[Congressional Record Volume 149, Number 16 (Wednesday, January 29, 2003)]
[Senate]
[Pages S1707-S1709]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     THE STATE OF THE UNION SPEECH

  Mr. CORZINE. Madam President, I will speak a little bit on part of 
the main topic the President talked about last night, where we heard 
President Bush eloquently address America's challenging agenda--an 
agenda of war and peace, of health care, and the American economy.
  In fact, as it relates to the economy, he said our first goal is 
clear, that we must have an economy that grows fast enough to employ 
every man and woman who seeks a job. He suggested that we work to have 
a prosperity that is broadly shared. I am certain his rhetoric 
resonated well with the American people. It sounds good.
  Today, I want to talk not about the rhetoric of the President's 
address but of the reality of the policies that have both been 
implemented and the purposes and possibilities of the policies he has 
laid on the table, which he suggests would turn our economy around and 
meet those lofty objectives.

[[Page S1708]]

  Let me be clear in my own view. There is a huge gap between the 
rhetoric and the reality of the President's economic stewardship and 
certainly with respect to the policies and proposals laid on the table. 
Let me begin by saying I am glad the President seems to finally 
recognize that our economy has problems. You will recall that the Vice 
President, only 2 weeks ago, was arguing at the National Press Club and 
at the Chamber of Commerce that the President's economic policies were 
succeeding.
  In this particular case, we will take the President's analysis 
because I think there is a need to get job growth and economic momentum 
back into our economy. I am afraid he really doesn't appreciate the 
depth of the problems we have in our overall economy and the compelling 
need to take effective and strong action now.
  Since March 2001, 2.4 million Americans have lost their private 
sector jobs. That is a lot of folks. The unemployment rate stands at 6 
percent, which is the highest it has been in 8 years. Mortgage 
foreclosures are at record highs. The stock market has declined 
dramatically in the past 2 years, losing about $5 trillion in value--a 
significant amount of value. Consumer confidence has been seriously 
undermined. In fact, yesterday we had an announcement that the consumer 
confidence level is at its lowest in 9 years. By the way, that is lower 
than in the 2 months that followed September 11. Demand has declined to 
such an extent in American business that businesses are operating at 
about 75 percent of operating capacity--well below the mid-1980s, which 
is on average. We have had 2 years of declining business investment. 
Our current account deficit is exploding--it is at record highs--and 
our Federal deficit is growing, with little improvement in sight for 
years.
  I think all of us know that as recently as 2 years ago, we were 
talking about projections of a $5.5 trillion surplus for America. 
Today, projections over the next decade have us anywhere from $2.5 
trillion to $3 trillion in deficits. I think we have some serious 
issues today. CBO announced they project a $200 billion deficit for 
this current fiscal year, and that is before tax cuts and any changes; 
and those estimates are based on our activities in the Middle East and 
a war on Iraq.
  I could go on. But, in short, we have serious economic problems and 
we need a serious and effective economic stimulus program, something 
that will really deal with the soaring rhetoric the President talked 
about to make sure every man and woman who seeks a job can have one and 
make sure prosperity is broadly shared in the American economy.
  I don't think the prescriptions on the table do the job, frankly. I 
will try to talk about it in specifics. In many ways, I think some of 
the President's suggestions are actually antigrowth. The President's 
rhetoric would lead one to think his plan would provide a stimulus. But 
the reality is very different. Look at some of the facts. Only $36 
billion of the plan's $675 billion in total tax cuts would kick in this 
year. By the way, that $675 billion--if you add the interest, it would 
