[Congressional Record Volume 149, Number 42 (Monday, March 17, 2003)]
[Senate]
[Pages S3774-S3791]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   CONGRESSIONAL BUDGET FOR THE U.S. GOVERNMENT FOR FISCAL YEAR 2004

  The PRESIDING OFFICER. Under the previous order, the clerk will 
report.
  The assistant legislative clerk read as follows:

       A concurrent resolution (S. Con. Res. 23) setting forth the 
     congressional budget for the United States Government for 
     fiscal year 2004 and including the appropriate budgetary 
     levels for fiscal year 2003 and for fiscal years 2005 through 
     2013.

  The Senate proceeded to consider the concurrent resolution.
  Mr. NICKLES. Madam President, I ask unanimous consent that the staff 
of the Senate Budget Committee named on the list I send to the desk be 
permitted to remain on the Senate floor during consideration of S. Con. 
Res. 23 and the conference report thereupon, and the list be printed in 
the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The list is as follows:

                     Senate Budget Committee Staff

       AMDUR, Rochelle, ANGELIER, Amy, BAILEY, Stephen, BAYLOR, 
     Lauren, BRANDT, Daniel, P., III, CHEUNG, Rock E., DUCKWORTH, 
     Cara, ESQUEA, Jim, FELDER, Beth (Chief Counsel: Full Access 
     Pass), and FLOYD, Ronnie.
       GALVIN, Timothy, GREENWOOD, Lee A., HEARN, Jim, HERNANDEZ, 
     Jody, full access (by UC), HERSHON, Lawrence, HORNEY, James, 
     full access (by UC), HAUCK, Megan, HUGHES, Stacey, full 
     access (by UC), JONES, Michael, and JONES, Rachel.
       KENT, Don, KEOGH, Erin, K., KONWINSKI, Lisa (General 
     Counsel: Full Access Pass), KUEHL, Sarah, LAVINE, Jessie, 
     MARSHALL, Hazen (Staff Director: Full Access Pass), MYERS, 
     David, NAGURKA, Stuart, and NAYLOR, Mary (Staff Director: 
     Full Access Pass).
       NELSON, Sue, full access (by UC), NOEL, Kobye, NOLAN, Tim, 
     O'NEILL, Maureen, ORTEGA, David A., OSTERBERG, Gayle, OSWALT, 
     Anne, PAPPONE, David, PHILLIPS, Roy, POSNER, Steven, and 
     PRICE, James Lee.
       REIDY, Cheri, RIGHTER, John, RUDESILL, Dakota, SEYMOUR, 
     Lynne, STEWART, Margaret Bonynge, STRUMPF, Barry, TAYLOR, 
     Robert, WINKLER, Jennifer, and WOODALL, George.

  Mr. NICKLES. Madam President, I ask unanimous consent that the 
following floor staff members, two from my staff and two from Senator 
Conrad's staff, named on the list I send to the desk be given ``all 
access'' floor passes for the Senate floor during consideration of S. 
Con. Res. 23: Stacey Hughes and Jody Hernandez from the Republican 
staff, and Jim Horney and Sue Nelson from the Democratic staff.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. NICKLES. Madam President, I ask unanimous consent that the 
presence and use of small electronic calculators be permitted on the 
floor during the consideration of the fiscal year 2004 concurrent 
resolution on the budget.
  The PRESIDING OFFICER (Mr. Burns). Without objection, it is so 
ordered.
  Mr. NICKLES. Mr. President, today we will be considering the budget 
resolution, S. Con. Res. 23, a resolution for fiscal year 2004--
actually, 2004 through fiscal year 2013. I urge my colleagues to 
seriously consider this resolution.
  I will readily say it is not perfect. It is a result of a lot of work 
from individuals on both sides of the aisle who considered and put this 
resolution together.

[[Page S3775]]

  We had a 2-day markup in the Senate Budget Committee. We had 20-some-
odd votes. And I thank my colleague Senator Conrad for his cooperation 
that we were able to finish and conclude the resolution we are now 
reporting to the Senate this week.
  This resolution has a lot of provisions in it. It provides for how 
much money we are going to spend, how much money we are going to tax, 
how much money we are going to take in. It also has a few other 
provisions in it, and I will go into those in a moment. It is most 
important that we pass a budget resolution. We have passed budget 
resolutions every year since the enactment of the Budget Act in 1974, 
except for last year when we did not get it done. I am not throwing 
complaints at anybody. I think it is vitally important, if Congress is 
going to get its work done; that we pass a budget resolution; that we 
tell the appropriators how much money they are going to spend; that we 
tell the Finance Committee and the Ways and Means Committee how much 
money we are going to spend on Medicare; that we set the outlines or 
the framework on the size of government; that we tell the Finance 
Committee whether they should have a growth package.
  In this resolution, we do call for a growth package. It is similar or 
identical to the number that the President requested. Actually, I think 
the President requested a number of about $670 billion for the growth 
package. The Committee on Joint Taxation scored it and said it is $725 
billion. That is what we have in our resolution. It is a resolution 
that says we want to figure out how we can grow the economy.
  It is vitally important that we do grow the economy, and I will make 
a couple of comments about that. We have inherited a very difficult 
situation. We have very large deficits. Some people might say that was 
caused by President Bush's tax cut in 2001. I say that is not the case. 
The very large deficits that we have, have primarily happened because 
we have had a precipitous decline in revenue, and that decline in 
revenue was not because of the tax cut, it is because the economy has 
been very soft, because a lot less money is coming into the Federal 
Government, both on personal income tax and corporate income tax.
  The chart behind me shows that in the year 2000, the Federal 
Government total receipts were over $2 trillion--actually $2.025 
trillion. In 2001, that declined about 2 percent to $1.9 trillion. It 
was $2 trillion, and then $1.9 trillion. Last year, it declined to 
$1.85 trillion. That is a reduction of $175 billion over that 2-year 
period of time. That is a reduction of 9 percent.
  Because of that reduction in revenue and because of an increase in 
expenditures, expenditures went from $1.8 trillion in 2000 to $1.86 
trillion, to last year over $2 trillion. So spending went up by about 
12 percent and revenues went down by 9 percent. That kind of 
intersection meant we went from a surplus of $127 billion in the year 
2001 to a $158 billion deficit in the year 2002. So we went from a 
surplus of $127 billion to a deficit of $158 billion in that period of 
time because revenues have gone down and expenditures have gone up. It 
is about that simple.

  One might say, why? Well, let's look a little bit more at the 
economy. There has been a very precipitous drop in the stock market, 
well beyond what our computers were able to estimate as to what is the 
flow going to be, what does this mean in actual revenues that will come 
in to individuals, both in capital gains and also in personal income 
tax.
  This gives an example. Nasdaq, which peaked in March of 2000, was 
down. It was almost 5,000. I believe it did hit 5,000 in March, went 
down to 2,500 or 2,600 by the end of the year 2000--almost a 50 percent 
reduction in the last 9 months in the year 2000. It continued to 
decline somewhat in 2001 and 2002.
  As a result of that flow, everybody missed it, including the 
Congressional Budget Office and the Office of Management and Budget 
when they gave their estimates of what the fiscal situation was in 
January of 2001. They missed it big time. They greatly overestimated 
the amount of money that would be coming in to the Federal Government.
  Both CBO and OMB were projecting revenues would continue to climb, 
maybe a little slower than what they did for the last several years in 
the 1990s, but they assumed that they would continue to ascend. In 
reality, they dropped by 9 percent. So the Congressional Budget Office, 
which is a nonpartisan office--and I do not fault them for their work; 
I am saying they missed it. Then we also had a little event on 
September 11, 2001, that was a real tragedy that cost 3,000 lives in 
the United States and caused untold damage to this economy. It would be 
interesting to see if the economists could ever figure the costs of 
that to our economy, but it has been in the billions of dollars and 
therefore and ultimately in revenues to the Federal Government.
  So we had a recession that was already starting in 2000. We had a 
stock market decline that was enormous, and then we also had 9/11/01, 
which was a double hit. If we add these things together, revenues are 
way down. They are actually down for the first 4 or 5 months of this 
year compared to last year.
  So we have been hit by a lot: The war on terrorism, that terrible 
tragedy of September 11, and the fact that we have had a very large 
decrease in the value of the stock market. All combined means that 
revenues coming into the Federal Government, like maybe revenues coming 
into a lot of States, are way down. So we went from surpluses of over 
$150 billion to last year we had a deficit of over $120 billion, which 
is forecast by the Congressional Budget Office to rise this year to, I 
believe, $246 billion. That is if we do nothing.
  I do not believe doing nothing is satisfactory. I guess we could just 
do nothing and hope that maybe things will get better, but I think we 
should do something. What can we do to help grow the economy? The 
President has a growth package. I understand people on the other side 
of the aisle have a growth package. Good. Let's consider a growth 
package. How can we grow the economy? I think we should consider any 
and all ideas. The President requested us to set aside as much as $700 
billion for a growth package. That is what we have done, and we have it 
in a reconciliation instruction.
  Now, we do not write the tax bill, and all of our colleagues should 
be aware of that. We do not write the tax bill in the Budget Committee. 
We do give instructions to the tax-writing committees: Here is the 
amount of money they can use to put together a growth package.
  What we have proposed is about $725 billion. I believe about $30 
billion of that is for actual spending, what we would call refundable 
tax credits, and the balance of the President's proposal is mostly 
geared toward various tax cuts that would help grow the economy.
  I believe many of those tax cuts would do that, they would help grow 
the economy. They would help get these figures on the revenues, that 
blue line, instead of going down, to go up. Frankly, it will not go up 
unless we really have a growing economy.
  The President has several proposals. I will touch on a couple of 
them. Probably the most controversial is eliminating the double 
taxation of dividends. We are long overdue for eliminating the double 
tax on dividends. Many have called for it, Democrats and Republicans.

  I don't see how anyone can defend the present policy which taxes 
distributions from corporations higher than almost any other country in 
the world. We tax the distribution profits, called dividends, to the 
stockholders at rates of 65 or 70 percent. There is only one country in 
the world that taxes dividends higher than the United States, and that 
is Japan. We are about even with them. We tax dividends higher than 
France. We tax dividends higher than the Swiss and almost higher than 
anyone with the exception of Japan. That is absurd.
  We are supposed to be this defender of free markets, 
entrepreneurship, and we are saying if you make money in the 
corporation, and you distribute to the owners, we want two-thirds, 
maybe three-fourths of it. That is terrible tax policy. The President 
said we should eliminate double taxation of dividends. If we did that, 
we would encourage a lot of changes in behavior. Right now, the present 
Tax Code encourages debt and discourages investment in equities. I 
compliment the President for his proposal. If we can get the taxation 
of

[[Page S3776]]

dividends down at a more realistic level, we would have encouragement 
for investment which would create jobs. That would be positive. We need 
to think what can we do--not to score political points but what can we 
do to help grow the economy. That is a fundamental part of the 
President's growth package, the elimination of the double taxation of 
dividends.
  He has several other provisions that would help. I used to run a 
small business, and he has a provision that would allow people to 
expense up to $75,000. That is a good provision. That would encourage 
jobs. That is positive. We should pass that.
  The President has several provisions that would be very helpful to 
families. Basically, eliminating the marriage penalty for couples with 
incomes less than $56,000 would be very positive. Right now, a married 
couple with combined incomes up to $56,000 have a marginal rate of 27 
percent. Say they make $50,000. Any additional dollar they make is 
taxed at 27 percent. The President said you should be taxed at no more 
than 15 percent, all the way up to $56,000. Not to get too wonkish, 
that equates to $1,100 more per couple with combined incomes up to 
$56,000.
  Some say this just benefits the wealthy. That is not true. You are 
not wealthy if you make $56,000. The President says you should pay 
combined tax together, husband and wife, not in excess of 15 percent. 
That is a positive proposal.
  The President has a proposal that says we should increase the per-
child tax credit from $600 to $1,000. If you have four kids, that is 
$4,000 you do not have to pay taxes on. That would be an increase of 
$1,600 that you get to keep from present law. Present law on the child 
credit and on the marriage penalty and on the 1-point rate deductions 
we have had is $600. That is scheduled to expire at the end of the year 
2010. In the budget, we extend that for the years 2011, 2012, and 2013.
  We do not propose to do it in the so-called reconciliation package. 
The reconciliation package is the growth package. In the growth 
package, what we proposed to the Finance Committee is an amount that 
would allow the per-child tax credit, that would allow elimination of 
the marriage penalty, that would allow expensing for small business, 
and that would allow for eliminating the double taxation of dividends, 
something I believe would very much help grow the economy.

  I had business people who saw me today and thought that would help 
grow the economy by hundreds of thousands of jobs. I heard others say 
that just eliminating double taxation of dividends alone would be 
several hundred thousand jobs.
  We need to consider how we can grow the economy. We have a measure in 
the budget that is under reconciliation that says we should consider 
opening the Alaska National Wildlife Refuge and allow exploration to 
occur in the refuge. I urge my colleagues to vote in favor of that 
proposal. I understand there may be an amendment to strike. That is one 
proposal that would create jobs. That is one proposal that will reduce 
our dependency on imported oil which right now is right at 60 percent 
and increasing. A lot of that is from the Middle East. Some of it 
happens to be from Venezuela and other places. Oil costs are high. So 
we need to figure out how we can reduce our dependence on foreign oil. 
This is a main provision where we can do it. And for those who say they 
don't think we should do that because it might not be sensitive to the 
environment, I guess they have not been there.
  I have been in the Alaska National Wildlife Refuge and the Coastal 
Plain area. It can be done. If you have been to Prudhoe Bay, you can 
see that is where we have been getting up to 2.1 million barrels per 
day. That is now under 1 million barrels a day. We need to supplement 
that. We can do that with exploration in a very scientific, 
environmentally safe and sound manner that will not have any negatives 
whatever on wildlife and will help reduce our dependence on foreign 
sources of oil. And we will keep billions and billions of dollars in 
the United States instead of sending those dollars to the Middle East 
and other countries. We are exporting so many dollars in purchasing 
imported oil; this is a way we can create jobs. There will be thousands 
and thousands of jobs created, good jobs created if we are able to 
enact the provision dealing with the Alaska National Wildlife Refuge.
  It is also important to note we constrain the growth of government 
under this budget. I have no doubt that many people will be complaining 
about the budget and will complain about the deficit, but they will 
probably be some of the same people who will be voting to increase 
spending far and above what is proposed in this resolution.
  The President has proposed and we have adopted in our resolution 
budget caps on the amount of money that we will have on discretionary 
spending both for 2004, 2005, and 2003, as well. We have caps for all 3 
years. We would increase the spending cap amount to a total of $784 
billion in 2004, compared to what we have enacted in 2003 of $765 
billion. In nondefense, it is a $10 billion increase. And we also have 
mandatory, total outlay increase for 2003 and 2004, 4.4. A majority of 
that is mandatory. We are holding down nondefense. The growth of 
nondefense between 2003 and 2004 is 2.9 percent. The growth in defense 
between 2003 and 2004 is 2 percent.
  Now, why only 2 percent? The year before in defense, 2003, we are 
already at 8.6 percent. We added $10 billion, actually $6 billion for 
defense, $4 billion for intelligence-related in the 2003 appropriations 
bill just passed last month. I mention that to my colleagues. It is 
very important.
  We hear about the growth package and people want to cut the growth 
package. I am sure we will have amendments. That is perfectly right. I 
hope we have the amendments to eliminate the growth package or to cut 
the growth package in half. We had those amendments in the committee. I 
expect we will have them on the floor. I hope they will be defeated. 
They want to take the growth out of the growth package. I want the 
economy to grow. How much is enough? Is $350 billion enough? Is $700 
billion enough? We anticipated having revenues of over $27 trillion 
over this 10-year life of this budget. So $350 billion is a very small 
percentage. It is about 1 percent; $700 billion is about 2 percent.
  Can we make some changes that would have a dramatic impact on 
revenues? I think we can. We have a little history on our side showing 
if we do what is right, we can make the economy grow. In 1997, we had a 
significant tax cut. We actually passed one in 1995 and President 
Clinton vetoed it. We passed one in 1997 and he signed it. If you look 
at the results, you also see the revenues went way up.

