Congressional Record, Volume 147 Issue 163 (Thursday, November 29, 2001)

[Congressional Record Volume 147, Number 163 (Thursday, November 29, 2001)]
[Senate]
[Pages S12121-S12129]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

ECONOMIC STIMULUS

Mr. DURBIN. Mr. President, I thank the Senator from Nevada for his
leadership. He works so hard on the floor on a regular basis to make
sure things run smoothly and we get about the business of deliberating
important issues. At this time, there is no more important an issue
than the economic stimulus package. As we move around the Nation,
clearly people have lost jobs

[[Page S12122]]

and businesses are hurting. We need to spark this economy, to move it
forward.
There was good news yesterday on Capitol Hill. The leaders--Democrats
and Republicans--came together to start a process to lead to a stimulus
package, a recovery package that will truly help all Americans. I have
taken a look at many of the proposals here, and I certainly support the
Democrats' position that we need to help families who have lost their
jobs. If you are unemployed in America today and you are lucky enough
to have unemployment insurance, you get about $230 a week on which to
live. Imagine for a moment, as you follow these proceedings, what life
would be like on $230 a week, trying to make your mortgage or rental
payment, pay utility bills, buy food for your family, and provide for
the necessities. It is very difficult.
Over half of the unemployed workers don't even have unemployment
insurance. They have left part-time jobs and they have no help. It is
no wonder we are finding that food pantries and kitchens for the poor
across America are being overwhelmed with those coming in asking for
help at the end of the year. It is important that we remember these
people as part of the stimulus package. Money given to these families
is money that will be spent on the necessities of life, and that would
be an expenditure that would not only help them but equally important,
spark the economy because they are going to be making purchases that
help retailers and producers of goods and services across America.
In addition, health insurance is one of the first casualties of an
unemployed family. And $500 or $600 a month for a COBRA plan, a private
health insurance plan, is beyond the reach of most families. Think for
a moment. If you are one of those lucky Americans, such as myself,
whose family is insured, what would it be like to know that tomorrow
your health insurance is gone; you are one accident or one illness away
from disaster?
We don't want that to happen to the families of the unemployed. That
is why the Democrats pushed hard to keep that in the package.
Let me tell you another thing we can do to spark the economy. We need
a tax cut that will have an immediate impact and is fair. One I have
talked about over the last several weeks--
Senator Domenici of New Mexico raised it as well--is a Federal tax
holiday. It means that for a month we would suspend the collection of
Federal payroll taxes on employees and employers across America. What
is the impact? If your family earns, say, $40,000 a year, it means that
in that month-long payroll tax holiday you would see an additional $250
in your paycheck, $250 at the end of the year for important purchases
for your family, for holiday purchases, for year-end purchases that you
might otherwise have put off.
The good thing about this approach is that it is fast, focused, and
it is fair. It not only helps workers, every worker who gets a payroll
check, it is going to help businesses, particularly small businesses.
Let me give you an illustration. If you had a small business with 100
employees, with each employee having an average income of $40,000, it
would mean for your small business, in that month-long holiday period,
an additional $25,000 in tax savings. Why does small business need
that? The last time I talked to people running a small business, they
told me, for example, the increase in health insurance premiums is
causing a real problem and hardship. So they can turn around and make
sure their employees are covered and also have this money through a tax
holiday.

This idea has strong bipartisan support. It certainly makes more
sense for us to spend the $30 billion involved in this proposal rather
than to put it on a tax cut for people in the highest income categories
in America. This payroll tax holiday, which I and Senator Domenici and
others support, would be focused on helping employees and employers
across America. We can do this. The Congress can enact it. We can say
to the American people, even before this holiday season comes to an
end, we are going to provide them a real tax cut and real tax relief.
I hope as part of our bipartisan package we can include this
provision. We can get this economy moving and do it in the right way,
and do it in a fair fashion.
I yield the floor.
The PRESIDING OFFICER. The Senator from Michigan is recognized.
Ms. STABENOW. Mr. President, I rise to commend my colleague from
Illinois for his comments. I wish to associate myself with the comments
of both Senator Durbin and Senator Domenici, who are involved in
advocating common-sense approach to put money in people's pockets
immediately. I congratulate them for doing that.
I also rise to speak about what needs to happen in terms of economic
recovery and an economic stimulus package. I commend our leader,
Senator Daschle, for bringing together the leaders for discussions. I
thank the leaders on both sides of the aisle for sitting down together
to move this measure because we do need to move quickly on a stimulus
and recovery package. But we all know it has to be the right thing.
I am very concerned about what the House Republicans passed and the
fact their approach is so very different from what mainstream
economists are telling us needs to be done in terms of moving this
economy forward quickly. What we saw in the House was an attempt to
place into law another round of large tax cuts for the top 1 percent of
the public, and literally billions of dollars in tax cuts for the
largest multinational corporations--supply-side economics at its best--
hoping that it would trickle down somehow in time to help small
businesses, workers, professionals, middle-income people, somehow that
it would trickle down in order for people to be able to receive some
kind of assistance during this recession.
We know in the past that approach has not worked. I am here today to
encourage us to do what mainstream economists across the board have
suggested we do, which is to put something in place that is immediate,
temporary, and stimulates the economy by putting money directly into
people's pockets. I think the payroll tax holiday is one good way to do
that. It would certainly support small businesses.

