[Congressional Record Volume 149, Number 83 (Monday, June 9, 2003)]
[House]
[Pages H5069-H5075]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[Congressional Record: June 9, 2003 (House)]
[Page H5069-H5075]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
[DOCID:cr09jn03-82]                         

 
[Congressional Record: June 9, 2003 (House)]
[Page H5069-H5075]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
[DOCID:cr09jn03-82]                         


[Congressional Record: June 9, 2003 (House)]
[Page H5069-H5075]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
[DOCID:cr09jn03-82]                         




                    AMERICAN ECONOMY NOT RECOVERING

  The SPEAKER pro tempore (Mr. Feeney). Under the Speaker's announced 
policy of January 7, 2003, the gentleman from South Carolina (Mr. 
Spratt) is recognized for 60 minutes as the designee of the minority 
leader.
  Mr. SPRATT. Mr. Speaker, on Friday of last week there was more bad 
news about the economy. The unemployment rate hit 6.1 percent, the 
highest rate in more than a dozen years. Since this recession started 
in March of 2001, we have lost 3.1 million jobs in the private sector. 
That is a loss of 2.8 percent of all the jobs in the private sector; 
and in percentage terms that makes this one of the worst recessions in 
the postwar period. That is one of the problems we have got; 6.1 
percent does not sound alarmingly bad compared to prior recessions, but 
it does not begin to tell the story of what is happening in this 
economy.
  First of all, this unemployment rate, 6.1 percent, does not indicate 
the persistence of this recession. Unemployment is not only up at 6.1 
percent, but it has been stuck in this range for more than a year.
  As you can see from this particular chart, this graph, this recession 
is not following the pattern of previous recessions. In previous 
recessions, the red curve, the U-shaped curve, plots the path that 
unemployment has taken. It reaches a peak, as it did in March of 2001, 
typically reaches a trough in about 12 to 18 months and then starts 
back up again. It takes awhile for recovery, it takes awhile for 
employment to get back on its feet, but eventually things come back to 
normal.
  There may be a lot of people in this country and in this Congress who 
think, well, this is your regular postwar recession, it is not a 
depression, it will come back. But what we trouble about is it is not 
following the pattern of the postwar recessions of the past, because 
this black line plots the path the economy has taken. It has not headed 
back up.
  Employment has not headed up, even though we have had signs of a 
recovery. It feels like a recovery. This is a jobless recovery. Worse 
still, the job situation is actually getting worse, as this line plots, 
because, if you follow that line, if you can see the bottom index, this 
means that jobs should have recovered 12 to 18 months ago, at the very 
least. We should have seen an up-tick, an upturn in jobs; and it should 
have been at this level by now. Instead, we are still way down here 
below the trough of the recession. So this is not a recession like any 
we have had before, particularly when it comes to jobs. Twenty-five 
percent of all the people who are out of jobs have lost all of their 
unemployment benefits. They are ``exhaustees,'' we call them.
  Second, the unemployment rate we are looking at does not count the 2 
million people who have dropped out of the job market. It may be more 
than that, but at least that number. They have given up the search for 
a job because they flat cannot find one.
  If they were counted in the labor force, the unemployment rate would 
be in the range of 6.6 percent. But even this figure, 6.6 percent, 
would not reveal the number of workers who have lost their jobs and 
found another, typically with lower wages and lower benefits. I see 
that all the time in my district, anecdotally, and I suspect it is 
happening everywhere in America.
  These folks do not show up in the employment statistics because they 
are working, but they are working at much less favorable terms than 
before this recession started. One indication of that is the loss of 
manufacturing jobs, 53,000 in the month of May alone. Every month for 
12 months we have lost at least 50,000 of these jobs, which are the 
best jobs in industrial America. Manufacturing jobs are hemorrhaging 
right now.
  These workers do not show up as unemployed. They are industrious 
workers. They have found a job somewhere else, but not at the same 
terms they once enjoyed. In truth, they are underemployed; but we do 
not have a number to reflect their status.
  Third, this unemployment rate does not say anything about household 
income. But when you consider the fact of unemployment, which is 
prevalent, and underemployment, you have to believe a toll is being 
taken on household income. Rising unemployment has to mean declining 
household income.
  In real terms, in fact, after inflation, the median household in 
America has seen its income fall by 2.2 percent, or $934. This is 
serious in itself for the individual household; but it is serious for 
the economy as a whole, because it means cutbacks in consumption, and 
it is consumer demand that drives two-thirds of the economy when it is 
at full employment. If you have weak household income, declining 
household income, you are not going to have the restoration of demand 
that is necessary to get this economy up and running.
  Fourth is another indicator. Look at real wages of full-time workers 
on a weekly basis. Let us take the median worker, the person who makes 
more than half of the workforce and less than the other half of the 
workforce, the guy who is stuck right in the middle.
  Over the last four quarters, the real wages of median workers has 
fallen every quarter. That is a fact. Now, that may not sound 
catastrophic. The rate of decline was just 1.4 percent, but it is 
catastrophic if it is your pocketbook, your household, your median 
wage. And these widespread weaknesses, moreover, are what are causing 
our economy to lag and drag and remain mired in a jobless recovery. We 
saw evidence of that in the numbers we saw last Friday; more evidence 
of it still, the latest data. We have been seeing this for weeks now, 
for months now.
  Last December, when the Republicans left here and did not extend 
unemployment benefits and gave a very, very backhanded present to those 
who are out of a job over the Christmas holidays, we started looking 
hard at the circumstances and asking what can we do to ameliorate this 
economy.
  On January 6, 6 months ago, we offered a solution. We offered a 
package of short-term stimulus and long-term balance. We proposed to 
give all American workers, working families, a tax rebate, $600 at 
least, based on their 2002 incomes. We proposed to speed up 
depreciation for all businesses, large and small, to encourage them to 
invest. We proposed to give the States $36 billion of fiscal 
assistance, going to Medicaid and highway construction and homeland 
security, all of this to get the economy up on its feet and running.
  But we proposed these remedies for 2003 alone so that the budget 
would recover when the economy recovered. We did not want to be mired 
in debt, long-term debt, because we recognize that long-term deficits 
and deeper national debt would only mean higher interest rates and, 
therefore, less growth and fewer jobs.
  It took our Republican colleagues almost 6 months to do anything. We 
were about to leave here for the Memorial Day holiday when they finally 
acknowledged our prodding and agreed to extend unemployment benefits, 
but not by merely as much as we would have, not for as long and not for 
the same people, particularly those who exhausted their benefits 
already.