  What was one of the main components of the tax bill that we passed in 
1997? It was reducing the tax rate on capital gains from 28 percent to 
20 percent. There was a flood of money coming into the Federal 
Government as a result of that change, a flood of money--more money 
than the Government ever anticipated because we didn't use dynamic 
scoring. We used static scoring. We actually assumed maybe this was not 
going to raise very much money. It raised a lot of money. Because we 
reduced the tax on financial transactions, we had a lot more financial 
transactions, and it caused and encouraged an explosion in the stock 
market. It encouraged a lot of investment. It encouraged growth.
  The changes we make can make a world of difference. That is why I 
encourage my colleagues to consider the President's growth package. 
What changes can we make now that will help grow the economy?
  If you look at taxation, we were taxing exchanges, financial 
transactions, and we were taxing those at 28 percent. If we reduced 
that to 20 percent and we had a lot more transactions, that would 
generate a lot more money.
  What about dividends? If they are taxed at 60 percent--combined rate, 
corporate and individual, at 65 percent or 70 percent, if we can reduce 
that and only tax it once so corporations are taxed at 35 percent, it 
is going to greatly encourage corporate investment and distribution to 
their owners. I think that would encourage investment and I believe 
have a very positive impact on the stock market and, frankly, on 
everybody.
  Somebody would say that only benefits the wealthy guy who owns a lot 
of stock. That is not true. Ask the person who works for the telephone 
company, who has a 401(k), and they have watched their stock 
investments go back down as Nasdaq did. They want it

[[Page S3777]]

to go back up. They want the entire market to go back up. Ask a Federal 
employee who invested in the C fund, the common stock fund. Are they 
invested? Sure they are. They want to see the stock market go up. When 
it does, I think it has a very positive impact on the economy. I just 
mention those things. The President has that proposal.
  He does have a cap and we put the cap in our budget, a cap on 
discretionary spending, a cap that grows just a couple of percent, 2.4 
percent, for 2004. So this very important figure, 784 figure--last year 
you might remember we heard a lot of discussion, talk about 751. That 
was the discretionary cap figure the President had. Then, 759 or 751, 
we discussed that figure like it was the total Federal budget. It is 
not. But it is the amount of money we say we are going to appropriate. 
We ended up appropriating 765, now 784; it is a 2.4-percent increase.
  I hope we do not increase that figure during the course of all the 
amendments we are going to consider. I know there are dozens of 
amendments that say we need to spend more money. We are already 
spending something like $7,000 for every man, woman, and child in the 
United States.
  Spending has been growing dramatically over the last several years. 
When these revenue figures were going up, our outlay figures said let's 
just catch up. Just on the discretionary side, outlays, nondefense, 
went up 17.1 percent; in 2002, they went up 12.5 percent. Both of those 
figures are greater than what we did in defense for 2001 and 2002. That 
is not sustainable. That is not affordable.

  Our proposal said let's at least limit the growth. We did better in 
2003 in nondefense discretionary. Now we are saying let's hold it at 
2.4 percent, about the rate of inflation. Many of our colleagues say 
that is not enough. We need to have more money for everything you can 
imagine, and I am sure those amendments will come. I urge my colleagues 
to show some fiscal discipline. Do we want to have the President's 
growth package, a bigger one or a smaller one? Let's vote and then 
decide how much money we are going to spend.
  We do not dictate to the Finance Committee the composition of the 
growth package. We are assuming the composition is similar to the 
President's.
  We also do not dictate to the Appropriations Committee. We make 
assumptions: This is how it will break down. But I might mention they 
could reallocate the money in any way they want.
  There are a couple of other things I will mention that are part of 
the resolution. We have assumed $400 billion for improvements in 
strengthening Medicare; not just offering a prescription drug package, 
which would be a component of it, but to improve and strengthen and 
solidify, make Medicare a better system for seniors and for future 
seniors. That is in the proposal, of the $400 billion increase.
  Homeland security--we have the President's request, an 18.4 percent 
increase over last year.
  In education, we have increased funding for title I by $1 billion; 
for IDEA, $1.2 billion.
  We have a reserve fund for uninsured of $50 billion, an instruction 
to the Finance Committee.
  We have a highway figure of $32.1 billion; that is 10 percent over 
the President's request. I know there is going to be a request to 
increase that figure dramatically--some people say by as much as $5 
billion or $8 billion or $10 billion more per year. There is not enough 
money in the trust fund to do it. There is not enough money generated 
by gasoline taxes to do it.
  I am a believer that highways should be paid for by user fees, by 
gasoline taxes. Some people would want to increase the deficit by 
whatever amount it is to expand on that figure. I hope we do not do 
that. I am sure that will be one of the contentious issues with which 
we wrestle.
  I encourage my colleagues, I hope they review this budget proposal. 
It tracks largely what the President requested for defense and 
nondefense for the first couple of years. It tracks the President's 
request for expanding and improving Medicare, homeland security, 
education--we bumped over the President's figures in education. I hope 
my colleagues will consider it. I hope they will say, What can we do 
that will help grow the economy? If they have a better idea, let's 
consider it.
  We will consider an amendment also at the appropriate time. I look 
forward to working with all my colleagues and particularly my ranking 
member, my friend and colleague, Senator Conrad, on this resolution.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Mr. President, today we begin a fundamental and 
critically important debate on the fiscal future of our country. We do 
it as our country is poised on the brink of war. We do it when our 
country is now in record budget deficits. We do it at a time when we 
see challenges facing our country on many fronts. This is a debate of 
enormous consequence.
  I, first, thank our chairman of the Budget Committee, Senator 
Nickles, for the way he has conducted our committee. He is new as the 
chairman. He has walked into a difficult, challenging situation, but he 
has conducted himself as a real gentleman and we, on our side, 
appreciate that very much. He has also gathered an exceptionally good 
staff. We appreciate working with them as well.
  This debate is about the fundamental question of where this country 
will go in its fiscal future. We will decide whether this country will 
continue down the dangerous path of deficits, debt and decline, or 
whether we will take a step back toward fiscal responsibility, balanced 
budgets, and economic strength.
  In the 2 years since the Bush administration has come into office, 
our Nation has suffered a dramatic and disturbing downturn in our 
fiscal and economic affairs. We went from a position of unparalleled 
growth, job creation, and opportunity to one of deficits, growing debt, 
growing unemployment, and doubt about our Nation's economic future. 
This budget resolution that we will begin debating today will determine 
whether we continue on the path set by this administration, a path that 
is rapidly undermining our fiscal strength, or whether we begin to 
reverse this dangerous course.
  The budget resolution that we have before us, the majority passed out 
of the Budget Committee on a party-line vote, I believe is not the 
answer to what ails this country. It follows closely the President's 
proposal for massive tax cuts for the wealthiest among us that will 
only drive us deeper into deficit and debt.
  The chairman of the committee calls part of those tax cuts a growth 
package, which is what the President terms it. We respectfully 
disagree. I do not believe, and many on our side do not believe, that 
it is a growth package. We believe instead that it will inhibit growth 
because deficits and debt will explode and the heavy weight of those 
deficits and debt will hold down economic growth. When you run 
deficits, you reduce the pool of societal savings. When there is less 
of a pool of societal savings, there is less money available for 
investment. And without investment, you cannot grow. I think on both 
sides of the aisle we agree on that basic premise.

  The majority's resolution includes fully $1.4 trillion in new tax 
cuts, $726 billion for the so-called growth package, and more than $600 
billion to make the President's 2001 tax cuts permanent. With interest 
costs, these tax cuts will add $1.7 trillion to the deficit.
  Let's make no mistake, these are not tax cuts that are being paid for 
by cutting spending; they are not tax cuts that come out of a surplus. 
They are tax cuts that will be funded by borrowing the money. I should 
also add, they will also be financed by taking over $2 trillion out of 
Social Security trust fund surpluses to pay for them.
  At a time when we are on the brink of war in Iraq, we face a crisis 
with North Korea, we face an ongoing global fight against terrorism and 
al-Qaida, deficits are at record levels and continue to grow, job 
losses are mounting, and the retirement of the baby boom generation 
looms just over the horizon, I cannot think of anything more 
irresponsible than enacting this plan.
  Now is a time that we should be focusing on strengthening our 
Nation's

[[Page S3778]]

defenses and homeland security, improving our economy, and restoring 
fiscal discipline over the long term to assure that future generations 
are not saddled with these debts.
  If Congress were to actually adopt the plan before us, it would 
plunge the country off a fiscal cliff and threaten the education of our 
children, the financial security of our seniors, the stability of our 
economy, and the ultimate strength of our Nation.
  First of all, it disturbs me we are even considering a massive tax 
cut package at a time when we are on the brink of war. How can we call 
on our troops to be willing to make the ultimate sacrifice but ask for 
no sacrifice here at home to fund their endeavors? I do not think that 
sends the proper message, when our troops are in the field, on the 
brink of battle.
  Past Congresses and past Presidents have almost always called on the 
American people to help share the burden of conflict by buying 
Government bonds, by forgoing tax cuts, or even paying higher taxes to 
pay for a war. The American people proudly carried this burden and 
recognized it was their responsibility and a small price to pay for the 
privilege of living in the greatest and strongest country in the world. 
They certainly did not consider tax cuts for the wealthiest when their 
fellow countrymen were in battle and their Nation was in deep deficit 
and growing debt.
  Amazingly, despite the fact that we are on the verge of war, neither 
the President's budget nor the majority's resolution includes any 
resources for such a conflict. How can we consider cutting revenues by 
$1.9 trillion, with the interest costs included, as the President has 
proposed and have not one penny in the budget for the looming war?
  Some say, well, it is hard to predict what the war will cost. Indeed, 
that is true. But one thing we know for certain is the right number is 
not zero. But that is what is in this budget resolution--zero, zero for 
putting our troops in position to launch an attack on Iraq, zero for 
the conflict almost certain to come, zero for the reconstruction of 
that country, zero for the occupation.
  We do have estimates of what all those things cost. Before the Armed 
Services Committee, they were told in some detail that the costs of 
just having our troops in place, without going to war--just having them 
in place--between now and the end of September, would be from $64 to 
$84 billion. But there is not a dime in this budget. What sense does 
that make? Are we in total denial that having a quarter of a million 
troops poised for a war against Iraq is not going to cost anything? 
Surely we know that is not true. The cost is substantial, and we ought 
to provide for it in this budget.
  Let's consider just how much this war could cost.
  Officially, the administration has refused to provide Congress with a 
cost estimate. The press reports have cited administration officials 
acknowledging that they could request a supplemental appropriation of 
$60 to $95 billion to cover war costs in 2003 alone.
  This chart shows how much the administration could request in a 
supplemental for these war costs, and it shows how much has been put in 
the budget resolution before us. The number is zero.
  Mr. President, colleagues, we know that is not right. That should not 
be our budget for this looming war. And nowhere has the administration 
accounted for the possibly large postwar costs, such as occupation, 
humanitarian assistance, and reconstruction, not to mention any 
indirect costs to the United States, such as an extended spike in oil 
prices.
  That is why it is so important that Congress be provided with a war 
cost estimate before we proceed with large tax cuts or large new 
spending initiatives. Congress should have the information before we 
make these long-term commitments, not after.
  It is disturbing to read press reports that Republican leaders may be 
asking the administration to delay their supplemental request until 
these tax cuts are locked into a budget resolution.
  This is how Congress Daily reported the situation:

       Vice President Cheney met with Senate Majority Leader Frist 
     [on] Thursday to discuss, among other things, the timing of a 
     spending request on military action in Iraq. It is not 
     expected that such a request would come until after the House 
     and Senate complete floor action on the budget resolution, a 
     key aide said.
       . . . [H]owever, having a supplemental that could total 
     somewhere between $65 and $95 billion come up while the tax 
     cuts and the budget resolution are being debated could 
     threaten the Republicans' economic agenda. House leaders have 
     also said they want the supplemental war request delayed as 
     long as possible to provide breathing room between the tax 
     cuts and war spending.

  If this report is accurate, and the war supplemental is really being 
held to give breathing room for the tax cuts, we are in worse shape 
than I even imagined.
  To understand why the majority's budget plan is, I believe, making 
incorrect assumptions with respect to the economy, it is worth 
reviewing what has happened to the budget over the last 2 years.
  When the President was advocating his first tax cut in 2001, he 
promised we could easily afford it. He ignored warnings that the tax 
cut he was proposing was too large. In a speech just 2 years ago, the 
President said:

       Tax relief is central to my plan to encourage economic 
     growth, and we can proceed with tax relief without fear of 
     budget deficits, even if the economy softens.