We hear a lot of talk about big business in the Congress. Yet small
business is the fastest growing part of our economy, employing millions
of people. They, too, have been affected--many times more so by what
happened in terms of the recession. We need to make sure we are
focusing on support for small business, whether it is being able to
write off investments more quickly, whether it is a payroll tax
holiday. I think supporting small business in this equation is very
important.
I want to share some facts. We know that if we focus on those who
have lost their jobs, whether it is through the airline industry since
September 11 or other jobs in our economy, when we give dollars
directly to those who are unemployed, they turn around and buy
groceries for the family, school supplies, Christmas, or other holiday
gifts. Those activities are important to keep the economy going. It
moves the economy along, and it helps our families. It is a win-win
situation for everyone.
Studies have also shown that for every $1 invested in unemployment
insurance, we generate $2.15 in the gross domestic product. A 1999
study by the Department of Labor estimated that unemployment insurance
mitigated the real loss in GDP by 15 percent. That is real, that is
measurable, and it is an immediate stimulus to the economy. In the last
5 recessions, real loss of GDP was mitigated by 15 percent, and the
average peak number of jobs saved was 131,000 jobs.
Economists are telling us that this is not just about doing what is
fair; it is the best solution. It is the best way to stimulate the
economy. Joseph Stiglitz, co-winner of the 2001 Nobel Prize in
Economics, has stated: We should extend the duration and magnitude of
the benefits we provide to our unemployed. This is not only the fairest
proposal but also the most effective. It is the most effective for the
economy. People who become unemployed cut back on their expenditures.
Giving them more dollars will directly increase expenditures and
improve the economy.
We are talking about a demand-side approach. The Republicans in the
House of Representatives have said

[[Page S12123]]

trickle-down economics, supply side, that is the way to get the economy
going. Economist after economist has come forward to say the problem is
not supply. In my State of Michigan where we make outstanding
automobiles, trucks, and SUVs, we want folks to purchase those
vehicles. We know the problem is not supply; the problem is demand and
people having a job, having income, and being able to purchase that
vehicle. It is demand side, and that is what the economists are all
telling us.

I want to speak about the economy and why we need to expand the
unemployment insurance needs and modernize the system and why the
Senate Democratic approach is so important to women in our economy.
When we look at unemployment insurance today, only 23 percent of
unemployed women meet the current unemployment insurance eligibility
requirements. Only 23 percent of unemployed women meet the eligibility
requirements of unemployment insurance. Women who are heads of
households and families dependent upon two incomes are
disproportionately and unfairly affected by layoffs and by our current
unemployment system.
That is why the Senate Democrats have put forward a modernization of
unemployment compensation by covering both part-time and low-wage
workers. This proportionately helps women more than it does men because
women are more likely to be in part-time positions or in lower wage
positions.
Unfortunately, the administration plan and the House plan do nothing
to include part-time or low-wage workers. Sixty percent of low-income
workers are women and 70 percent of part-time workers are women.
I believe it is important for us to understand that those part-time
workers may be care giving for their children, may be care giving for a
mom, a dad, a gramps or grandma who need assistance. They are
fulfilling other family obligations while providing important income
for their family. They should not be left out of the economic picture.
When we are looking for ways to support the economy and working men and
women, we need to remember those women who are working part time or are
in low-wage professions.
Women are the majority of workers in industries that have been
hardest hit by the economic downturn: 56 percent of retail sales, 69
percent of restaurant and wait staff, 65 percent of kitchen workers, 79
percent of flight attendants.
I find it so disconcerting that here we are, long past September 11
when we immediately responded to the concerns--and I supported doing
that--of the airline industry to help them recover from what happened
on September 11, we have yet to pass a bill to support the people who
work in that industry.
We were promised that if we dealt with the industry first, we would
come back to those hundreds of thousands of airline industry-related
workers who had been laid off. Yet we have not done that. Again, we see
that this disproportionately affects women.
Also, women only earn 76 percent of men's median income, and women of
color earn 64 percent of the wages of working men. As a result, women
have a greater need for income replacement when they are unemployed. It
is important to note that we are talking about women who are providing
a significant percentage of their family income, in addition to caring
for their children and caring for older adults and all of the other
work in which women are involved. For poor female heads of households
who work part time, their earnings represent 91 percent of the family
income. If they lose their job, we are talking about 91 percent of the
family income disappearing. Failure to replace the wages of part-time
workers through unemployment insurance benefits detrimentally impacts
working women and their families.
This is about doing the right thing in stimulating the economy. It is
about coming up with ways that support small business, as well as
large, and our workers. It is about tax cuts that go to low- and
moderate-income people who will put that back into the economy.
Also, this is about making sure we remember the large part of our
workforce, our women, who are disproportionately affected by the
current unemployment system. It is designed in a way that unfairly
penalizes women who are working part time while caring for their
children and caring for loved ones at home or working in important but
very low-wage jobs.
This debate about stimulating the economy, about economic recovery,
is incredibly important for everyone. We need to keep an eye on the
fact that the policies we set may, in fact, have different results for
working women than for working men, and we need to remember women and
their families as we put together this economic recovery package.
I urge we do what is right, what is fair, and most importantly what
is effective, what the economists across this country have said we need
to do, put money into the pockets of working people and those who are
unemployed, and make sure we do not forget our small businesses as part
of this economic recovery process.
The PRESIDING OFFICER (Mr. Nelson of Florida). Under the previous
order, the Senator from Tennessee is recognized.
Mr. THOMPSON. Mr. President, I want to address some of the issues my
distinguished friend from Michigan has been discussing. First of all,
not only can we not agree as to what belongs in the stimulus package,
we cannot seem to agree in the Senate, unfortunately, as to what our
priorities ought to be. We are a nation at war and in recession. Those
ought to be our priorities. Yet we are talking about railroad
retirement, we are talking about farm bills, everything but what we
ought to be discussing.
We ought to be talking about the issues my friend from Michigan has
raised concerning the stimulus package. I will address that for a few
moments myself. There is no doubt for some time now there has been
pretty much a consensus on the idea we need a stimulus package. Later
on in my remarks I will discuss further whether or not that is really
necessarily true. I think there has been a consensus, but there
certainly has been no consensus as to what we ought to do about it and
what belongs in it.
In fact, there is no consensus as to what in fact stimulates the
economy. Everybody has their own ideas. We have our own ideas in this
Chamber, and we state them authoritatively. But it is not only us, it
is the economists. We cannot really say the economists think this or
say that. They think everything and they say everything. They are on
all sides of all of these issues. So are businesspeople, labor people.
Remarkably, their economic philosophy seems to somewhat coincide with
their vested interest, which is not really different from the rest of
us, I suppose. That is the situation we are confronting.

