[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
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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
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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.
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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.
____________________