                              {time}  2115

  They have now come up with a package, mainly tax cuts, 62 percent of 
which go to the top 5 percent on the income scale; they provided some 
help for the States, and I think that is good, but I think they took 
that page from our book, not as much as we proposed, though. They 
proposed tax rebates, again, not as much as we proposed and not to 
those that we proposed to give the tax rebates to, because we think 
they should go primarily to the unemployed, to working families with 
children who need the money and who also will spend the money. We were 
told today and have been told before by Macroeconomic, by Economy.com, 
that it is their rule of thumb that for every dollar of unemployment 
benefit we extend, we generate about $1.73 in economic activity in the 
economy over the ensuing year.

[[Page H5070]]

  Well, our Republican colleagues claim that the package that they 
proposed and passed now will create 1.4 million jobs over the next 
year. We had an important effort, which the gentleman from Virginia 
(Mr. Scott) saw this morning when Lawrence Michel testified before our 
small ad hoc committee of Senate and House Democrats and pointed out 
that the economy itself, if you believe the Council of Economic 
Advisors and what they are putting on their Web page and what they have 
been projecting and testifying to, the economy itself, if it recovers 
as they project over the next 12 months, will generate over the next 12 
to 18 months 4 million jobs.
  So Michel proposed a yardstick. He proposed we will be able to tell 
whether or not the President has succeeded, the Republicans' package 
has achieved its goal if it creates 5.5 million jobs over the next 16 
months, between now and November of 2004. Mr. Speaker, 1.4 million for 
the package itself, and 4 million for the economic growth that the 
economy is supposed to generate in any event.
  Now, is this fair? Is it fair to hold the administration to this kind 
of test? I say it is fair, because I think what we are going to see as 
a result of this test will be hard to meet, but it is fair in 
comparison to what the first Bush administration achieved and also what 
the Clinton administration achieved. It should be recalled that Mr. 
Clinton took office in a recession, too, and notwithstanding that, in 
the first 4 years of his administration, more than 10 million jobs were 
generated by this economy. Among other things, at that point in time, 
we raised taxes, but we also cut spending and we started working down 
the deficit so that every year for 8 straight years the bottom line of 
the budget got better, the Federal Government literally got out of the 
capital markets and started paying off debt; $400 billion in debt was 
retired, paid off between 1998 and 2000. And, in the year 2000, we were 
in balance without counting Social Security for the first time in 40 
years, the first time since the year 1960.
  So we believe it is fair to hold the Bush administration to this 
account, to release 5.5 million jobs. The President says that he wants 
every American who wants to work to be able to find a job. Well, there 
are 8 million unemployed Americans waiting for that promise to be 
fulfilled, for that goal to be attained. We are saying here, at least 
5.5 million of those jobs ought to be generated if this package comes 
true over the next 16 months.
  But there is another problem that is seldom talked about when the 
effects of this stimulus jobs and growth package, so-called, are 
discussed. And that is that unlike the package we proposed last 
January, what the Republicans have proposed and put in place right now 
will have such a huge tax revenue impact or cost, that going out into 
time, we will accumulate, it is our expectation, as much as $4 trillion 
in additional debt over the next 10 years. And every economic advisor 
who has looked at this projection and found it reasonable has said, if 
that happens, we cannot help but lose jobs and lose economic growth, 
because the additional credit demands of the Federal Government are 
bound to drive up interest rates; and when interest rates go up, the 
growth in the economy will go down, and jobs will go down with it.
  So that is the dilemma we face here. That is the problem we face 
here. The President's package which was proposed and passed just a 
couple of weeks ago bore a price tag of $350 billion. The problem is, 
every tax concession in that package has a sunset date, an expiration 
date, and not a Member of this House, nor a Member of the other body, 
the Senate, believes that those sunset dates will ever stick. We all 
believe that when those dates are reached, sooner or later, they will 
be repealed. The expirations will be relieved, and, therefore, when we 
take out all of the sunset dates in the tax package that passed here as 
a stimulus package, the cost of it in revenues is not $350 billion, it 
is $1 trillion.
  Furthermore, to make permanent the tax cuts that were passed in the 
year 2001 will cost another $600 billion. And, to deal with the 
problems of the alternative minimum tax, the AMT which the Treasury 
tells us will affect more and more taxpayers, rising from affecting 2 
million taxpayers today to 30 million in 10 years, when we take care of 
that, try to limit the number of taxpayers whom we never intended for 
it to apply to, what will happen? It will cost at least $600 billion in 
revenues over the next 10 years.