  He was wrong. We now know how wrong he was. Instead of the $5.6 
trillion in projected surpluses over the next 10 years that were 
projected when the President came into office, now, according to the 
Congressional Budget Office's latest estimates, if we adopt the 
President's budget plan, we will face a $2.1 trillion deficit over that 
time period. That is a stunning downturn of nearly $7.7 trillion in 
just 2 years.
  I listened to our chairman give the reasons for this downturn. The 
one thing I did not hear him mention was the effect of the tax cuts. 
And yet the tax cuts over the 10-year period are the biggest single 
reason for this deterioration in our financial condition.
  What could be more clear? Let's just do the math. We were told we 
would have $5.6 trillion over the next decade in surpluses.
  Now we are told if we adopt the President's tax and spending plans, 
we will be $2.1 trillion in the hole over that same period. The tax 
cuts we passed in 2001 were $1.35 trillion plus the associated interest 
costs. If you reduce revenue, and that means you have more deficit and 
more debt, that means your interest cost goes up. The total cost of 
those tax cuts, about $1.7 trillion.
  Now the President comes before us with an additional $1.6 trillion of 
tax cuts over this period of time. The associated interest cost takes 
that to a total cost of $1.96 trillion. If you add the $1.7 trillion 
from the previous tax cuts, the $1.96 trillion from these tax cuts, you 
get almost $3.7 trillion; $3.7 trillion of the $7.7 trillion of 
deterioration. That is about 40 percent of the variance. That is the 
biggest reason.
  The second biggest reason is the increased cost associated with the 
attack on this country--increased defense cost, increased homeland 
security cost, which we all have supported.
  The third biggest reason, quite apart from tax cuts, is the economy 
is not throwing off the tax revenue anticipated for this level of 
economic activity. That is a simple mistake in the calculations.
  The fourth reason is the economic downturn.
  Those are the key reasons for this collapse in our fiscal fortunes. 
But let's be clear, the tax cuts are the biggest single reason.

  In last year's State of the Union address when this change in our 
fiscal fortunes was becoming more clear, the President saw what his 
policies were doing and he began to acknowledge that deficits had 
returned. He said then:

     . . . [O]ur budget will run a deficit that will be small and 
     short-term . . .

  Again he was wrong. It is now very clear that the deficits will be 
neither small nor short term. In fact, the Congressional Budget Office 
has told us that the deficit would total $338 billion in 2004 if we 
were to adopt his plan. And if, as the law requires, we are to exclude 
Social Security from that calculation, the deficit in this coming year 
would be $512 billion. In fact, we would see throughout the rest of 
this entire decade deficits would never be below $400 billion.

[[Page S3779]]

  This chart shows it. This is what CBO told us back in May would occur 
without the President's policies, the top line. And we would have 
emerged from deficit in about 2011. If, instead, the President's 
policies are adopted, and this is the balance line, this is where you 
have no deficits, this is what happens if the President's policies are 
adopted. We never escape from deficits the entire rest of this decade, 
and they are not small. They are very large. In fact, they are record 
deficits, record in dollar terms, over $500 billion in 2004 alone on a 
budget of $2.2 trillion. That is a deficit of over 25 percent. That is 
not a small deficit.
  In 2001, the President gave a radio address to the Nation. He said 
then:

     . . . [M]y budget pays down a record amount of national debt. 
     We will pay off $2 trillion of debt over the next decade. 
     That will be the largest debt reduction of any [nation] ever. 
     Future generations shouldn't be forced to pay back money that 
     we have borrowed. We owe this kind of responsibility to our 
     children and grandchildren.

  The President was absolutely right in his values and in his 
sentiment, but that is not what we are getting in terms of a policy. 
What we now see is endless deficit and endless debt passed on to our 
children and grandchildren. In fact, when he said he would virtually 
eliminate the debt back in January of 2001, he said there would only be 
$36 billion of debt left by 2008. Now we see, instead of almost 
eliminating the debt, it is growing. In fact, it will be over $5 
trillion by 2008, over $5 trillion. That is just the publicly held 
debt. That doesn't include the debt we are running up to the trust 
funds of Medicare and Social Security, debts that will also be in the 
trillions and trillions of dollars.

  The consequences of this dramatic increase in debt are many. But one 
of them that hurts this Nation the most is the increased interest cost 
we will face. Back in January of 2000, we were told the interest cost 
during this period would be $622 billion. Now we see that instead of 
$622 billion, the interest cost will be $2.3 trillion; $1.7 trillion in 
interest cost, money that can't be used to build a destroyer to protect 
the Nation, money that can't be used to eliminate the terrorist threat 
to our country, money that can't be used to educate a child or feed a 
hungry person or do anything else that government does. Instead, it is 
wasted money, wasted in the sense it won't do anything positive other 
than pay our bills.
  That increase in debt, that increase in deficits is, to me, the 
greatest threat posed to our national economic security. Again, if we 
listen to President Bush, we know his heart is in the right place. In 
his State of the Union address this year he said he would not pass on 
our problems to future generations. He said then:

       This country has many challenges. We will not deny, we will 
     not ignore, we will not pass on our problems to other 
     Congresses, to other presidents and other generations.

  That is precisely what the President's budget plan, and what the 
budget plan before us, does. It passes on the burden to future 
generations. It asks our children to shoulder the debts we are running 
up.
  It is interesting to look at what the President's policies will do 
according to his own analytical perspectives. From page 33 in his 
budget, what this chart shows is the next 10 years, the budget sweet 
spot. Even though we are in very large deficit, even though we are in 
record deficit, even though the debt is mounting, we can see this is 
the good times because this is the chart from the President's own 
budget document looking out as far as 2050.
  What it shows is, if the President's policies are adopted, his 
proposals for tax cuts, his proposals for spending, we are going to 
take a leap off the cliff into deficits that are unsustainable and that 
are dramatic and that are devastating to this country's economic 
strength and economic future.
  We need to remember this is the worst possible time for us to be 
accumulating such a mountain of debt.
  This is precisely the time when we should be paying down debt, or 
prepaying the coming liability of the baby boom generation.
  When we look at the next two decades, we can see that the President's 
tax cut explodes in costs at exactly the same time the Social Security 
and Medicare tax surpluses disappear. Right now, the tax cuts are 
somewhat less than the trust fund surpluses from Social Security and 
Medicare.
  But look what happens when those trust funds go cash negative in the 
next decade. At the very time the trust funds of Social Security and 
Medicare go cash negative, the cost of the President's tax cuts 
explode. That is what this chart shows us.
  The blue bar, which is the smallest, is the Medicare surplus. 
Ultimately, it becomes Medicare deficits. The green bar is what Social 
Security is running now in surplus, which will also turn to deficits 
when the baby boomers start to retire. The red bar shows the 
President's tax cuts.
  What this chart shows is as clear as it can be. None of this adds up. 
It doesn't come close to adding up. Right now, while the trust funds 
are running substantial surpluses, those funds are being used to pay 
for the tax cuts and other expenditures of Government. They are not 
being banked. They are not being used to pay down our other debt so 
that we would be in a better position when the baby boomers retire. And 
those surpluses are not being used to prepay the liability we all know 
is to come. Instead, those trust fund surpluses are being spent. They 
are being spent to fund these tax cuts; they are being spent to fund 
other expenses of Government.
  Look what happens when we get out into about the next decade. Then as 
the baby boomers retire, the trust fund turns to cash negative, instead 
of throwing off big surpluses.
  For example, this year, the Social Security trust fund surplus is 
over $160 billion. That is real money--$160 billion in this year alone. 
But all of that is going to change when the baby boomers start to 
retire. Then the trust funds of Social Security and Medicare go cash 
negative. As the years progress, we go cash negative in a big way. That 
is the very time that the cost of the President's tax cuts explode. The 
result: massive deficits, massive debt.
  This chart is looking out to 2018, when we will have a deficit 
approaching a trillion dollars for that year alone. That is what these 
charts show. That tells me that this budget plan can only have one 
conclusion, and that is to take us on a course to massive cuts in 
Medicare, in Social Security, and in all the rest of Government. That 
is the only conceivable outcome of a policy that has been laid down by 
the President and that has been largely adopted in the budget 
resolution.
  I don't think that is the direction in which the American people want 
to go. But they need to know that the logic of this plan is 
inescapable. It is massive deficit; it is massive debt.
  The President has proposed what he calls an economic growth package. 
Clearly, we need to have an economic growth strategy. That is something 
on which we can all agree. We need an economic growth strategy because 
we have lost 2.5 million jobs in the private sector since January of 
2001. Let's be clear. What has caused that? No. 1, economic downturn. 
No. 2, the attack on this country that made the economic downturn more 
severe. Those are the culprits in the near term for what has happened 
to us. So we simply must respond to 2.5 million jobs lost during that 
period of time.
  But the President has told us that his growth package, which doesn't 
cost $725 billion--when you include the interest costs, it costs $994 
billion from 2003 to 2013--almost a trillion dollars of costs, only a 
very small part of it is effective this year when the economy is weak 
and needs a boost. This doesn't make sense to me, nor does it make 
sense to many economists. Clearly, we need a growth strategy. This is 
where the chairman and I are in complete agreement. We need a growth 
strategy.
  But we need a growth strategy that will really grow the economy, one 
that will provide lift at a time of economic weakness, but one that 
will return us to fiscal balance in the long term so we are not putting 
upward pressure on interest rates that would only slow economic growth 
and kill a stronger economic future.
  Some have said deficits don't matter, deficits don't affect the 
economy. Chairman Greenspan, head of the Federal Reserve, believes 
deficits matter. He said in testimony before the Senate Banking 
Committee:

       There is no question that as deficits go up, contrary to 
     what some have said, it does affect long-term interest rates. 
     It does have a negative impact on the economy, unless 
     attended.


[[Page S3780]]


  Well, it is not just Chairman Greenspan who believes it. Mark Zandi, 
a well-respected economist with Economy.com has evaluated the 
Democratic plan for economic growth and contrasted it with the 
President's plan. What he concluded is that, in the short term you get 
more economic growth from the Democratic plan because we put more into 
giving lift to the economy now, when it is weak.
  He shows that, in 2003, we would have almost twice as much economic 
growth as the President's plan. The same is true in 2004. And perhaps 
even more interesting, he concludes that over the long term, the 
President's economic growth plan actually hurts economic growth.
  Let's be clear. We believe the President's so-called growth plan will 
help in the short term--not as much as our plan would, but it would 
help--but it actually hurts in the long term. Why? Because the tax cuts 
are not paid for by spending reductions in the President's plan. 
Instead, the President's tax cuts are financed by borrowing and taking 
the money out of the Social Security trust fund surpluses. That is a 
prescription for putting upward pressure on interest rates and for 
hurting long-term economic growth.
  Again, that is not just my view, that is not just the view of Mr. 
Zandi; it is also the view of Macroeconomic Advisers. They happen to be 
the group that is hired by the White House, hired by the Congressional 
Budget Office, to give long-term assessments of what different policies 
will do for economic growth. This is what they have said the effect of 
the President's plan will be.
  This chart shows the President's policy compared to the base. The 
base is the green line; the President's policy is the black line. What 
it shows is that in the short term the President's policy would 
increase economic growth--again, not as much as the Democratic plan; 
nonetheless, it would be positive. Over the long term, it would be 
worse than doing nothing. It would actually hurt long-term economic 
growth.
  Again, the reason for that is very simple. The reason is, if you 
finance these tax cuts with borrowing, you are increasing deficits, 
increasing debt, and that provides a dead weight on this economy.
  We have the Federal Government in there competing with the private 
sector to borrow money. That drives up the cost of borrowed money, 
drives up interest rates, and that hurts economic growth.
  It is just not my view, or the view of Macroeconomic Advisers, or Mr. 
Zandi; it has now been expressed by a group of the most distinguished 
corporate leaders in America.
  The nonpartisan Committee for Economic Development, a group of some 
250 CEOs of major companies, has looked at the President's plan, and 
they have come forward with the following conclusions. I should 
emphasize the Committee for Economic Development is a nonpartisan, 
nonpolitical group of 250 leading businessmen and academics, a group 
composed of largely fiscally conservative business leaders and 
academics, including executives from the Bank of America, Bell South, 
Allied Signal, PricewaterhouseCoopers, Deloitte & Touche, Ford Motor 
Company, and many more.
  This group issued a report opposing the President's tax cut and 
noting that it would explode deficits and debt right in the face of the 
retirement of the baby boom generation. That is exactly right. Here is 
what they found.
  No. 1, current budget projections seriously understate the problem.
  No. 2, while slower economic growth has caused much of the immediate 
deterioration in the deficit, the deficits in later years reflect our 
tax-and-spending choices. So this is the debate between the chairman 
and me. He is saying the tax cuts are not the reason for the opening up 
of these deficits, and he is right, in the first few years of this 10-
year plan. But over the full 10 years of the 10-year plan, the biggest 
reason for the return to deficits is the tax cuts. That is not just my 
conclusion, that is the conclusion of this group of corporate leaders.
  No. 3, deficits do matter. When you have to be borrowing money for 
the Federal Government, that puts the Federal Government in competition 
with the private sector and that puts upward pressure on interest 
rates, especially at a time when the economy is recovering.
  No. 4, the aging of our population compounds the problem.
  I do not know what could be more clear. We have record deficits now. 
The President says cut another $2 trillion out of the revenue base and 
do not offset it by cutting spending, but increase spending and do it 
when we all know the baby boomers are about to retire and will really 
explode costs to the Federal Government. What earthly sense does this 
make? We are cooking a stew here that will be impossible to choke down. 
We will be choking on deficits and debt in this country, and you do not 
have to just take my word for it. The President's own budget documents 
have reached precisely the same conclusion. They show we never emerge 
from deficit and that as the baby boomers retire and the costs of the 
tax cuts explode, the deficits mushroom, the debt grows geometrically 
to unsustainable levels.
  Let me put up the reasons for the decline we were discussing earlier. 
The reasons for the disappearance of the $7.7 trillion--remember 2 
years ago, we had a forecast of $5.6 trillion of surpluses over the 
next decade. We now know, according to the Congressional Budget Office, 
if we adopt the President's tax-and-spending plans, instead of $5.6 
trillion of surpluses, we will have $2.1 trillion of deficits. That is 
a swing of $7.7 trillion in 2 years.
  Where did the money go? Over the 10 years, 38 percent went to the tax 
cuts, those already passed and those proposed; 26 percent went to the 
problem of the models not correctly forecasting revenue for various 
levels of economic activity. That is apart from the tax cuts. It is 
less revenue, but not caused by the tax cuts. The two of them together 
are 64 percent of the reason for the disappearance of the surplus. 
Sixty-four percent is less revenue than anticipated. Most of it is the 
tax cuts, but the other is mistakes in forecasting. Twenty-
seven percent of the reversal is additional spending caused by the 
attack on the country, the additional defense spending, and the 
additional spending for homeland security. Only 9 percent is the 
economic downturn.