I want to discuss for a moment where we are, examine the validity of
the ideas we are using in support of our positions in general terms,
and then discuss what we should do about it.
Assume for a moment this is not a political issue. One could make
that case. There have been a lot of disparaging remarks about certain
provisions in the House bill. There certainly have been a lot of
disparaging remarks about what came out of the Senate Finance
Committee, all the pork and unrelated items, but we can put that aside
for a moment. We can put aside the remarks of the former adviser to
President Clinton, who in a local publication said it is in the
Democrats' self-interest to defeat a stimulus package or not have one
because it might affect the economy negatively and President Bush would
get blamed for a negative economy. I do not think that is the way most
of my colleagues believe, but those thoughts exist.
Unfortunately, we do spend a little bit too much time in this body
talking about how to divide the pie instead of trying to figure out how
to make the pie bigger, who is going to get what. There is the tax-
cuts-for-the-rich rhetoric, of course, we all have heard, ignoring the
fact that 80 percent of the individual tax cuts would go to small
businesspeople who provided 80 percent of the new jobs over the last
decade.
I must say I find it somewhat ironic that every time we get into the
stimulus discussion, we talk about tax breaks for the rich, when the
same folks who make those arguments are also promoting a farm bill
where 10 percent of the richest people in farming get 61 percent of the
benefits. So

[[Page S12124]]

tax cuts for the rich are bad, but pork for the rich is good.
Let us set all that aside for a moment, take the political aspects
out of it, and talk about the economics of it. Basically, we have two
different economic views in this body--at least two main ones--as to
what in fact does stimulate the economy. We each make statements as to
what will stimulate it and what will not, but we never provide any
authority or any evidence or any historical precedence for what we are
saying.
There are four or more proposals now before us: The House bill, the
Senate Finance bill, the President's bill, a compromise that is being
worked on; a lot of things in common among all of those bills: Rebates
for low-income folks, additional unemployment benefits, health care
provisions. We disagree on the amounts of those, but those are pretty
much common to all of these proposals, and if a stimulus package
passes, that is going to be in there. That is where the similarity
breaks down and the division begins.
There is nothing wrong with philosophical divisions. That is why we
have elections, and that is why we have parties. Everyone is entitled
to their opinion, but they are not entitled to their facts or their
history. Let us examine which side is supported by history or precedent
or facts and which is not.
On our side of the aisle, we basically think the majority of the
package ought to be tax cuts for the private sector, working men and
women who are carrying the load and paying the taxes, and that includes
a speed-up of the reduction of the individual tax rates. That way,
people can get not just an extra check in their pocket one time, but
they can rely on a tax system that is going to be lower, and they can
look at it in the future and base their conduct, whether it is
additional work or additional investment, on a tax code that has
been changed to their benefit on out into the future, not just a check
but a change of policy. That is what we believe.

Our friends on the other side of the aisle basically seem to think
the way to stimulate the economy is spending by the Federal Government,
and therein lie the differences and the debate. Our friends on the
other side of the aisle and some on our side, and many in the media and
some economists, point out we need to get money into the hands of the
consumer by means of the Federal Government, which incidentally is
money that either has to be borrowed or on which people have to be
taxed. That is where the Federal Government gets its money and
redistributes it to others in the form of checks which they will
immediately spend.
The argument goes, the lower the income level, the more likely they
are to spend it. So getting checks into the hands of consumers will
stimulate the economy. The problem is there is not any evidence to
support that proposition. I know it is often said. It might even be
considered to be common wisdom at this stage of the game. But I submit
all of the evidence and historical precedent indicate Federal spending
programs designed to grow the economy have not proven to be successful.
What are my citations for that? I am accusing other folks of not
giving their reasons, historical precedent or evidence. ``Thompson,
what are your citations?'' one might say. I cite studies prepared by
the Joint Economic Committee back in 1988. I cite the 1930s, when in an
attempt to ameliorate the effects of the Great Depression, we saw a
percentage of the gross domestic product in this country almost triple
while unemployment doubled.
I cite the case of Japan. They have been trying to do this
fordecades--spend themselves into prosperity. They have had 10 separate
spending stimulus packages in the 1990s, to no effect. France and
Sweden have had similar problems. I ask, if in fact we really run our
economy based on an ATM principle, where we have it figured out, that
we have to put in our card, our solution, our congressional solution,
and out comes the result we want, why do we ever tolerate recession
anyway? Why do we not print some more money? Why do we not send out
some more checks? Why do we ever sustain the average recession of 11
months? Why do we go that long if that is the solution? It is an easy
solution and an easy one to understand. I submit it is because it has
not proven to work.
On the idea the poor will spend more, there is no historical evidence
for that either. It might seem logical, but a lot of things that seem
logical are not borne out in real practice. The last time we sent
checks out, 18 percent of people spent them. According to the
Presidential adviser, Mr. Hubbard, I was reading the other day he says
all the economic evidence is that people spend at various income
levels. People basically spend the same percentage. We already have the
budget with $686 billion in spending, an additional $40 billion that
has been allocated, and an additional $15 billion in airline support.

