Congressional Record, Volume 149 Issue 70 (Monday, May 12, 2003)

[Congressional Record Volume 149, Number 70 (Monday, May 12, 2003)]
[Senate]
[Pages S6014-S6022]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

JOBS AND ECONOMIC GROWTH RECONCILIATION

Mr. KYL. Mr. President, this will be the beginning of the debate on
the legislation the Senate will be considering this week on an economic
growth and jobs package. The legislation that came out of the Senate
Finance Committee will be debated, as will other proposals and
amendments. That will all be laid down a little bit later, but actually
we will begin the conversation right now.
I will begin by noting something rather political, and that is that
over the weekend talk shows I noticed a lot of pundits talking about
what was good for the economy and what was good for the President. It
got me thinking a little bit about the difference between some of our
colleagues on the Democratic side and most of us on the Republican side
who support the President's proposals for economic growth and job
creation.
The point is this: Those pundits were saying if the economy is in
pretty good shape next year, the President should have a pretty good
chance of being reelected, but if the economy is not good, then it will
be more difficult for the President to be reelected. That is not
exactly rocket science, but it makes the point that many of us on this
side have been making: The President would not propose a package for
economic growth and job creation he did not think was not going to
work. The whole point of his package is to help get the economy
growing, to create jobs so people will be in the mood to reelect him
President.
Obviously he wants to do good for the country, for the people of this
country, for the senior citizens, for the economy at large, for
American families. If he can get reelected, that would be a good thing.
My point is that the President is not proposing something he thinks is
going to be bad for the economy, because that would be the worst
possible thing for him to do in terms of his reelection possibilities.
So it stands to reason that he really believes what he is proposing
will work, and so do I. So do the majority of us. We would not be
proposing this if it was not obvious to us that the best way to get the
economy moving again, the best way for economic growth and job
creation, is to reduce taxes in those areas of the economy which would
provide the best economic growth with that tax relief.
We know, for example, that one of the best ways to get reinvestment
is for people to have more of their money to invest, obviously. The
best way for them to have more money is not to pay so much to Uncle Sam
in taxes. That is what tax relief is all about.
Two years ago, we passed the tax relief President Bush suggested, but
we phased it in over time. What the President is now proposing is,
let's accelerate those tax reductions, those marginal rate income tax
reductions, so they take effect immediately. If, as the President said,
it is a good idea to do it in 2 years, it is an even better idea to do
it now when we need that money in our pockets to invest so our
businesses can create jobs and help with economic growth.

The first point of the President's plan is to take those tax breaks
on the income tax marginal rates for each of the brackets we were
reducing, and reduce them this year rather than waiting 2 years from
now. It makes great economic sense. It will help families, it will help
small businesses, and it will enable those businesses to take that
money that is being saved and invest it in new jobs and in new
business.
The second feature of the President's plan is to eliminate something
very unfair in the current Tax Code. As a matter of fact, the United
States is second only to Japan in having the worst possible tax policy
on corporate dividends. Only one country in the world taxes dividends
more than the United States: Japan. Every other country in the world
that has developed economies has a much lower tax rate on dividends. So
we have put ourselves at a competitive disadvantage with all of these
other countries in the world. The reason we have such a disadvantage is
because we do not just have one tax on corporate dividends; we repeat
the tax. We tax the corporation the first time around when the income
is earned, and as soon as they pay the dividends out to the
shareholders, we tax it again. So it is a double taxation. No wonder
our rate is so high. It is 70 percent.
As I said, only one country in the world, Japan, which is having huge
economic difficulties at the current time, has a worse tax rate on
dividends than we do. So the President logically says, let's get rid of
that double taxation. The way he chose to do it was to repeal the tax
on the dividends that are earned by American citizens, investors. The
corporation still pays the tax, but it is not taxed the second time
around.
There are many advantages to doing it that way: First, it really
helps the senior citizens in this country who derive a lot of their
income from this dividend income. Secondly, it really helps to spur
economic growth because not only will the dividends then be used for
reinvestment into business, but it also helps the stock market
generally by infusing capital back into the stock market. The
economists we have talked to all make the point that it is not just the
corporations that choose to issue dividends that will benefit from
this, and their taxpayers, but it is all of the stocks because of the
general increase in the value of equities. I think we have seen that in
the way the market has responded to the President's proposal.
A third side benefit of this elimination of the double tax of
dividends is the impact it will have on corporate governance. We all
know the problem that was revealed over the course of the last couple
of years about certain corporations, not corporations that were paying
dividends but corporations that were putting money into the hands of
their executives, in some cases in a very bad way. Fortunately, the
President cracked down hard on them, as did the Congress, with the
Sarbanes-Oxley legislation. The idea is to create transparency, to let
the stockholders know what is going on in corporations, and to give
them an incentive not to create more debt but to finance their
expansion through equity; that is to say, through offering stock to the
public, which the public then buys, the money then enabling the
corporation to invest in expansion of the business, hiring more people,
for example, rather than going to the bank to borrow the money to do
that.
Today, our Tax Code gives the incentive to go borrow because
corporations get to deduct the interest on the money they borrow. That
is the way corporations treat that when they pay the income tax. We
need to give them at least an equal incentive and perhaps a greater
incentive to finance their corporate expansion not through borrowing
but, rather, through the issuance of stock, which then Americans can
acquire.
What is one way to do that? By ensuring that if they pay dividends on
that stock, the purchasers of the stock are not going to have to pay a
tax on the dividends they receive. It is a way of providing an
incentive for the corporations to finance their expansion that way.
For all of these reasons, the economists we have talked to are pretty
clear that eliminating the double taxation on dividends would provide a
real spurt in investment in business, would enable the businesses to
expand, would create something like 500,000 jobs this year, 1.4 million
jobs next year. That is real job creation.

[[Page S6015]]