  So that is the tax cut agenda, and the built-in tax cuts that are 
bound to unfold here, and that is our concern; that even if the package 
the administration offered, given its size, does something for the 
economy, if you raise spending and cut taxes, you are bound to 
stimulate the economy to some extent. Number one, it is questionable 
about how much it will do, since 62 percent of it goes to the top 5 
percent who probably will not change their behavior in response to it; 
but in addition, in the long run, it can have a real downward drag on 
the economy, because it is bound to increase interest rates and bound 
to slow down the growth of this economy, job creation, stifling growth 
and stifling job creation. That is our concern. We are not trying to be 
Cassandras, we are not trying to dump discredit on every proposal that 
comes forward that we do not happen to agree with 100 percent, but we 
have deep and real concerns about the long-term direction of the budget 
that is being given here by Mr. Bush.
  I will wrap up my remarks and yield to my colleagues after noting 
this: The numbers that I have just described, $4 trillion in additional 
deficits and in additional national debt over the next 10 years are not 
fabricated or invented by us on the Democratic side, not by our own 
staff on the House Committee on the Budget. If we look at the budget 
resolution which our Republican colleagues brought to the floor, and 
look on page 93 of it in particular, we will see that on that page they 
summarize on one chart, one table, the effects of their budget and they 
show that gross Federal debt, all the debt of the United States, will 
grow from about $6.5 trillion today to over $12 trillion 10 years from 
now. If we go to CBO's analysis of the President's budget issued in 
March of this year, and look at it, look at the top line on table 1, 
the very top line, it shows that $4.4 trillion in additional deficits 
would be generated if those budget proposals were fully enacted. And, 
in fact, we are on that course right now, and that is our concern 
tonight.
  Mr. Speaker, I yield to the gentleman from Tennessee.
  Mr. COOPER. Mr. Speaker, if the gentleman would take a few questions 
I would certainly appreciate it, because I would like to have a 
dialogue with him on these issues.
  My impression is that most Members of this Congress, most folks back 
home are probably finishing up their supper, tired after the long day 
at work; if they are tuned in to C-SPAN, all of them are wondering 
where is the straight talk about the U.S. economy, where is straight 
talk about their job and their future, or how long will their 
unemployment continue to last. People want real information, real 
facts. So many of the Federal budget numbers are so large that it is 
hard for the average citizen to comprehend. It is hard for the average 
Congressman or woman to understand.
  I know the gentleman from South Carolina has played a long and 
constructive role in budget debates for many years now, helping, for 
example, in the Clinton years to build a surplus.
  If the gentleman would turn to that chart, I think that is a period 
of real pride in American history. I think the gentleman just passed 
the chart right there, where we got out of a sea of red ink and 
actually built up toward a surplus and achieved a surplus in 8 short 
years, the first time that had been done in some 40 years in American 
history. So that was a truly significant accomplishment but, 
unfortunately, it has been largely voided by recent events.
  I know that the gentleman is a positive and constructive force in 
this debate, and we try to seek out positive ways that our country can 
grow and advance. But it is important for us to first realize the 
predicament we are in.
  Is my understanding correct that the job performance that we are 
witnessing right now is the worst in half a century?
  Mr. SPRATT. Mr. Speaker, there have actually been job losses in the 
private sector, gains in the public sector, but the net job loss is 
somewhere

[[Page H5071]]

around 2.2, 2.3 million people. The private sector job loss number is 
3.1 million jobs since the peak of this recession, which was March 
2001, shortly after the President took office.
  Mr. COOPER. So since March 2001, our economy has lost 3.1 million 
jobs.
  Mr. SPRATT. Private sector jobs. Private sector jobs.
  Mr. COOPER. And that is the worst job creation performance of any 
President since 50 years ago and Harry Truman?

  Mr. SPRATT. The Clinton administration, which inherited an economy 
just coming out of a recession and had to deal with the credit crunch 
and other problems that were dragging the economy then, nevertheless 
generated more than 10 million jobs during its first 4 years and more 
than 10 million jobs during its second 4 years. The first Bush 
administration was marred by a recession for the second half of it and 
had a poor performance. The Reagan administration had an adequate 
performance, but it did not come close to the performance of the 
Clinton administration.
  And what happened in the Clinton administration? This chart shows it. 
The gentleman is absolutely right. When he came to office, the deficit 
was at a record high: $290 billion and headed up. The President left 
his economic report on the desk for Mr. Clinton to pick up on January 
20 when he came to office. On page 69 of that report, they showed that 
they expected the deficit to hover in the range of $300 billion or $330 
billion for the next 5 years.
  The gentleman from Tennessee was here, I believe, and the gentleman 
recalls well what happened. The President sent down his budget on 
February 17. We passed it with one vote in the House and the Vice 
President's vote in the Senate, and for every year thereafter, the 
bottom line of the budget got better. It went from 290 to 255 in 1994, 
to 203 in 1995, on down to 164, and finally to the point where, in 
1998, as I said, we had a surplus of $236 billion, more than any 
surplus in the postwar period. Without counting Social Security, it was 
the first time we were in surplus in 40 years. That happened at the 
same time, at the same time, as opposed to hindering growth, we saw the 
economy boom as we had never seen it since the 1960s.
  Mr. COOPER. Mr. Speaker, it is hard to imagine a starker policy 
contrast than the one that you are exhibiting right there to show that 
we were drowning in red ink until 1991, and then we climb up to the 
surface and can breathe again, and now we are drowning one more time in 
another sea of red ink.
  Mr. SPRATT. That is our concern. That is what we are talking about 
tonight, the future as it looms ahead of us. And each time we pass one 
of these mammoth tax bills, we take another step down this road and it 
becomes all the more irreversible for us, and that is our concern.
  Mr. COOPER. The gentleman mentioned a Democratic stimulus package, 
and if he could elaborate on that, because it is my understanding that 
the Bush tax cut plan actually has very little stimulus in the short 
term for our economy, whereas the plan that the gentleman put forward 
actually had much more of a stimulant effect to help our economy today 
get out of the ditch. Could the gentleman elaborate?
  Mr. SPRATT. Mr. Speaker, we said we wanted to go to everybody who 
filed a return in the year 2002 and who earned up to $6,000 in income 
and give them 10 percent of what they had earned, up to a ceiling of 
$600, and send them a check for it right away. That way we would have 
reached 17 million American families who did not get a rebate in the 
year 2002. We would have put money in the pockets of people who were 
most likely to spend it, $60 billion to $70 billion for that purpose 
alone.
  We also said we want to go to the States and help the States because 
what they are doing is contractionary, and if we do not counteract that 
to some extent then they will undercut what we are doing and there will 
not be any effect on our economy. Medicaid, a shared State-Federal 
program, we said we wanted to give the States $15 billion to $20 
billion to help them meet the extraordinary cost of the Medicaid 
program. We also said as to businesses, we wanted to give them an 
incentive to invest; for small businesses, we said $75,000. You buy 
that new equipment or new computer or new desk, you can write it off 
the year you buy it, the year you purchase it.

