[Congressional Record Volume 149, Number 7 (Wednesday, January 15, 2003)]
[Senate]
[Pages S326-S330]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE ECONOMY
Mr. GRASSLEY. Mr. President, I have listened to a lot of debate
yesterday and today on these subjects about the economy and about tax
bills and things such as that. I want to address the tax bill as well.
I think it is very legitimate for people to raise concerns about the
deficit because I think a deficit is part of a measure of whether or
not there is fiscal responsibility in Government. It is obviously not
the only measure because you cannot have deficits and maybe still be
fiscally irresponsible. I would like to hear from my colleagues who are
concerned about deficits when they express these at times when we are
talking about tax cuts. I have not seen that same concern about
deficits when they want to spend more money. I think we ought to demand
a certain amount of consistency from people who are worried about
deficits; that they are equally concerned about them at the time we
might be cutting taxes as well as when we are spending money. I bet
before a week is out there will be--from the very same people who are
concerned about tax cuts being too much right now and raising the
deficit--dozens of amendments offered to spend more money on the
appropriation bills for 2003.
There is another thing I would like to make some comment on, because
I have heard several members, particularly on the other side of the
aisle, make reference to the fact that certain wealthy people have said
they don't need tax cuts. Don't cut my taxes; I don't need the tax cut.
I think it is very altruistic for people to say those things and
probably mean them. But one of the things I hope we will consider as we
are working at cutting taxes--particularly marginal tax rates--deals
with the issue of whether or not you are a corporate executive of a
Fortune 500-type company that says you don't need it because that
individual might say he doesn't need a tax cut, as opposed to 80
percent of the benefits from the tax cuts, cutting the marginal tax
rates from 39.8, 2 years ago, eventually down to 35 percent--85 percent
of those benefits go to small business.
It happens that small business is a class of people that create about
80 percent of the jobs in America. A lot of small business people
regularly are investing in their own business to create more jobs, to
expand their business and, in the process, living throughout their
lifetime relatively modestly in order to expand their business and be
successful. We are talking about a jobs bill and marginal rate cuts, 80
percent of which are going to small entrepreneurs to create jobs, which
ought to be something we would separate from the CEO who may make a lot
more money and doesn't need a tax cut.
I want to speak generally about taxes and some reference to the tax
bill of 2 years ago that the President's proposals are going to be
building on, because I was chairman of the Senate Finance Committee
when that bill passed. I had a good working relationship with my
colleague, Senator Baucus, in getting that bill to the floor and to the
President.
On June 7, 2001, President Bush signed tax relief legislation. For
the first time in a generation, every income tax paying American
received much needed tax relief. Unfortunately, in the period since
Americans first started to receive their rebate checks, the effect of
this legislation has been distorted. The distortion comes in the form
of often-repeated bogus criticisms of the tax cut. This repetition has
created what I will call three myths of the tax cut.
The first myth is that the bipartisan tax relief was a partisan
Republican product. The second is that the bipartisan tax relief
package is the primary source of our current budget problems. The third
myth is that the tax relief favored the wealthy over low and middle
income taxpayers.
Compare the first myth against the record. Often we hear the phrase
Republican tax cut or partisan tax cut. In fact, the tax cut was
bipartisan. Twelve Democratic Senators voted for the conference report.
Senator Jeffords also voted for the conference report. That's over one-
fourth of the Democratic Caucus.
Let's take a look at the second myth. How many time have we heard in
debate or seen written in the media the charge that the bipartisan tax
relief caused the current and projected deficits. Cold hard numbers
tell a different story. Cold hard numbers from the Congressional Budget
Office, the Office
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of Management and Budget, and private sector sources reveal the truth.