Certainly, when we hear of economists saying this is a solution, you
would not want to include Mr. Greenspan in that category. He doesn't
say that spending is the way to do this. He says if we do it, we cannot
do it fast enough to have any effect anyway. In fact, by the time it
kicks in, by the time our governmental spending kicks in and the checks
get in the mail, are received and spent, even if it works the way we
want it to, it will be too late. If the average recession lasts 11
months--and ours started last March--we are going to have to hurry up
or the doggone recession will be over before we act and we will not get
credit for anything. There is no way we can possibly have anything that
affects the economy by next February or spring. We could assist it if
we did exactly the right thing. Is it worth $100 billion under those
circumstances, when we cannot agree on the components? I question that.
What about the other side? I have been talking about the philosophy
of Federal spending being the answer to stimulating the economy. What
about this side of the aisle? As to the idea that the private sector is
the source of the solution for recession and that tax cuts, and
especially marginal rate cuts, is an integral part of that, what about
the evidence for that? I submit the historical evidence to support that
proposition is just as clear as the historical evidence that fails to
support the Federal Government spending proposition.
The evidence is, those kinds of tax cuts not only grow the economy
but they produce more revenue to the Federal Government. President
Kennedy pointed that out. He said: It is not a matter of either tax
cuts or higher deficits; the more you cut taxes, the more revenue you
will generate. Of course, he was right.
Incidentally, the rich pay more as a percentage of the taxes paid
when you have the marginal rate tax cuts than beforehand. At every
level it is borne out, and especially marginal rate reductions, which
encourage work, encourage investment, are the kinds of action that get
the economy going. Sending someone a check to buy a pair of gym shoes
will be momentarily beneficial to somebody, I suppose, but that is not
the kind of policy that strengthens our economy or causes that money to
recirculate or to be there for a longer period of time.
What is my historical evidence? I refer to the 1920s, the 1960s and
the 1980s. During those periods, the country went with that approach.
In every instance, we had more economic growth, more revenue to the
Federal Government, and the richer paid a higher percentage of the
taxes that were paid in terms of dollars. From 1961 to 1968, the
economy expanded 42 percent because of President Kennedy's tax cuts,
over 5 percent a year. I would settle for that. We could use a little
of that right now.
When you look at the package from the Finance Committee or what is
being talked about in the Chamber by my friends on the other side of
the aisle, the best I can figure is, only 20 to 25 percent of the
possibly $100 billion package would in any way justify being called
stimulative, if you look at the evidence and do not just pick this
economist's statement who is aligned philosophically with one group or
another economist aligned with another group or someone who comports
with our own philosophy.
My concern is that in all this compromise language talk, we will say,
OK, let's do what we often do around here and take both of them: Have
the tax cuts and additional spending. That is what got us in trouble
before. We do not need to go that way. Not only would it not be good,
it would be harmful.

[[Page S12125]]

We will need that revenue. If we had good reason to believe such an
approach that just gave pennies on the dollar to stuff that would be
stimulative, and the rest would make us feel good and help us with
certain voters in certain segments of the economy--we are all concerned
about the unemployed. I am as concerned about unemployed in Tennessee
as unemployed in New York. They are all unemployed and all deserve our
consideration, and they will under these bills, but they will not
stimulate the economy.
We have only begun to assess the costs of what happened in September.
We know now almost overnight not only will we have to spend a whole lot
more in our defense budget, but we have law enforcement, public health
facilities, nuclear facilities, government buildings, Border Patrol,
post offices, airports, mass transit. Those are all directly at the
feet of the Government and the private sector. We have handling of the
mail, insurance costs, transportation costs. Somebody said it is not
that ``just in time'' philosophy with the average business, it is
``just in case'' philosophy. That will cost money. Slowing
globalization has hit a lot of company pockets; computer security--all
these things cost a lot of money in the public and private sectors.
Unless we are very sure what we are doing with $100 billion or $85
billion, we should not do it.
Now the OMB Director says we will be in deficit at least until 2005.
If we cannot at least get half of a stimulus package that stimulates
the economy, we should not do it. We do not know how long the recession
will be. If it is average, we have already bottomed out and are working
our way back. Nobody knows for sure. But we do know retail sales are
up, unemployment stabilized, low oil prices, and interest rate
reductions have put more money into the consumer's hands faster than
the Federal Government could. The stock market is not doing too badly.
We should give ourselves a chance. There is a good argument to be
made that we can do the right thing, have policy that stimulates the
economy, which is the private sector, and a large portion has to be tax
cuts and rate reductions which are tried and true. We can also make
some compromises and do some things in terms of spending that many
think are not stimulative but within the bounds of political reality,
realizing that has to be part of the package, and have a decent mix and
maybe do some good. Anything less than that, I fear, would do harm.
I hope the President draws the line and says something to the effect,
if part of this package cannot be stimulative, I will veto it. I think
that is a position we ought to take. I don't think we have been talking
about this for so long and the markets are so convinced and have been
convinced that this is what we are going to do and it is such a great
idea. I don't think they are paying that much attention to us in that
regard. I don't think that train is down the track that far that we
have to pass something, regardless. I will not vote for something
``regardless'' that is, in the long term interests, detrimental to the
economy of this Nation. But it will be unfortunate if we do not have
the opportunity to do something that would be beneficial and come
together on something that would be beneficial.