                              {time}  2130

  And as to large businesses, we said, we will give them a bonus if you 
go invest it in 2003.
  Now, the Republicans have been into bonus depreciation before, but 
they wanted to stretch it over a 3-year period of time. We said to give 
the economy a real jolt, let us say to American industry, do it this 
year when we desperately need it and we will give you a reward, 50 
percent write-off in the year of purchase. That was our package. The 
net cost of it was about $100 billion and $100 to $136 billion. Over 
time, some of that washed out.
  The key thing was after 2003, 2004, there were no net effects on the 
economy. As the economy recovered, ours faded out and faded away and 
did not constitute a long-term drain on revenues.
  Mr. COOPER. Let me make sure I heard this right. In the short run, 
the Democratic bill would have been twice as stimulative as the 
Republican bill, $130 billion versus $60 billion, and in the long run 
we would not have had any of the deficit hangover that the Republican 
bill has?
  Mr. SPRATT. The gentleman is absolutely correct. The Council on 
Economic Advisors put on their Web page their estimate of what the 
President's proposal would do and the methodology they were using. They 
had a model developed by macroeconomic advisers who were retained by 
them to give them macroeconomic econometric advice. They gave the 
methodology of how they estimated their jobs.
  We took the same methodology and applied it to our proposal and we 
got, for a fraction of the impact on revenues, twice the impact on 
jobs. Our program would have created 1\1/2\ million jobs. Theirs would 
create around 600,000 or 700,000.
  Mr. COOPER. Mr. Speaker, the Democratic proposal would have 
stimulated consumer demand with the rebate program and business 
investment with the depreciation incentives.
  Mr. SPRATT. Which is critically important, because this is a demand-
deficient economy which we are living in today. Two-thirds of the 
demand that typically drives the economy at full employment is a 
consumer demand, and that is why we are trying to boost consumer 
demand.
  Let me now yield to my friend, the gentleman from Virginia (Mr. 
Scott), also a member of the Committee on the Budget, who has a whole 
battery of charts he would like to talk about.
  Mr. SCOTT of Virginia. Mr. Speaker, I thank the gentleman for 
yielding to me.
  As we have said, this chart tells the story. When people ask, what is 
the Democratic plan to get us out of the mess, the green is the 
Democratic plan. We ought to remember history on how that green was 
created, because as the gentleman has indicated, not a single 
Republican, 218 to 216 in the House, not a single Republican in the 
House, 50-50 in the Senate, not a single Republican in the Senate voted 
for the plan that started digging us out of this great deficit.
  When the Republicans used those votes that created the green ink, 
they used those against us in the campaign and took over both the House 
and Senate. Now they want to take credit for some of the green. But 
remember, after the 1994 election, 1995, they passed these trillion-
dollar tax cuts and President Clinton vetoed those tax cuts. In fact, 
they threatened to shut down the government, and he vetoed them again. 
In fact they shut down the government, and he vetoed them again.
  We had gotten the budget deficit down from 290 down to less than 10 
before they finally agreed to a budget that the President could sign. 
That is right up in here somewhere. All of this was without any 
Republican votes, so they finally jumped on the bandwagon right at the 
last minute.
  When President Bush came in, the Republican Congress passed the 
trillion-dollar tax cut and President Bush signed those tax cuts. Here 
is what we have as a direct result.
  Now, who got the tax cuts? This is by 20th percentile. The lowest 20 
percentile got that little bit, here is the middle 20 percent, and here 
is the upper 20 percent. Right at about 50 percent is

[[Page H5072]]

what the upper 1 percent of the income got out of that tax cut. So we 
ruin the budget by giving tax cuts to the rich, and we are told that 
would create jobs.
  Here is the job chart that has been referenced. The first chart is 
what was created during the Truman administration. Each administration, 
all the way through. Then they had 2\1/2\ million jobs lost.
  Mr. SPRATT. Mr. Speaker, will the gentleman suspend just a minute? 
That is the chart I was looking for just a minute ago. The gentleman 
had it. I am glad to see it.
  The two tall bars right there beside the bar below the X axis are 
Clinton administration job gains. Is that correct?
  Mr. SCOTT of Virginia. This is the first Clinton administration and 
this is the second Clinton administration.

