[Congressional Record Volume 148, Number 4 (Monday, January 28, 2002)]
[Senate]
[Pages S162-S165]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    HOPE FOR CHILDREN ACT--Continued


                           Amendment No. 2723

  Mr. DOMENICI. Mr. President, I believe I have an amendment at the 
desk, amendment No. 2723. I ask unanimous consent that we set aside the 
pending amendment and take up the amendment that is at the desk, 
amendment No. 2723.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will report.
  The assistant legislative clerk read as follows:

       The Senator from New Mexico [Mr. Domenici] proposes an 
     amendment numbered 2723.

  Mr. DOMENICI. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

            (Purpose: To provide for a payroll tax holiday)

       At the end, add the following:

     SEC. __. PAYROLL TAX HOLIDAY.

       (a) In General.--Notwithstanding any other provision of 
     law, the rate of tax with respect to remuneration received 
     during the payroll tax holiday period shall be zero under 
     sections 1401(a), 3101(a), and 3111(a) of the Internal 
     Revenue Code of 1986 and for purposes of determining the 
     applicable percentage under section 3201(a), 3211(a)(1), and 
     3221(a) of such Code.
       (b) Payroll Tax Holiday Period.--The term ``payroll tax 
     holiday period'' means the period beginning after February 
     28, 2002, and ending before April 1, 2002.
       (c) Employer Notification.--The Secretary of the Treasury 
     shall notify employers of the payroll tax holiday period in 
     any manner the Secretary deems appropriate.
       (d) Transfer of Funds.--The Secretary of the Treasury shall 
     transfer from the general revenues of the Federal Government 
     an amount sufficient so as to ensure that the income and 
     balances of the trust funds under section 201 of the Social 
     Security Act and the Social Security Equivalent Benefit 
     Account under section 15A of the Railroad Retirement Act of 
     1974 (45 U.S.C. 231n-1) are not reduced as a result of the 
     application of subsection (a).
       (e) Determination of Benefits.--In making any determination 
     of benefits under title II of the Social Security Act, the 
     Commissioner of Social Security shall disregard the effect of 
     the payroll tax holiday period on any individual's earnings 
     record.

  Mr. Domenici. Mr. President, I am offering this payroll tax holiday 
amendment today to move this process 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.
  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.
  The payroll tax holiday is an idea supported by both Republicans and 
Democrats.
  Yes, I think we should have acted on a stimulus plan last October or 
November. I would have preferred that this payroll tax holiday had been 
in place for the December holidays.
  But having said that, whenever implemented, a payroll tax holiday 
will be more effective at increasing spending than the rebate checks 
sent out earlier. It will put the tax cut in paychecks automatically, 
without the need for special mailings.
  This tax holiday would be in March 2002. This gives employers and 
payroll administrators time to adjust their systems for the change.
  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.
  The Congressional Budget Office analyzed the various stimulus 
proposals. CBO said:

       Among the options being considered for providing fiscal 
     stimulus, a payroll tax holiday could have a comparatively 
     large bang for the buck . . . bigger paychecks might induce 
     more spending than rebates would and a payroll tax holiday 
     would reach many lower income working families.

  The bottom line: A payroll tax holiday is truly a stimulative, 
temporary tax cut that is very likely to be spent.
  Nearly all wage earners, all except those who have already reached 
the taxable maximum of $84,700, even those who don't earn enough to pay 
income taxes, would benefit.
  Both the employee and employer share--6.2% each--of the Social 
Security--OASDI--payroll tax would be suspended. Self-employed Social 
Security

[[Page S163]]