  Now we have the Committee for Economic Development telling us that we 
are on a course that does not make sense. So we look at the proposal 
before us by the chairman of the Budget Committee that passed on a 
party-line vote out of the committee. What does it show us?
  It shows us that if you do not use Social Security, if you do not 
throw that money into the pot, if instead you treat it like a trust 
fund, if instead you protect it, if you treat Social Security as a true 
trust fund, the deficit in 2004 under the budget chairman's mark will 
be $503 billion out of a budget of approximately $2.2 trillion. That is 
a huge deficit. What we see is never emerging from deficit if we do not 
use Social Security for other purposes for the whole rest of the 
decade. In fact, we never get below $300 billion in shortfall on an 
operating basis.
  Where is the money coming from? Mr. President, $2.7 trillion is being 
taken from Social Security surpluses and used to pay for these tax cuts 
and being used to pay for the other expenses of Government.
  These chickens are going to come home to roost. This is a profound 
mistake, I believe. I believe we should have either used this money to 
pay down debt or prepay the liability we know is to come, but to take 
this money from Social Security surpluses when we are right on the eve 
of the retirement of the baby boom generation, we know what it is going 
to do. It is going to force incredible choices on a future Congress and 
a future administration. They are going to have to run up massive debt 
or have enormous tax increases or deep cuts to Social Security and 
Medicare. This is reality talking now, and it is a hard reality, but it 
is something we have to face up to.
  Instead of paying down debt, here is what is happening to the gross 
Federal debt. It is exploding. It was $6 trillion in 2002. If we adopt 
the chairman's mark, it will be $12 trillion at the end of this budget 
period; $12 trillion in debt.
  The chairman said the tax proposals of the President are not weighted 
to those at the top. I must say I differ. I do not know what tax plan 
he is studying, but the tax plan I look at that the

[[Page S3781]]

President has advocated shows the overall tax cuts are almost totally 
weighted to the top end. This is from the Center on Tax Policy, and it 
shows that taxpayers with over $1 million of income a year will get an 
$88,000 tax cut--$88,873. That is pretty generous. Taxpayers who are in 
the middle of the income scale, those earning from $21,000 to $38,000, 
get a $265 tax cut. If that is not weighted to the top, I do not know 
what is.
  By the way, this AGI, adjusted gross income, of $21,000 to $38,000, 
is 20 percent of taxpayers who are in the middle of income distribution 
in this country. They take the income of all those in America and 
divide them into groups of 20 percent. The group that is in the middle 
20 percent has an adjusted gross income of between $21,000 to $38,000. 
They get very little by way of this tax cut. Those at the top--and, of 
course, people earning over $1 million a year are in the top 1 percent 
of this country--get a tax cut of over $88,000. This is trickle-down 
economics all right. It did not work before, and I do not think it will 
work now.
  This shows the benefit by quintile of the President's proposal. It 
shows the bottom 20 percents get two-tenths of 1 percent of the 
benefit; the second 20 percent gets 10.8 percent; the third 20 percent 
get 23 percent; the fourth 20 percent get 32 percent; the top 20 
percent get a third of the benefit. So that is clearly heavily weighted 
to the top.

  I conclude by saying I hope we pause, think, and reflect about what 
adopting these policies would mean to the economic future of the 
country. I think these are fateful decisions that are about to be made, 
fateful decisions that will have an effect on this country for many 
years to come. I very much hope that before we are finished our work on 
this budget resolution that we change course, that certainly we enact a 
growth package, one that includes tax cuts, one that gives a lift to 
the economy but one that does not burden us with deficit and debt for 
years to come; that we return to an understanding that fiscal 
responsibility is critical to long-term economic growth. That must be 
the conclusion that we come to during this debate on the budget 
resolution.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Cornyn). Who yields time?
  Mr. NICKLES. 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. NICKLES. 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. NICKLES. Mr. President, I have heard many people say the tax cut 
is really weighted towards the upper income people, and sometimes I do 
not know if we are talking about the 2001 tax cut or the tax cut that 
President Bush is now proposing for growth or the extenuation of the 
2001 tax cut.
  In his total 10-year budget, the President had about $1.5 trillion of 
reduced revenues. Of that, $695 billion, I believe, was in the growth 
package and tax cuts; about $30 billion in expenditures. Some of the 
tax cuts were refundable, so Government will write a check. So that 
goes on the expensing side. About $600 billion of that figure is the 
extension of the 2001 tax cuts that will sunset at the end of the year 
2010. Those are tax cuts that are the per-child tax credit, the 
marriage penalty, and also the reduction in rates.
  I might mention the reduction in rates, what we already passed in 
2001, particularly as far as income strata is concerned, who benefited 
the most percentage-wise, low income benefited a much greater 
percentage than upper income. Those are the facts. We reduced the 15-
percent bracket to 10 percent, and we did it retroactive in June of 
2001. We made it retroactive to January of 2001. Now, that is a 
reduction of rates of about 30-some-odd percent. That is from 15 
percent to 10 percent, and it was made retroactive for individuals who 
were in that income tax bracket.
  For individuals who were at the maximum tax bracket, we went from 
39.6 percent to 38.6, 1 percentage point. Incidentally, we went 1 
percentage point in the other rates as well. The 28-percent rate went 
to 27 percent, for example. So percentage-wise, they did not do near as 
well, about a 3-percent reduction compared to a 33-percent reduction 
for lower income.
  As a matter of fact, the Tax Code is more progressive now as a result 
of the 2001 tax cuts than it was without the 2001 tax cuts. Upper 
income people pay a greater percentage of the income tax. Senator 
Grassley will probably allude to this when he makes some of his 
comments.
  If we pass the President's entire package as presented, the tax cut 
would still be more progressive. One might say, why? Well, because we 
are increasing the number of people who will pay no income tax. If one 
has four kids, passing a child credit of $1,000 per child is $4,000 
they do not pay taxes on. If one has income less than a certain amount, 
they may not pay any in connection with tax. So percentage-wise, that 
may be a 100-percent reduction of their income tax. That is rather 
significant.
  I mentioned the marriage penalty. Couples with taxable income less 
than $56,000 would be taxed at a 15-percent bracket instead of 
marginally at a 27-percent bracket. So that benefits them dramatically. 
It goes from a 27-percent bracket to 15-percent bracket. That is almost 
a 50-percent reduction. That is very significant. Sometimes people want 
to play class warfare. I don't. I want to come up with good tax policy. 
It is absolutely not good tax policy to be taxing distributions from 
corporations to the tune of 67 or 70 percent.

  And now a personal example. I used to run a manufacturing company 
before coming to the Senate. It was a corporation, Nickles Machine 
Corporation. We made money for a while. Unfortunately, we turned into a 
nonprofit organization--but not by choice. When we were making money, 
we wanted to distribute some of the money to our shareholders, to the 
owners of the company. At that time, corporate tax was 48 percent and 
the tax on individuals was 50 percent, for our purposes. If you have 
$1,000 and distribute that to the owners, the net result is the Federal 
Government gets 75 percent and the owners get 25 percent.
  What is it today? If a corporation wants to distribute $1,000, they 
pay 35 percent corporate tax and the individuals might be paying 27 
percent, possibly 33 percent or 38.6 percent. If a corporation wants to 
distribute $1,000 in earnings to the owners, the Federal Government 
gets 70 percent and the owners get 30 percent. This is not a very good 
deal.
  A lot of corporations said: Let's do something else; let's pay 
bonuses. So there were bonus schemes. The goal of a business is to 
generate a profit and distribute that to the owners. It makes no 
economic sense to pay a lot of dividends if the Government gets over 
half, maybe as much as two-thirds, maybe more than two-thirds, even up 
to 70 percent. That is how present law is written.
  The President proposes changing that, and I compliment him for doing 
so. Alan Greenspan has spoken in favor of that needed change. Many who 
follow the markets, including Charles Schwab and others, say this would 
be very positive and would help raise the markets. We would stop this 
terrible suffocating policy of overtaxing corporate distributions, 
which is what we are doing. We are currently grossly overtaxing 
corporate distributions. We need to change that.
  Again, this will help anyone, including Senate employees. I don't see 
too many millionaires walking around here, but it would benefit every 
Senate employee who works for me who has money in the retirement 
account. It would help employees of corporations who have money in 
retirement funds. A teacher retirement fund is one of the largest in 
the country. I believe it is the California teachers retirement plan. 
They invest in the stock market. They would benefit from this proposal. 
It would benefit everyone, including our country.
  I don't think we should be talking about class warfare. Percentage-
wise, the lower income group has a greater percentage reduction of its 
income tax than any other group. That is a fact.
  Some are talking about this leading to cuts in Social Security and 
Medicare. I find that not to be the case. The Social Security trust 
fund will be just as large in 10 years whether we pass this budget or 
not. We do not do one thing that would have any impact on the Social 
Security trust fund.

[[Page S3782]]

  Right now, the Social Security trust fund is financed by payroll tax. 
There is more money going out than coming in if you look at Social 
Security and Medicare combined. If you take the two trust funds 
combined, there is more money going out because we subsidize Medicare 
substantially in Part B. I will have charts on the total money in those 
pots of funds.
  We want to have a very good, enlightened debate on this entire 
budget. I encourage my colleagues, if they find this budget deficient, 
to please offer their own. We will have ample time to consider 
alternatives. I am sure others have ideas, and we would be happy to 
debate those.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Mr. President, let me indicate when one is assessing 
effective tax rates on corporations, it is a very tricky business. The 
chairman is citing the tax rates found in the tax tables. But those are 
not the effective tax rates that companies pay. It gets to be much more 
complicated than it appears superficially in terms of top rates.
  For example, the chairman is making the point regarding everyone who 
has retirement account benefits. Our employees benefit--although they 
are, for the most part, well-to-do people--from the dividend taxation 
proposal. The way tax law works, they do not pay those taxes in a 
retirement account. Those are tax-free accounts. They are not paying 
the dividend tax. It might be true they would benefit if the value of 
the stocks went up, but that is very much a crapshoot. No one knows for 
certain what the effect of a dividend tax proposal would be in terms of 
stock valuation. But we do know the effect on deficits and debt. It 
will drive up deficits. It will drive up debt.
  Many Members believe, and many economists believe, increased deficits 
and increased debt will inhibit long-term economic growth, not improve 
it; it will hurt people, not help people.
  When the chairman talks about lower income people getting a bigger 
percentage reduction in their income taxes than higher income people, 
that leaves out a profoundly important point. That is, most lower 
income people--in fact, most taxpayers--pay much more in payroll taxes 
than they pay in income taxes. There is no payroll tax relief in this 
plan. It is all geared to income taxes. Automatically, that is giving 
the greatest benefit to those who are the best off.
  When you take all the President's proposals together and evaluate who 
the big beneficiaries are, it is indisputable that it is heavily 
weighted in the top end. Certainly, the dividend top proposal is 
weighted in the top end heavily, and that is half of the President's 
so-called growth package.
  I will yield the floor so colleagues have their chance to express 
their views on the budget resolution before the Senate.
  Mr. NICKLES. I yield to the Senator from Wyoming such time as he 
desires.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Mr. President, I am pleased we are at the point of having 
the debate now on the budget. It is extremely critical to the operation 
of the Nation to have this done in a very timely fashion. I appreciate 
the cooperation on both sides of the aisle to bring it to this point.
  I enjoyed the insights and debate we had last week as it congenially 
went through committee. There was a lot of cooperation, a lot of 
exploration, a lot of decisionmaking last week that resulted in the 
budget that is here today so we can begin the floor debate. I look 
forward to making progress on the budget this week and getting it 
wrapped up so the authorizing committees can look at the exact projects 
they have coming, have some kind of idea of the amount of money that is 
in there and, at the same time, the projects they want to do over the 
years that are necessary to accomplish. Then, of course, the timely 
work of the authorizing committees will allow the timely operation of 
the Appropriations Committee.

  Last year we were not able to approve an appropriation until this 
year, in January. That is supposed to be done in October, not January--
October. We got it done in January. But we ought to be able to get it 
done in October, before October 1, so all the agencies know what they 
are operating on for that year so we are not guessing for part of the 
year and then operating on an appropriation.
  All of that ties back into this budget process. The budget process is 
not the details of where the money goes, but it is the broad blueprint 
for where it goes. Most importantly, it establishes the rules that 
people have to operate under when they do authorizing and 
appropriations.
  This is an extremely critical piece of the puzzle. It is a piece 
designed to be done in relatively rapid fire, so those other parts of 
the process can be done.
  Today I rise in support of the budget resolution as reported by the 
Budget Committee last Thursday. I do commend the chairman of the 
committee and my colleagues for developing a fiscally responsible and 
realistic budget, and for doing it in a timely manner. The hard work of 
the committee has set the stage for final adoption before the April 15 
deadline.
  You may not know that the April 15 deadline has only been 
accomplished four times since 1976. We have a great opportunity to have 
it accomplished this year. I look forward to doing that.
  The resolution as introduced today will not only enable us to win the 
war on terrorism, to secure the homeland, and to generate long-term 
economic growth, but it will also provide critical funding for 
America's children and our national transportation system.
  As a new member of the Budget Committee, this has been my first 
opportunity to work on the Federal budget in depth. The week the 
President's budget was released I read the entire thing from front to 
back. Since then, I have studied the summary tables for each of the 
budget functions and have worked through the costs and benefits of the 
President's economic growth and development plan. As an accountant and 
businessman, I believe I have a unique understanding of the President's 
growth package and the budget, and I strongly urge my colleagues to 
pass this budget as introduced.
  I would like to speak specifically about the President's economic and 
growth package for a moment. I have taken the last several weeks to 
closely analyze that Economic Growth and Jobs Plan because I think we 
must ensure that each initiative will act as a stimulus and not as just 
another expenditure. While I have a degree in accounting, you do not 
need to be an accountant to know we cannot spend our way out of debt. 
Accounting does not work that way. We either have to increase revenue 
or decrease spending in order to balance the budget in the coming 
years.
  I had a little lesson right after the first of the year in balancing 
budgets and the importance of it. The President asked me to go to 
Brazil and represent the United States at the inauguration of the new 
President down there. I was delighted to make the trip. It was quite an 
adventure. They invited heads of state to their inauguration, unlike 
our inaugurations, and the heads of states around the world do respond. 
There were 130 countries represented.
  They take the credentials on a seniority basis that goes to heads of 
state and then crown princes and then vice presidents and eventually it 
gets down to the delegation that we had over there. We were 40th in 
line, so there were a lot of heads of state there. I had an opportunity 
to talk to many heads of state. Our delegation had an appointment every 
hour with a different head of state or with a cabinet member of the new 
President, and a meeting with the new President.
  He is from a leftist government, so it was interesting to find out 
what he had in mind for his country. One that was particularly critical 
to him was balancing the budget. He recognized that the future of his 
country depends on that more than, perhaps, any other item that he can 
do. He is also interested in moving the programs to as close to the 
people as possible, giving them flexibility and reducing the 
bureaucracy.
  That sounds like a lot of the issues I have been talking about, and I 
do not consider myself to be leftist, but I did notice with most of the 
heads of states to whom I spoke, they did put an emphasis on that 
balancing of the budget. I am convinced that is what we can do for this 
country to ensure the future of the country, and the sooner it is 
possible to do it, the more important it is--but the more sure that we 
can do it, the more important it is.