Here is what the numbers say. You can check it out on the CBO Web
site. According to CBO, for the current fiscal year, the tax cut
represents barely 8 percent of the total change in the budget since
last year. For instance, for the same period, increased appropriations
outranked the tax cut by $6 billion. So, spending above baseline,
together with lower projected revenues, accounted for 92 percent of the
change in the budget picture. Let me repeat that. Bipartisan tax relief
was a minimal, 8 percent factor, in the change in the budget situation.
Over the long term, the tax cut accounts for 33 percent of the change
in the budget picture.
There is a third myth about the tax relief package. According to this
myth, the tax relief package was a tax cut only for the wealthiest
Americans. Most often this myth comes in the form of a statistic. The
statistic is that 40 percent of the benefits of the tax cut went to the
top 1 percent of taypayers?
Where did the statistic come from? Did it come from the non-partisan
Joint Committee on Taxation? The answer is no. The statistic cited by
the media and the Democratic Leadership critics comes from a liberal
think tank.
Once again, facts can be ugly things for harsh critics of the
bipartisan tax relief package. According to the Joint Committee on
Taxation, Congress's official non-partisan scorekeeper, the tax code is
more progressive with the tax relief package. Joint Tax, concludes that
the bipartisan tax relief returns to taxpayers, on a progressive basis,
a small portion of the record level of Federal taxes.
Joint Tax's analysis shows that the largest reduction in tax burden
went to taxpayers in the lower and middle income brackets. For
instance, taxpayers with incomes between $10,000 and $20,000, will see
their taxes reduced by almost 14 percent when the tax cut is fully in
effect. Taypayers with over $200,000 will see their taxes reduced by
barely 6 percent. This analysis shows that the third myth, like the
first two, does not stand up when compared to the facts.
It is understandable that the largest tax relief package in a
generation would spark continuous opposition from those that prefer
record levels of Federal taxation. That is a good political debate that
should play out. The terms of the debate, however, should be based on
facts, not myths.
Now, I raise this point because we are about to embark on a new
effort at aiding the recovery of the economy. As chairman of the Senate
Finance Committee, I am open to all ideas, Republican and Democrat,
aimed at boosting investment and consumer demand. The Finance Committee
will begin to examine these proposals in our usual bipartisan manner.
When we examine these proposals, however, we will use facts, not myths
as our guide.
Now, let's look at some facts about the President's proposal. These
are facts developed by the Treasury Department. These facts tell the
story about who benefits from the President's proposal.
I have five examples, and then I will yield the floor.
Example No. 1: A married couple with one child making $40,000 gets a
tax cut of $732. That is a tax bill of $2,235 goes down to $1,503. For
that married couple with one child making $40,000, that is a 33-percent
tax cut.
Example No. 2: A married couple with two children making $40,000 will
get a cut of $1,133; in other words, a reduction of their $1,178 tax
bill down to only $45, and that is a 96-percent tax cut.
Example No. 3: A married couple with two children making $20,000
more, $60,000, will get a tax cut of $900, a reduction, then, from
$3,750 down to $2,850. That married couple with two children gets a 24-
percent tax cut.
Example No. 4: A married couple with two children making $75,000 gets
a tax cut of $1,122, and that is from a $5,817 present tax bill reduced
to $4,695, and that is a 19-percent tax cut.
Example No. 5, the last example: A married couple, both age 65,
making $40,000, of which $2,000 might be dividends and $15,000 Social
Security benefits, will get a tax cut of $380--their tax bill down from
$930 down to $550--or a 41-percent tax cut.
I ask everybody to stick to the facts, use the facts, let the facts
speak for themselves, and I think we will have a more intellectually
honest debate.
I yield the floor, and since I do not see any colleagues wanting
recognition, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. DURBIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DURBIN. I ask unanimous consent to speak as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DURBIN. Mr. President, throughout the course of the day, those
who have followed the debate know we have been discussing the state of
the economy and what we can do in Washington--if anything--to improve
it. I listened with great interest to my friend and colleague from
Utah, Senator Bennett, who came to the floor and admonished us to
remember that government did not create jobs. He was very specific in
saying jobs are created by business, by the capital investment, the
creativity, the entrepreneurship, and risk taking of individuals. It is
hard to argue with that. My own experience in business confirmed as a
basic premise that the success of business and the private sector
depends to a great extent on individuals.
