[Congressional Record Volume 150, Number 130 (Monday, October 11, 2004)]
[Senate]
[Pages S11235-S11237]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                FSC/ETI

  Mr. DODD. Mr. President, I rise this afternoon to speak about the 
most recently passed piece of legislation; that is, the FSC/ETI tax 
bill that consumed a great deal of time over the last several days. I 
begin by congratulating Senators Grassley and Baucus who wrote a very 
good bill in the Senate.
  When that bill left the Senate, I thought that it was a very sound 
piece of legislation, one that not only addressed the immediate problem 
dealing with trade issues, but also incorporated some other good ideas 
that all of us believed were important to be a part of that 
legislation. All of them were in one way or another bipartisan 
amendments offered on the floor of the Senate.
  The legislation provided tax deductions for American manufacturers to 
stimulate job growth in our economy. It protected American workers' 
overtime provisions that had been adopted by this body and the other 
body on several occasions over the last year.
  The legislation limited the outsourcing of American jobs with the use 
of American taxpayer money. Senator Specter and I and 68 of our 
colleagues endorsed that amendment which was before the Senate.
  In addition, the Senate-passed bill contained an extremely important 
and delicate compromise worked out between the Senator from 
Massachusetts and the Senator from Kentucky that would have provided 
financial relief to hard-pressed tobacco farmers, while at the same 
time establishing critical new protections for the health and safety of 
our children, 2,000 of whom start smoking each and every day in the 
United States.
  The Senate bill was a very good piece of legislation. It was a 
sensible bill and a well-crafted bill. Senators Baucus and Grassley did 
an outstanding job.
  Unfortunately, that bill is at best dimly reflected in the conference 
report that we voted on today. The Senate bill essentially has been 
mugged, if I might say, by the other body and by the administration. In 
its place, the Senate was asked to consider a conference report that 
lacks many of the provisions most important to America's small 
businesses and to workers. In their place, the conference report has 
added a number of provisions that amount to little more than sops to a 
variety of special interests from NASCAR to makers of ceiling fans.
  In the process the bill neuters the ability of Congress to make 
meaningful contributions to economic growth. At the same time it 
creates new threats to fiscal discipline, which is at an all-time low.
  Allow me to discuss several of these shortcomings in more detail, and 
to discuss other provisions that were either left out of this 
conference report or changed dramatically from the legislation that 
left this body only a few weeks ago.
  First, I am concerned that this bill may not achieve its central 
goal: lifting the European Union duties, which currently are at 12 
percent and could reach as high as 17 percent. Instead of simply 
repealing the Foreign Sales Corporation and Extraterritorial Income 
Exclusion (FSC/ETI), the conference report uses House language which 
phases the subsidy out over two years and allows companies to receive a 
percentage of the subsidy based on what they export each year. We were 
told early on that the European Union would find the Senate language 
acceptable for the removal of sanctions. We were also told that the 
language from the other body raises serious reservations within the 
European Union.
  In last week's Washington Post, the European Union spokesman Anthony 
Gooch was quoted as saying:
  ``The export subsidy phases out of existence slowly when it should be 
lifted immediately.''
  So here we are, about to pass a massive tax bill that is supposed to 
fix our FSC/ETI problem, and yet we are not even sure if it will do 
that job. In other words, we might have to do this all over again. The 
E.U. had said that the Senate-passed language would be acceptable, but 
had expressed concern over the House language. And here we are with a 
conference report with the House language. I find this baffling and 
deeply troubling. And while some would welcome another opportunity to 
pass even more special interest tax cuts in another FSC/ETI bill, this 
Senator would certainly not.