[[Page S3783]]

  Unfortunately, while the Federal Government accounting offices are 
good at estimating expenditures, they are not very good at projected 
revenues. They use static numbers. That means that no matter what kind 
of economic plan we have, those numbers are not going to be reflected 
in any budget, toward helping to balance the budget at all. Keep that 
in mind when we are talking about budget here.
  The static numbers provided by the Congressional Budget Office do not 
take into account the long-term positive effects of the President's 
growth package, the effects that would have on the economy. I believe 
this erroneously skews the debate. Positive results should be reflected 
along with negative results, and increased revenues should be taken 
into account when making decisions about an economic growth package.
  The answer to improving our economy is not through increased 
expending of Government programs. You cannot spend yourself into a 
better economy. Try that on your own budget. It works kind of the same 
way. You have to do it with the Government by growing tax revenue from 
the private sector.
  As we know from past economic reports, dollars invested by private 
companies tend to circulate through the private sector nearly twice as 
much as those spent by the Government on domestic programs. Some of 
those estimates go up as high as seven times when you spend in the 
private sector as opposed to spending in the Government sector. For 
example, when one business buys something, the business that sold it to 
them receives the money. The business that sold it to them turns around 
and spends it at another company, which takes it and spends it at 
another company, which spends it. Some say this action circulates the 
dollar as many as seven times through the economy--seven taxable times 
through the economy. That is one of the differences between a 
government expenditure and a private expenditure.
  The result is the efficient use of capital and more Federal revenue. 
The trick is to get the private sector into that expanded mode fast 
enough that the tax revenue comes in at greater amounts than had been 
anticipated. From past times we have seen that providing an economic 
plan, providing some tax relief, has stimulated the economy. It can do 
that again. But what we are talking about is the efficient use of 
capital; where it can be best applied to get the best results.

  This does not mean we have to decrease spending for critical programs 
in order to spur investment. Instead, I believe we must hold our 
spending in check and then increase revenue by creating an environment 
that allows businesses to grow and subsequently pay more into the 
Federal pot.
  We need to grow the economy back to where it was before the recession 
that started 3 years ago, and then was added to by September 11, and 
then we have to grow it beyond.
  When I first got to the Senate, the first item of business was a 
balanced budget constitutional amendment. We were going to force 
ourselves to balance the budget. I have to tell you, the constitutional 
amendment came within one vote of passing--one vote. I have to tell 
you, that was pressure from the American people, and we paid attention 
to it in this body and we began balancing the Federal budget. When we 
did, the economy skyrocketed. That is what can happen if we have a plan 
for getting back to a balanced budget. We can grow the economy faster 
than it grows right now.
  It wasn't that we cut spending during that time. Lord knows, we did 
not cut spending. But we increased the revenues. That is the key. It is 
easier to balance the budget when you rapidly increase the revenues. 
That is what I think the President's economic growth plan will do. I 
believe the President's proposal is the most effective engine for 
spurring that growth.
  We need to aid the people and businesses that make up our economic 
machine and get it moving down the tracks at full speed again. That is 
the businesses, particularly the small businesses.
  The President's economic growth package makes sense. Eliminating the 
double taxation on dividend income is fair and right, as income should 
not be taxed twice. The proposal will eliminate the current tax bias 
against equity investment, and because a little over 50 percent of 
American households own equities, it will benefit a wide range of 
income levels.
  I have to mention, there are seniors in this country who have done 
some planning for their retirement, and one of the ways they did that 
was to pick out companies that pay dividends, and to pick out companies 
that pay dividends in different months so they get a dividend check 
each month. I will tell you, those senior citizens know what it is to 
have their income taxed twice. In fact, they have a lot of instruction 
on unfair taxation that falls on them.

  Further, eliminating the double taxation may encourage investors to 
reward companies that pay out a healthy dividend, not just by 
purchasing their stock but by purchasing the stock at a higher multiple 
of corporate earnings.
  I have to tell you, that balance can be paid out. That has to be real 
money. That cannot be phony accounting. That straightens out some of 
the accounting process. Look to the dividends.
  The President's proposal to accelerate the 2001 tax cuts will rightly 
put money back into the hands of hard-working taxpayers. I believe the 
most important acceleration would be the reduction in the highest tax 
rate because sole proprietorships, partnerships, and subchapter S 
corporations are taxed at that level.
  We talk about it as though it were a few wealthy individuals. I had 
people talking to me about the unfair double taxation of dividends 
before the President ever mentioned it. It was coming from Wyoming 
people who had small businesses who have grown those small businesses 
and have grown them very successfully. They started to mount as regular 
corporations rather than subchapter S corporations. They were able to 
build those businesses. They have very successful businesses with some 
retained earnings now that could go into some other projects, but they 
are not about to pay that out if they have to get taxed on it one more 
time. They already paid the tax. They do not think it is fair to be 
taxed on it again.
  As some of you know, I owned a shoe store in Gillette, WY. So I 
understand this subchapter S and C corp taxation and know that those C 
corp small businesses are taxed at a different rate. Subchapter S 
corporations pay at the individual rate. And for many of those in 
business, because of the money that is flowing through the 
corporation--not money they are getting, money flowing through the 
corporation, money they are putting back into inventory and equipment 
and buildings so they can grow that company--they are paying taxes on 
it, if they have it as a subchapter S corporation, and they are paying 
it at the highest individual rate, which cuts into the amount they can 
put back into the business.
  So, simply put, the more money that corporation has to pay in taxes, 
the less money they have to invest in inventory, to maintain the 
building, or, more importantly, to hire more people to take care of 
customers--jobs.
  As such, I think reducing this tax burden on small businesses will be 
the most effective growth mechanism. I also believe the President's 
efforts to encourage long-term economic growth, through higher 
expensing caps for small business expenditures, is extremely helpful 
and long overdue. Again, the money that they are investing in equipment 
and buildings would be able to be written off quicker, which would 
encourage them to go ahead and make those expenditures sooner, which is 
short-term growth for the economy. Months and years before the 
President released his growth package, small business owners from 
Wyoming were asking me for that kind of relief as well.
  I have to tell you, it is small business that has been building this 
country. For the past several years we have had the megamergers, we 
have had a big company buying up another huge company. The numbers they 
talk about from those purchases are absolutely astronomical to me. I 
don't even have the concept for how much money they are talking about. 
But one of the things I have noticed is, after they make that 
megamerger, they have what they call a downsizing, or a 
``rightsizing.'' I call it laying off people--10,000, 20,000 people 
laid off.

  Until the decline of 3 years ago--and actually up until about a year 
ago--the

[[Page S3784]]

slack from those megamergers was being picked up. Those people were 
being hired. Those people were being put to work. Those people were 
given jobs. Where? In small business. Small business was growing the 
economy. They are able to define a niche and able to provide a need. 
And they are able to respond to change quickly. That is the advantage 
of small business.
  Fortunately, we have people in this country who are willing to take 
the risk of developing a special niche, filling a need for this 
country, and selling the people of this country on that need. That is 
what has grown the business. A lot of those little businesses have 
grown into very big businesses, but that is how they started.
  That is where we really need to fuel this engine. We need to fuel it 
from the small business aspect. We have that opportunity. We have that 
opportunity with the President's economic growth plan. I hope we will 
take advantage of it.
  Small businesses should not bear the brunt of taxes. As corporations 
struggle to meet income projections and cost reductions, small 
businesses are the ones providing jobs and putting food on the table 
for our working families. They are the ones growing the jobs. Small 
businesses are the backbone of the American economy, and we must allow 
them to grow and prosper.
  While I support the President's plan and the package we assumed in 
the budget resolution, it is important to remember the Budget Committee 
cannot dictate how the Finance Committee structures the tax package. 
This resolution simply reconciles the Finance Committee to reduce 
revenues by $698 billion, which is consistent with the President's 
growth plan. I urge my colleagues to support the reconciliation package 
without amendment.
  During this uncertain time, we must be mindful of the fiscal impact 
of the war on terrorism and the war in Iraq. These are threats we may 
not be able to avoid, and we must be prepared to provide the resources 
necessary to keep the men and women of our armed services safe and 
strong.
  However, I caution my colleagues. We should not add the cost of the 
war to the baseline of our budget. God willing, this war will be short, 
if it happens. And we should not treat it as an ongoing expense. We 
should not put it in as a baseline so that next year we can build from 
that baseline at even greater expenditures. It has to be treated as a 
one-time emergency.
  Mostly, I fear that the money used this year to fund the war will be 
swallowed up next year by the spending machines we can't wait to dip 
into as a new pool of money.
  Finally, in closing, I would briefly like to mention another issue 
that is important to the people of Wyoming and to many Senators who 
hail from rural States. This issue is drought assistance. During the 
Budget Committee markup, I worked with my colleagues to include a sense 
of the Senate that would direct Congress to develop a long-term drought 
plan and establish a reserve that would fund emergency and disaster 
assistance to livestock as well as agricultural producers hurt by 
drought.
  I think this provision goes a long way in making a clear statement 
that we are systematically preparing for the negative impacts of 
drought and other disasters through a long-term strategy rather than a 
knee-jerk reaction.
  Something that has disturbed me in the budget for our country has to 
do with our knowledge of impending disasters. We don't know which 
disasters they are; we don't know where they are going to strike; we 
don't know what they are going to be or we might be able to do more in 
the way of prevention. That just isn't the way Mother Nature works. But 
we do know every year--since I have been here, and looking back several 
years before that--there are around $6 billion worth of disasters in 
our country.
  We do not budget for that. We treat them strictly as emergencies. 
Anybody in the private business sector who knows there is going to be a 
huge expenditure builds that into the budget. I am hoping, through a 
process, we can eventually get to the point where the known 
emergencies--that is, the known amount of dollars of the emergency--
even though we don't know which they are or where they will occur, that 
they will be provided for up front as part of the budget.
  Mr. SESSIONS. Will the Senator yield for a question?
  Mr. ENZI. I yield for a question.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, the Senator is speaking so well on these 
issues as an accountant. I think he is the only accountant in the 
Senate, and a small businessman himself. I would like to ask this 
question on the double taxation.
  I have heard economists and others, like Larry Kudlow, for example, 
say that big corporations are withholding earnings. They are not paying 
them out in the form of dividends because they are taxed. And they are 
retaining those earnings. Then they are using those earnings, when they 
don't know what to do with them, basically, to buy up small competitive 
corporations. Does the Senator think, based on his experience in 
business, that could be one factor in the consolidation of big 
businesses more and more in America? And is that unhealthy for the 
country?
  Mr. ENZI. I think our tax system has encouraged companies to get 
bigger and to enfold more kinds of operations into their current 
operations, even if they were not compatible with the current 
operation, just so they could do as you have expressed, avoid some of 
the double taxation there would be on dividends and also drive up the 
price of the stock by making these other acquisitions.

  Growth, sometimes, of another business will drive up the price of the 
stock because it increases the number of sales for the host 
corporation. It did not increase the number of sales for the purchased 
corporation, but by adding that to the new one or by sticking some 
other units out there, they can drive up the stock prices. We have seen 
a number of mechanisms for being able to drive up the stock prices.
  I do expect we will see kind of a reversal in the way companies have 
been doing that. If we can put some plans in place to better stimulate 
small businesses, we will see some of those big businesses spinning off 
some of the businesses that they have had before, taking the cash, 
paying some dividends and increasing the value of their stock based on 
the true accounting, the cash that they are able to generate. They will 
be able to do that because they won't have that double taxation burden 
some of the investors look for, those opportunities. They don't want to 
receive the dividends. They want to see the increase in stock value 
instead. So instead of encouraging cash to be distributed so they can 
put it into the economy, perhaps for smaller business earnings, it is 
going exactly the opposite way.
  Mr. SESSIONS. Just to follow up, is it the view of the Senator that 
by eliminating the double taxation on dividends, this would encourage 
businesses to distribute dividends to shareholders and not hoard it and 
end up purchasing and consolidating their business interests, expanding 
it by purchase of competitive smaller businesses?
  Mr. ENZI. The Senator from Alabama is absolutely correct. It will 
grow a lot of new businesses. It will put it in the hands of people who 
will be looking for opportunities of small businesses that fill niches, 
and there will be money available for small businesses through venture 
capital to be able to get the money to put that idea they have had in 
place for a long time and actually produce the product, market the 
product, get it out there where it is providing a service to people and 
growing the business at the same time. It will change the way people in 
this country invest. It will improve the way corporations operate.
  I thank the Senator for his questions. I urge my colleagues to 
support the fiscal year 2004 budget resolution as reported by the 
Senate Budget Committee.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. CONRAD. I am pleased to yield 25 minutes to the Senator from 
Massachusetts.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. Mr. President, before my friend from Wyoming leaves the 
floor, I want him to know I listened carefully to his arguments. I had 
difficulty following the argument that we