There are those on the other side who say that is impossible. There
are not going to be that many jobs created. The economy is not going to
get better with the President's proposal.
I go back to my first point. The President has a very personal reason
in mind, as well as the good of the country, when he talks about a
program that will really improve the economy. He wants to be reelected.
He would not be doing this if he thought it would be bad for the
economy.
There is a misperception by some that this recession we are in right
now is a recession that should be dealt with not by allowing businesses
to have more money to reinvest to create jobs; that is to say, it is
not a capital deficit problem but, rather, it is a matter of consumer
spending. If only we would give more money to people, they would spend
it and that would make everything better, create more demand for
products, they would buy more, and so on. That just does not happen to
be true.
Here are the statistics. Consumer spending has been going up. It went
up 3.1 percent in the year 2002, 2.5 percent the year before that;
disposable personal income has increased, up 4.3 percent last year.
The problem is not disposable personal income; it is not consumer
spending that has been going on. We know from personal experience,
people have been able to refinance their homes, they have been able to
buy cars at zero percent interest. There are a lot of factors we are
personally aware of that confirm it is not a matter of consumer
spending but, rather, a capital asset problem. Businesses cannot get
the money to expand.
What happened? We all know what happened in the stock market in the
last several years. According to some people, $10 trillion in value in
stocks has essentially disappeared, evaporated. The stocks were way up
here, and now they are down here. What is the difference? It is $10
trillion in value, in assets, in money that corporations do not have
anymore. They do not have that value, and therefore they cannot go to
the bank and borrow. They cannot sell their stock for a good price;
people are not buying. And the question is how do you get more capital
assets into the business sector, which is the sector which provides the
jobs. Whether it be small business or big business, it is the same; it
is a capital asset deficit, not a consumer spending problem.
I will emulate my good friend from North Dakota, the master of
charts. He has a chart for everything. I will produce a big chart, but
I will now show the small version that will make the point. The upper
line is the line increasing, and that is consumer spending. It shows
that from 1999, the first year up to the current time, consumer
spending has continued to increase. It went up 3.1 percent last year.
We do not have a demand problem, a consumer spending problem in this
country; we have a capital asset problem.
Here is what has happened with capital assets. Here is the big stock
boom. With everyone investing in the stock markets, the corporations
had a lot of value. And here is what happened to the stock. We all know
what happened. A lot of that value was taken out as the market plunged.
That is what this line shows. It hit the bottom and is just barely
beginning to move up.
This is what we have to make up. This is the area we need to improve.
It is the area of providing more capital to our businesses so they can
expand and create more jobs. Again, how do you do that? They basically
have two ways. They can try to borrow the money--not good policy, but
besides that, they do not have the leverage to do that these days
because the Federal institutions are looking at them and asking: How
exactly are you going to repay us? How will you do something good with
this money? We are not convinced yet that the value is there that they
want to lend the money at a reasonable rate. Or they can go to the
public and say: Here is some more stock; would you please buy it.
In the past, the public said: We are not sure we want to invest
anymore in the stock market because you are not doing that well. So
along comes the President's plan. He says: We will accelerate
depreciation for small business, we will end the double taxation of
dividends, and we will accelerate the marginal income tax relief we
passed 2 years ago.
Just like that, we have created an opportunity for people to take the
money they have saved, put it into the stock market, put it into
businesses, or put it into small businesses that are not publicly
traded and create those jobs. That is the genius of the President's
program. It is nothing new. The same concept has been used before in
tax relief that has been provided to investors who turn around and
reinvest that in the businesses that create the jobs.
The problem is this recession is not like the old recessions, and
that is why I understand those who are stuck in the last century in
looking at this as a consumer or demand recession. This is the first
21st century recession, the first high-tech recession, and it is the
first capital asset deficit recession. It is not a consumer recession.
That is why it does not do any good, as the Democrat leader's plan
essentially does, to just drop money out of an airplane and say: Here
is money, consumers; go ahead and spend it on something. That is not
the problem. That is not going to help. What we need is for those
businesses to acquire capital so they can expand, create jobs, and
therefore the economy can grow and we can all benefit.
There are those who want to demagog the issue, and I would never
accuse colleagues on the other side of the aisle of this, but I have
seen folks on TV say that is giving money to the rich, to the elite.
First of all, over half of the American people today are investors.
Senior citizens, in particular, are very large investors, and a
significant amount of the tax relief the President is proposing would
go to our seniors. As a matter of fact, under the President's jobs and
economic growth plan, 13 million elderly taxpayers would receive an
annual tax cut of $1,384 this year. One of every two senior filers
receives dividend income, and as a group seniors receive half of all
the taxable dividends paid to shareholders. So elimination of the
double taxation of dividends provides average relief of $991 for the
more than 9 million seniors who include dividend income on their tax
return in the year 2003. That is a real benefit to the seniors in our
society. It is a real benefit to the American taxpayer at large.
I will have more to say on this subject later. I appreciate my
colleague from Wyoming allowing me to open this debate, and I look
forward to hearing from my colleagues on the subject.
The ACTING PRESIDENT pro tempore. Under the previous order, the
Senator from Montana is recognized.
Mr. BAUCUS. Mr. President, although we are in morning business, I
begin by thanking the chairman of the Finance Committee, Senator
Grassley, for the way he has approached putting this bill together. He
has been a very fair, very honest, and very decent man, a man who keeps
his word. Regrettably, he is not in the Chamber at this moment, but he
will be spending a lot of time in the Chamber this week. I want the
Senate to know how much this Senator regards the chairman of the
Finance Committee. He has done a masterful job. He has a very difficult
job. Believe me, I know; I have been in that position. He has always
conducted the committee's business and the Senate's duties very
appropriately, fairly, with courtesy and civility. I deeply appreciate
that, and I know I speak for the rest of the members of our committee
and the Senate Finance Committee as well as Members of this body.
The Finance Committee of the Senate works best when we work together.
We then get a better product with broader support from both sides. The
Finance Committee has a long and deserved reputation for working
together cooperatively.
It is with great sadness I note today the passing of the former
chairman of the committee, Russell Long, just a couple days ago. He was
well known for not only his willingness but his desire to work hard
with both sides of the aisle.
I served with Senator Long a good number of years ago, and I think he
set the model. On occasion, the committee has deviated slightly, and
every time it has, I think it has been a mistake. The tradition of
bipartisanship has served the committee very well.
I know that is Chairman Grassley's inclination as well. I also know
that

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circumstances have not allowed him to carry out this role on this bill
as much as he would like. It appears some in the committee have made
nonnegotiable demands for what they say ``must'' be in this bill.
Rather than pass a bill that would include all the terms with which we
can agree, or at least most of us, some insist that the bill must, for
example, include tax cuts for dividends. That is an insistence that
some members of the committee are making and do not want to negotiate.
Some insist this bill must include an acceleration of the tax rates for
the 1 percent of American elite with income greater than $311,000. That
is something they insist on or there is no bill; that is, rather than
pass a bill with overwhelming support and seek a bipartisan vote.
The Senate often works because of willingness to compromise. Senators
give up what they consider perfect in order to get in the end what will
be good. I know Chairman Grassley works to get things done in that way,
and so does this Senator. Without compromise, we will get less
done. Without compromise, the result will command less popular support.
It will be more tenuous, more fragile, and without compromise the
Senate will be a much more partisan place, a place that is not much fun
in which to work.