It is naive to suggest that is all it takes in order for a
businessperson to be successful. There are several things they have to
turn to. One is the rule of law which, fortunately, we have for the
most part in this country. Some countries do not have that. They also
have to look to a basic infrastructure in a country to serve that
business, whether it is the telephone communications or the Internet or
highways, which of course involve government, and of course the
educational training of the people in the business; that usually
involves the government, as well--things that we do create a climate
for business to succeed or fail.
What we are talking about now is how to improve the business climate
in America: What is it we can do that will encourage entrepreneurs--
businesses large and small--to expand and create employment with the
production of goods and services, create the kind of economic activity
that leads to economic growth and the improvement of the quality of
life in America? That is what the debate comes down to.
I would not argue with Senator Bennett's premise, but I conclude that
a good government with good policies can certainly help businesses
prosper. We need it at this point in time. The unemployment data we
have been given by official government sources suggests we are facing
unemployment levels that we have not seen for 50 years in the United
States. It is hard to imagine we are at that point, but we are. The
economy lost 101,000 jobs in December, 188,000 over the last 2 months;
188,000 wage earners and employees in America are unemployed. What can
we do to create a business climate to put them back to work?
The President came in with his so-called stimulus or growth package.
He said, by analysis, that it would create 123,000 jobs after the next
year. Think about that for a second. The President's plan would create
123,000 over the next 12 months, and we have lost almost twice that
number in the last 2 months. So if you say that the President's
commitment to this is halfhearted or not complete, it is fair. We
should be talking about what we can do, if anything, to invigorate this
economy overall. Many believe the President's package falls far short
of the mark.
Look at what the President has said on how much he would spend on a
stimulus plan. Here are the Democratic alternatives. Senator Baucus,
the ranking Democrat on the Senate Finance Committee, would spend $160
billion in the first year; Congresswoman Pelosi, the Democratic leader
in the House of Representatives, $136 billion in the first year. Look
at the President's plan: $35 billion in the first year. No wonder it
does not create jobs. No wonder it does not invigorate the economy.
But stay tuned. The President's plan, after the first year, spends a
massive amount of money, $674 billion, and, with interest, almost $1
trillion for the President's plan.
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But it does not meet the first test. The first test is: Does it
stimulate the economy? Does it get us moving again? Will it encourage
businesses to expand and encourage people to invest? Will it create
jobs? Will it create wealth? The honest answer is, for this downpayment
of $35 billion, it is not much of a commitment. The sad part is that
even though it is not much of a commitment, the overall cost of the
President's plan over the 10-year period of time, $939 billion for the
President's plan, comes directly out of the Social Security trust fund.
So, not only does the President's plan fail to stimulate the economy,
the money that is being spent, the tax breaks being given, are coming
right out of the Social Security trust fund.
Remember the ``Saturday Night Live'' routine where Al Gore, during
the campaign, was being chided for always talking about the lockbox and
people wondering: What is this politician raving about--a lockbox? What
could this mean? It was a shorthand term used on the floor of the
Senate over and over again by Democrats and Republicans to suggest we
were creating a lockbox for Social Security; we were never going to
reach into Social Security; we were going to protect it at all costs.
That debate disappeared 2 years ago. And now we have a wholesale raid
on the Social Security trust fund. The lockbox has been busted open and
is now being spent right and left at the very time when we know the
Social Security trust fund is going to need to have extraordinary
resources in order to meet its obligations.
Let me show this illustration. This is the Social Security trust fund
that is going to face a cash deficit as baby boomers retire. People
born immediately after World War II reach their Social Security
eligibility after having paid a lifetime into Social Security and will
turn to their Government for this pension protection into which they
paid. We know they are coming in large numbers--the largest numbers in
our history. The question is: Will we be prepared? The answer is: No,
if you follow President Bush's plan.