[[Page S3785]]

should not include any funding in the budget for the war in Iraq. I am 
sure he has attended--I have seen him there--a number of meetings where 
we have listened to the Secretary of Defense and others say we couldn't 
project what the war is going to cost because we didn't know what other 
allies were going to contribute, how many troops they were going to 
have, what they were prepared to spend. Now on the eve of the 
President's statement, we have a very good idea about where the burden 
of this conflict is going to fall. It is going to fall on American 
taxpayers.
  I am troubled about why we don't include any of that in the budget. 
We know it cost $25 billion to send the service men and women over 
there. That is a CBO figure. It will cost $25 billion to get them back. 
We know now that to build the Iraqi oil industry, if we were to go in 
there today without any kind of impact or any destruction, it is going 
to cost about $15 billion more to bring it up to speed. We know that 
electricity is about half pace and it is going to cost another $10 
billion to bring that up to speed. We are trying to bring Iraq back to 
its former self. We know that communications is about half speed and 
that will cost another $10 billion.
  We know we will need a minimum of 50 or 75,000 troops. General 
Shinseki says 200,000 troops. General Nash, a previous commander over 
there in the first Gulf War, mentioned a couple hundred thousand 
troops. We had 70,000 in Bosnia. It is difficult for me to think that 
just as an opener we will not need $50 to $75 billion. I find it 
difficult to understand why we are not including that and discussing 
that when we are talking about the budget for the future, when we know 
we are going to have to get the expenditures.
  As I heard, the argument was, we don't want to put it in because it 
will be part of a baseline in terms of future spending, which suggests 
that we are not rational enough or sensible enough or responsible 
enough to be able to deal with these figures down the road.
  I don't want to be unfair to my colleague from Wyoming. If I don't 
have it right, I will be glad to yield for a question.
  Budgets are the way a nation sets its priorities, and the priorities 
in the Republican budget are profoundly wrong for America. It fails to 
address the real problems of real families. It appears to have been 
drafted in a sound-proofed room so that the voices of working men and 
women, students and senior citizens could not be heard. It's a harmful 
rehash of the same failed economic policies that have caused so much 
misery and pain for so many Americans.
  In the 2 years since President Bush took office, the well-being of 
American families has declined at an alarming rate. Ask most Americans 
how their lives have changed since President Bush took office, and they 
will tell you. Declining job security. Disappearing retirement savings. 
Plummeting school budgets. Rising college tuition. Skyrocketing health 
care and prescription drug costs. Duct tape and plastic sheeting 
instead of real steps to make neighborhoods secure. Federal budget 
deficits as far as the eye can see. The White House has not only failed 
to feel their pain, it has made their pain worse.
  Even when it comes to the Government's highest obligation--the safety 
of our country--this budget falls short. Al Qaeda and other terrorist 
groups are planning every day how they can inflict yet another terrible 
act of terror on our soil. We deserve better than duct tape and orange 
alerts to protect our communities from terrorism. We need a budget that 
ensures that fire fighters and police officers and health care workers 
and other first responders have the resources and training they need to 
protect us. We need to protect not only our airports, but our seaports 
and bridges and schools and other public buildings.
  At the same time, President Bush is preparing for a new war with 
Iraq. At this very moment, a quarter of a million American men and 
women in uniform are poised in the Gulf, awaiting the order from their 
Commander-in-Chief. They are prepared to sacrifice their lives for 
their country. Even after the war, we face an uncertain future in Iraq 
as we struggle to win the peace. We all know that to do the job right 
in Iraq may well require a huge commitment of dollars and troops over 
many years, and it is far from clear that we will have significant 
support from other nations in this mission.
  But what does this budget propose? Yet another round of tax breaks 
for the very wealthiest Americans.
  How will more tax breaks for the wealthy hire more qualified teachers 
to teach our children? How will another tax break for millionaires help 
working men and women get job training and find a new job? How will 
another tax break for the wealthy help families afford health insurance 
or provide prescription drugs under Medicare? How will another tax 
break for the wealthy help them recover their lost retirement savings? 
How will another tax break for the wealthy win the war against 
terrorism? How will a mountain of budget deficits help us build a 
better future for our children? And how will more tax breaks for 
millionaires help us defeat Saddam Hussein?
  With the economy in shambles and continuing threats from terrorists, 
these are not normal times. Our responsibility in Congress is to pass a 
budget that meets the challenges of our times. Instead of more tax 
breaks for the wealthy, we should be concentrating on our national 
security and our economic security.
  We should enact no further permanent tax breaks until the costs of 
war with Iraq are determined. Giving our troops everything they need to 
do the job, and to do it safely, should come first.
  Surely, when our troops come home, we want them to come home to 
better schools, not schools facing drastic budget cuts, fewer teachers, 
and with crowded classrooms. We want them to come home to a strong 
economy, with jobs that let them care for their families and save for a 
secure retirement. We want them to be able to afford health insurance 
and look forward in their retirement years to a strong Medicare program 
that helps them afford the prescription drugs they need.
  This budget fails these tests. It rejects the steps needed to restore 
the economy, and instead embraces ideologically rigid policies that 
have not worked and will not work. In 2001, President Bush pushed a 
$1.3 trillion tax cut through Congress that disproportionately benefits 
the wealthiest taxpayers. Now, the administration is seeking an 
additional $1.6 trillion in tax cuts, even more heavily slanted toward 
the rich. That is not the solution to the problems facing working 
families. That is a strategy that will only add to their problems.
  These problems have grown steadily worse since President Bush took 
office in January 2001. Certainly, his policies are not the sole cause 
of the economic downturn we have witnessed in the last two years. The 
stock market began its decline before he took office, and so did the 
recession. The economic shock caused by the September 11 attack was 
beyond his control. However, the response of the administration to 
these economic challenges has been ineffective. The President's single-
minded commitment to tax cuts for the wealthy as the cure for every 
economic ailment has made a bad situation worse. The administration has 
ignored remedies that would provide a significant short term stimulus, 
while undermining our long-term economic strength. As a result, the 
economy continues to stagnate, and the number of families facing 
hardship continues to grow.
  Huge numbers of working men and women have lost their job security. 
As layoffs mount, they live in fear of being the next to be let go. 
There are two and a half million fewer private sector jobs in America 
today than there were just two years ago. Those looking for a job are 
finding it increasingly difficult to obtain one. The number of long-
term unemployed workers has increased by nearly 200 percent since 
President Bush took office. The Bush administration is the first 
administration in fifty years to have a net loss of private sector 
jobs. In the face of these problems, Republicans have been slow to 
support an extension of unemployment benefits. They continue to oppose 
assistance for one million workers facing long-term unemployment and 
for hundreds of thousands of part-time and low-wage workers who 
currently receive no benefits.
  Mr. President, this chart shows the 2.5 million private sector jobs 
that have been lost in the last 2 years. From

[[Page S3786]]

111.7 million jobs in January 2001, to 109.2 million in February of 
this year.
  Health insurance is becoming less and less affordable for millions of 
workers and their families. Over two million more Americans are without 
health insurance today than there were two years ago. One in ten small 
businesses which offered their employees health insurance in 2000 no 
longer do. The average cost of health insurance is rising at double 
digit rates--up by 11 percent in 2001 and another 12.7 percent in 
2002--nearly four times the rate of inflation. The health care squeeze 
on working families is getting tighter and tighter.
  The cost of higher education is rising beyond the reach of more and 
more families. The gap between the cost of college tuition and the 
tuition assistance provided by the federal government has grown by 
$1,900 in the first 2 years of the Bush administration. Yet, 
Republicans oppose efforts to meaningfully increase financial aid for 
qualified students. As a result, the number of worthy students being 
denied the chance to go to college is growing each year.
  For millions of families, their retirement savings have seriously 
eroded in the last two years. The value of savings in 401(k) plans and 
other defined contribution plans has declined by $473 billion in the 
last two years. The value of individual retirement accounts dropped by 
$229 billion in 2001. The 2002 data are not available yet, but given 
the poor performance of the stock market, it will be another steep 
decline. Many middle-aged workers who thought their retirements were 
secure are suddenly being forced to consider staying in the workforce 
longer and reduce their standard of living in retirement.
  These are the realities American families face today. It is no 
surprise that consumer confidence has dropped more than fifty percent 
since President Bush took office.
  The fiscal well-being of the Federal Government has suffered as 
dramatic a reversal as the financial well-being of America's families. 
When President Bush took office, CBO projected a $5.6 trillion surplus 
over the next ten years. Two years later, that surplus has disappeared. 
CBO's most recent projection is a $378 billion deficit over that same 
period. Part of the surplus disappeared with the economic downturn, but 
a major portion of it was dissipated by the policies of the Bush 
administration. It is even more disturbing that the White House has not 
learned from this sad experience. If Congress enacts the proposed 
budget submitted last month by the Bush administration, the deficit 
will grow to over $2.1 trillion. These numbers have a serious real 
world impact. The President's plan would make it impossible for the 
Federal Government to meet its most basic obligations to the American 
people.
  To all these problems, the Bush administration has one answer--more 
and more tax cuts predominately benefitting the wealthiest taxpayers.
  In this current situation, the most irresponsible action Congress 
could take would be to accept the proposal of the Bush administration 
to enact major new permanent tax cuts. The combined cost of the 
President's plan to exempt dividend income from taxation, accelerate 
the tax cuts for the upper income brackets, and make the 2001 tax cuts 
permanent would be over $1.3 trillion in the next 10 years. This 
immense increase in the deficit would also trigger an additional $300 
billion in interest costs on the larger national debt. We cannot afford 
the loss of an additional $1.6 trillion from the Treasury. Temporary 
tax cuts to stimulate the economy are affordable, but the President's 
large, permanent tax breaks are not. If the Bush plan is adopted, the 
Federal Government will not have the resources to meet urgent domestic 
needs in education, in health care, and in homeland security. Even more 
troubling, their plan will make it virtually impossible for us to keep 
the commitment of Social Security and Medicare in future years.
  If Congress accepts the budget which Senate Republicans have 
proposed, the on-budget deficit will be nearly four trillion dollars by 
2013. That fact is not in dispute. The number comes right from the 
Chairman's mark. The cumulative on-budget deficit in fiscal year 2013 
will be $3.948 trillion--an extraordinary amount. More than three-
quarters of that amount is directly attributable to the Bush tax cuts 
enacted in 2001 and the additional cuts proposed in 2003.
  The impact of these new tax cut proposals is clear from the 
administration's own budget. When the President says ``no'' to 
obviously needed spending on urgent domestic priorities such as 
education and health care, he says the war on terrorism requires us all 
to tighten our belts. The burden of these sacrifices falls mainly on 
low and middle income individuals and families. The President refuses 
to ask the wealthiest taxpayers to share the burden.
  In the midst of his repeated calls on others to sacrifice, he is 
advocating over $1.3 trillion in new tax breaks--$726 billion for his 
``economic growth'' package and $624 billion to make the reduction of 
the higher brackets and the estate tax repeal permanent--primarily for 
those with the highest incomes. That policy is wrong.

  As a result of the Bush tax plan already enacted, the wealthiest 1 
percent of the taxpayers will each save an average of $50,000 a year, 
and now he wants to give each of them even more--an additional $25,000 
a year.
  This chart indicates who benefits from President Bush's tax cut 
proposal. This is a Brookings analysis. We see on this chart $88,000 to 
millionaires, $239 for working families.
  It cannot be wartime for middle America, but still peacetime for the 
rich.
  The Bush administration is using the recession to justify major new 
permanent tax breaks for the wealthy. Exempting dividend income from 
taxation will take $400 billion out of the Treasury over the next 10 
years. Half of that enormous amount--$200 billion--will go directly 
into the pockets of the richest taxpayers.
  The information on this chart is from Citizens for Tax Justice. Under 
the Bush plan to eliminate the tax on dividends, the richest taxpayers 
get half the savings, pocketing $200 billion; 49 percent goes to the 
richest 1 percent; 31 percent goes to the next 10 percent. Effectively, 
80 percent of the benefit goes to the richest 10 percent.
  The American people deserve better from the White House. We should be 
freezing the rates of the top income tax brackets at their current 
level and maintaining the estate tax on estates over $4 million. We 
should not be enacting any new permanent tax breaks for the wealthy 
when we are so clearly failing to address so many of our most basic, 
urgent national needs.
  For the cost of reducing the tax rate--listen to this, Mr. 
President--for the cost of reducing the tax rate on the top income 
brackets, we could provide the additional education funding needed to 
keep the promise made in the No Child Left Behind Act for a decade. We 
could fund that program for a decade.
  For the cost of permanently repealing the estate tax on multimillion 
dollar estates, we could help to ensure that Social Security has the 
financial resources needed to keep the promise of a secure retirement 
for future generations. That is the alternative.
  For the cost of President Bush's newly proposed $726 billion package 
of additional tax breaks tilted to the most wealthy taxpayers, we could 
fully fund a generous program of prescription drug assistance for 
senior citizens and extend health insurance to more uninsured families. 
That is the alternative.
  Which does this body want to do? Which of these choices will make the 
American community stronger and better able to face the challenges of 
the future? The decision to pass more and more tax cuts for the richest 
among us is a decision to ignore America's greatest needs. Now is the 
time for Congress to bring our policies back in line with our national 
values.
  The economy needs a real stimulus plan. A genuine economic stimulus 
must meet three criteria. It must have an immediate impact, it must be 
temporary, and it must be fair, bringing the recovery to all Americans 
and not just to the wealthy few. The Bush proposal fails on all three 
accounts.
  Less than $40 billion of the $726 billion cost of the 
administration's plan would reach the economy in 2003 when it is needed 
to stimulate growth. That is, of the $726 billion of the President's 
proposal, only $40 billion of it would be stimulative right now, Mr. 
President. Most of the revenue will be spent long

