[Congressional Record Volume 147, Number 159 (Friday, November 16, 2001)]
[Senate]
[Pages S12002-S12004]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DOMENICI (for himself, Mr. Bond, and Mr. Frist):
  S. 1717. A bill to provide for a payroll tax holiday; to the 
Committee on Finance.
  Mr. DOMENICI. Mr. President, I send to the desk to be appropriately 
referred a bill that is cosponsored by Senator Bond and Senator Frist. 
This is going to be called the payroll tax holiday bill.
  Mr. President, we have been talking a lot about a war, and we are 
beginning to read stories about the great valor and the fantastic 
American military machine, of which the American people ought to be 
very proud. Clearly, we have, in months and years past, supplied a very 
large amount of the American tax dollars to provide for adequate 
defense. This war we have waged for a few weeks against hatred and 
terrorism--while that war changed us forever, it also showed the world 
what a tremendous military force America is and what a great idea we 
have with democracy and capitalism matched up, with growth and 
prosperity--what a tremendous idea it is.
  The idea and ideal was received on the streets of cities in 
Afghanistan with cheering for the few Americans who were part of it. 
This morning, we hear a communique from one of our military talking 
about how they are being received.
  At the same time that we are paying for this and asking for our 
wonderful volunteer men and women of the military, there is another 
war, and it is a tough one. It has to do with an economy that for 11 
years was at the very peak of performance--almost without comparability 
in any period of economics that we note here in America. Now that 
economy, as one might have predicted, is going into one of the normal 
and natural downturns--except each one of these recessions are 
different. The qualities are different. What happened to get us there 
is different. There are also a lot of similarities. If we don't engage 
in the war that is also on our plate, called recession, in as unified a 
manner as we attacked the war on terrorism, with a proposal to help the 
economy, thus help our people--that is, Democrat and Republican--and 
gather together and say we each, Democrat, Republican, and the White 
House, have a plan--a lot of Senators have plans. We only had one vote, 
and it is pretty obvious that the Democrat plan can't muster the 60 
votes that is going to be required to get a tax package through the 
Senate.
  We all know the vote. The distinguished Senator from Montana, the 
chairman of the Finance Committee, has done a yeoman's job in trying to 
put together a partisan package. I have been there when you had to do 
that, and then I have had to defend it and try to get it through, with 
the entire party on the other side being opposed. I have listened and 
watched and seen this distinguished Senator do his very best. If the 
Republican plan--which may be the President's plan--is called up, I 
regret to say that I think it is going to get the same kind of 
treatment from the other side of the aisle. I can't say why each side 
has decided that they have a better plan, but that is what has 
happened. Let's hope that it is nothing more than that and that both 
sides still wish to get something done, to get an economic stimulus 
package; that is, a package that will cause America's economy to grow, 
jump-start, give it a little boost.
  I am not going to talk about the things that have already been done, 
other than to say that once the recession started--that is a long time 
ago; for those who think this just came upon us, if you trace the 
economy--and I am sure the occupant of the chair, who, for many years 
of his life, day by day, had to rely upon his ability to analyze the 
economy and/or that of those who worked for him, and decisions had to 
be made on the best assumptions you could put together. But it is clear 
if you look at what happened, this recession started downward about 16 
months ago, before the swearing in of the new President. It started 
down and it has been coming down a little bit at a time for all these 
months.

  During that period, the Federal Reserve Board has, for the 12th time, 
I believe, reduced interest rates. I know if my friend from New Jersey 
were standing here and we were discussing this issue, we would both be 
saying that is a very good thing, reducing the interest rates. No 
question, America relies upon capital for growth, for investment, for 
everything we put people to work with; you have to have money to buy a 
house, to buy a car.
  Incidentally, if anybody wants to know how important interest rates 
are, look at the anomaly in America today. One of the biggest anomalies 
is that we are selling more cars than ever. So we are breaking the bank 
on selling cars in America in the middle of a recession. Well, I guess 
one could say the people finally woke up and wanted new cars, but I 
don't think so. I think they have wanted them all along. But guess 
what. The automobile companies decided it was better to sell cars and 
finance at zero interest rate and keep people working than it was to go 
ahead and cut back on production, charge interest rates so the finance 
companies would be turning a profit, but their factories would be 
laying off people. What an experiment because their people kept working 
and producing automobiles, and the rate of finance is zero. They must 
have analyzed what that does or does not do for their economic picture. 