  Second, instead of meaningful, broad-based, and fiscally responsible 
tax relief for manufacturing here in the United States, the conference 
report includes a smorgasbord of special provisions. Even the 
administration's Treasury Secretary just last week highly criticized 
this legislation as including a ``myriad of special interest tax 
provisions that benefit few taxpayers and increase the complexity of 
the tax code.'' I am quoting the Secretary of the Treasury about this 
bill we just overwhelmingly adopted.
  Let me mention some of these provisions, and then ask your own 
constituents whether they think this is a wise use of their tax 
dollars. We are going to provide a $101 million tax break that would 
allow NASCAR racetracks to recover costs over 7 years; a $445 billion 
Alaska energy tax break; $42 million for film and television 
production; $27 million to the horse and dog racing industries. Ask 
your constituents whether they think these provisions are critically 
important at a time when we have massive deficits, whether these 
interests are the kinds of interests we should be including in a bill 
primarily designed to increase manufacturing, to limit the kinds of 
export problems we have as a result of trade agreements.
  It seems to me we have gone far afield of what we should have been 
doing, far afield of what the Senate did only a few weeks ago.
  I might point out as well that in this legislation we are not doing 
what we ought to be doing, and that is, of course, trying to provide 
some real relief for the manufacturing sector in our economy. It is a 
well-known fact that our manufacturing sector is hurting. The erosion 
of our manufacturing base is of great concern. Under the present 
Administration we have lost nearly 2.7 million manufacturing jobs. Just 
last Friday, the September unemployment numbers showed that we only 
added 96,000 new jobs. This is one-third the job growth of 300,000 per 
month that would have been achieved if job growth had occurred at the 
rate this average for a recovery. The September unemployment numbers 
also showed that we actually saw manufacturing jobs fall by 18,000--the 
largest drop since December, 2003. Despite this fact, this conference 
report weakens language that would have rewarded domestic manufacturing 
by giving an even bigger tax cut to companies that manufacture more of 
their goods in the U.S. It expands the definition of what constitutes 
manufacturing to include industries that hardly fall within the 
category of manufacturing. By diluting the definition of manufacturing 
and expanding this out by some 9 or 10 percent, we are going to make it 
harder for the very industries which are critically important to our 
long-term economic growth to create jobs. By expanding that definition, 
we have set ourselves back.
  According to the Joint Committee on Taxation's complex analysis of 
the manufacturing deduction in this bill, which they are required to do 
by law and which was tucked away at the end of the conference report, 
only slightly more than 10 percent of small businesses will be affected 
by these provisions. Only 10 percent of small businesses will be able 
to enjoy the benefits of this legislation. Since the title of this bill 
is a jobs bill, I would have expected more help for our smaller 
companies which are the biggest source of job growth in our Nation.
  The Joint Tax report also notes that ``the provision will result in 
an increase in disputes between small businesses and the IRS.'' Reasons 
for such a dispute ``include the complexity of the provision and the 
inherent incentive for small businesses and other taxpayers to 
characterize the activities as qualified production activities to claim 
the deduction under the provision.'' Just what a small business needs, 
a more complex Tax Code and problems with the IRS.
  Third, this legislation changes a major provision which was adopted 
in the bill as it left the Senate--a provision that stopped the use of 
federal tax dollars to subsidize the outsourcing of American jobs. As 
the author of this provision dealing with outsourcing, I

[[Page S11236]]

am terribly disappointed that, despite the fact that an overwhelming 
majority of our colleagues on a bipartisan basis approved language that 
prohibited the use of American taxpayer money to outsource jobs outside 
of the United States, this provision was stripped out in the conference 
report.
  We ought to be exporting our products and our services, not jobs in 
this country. At a time when as many as 14 million white-collar jobs 
could be lost over the next 10 years from outsourcing and with 2.7 
manufacturing jobs already lost in the last four years, the American 
people deserve a majority in Congress to stand up against the surge of 
outsourcing afflicting this country.