  Mr. SPRATT. What are the numbers there?
  Mr. SCOTT of Virginia. Over 10 million jobs created each 4-year term.
  Mr. SPRATT. What is the number below the line so far for the Bush----
  Mr. SCOTT of Virginia. Minus 2\1/2\ million so far and dropping. We 
ought not refer to September 11, because this chart going back to the 
Truman administration includes the Korean War, the Vietnam War, the 
beginning and end of both of those wars, the Cold War, hostages in 
Iran, the first Persian Gulf war. All through that period of time, 
coming and going, through everything that has happened in the economy, 
jobs were created. Not after we passed this trillion-dollar tax cut.
  I just want to point out, again, who benefited, because obviously 
people did not get jobs as a result. This is by income. We will see 
$10,000, $10,000 to $20,000, $20,000 to $30,000, and $30,000 to 
$40,000. We begin to see a little benefit here at $75,000 to $100,000, 
but those who are making over $1 million are off the chart.
  Now, we should not be surprised that we did not create jobs. This is 
a study by the Joint Committee on Taxation, with a Republican majority, 
on how many jobs would be created if we passed this plan. We will see 
that there is a short-term spike in jobs, but right after that, at best 
we will end up where we started. Most of the models show we will end up 
with fewer jobs had we done nothing at all.
  Mr. DAVIS of Florida. Mr. Speaker, will the gentleman yield?
  Mr. SPRATT. I yield to the gentleman from Florida.
  Mr. DAVIS of Florida. Mr. Speaker, the proponents of the tax cut have 
justified the remarkable difference in benefits by the job growth that 
is not predicted by the charts the gentleman just showed. So I think it 
is important to go back and talk about the disparity.
  As I understand it, if the gentleman or I were to make $1 million, 
and certainly we, like every American, dream of achieving that level of 
wealth some day, we will receive an average tax cut of about $95,000 
under this tax cut. So if the gentleman makes $1 million, he will get 
about a $95,000 tax cut.
  Most regular Americans are, on the other hand, going to get an 
average of I think about $100 or less on the tax cut. I would ask the 
gentleman, is that correct?
  Mr. SCOTT of Virginia. Mr. Speaker, this chart shows, and we can 
hardly see, compared to what the millionaires get, we can hardly see 
the benefit we get if we are in the $50,000 to $75,000 or less range. 
This chart shows what we would get.
  Mr. DAVIS of Florida. The tax cut that the gentleman from South 
Carolina (Mr. Spratt) referred to, for which there was a bipartisan 
consensus, was a tax cut that evenly spread the benefits out and 
provided a true stimulus. The tax cut that was passed on an extremely 
partisan basis, only 5 percent of it will take effect immediately as a 
stimulus, and the rest results in this exploding difference the 
gentleman is describing.
  Mr. SCOTT of Virginia. The reason we are not creating many jobs is 
that by the time we have run up all the deficit and we are worse off 
than we started, it is because the tax cut was not targeted to those 
who will actually spend it. It was not targeted and the spending was 
not done in such a way that it would actually stimulate the economy. It 
would just help those in the upper-income brackets.
  There were a number of other alternative ways of stimulating the 
economy. The gentleman from South Carolina (Mr. Spratt) indicated if we 
continue the unemployment benefits, those people what are used to a 
paycheck, no longer having a paycheck, will spend that money before the 
check clears. As soon as they get the check, they will deposit it and 
the money will be spent. They have overdue bills and they have things 
they have to buy. It is the only income they have. They will spend that 
money.
  If we give a few thousand to a millionaire, if they wanted a 
television they would have bought a television. If they wanted a car, 
they would have bought a car already. They are much less likely to 
spend the money and help stimulate the economy.
  One study was done on the dividend tax decrease; that for every 
dollar we lose in tax revenue, the economy is stimulated by 7 cents. 
Every dollar we put into unemployment compensation, the economy is 
stimulated $1.73. So if our goal is to stimulate the economy so 
everyone can benefit, there are other things we can do other than 
reduce the taxes on dividends, capital gains, and for those in the 
upper income.
  Mr. DAVIS of Florida. A lot of citizens and taxpayers from my home in 
Florida are confused about this tax cut. They have said to me, at a 
minimum, tell us the truth. It has been described as a $350 billion tax 
cut. On that basis, the proponents of the tax cut have said that we are 
taking a responsible approach to the deficit.

  That in fact is not the case. As I understand it, this is really a 
tax cut in excess of $1 trillion. Could the gentleman explain what the 
truth is? The public is at least entitled to know the truth about the 
size of the tax cut.
  Mr. SCOTT of Virginia. First of all, I think we ought to suggest that 
if we are this far in the red already, we ought to be talking about 
something other than additional tax cuts. We use the adage around here 
that if we find ourselves in a hole, the first thing we ought to do is 
stop digging.
  This chart is actually somewhat out of date, because on the more 
recent numbers there is more red ink down here than this chart shows. 
The present situation is actually worse.
  But as the gentleman has suggested, they concocted a plan that they 
call $350 billion because they would pass a tax cut, but then in a 
couple of years they would what is called sunset it; that is, stop the 
tax cut and revert back to present law. Everyone expects that when you 
get to that point in time, that instead of a sunset we will have a 
sunrise, and continue the tax cut into the future.
  If we assume, as everyone does, that the tax cuts will be eventually 
made permanent, it is not just $350 billion but approximately $1 
trillion, three times bigger, particularly if we add on the interest 
and other fixes that have to be made when we have those kinds of tax 
cuts.
  Mr. DAVIS of Florida. In my home State, Florida, the historically low 
interest rates have contributed to prosperity for so many more than any 
tax cut I have ever heard promised in Washington.
  What has Chairman Alan Greenspan said in front of the Committee on 
the Budget about the impact on low interest rates and student loans and 
credit card debts and mortgages if we continue with this level of 
deficits?
  Mr. SCOTT of Virginia. He has said on numerous times that if we run 
up significant deficits and increased debt that it will eventually have 
an effect on interest rates. It will increase interest rates. For a 
person with a mortgage, car loans, and credit cards, every time we 
increase interest rates we have taken money out of their pockets.
  As we look at this, we just have to wonder how bad does it have to 
get before we notice that something is not right. As I indicated, we 
are not creating jobs. The Joint Committee on Taxation shows that in 
several years after we have passed this thing, as a direct result, we 
will have fewer jobs than if we had done nothing.
  Now, running up debt has consequences. Even if we do not pay the debt 
off, we have to pay interest on the national debt. Under the Clinton 
administration we left a surplus that was in the process, by all 
projections, of paying off the entire national debt, debt held by the 
public, by 2008; and by 2013 or so, pay off the entire national debt. 
So as this green bar shows, the

[[Page H5073]]

interest on the national debt would be going towards zero.
  Unfortunately, because of all the new debt we are running up, the 
interest on the national debt that we can actually pay in red is going 
up to almost $500 billion. To put this number, since it is a big 
number, in perspective, I have put in blue the defense budget. We are 
going to be paying, instead of zero interest on the national debt, 
almost as much in interest on the national debt as we are paying on 
defense.
  Now, we can make it personal and divide the interest on the national 
debt by the population, multiply it by 4, so we have the family of 
four's portion of the national debt, interest on the national debt, 
just interest. Right now it is about $4,500. We are paying a family of 
four's proportionate share of interest on the national debt, and it is 
growing by 2013 to $8,500.
  Now, the difficulty, the challenging thing about this is when we 
consider that chart and the Social Security cash flow, we are running 
about a $100 billion surplus in Social Security; but soon, by 2017, we 
will be running a significant deficit.