What I am about to show gets even worse. This is an illustration of
what happens to the Social Security cash deficit. This period shows a
surplus of Social Security. It is because we were drawing more from
payroll taxes and we were trying to create surpluses in Washington
which would not raid the Social Security trust fund. For years in the
Clinton administration, we had surpluses for the first time in 30
years. The surpluses meant that the Social Security trust fund was
showing a surplus.
Look at what happens. In the year 2017, right as the baby boomers
start arriving in huge numbers, we now see all the accumulated
surpluses in Social Security trust fund, the green ink disappearing
into red ink. Look at what is coming. One would say a good steward, a
President who saw this, would think twice about a tax plan which would
create a deeper pool of red ink in the Social Security trust fund. But,
in fact, he is not. President Bush's plan, $939 billion over 10 years,
as I mentioned earlier, creates even greater deficits in Social
Security.
Will we meet our obligations in these years? I might not be here to
attest to it, but I would guess we would. We will not break our faith
with the American people. But it basically means we will be drawing
money from other government spending to put it into Social Security to
make up for the deficit which we are creating and aggravating today.
Would anyone consider that in terms of your own family and children?
Would anyone consider it fair to enter into a debt today that your
children would have to pay--a substantial debt that you know your
children would have to sacrifice to pay? I don't think that is fair for
a family. I don't think it is fair for America. So the President's plan
not only betrays the baby boom generation which is expecting its
payment and deserves it, it is entitled to it, it betrays their
children and grandchildren who will have to pay off the debts created
by the President's economic policies and decisions today.
Of course we know about Medicare, another plan that is critically
important for seniors across America. This chart shows health insurance
for senior citizens. About the same thing is happening with Medicare,
as shown on this chart, as happens with Social Security. As the baby
boomers arrive, taking advantage of Medicare, with escalating health
care costs, less and less money is available, creating deficits.
Nothing is being done by this administration to deal with this crisis.
In fact, the President's economic stimulus plan will make the crisis
worse. We take the money out of Medicare, out of the Social Security
trust fund, and make it more difficult to meet those obligations which
we know we will face. This cannot be ignored. It is reality.
As we look at this, we find ourselves going more deeply into debt
because of the plans of the President. These are projections the
President's administration came up with. When we said ``the debt to be
held by the public of the United States in the year 2008,'' the
President told us in January of 2001 not to worry, the first round of
his tax cuts would be so good for the economy, would encourage so much
growth, that we would see the debt of America by the year 2008 shrink
to $36 billion. I wish that were true. In fact, his administration came
back 2 years later and said: Slight miscalculation. We have to
recalculate the anticipated debt in 2008, and it will not be $36
billion, it will be $4.7 trillion.
So the President's first economic stimulus plan fell flat on its
face. It gave tax breaks to the wealthiest people in America. It did
not invigorate the economy. It created more deficits and more debt, and
the President has said to us: We want to continue doing that, we want
to continue moving in that direction.
That is not healthy for America. That kind of debt will have to be
paid for by our children, and the Government borrowing this money will
be at the expense of the capital available for businesses in the
private sector.
Going back to Senator Bennett's point, a business wanting to create a
job many times needs capital to expand. A businessperson, if he or she
doesn't have the money to put in the business, will borrow it. The
interest rates paid will depend on the competition for that money. If
the competition is fierce for limited money, interest rates go up.
The PRESIDING OFFICER. The time of the Senator has expired.
Mr. DURBIN. I ask unanimous consent for 10 additional minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DURBIN. If there is competition for this money, the interest
rates go up. If the Government is borrowing to cover its own debt, that
means interest rates go higher so the businessperson, whether he is in
Chicago or she is in Springfield or New York City, is going to pay a
higher interest rate for the capital needed in order to expand the
business. That is what we are doing here. We are deepening the debt of
the United States of America and increasing the deficit.