I still hope we will be able to do that because I think that would be
the best solution for the economy and for the Nation.
I yield the floor.
The PRESIDING OFFICER. The Senator from New Jersey.
Mr. CORZINE. Mr. President, I wonder if the senior Senator, the
distinguished Senator from Tennessee, would respond to a question.
Mr. THOMPSON. Yes.
Mr. CORZINE. I wonder if the Senator is familiar with the Federal
Reserve's view of how they model or look at the economy, and how tax
cuts and spending cuts work through the economy. We just had a Joint
Economic Committee meeting yesterday in preparation for that. We went
back and looked at some of their models which are based on statistics
and observations through time.
When you were commenting earlier, I thought it would be worthwhile if
I mentioned that, at least according to the Federal Reserve's models,
spending has a multiplier effect of 1.4 times in the first year
relative to tax cuts, which have about a half of 1 percent impact in
the first year.
Sometimes when you drag those out over a longer period, you catch up
with the benefits of taxes, depending on the nature of them. But there
is solid evidence in the economic community, and I think among the
Federal Reserve, that spending can have and often does have meaningful
multiplier effects on the economy. That is why so many people would
argue, and I think they would argue based on fact, or at least data,
that there is reason to believe that spending does have a positive
impact on the economy.
Mr. THOMPSON. I will respond to my friend that I do not doubt that. I
do not know the details of how they do that. I am aware that they do
it. I do not doubt, as I have indicated, someone, going down at the
micro level, going down and getting a check and buying some goods has
some effect; that a lot of people doing that might not have some
effect.
I think the difference has to do with short term versus long term.
The history I have read on the subject concerning a concerted effort by
the Government, with Federal spending programs over a period of time--
whether it be the United States in the 1930s, or Japan for the last
decade--has not proved beneficial, has not brought about growth. So we
might be talking about the difference between microeconomics and
macroeconomics. I am not sure. I do not dispute the statistic that the
Senator gave, but I think the studies that were done from the Joint
Economic Committee back in 1998 is the other side of that coin.
Mr. CORZINE. Would the Senator comment on whether he believes
unemployment benefits tend to get expended or not in the process of
going to people who have lost their jobs? Do you think that goes to
savings? Is that what I am reading you to say?
Mr. THOMPSON. No, I think you can assume in most cases, if you are
talking about that very small part of the economy that has to do with
unemployment benefits, that those checks probably are spent.
My concern, I suppose, is that if you expand that concept, then why
not send everybody a check. A lot of people laughed at Senator McGovern
several years ago--what was the size of the check he wanted to send
everybody, $1000? Why not extrapolate that concept, if the concept is
the solution?
I think there is some factual validity to what you are saying. But I
am saying if you expand that concept in terms of the overall economy,
the evidence is not there to support it.
If it is that simple, if that is the solution, why do we ever put up
with a recession? When we first see one, why don't we decide to whom we
want to send the checks and get it over with and the economy will
bounce back?
Mr. CORZINE. I appreciate the remarks of the distinguished Senator. I
think there really is--the point that I was trying to make--some
evidence that spending does have meaningful impact on the growth of the
economy. I will make sure I send you over a copy of the Federal Reserve
Bulletin's commentary on this so you can get a sense of what this is
about.
Mr. DASCHLE. Mr. President, I ask unanimous consent the recess be
postponed until 1 o'clock.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DASCHLE. Mr. President, 5 months ago, America had a projected
budget surplus of $2.7 trillion over the next 10 years. The stock
market was soaring. The question before us was one that most leaders
could only dream of: ``What should be we with out prosperity?''
At that time, we came to this floor to debate our Nation's fiscal
future--how could we sustain that hard-won prosperity, meet our great
unmet needs, and, yes, provide meaningful tax relief for millions of
American families.
Democrats put forward a balanced plan that maintained our fiscal
discipline, while at the same time making sound investments in our
children, our health, and our security, and provide tax relief.
Because we recognized how fragile and inaccurate budget projections
are, we left room to deal with an economic downturn or an unforeseen
emergency.
Unfortunately, our approach was not the one that prevailed.

[[Page S12126]]

Instead of a balanced and fiscally responsible plan, we ended up with
one so top-heavy with tax cuts, it left little room for other
investments, and no flexibility for a change in circumstances.
I made no secret of the fact that I was unhappy with that debate, and
its outcome. But based on the administration's predictions--and
assurances--that we could afford such cuts without running into
deficits or shortchanging our priorities, the majority of my colleagues
voted for it.
Early this morning, just several months after receiving those
assurances, and several months into the administration's 10-year plan,
we now learn that the White House budget director is predicting that
our government is likely to run budget deficits until 2005. This is a
stark reversal from the situation this administration inherited less
than a year ago.
This is a marked departure from the rosy predictions we were being
offered just months ago.
So, how did this happen? Let's start with how it did not happen.
As deeply as the September 11 attacks impact our lives, our security,
and our economy--they are not responsible for the fiscal situation in
which we now find ourselves.
While the attacks of September 11 seemed to change everything in a
moment, the economic trends before September 11 were clear.
As a panel of economists announced earlier this week, our economy had
officially entered a recession in March.
Neither does our current situation have to do with congressional
spending.
We have not spent a dollar more than what the President and the
Congress agreed to, either in the course of the normal appropriations
process, or in response to the events of September 11--not a dollar.
Although we have taken a great deal of action in the aftermath of
these attacks--supporting the President's use of force in Afghanistan,
keeping the airlines solvent, giving law enforcement additional tools
to combat terrorism, and strengthening airport security--to date, we
have actually spent less than $40 billion. So why are we now facing
deficits when just months ago we were looking at years of surpluses?
Regrettably, what we feared then is what we are faced with now. The
economic plan that was passed ate up nearly two-thirds of what was an
optimistic prediction of our 10-year surplus. It left no room for an
economic slowdown, or an unanticipated emergency.
As Robert Reischauer, the former Director of the nonpartisan
Congressional Budget Office said:

Had we not had the tax cut, it's likely that we would have
skated along with close to a balanced budget, despite the
costs of the war and the effort to contain terrorism.