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 May. A self-employed contractor earning $40,000 per 
year, who pays both the employer and employee share of 12.4%, would see 
an increase in pay of $413.
  This proposal enjoys wide support. The majority leader was ready to 
include it in his earlier plan. Several Senators have cosponsored the 
bill here in the Senate. I believe this proposal could provide us with 
a bipartisan way to enact a stimulus bill quickly.
  Mr. President, I didn't want to let today go by without reintroducing 
this measure we call the ``payroll tax holiday'' amendment. The 
occupant of the chair has on a couple of occasions spoken to the 
Senator from New Mexico about this amendment. At some point in the 
history of the so-called stimulus, are we going to do it or are we not? 
The distinguished Senator was a cosponsor of the amendment.
  People are now talking about the fact that a very large surplus that 
we were reporting at the beginning of this year, some $300 billion, has 
disappeared for all intents and purposes and that the President 
tomorrow night is going to deliver to the American people his ideas and 
his proposals and concepts. And, obviously, shortly thereafter he will 
call for the budget that will be his proposals to match fiscal policy 
and tax policies with the speech he made and what he intends to do 
during the ensuing year.
  I remind everyone, once again, what actually happened to this surplus 
for the year we are talking about, this year, had very little to do 
with whether we cut or raised taxes. Some are saying to the American 
people, the tax cut is what brought down this wonderful surplus that 
was going to pay down our debt and we should not be cutting taxes. 
Well, the point is, we only cut $38 billion worth of taxes as a 
temporary reduction in that surplus. The fact that we have gone down in 
terms of our economic prosperity and slowly but surely ended up with a 
recession, a real recession--it doesn't seem as if it is going to last 
too long--that period of time of the American economy coming from a 
projected growth of over 3 percent to what all of us know is currently 
a negative growth, that is what took $220 billion of this surplus.
  I know as I say this, if there are people interested in what we say, 
some are asking, what do you mean?
  In the U.S. Government, when we have a growing economy, an economy 
that is projected to grow for the rest of this year at 3.4 percent, we 
have to estimate how much in taxes is going to come into the Treasury 
of the United States based on that kind of growth. What I am saying to 
Senators and to the public is that everyone agreed we should project 
the growth for this year at about 3.4 percent, a pretty healthy growth 
year over year. That means the entire basic growth of the United States 
was going to go up substantially. It turned out the estimates were 
wrong, and it came down. We lost $220 billion in the assumption with 
reference to how much money we were going to take in.
  Let me repeat, that is about a 72-percent reduction in the surplus we 
had expected to accumulate, just that one item. For those who wonder 
about the effect of our tax cut, it was $28 billion compared to the 220 
that came from the economy plunging. It is 14 percent for the tax cut. 
That is the reality of it.
  I remember rather vividly that the chairman of the Budget Committee, 
who presided over two hearings early this year, at the last one or the 
second-to-last hearing, did acknowledge that in terms of this year the 
tax cut had only the impact about which the Senator from New Mexico is 
talking.
  When we speak about a tax cut that we have already passed being too 
big, then we have to try to look at what we are talking about. We 
passed a tax cut that came into play little by little over a full 
decade, a little bit each year, with the biggest tax cuts coming 6, 7, 
and 8 years from now. That was already passed, but it will not take 
effect. So for those who think it is too big and that we should not 
give the American people that kind of tax relief 6, 7, 8, 9 years from 
now, they have plenty of time to fix it. They could fix it this year in 
the budget, if they would like, by suggesting we increase taxes in lieu 
of the decrease we passed. They could wait until next year and say 
let's increase taxes.
  I don't believe we should increase taxes. Actually, the tax 
reductions we made over the next decade still leave the overall tax on 
the American people at a high level compared to other tax years during 
the last 30 to 40 years.
  Let me quickly tell you about that. For 60 years, postwar, the 
average taxes as a percentage of GDP were 18 percent. For a period of 
60 years, after the war and continuing on, the average tax take was 18 
percent. Now even with the tax cut over the 10 years, the taxes are 
going to be 19 percent of the gross domestic product. They are 
projected by CBO to rise to 20 percent of the gross domestic product 
over the next decade. In this year, it will be 19 percent. Over the 
decade it will go up to 20.
  How can they be higher than they have been on average for the past 60 
years and yet there are some who would like to increase taxes from this 
high level that already is imposed upon them?
  So we ought to be talking about that for some time. But right now, 
the President will be speaking to us tomorrow, Senators and House 
Members. On behalf of our people, we are going to have to make a 
choice. He is going to suggest that while there is evidence the 
American economy is coming back and, as some say--perhaps Dr. Greenspan 
would say--if he were to put nine criteria up there on the economy, he 
would say we are now out of recession on five out of nine. So if you 
want to weigh that, a majority of the indicators of growth, or 
nongrowth, are on the growth side.
  We still have to ask ourselves, is it going to take too long to come 
out of this recession or should we pass a bill that would stimulate the 
American economy?
  I believe the President is going to say he would like us to join him 
in passing a stimulative tax incentive package. It is with reference 
thereto that today I ask if the Senate is going to consider passing a 
tax incentive bill, that they give serious consideration to a payroll 
tax holiday--that is, a Social Security payroll tax holiday--for all of 
the employees of the Nation for 1 month and all of the employers of the 
country for 1 month, and that that month be the month of March. That is 
about as fast as you can do it. It is also about as fast as any of the 
other taxes you are going to consider and get implemented and become 
part of the tax laws of the land, to either cause growth or restrain 
growth.
  As I have said, I knew this was going to be the case when I asked for 
cosponsors, and many helped. Many have said this is probably a good way 
to get the economy going. It probably amounts to about $40 billion that 
gets back into the hands of American workers everywhere and employers, 
large and small, in 1 month, for they don't have to pay their half.
  In the meantime, we also heard from various institutional analysts--
in this case the CBO, which does a lot of analysis and upon whose 
numbers we base our projections with reference to what is going to 
happen when you pass tax packages. We run it through a joint committee, 
but CBO gives their estimates, and they are pretty good. They indicated 
that, of the taxes being contemplated, the most stimulative would be 
this tax holiday. They base that on assumptions as to what happens when 
you get more money in your paycheck and what happens when you get less 
in your paycheck. They have concluded that the overwhelming percentage 
of Americans will spend the money if it is reflected in their check as 
a payroll check. This will not be huge for each taxpayer of America. 
But somebody making $40,000--depending on who is working, the husband 
and wife, it could be between $200 and $400 in 1 month. That would be 
the change in their checks.
  If an employer has 10 such employees--you see, they don't pay--their 
half is the same amount. They don't pay that to the Federal Government. 
They get it to invest or do whatever they would like, in terms of 
helping their