If you look at why we are doing it, I think it tells another part of
the story. This plan being proposed by the President for tax cuts is
one that does not pass the fairness test. That is critically important.
Issues have been raised during the course of the day, interesting
issues about sacrifice in America. Since September 11, we have been
proud of the unity of America and the spirit of sacrifice. People have
said: We are coming forward to help.
I remember, in the days after September 11, how many of us went to
blood banks all across the United States, believing if there was a
national emergency and a need, we wanted to make sure there would be an
adequate blood supply. I remember seeing that in Chicago and other
places, being a participant myself. There was an actual belief that we
had an obligation as citizens to do something extra for America, the
belief that we should sacrifice for the good and strength of this
country.
That belief is always out there in America. The right leader can tap
it, and Americans will step forward time and time again. They won't
disappoint you. The people will be there to stand behind their country.
We are still in that time of testing. Mr. President, 130,000 military
personnel in the United States are now positioned for the invasion of
Iraq; 130,000 men and women, civilian and military, who are there
prepared to risk and, sadly--I hope it is never necessary--maybe even
give their lives in service to their country. We cannot ask a greater
sacrifice of
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any person than what we are asking of those 130,000.
Some of them are full-time military. Others are Reservists and
National Guardsmen who were called up and left their families and jobs
to serve their country. The point raised on the floor today was: What
does the President's plan do for these Reservists and Guardsmen and
their families? What does it do for people in their income categories?
The sad reality is that it does little or nothing.
Take a look at these numbers as an indication of what the President's
plan would do when it comes to tax cuts for those in different income
categories. If someone is earning from $21,000 to $38,000 in income--
that is certainly the low end of the middle class--the President's tax
cut is $265 a year. What is that, $5.50 a week under the President's
tax plan. How does that change the economy? Now look at the 260,000
people in America with incomes over $1 million a year who would see an
annual tax benefit of $88,873 from the President.
Does this make sense? Is this fair? We are saying to people in lower
income categories: Sacrifice for the good of America and stand unified.
Be prepared. We need your help. We need to be together.
Then you say to people who are better off than virtually anyone else
in America: We are going to make certain that you receive the lion's
share of the benefit in the President's tax cut package.
As my friend from Minnesota and others have said, this is clearly
``no millionaire left behind.'' That is the policy of the Bush
administration when it comes to tax cuts.
If it worked, if it were a winning formula, I would swallow hard and
say, do it again. But the President tried this 2 years ago, and it
failed. It failed to invigorate the economy. That is why we are still
in this drastic circumstance today. Giving more tax breaks to wealthy
people, the trickle-down theory of economics, the philosophy that this
administration has pushed time and time again, has failed to invigorate
this economy, and the President wants more of the same.
That is not going to work. I am hoping some of my Republican
colleagues who are now in the majority of both the House and the Senate
understand that, too, and will prevail on the President to move beyond
this whole notion that somehow taking the personal tax off corporate
dividends is going to turn the American economy around and somehow
giving $89,500 a year in tax breaks to the wealthiest people will
invigorate this economy.
Mr. DAYTON. Will the Senator yield?
Mr. DURBIN. I am happy to yield to my colleague.
Mr. DAYTON. I thank the Senator for bringing these facts to our
attention.
Regarding the last chart the Senator had, regarding the benefits for
those making more than $1 million, as I recall, isn't that in addition
to a tax cut that was about $45,000 per multimillionaire in 2001? So
this $88,000 would be in addition to the $45,000 a year tax cut those
individuals received 2 years ago?
Mr. DURBIN. My understanding is the Senator is correct. There is a
minority group which the President clearly wants to speak for and stand
up for. The $44,000 in tax benefits given 2 years ago the President and
the administration believe were not enough; they need to give more tax
breaks to people in those higher categories.