[[Page S3787]]

after the recession has ended. More than $570 billion of the total 
amount would not be spent until 2005 or later. In contrast, our 
Democratic stimulus proposals would put much more money into the 
economy in 2003, with little additional long-term costs. Temporary tax 
cuts to stimulate the economy are affordable, but the President's large 
permanent tax breaks are not.
  The cost of the new permanent tax cuts of the President's plan is so 
high--$1.3 trillion over 10 years--that it would dramatically expand 
the deficit, leading to higher long-term interest rates. These higher 
rates could actually prolong the recession by making it more expensive 
for businesses to borrow the money they need to grow. The overall White 
House proposal is unfair to most Americans. It will provide a tax cut 
windfall to the wealthy few, while neglecting the needs of working 
families, and it will not provide the timely and targeted stimulus the 
economy needs.
  The stimulus plan proposed by the Democratic leader would inject $140 
billion into the economy this year, and it is designed in a way that 
will maximize the stimulus effect of each dollar. Half of the total 
amount--$70 billion--would be used to provide immediate tax relief to 
working families. Each person who pays either income tax or payroll tax 
will receive $300, and families with children will receive additional 
tax relief. Thus, a family of four would receive a $1,200 tax cut this 
year. It is a fair plan that will provide tax relief to the hard 
working families who need it most and are most likely to spend it 
quickly. In designing a stimulus tax cut, it is particularly important 
to include relief for low wage workers who pay substantial payroll tax 
but owe no income tax. The Democratic plan covers the millions of 
workers in this category who are excluded from the administration's 
much more costly plan.
  The Senate Democratic plan also provides immediate, targeted tax 
relief for businesses to stimulate new investment. It accelerates 
depreciation to 50 percent for this year and triples the amount small 
businesses can expense this year. The goal is to provide businesses 
with strong tax incentives to invest in new plants and equipment now, 
rather than postponing those expenditures until further years.
  Our plan also recognizes the dire fiscal problems that state and 
local governments across America are facing. These governments must 
balance their budgets each year. When a recession cuts revenue sharply, 
state and local governments must either raise taxes or cut spending. 
Either step will deepen and prolong the recession, and undercut our 
stimulus efforts at the Federal level.
  It is also important to remember that more people need to rely on 
state and local programs in an economic downturn. The number of people 
eligible for Medicaid grows substantially in times of recession, and 
many other costs rise as well. Without jobs and without health care, 
families have no where else to turn. We should make certain that the 
needed resources are available for them. The Democratic stimulus plan 
will provide $40 billion to hard-pressed states and communities. It 
will provide additional dollars to maintain health care, education, and 
social services. It will also help with the substantial costs of 
dealing with the threat of terrorism. It is money well spent which will 
help stimulate the economy now. Unfortunately, the Republican budget 
totally ignores this need.
  The American people face a health care crisis. The administration and 
Republicans in Congress have responded with a budget that not only 
fails to address this crisis, but advances an extreme right wing agenda 
that will make the crisis worse.
  Every American family is experiencing some aspect of this crisis. 
Health care costs are skyrocketing, and families with insurance are 
facing unaffordable premium increases at the same time benefits are 
being reduced. The number of Americans without any insurance at all is 
unacceptably high and rising rapidly. No family with insurance today 
can be sure that it will be there tomorrow if serious illness strikes. 
And for senior citizens, the national promise of affordable health care 
through Medicare is being broken every day because Medicare does not 
provide prescription drugs.
  In the face of this crisis, the administration and the Republicans in 
Congress have proposed a budget that pays lip service to meeting the 
needs of senior citizens for prescription drug coverage, but fails to 
provide resources that are adequate for the job.
  Even worse, they have proposed to dismantle Medicare and force senior 
citizens into HMOs and other private insurance plans in order to obtain 
the drug benefit they are offering. They are proposing to use Medicare 
as a piggy bank to fund tax credits for the rich. Under the House 
budget resolution, the Ways and Means Committee is directed to come up 
with $214 billion in Medicare savings so that the wealthy few can 
become even wealthier.
  It is no accident that the Bush administration's program depends on 
forcing senior citizens into HMOs and other private insurance plans. 
Whether the issue is Medicare or the Patients' Bill of Rights, the Bush 
administration has consistently stood with the powerful special 
interests that seek higher profits and against the patients who need 
the medical care. If all senior citizens are forced to join an HMO, the 
revenues of that industry would increase more than $2.5 trillion over 
the next decade. Those are high stakes. There is a big reward for HMOs 
and the insurance industry if the Bush administration plan is enacted. 
But there is an even greater loss for senior citizens who have worked 
all their lives to earn their Medicare, and that loss should be 
unacceptable to all of us. No senior citizen should be forced to give 
up the doctor they trust to get the prescription drugs they need. No 
budget accepted by this Congress should put the interests of the rich 
and powerful ahead of the interests of senior citizens and their 
families.
  The Republican prescription for Medicaid is equally unacceptable. 
Their proposal would victimize 46 million of the most needy and most 
dependent of our fellow Americans. The administration is proposing the 
same type of destructive block grant program for Medicaid that the 
Gingrich Congress failed to enact almost a decade ago. The Republican 
block grant would leave many innocent victims in its wake--sick and 
needy children and their parents, the disabled, and low-income elderly.
  In each year's budget process, the Bush administration shows less and 
less support for education. At a time of enormous unmet student needs, 
it is shameful for the President year after year to submit anti-
education budgets that provide zero overall growth in financial support 
for education and that cut priority programs for schools.
  The PRESIDING OFFICER. The Senator has used 25 minutes.
  Mr. KENNEDY. May I get 5 more minutes?
  Mr. CONRAD. I will be happy to provide to the Senator whatever time 
he consumes.
  Mr. KENNEDY. I thank the Senator.
  The PRESIDING OFFICER. The Senator may continue.
  Mr. KENNEDY. Mr. President, it is shameless for this administration 
to talk about the promise of the school reforms contained in the No 
Child Left Behind Act while submitting a budget to cut the resources 
necessary to make school reform a reality for millions of children.
  The administration proposes massive new tax breaks for the wealthy, 
but it has no compunction in proposing that over 6 million needy 
children must be left behind for every year for the foreseeable future. 
The administration has no hesitation in proposing that over half a 
million children be dropped from after school programs.
  It even proposes to cut aid to the schoolchildren of the Nation's 
soldiers serving in the war against terrorism who have been sent off to 
fight a war against Iraq.
  The Senate Republican budget before us rejects the President's cut on 
the Impact Aid Program for military schoolchildren, but it still cuts 
funding for the No Child Left Behind Act school reform bill by $700 
million.
  On this chart, if we look at the years 1997 to 2001 in terms of 
support for education, it was an 11-percent increase on average during 
that period of time. Now these figures are the requests, not the actual 
numbers: In 2002, 3.6 percent increase requested by President Bush; 
2003, 2.8 percent; and for fiscal year 2004, half of 1 percent. These 
figures

[[Page S3788]]

were up higher because of the work that was done ultimately on the 
floor of the Senate, but these are the budget requests over the past 
few years.
  In the past, Democrats and Republicans in Congress have worked 
together to reject the Bush administration's anti-education budgets by 
a substantial bipartisan majority, and we should do the same this year. 
We have to make sure Congress lives up to its promise to leave no child 
behind.
  At the same time, we have to provide more college students with 
financial aid to meet rising tuition costs. The President proposes not 
one penny, not a single penny, in individual student Pell grants. 
Without an increase in Pell grants, over 110,000 students are in danger 
of being shut out of college.
  The gap between the cost of college tuition and the level of tuition 
assistance has grown by $1,900 since President Bush took office. Yet 
this budget does nothing to narrow that gap.
  Young Americans now have an average of $17,000 in student loan debts. 
Low- and moderate-income students face more than $3,000 in annual 
college costs not covered by financial aid, work study, or savings. 
This budget does nothing to help these students.
  Just as Social Security is a promise to senior citizens, we should 
make education security a promise to every young American. If one works 
hard, finishes high school, is admitted to college, we should guarantee 
that they can afford the costs of the 4 years it takes to earn a 
degree. That was President Kennedy's goal in the 1960s and it must be 
our mission today, and we will fight on the Senate floor this week to 
make the dream of a college education a reality for all. We will fight 
this month, this year. We will not stop because the fight is for 
America's future.
  Finally, as I mentioned earlier, this budget fails to include the 
costs of the impending war in Iraq. The Senate Republican budget 
contains no money to pay for the war in Iraq, which may begin in a 
matter of hours, and no money for the cost of occupying and rebuilding 
Iraq after the war.
  The President has refused to submit a cost estimate to Congress 
despite repeated requests. Over 200,000 military personnel have been 
moved into place for the war; 90,000 more are on their way. Many of 
them are from the National Guard and Reserve. They had to be mobilized 
especially for this mission. The Pentagon is already soliciting 
proposals from major contractors for the rebuilding of Iraq, yet the 
administration continues to stonewall us on the costs of the war.
  The President knows that the overall costs will be enormous and is 
obviously afraid of sticker shock when he discloses the facts to the 
American people. The President does not want to tell Congress what the 
war will cost until his tax cut proposals are locked in. He is afraid 
if he tells us, Congress might do something sensible, such as reducing 
the size of the tax cut to help pay for the war. That is the last thing 
this administration wants--Congress making responsible fiscal 
decisions.

  So instead, this Republican budget is asking us to pretend that the 
war is not on the horizon. The Senate of the United States cannot 
accept such a sham. Let's do the responsible thing: Pay for the war 
with Iraq and the aftermath before we have another tax cutting raid on 
the Treasury.
  The timing of the President's tax cut could not be worse. We already 
have record deficits. We are about to go to war. We have never cut 
taxes in wartime before in the history of the country, and now is not 
the time for new permanent tax cuts.
  The Republican budget fails to provide even one dollar to address the 
costs of the impending war with Iraq. It places more tax breaks for the 
wealthy ahead of the needs of our men and women in uniform who are 
making the greatest sacrifices. Funding for their needs should be our 
highest priority, not an afterthought.
  As I have said, it cannot be wartime for most Americans but still 
peacetime for the wealthy. The wealthy should have to wait for their 
tax cuts, at least until the costs of the war and reconstruction of 
Iraq are addressed.
  I thank our ranking member for the time he has yielded, and I yield 
the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Oklahoma.
  Mr. NICKLES. I yield whatever time he consumes to the Senator from 
Idaho.
  The PRESIDING OFFICER. The Senator from Idaho.
  Mr. CRAPO. Mr. President, I appreciate the opportunity to discuss 
this important issue. This week we are going to be discussing a number 
of critical issues, as has already been mentioned by a number of those 
who have spoken. It is expected that the possibility of war with Iraq 
will come closer, if not become a reality, sometime in the near future. 
At the same time, we are debating probably the biggest economic issue, 
and the biggest issue for the management of this country, that the 
Senate will deal with this year, as we put together the budget 
resolution. In that context, I will basically give a brief overview of 
how we got to where we are, where it is that we are, and the decisions 
we will be making.
  Many people will remember that a few short years ago we were talking 
about major surpluses across the board and for as far as we could see 
into the future. In fact, I have in front of me a projection that was 
based back in January of 2001, which estimated that in this budget year 
that we are working on right now, the 2004 budget year, the surplus was 
projected to be around $396 billion. This same sheet shows what the 
projection today is as opposed to what was projected in the year 2001, 
and the projection is around a $199 billion deficit. In other words, 
just for the budget year in which we are working, the projections over 
the last essentially 2-plus years have gone from a projection of a $396 
billion surplus to a $199 billion deficit.
  Now, what caused that? We will hear a lot of debate about what caused 
it. In fact, it has already been said today that President Bush's tax 
cut from a few years ago caused it, that President Bush's economic 
policies have caused it. In reality, we are going to see some of the 
numbers that have been put together.

  What happened is that on 9/11 the United States was attacked by 
terrorists and people saw the World Trade Center collapse. People saw 
what happened very vividly as the United States responded to the fact 
that we were at war with terrorists. Following that, there were massive 
increases of spending at the Federal level; spending required to 
respond to the 9/11 attacks; spending required to address the war 
against terrorism, for example, the war which we have fought already in 
Afghanistan; spending to deal with our homeland security; spending to 
deal with strengthening our national security and preparing ourselves 
to be sure that America and Americans are safe throughout the world as 
we deal with an increasingly dangerous world.
  In addition to that, spending has gone up on health care. Spending 
has been driven up in a number of the other social areas of our budget. 
We saw very little relief, if not in fact dramatic increasing 
pressures, for spending in the last 2 years. At the same time, the 
economy collapsed.
  I will put up our first chart. We have seen this chart already today, 
but this chart shows that at the same time our spending started to go 
through the roof, as spending started to go up dramatically, revenue, 
which is the blue line, dropped off dramatically. The revenue dropped 
off dramatically for a number of reasons. It has been said that the 
revenue dropped off because of President Bush's tax cut. In part, that 
is true, because although that tax cut was phased in over 10 years and 
although most of that tax cut has not even occurred yet and cannot be 
the responsibility of these declines in revenue, a part of it was. 
There was tax relief, and as a result of that tax relief there was some 
decline in revenue. However, let's go to the next chart.
  This next chart is another way of looking at the same thing. Again, 
the blue is revenue and the red is spending. The revenue since 2000 has 
gone down precipitously. The spending in Washington has not. This is 
another way of showing we are facing the dual problem of increasing 
pressures on spending and reducing our falling revenue to support the 
Federal budget.

  Why did the fall-off on revenue happen? This chart shows what 
happened in our economy. This is the Nasdaq. Starting in 2001, it hit 
about 5,000. It is now down to--when the chart was

[[Page S3789]]

made--around 1,200 and is hovering in that neighborhood today, about a 
75-percent reduction in the values just on this market. The same type 
of charts could be put here for the New York Stock Exchange or for 
other exchanges across the world which have seen worldwide dramatic 
reductions in economic activities.
  Virtually everyone who pays any attention to the economy these days 
knows the bubble popped and the economy went into a serious collapse. 
Many have called it recession. We have held dozens of hearings in 
Washington to understand what happened, why it happened, and how soon 
we will be able to climb out. People know about the Enron debacle, the 
WorldCom debacle, and the loss of confidence the American people have 
in our markets today, which loss of consumer confidence has generated 
further difficulty in the economy. People are also aware we are 
potentially going to have to go to war in Iraq. That cloud over the 
economy itself is generating the kind of lack of confidence in economic 
activity that causes us to have difficulty in seeing a rebound in the 
markets.
  The next chart shows what it was that caused us to see the dramatic 
change in our deficit. This chart shows the year 2004. There are charts 
that can predict it out for 10 years and add in some of the proposed 
stimulus package. But this chart shows what caused us to end up where 
we are today in the budget.
  Over half of the problem we are facing is what I have been 
discussing, the weak economy and changes in the estimates of what 
revenue will be coming into the Federal Government through our current 
tax and revenue structure. As I indicated, a portion is attributable to 
tax relief, although this is static scoring, and if one looks at what 
tax relief does to the economy, I suspect that number will go down 
dramatically. Static scoring shows nothing but 100 percent loss of 
revenue for any tax dollar relief.
  But we know when there is tax relief, that causes an impact in the 
economy. That dollar is not spent by the Federal Government but spent 
somewhere else, and if the relief is effectively projected, it could be 
significant. So this number could be reduced significantly. But even if 
we use static scoring and say a tax cut reduces revenue, dollar for 
dollar for the Federal Government, only 19 percent of what we look at 
now is attributable to the tax relief we passed a few years ago in the 
Senate and the House. That is another 6 percent for tax relief not 
attributable to the vote a few years ago and the increased spending.
  Take just the increased spending that has been caused in Congress by 
September 11, the war on terrorism, the need to beef up our national 
security, the increases in health care costs, and a number of other 
cost drivers we have in our budget. Take the increased spending and the 
collapse of the economy. It represents 75 percent of why we are where 
we are.
  I suspect during the week we will hear how President Bush's economic 
plan caused us to be where we are. Here are the facts. There will be a 
lot of projections and a lot of charts, but nothing can change the 
reality of what happened on September 11, what our response to it has 
been, and what happened in the economy following that. That, in a 
nutshell, is what caused us to end up where we are.