Even more ominously, the administration warned that decisions about
taxes and spending in the next year ``will determine whether we ever
see another surplus.''
Despite the fact that some of us did not approve of the plan that got
us here, all of us should now work together to make sure that we pass
an economic recovery plan that helps--rather than exacerbates--the
problem.
As we consider a package to stimulate the economy, we need to be
extremely careful to pursue a policy that is temporary, truly
stimulative, and--now more than ever--fiscally responsible.
As I look at the Republican proposals, I am disappointed to see that
they are based on tax cuts that fail these simple yet essential tests,
and they do little or nothing for the dislocated workers who most need
our help.
In the weeks since September 11, Democrats and Republicans have been
able to work together in a way that I haven't seen in all my time in
Washington.
Our ability to speak together and work together is one of the
reasons, I believe, we have been able do so much, so quickly, in
response to the attacks and the continuing terrorist threat. The fiscal
outlook we are now facing is as serious as anything we have faced to
date.
We need to renew that same spirit, if we are to address this problem
as well.
Right now, we have an opportunity to help those who are hurting, and
lift our economy in the process.
It is an opportunity we cannot afford to lose.
I appreciate the opportunity to come to the floor because I do fear
with these economic projections--we have said on several occasions we
knew the real possibility existed--that we will revert right back to
the bad old days of deficits and huge new debt. I never dreamed it
would be this soon. I never dreamed we would be talking in the third
quarter--now the fourth quarter of this calendar year and the first
quarter of the new fiscal year--that we would have deficits well into
the third year beyond this year.
That ought to be as strong an indication as we ever need that what we
did last spring was a mistake; that what we did in economic policy with
the passage of that tax cut was a disaster, not only for our economy
but for our ability now to respond to the array of challenges we face
in the aftermath of the crisis of September 11.
How sad it is that the legacy of the last 8 years did not last longer
than a few months. I am very hopeful we will take to heart the
admonition of the Budget Committee chairman who has asked every Member
of our Senate body to look very carefully at the report made by the OMB
Director, to look at it with the recognition that, as we face these
other additional challenges, whether it is the economic stimulus plan
or the array of other challenges we face as we meet the needs of our
current situation in fighting terrorism, that we do so prudently and
with the recognition that a major mistake was made last spring.
I yield the floor.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. DAYTON. Mr. President, I ask the Chair, are we under an earlier
agreement for a time limit?
The PRESIDING OFFICER. The Senator is correct. Senator Carnahan will
have 10 minutes, but there is not a particular sequence.
Mr. DAYTON. Mr. President, I ask unanimous consent that at the
conclusion of Senator Carnahan's remarks I be granted 10 minutes in
morning business, and following the conclusion of my remarks Senator
Reed be granted 10 minutes, and that the time be charged against
postcloture.
The PRESIDING OFFICER. Under the previous order, we are to recess at
1 o'clock. Is the Senator asking to extend that time?
Mr. DAYTON. No. I am not asking to extend the time. Maybe the Chair
could clarify exactly what we are in.
The PRESIDING OFFICER. We have 16 minutes remaining before the recess
time. Under the previous order, the Senator from Missouri is recognized
for 10 minutes. That leaves 6 minutes remaining.
Mr. DAYTON. Mr. President, I ask unanimous consent that order be
modified: That at the conclusion of Senator Carnahan's remarks, I be
granted 10 minutes to speak as in morning business, after which Senator
Reed be granted 10 minutes to speak in morning business, the time be
charged against postcloture, and the time for the recess be extended
until the completion of Senator Reed's remarks.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The Senator from Missouri.
Mrs. CARNAHAN. Mr. President, I am very encouraged to hear that the
leadership has begun negotiations regarding the stimulus package.
Congress has been paralyzed on this issue for weeks now. And while we
sat here at an impasse, economists confirmed that our Nation is in a
recession.
We must act quickly to jump start our slowing economy. It is well
past time for us to find common ground.
As we seek compromise, I encourage my colleagues to keep in mind the
goal of a stimulus package.
In order to truly promote economic growth, the policies we approve
should take effect immediately, they should have a temporary cost, and
they should focus on those individuals and businesses most likely to
spend and invest additional cash.
These are the bipartisan principles that we started with. These
principles ought to guide our negotiations now.
A wide range of proposals will be on the table for this negotiation.
The Republicans have a plan, and the Democrats have a plan. The
Centrist Coalition has its own proposal.

[[Page S12127]]