I will bet the Senator from Minnesota knows families in his State, as
I do in mine, at much lower levels who could use assistance, a few
extra dollars to help pay for the necessities of life and pay a few
extra dollars to put in savings for their children's education. These
sorts of things are the realities of life of families. I think
millionaires and people who have been fortunate to be that well off can
take care of themselves. I am curious as to why this administration
continues to want to throw out the life preserver to people who are
floating around in their yachts. I don't get it.
Mr. DAYTON. I share the view of the Senator. For someone making more
than $1 million, if they can't live on what they are making, they
should not come to the rest of taxpaying Americans and ask for these
handouts. Most Minnesotans don't make as much in income as these tax
breaks for these people who are making these amounts. The facts speak
for themselves. The facts tell the American people who gets everything
out of this bill and who gets very little.
Mr. DURBIN. This is another chart, I might say to my friend from
Minnesota, which tells the story as well in terms of whom it benefits.
Mr. President, 78 percent of the benefits in the President's proposal
are to people in the top 20 percent of income. If you divide all the
wage earners in America into five groups based on how much they make,
the top 20 percent get 78 percent of the President's benefits, more
than $68,000 a year. Then, when you get down to the lower 40 percent of
wage earners, they are getting less than $21,000. It really tells the
story. If you are going to give tax benefits to a majority of
Americans, and a majority of benefits to those Americans, you really
have to take a look at the distributional charts here.
First, it strikes me it is not good economics. Good economics suggest
if you want to increase demand for goods and services, you give
spending power to people who will spend rather than save. That is basic
as principles of economics. So it is not good economics to stimulate an
economy by rewarding the wealthiest people, who are more likely to save
the money than spend it.
Second, it is fundamentally not fair. I think many of the people who
propound the President's proposal before us really do not believe and
agree with progressive income tax. They don't believe that people who
are more comfortable and better off should pay more than those who are
struggling. Frankly, over the last several weeks we have heard some of
those arguments. I still recall a statement on the floor from the
Senator from Pennsylvania, who got up and said a third of the wage
earners in America pay no taxes at all. I invite him again to go out
and meet with those wage earners who will show to the Senator their
payroll stubs. They are paying taxes every hour of every day of every
week they work, and to say they are not taxpayers I think is an
indication that that Senator is out of touch with the reality of
working America.
These are the things we have to deal with here. I hope in the days
ahead when we deal with the economic stimulus package we will not
overlook the real challenges facing America to fund education.
I voted with the President's No Child Left Behind proposal. I think
there are many good things in there. But I was warned by my colleague
who sat at this desk, Senator Paul Wellstone of Minnesota, who voted
against it. He said when the time comes, the President will not put the
money on the table for schools. Sadly, I have to say in Paul
Wellstone's memory, he was right. The President has refused to fund the
program for No Child Left Behind which he has created. He has
established the standards and mandates on school districts across
America, but has refused to fund them.
We will give the Senate a chance, I hope, in the next few days to
vote for the funding.
Second, we have to do something about health care in this country.
The cost of health insurance is prohibitive. The increases are so high
we now have employees of companies such as General Electric going on
strike because the employees cannot sustain the increased costs of
health insurance. And not a word comes from this White House and this
administration to address this national crisis.
A hospital administrator in Illinois came to see me last week. He
said, Senator, we have a perfect storm here. Health insurance costs are
beyond the reach of families and businesses. The costs of maintaining
hospitals are going up, and the Government is totally unresponsive to
any of these elements. He is right, sadly. The President's State of the
Union Address will give him a chance to really show he is even aware of
this problem. I hope he is.
In the meantime, $89,000 breaks to millionaires is hardly the kind of
assistance Americans need.
I yield the floor.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, it is my understanding that morning business
has expired.
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The PRESIDING OFFICER. The Senator is correct.
Mr. REID. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________