But this is only Monday. It is early in the debate and there is still
time, even at this late date. I believe it is not too late for us in
the Senate to work in the Senate's best traditions; that is, work
together.
Let me take a few moments now to discuss why we are here today. I
will also discuss the President's proposal and the congressional
reactions to it.
Why are we here today? In the first instance, we are here because the
budget resolution directs us. The budget resolution expressing the will
of the Congress tells us that this month we shall consider a
reconciliation bill, so we are carrying out our duty under the budget
process. We are also here because the times demand it. The times demand
action.
On a Montana ranch, when the grass has burned dry and there is just
dust in the air, the rancher has to take steps to feed and protect his
herd. And when drought hits and times are tough, no Montana rancher
would fail to dig down deep, even deeper, rather than fail to find a
way to make things work to get his place back on solid ground.
On a larger scale, we are here today because the American economy
demands it. There is a drought in the American economy, just as there
has been in many parts of America, a very severe drought facing
agriculture.
The week before last, the Government reported that the unemployment
rate surged to 6 percent. Since January 2001, just 2 years ago, the
private sector has lost, not gained--I might put that in the context of
the 2001 tax cut--the private sector has lost more than 2.1 million
jobs. The economy has lost more than half a million jobs in the last 3
months alone. We now have the fewest number of jobs in 41 months. Since
January 2 years ago, the economy has grown by an anemic average of 1.5
percent, far below the post-World War II average.
Business owners tell me they are not investing, despite what the
Senator from Arizona just said on the floor, because of so much
uncertainty and too much overcapacity. Consumer confidence has dropped.
Simply put, there is a lot of uncertainty out there.
The reason the investment curve has declined is very simply because
the bubble burst. That bill that was run up in the 1990s, whether in
the high-tech sector or the telecommunications sector--generally that
bubble burst. The price-to-earnings ratio was way too high. Everyone
knew it but said maybe they would get on the gravy train, knowing it
would not last forever, but trying to stay on as long as it would last.
Sure enough, the bubble did burst--no more gravy train. The economy
didn't collapse, but we fell into recession.
As a consequence, there is amazing business overcapacity. Businesses
are not investing now because they have overcapacity. They cannot fully
use the capacity they now have because people are not buying as much as
they once did. That is why investment is down.
The chart the Senator from Arizona pointed out to us a few minutes
ago may be interesting. It has two lines on it, but his explanation for
the lines is totally inaccurate. It is totally fallacious. There are
other reasons to explain why the investment curve is down, and I just
explained the main reason it is down.

There is a lot of uncertainty in the economy. There is a lot of
uncertainty because there are fewer jobs and the unemployment is so
high and there is also an increased need for unemployment benefits.
We have to increase investor confidence. They tell me, as I am sure
they are telling you--businessmen are telling me, as I am sure they are
telling you, over and over again, they are unwilling to invest now.
They don't want to take that step to invest. They are afraid. They are
a little nervous. Why? Because there is no pricing power. They cannot
get people out to buy more of their products. The economy is stalled
out. There is no great demand.
Consumer confidence has fallen off, too, actually. But the main
reason for businesses not investing is people won't buy their products.
They are waiting for citizens to buy more of their products. That is
what is happening today. At least that is what all businessmen are
telling me. I talk to Republicans and Democrats, Independents and
liberals; I don't care who they are. I ask them, What is going on? What
do we need to do?
I always get the same answer when I talk to people where the rubber
meets the road; that is, business people, not theoretical economists. I
don't mean to disparage the economists, but we all know economic
prognoses and economic predictions are all over the lot because people
are people. What really counts is those financial statements and those
buy orders. Business people face the payrolls and the cost structures
that business people face. That is what really counts.
Business people are telling me they are not investing partly because
they have overcapacity already and can't use what they have; second,
because there is just no great demand.
I also say that after looking at the economy today it is important
for us to look at specific goals we think any tax bill, any economic
growth bill should contain. One major point about any growth package is
that it should take effect as soon as possible. That is what we are
talking about here. We are talking about an economy that is stalled
out, so any tax bill that is presented before us should take effect as
soon as possible. It is an obvious point but one I make because the
legislation before us fails totally on that point. It does not take
effect soon at all.
We should also look at our long-term fiscal situation; that is, our
debt. We should not add needless debts, additional burdens on our
children and our grandchildren. We must avoid action today which may
have the effect of raising interest rates, particularly mortgage
interest rates, not far down the road.
I remind my colleagues that this is only May 2003. Things can change.
Things can happen very quickly. Where are we going to be a year from
now? Where are we going to be 2 years from now? What actions are we
taking today that will have an effect on long-term interest rates? We
are lucky that inflation is low, but I can remember when inflation was
high and interest rates were very high and that day, unfortunately,
will happen again. We don't know when, but we should not take actions
to exacerbate that or make it more likely that interest rates will rise
more quickly.
We should also address a third goal; that is, we should spread the
benefit of the tax reduction among all taxpayers. We are all Americans.
We all should benefit, not just the special elite.

Let me turn now to the President's proposal. The President proposes a
budget, but under the Constitution Congress legislates. We do not
merely rubberstamp the President's budget. We have a job to do. After
all, we are supposedly elected to exercise our own independent judgment
as Senators.
Many of the President's proposals command broad support. I support a
good number of them. They may not be the most efficient stimulative
proposals possible, but they should increase some consumer demand, and
I, for one, think that is good. Specifically I support--and I believe
Senators broadly do--helping families meet

[[Page S6017]]