[[Page S164]]

business grow and helping them to add more employees or, as may be the 
case, staving off having to lay someone off or, indeed, being able to 
buy equipment they weren't going to be able to buy.
  All of this is going to be at the disposal of businesses, large and 
small. It will be a very healthy dollar amount as we move through that 
1 month and the effective date that will take place, depending upon 
whether we in the Congress decide to pass this proposal.
  Let me repeat, for simplicity, we will call it the payroll tax 
holiday amendment. So everybody will know, it is the payroll 
withholding for Social Security for 1 month on employers and employees 
of America. I believe I am correct in saying it is somewhere between 
$39 billion and $42 billion in that 1 month. And to the extent there is 
a month that we do not put the money into the Social Security fund, we 
do replenish it from the general tax revenues of the United States, 
which is the way we have done it for years when indeed we have had this 
kind of expenditure occurring.

  I will repeat that when the President sends his budget here and he is 
asking that we spend more, not less, on defense--in fact, I think he 
will ask for a 12-percent increase in defense spending. I believe on 
homeland defense spending he is going to ask that it be doubled in 
percentages--about a 111-percent increase. Of course, it was a small 
number. He is going to ask that those two items across our various 
expenditure lines be considered the highest priority and that we spend 
our money on those two. And a third is that we produce a stimulus. I 
believe the stimulus I am talking about here--the payroll tax holiday--
will ultimately, depending upon what you put with it, receive the 
support of the President. I believe he will sign a bill with that in 
it.
  I think if Senators begin to pay attention to what might work, surely 
we have to do something on unemployment compensation and we have to do 
something on a few other of the social programs that affect our working 
men and women. But we are also going to do something on the tax side of 
the ledger. I submit that this one is more apt to get us out of the 
lethargy that is currently in various parts of our economy, which 
doesn't seem to want to move.
  I ask unanimous consent that at the end of this speech, the chart on 
the CBO baseline projections of the surplus since January 2001 by 
fiscal year in the billions of dollars be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 CHANGES IN CBO'S BASELINE PROJECTIONS OF THE SURPLUS SINCE JANUARY 2001
                [By fiscal year, in billions of dollars]
------------------------------------------------------------------------
                                              Total             % 2002-
                                     2002   2002-2011  % 2002     2011
------------------------------------------------------------------------
Total Surplus as Projected in          313      5,610  ......  .........
 January 2001....................
                                  ======================================
Changes a
  Legislative
    Tax act b....................     (41)    (1,657)      12        41
    Discretionary................     (45)      (714)      14        18
    Other........................      (5)       (49)       1         1
                                  --------------------------------------
      Subtotal...................     (91)    (2,420)      27        60
  Economic and Technical c           (242)    (1,588)      73        40
                                  --------------------------------------
      Total......................    (333)    (4,008)     100       100
                                  ======================================
Total Surplus or Deficit (-) as       (21)      1,602  ......  .........
 Projected in January 2002.......
            Memorandum
 