From among all these ideas, we must put together a balanced,
reasonable package.
In the end, the stimulus package needs to promote business
investment, spur consumer demand, and assist those Americans who have
lost their livelihoods during this recession.
Shortly before Thanksgiving, Senator Domenici, with the support of my
colleague from Missouri, Senator Bond, added a new and interesting idea
to the debate. They suggested that Congress should provide a payroll
tax holiday for the month of December. This idea has some merit. It
would distribute benefits across a broad range of taxpayers, including
most individuals who earn less than $80,000 a year. And it would
provide needed cash to businesses based on the size of their payrolls.
However, the question remains:
How does this new idea fit into the overall stimulus debate?
It has been suggested that a payroll tax holiday could substitute for
proposed rebate checks to low-income workers.
I have serious reservations about such a tradeoff.
Rebate checks of $300 would go to low-income workers who have not yet
received any tax refund this year.
Let me give you an example.
A single mother working full time at a minimum wage job would
probably be eligible for a $500 rebate check. This money could help her
put food on the table, or cover the rent, or keep her old car going a
few months more.
However, under the Social Security tax holiday, she would receive
about $50 worth of tax relief--not enough to make a real difference.
That is not a fair trade.
I am sure that the single mother who is struggling to make ends meet
would not consider that a good deal.
This is not to say that the payroll tax holiday has no place in a
stimulus package. Rather, I simply suggest that it is not an
appropriate substitute for tax relief for our lowest income workers.
In spite of this observation, I think that the payroll holiday may
have a place in the stimulus package. The payroll tax holiday has the
benefit of providing assistance to both workers and businesses. It is
therefore appropriate that it be included in place of other individual
and business tax cuts under consideration.
I propose that the payroll tax holiday is appropriate in lieu of two
proposals in the House bill: The acceleration of the 28 percent tax
rate cut, and the repeal of the corporate alternative minimum tax, or
AMT.
Let us first look at the impact of my suggestion for individuals.
Under current law, the 28 percent tax bracket is scheduled to be
reduced to 25 percent by 2006. It has been proposed that it would be
stimulative to implement this cut next year. This tax cut would benefit
married couples filing jointly with income over $45,000, and
individuals who earn more than $27,000. This is approximately one-
quarter of all income tax payers.
On the other hand, a payroll tax holiday will help almost all
taxpayers.
Americans are subject to payroll taxes on the first $80,400 of income
per year.
In other words, every worker who has earned less than about $80,000
by the end of November would get a tax break. And very importantly, the
payroll tax break is immediate and temporary.
If we accelerate the rate cuts next year, it will still cost us money
in 2003, in 2004, and in 2005.
In all, over the next 10 years the accelerated tax cuts could cost
$78 billion. But only the money put into workers' hands now can
stimulate the economy. The payroll tax holiday would inject more money
into the economy now. It would cost less in the long run than
accelerating rate cuts. And it would benefit a much greater number of
workers. In short, the payroll tax holiday meets our basic principles
for stimulus and accelerating rate cuts simply does not.
Now I will discuss the impact of my suggestion for corporations. The
House-passed stimulus bill and the proposal made by Senator Grassley
would repeal the corporate alternative minimum tax. Elimination of this
tax would cost approximately $25 billion next year.
Let's be clear. This is a tax paid by profitable corporations that
would otherwise pay no tax at all. By contrast, a payroll tax holiday
would benefit all corporations.
Under current law, corporations pay a Social Security payroll tax
equal to 6.2 percent of each employee's income up to $80,400 per year.
With a payroll tax holiday for the month of December, these businesses
would save $19 billion.
This is additional cash infused into virtually all businesses. It
would help our small businesses, the true engine of our economy. The
size of the tax benefit is linked directly to the wages the company is
paying to its employees. This tax cut would make it easier for
businesses to keep workers on their payrolls, and that is the whole
goal of this stimulus package, to keep America working.
Congress ought to act quickly to reinvigorate this country. In order
to do so, we must be willing to compromise. While I may not think that
a payroll tax holiday is the perfect way to stimulate our economy, I
understand compromise, and I am willing to support Senator Domenici's
proposal, if it is offered in place of these other tax cuts that are
unpalatable to me.
This is a compromise that makes sense to me. It makes sense to that
single mother who is trying to make ends meet. It makes sense to most
businesses which would not benefit from a repeal of the corporate AMT.
And it makes basic sense, based on the principles that were laid out by
the House and Senate Budget Committees at the beginning of this year,
that the effects of the stimulus be temporary, immediate, and focused
on those most likely to spend the investment.
I hope my colleagues will join me in support of this sensible
compromise.
Thank you, Mr. President.
The PRESIDING OFFICER. Under the previous order, the Senator from
Minnesota is recognized.
Mr. DAYTON. Mr. President, during the last few weeks we have all
heard about and discussed many ideas and proposals for inclusion in the
economic stimulus legislation. In fact, one of our difficulties is we
have so many meritorious proposals that we could not possibly fit them
all in, even if we could all agree on them.
One proposal of which I have heard recently, and one I believe may
have merit, deals with tax provisions which apply to many families and
small businesses throughout the country. Many were taxed for years
under subchapter C of the Internal Revenue Code. In recent years, with
the liberalization of the rules under subchapter S of the code, many of
these businesses have elected a sub S status, which means, in general,
all corporate income is taxed at the shareholder level, not to the
corporation as a separate legal entity.
One exception to this rule applies to built-in gains which are taxed
at the corporate level in full and at the shareholder level in full for
10 years after a C corporation converts to an S corporation.
The original and primary purpose of this tax on built-in gains was to
prevent C corporation shareholders from converting to subcorporation
status and thereafter immediately being able to liquidate or mix
corporate distributions with only the single level of taxation
applicable to an S corporation as opposed to the double layer taxation
applicable to a C corporation.
Unfortunately, however, this proper purpose also prevents the
shareholders of an S corporation from selling corporate assets without
incurring a double tax even if the proceeds are not distributed to
shareholders but instead are reinvested in the business to help create
new jobs and stimulate the U.S. economy.
This tax burden makes it difficult, if not impossible, for many
families and small businesses that have elected S status to access the
capital of the business to help stimulate our economy.
This proposal would provide for the elimination of the built-in gain
tax where the entire proceeds of the sale are reinvested in the
business. In other words, it would permit the business owners to do
what we should want any good business to do as much and as often as
possible: expand the business and create new jobs. That should be the
foundation of our economic stimulus legislation. It will also be the
foundation of our national economic recovery.
All of us know that small businesses provide most of the jobs in
America.

[[Page S12128]]

Their abilities to do so have been longstanding concerns of Republican
and Democratic Members of this Senate body for many years.
When I worked as a legislative assistant in 1975 and 1976 for one of
Minnesota's greatest Senators, Walter Mondale, one of my areas of
responsibility was to staff him on the Senate Small Business Committee.
The committee operated then, as I understand it does now, largely in
the spirit of bipartisan cooperation to help encourage and assist in
the creation and growth of as many American businesses as possible.
This proposal presents us with an important opportunity to take
another step in that direction.
Mr. President, how much time do I have remaining?
The PRESIDING OFFICER. The Senator has 6 minutes 39 seconds
remaining.
Mr. DAYTON. I thank the Chair.
Mr. President, I also wish to express my strongest possible support
of the Railroad Retirement and Survivors' Improvement Act of 2001. I
would like to thank Senator Baucus and Senator Hatch for offering this
important legislation.
My office has received hundreds of calls and letters from current and
retired railroad employees. From St. Paul to St. Cloud, from Brainerd
to Duluth--from everywhere in Minnesota--railroad retirees and current
railroad employees understand the critical need to pass this
legislation now.
My very good friend Tom Dwyer, originally from Hibbing, MN, has been
working on railroad retirement issues since 1973. He also was a clerk
for different railroad companies for 35 years until he retired in 1997.
Tom is now the legislative director for the National Association of
Retired and Veteran Railway Employees.
Advocating for retired railroad workers, widows, and widowers is
Tom's life work. He reminds me that this debate is not over Government
money. This bill is about the pensions that workers have paid into this
fund. It is their money.
Throughout our country, there are 673,000 railroad retirees and
families and about 245,000 active rail workers. Minnesota's Eighth
Congressional District, up in the northeastern part of our State, ranks
10th in the Nation in the number of retired and active railroad
employees. Throughout our State there are over 18,000 retirees and
their families depending on railroad retirement benefits.
In addition, over 5,500 Minnesotans are presently working for the
railroads. They will eventually need pensions for their retirement.
All of these fine men and women have worked hard, and they all
deserve the best possible retirement program. They know better than we
what kind of retirement program is best for them. They paid in the
money, out of their paychecks, for all their working years, and all
they are asking us to do now, by passing this legislation, is to return
to them their money in a way that is best for them.
What could be controversial about that? Which one of us, if we were
in their shoes, would not want the same and think we deserve it. They
are right. And they do deserve it.
This bipartisan legislation presents a historic opportunity for our
Nation's railroad retirement system. Senator Baucus and Senator Hatch
deserve tremendous credit, and they have my gratitude, for bringing
together railroad companies, labor organizations, and retirees to work
together to modernize this system. The result of all that hard work is
this legislation, which provides better and more secure benefits, and
which does so at a lower cost. What could be better than that?
I say, let's vote on this bill today and pass it.
I thank the Chair.
The PRESIDING OFFICER. Under the previous order, the Senator from
Rhode Island is recognized.
Mr. REED. Thank you, Mr. President. I ask unanimous consent that, at
the conclusion of my remarks, Senator Gregg be recognized for 10
minutes, and upon the conclusion of his remarks, the Senate stand in
recess under the previous order.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REED. Mr. President, I am privileged to serve as the vice
chairman of the Joint Economic Committee. The Democratic staff of the
Joint Economic Committee issued a very pressing report about America's
economy. I would like to read from the first paragraph of the Executive
Summary.