their costs by increasing the child credit to $1,000 right now. I also
support speeding up relief for the marriage penalty.
Let's eliminate that marriage penalty. I also support expanding the
10-percent bracket immediately, to give immediate relief to most
taxpayers. They will spend those dollars. They will spend them right
away to help rebuild our economy.
Also, I support ensuring we do not worsen the difficulties created by
the alternative minimum tax. I am pleased the committee-reported bill
includes something on each of these items.
But Congress has a role to temper and improve the President's
proposals. From my perspective, several areas are key.
First, the amount of the tax cut package is critical. The absence of
fiscal responsibility over the long term affects interest rates now and
in the future. We have a duty to be responsible. We must not worsen
interest rates and dampen economic growth by passing an irresponsibly
large package.
In January, 2 years ago, the Congressional Budget Office projected
surpluses of $5.6 trillion for the next decade. That is an important
figure to remember. Surpluses were projected 2 years ago of $5.6
trillion for the decade. Today, CBO projects the President's budget
will result in deficits--not surpluses but deficits--of $2.1 trillion
for the same period. That is a swing of almost $8 trillion in just 2
years, and recent projections make those projections look overly
optimistic.
I might note other bills we are going to have to pay, whether it is
Medicare, prescription drug benefits, more AMT--which we all know we
will have to pay for relief for the alternative minimum tax--Iraq.
Things are not going well in Iraq. That is going to cost money. Who
knows what other events are going to occur around the world?
Think a little bit about the burgeoning health care costs which
people are facing around this country and how much that is translating
into Medicare costs and Medicaid costs, and with the baby boomers
starting to retire in just a few years from now.
I believe we would be irresponsible by adding significantly to our
deficit.
Our national balance of payments bill, which is how much more we owe
other countries compared to what they owe us, is getting larger and
larger on an absolute relative scale each year. Someday we are going to
have to pay that bill. We all know we are going to have to pay that
bill. The question is, When? What day? I would rather not hasten the
day of paying that bill, and that bill will not be hastened the more
fiscally responsible we are.
The dollar is declining against the euro. The dollar is not tanking.
But why is it steadily declining against the euro? Could it be that the
investors around the world are beginning to question America's long-
term economic policies? I think that is a small part of it. I can't
describe all of it. I don't know. But I raise those concerns.
Clearly, our fiscal circumstances are much less favorable than when
we considered the 2001 tax bill. We are in a different situation today,
much different from that of 2001.
Today, we must keep the size of the tax bill within narrower limits.
Today, we must be more concerned about contributing to higher interest
rates. In that regard, I am pleased that the committee-reported bill
keeps within the $350-billion limit over the coming decade that was
agreed to during consideration of the budget resolution.
Second, the President's proposal on dividends is troubling for many
of us. It must either be eliminated or even more dramatically scaled
down. Yes, the tax treatment of dividends might be a worthy subject--as
part of a budget-neutral corporate tax reform debate. But the
President's dividend proposal--at roughly $400 billion--is simply too
fiscally irresponsible, too complicated, and affects too few taxpayers
to be appropriately included in this stimulus package. It borders on
irresponsibility.
Only 3 out of 10 tax filers report dividend income on their tax
returns. They are the only ones who would benefit from the dividend
proposal. In other words, seven out of 10 Montanans would see no tax
benefit at all from a dividend tax cut as a consequence. The provisions
in this bill should benefit taxpayers more broadly across the income
spectrum. That way, they can most effectively get money to taxpayers
who would spend it and spur the economy.
The committee changed the President's dividend proposal.
Unfortunately, the committee-reported bill also contains an ill-
conceived dividend proposal. The bill would exclude from income all
dividend income up to $500. It then includes a 10-percent exclusion for
dividend income above $500 from 2004 to 2007. And the exclusion
increases to 20 percent for 2008 through 2012.
On one hand, the dividend exclusion provides simplification. A capped
exclusion of $500 would make it no longer necessary for half of
taxpayers with dividend income to report their dividends on their tax
returns.
But this benefit is overshadowed by the worst part of the proposal--
the 10-percent and 20-percent exclusion for dividends above $500. This
provides a very large tax cut to the elite.
Take the example of a taxpayer who has $1 million in dividend income.
Under the committee-reported bill, that fortunate taxpayer gets to
exclude a little more than $100,000 of dividend income--$100,450, to be
exact. Applying tax rates to this excluded income, this taxpayer would
get a tax cut of about $35,000 a year from the dividend tax cut alone.
A third problem with the President's proposal is the acceleration of
the rate cuts for that 1 percent of American elite with income greater
than $311,000. This proposal alone costs some $35 billion.
In better times, I would support a package that included benefits for
those making over $311,000. But these are not better times. In better
times, I would support a package that included benefits for those who
make over $311,000. But with the budget in the shape it is in, now is
not the time to accelerate this rate reduction. This provision is just
too costly and too narrow to effectively spur demand and rebuild the
economy.
Fourth, more needs to be done to infuse funds to cash-strapped States
and localities. The economic downturn has cut State and local revenues
dramatically. But State constitutions--as opposed to the U.S.
Constitution--require States to balance their budgets.
So State and local governments are forced to make widespread, often
painful spending cuts in education, in health, and in other vital
programs.
More than half the states are still struggling to balance their
budgets this fiscal year. And almost all of them are struggling to
balance their budgets for the fiscal year that begins in July.
These State spending cuts, layoffs, and tax increases, I believe,
will offset the gains from tax breaks in this bill. And the economic
gains to tax breaks for the elite are overstated or theoretical.
Last year, the State of Montana cut benefits for severely mentally
ill youth, just in order to make ends meet. The State also made across-
the-board cuts in Medicaid provider payments and increased cost
sharing--both of which now threaten access to care for low-income
Montanans.
If those cuts were not drastic enough, this year, the State
legislature just cut more than a quarter of a million dollars from
Meals on Wheels for seniors. That will mean about 67,000 meals lost
over the next 2 years. And budget constraints have also forced my State
to put 700 working families on a waiting list for child care.
Translating Montana's small population to a national level, those
cuts are the equivalent of more than 2 million lost meals nationwide.
It's the equivalent of a 22,000-family waiting list for child care.
We can pass all the Federal tax cuts we want. But what good will they
do if we force States and localities to raise taxes, cut jobs, and
reduce benefits.?
We can avoid these economically-damaging State and local actions by
assisting these governments with their budgets through temporarily
raising the Federal Medicaid match and through other, more broad-based
methods.
I am pleased that the committee-reported bill includes something in
State aid. Unfortunately, the committee-reported bill includes $20
billion--only a little more than 5 percent of its total--for this
purpose. I would have preferred a package that included $40 billion in
State aid; the need is that great.