But in the end, cars are selling because the cost of buying them is 
cheap.
  Now, the economy is still not recovering properly, although somehow--
at least this Senator believes that while I understood what was 
happening and clearly was out front saying we were moving toward a 
recession probably 12 months before we started saying it here, I 
believe there is a real chance if we do something right quick that this 
economy will start back up.
  There are some good signs out there, but there are some not so good 
signs that could indicate it is going to be a long recession. But I am 
putting before the Senate today a proposal. There are many Senators I 
have talked to about it. I won't mention their names. But a few of them 
I thank profusely because they have publicly commented to papers such 
as the Wall Street Journal, and others; some Democrat Senators who have 
analyzed it with me have said it is a very good approach.
  The reason that it is not moving with large numbers of Senators at 
this point is because everybody has some entanglements--and I use that 
word not pejorative--in terms of putting the packages together where 
they have committed here and there and, of course, they can't just jump 
off those ships, they have to let normal events occur.
  But this morning, Senator Bond, Senator Frist, and I put this before 
the Senate and the American people because we truly believe it is 
something that ought to be looked at. We are not here saying it is 
absolutely a cinch that it will work. But we are saying--three of us--
with gaining strength today--the Wall Street Journal quotes Dr. Lindsey 
from the White House. His analysis would indicate that this is a good 
economic stimulus package. Let

[[Page S12003]]

me suggest that it is quick, doesn't have any administrative costs 
associated with it. It helps city, county, States, and private sector, 
and, indeed, every working man and woman in America who pays payroll 
tax for Social Security.
  The 6.2 percent that comes out of their paycheck will stay in their 
paycheck for whatever month we choose. The legislation is drawn for the 
month of December, for one month. Likewise, the employer does not remit 
to the Federal Government; they keep the money.
  In one month, if the month of December is chosen, I say to my friend 
from the beautiful State of Montana, $38 billion will go into the 
American economy via the wage earners and businesses, large and small, 
in one month. They will have that money close to the Christmas season 
one way or the other.
  If we do January, everybody will know it is there. If we do December, 
it will be in their paychecks. The reason I keep using one or the other 
month is because we have not moved with dispatch as everybody had 
hoped. As a consequence, I do not know if we can get it done in time 
for Christmas relief.
  It is a very simple bill. It is quick. The economic activities of it 
are immediate. It eliminates 12.4 percent payroll tax from the OASDI 
for the month of December; $38 million in immediate relief to be spent 
for whatever the recipient wants to do with it.
  Self-employed workers will see their taxes reduced by 12.4 percent in 
that month. It will be split evenly between the employer and employee 
at 6.2 percent on each side. Then, obviously, there is language putting 
the Social Security fund back in its original posture by transferring 
from the general fund. That accounts for the removal and use in the 
economy and the replenishment that one would expect. It is very simple.
  The three of us do this not as a total stimulus package, but for the 
tax portion that has been discussed by each side as being important.
  By a strange coincidence, the two provisions that were in the 
Republican package, the rebate and the 2 percent, the 2-percent 
marginal rate change, turned out to be $38 billion. This package is $38 
billion. It is just a coincidence, but if we are looking for a 
substitute, we could substitute that money.
  Whatever the Senate wants to do about workers compensation, hospital 
and health protection--those are not part of the stimulus package in 
any event. They are part of us wanting to be helpful because people are 
hurting. Those can be worked out. Whether we fight over those or not, 
clearly, eventually, they will be worked out in both bodies.
  There are a lot of economists who have been analyzing this. We do not 
have a lot of them here today to talk about, but there are a lot. 
Perhaps when we return, I will print in the Record an article entitled 
``A Stimulus Package May Not Work'' by Joanne Morrison. It cites three 
or four economists who analyze where we are.