Legislative changes to
 discretionary spending a
  Defense........................     (34)      (396)      10        10
  Nondefense.....................     (11)      (318)       3         8
------------------------------------------------------------------------
a These estimates include the interest effects of changes assumed.
b CBO cost estimate for the Economic Growth and Tax Relief
  Reconciliation Act of 2001 (P.L. 107-16). The estimate includes both a
  reduction in taxes and an increase in outlays.
c Changes not directly driven by new legislation or by changes in the
  components of CBO's economic forecast are considered technical.
 
Source: Congressional Budget Office.

  Mr. DOMENICI. Mr. President, that is what it is going to be in 2002 
through 2011. The source is the CBO. The facts are pretty easy to 
understand--the estimates for the Economic Growth and Tax Relief 
Reconciliation Act. The estimate includes both a reduction in taxes and 
an increase in outlays. That will be in the budget if we choose to do 
something on the tax side.
  The PRESIDING OFFICER. The Senator from Nevada is recognized.
  Mr. REID. Mr. President, we have had an agreement with the minority 
since this bill came up that we would alternate amendments. We have 
done that, but we have never formalized that.
  I ask unanimous consent that the first-degree amendments offered with 
respect to H.R. 622, the economic recovery/stimulus measure, be offered 
and considered in an alternating fashion.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, I inquire of the Chair if the following is 
the order in which these amendments have been offered: Durbin, No. 
2714; Bond, No. 2717; Baucus, No. 2718; Allen, No. 2702; Harkin, No. 
2719; Bunning, No. 2699; Baucus, 2721; and Hatch, No. 2724, plus we 
have an amendment, No. 2723, offered by the Senator from New Mexico.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. REID. That being the case, there would be two Democratic 
amendments next in order.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. REID. I thank the Chair.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. HARKIN. Mr. President, I commend Chairman Baucus and Senator 
Daschle for their leadership and their determination on this important 
issue of the ever-deepening recession of the United States and the fact 
that so many people are out of work. They have consistently returned 
time and time again to make sure we commit to the real needs of the 
people in this country.
  But in our slowing economy, States are already facing a serious 
budget crunch, forcing some of our State leaders to make tough 
decisions. In fact, the recession would force Iowa to cut $18 million 
from its State Medicaid budget, funds that would have brought an 
additional $32 million in Federal money to our State.
  All of us, when we are talking about a stimulus, have to think about 
what is happening in the State budgets. I know the occupant of the 
chair is the former Governor of the distinguished State of Delaware and 
he knows, as well as others, that when recessions go up and 
unemployment goes up, the impact on the State budgets to meet their 
requirement for Medicaid increases dramatically.
  What happens is, as these rolls grow, then there is more of a demand 
on the State moneys. For example, there are already 240,000 Iowans on 
Medicaid, about 15 percent more than what the State expected to serve 
this year. The same providers who are facing the cuts will also be 
called upon to serve a growing number of people. When the providers are 
cut, the patients they serve feel it.
  As we look at what is going on in the country today, we cannot allow 
Medicaid recipients, some of the most vulnerable people in our country, 
the most vulnerable of my constituents in Iowa, to fall through the 
cracks. But unless Iowa and other States get help, they will have to 
either make deeper provider cuts take effect, make eligibility 
requirements tougher, or cut benefits, all of which are going to impact 
the most vulnerable people in our society.
  One provision in the stimulus bill is of particular importance to my 
State of Iowa, and I would say all States across the country. This 
provision will give States critical assistance in meeting their 
Medicaid responsibilities by increasing the Federal match for Medicaid, 
the FMAP, for 1 year.
  Under the Daschle amendment, every State would get a 1.5-percent 
increase in their 2002 FMAP. I do not know what it will mean to all the 
States, but I do know it will mean an additional $30 million to the 
State of Iowa.
  Again, while what is in the underlying bill is an important first 
step, we must remember it was developed when State-projected deficits 
were estimated to be a lot lower than they are today.
  On October 31 of last year, the National Association of State Budget 
Officers predicted a $15 billion shortfall for the States for 2002. On 
October 31, there was a $15 billion estimated shortfall in our State 
budgets. Six weeks later, on December 19, they updated that to a $38 
billion shortfall in our State budgets. We all know when we talk about 
State budget deficits, we are talking in large part about their 
Medicaid budgets. In many States, that is the largest part.