  With that explanation of what happened, we get to a situation where 
this economy has put forward a budget. I will be rough in my numbers 
because I don't have the charts in front of me. If we do nothing, if 
this committee simply says we will keep Federal spending at its current 
levels--we will not drive it up or down, we will not reduce taxes or 
increase taxes, we will take current law as it now sits--someone could 
give me a more accurate number, but it is in the neighborhood of $150 
to $200 billion of deficit, if we do nothing.
  The question is, Should we do something? Should we cut spending in an 
effort to keep the difference down? Should we raise taxes? I don't 
believe there is anyone who is suggesting raising taxes right now is a 
good idea. But there are those who are suggesting because of this, 
because the economy is no longer contributing what it was contributing 
before, and because if we learned any lesson in the last few years, it 
is that the way to get out of these economic difficulties in the 
Federal budget is to have a strong, flexible, dynamic, vibrant, 
resilient economy--if we want to do something to make this gray part of 
the chart get stronger and become better in terms of generating revenue 
for the Federal Government, then we should have some kind of a stimulus 
package.
  So the debate comes around: Should we cut spending? Should we freeze 
spending? Should we keep spending controlled? Should we reduce taxes? 
Should we have a stimulus package? And if so, what, and how?
  Looking at the spending side of this equation, the spending drivers 
in this budget are the beef-up in our national security. In fact, these 
numbers do not even include the possibility of a war with Iraq. I will 
talk about that in a moment. The increase in our national security 
spending, the increase in the costs of fighting the war on terrorism, 
the increases in homeland security, and the increases in health care--
and there are a few others--are the main drivers of the increases in 
costs in this budget. I don't believe there are very many in the 
Senate, or in America, who would say right now is the time to cut 
defense spending or right now is the time to cut homeland security 
spending. We can hold the line, and we are going to do that, and this 
budget does put significant pressure on holding those lines, but there 
is not a lot of room in the circumstances we see right now to reduce 
those spending areas, although we will work our hardest to do so. I 
believe we will do so in a bipartisan fashion to get to the right 
numbers on the budget.
  To make a quick aside, I have fought for a balanced budget amendment 
for years. I still believe we should have one. As I and others have 
fought for a balanced budget amendment, one of the examples for 
exceptions we have always acknowledged is we could see a situation 
where we would need to tolerate deficits for a period of time if we 
were facing war or a national emergency declared by the President. 
Today I believe those circumstances face us. I believe we are at war 
today with terrorists. I believe it is very possible we will be at war 
with Iraq soon. And I believe we face a national emergency in terms of 
our homeland security needs. Those are the unfortunate realities that 
cause us to have very little flexibility on the spending side of this 
budget, although again I say we are going to do everything we can to 
bring it under control on the spending side.
  The question is, What do we do then, after we have done everything we 
can on the spending side? By the way, contrary to some of the arguments 
heard today, the budget proposed works its way back to a balance. It 
takes 10 years to do so. I am very disheartened by the fact, with the 
spending pressures we see and with the revenue drop-off we have seen, 
that our projections are going to take us 10 years to get back into 
balance. The fact is, this budget balances over the 10-year period.
  What do we do when we look at this revenue side? The question is, Do 
we do nothing? There are those who have advocated today that we should 
not have any tax relief. One argument is, have no tax relief until we 
know what the cost of the war is. Another argument is, have no tax 
relief because we should not have tax relief when we face this kind of 
spending pressure in the budget. And when we face these kinds of 
problems we have talked about that legitimately cause us to have to 
increase expenditures in major categories, we should not be looking at 
tax relief.
  There is another side of the argument, and that side of the argument 
is, unless we do something to give a basic boost, a shot in the arm, a 
revitalization to our economy, we will see the grow-back of this 
weakened economy be much slower. It gets back to that argument about 
dynamic scoring, of what a tax cut really will do. That is one of the 
reasons President Bush has proposed--and this Budget Committee has 
proposed to the Congress--that we have tax relief.

  As our chairman of the Budget Committee has indicated, this Budget 
Committee does not write the tax bill. We simply tell the rest of the 
Congress, and in this case the Finance Committee, how much money we are 
willing to budget for them to utilize in establishing a tax cut. Then 
the Finance Committee can come together and, in

[[Page S3790]]

its best wisdom, craft the most effective tax cut designed, in their 
opinion, to do the best for our economy.
  That having been said, there are proposals out there. The President 
made his proposal. This budget accommodates the President's proposal. 
The President's proposal is to do basically three things.
  It is to take the tax cut that we passed in the year 2000 and make it 
permanent. Most people in the country never quite understood why it was 
that Congress would pass a tax cut and make it only last for 10 years, 
phase it in over 10 years, and then have it expire basically as soon as 
it is phased in. It has to do with some interesting procedural 
requirements on the floor of the Senate which I will not get into now, 
but the fact is the tax cut which was implemented a few years ago will 
expire in 10 years, and the first part of the President's plan is to 
make it permanent.
  The second part is to say we should not phase it in over 10 years. We 
should accelerate it and implement it all now.
  The third part has a number of pieces, but the core of it is 
elimination of double taxation on dividends.
  Let's put up the next chart.
  There is a big attack on this. Frankly, in all these areas the attack 
starts out--you will hear this said dozens of times in the next few 
days--it is a tax cut for the wealthiest of Americans.
  I have been in Congress now 10 years. I served 6 years in the House, 
4 years in the Senate. I am in my fifth year in the Senate. Over that 
10 years, in virtually every year I and others like me who want to see 
taxes cut and reduced, when we have fought for tax relief, every single 
solitary time that we proposed a tax cut of any kind or nature, it has 
been attacked as a tax cut for the wealthy. Every time. Even when all 
we did was propose the marriage tax penalty elimination, it was 
attacked as a tax cut for the wealthy.
  The common rhetoric of those who do not support reducing the Federal 
tax burden begins with ``a tax cut for wealthy Americans,'' because the 
attack is that any tax cut is going to benefit the wealthy. If you look 
at the numbers, as to who pays taxes in America, it is primarily those 
in the upper income brackets who pay by far the largest percentages of 
the taxes. So if you look at actual dollars, you can make that 
argument.
  But if you look at what is being done in the tax relief proposed by 
the President on a proportional basis, on a percentage basis, the 
biggest amount of tax relief is going to those in the lower income 
brackets.
  As this chart shows, those earning from zero to $30,000 will have 
their taxes reduced by 17 percent. Those earning from $30,000 to 
$40,000 will have their taxes reduced by 20 percent. In the $40,000 to 
$50,000 category, the reduction is 14.5 percent.
  You can see as you go up in income categories, until you get past the 
$75,000 to $100,000 figure, the higher percentage reductions are all 
occurring in the lower brackets. The higher income brackets have the 
lowest percentage of income reduction.

  Again, one could take the actual dollars, but because very few 
numbers of Americans fit in these categories proportionately, but they 
make the higher levels of income, a smaller reduction in their taxes is 
going to give them a higher dollar benefit and people can use dollar 
numbers to show that. But the reality is that the higher percentage of 
relief is going to those in the lower income categories. It is pretty 
much impossible to have a tax cut, unless it is just a tax cut for the 
lower brackets, that doesn't have some relief across the board, and 
then allow those to make that argument about the tax cut for the 
wealthy.
  In my opinion, it is class warfare. It is attempting to say those at 
the upper ends of the income brackets in America should have no tax 
relief and all tax relief should be favored toward this end, toward the 
lower income brackets. What happens if you follow that logic is that 
eventually no tax cut is ever acceptable because the tax down in these 
categories gets to the point where, no matter what you do with it, 
unless you eliminate it, it doesn't generate the revenue reductions or 
doesn't generate the stimulus to the economy that is necessary to get 
the impact that is desired. That is where we are today. That is why we 
are seeing these arguments.
  I think it is very unfortunate that every time we try to cut taxes in 
this Congress the first response is that whatever the tax is that is 
proposed to be reduced, it is a tax cut for the most wealthy Americans.
  Let's go back to the chart I just took down. With regard to the 
proposal that we eliminate double taxation of dividends, Charles 
Schwab, the founder and chairman of Charles Schwab Company, indicated 
in a Washington Post commentary on March 11 of this year:

       I can't think of any other tax policy that would, at one 
     stroke, be more beneficial to ordinary investors.

  I suspect somebody could say only rich people invest, and therefore 
this is a tax cut for the wealthy. But I do not think that argument is 
going to be made too strongly on the floor this week because most 
Americans are now involved in the markets in one way or another, even 
if it is only through their retirement plans. But most Americans know 
it is critical to see things like the New York Stock Exchange and the 
NASDAQ and others get a boost.
  Charles Schwab goes on to say:

       The impact [of dividend relief] would be enormous.

  I believe in that same commentary he indicated his personal belief to 
be he would expect to see the stock market rise 10 or 15 percent with a 
renewed bolt of confidence throughout the entire economy just by doing 
what the President has proposed with regard to the double taxation of 
dividends.
  We have another financial expert in the country who has weighed in on 
this issue, Alan Greenspan, on February 12, before the House Financial 
Services Committee:

       In my judgment, the elimination of the double taxation of 
     dividends will be helpful to everybody.

  I think he was responding directly to this notion that it only helps 
a certain class in society. He was responding to this class warfare 
argument that continues to be brought up as we try to address tax 
policy. He said:

       There is no question that this particular program will be, 
     net, a benefit to virtually everyone over the long run, and 
     that's one of the reasons I strongly support it.

  The reason it is strongly supported by these experts is because 
today, as has been indicated by others who have spoken on the floor, 
there is very little incentive in a corporation to generate dividends. 
That is because, if those dividends are paid out, they are taxed twice. 
As the chairman of the committee indicated, the net tax burden is about 
70 percent. Whereas, if the corporation instead incurs debt, and 
further leverages itself, then it gets a deduction for that debt or it 
gets a deduction for a portion of the debt costs. So it can actually 
get a tax benefit for going further into debt, and it pays a tax 
penalty if it sends out dividends to its shareholders.
  What we have seen is corporations increasingly following this path 
because of the pressure that is put on them by our Tax Code, putting 
themselves further and further into leveraged positions which I believe 
is one of the reasons we saw what happened to Enron. That is why Enron 
had to go through these incredibly complicated sets of transactions to 
try to mask the amount of debt it was really carrying. It is the same 
with many other corporations.

  If we want to encourage corporate America, which generates strength 
and jobs for this country and the families which depend on those jobs, 
if we want to generate pressure in the business community for the kinds 
of proper decisionmaking that will give us stable, strong businesses 
that will generate strong and lasting jobs, then we need to address the 
policies by which we tax them. We need to encourage policies that will 
support dividend payment rather than debt. That is one of the reasons 
why you see so many experts saying it is critical for us to move into 
this new kind of tax policy.
  The question is--given it is good policy--can we do it now with this 
very dire budget situation we face? That is a tough question. It is a 
tough question for me to answer because in the short term it will cause 
our deficits to go up, although the amount of that is in discussion and 
in dispute because some will use static scoring, and some will use 
dynamic scoring, and we really don't know the dynamics of it.
  There will probably be charts here today that show all these 
projections

[[Page S3791]]

have the potential to be widely inaccurate; and we all agree with that. 
But the fact is, we do know there is a dynamic that occurs when we 
change our tax policy, and the experts are telling us that dynamic will 
be beneficial to making our economy more flexible and more resilient.
  So the question is, Do we take this stand now? Do we do what is 
necessary to give a boost to the economy, realizing it may take a 
period of years for the real strength of it to build us back to where 
we have made our posture stronger, do we sit tight and do nothing now 
and hope the economy grows out of it on its own or, as some will 
probably suggest, do we spend ourselves into prosperity? Does the 
Federal Government take the position that we need to have a lot of 
spending, a lot of stimulus in the economy, and we should just not 
concern ourselves with the deficit but spend ourselves back into a 
strong position economically?
  As you might guess, I strongly reject that ``spend ourselves back 
into prosperity'' argument. It will probably never be said that way 
today or throughout this week. But I encourage people who follow this 
debate to note, when amendments are proposed, do those amendments drive 
up the deficit or do they not? Do those amendments drive up Federal 
spending or do they not?
  Let's go back to that first chart with the lines, because as we 
debate amendments on this budget, the amendments will generally have 
one of two or three impacts. They will either be deficit-neutral, which 
means they could increase spending by increasing taxes or they could 
reduce taxes, which is reduce this line, or they could increase 
spending, which is this line.
  I think it is very important for people to pay attention to the 
amendments that are offered because this whole week I hope we do not 
get any amendments on the floor that would drive the deficit up with 
more spending. I would hope we would recognize the deficit increases 
that are caused by the tax reductions can be addressed with an 
understanding of the dynamic impact they will have over time.
  Just a couple of other arguments I want to address.
  It has been said the proposals of this budget spend the Social 
Security trust fund. I understand what is being said there. Let me 
clarify what the situation is because I do not believe Americans should 
go away from this debate believing that somehow the Social Security 
trust fund is being robbed. The fact is, regardless of whether the tax 
cut is eliminated from this budget or whether it is put into this 
budget, the Social Security trust fund, at the end of the 10-year 
cycle, will be about $4.1 trillion. It will be the same trust fund no 
matter what happens. Because what occurs is that, in the Social 
Security trust fund, the excess that comes in from payroll taxes that 
is not spent out into the Social Security system is a part of that 
surplus. That surplus is turned into Federal debt instruments.

  Then, what are those Federal debt instruments used for? Spending, or 
for tax relief, or for whatever is a matter for Congress to address. 
But the fact is, those Federal debt instruments are there, and they are 
still there to protect Social Security.
  My last point. Some have said we should not do anything because we 
are possibly going to be going to war. Again, the argument there seems 
to be that tax relief is not wholesome for the economy; therefore, we 
should not be doing anything to destabilize the economy.
  I believe what I have said indicates where I come down on that point, 
that the fact is we must do something to stimulate and strengthen this 
economy. The medicine we need is in the President's proposal and is 
made possible by the projections of this budget.
  Although we will face some very expensive and very difficult budget 
decisions, if the United States goes to war in Iraq, that simply 
increases the need for us to do our best to make this economy strong 
and to do what we can, through our tax policy decisions, to put us in 
the best posture to have a flexible, resilient economy in these 
difficult world circumstances. So for all these reasons, I encourage 
this Senate to support this budget.
  I yield the floor.
  The PRESIDING OFFICER. The Democratic leader.
  Mr. DASCHLE. Mr. President, I wish to speak as in morning business 
and I will use my leader time to do so.

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