  The unanimous vote of the 12 conferees on the Republican side to take 
the outsourcing provisions out of this bill, I think, is a slap in the 
face of American workers. The fact we would be using Federal taxpayer 
money to hire someone offshore to do a job that ought to be done in the 
United States I think is wrong. I am for fair trade and free trade. We 
ought to stand up for the American worker. They are worried and 
concerned about their future. They are bothered about whether they are 
going to have enough to take care of their families' needs.
  Yet we found nothing wrong with continuing to have provisions in our 
policies that allow tax money to be used to hire people outside of this 
country, when jobs are needed in the U.S. We have the worst job 
production in almost 70 years in the U.S. We ought not to be stepping 
back. This bill stripped out a provision that was adopted here by a 
vote of 70 to 26. I think that was a great mistake. I regret that my 
colleagues on the conference committee sought to do that.
  It is no secret how much this Administration supports outsourcing. 
They believe, it is, in their words ``a good thing.'' They said so in 
the President's Economic Report to Congress this year, and they so 
again in this conference agreement.
  Fourth, the conference report does nothing to protect overtime pay. 
Six million citizens rely on overtime pay to provide for their 
families' needs. So many families are struggling to make ends meet. The 
cutback in overtime is an unfair burden that American workers should 
not have to bear.
  Overtime pay amounts to about 25 percent of the income of workers who 
work overtime. These include police officers, firefighters, nurses, and 
many others. Workers stripped of overtime protections will end up 
working longer hours for less pay.
  The Bush administration's overtime regulation would deny overtime 
protections to as many as 6 million hard-working men and women, 
including registered nurses, cooks, clerical workers, nursery 
schoolteachers, and others. Even veterans, who have served in Iraq and 
Afghanistan, would be hurt. If they received some training as soldiers 
that would give the administration an excuse to classify them as 
``managers'' in the civilian workforce, they could be denied overtime--
even if they resume the same job. That is an outrage.
  The Senate has voted against the Bush rule three times and said you 
should not impose that rule. The House voted twice to say don't impose 
that rule. Yet the conference committee sought to drop it entirely.
  So the Bush administration's rule on overtime will affect 6 million 
Americans adversely. Fifty-five categories of jobs that qualify for 
overtime pay are gone. That is now out, despite the fact we insisted it 
be part of this legislation.
  Fifth, the conference report breaks an agreement we made not only to 
protect tobacco farmers but also children. It was a bipartisan 
agreement that simply said that if we were to help out tobacco farmers, 
we were going to have FDA regulations to protect children from the 
life-threatening dangers of tobacco. These dangers--and the costs they 
pose to our nation--are enormous.
  By regulating tobacco products and taxing them higher, tobacco 
farmers are going to be adversely affected. Some tobacco--specifically 
tobacco made into cigar wrappers--is grown in my State. I see my 
colleague from North Carolina here and I know how important that issue 
is to her and her constituents, just as it is in Kentucky. I think they 
deserve help as a result of this legislation, but I also believe part 
of the deal here was that we were going to allow this industry to be 
regulated by the FDA. To strip the FDA provision out, I think, was a 
great mistake. I think that we will regret it.