  I say to my colleagues, there are two arguments against what we are 
doing. One, it is taking too long, and, two, it will take too long 
after we pass it. It may be a long-term event rather than a short-term 
stimulus. Second, without any question, there is serious doubt as to 
whether the other packages are very stimulative. In both instances, 
that is corrected here.
  Is it fair? It seems pretty fair. I am not saying we can solve each 
and every problem, but it is pretty fair. I have sent the tax bill to 
the desk.
  I thank my two cosponsors and the Senator from Montana for letting me 
present my thoughts on this. There are a lot of people beginning to ask 
about it and starting to support it. We will put the names of those 
institutions that support this in the Record as soon as we can. The 
Governors are coming on board. We have asked no one. They are reading 
about it now, and we probably will ask a number of other groups in the 
country to give us their views.
  I thank the Senate for giving me time. It is nice that debate can 
occur, but we are not there yet. Maybe a new idea can find its place 
here. I hope it is new enough to receive the consideration it deserves.
  Mr. President, we must move forward. Right now, we have a Republican 
stimulus bill that passed the House. We have the President's plan and 
the Senate Republicans' plan. We have the Senate Democrats' plan.
  But we don't yet have a stimulus plan that will pass the Senate and 
be signed by the President.
  I believe this bill can be the key to bringing both sides together 
quickly once we return from the upcoming Thanksgiving week recess.
  Let me be clear. I support the President. I think this administration 
is right on track when it comes to an economic stimulus package. 
However, any existing plan has to be modified to garner enough Senate 
support to pass.
  We can't wait till later to get this job done. The administration and 
Congress have promised to enact a stimulus package. The American people 
expect a stimulus package. The markets expect a stimulus package. It 
would be a huge mistake to wait.
  The retail sales reported yesterday showed sales up 7.1 percent in 
October. However, this was almost all due to aggressive and 
unsustainable incentives in the auto sector. In effect, these 
incentives are shifting auto sales that would have been made next year 
into this year. The economy is going to be in trouble once these 
incentives stop.
  In order to break the impasse and move the process forward, let me 
describe the bill we have introduced today.
  We propose a one-month payroll tax holiday, which would replace the 
current proposals for a supplemental rebate and the speed-up of the 
marginal rate reductions.
  I'll tell you why.
  IRS Commissioner Rossotti has raised administrative issues related to 
the supplemental rebates. Because of where we are in the calendar, such 
rebates would have to be folded into the taxpayers' 2001 tax returns 
and refunds next spring.
  A payroll tax holiday will be more effective at increasing spending 
than the rebate checks sent out earlier this year or a new round of 
rebate checks. It will put the tax cut in paychecks automatically, 
without the need for special mailings.
  Psychologically, workers are used to adjusting their spending habits 
based on the size of their paychecks. At present, workers spend about 
95 cents for every dollar of after-tax earnings. Increasing their 
after-tax earnings will therefore lead to more spending--if they 
perceive the tax cut to be part of their regular earnings.
  That's why separate rebate checks don't work as well. When a worker 
gets a separate rebate check they are more likely to treat it as a 
special windfall gain and save the money or pay down debt. According to 
the University of Michigan, as of October, in the midst of a recession, 
only 30 percent of people receiving rebate checks were saying they 
would spend the money.
  The speed-up of the marginal rate reductions up has been criticized 
as a permanent change in tax law that benefits upper income folks most.
  The bottom line: A payroll tax holiday is truly a stimulative, 
temporary tax cut that is very likely to be spent.
  All wage earners earning below $80,400, even those that don't earn 
enough to pay income taxes, would benefit.
  Both the employee and employer share (6.2 percent each) of the social 
security (OASDI) payroll tax would be suspended. Self-employed social 
security payroll taxes would also be suspended. The Social Security 
trust fund would be made whole via a transfer from the general fund.
  Employees would have more take home pay and employers would have 
increased cash flow.
  A school teacher making $40,000 would see an increase in their take-
home pay of $207 in December. A self-employed contractor earning 
$40,000 per year (who pays both the employer and employee share of 12.4 
percent) would see an increase in pay of $413.