be $950 billion in the decade, and if you take the acceleration of the 
tax cuts that the President also has proposed, the cost to the Federal 
Treasury would be about $1.5 trillion--a relatively serious amount of 
money.
  The $36 billion the President is targeting for fiscal year 2003 is a 
mere drop in the bucket. It is not even half of 1 percent of GDP. I do 
not read anywhere or hear in broad discussions from the Congress that 
this is going to do much of anything with regard to stimulating growth 
today and creating jobs today. The right and the left--it is almost 
universal--talk about growth packages as opposed to stimulus packages 
because it is such an insignificant amount of input into the current 
economy.
  In fact, the President's plan, in my view, actually could do real 
harm in the short run. Its proposed dividend exclusion will encourage 
corporations to do something that is negative with regard to growing 
the economy. It will shift cash off the corporate balance sheet, away 
from investments, away from employment into dividend payments. It may 
be nice for the people who receive it, the very narrow segment of folks 
who actually will receive dividend payments, but it reduces the 
capacity of business to do anything.
  Taking cash off the balance sheet is the opposite of what we want to 
be doing if we are trying to stimulate the economy. Accelerated 
depreciation puts cash on the balance sheets. It lets business retain 
value of cash. It is hard for me to understand why anyone thinks that 
is a stimulus program. In fact, as I suggest, it may actually be 
antigrowth.
  We cannot spend a dollar twice, so for each dollar distributed as 
dividends, companies will have one less dollar to invest in plant and 
equipment, one less dollar to plow into research and development, one 
less dollar to hire or retain personnel. The end result will be lower 
investment and fewer jobs in the short run.
  By the way, it takes a long time for those dividends to work their 
way back into the job growth and economic expansion that all of us 
would like to see.
  Another point I believe is very important within the context of the 
view that this proposal is antigrowth, the President's plan does 
absolutely nothing to help our State and local governments which are 
suffering severe fiscal crises throughout our country. The estimates 
are that it is a cumulative $90 billion deficit for States. That is 
before the local governments. That is much larger than that $36 billion 
we are going to put into the economy.
  Back home, our State governments are raising taxes and cutting 
services $90 billion while we are putting $36 billion into the economy. 
I do not see how that relates to stimulating growth, and it fits pretty 
clearly into a commonsensical analysis to say we are not on the right 
track to get this economy moving again.
  New York City, New Jersey's neighbor, is having to raise property 
taxes 18 percent. In my State, property taxes have been raised 7 
percent. Everywhere I go across the country, State and local 
governments are raising property taxes to offset those very actions we 
are trying to take to stimulate the economy in Washington.
  I do not understand why we are not thinking about this in a more 
holistic and comprehensive approach. These cuts in services and rises 
in taxes are going to create more economic problems and lead to almost 
an antigrowth policy if we implement it as it now stands. The Federal 
Government needs to be a partner in this process.
  By the way, in the long run, there are even more serious problems if 
there is no help to the States. Dividend exclusion is actually going to 
create an investment instrument that will compete with how State and 
local governments borrow in the tax-exempt market. It is going to 
increase the borrowing costs, that is at the same time we are laying 
down new mandates with regard to homeland security and education--Leave 
No Child Behind--where we are underfunding the mandates we promised we 
would bring to bear, and I think we are putting our State and local 
communities in a financial vise that is actually going to offset a lot 
of what we are trying to accomplish in Washington, regardless of how 
one feels about specific elements of the program.