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Fifth, making tax cuts refundable will help spur economic growth.
Very simply, it works. They will quickly get funds to people who are
likely to spend them rapidly, spur demand, and rebuild the economy.
The President's proposal accelerated the $1,000 child credit. I
supported the increase in the child credit when it was passed in 2001,
and I support the acceleration.
But the President's proposal did not accelerate the refundability of
the credit. Fortunately, during consideration of the bill, the Finance
Committee adopted Senator Lincoln's amendment to accelerate the
refundability of the child credit. The Lincoln amendment will allow
many low-income families to take full advantage of the increase in the
credit.
Under current law, the credit is partially refundable. Families can
take the credit if they pay payroll taxes, but do not have income tax
liability. The amount that low-income families can get refunded is set
to increase in 2005. Thanks to the Lincoln amendment, this improvement
will be accelerated to 2003 along with the increase in the credit. More
hard-working low-income families will be able to get up to $1,000 per
child in this credit in 2003, thanks to the Lincoln amendment.
Sixth, we should increase the bonus depreciation deduction for the
year that a business purchases new equipment. In 2001, we saw a sharp
drop in direct investment by businesses. The next year, we changed the
law to give a larger first-year deduction. The drop; in direct
investment leveled, and even increased slightly. We need to provide
more in the depreciation deduction for 2003 to encourage even more
business investment.
And seventh, we need to extend unemployment benefits and help those
who have exhausted their benefits. The government has reported that
nearly 2 million people have been without work for 27 weeks or longer.
The average time people have been unemployed is almost 20 weeks--the
longest since 1984.
The weak economy has hit everyone. Unfortunately, some more than
others. As we rebuild the economy, we should not leave these unemployed
workers and their families behind.
Any bill to help rebuild the economy must help those most affected by
the bad economy. As well, putting funds in these hands will be an
effective stimulus. The recipients of unemployment benefits and their
families are likely to spend every dollar they get quickly. This spurs
demand which, in turn, helps rebuild the economy.
We cannot glibly assume that all actions we could take here would be
equally stimulative. Not all tax cuts are created equal. Not all
spending is equally stimulative, either.
A lot depends on when the provision takes effect. A provision that
takes effect in 2006 will likely provide less stimulus than one that
gets money into the system this year or next.
Much also depends on who receives the benefit. A provision that gets
money into the hands of working and lower-income families--people who
spend more of what they have, and spend it quickly--will be more
stimulative than a provision that transfers money to elites who would
save more of it.
Comparing various options for stimulus, a study by Economy.com
concluded that extension of the Temporary Emergency Unemployment
Compensation program would provide the most effective stimulus of the
options they studied. They concluded that ever dollar in these
unemployment benefits generated an estimated $1.73 in demand in the
year ahead.
In contrast, they estimated that cutting dividend rates and
accelerating 2006 rate cuts both would generate less than a dollar's
worth of demand in the year ahead for each dollar spent. So, in terms
of stimulus, some policy options are better than others, and
unemployment insurance would be among the best.
Finally, the Finance Committee improved the President's proposal by
adopting a series of small but important provisions that will make
people's lives better.
For example, the committee adopted an amendment that Senators Hatch
and Lincoln and I offered to significantly simplify tax return filing
for millions of taxpayers. This provision reconciles the five varying
child definitions into a single definition for a ``qualifying child.''
It is time for us to stop talking about simplification. It is time for
us to do something about simplification. This amendment will at least
make it so that we have just one definition of who is a child for
purposes of claiming a tax benefit.
Another useful improvement that the committee made to the President's
proposal was in repealing the special occupational tax relating to
alcoholic beverages. This provision will give much-needed relief and
fairness to hundreds of thousands of small businesses.
Because this tax is levied on a per-location basis, a sole
proprietorship must pay the same amount as one of the Nation's largest
retailers. Locally owned chains pay as much as, if not more than, the
Nation's largest single-site brewery. That is not fair, and this change
will help.
I make all of these points with the recognition that our differences
are not as large as what we have in common. We agree broadly that we
need to help create jobs and get the economy moving. We in the Senate
should take the steps needed to address these goals.
The economic times that face us call us to govern. We should avoid
political point scoring. We must pass legislation to improve the lives
of the people we represent.
Each of us was sent here by the people of our States. They sent us
here not to make speeches, not to win debates; they sent us here to
make life better. In these difficult times, they sent us here to help
create jobs, to rebuild the economy. We have a duty to respond to the
times, not the politics. We have a duty to do the people's work.
I thank the Chair.
The PRESIDING OFFICER (Mr. Roberts). The Senator from Wyoming.
Mr. THOMAS. Mr. President, I am glad we have begun this debate to do
something that is necessary to help solve a problem we have in this
country. Clearly, there will be differences in our views as to how we
do this, and I guess that is no surprise. I think most all of us agree
something has to be done to help our economy. We do not agree on what
is the best way to do that, of course. There are pretty general
differences in how it ought to be resolved.
My friends on the other side of the aisle are more interested in
sending out money on a short-term basis, sending checks to a bunch of
people for 1 year; whereas we on this side are trying to find ways to
create jobs, ways to change the economy so there is a future of
prosperity rather than some kind of a Band-Aid that will surely wear
out at the end of a year. So it is difficult, of course, and I
understand that. But I do believe there is a clear difference between
having a plan that will do something over time or simply doing
something that will have an impact next week but will not continue.
For example, if you are going to do something for businesses, they
have to have some confidence that what they are doing is going to last
for a while. People do not change the way they manage their business
because there is going to be a 1-year kind of a change. I think that is
so true. So you have to do something that is a little more permanent
than that.
I think we have to have a commitment to see to it that what we do,
and what our vision is, really changes the economy--not having a Band-
Aid, not having a patch, but doing something that will cause the
economy, then, to have a good future for all the families in this
country.

One of the differences, of course, is that our view is we need
investments to create jobs, not to have a little more spending for a
short period of time that will not be enough to stimulate the idea of
reinvesting, but to stimulate the economy thus creating jobs.
Of course, by reducing taxes you put money in people's hands over a
period of time. Most people have a view as to how they plan to operate
economically in the future. One little burst of money does not make
much of a difference in what a person does in their economic plan. We
need to have something that is dependable for the future. We need
something that is stimulative to both the consumer sector and the
business sector. In relation to the President's proposal, I think
particularly in the media, benefits from dividends have been largely
dwelt upon, which is valid, but there is a very large other sector.

[[Page S6019]]

The Senator from Montana talked about that. We have a consumer base and
a business base, and we need to have both of them.
This bill will have an impact. As a matter of fact, in the first 18
months, $144 billion is put into the economy. That is a short period of
time. That is a lot of dough in a short while. So that is an example of
the kinds of things that are in the bill. I think we need to really
make sure that we talk about the different items in the bill when we
talk about it.
Of course, all of us must recognize we are in an unusual situation.
People go back to the late 1990s and compare that period of time to
present day. In the late 1990s, we had not had a turndown in the
economy. In the late 1990s and the early 2000s, we had not had
September 11, we had not had homeland defense, we had not had Iraq, we
had not had an economy that was going down for several years. Today we
have a different kind of situation.
So it is sort of interesting to me. I suppose I have tried as hard as
anyone to be a budget balancer in this place, but I recognize you
cannot talk about the same things under different circumstances. You
can talk about balanced budgets all you want--and it is something I
surely agree with--but when you are in a pit in terms of the economy,
you have to do something so the economy will grow and replace that
deficit. That is the whole purpose of what we are talking about.
We face, of course, an economic slowdown that began before the year
2000. The events of September 11 changed our world, stopped any
recovery. The uncertainty of where we have been over the last several
years has slowed down investment. There is no question about that. Now
we are a little closer to the end of that, hopefully. The war and
ongoing terrorism have created a challenge.
We have to create an environment that spurs both short- and long-term
growth. The idea that we ought to do something for just a year to help
the economy has been tried. It did not work. If you are a
businessperson, if you are planning for your family, if you are doing
anything long term, you have to know what you are doing is not going to
expire in the next 9 months. So I think that is an important idea for
us to build on.
Of course, tax reductions will very quickly put money in people's
pockets--and a very broad part of the economy, as a matter of fact.
That will help create the confidence necessary to do some of what this
economy needs.
I disagree with those who maintain that the answer to strengthening
our economy is to go on another Federal Government spending binge. I
believe we are already spending too much. I am interested in reducing
taxes and changing some of the ways we do business.
But we are talking now about a bill that moves us in the right
direction, one that has innovation and inspiration for investment,
wanting to do something that gives incentives to do that.
I was just in Wyoming over this past weekend talking to the Governor
about the economy and the vision we want for our State and our country
and our families over time, we need to really kind of know where we are
going so we can measure what we do against what we do in the interim to
see if we are going to get there. The governor said something about: I
am more interested in figuring out what to do, getting on with it.