New reports from the Bush Administration's Office of
Management and Budget and the Congressional Budget Office
confirm that the combination of the large tax cut and the
worsened economic situation have essentially eliminated any
expected on-budget surplus for the next five years. Indeed,
there is a growing possibility that the government's
fiscal position could be even worse, with no surplus at
all by the end of the decade and with a national debt that
might be even higher in ten years than it is now.

What is particularly prescient about this report is the fact that it
was not issued this morning, hours after Mr. Daniels of OMB declared
that the fiscal policies of this administration have locked this
Government into deficits for the next several years. This report was
issued on September 7, 2001.
It is also interesting to note that this report suggests very
strongly, prior to the attack on America on September 11, that the
fiscal policies of this administration had headed us down a road to
deficit after deficit after deficit.
The attack on September 11 was a dreadful assault on this country,
but it is not the cause of the current deficit we are staring at over
the next several years. It may have accelerated the timing, but the
fundamental core was the irresponsible tax policies of this
administration.
If we look across several years, we see a situation where our
colleagues on the other side resisted, in 1993, President Clinton's
plan, which mercifully passed by a very narrow margin, which set the
fiscal context, together with monetary policy, for the largest
expansion of our economy perhaps in our history. Yet when this party
came to power, not only in the Senate and the House but in 2001 in the
Presidency, it took them a scant 9 to 10 months to reverse years of
economic progress and prosperity and cast us back again into deficit
after deficit after deficit.
The consequences are severe. We are approaching critical choices
about Social Security and Medicare. Just a year ago, we had surpluses
which we could use to make these difficult choices. Those surpluses are
gone. But the demographic timebomb of the baby boomers is not gone. It
will be here. It is virtually on our doorstep. So we now have to
respond to these issues bereft of a surplus that was hard-earned over
years of effort during the 1990s.
There is something else, obviously, that is one of the direct
consequences of September 11. We are at war. This is a war that will
demand increased expenditures which we cannot decline to make, not just
in the military operations, which are expensive inherently, but if we
are not to repeat the mistakes that were made previously in the area of
Southwest Asia. We have to maintain a presence there. We have to be one
of the international participants to help in the reconstruction of
Afghanistan. We have to take steps across the globe to eliminate other
terrorist threats, sometimes more sinister than the dreadful events we
saw in New York.
We have to recognize there are loose nuclear materials around the
world, particularly in Russia, loose biological agents around the
world. All of these things will cost money. And the war on terror will
not end simply with the defeat of al-Qaida. It will be a constant
ongoing battle, perhaps akin to the Cold War--increased expenditures
now, because of this tax cut policy, without the benefit of a surplus.
There is something else we must recognize. We are looking at short-
run economic consequences of this tax policy. But what is going to
happen in the next several months and days and years ahead is that the
administration's response will be OK, we can't shun funding defense. We
will have to cut back in every other area of effort.
The key to our long-run economic prosperity is the productivity of
America. That productivity is not simply machines and tools and
computers. It is human capital. It is healthy, educated Americans who
can use these tools, who can invent new tools, who can continue this
growth. When we cut education and when we refuse to fund special
education and when we go ahead and cut back on health care and we do
all these things, we are harming our long-run productivity.

[[Page S12129]]

That is the dilemma we are in today. It is a dilemma that was
entirely avoidable by a more responsible fiscal policy of this
administration.
There is no surprise about Mr. Daniels' announcement yesterday.
Perhaps the only shock, if you will, was the timing. It was inevitable
after we passed this tax cut. Now as we go forward, we are seeing the
consequences. Those consequences will be very difficult to bear. What
is worse than that, our colleagues are compounding this terrible
situation by advancing the same policies in the guise of a stimulus
package: Accelerating marginal tax cuts further and proposing corporate
AMT that is retroactive. That is not going to get this economy moving.
That will simply make the hole we are in much, much deeper and the
climb out much steeper and longer and harder, particularly for working
Americans.
Again, there should be no surprise about Mr. Daniels' announcement,
but there should be surprise, shock, and perhaps even anger, that
having brought us down this path, they refuse to see the error of their
ways. They refuse to recognize that, yes, we do need a stimulus package
but one that would truly stimulate the economy by getting consumers
back in the marketplace, by ensuring that middle- and low-income
working Americans get access to additional dollars that they will spend
quite quickly. We must in fact protect ourselves through increased
expenditures on homeland defense.
I hope yesterday's announcement represents not just waking up to the
reality of their policies but changing the policies, that in working
collectively with the leaders in the House and in the Senate to script
and craft a fiscal package that will move America forward, we will
begin our slow climb out of this deficit situation. But there should be
no confusion about the fundamental cause of our current economic
situation--a precipitous collapse from surpluses to deficits. It was an
unwise, irresponsible tax plan promoted and proposed by the President
and regrettably accepted by this Congress.
I hope the searing news that Mr. Daniels gave us yesterday will
provide something more than heat, that will provide a little
illumination to those who seek to lead this country.
I yield the floor.
The PRESIDING OFFICER. Under the previous order, the Senator from New
Hampshire is recognized for 10 minutes.

____________________