to our competitiveness in the future. 
As we look at technology in the future, whether it is computers, 
whether it is clean coal technology, whether it is fuel cell 
technology, these are important for future competitiveness, our quality 
of life, and good jobs in the future.
  The lifeline to our economy, consumer spending, has been seriously 
dampened by the terrorist attacks which occurred on September 11, 2001. 
That is why I would like to bring the attention of my colleagues back 
to a bill I introduced in March of this year, the Educational 
Opportunity Tax Credit of 2001. This proposal will provide a $1,000-
per-child computer purchase tax credit which families can also use, not 
just to buy computers but printers, monitors, educational software, or 
Internet access. However, this tax credit would not apply to tuition at 
a private school. This would provide the exact type of boost both 
consumer spending on durable goods and the technology sector need. 
Maybe we could limit this tax credit to 1 or 2 years. Even with that 
limitation I would estimate it would provide upwards of $20 billion in 
new consumer spending.
  Think of parents who have a child in school. If they could buy their 
son or daughter a computer or some peripherals, a printer, they would 
say: Gosh, if I do it this year or next year, I will get a tax break 
for it. That will induce that spending.
  It clearly would induce computer and technology spending, especially 
if it is available for 2 years, thus propelling the technology sector 
while also improving educational opportunities for students. The fact 
is, experience shows that even a small, temporary reduction in taxes 
can bring about huge increases in computer sales.

  In South Carolina, they had a sales tax holiday on computers for just 
3 days. CPU sales increased more than tenfold; 1,060 percent in those 3 
days.
  In the Commonwealth of Pennsylvania they eliminated the sales tax on 
computers for 1 week. CPU sales increased sixfold; 615 percent in that 
time.
  My Educational Opportunity Tax Credit would not just impact computer 
sales but also software makers, Internet access providers, printer, 
monitor and scanner manufacturers as well.
  In South Carolina they realized a 664-percent and 700-percent 
increase in monitor and printer sales, respectively, with only a 5-
percent tax break. We know that consumer spending accounts for two-
thirds of all economic activity, which is largely flat and has been 
flat this summer and weakening in the last report in our economy.
  The Education Opportunity Tax Credit represents the right solution 
for our economy. No. 1, it increases consumer spending on computers and 
related technology. No. 2, it injects $20 billion into the weakest and 
one of the very important links in our economy. No. 3, it provides 
previously out-of-reach education and technology opportunities for 
families.
  As I said before, I am willing to work with my colleagues in 
addressing the best way to implement this proposal. We can shorten the 
applicable timeframe from the original bill. We can look at a different 
credit level to make sure we get the maximum economic impact for 
minimum fiscal impact to the Treasury. But I am convinced that 
combining consumer-oriented tax cuts with appreciation of what is 
really going on in the technology sector can improve consumer 
confidence, accelerate consumer spending, and provide the technology 
sector the revenues they need to reinvest and return our economy to 
strong growth and also provide more good paying jobs for the people of 
America.
  Mr. President, I yield the remainder of my time, and I suggest the 
absence of a quorum.
  The PRESIDING OFFICER (Mr. Johnson). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. FRIST. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Bingaman). Without objection, it is so 
ordered.
  Mr. FRIST. Mr. President, I understand we are in morning business.
  The PRESIDING OFFICER. We are in morning business.

                          ____________________