Getting on with it doesn't work unless you know where you want to go.
That needs to be part of the case here.
Today we are considering a tax relief bill that will point the
economy in the right direction. It is a good package. It puts money in
the pockets of hard-working Americans, spurs investment, builds
confidence in the economy, creates employment opportunities throughout
America. Employment opportunities are the key.
Some of the provisions include accelerating the reduction in
individual tax rates for everyone. As to this idea that it is just for
the wealthy, of course, someone who pays a great deal in taxes gets
more dollars out of it, but as a percentage, it is to help everyone. It
increases small business expensing limits. One of the real things we
can do is cause these small businesses to invest. It creates increased
relief for individuals on the minimum tax. We have these tax deductions
all along the line. And then we say, yes, but you can't use them
because we have a minimum tax. I agree with the Senator, we need to do
some tax changes just in the structure. Increase the child tax credit.
We talk about dividends.
There are other things that are there: provide marriage penalty
relief and, of course, the dividends. The dividends are not so much
entirely just what people get out in dividends, but what it does to the
corporate sector in how they function, how they operate, how they will
be expanding, how they will create employment. These go beyond simply
the distribution at the moment.
I am particularly pleased with the provisions that benefit small
businesses; namely, of course, the acceleration of the individual tax
rates. It increases small business expensing limits. Four out of five
businesses have fewer than 20 employees. Generally we are talking about
small business. Small firms are responsible for 55 percent of the new
innovations and changes. From 1994 to 1998, nearly 11 million net jobs
were added to the economy. Businesses that employed fewer than 20
workers created 80 percent of those jobs over that period of time.
It is a share of the private and nonfarm gross productive produced by
small businesses which sustains stability over time. It is
approximately 50 percent of the GDP. We need to take a long look at
that.
One of the things I think is important that we ought to talk about is
the taxpayers in the highest income brackets are often entrepreneurs
and small business owners, not just high-paid executives or people
living off investment. Small business owners typically report their
profits in their individual income tax returns. So that individual
income tax is effectively the small business tax. When we talk about
people who are earning more money getting some reduction, often those
are small businesses that will put that money back in terms of
investments.
Small businesses frequently pay the highest marginal rate. Taxpayers
in the highest rate currently face a marginal rate of 38.6 percent.
Although they file less than 1 percent of all tax returns, these
taxpayers account for 16 percent of reported income, more than 31
percent of individual income tax payments.

Small business owners receive almost 80 percent of the tax relief
from the top marginal tax rates of 35 percent. What we are seeking to
do is to generate those jobs in the small businesses. Particularly, I
suppose, in States such as Montana and Wyoming where almost all of our
businesses are small, that is a crucial part of the economy. More than
98 percent of all companies have fewer than 100 employees. This is
where we ought to be really focusing.
We talk about the dividend exclusion, of course, the economic impact
of it. Double taxation of corporate earnings can eat up 60 percent of
the profits, and the Federal tax is 35 percent at the corporate level,
and another 38.6 percent of the remaining 65 percent at the individual
level. There is something wrong with that--if you invest in a company
and that money, before you can get it back, is taxed at that rate. That
doesn't, of course, include any State or local taxes. So the tax burden
on dividends could be higher than 60 percent.
This bill is a downpayment on ending double taxation. It is less than
the President asked for. It is really less than the House has in
theirs. But it is something that has a real impact on the future of
jobs in this country.
We have a real challenge before us. I know we will be involved in
many different views and all kinds of debate and discussion. There will
be a great deal of interest in sending money back to the States. There
is quite a bit of evidence that in most States over the last few years
spending has gone up tremendously, taxing has gone down. So there are
going to have to be some changes there. In our bill we put $20 billion,
most of it to be designed for Medicaid. I hope, again, that we don't,
in this effort to do something to help, increase the long-term
arrangement as to who is going to pay for these various programs. I
happen to be one who thinks government closer to the people is the best
way to go and that we ought to

[[Page S6020]]

give the States more and more opportunity to do their own thing by
reducing our taxes. And if they need more taxes, that is where it ought
to be, so that it can conform to the needs of a particular State.
We are going to be involved. As I understand the rule, there is a 20-
hour limit on the debate on this reconciliation bill. That is good. We
will need to address ourselves to a good many amendments. We talked
about a good many of them in our committee before we got here. They
deserve consideration. We should do that. All I ask is that we keep in
mind we really ought to have a goal. That is to strengthen the economy
in a way that extends over time; that we create opportunities rather
than payouts; that we have an opportunity to have a stronger economy
for a period of time. And that is really what it is all about.
I yield the floor.
The PRESIDING OFFICER. The acting Presiding Officer is pleased to
recognize the distinguished chart king from North Dakota.
Mr. CONRAD. I thank the Chair. I won't disappoint.
I would like to respond to some of the arguments my colleague from
Arizona made in his remarks because he referenced a number of matters
which are mistaken. First, the Senator from Arizona said the current
weakness in the economy is not a result of weak consumer demand. He
then referred to numbers last year where for a couple of quarters
consumer demand was good.
Weak consumer demand is right at the heart of the weakness of this
economy. Consumer demand in the first quarter of this year went up at
1.4 percent. That is tepid. That is weak. That is right at the heart of
the weakness of the economy. In the last quarter of last year, consumer
demand went up 1.7 percent. That is right at the heart of why this
economy is weak. People have lost confidence, and they have lost jobs,
and they are not buying. That is why companies aren't investing.
Have we missed what has occurred? Our colleague said it is a capital
problem, a lack of capital. That would suggest we have a lack of
capacity in our manufacturing. That is not what we are seeing. The
capacity of America is operating at 74.8 percent. That means 25 percent
of the manufacturing capacity is idle. Why is it idle? Is it because of
a lack of investment? Absolutely not. It is idle because there is a
lack of demand. People are not buying. If we want to give a lift to the
economy, we ought to strengthen consumer demand so they will buy from
our businesses, so our businesses will have a reason to invest.
We know we have overcapacity in telecommunications, in computer
chips, and in area after area. The reason we have a tremendous bubble
in markets is because overcapacity developed.
That takes us to the plan before us. I believe the plan the President
has put before us is ineffective with respect to dealing with the
weakness in our economy. I believe it is fiscally irresponsible, and I
believe it should be defeated. I believe the President's plan will
actually weaken the economy further because it is going to explode the
deficits and debt we see in this economy.
Finally, the proposal is unfair because it is heavily weighted to the
wealthiest among us. One of the assertions made by my colleague from
Arizona was that our corporate taxes are very high in this country.
They are not. On this chart is a comparison of taxes made by the
Organization for Economic Cooperation and Development, which is the
international scorekeeper. This looks to the most recent year for which
they have full figures. For corporate income taxes as a percentage of
gross domestic product, the average is right here, about 3\1/4\
percent. The United States is way down here on the chart. The
suggestion that we have the second highest taxes on corporations next
to Japan is just not so. It is just not so.
The reason they come to the conclusion they do is they take our
nominal tax rates--the tax rates that are in the law books--and forget
to look at what actually happens when you start paying taxes: the
deductions, the writeoffs, the ability to reduce your tax burden from
what is in the law. Certainly, we all know what the tax rates are in
the law. But that isn't what the corporations pay. In fact,
corporations pay substantially less than that because of deductions,
exclusions, and writeoffs. So the reality is that we are a relatively
low cost tax jurisdiction when you compare us with other countries in
the world.
When we look at the question of stimulating the economy, I think this
comparison is important. On this chart is Senator Daschle's plan. Here
is the first-year cost and the 10-year cost, compared to what is before
us in the Senate--called the Senate Finance Committee plan--and this is
the House plan. You can see that in terms of stimulus, in terms of
giving lift to the economy now, Senator Daschle's plan is far better,
far stronger than the other competing plans. He has $125 billion of
stimulus to the economy this year. The bill before us has $44 billion.
The bill from the House has $48 billion in the first year. So they have
very little lift to the economy in their plans.
Let's think about it logically. We have a $10.5 trillion economy, and
they are proposing giving a $45 billion, or $46 billion, or $48 billion
lift--in a $10 trillion economy. Most economists say you have to at
least have 1 percent of gross domestic product to 1.5 percent to have
any significant effect. They are far short of that--less than one-half
of 1 percent. They are not going to give any meaningful lift to the
economy. Senator Daschle's plan is about 1\1/4\ percent of the gross
domestic product. But, in addition to that, his cost over 10 years is
much less. Their cost over 10 years is much more.
Why is that important? Because we know we are already in record
deficit and we know that if we follow the President's plan, the
deficits are going to explode, leaving us in a totally unsustainable
situation.
Now, some have gone out and analyzed the effect on jobs of these
various plans. Here is what they have found. Comparing the Democratic
plan to the President's plan, they found that our plan gives about
twice as much lift to the economy in the first year as does the
President's plan. In the second year, it is about twice as much lift to
the economy. But we do not have the negative long-term effect that the
President's plan has.
Some people may look at this and say, What negative effect could the
President's plan have long term? Well, economists have studied his
plan--including 10 Nobel laureates in economics--and they have said the
President's plan is not an economic plan, not a job growth plan; it
will hurt long-term economic growth; it will diminish job creation in
the country because it is all financed with borrowed money. The
deadweight of those deficits and debt is going to hurt our long-term
economic condition.
You know, it is interesting, the people hired by the White House to
make these determinations came to that same conclusion. This is a group
called Macroeconomic Advisers, hired by the White House to do
macroeconomic analyses--our own budget office--and here is what they
told us: The President's policy will give a short-term boost before
2004, and then it is worse than doing nothing.
After 2004, look at what happens to economic growth under the
President's plan, according to Macroeconomic Advisers. It gives a
short-term boost right before the 2004 election, and then look at what
happens to economic growth. It plunges, and you are better off for the
long term having done nothing.
How can that be? Here is what Macroeconomic Advisers--I didn't hire
them, the White House did; the Congressional Budget Office hired them.
Here is what they said, talking about the President's plan:

Initially the plan would stimulate aggregate demand by
raising disposable income, boosting equity values, and
reducing the cost of capital.

These are arguments our friends on the other side of the aisle have
made.

However, the tax cut also reduces national saving directly
while offering little new, permanent incentive for either
private saving or labor supply. Therefore, unless it is paid
for with a reduction in Federal outlays, the plan will raise
equilibrium real interest rates, crowd out private sector
investment, and eventually undermine potential gross domestic
product.

That is not a plan that is an economic growth plan. It is a plan that
will undermine long-term economic growth. It is not just economy.com
and 10 Nobel laureates in economics, and it

[[Page S6021]]

is not just Macroeconomic Advisers. Here is a group of 250 of the
leading CEOs in America's Committee on Economic Development. They say
the current budget projections seriously understate the problem of the
growing deficits. They say 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. Deficits do matter. The
aging of our population compounds the problem. I think they got it
exactly right and the President has it exactly wrong.
This is the chart that tells us what is happening to our budget
deficits. This chart shows us that the deficits are skyrocketing. In
fact, they will be between $500 billion and $600 billion this year. We
have never had a budget deficit of more than $290 billion in our
country's history, and we are heading for a deficit, on an operating
basis, of over $550 billion. That is on an operating basis.
To be fair, on an operating basis, I think the previous record
deficit was $350 billion or $360 billion. So this is by far the biggest
deficit, on an operating basis, we have ever had. It doesn't end
anytime soon. The whole rest of this decade, we are running operating
deficits, each and every year, of over $300 billion.
Let's review the background of how we got here. You will recall that
2 years ago we were told by the administration we could expect almost
$6 trillion in surpluses--$5.6 trillion in surpluses, we were told,
over the next 10 years. Now we see, according to the CBO, if we adopt
the President's tax policy and his spending policy, instead of
surpluses, we will have $2 trillion in deficits. That is fiscally
irresponsible.
I am not talking about the short term. The Senator from Wyoming said
you sometimes have to run a deficit to give lift to the economy. I
agree with that. But we are talking about never getting out of deficit,
according to the President's plan.
Take his own budget documents--and I will show them in a moment--
according to the President's analysis of his own plan, you never escape
from deficits, and they absolutely explode as the cost of the tax cuts
increase at the very time the cost of the Government increases with the
retirement of the baby boom generation.
Where did all that money go? Where did it go? Nearly an $8 trillion
turn in 2 years--a turn for the worse. Where did it all go? The biggest
chunk went to the tax cuts, those already passed and those proposed.
That is 36 percent of the disappearance of the surplus.
The second biggest reason is additional spending in response to the
attack on this country and the war. That is 28 percent of the
disappearance of the surplus--increased spending for defense, increased
spending for homeland security. Oh, no, this is not a matter of the
Democrats were spending money. We all supported increasing defense
spending and increasing homeland security.
The third biggest reason for the disappearance of the surplus, 27
percent of the reason is lower revenues, not as a result of tax cuts,
but revenues lower than anticipated because the models predicting how
much revenue we would get have simply been wrong. This is lower
revenue, not as a result of tax cuts. Lower revenue is the third
biggest part of the reason for the disappearance of the surplus. Those
two together are 63 percent.
Only 9 percent of the disappearance of the surplus over the next 10
years is because of the economic downturn.
Now we have record budget deficits. The surpluses are all gone, and
we are talking about massive deficits. What our friends on the other
side of the aisle recommend is more tax cuts, massive tax cuts; not
just tax cuts this year or next to give lift to the economy at a time
of weakness, but tax cuts that go on in perpetuity.
They are not the tax cuts that have been advertised on television.
They say there is a debate between $350 billion in the Senate and $550
billion in the House. That is not what the budget provides. The budget
that our Republican friends passed provides for $1.3 trillion of
additional tax cuts; $350 billion reconciled in the Senate bill, and
another $200 billion allowed in the conference report. Then there is
the part the media never talks about, another $725 billion of tax cuts
that are the so-called unreconciled tax cuts, which simply means they
are not given special protection on the floor from the normal operating
procedures in the Senate.
Here we are with record deficits, and our friends propose another
$1.3 trillion. Look, some of us are supporting tax cuts as well. I
support additional tax cuts this year and next to give lift to the
economy now, but I do not support running massive deficits that are
only made deeper and more serious by tax cuts that have effect 5 years
from now, 8 years from now, 10 years from now, and 15 years from now.
It does not make any sense.
When I say we are faced with $2 trillion of deficits in the next 10
years according to the Congressional Budget Office, others say the
deficits are going to be much more serious than that. Goldman-Sachs, a
very distinguished private investment firm, has done an analysis. It
says: No, the deficits are not going to be $2 trillion over the next 10
years; they are going to be $4 trillion. In fact, they are going to be
$4.2 trillion when they do their estimates of where things are headed.