  All these reasons--the very small amount of stimulus for 2003, its 
incentives to take cash off the balance sheets, which is 
incomprehensible, in my view, and its failure to help States--make this 
plan one that is failed on arrival, even if it is not dead on arrival, 
and I certainly believe it is misguided. Again, the President's 
rhetoric sounds good. We are all for making sure every man and woman 
has a job, but I think the reality of the program is substantially 
different and should be evaluated accordingly.
  Let's take a look at another part of the rhetoric of the speech last 
night: The claim that somehow this plan would benefit ordinary middle-
class families and create a broad-based prosperity. I feel strongly 
that it is not particularly an effective macroeconomic stimulus 
program, but I think there is a big gap in rhetoric and reality with 
regard to where the money goes.
  We talk about averages as opposed to means. There is a general 
agreement among economists that people with low or moderate incomes are 
more likely to spend; they have a higher propensity of consumption for 
tax cuts than people with higher incomes. This is a matter of general 
economic policy.

[[Page S1709]]

  Any stimulus plan ought to focus--if you are really trying to 
stimulate the economy--largely on tax cuts for middle- and lower-income 
families. The Bush plan does exactly the opposite. Over the next 10 
years, those with annual incomes of more than $1 million will get a tax 
break worth almost $90,000 a year. That is $900,000 over 10 years. Yet 
some middle-class families with incomes--by the way, middle class in 
New Jersey might very well fall into this category--$75,000 to $100,000 
would get only about 2 percent of that tax break, about $1,800 annually 
or $18,000 over the 10 years. Consider people making between $30,000 
and $40,000, which is closer to the $27,000 median income for the U.S. 
as a whole, and that would be $350 from the Bush plan.
  We are looking at different segments of income earners and seeing 
what this actually means, and that is about four-tenths of 1 percent of 
the benefits going to $1 million earners. It certainly does not jibe 
with trying to put the stimulus into the pockets of people who will 
turn around and spend it to stimulate the economy.
  This is a hard sell. Consider the 25 million taxpayers who reported 
adjusted gross income of less than $10,000. These are people worrying 
how they are going to put food on the table. They are 20 percent of all 
taxpayers, if you consider payroll taxes. What will they get? They will 
get a grand total of $5 a year. Let's review: $90,000 a year for people 
over $1 million, $1,800 for those with incomes of between $75,000 and 
$100,000, $350 for those with incomes between $30,000 and $40,000, and 
$5 a year for 20 percent of taxpayers below $10,000 adjusted gross 
income. I don't know, it does not sound to me we are going to put money 
in the hands of people who will spend it.
  This is not class warfare, it is how we are going to get an 
effective, efficient stimulus program; how do we get this turned around 
so the economy is growing. Businesses are taking inventories off the 
shelf and restarting their businesses to restimulate those inventory 
growths. We need to go back to the principle of the President, which is 
we want to promote prosperity for all Americans, and to do that, we 
ought to make sure that a program works.
  I am not against people doing well in our economy. As a matter of 
fact, we made more millionaires in the 1990s with an entirely different 
proposal with regard to taxes and structure with regard to taxes than 
at any time in the history of America. Rising tides do lift all boats, 
and I think it is important that when we are thinking about our tax 
policy, we talk about how do we grow the total economy.
  I think this program is focused in an upside down way completely 
ignoring payroll taxes, State, local, sales and property taxes, and the 
distribution of all of those taxes together on all these individuals, 
and we are getting too much of it going in one particular area.
  The next type of Presidential rhetoric I want to address is in the 
administration's claim that the President's plan benefits seniors. The 
reality is very different. There are 37 million seniors. I think most 
people would agree with that number. Yet only about one-fourth of them, 
less than 10 million, receive dividends, according to the President. So 
75 percent, or 27 million, of America's seniors will get absolutely 
nothing from the President's dividend exclusion.
  Moreover, only a small fraction of the wealthiest seniors would enjoy 
most of the benefits. Nearly 40 percent of the dividend tax cut for 
seniors would flow to those filers with incomes exceeding $200,000. 
That may be a high concentration of seniors in a lot of States, but I 
do not know too many seniors in New Jersey, 65 years and older, who 
have $200,000 incomes.
  That is a mere 2.5 percent of the tax returns filed by senior 
citizens. They get 40 percent of that so-called 10 million seniors 
benefiting from the dividend exclusion. It is less than 500,000 of the 
37 million seniors that we are talking about. It can be cut and sliced 
in other ways, but we are talking about a very narrow segment of 
seniors in America getting the benefit from the dividend exclusion.
  It is great rhetoric to claim that seniors will benefit, but the 
reality is it is a very small number relative to those who are doing 
well and have a great deal of wealth.
  More fundamentally, the truth is this plan will dramatically increase 
Federal deficits in the long term, and the problem with that is, how 
are we going to continue to sustain our Social Security programs and 
our Medicare programs if we are running serious deficits and they are 
going to explode as the baby boomers retire in the outyears. So if one 
wants to put all of these programs together, as we talk about seniors, 
I think we have a real gap between the rhetoric and the reality of who 
is going to benefit and how this is going to benefit our economy.
  I have some other examples with regard to small business. With most 
of the numbers we hear talked about, the rhetoric does not match the 
reality. I think there are a whole series of flaws with regard to that. 
I would love to see us go back on a bipartisan basis and talk about an 
immediate, temporary and substantial stimulus program more fairly 
distributed across the breadth of America, as suggested in the 
President's opening remarks last night as he talked about the economy. 
I think we could all benefit.
  If there is growth in the economy, our deficits will be reduced. We 
will have greater resources to take care of the needs in this Nation. 
It is hard to understand, at a time when we are talking about going to 
war, when we are trying to ask people to sacrifice, that we have such 
an economic program so focused on those already doing well and doing so 
little to stimulate the economy. If one reviews almost all of the 
economic literature and commentary, a lot of it from business, they 
will find many of the views are that this program has grave weaknesses 
as far as the stimulus program and needs to be rethought. I hope we can 
stand back, work together, make a serious effort to come together to 
produce an effective, efficient, bang-for-your-buck stimulus program, 
and get on with meeting those high-minded objectives that were part of 
the rhetoric.
  The quality of life for millions of Americans depends on our success 
and being able to come up with that integrated, cooperative, and 
bipartisan approach. There are a number of great ideas on the table. I 
hope we can sit down and work together to make that happen.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Madam President, it is my understanding I have until 4 
o'clock to speak. Therefore, if I need a unanimous consent request for 
that I will propound it at this time. If I do not, I will simply 
proceed.
  The PRESIDING OFFICER. The Senator has the right until 4 o'clock.

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