                              {time}  2145

  As the interest on the national debt is increasing, how are we going 
to pay the Social Security for the baby boomers on out?
  Now, the egregious thing about the tax cut is if you look at this 
challenging chart and wonder how we can possibly pay Social Security in 
the future, we did some calculations and found that if, instead of the 
tax cut given to the top 1 percent, if that amount of money had been 
allocated to the Social Security trust funds, that would have been 
enough money to have paid Social Security benefits for 75 years without 
any reduction in benefits. We had a choice: make Social Security 
solvent for 75 years or a tax cut for the upper 1 percent. And this 
House and Senate passed a tax cut for the upper 1 percent and left 
Social Security who knows where.
  Mr. KIND. It is one of my chief concerns as a member of the Committee 
on the Budget, as a Member of this House, the fact that the fiscal 
decisions being made today, if carried out the way we have intended is 
going to set up future generations for failure. As a member of the 
Committee on the Budget, I do believe deficits matter. As a father of 
two little boys back home, I do believe deficits matter. At a time when 
we should be investing in our children's and grandchildren's future, we 
are borrowing against their future.
  This is happening at exactly the worst moment in our Nation's 
history, when we have 80 million of the so-called baby boomers all 
marching in lockstep to their retirement, which will start in a few 
short years; and we are digging this fiscal hole deeper and deeper and 
deeper at a time when the next generation will be taking over the reins 
of leadership. We will be setting up future Congresses and the younger 
generations for failure unless we can reverse course.
  I appreciate the voice of my colleague in this deficit wilderness of 
warning the Nation of the consequences of these fiscal policies. The 
ranking member on the Committee on the Budget, the gentleman from South 
Carolina (Mr. Spratt), has been telling us for a very long time that we 
need to keep an eye on the bottom line with the spending and the 
revenue streams and try to maintain some balance.
  The question I have for both of the gentlemen here is that it was 
such a remarkable turnaround during the decade of the 1990s, 
unfortunately, we do not have another decade like that to prepare for 
the onset of the baby boom generation's retirement; but were there some 
fiscal tools available during the 1990s that no longer exist today, 
that we should consider putting back in place in order to develop some 
fiscal discipline and some fiscal responsibility in this House again 
before it is too late?
  Mr. SPRATT. In 1990, when the first President Bush was in office, we 
prevailed upon him to sit down and negotiate with us a 5-year budget, a 
so-called budget summit deficit reduction plan. The negotiations went 
on for 4, 5, 6 months at Andrews Air Force Base; and they culminated in 
a budget agreement which, frankly, only about 60 Republicans voted for 
the first time it hit the House floor, failed then because there was no 
support there for it. It was modified and passed by the House mainly 
with Democratic votes. It was eclipsed by the recession.
  It was an important piece of work because it established a ceiling 
for discretionary spending, that is the money we appropriate every year 
in 13 different appropriation bills. It also took on the Medicare 
entitlements, Medicare and Medicaid; and it addressed revenues. It 
increased revenues; and, of course, that caused Mr. Bush a lot of 
trouble in his own party.
  In 1993 when Mr. Clinton came to the White House, because the results 
of that had been aggravated by recession, it was not evident; but he 
proposed a second 5-year plan that would have taken us until about 197. 
That plan was designed to cut the deficit by a bit more than half. Once 
again, it extended a ceiling on discretionary spending. It actually cut 
the rate of growth in some of the health care entitlements, and it 
raised revenues. The revenue increases went largely to upper tax 
bracket taxpayers. And as it so happened, the boom of the 1990s 
resounded more to their benefit than any other income class; and so 
they paid more taxes. Capital gains taxes went up from $40 billion a 
year in 1995 to $120 billion, by a factor of three, over a period of 5 
years.
  We finally got that budget passed here by one vote, the Vice 
President's vote in the Senate. Everyone said it would cut the economy 
off at its knees. We had bought ourselves a one-way ticket to 
recession, said Phil Graham over in the Senate. And what happened? The 
economy got up and ran. It took off like never before. For 10 straight 
years we had a phenomenal economy, partly because we were paying off 
our debt for the first time in years, adding to the pool of capital in 
this country, driving down interest rates and the economy 
prospered like never before to the point where we got to a $236 billion 
surplus. It is a matter of record. It is hard to believe now because it 
was just 3 short years ago, but that is where we were when President 
Bush came to office.

  Now, we do not have those rules that limited the growth of 
entitlements before the so-called PAYGO rule. We do not have the PAYGO 
rule that says for every tax cut it has to be deficit neutral. It 
cannot impact the bottom line. You have to have offsetting spending 
cuts or offsetting revenue increases. We do not have the ceiling on 
discretionary spending anymore. None of those rules that we put in 
place in 1993 and 1997 with the balanced budget agreement any longer 
applied. We have a budget in free fall, an ad hoc budget.
  Mr. KIND. I think the gentleman makes a very important point. The 
PAYGO did require fiscal discipline because for any proposed increase 
in discretionary funding, there had to be an offset in the entitlement 
in order to maintain balance. And it put the Nation in a position where 
there was a true lockbox on Social Security and Medicare trust funds, 
where the money was not being robbed to pay for other aspects of 
Federal spending which has gone out the window again in 2 short years. 
They have taken all the money out of the Social Security and Medicare 
trust fund to pay for these tax cuts or to pay for other spending 
programs when we should be downloading our debt in anticipation of this 
massive retirement boom.
  One final point on the tax cut that was recently enacted into law, 
there was a lot of fanfare and Rose Garden ceremony, naturally, for the 
tax cut that the President signed. But what did not receive as much 
attention was the day before, unceremoniously and very quietly, within 
20 seconds, the President also signed an increase in the debt ceiling 
by a trillion dollars.
  Mr. SPRATT. $984 billion.
  Mr. KIND. That is over next year alone.
  Just to put this in context, the entire national debt in 1980 for the 
preceding 200 years was roughly $900 billion, and they are proposing to 
have a $1 trillion increase in the debt ceiling in 1 year alone. This 
was not economic stimulus that he signed into law. It was major 
structural tax reform, and it should be referred to as such. And no 
less an expert on capital accumulation in this Nation and the world, 
Warren Buffett has also weighed into decrying this tax cut. He says 
there is something fundamentally unfair with a tax cut proposal which 
will reduce his marginal