To buttress their idea, if we just look at the first 7 months of this
year and the revenue that is coming in, what we see is it is $100
billion below the forecast. The forecast that was made just 7 months
ago is proving to be all wrong. The revenue is running $100 billion
below the forecast.
If that trend continues this year, we are going to have the lowest
revenue to the Federal Government since 1959. When revenue was at a
high percentage of the gross domestic product, the President said: You
have to cut taxes; you are getting too much revenue; people are being
overtaxed. So we did cut taxes. We cut them dramatically in 2001. Now
we are headed for a circumstance in which the revenues are going to be
the least since 1959, and the President's answer is cut taxes some
more.
Again, I would support tax cuts and additional spending to give
stimulus to the economy now. And yes, spending stimulates just like tax
cuts do. In fact, they are probably a little better because at least
some part of tax cuts get saved and do not get into the economy and do
not stimulate the economy.
I would support a balanced package. I would certainly support
additional tax cuts now to give lift to the economy now. Remember, very
little of the President's proposal is effective now. Very little of the
proposal before us is effective now. About 5 percent of the President's
plan is effective this year. Ninety-five percent is off in the future.
It makes no earthly sense. He is giving tax cuts when he is forecasting
the economy to be strong. He is giving tax cuts when he is forecasting
massive deficits. He is giving tax cuts right on the eve of the
retirement of the baby boom generation when the cost of the Federal
Government is going to explode.
Two years ago, the President told us: Adopt my plan and we will pay
off virtually all the debt. That turned out to be wrong, too. This
year, we have had $6.7 trillion of gross Federal debt. Now the
Congressional Budget Office tells us if we adopt the President's plan,
10 years from now we will have $12 trillion of debt. The debt is going
to almost double and at the worst possible time because the baby boom
generation is going to start to retire.
I think the juxtaposition of all this is really odd. Maybe that is
the best word to put to it. The President is asking for a massive tax
cut when we already have record budget deficits, and at the very time
our Republican colleagues are asking for the biggest increase in our
debt in the history of the country. They are asking for a $984 billion
increase in the debt. The largest increase we have ever had was in the
President's father's administration when the debt was increased at one
fell swoop by $915 billion.
The President today said to the American people: This money is not
the Government's money, it is your money, and you ought to get it back.
I agree with the President absolutely. The money that comes to the
Federal Government is the people's money. He is absolutely right. But
this debt is the people's debt. Social Security is the people's Social
Security. Medicare is the people's Medicare.
Make no mistake about it, we the people are on the hook for this
debt.

[[Page S6022]]

When the President says, when we are already running record deficits,
cut the revenue some more and increase spending--remember, the
President's budget plan was not cut taxes and cut spending. The
President's budget plan was to increase spending and to cut taxes, even
when we have record deficits. The result is a massive explosion of
debt, and it is the people's debt, make no mistake about that. In the
future, when they come around to start to retire this debt, it is all
of us who are going to be on the hook.
Maybe it is not going to be us. Maybe it is going to be our kids.
Maybe that is the idea. Let us give ourselves big tax cuts. I would be
a big beneficiary of those tax cuts.
I would get thousands of dollars of tax relief under this plan. I do
not think it is right to give me a big tax cut now and shuffle it off
to my kids and everybody else's kids. That is what is happening. That
is, again, not my estimate of what is happening. This is from the
President's own budget document. This is his long-term outlook of what
happens if we adopt his plan. This is on page 43 of his analytical
perspectives, and it shows the deficits now which, remember, these are
record deficits. They look small on this chart because that is in
comparison to what is to come. This is in percentage of GDP terms. This
is not in dollar terms. So this is an apples-to-apples comparison.
Look what is going to happen if we adopt the President's spending and
tax cut plan. The deficits explode, according to his own analysis of
his own plan. It is not surprising why that is the case. This is the
chart that tells it all. The blue bars are the Medicare trust fund. The
green bars are the Social Security trust fund. The red bars are the tax
cuts. What it shows is right now the trust funds are running big
surpluses in anticipation of the retirement of the baby boom
generation. But instead of using that money to pay down debt or prepay
the liability, we are taking it and using it to pay for tax cuts.
What happens when those trust funds go cash negative when the baby
boomers retire? Under the President's plan, at the very time the trust
funds go cash negative, the cost of the tax cuts explode. Does this
make sense? Is this really an economic growth plan? We are not talking
about tax cuts now to give a lift to the economy when it is weak. We
are talking about tax cuts that explode 10 and 15 years from now at the
very time the expenses of the Federal Government explode because of the
retirement of the baby boom generation.
Some are saying, well, deficits really do not matter. We do not need
to worry about deficits anymore. The Chairman of the Federal Reserve
Board thinks deficits matter. This is what he said to 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.

He is exactly right. Deficits do matter. They always have. When
Chairman Greenspan looks at this tax cut, here is what he says: Without
spending reductions, they could be damaging to the economy.
With a large deficit, Mr. Greenspan said, you will be significantly
undercutting the benefits that would be achieved from the tax cuts.
Not only is this time--
The PRESIDING OFFICER. The time of the distinguished Senator has
expired.
Mr. CONRAD. I ask unanimous consent for 1 additional minute.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. One additional minute on the other side.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. Mr. President, I conclude by saying not only is this plan
ineffective in terms of giving lift to the economy and irresponsible in
terms of the exploding deficits and debt, but it is also unfair. It is
unfair because it overwhelmingly gives the greatest benefit to the
wealthiest among us.

The effect of this plan on people earning over $1 million in 2003 is
this: They will get a $64,000 tax cut on average. That is for those
earning incomes of over $1 million. Those who are in the middle of the
wage distribution in our country will get a tax cut of $233.
We heard earlier that this thing has tremendous benefits to the
elderly. Well, it certainly does. It has tremendous benefits to those
who are wealthy who are elderly. Elderly earning more than $500,000 a
year would get a $24,000 tax break.
The PRESIDING OFFICER. The additional minute requested by the Senator
has expired.
Mr. CONRAD. I ask unanimous consent for an additional 30 seconds.
Mr. REID. The same on the other side, Mr. President.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. I conclude by saying that if one is elderly and earns
less than $50,000 a year, they will get a $90 tax reduction. If they
are elderly and earn more than $500,000, they get a $24,000 tax
reduction. That is not my idea of fair. That is not my idea of being
effective for economic growth, and it is ultimately self-defeating
because the plan is all financed by borrowed money.
The PRESIDING OFFICER. The additional 30 seconds requested by the
distinguished Senator has expired.
Mr. REID. Parliamentary inquiry.
The PRESIDING OFFICER. The Senator will state his parliamentary
inquiry.
Mr. REID. When and if we complete the morning business--which I
understand there is a minute and a half remaining; is that right?
The PRESIDING OFFICER. That is correct.
Mr. REID. What would be the order before the Senate at that time?
The PRESIDING OFFICER. There is 11 minutes remaining. I am in error.
Mr. REID. What would be the order following the majority using its 11
minutes?
The PRESIDING OFFICER. The Senate has an order to proceed to S. 2.

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