  It is most desirable to make the one-month period December 1, 2001 
through December 31, 2001. A payroll tax holiday in December would be 
perfectly timed for the holiday shopping season. The whole tax cut 
would go out in only one month. We wouldn't have to wait for a new 
round of rebate checks to go out--a process that could take months and 
interfere with the speed of tax refunds.
  In addition, in 2001 the payroll tax is applied to income up to 
$80,400. By December, approximately 6 percent of

[[Page S12004]]

wage earners have already reached the limit and would not receive the 
benefit of the payroll tax holiday.
  The cost of a December holiday is about $38 billion in fiscal 2002. 
If the holiday were in January, the cost would by about $43 billion, 
because all wage earners would receive the benefit.
  Mr. President, we are at an impasse here in the Senate. Let's all 
admit that neither the Democratic plan nor the President's plan has the 
requisite 60 votes to pass this Chamber.
  I believe this proposal could provide us with the key component to 
reaching a bipartisan way to enact a stimulus bill quickly.
  Mr. BOND. Mr. President, Senator Domenici has a proposal he has 
crafted to provide immediate economic stimulus and assistance to low- 
and middle-income workers who have been suffering, as we all have, from 
the economic downturn.
  I have signed on with him in support of his measure because his idea, 
which is a payroll tax holiday for December, would be the easiest, 
simplest, fairest, and most effective way to get a stimulus of between 
$38 and $41 billion directly into the pockets of middle and lower 
income workers in the United States.
  This is not a tax cut for the rich because anybody who is making over 
$80,000 a year has already finished making their Social Security or 
payroll tax, FICA tax, contributions. This would provide, if we can put 
this in the stimulus package and pass it quickly this month, that you 
would not send in your FICA tax withholdings or contributions for 
December. It is simple. Nothing goes in the mail. You don't have to 
worry about mail deliveries or all the problems we have had. Obviously, 
most people know we haven't had mail for almost a month in Congress. 
There are other places where security precautions have delayed the 
mail.
  You don't have to go through a complicated system of developing 
regulations and rules or even cutting checks for a rebate. When the 
President proposed a rebate many weeks ago, there was time to get the 
rebate check prepared and get it out in December so we would have a 
productive, economically thriving holiday season. Unfortunately, 
because of the lateness of the hour, it is likely that a rebate check 
or other assistance that has to be paid out by check from the Federal 
Government will be 6 to 8 weeks away and will not hit in the pockets 
where the working men and women can spend it until sometime in January 
or February.
  This obviously is one part of a stimulus package. I happen to believe 
that in addition to more generous unemployment benefits and providing 
assistance through grants to the States for health care, we also need 
to have assistance for small businesses, many of which have been 
absolutely savaged by the economic downturn as well as the crash at the 
World Trade Center.
  Those parts are important, too. I have some small business provisions 
I hope will be included in the stimulus package.
  The great thing about the Domenici proposal for the FICA December tax 
holiday, not paying the Social Security withholding amounts in 
December, is that it can happen immediately. It will put the money in 
the pockets of those who can best spend it. It helps the single mom who 
is just struggling to get by. It helps the individual worker who makes 
about $40,000. They would have $210 more in their pockets. For a self-
employed person who has to pay both the employee and employer side of 
the FICA tax, 12.4 percent, that would be about $420 they would not 
have to send to the Federal Government in December. Of course, there 
would be a transfer from the general revenue to Social Security so we 
would not impact Social Security.
  I urge all my colleagues to pay attention to the thoughtful and 
effective proposal Senator Domenici has outlined for us. This should be 
the centerpiece. Democrats and Republicans can come together behind 
this proposal, move it quickly; let's get moving. We are in an economic 
downturn. It has been going on for 15 months. It got a whole lot worse 
after September 11. This economy needs a boost. Leaving the FICA tax in 
the pockets of the people who are working, the medium- and low-income 
workers, and the people who employ them is the best way to get this 
economy moving again.
                                 ______