[[Page H5074]]

tax rate, Warren Buffett, who is worth about $55 billion, will reduce 
his tax rate to roughly 5 percent when the receptionist in his own 
office has a marginal tax rate of 30 percent. Even Warren Buffet says 
that is not fair; that is not the values that reflects our great 
Nation. But that is what this tax cut was about. A major restructuring 
of the Tax Code, who is going to pay and who is going to be left on the 
hook. And, unfortunately, again, no less an expert on capital 
accumulation than Warren Buffett, he says it does not fly and it is 
very troubling.
  Mr. SCOTT of Virginia. I was just going to ask the ranking member, 
since we have run out of the surplus and Social Security, Medicare and 
other surplus, as you pass a tax cut, how is it funded if it is not 
under the PAYGO rules?
  Mr. SPRATT. How is the tax cut funded? It was not funded at all. It 
simply goes straight to the bottom line.
  Something very significant happened this year. This year when the 
Office of Management and Budget sent us the President's budget, they 
sent with it an analysis and a forecast which said, the surplus we have 
projected in the year 2001, for 2002 through 2011, that 10-year surplus 
we projected back then, was $5.637 trillion over 10 years. We made a 
mistake, said OMB.

  Looking at the economy as we see it and understanding it today, 
according to OMB, the true surplus today for that same time period, 
2002 through 2011, is really about $2.492 trillion. We were off by that 
much, $3.2 trillion.
  They went on to say that of that $2.4 trillion, $2.5 trillion, more 
than that amount, about 2.6, has already been committed to tax cuts, 
spending increases, national defense, homeland security, and other 
things. Already committed. As a consequence, you start the process this 
year with no surplus. So if you have additional tax cuts or additional 
spending, it will go straight to the bottom line. There is no 
mitigation; no offset. It adds dollar for dollar to the deficit. And 
what did Mr. Bush propose? He proposed $2 trillion, 1 trillion 990-
something billion dollars in additional budget actions that would add 
that much to the deficit over the next 10 years.
  It is a matter of record; OMB acknowledges it. So there was no PAYGO 
rule, which in the past would have required that all of these things be 
offset by some spending cut or revenue increase. Instead, they proposed 
$2 trillion in additional budget actions, all of it going to the bottom 
line and swelling eventually to a deficit in 10 years of about $4 
trillion cumulative deficit over that period of time.
  Mr. SCOTT of Virginia. Now, we had the previous speaker before our 
Special Order suggest that it was wrong to give income tax relief for 
those who do not pay income tax. There are some that have lower income 
that do not pay income taxes, but I was wondering if they paid a 
payroll tax.
  Mr. SPRATT. Of course they do pay a payroll tax on their gross 
earnings, not on net earnings, on gross earnings up to a ceiling of 
about $86,000. And for the lower- and moderate-income people, that 
payroll tax which essentially is about 16 percent when you include the 
employer's share is a big percentage of their income.
  Mr. SCOTT of Virginia. Now, do they pay a sales tax?
  Mr. SPRATT. Of course they pay a sales tax. They pay property taxes 
on the homes they own, on the cars they drive, all of these taxes they 
pay; and we are trying to give them some tax relief, because let us 
face it, they need it more than anybody else.
  Mr. SCOTT of Virginia. The suggestion was that we would just pick one 
tax, the income tax, and only those that paid, there are other taxes 
that a lot of people do not pay; a lot of people do not pay estate 
taxes. What portion of the people have estates when they die over $1 
million?
  Mr. SPRATT. No more than 1 to 2 percent of all estates.
  Mr. SCOTT of Virginia. So if we focus all of our tax relief on that, 
it would not surprise anybody that it would not be broadly based. It 
would just be aimed at the 1 or 2 percent. So it does not make much 
sense to complain that if we are trying to give tax relief to everyone, 
particularly when we are also trying to stimulate the economy, that we 
would give tax relief, however we can, to everyone, particularly those 
that might actually spend the money and help stimulate the economy.
  Mr. SPRATT. Exactly. That is the complete and full point, namely, 
that we have got an economy with deficient demand. It is lagging. It is 
mired in a jobless recovery. And to get it up on its feet and running, 
you have got to put money in people's pockets to spend so that they can 
go buy things, work down inventories, and get the economy running at 
full speed again.
  Mr. KIND. That is really the point of tonight's Special Order is what 
is going to get the economy back on track. That is what all of America 
embraces. We need to grow the economy, create jobs, stimulate 
investments. There is nothing that solves problems better for our 
Nation than a growing economy. But the fact of the matter is over the 
last 2 years, and the gentleman from South Carolina (Mr. Spratt) 
recited these stats, is we have lost 3 million jobs in this economy. 
Two million of our citizens have gone from middle class back into 
poverty. During the 1990s when we had declining deficits and surpluses, 
8 million of our citizens went the other way, from poverty into middle 
class. We have had over a trillion dollars of corporate assets that 
have been foreclosed upon over these last 2 years, one of slowest 
worker productivity rates in the last 30 years.
  The economic policies are not working. And that is what we need to do 
is get together in a bipartisan fashion and figure out a plan that is 
going to work for working families and for all Americans throughout the 
country so we can stimulate economic activity and create jobs again. 
That is what we need to do rather than pursuing an idealogical agenda 
that has a poor track record during the 1980s, the first part of the 
1990s, and now it is deja voodoo economics all over again here in the 
new century. And that is really the task that lies before us today. But 
unfortunately, there is an unwillingness with the administration and 
leadership of Congress to admit that things are not working.
  Most reasonable and logical people, when they find themselves in a 
hole, stop digging. Ideological extremists ask for a bigger shovel. And 
later this year, as true as we are standing in this well today, there 
is going to be another trillion dollar tax cut proposal coming before 
this body with everything including the kitchen sink involved in it. 
They are just clinging to this mantra that tax cuts solve all the 
problems that this country is facing, when, in fact, the record belies 
that and it is very troubling.