[[Page S165]]

  Because most States are required by their constitutions to balance 
their budgets every year, they have to look to Medicaid for cost 
savings.
  Without adequate State fiscal relief through a temporary increase in 
the FMAP, the Federal Medicaid matching rate, these cuts are likely to 
be approved. It could be even worse as the deficits worsen further.
  To help States avert these otherwise unavoidable cuts, I have offered 
an amendment which is in the lineup for tomorrow that will increase the 
Federal Government's match of State Medicaid spending by 3 percent 
instead of the 1.5 percent that is in the underlying amendment for the 
next fiscal year.
  If this amendment is agreed to, all States will receive an enhanced 
3-percent increase on their FMAP. Also, the States that have high 
unemployment rates will still get their 1.5-percent bonus and all 
States will still be held harmless.
  Basically, my amendment takes the underlying 1.5 percent and makes it 
3 percent in terms of the Federal match for Medicaid.
  It will provide about $3.5 billion more to the States than the 
pending legislation and over $7.5 billion more than the House-passed 
plan to help offset the impending State Medicaid cuts for providers and 
beneficiaries.
  Again, State fiscal relief is one of the best ways to stimulate the 
economy because Federal dollars used for this purpose help avert the 
State budget cuts and the tax increases that can be detrimental to any 
economic recovery.

  The people in Iowa and all across the Nation have enough trouble 
finding affordable quality health care. They need our help and support 
during this recession. When it comes to protecting the vulnerable in 
these difficult times while getting our economy back on track, putting 
Iowans and all Americans back to work, this proposal to increase the 
FMAP, the Federal match on Medicaid, is right on the mark.
  This amendment will be up tomorrow for a vote. I hope it will get 
overwhelming support because, again, we cannot afford to let the most 
vulnerable in our society fall through the cracks, and we have to 
recognize that States are facing over a doubling of the initial 
estimate of what their State shortfalls would be in their budgets for 
this next fiscal year.
  Looking at all that, we need to make sure we increase the Federal 
share. For a small amount of money we put into it, considering the 
nationwide impact, the multiple effect it will have on our economy will 
be tremendous, especially as it affects those State budgets.
  Again, I commend Senator Daschle and Senator Baucus for the 
underlying amendment. If we had voted on this last year, perhaps 1.5 
percent might have been sufficient with what we knew then. But with 
what we know now, 1.5 percent is not sufficient. I believe this 
amendment I have offered to double that from 1.5 percent to 3 percent 
will make it so that the States will not have to cut their Medicaid 
budgets this year.
  I hope we can adopt this amendment. I hope we can get the stimulus 
bill passed and get increased unemployment benefits out there, health 
care benefits, and help our States with their Medicaid budgets. This 
will do more to stimulate the economy than anything else we are doing.
  Mr. President, I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. KYL. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Miller). Without objection, it is so 
ordered.
  Mr. KYL. Mr. President, I ask that I be allowed to speak in morning 
business for a period of 25 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________