                              {time}  2200

  Mr. SCOTT of Virginia. We just want to remind people who asked what 
our plan is, our plan is the green. If we had our ways, we would be 
running up back into surplus with the stock market high, unemployment 
low. This is what we would do if we had the choice.
  Unfortunately, this is where we are because of all the deficit 
spending and the tax cuts which basically went to the wealthiest 
Americans.
  Mr. COOPER. Mr. Speaker, will the gentleman yield?
  Mr. SPRATT. I yield to the gentleman from Tennessee.
  Mr. COOPER. Mr. Speaker, the gentleman makes a great point, talking 
about the 12 million kids who are left out of the tax cut. Right now, 
as I understand it, this House is considering whether to repair that 
mistake. The other body in the Senate has voted, I think 
overwhelmingly, 94-2, to help the 12 million poor children. The 
question before this House is whether we will take action to correct 
the mistake, to help the 12 million kids who should have been covered 
by the tax bill.
  Mr. SCOTT of Virginia. We have legislation pending in this body that 
would do that. Interestingly enough, that tax cut would be paid for 
under the standard that we had adopted helping to create the green, 
that if you pass a tax cut it ought to be paid for with other tax 
increases or spending cuts so that the tax cut does not add to the 
deficit. And we close some loopholes and do other things that pay for 
the tax cut that would give relief to those in the $10- to $25,000 
range. And people have said that is close to the minimum wage. A full-
time worker at minimum wage makes about $10,000.
  So when you get up to 25, you are 2\1/2\ times the minimum wage. So 
it is just not the bottom of the scale. You have

[[Page H5075]]

gone quite a ways up of people that were left out that would be 
compensated and would be able to get the benefit of the tax cut without 
adding to the national debt, because in our plan that would be paid 
for, and that is the fiscally responsible way of doing it.
  Mr. SPRATT. Mr. Speaker, we have talked about the economy. We have 
talked about fiscal policy and budget propriety.
  We have not talked about the moral question of intergenerational 
burdens. That is a fancy way of saying what we are doing here, if we 
continue down the path we are on right now, stacking debt on top of 
debt, building $4 trillion in deficits and debt over the next 10 years, 
is take the tab of these tax cuts, the defense build-up and everything 
else that we are doing now but not fully paying for, and leaving it to 
our children. We are leaving them a legacy of debt.
  On top of the responsibility of maintaining and sustaining the Social 
Security program, which is underfunded and will be significantly 
underfunded with 77 million baby boomers, doubling the number of 
beneficiaries in a matter of a few years; Medicare, same situation, the 
same increase in benefits that is looming in the future; they will have 
to sustain both of those promises, both of those programs, the benefits 
promise. And on top of that, if that were not enough, we are telling 
our children, the next generation, that they are going to have to bear 
as much as $12 trillion in gross statutory debt subject to limit.

  It is just totally immoral, not just bad fiscal policy, not just bad 
economic policy. It is immoral and the wrong thing for us to do to our 
children and their children.
  Mr. SCOTT of Virginia. When we spend without paying for it, we run up 
debt and you have to pay interest on the national debt. This is a 
family of four's portion of interest on the national debt. It is going 
up year after year after year.
  When President Clinton left office, the projection was at that time 
if you did not take any action the interest on the national debt, just 
maintain services, kept the Tax Code as it is, interest on the national 
debt by 2013 would be zero. Instead, a family of four's portion of the 
national debt would be $8,500 and rising. At the same time, the Social 
Security Trust Fund would stop running the surplus that we have been 
spending and turned into a significant deficit.
  Mr. SPRATT. The gentleman made a very significant point a minute ago, 
namely, in 2001, we stood at the fork of the road. Prior to Mr. Bush 
coming to office, we were on the cusp of adopting a very conservative 
economic policy which would have called upon us to forswear ever again 
spending anything in the Medicare or Social Security Trust Funds except 
for those benefits, and using the funds in the meantime solely to buy 
up outstanding debt, not newly issued debt, but outstanding debt so 
that over a period of about 10 years we could have just about paid off 
the debt held by the public, and therefore, Treasury would have been 
interest free, would have had no interest obligation to pay to the 
public at a time when the baby boomers began to come to the Treasury or 
at least assert their demands for benefits which they had been promised 
and draw down their benefits. The Treasury would be in a more solvent 
situation than it has been in since the Second World War.
  Mr. SCOTT of Virginia. During the Presidential campaign, everyone had 
agreed that you would have a lockbox; you would not touch the Social 
Security money that was supposed to be for Social Security, and 
Medicare money collected for Medicare should be reserved for Medicare. 
Instead, we passed a $1 trillion tax cut and dipped into that spending, 
into great deficit.
  Mr. SPRATT. More than dipped into it. For every year that we 
forecast, all 10 years to get to the right-hand edge of the paper, 
cannot see anymore, we will fully expend the Social Security surplus, 
fully draw it down and spend it for non-Social Security purposes.
  Mr. SCOTT of Virginia. You wonder how you could pay the Social 
Security challenge that is shown on this chart, because instead of a 
nice surplus that we have been spending, we are going to have to 
actually come up with even more money. At the same time, the interest 
on the national debt is increasing. We are going to have to come up 
with more cash to pay this. And the tax cut, the amount of money that 
went to the top 1 percent in 2001, not 2003, 2001, that tax cut to the 
upper 1 percent only would have been sufficient to cover all of this 
red ink, for 75 years, no reduction in benefits.
  Mr. SPRATT. Mr. Speaker, if I can reclaim my time, we are about to be 
gaveled down. Basically what we have said tonight is we are not opposed 
to a tax cut. We have proposed them before. We will propose them again. 
We recognize they can stimulate the economy if they are directed in the 
right manner. But we are deeply concerned about deficits and debt, and 
of course, we are primed for stacking deficits upon deficits and 
building the debt ever bigger every year. We simply do not believe that 
is the right prescription for our economic future.

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