  It costs us $75 billion a year in health care costs to deal with 
tobacco-related illnesses in America. According to the Centers for 
Disease Control and Prevention, tobacco use by pregnant women alone 
causes between $400 million and $500 million per year due to 
complications of low birth weight, premature births, and sudden infant 
death syndrome.
  Every day, another 2,000 kids start smoking in America, one third of 
whom will die prematurely. That is not speculation. That is a fact. Yet 
this bill stripped it out and said we would provide relief to tobacco 
farmers but forget about doing a better job of regulating an industry 
that is causing so much harm and sadness in our country because of the 
related illnesses and death caused by people who smoke.
  Sixth, the conference report is missing a provision included in the 
Senate bill I cosponsored, which is the Landrieu amendment. We are 
going to have a separate vote on that later. It is not a likely 
amendment that will be offered and voted on in the House. We will vote 
on it, but it is still not going to be included in legislation that 
goes to the President for signature. That was the provision that would 
have honored patriotic employers who continue to pay the salaries of 
their employees, who are members of the National Guard and Reserve and 
are deployed in the war on terrorism--whether it be in Afghanistan or 
Iraq. Employers would have been eligible for a 50-percent tax benefit 
for wages they paid to members of the National Guard and Reserve while 
on Active-Duty status. The credit would have been good up to 12 months, 
about the length of a standard deployment in Afghanistan or Iraq.
  Forty-one percent of activated Guard and Reserve take a reduction in 
pay when called to duty. This places a tremendous burden on their loved 
ones back home. Yet conferees stripped the provision out of the 
conference report.
  As my friend and colleague from Louisiana pointed out earlier, the 
$44 million tax credit for ceiling fans included in the conference 
report would have paid for 1 year of Guard and Reserve tax credits. Yet 
the conferees chose ceiling fans over businesses, or saving jobs for 
our National Guard and Reserve people.
  Finally, this conference report is fiscally reckless. While the 
offsets are likely to expire, the tax breaks are likely to be 
extended--if past history under this leadership is any guide. That will 
only add tens of billions of dollars to the deficit. We have the 
highest deficit in the history of our country. This is a birth tax on 
young children being born because we already know they bear an 
obligation to pay back in interest to the Federal Government a 
staggering amount of money. The idea we are going to have higher 
mortgage rates, higher car payments, and tuition costs because of 
mounting deficits, because $1.8 trillion of America's debt is held by 
nations outside of the United States--principally Japan and China. That 
is dangerous, in my view. This bill adds tremendously to the national 
debt. We are not paying for it.
  For all of those reasons, I think we would have been wise to wait 
when cooler heads prevail, and deal with what we should have been 
dealing with, or at least draft legislation that was the rationale for 
bringing it up in the first place, and deal with the trade issue. We 
didn't do that well in this bill.
  I was in a small minority to vote against this, but I believe 
strongly that if you think something is as wrong as this is, you have 
to speak out against it. For the reasons outlined here, and because we 
so emasculated what we did in the Senate a few weeks ago and brought 
back a piece of legislation that hardly resembled what we did in the 
Senate, I could not vote for this legislation.
  I hope we come back in January and reconsider some of the provisions 
included in this bill and do a better job on behalf of the American 
taxpayer and future generations of Americans.
  I yield the floor.
  For his last 5 years, Jesse's right hand on tobacco issues was David 
Rouzer, and David has been my senior

[[Page S11237]]

adviser as we have worked through this buyout.
  At a young age, David began working on his family's tobacco farm in 
Johnston County, NC. He understands the stress that tobacco farmers 
have been under, and he has labored tirelessly to get us to this day.
  I made the buyout a top priority when I arrived in the Senate because 
our tobacco-producing communities have suffered terribly--terribly--in 
recent years. The rigid Government program created in the 1930s was not 
designed for the intense world competition of today. It was not 
designed to withstand the consequences of the master settlement 
agreement.
  In past years, our farmers led the world in tobacco production. Now 
they account for only 7 percent of flue-cured tobacco sold worldwide. 
The time has come to end the last of the Depression-era farm programs. 
Our farmers want to operate in a free market.
  As the U.S. market share of tobacco has slipped, the quota system, 
with its price supports, kept U.S. producer costs artificially high. 
These high prices led to tobacco imports from lower cost countries, 
such as Brazil and China. Under the current tobacco program formula, 
the decline in demand for American tobacco produced a cut in quota, the 
amount of tobacco a farmer can grow and sell.
  In just the last 5 years, the tobacco quota has been cut almost 60 
percent. That is the equivalent of cutting your paycheck by 60 percent. 
There is not a business in America that would not take a serious hit 
with a 60-percent cut in revenue. And according to agricultural 
economists, these farm families were about to get an additional 33-
percent cut in quota for the 2005 crop-year. These cuts have had 
profound impacts on North Carolina's tobacco communities. For almost 70 
years, the U.S. Government-issued tobacco quota was something you could 
take to the bank, literally.
  Under permanent law, they could expect a yearly return on investment. 
Farmers used it as collateral for loans in order to put the next year's 
crop in the field. Families handed quota down from generation to 
generation. That paid the death tax as part of keeping family farms 
alive. Widows have counted on quota as an investment to supplement 
their Social Security.
  By buying out these quota holders, we give families the option of 
retiring with dignity. We give them the ability to pay off the banks 
for loans made against an ever-shrinking collateral. By getting the 
buyout done before the next quota cut, literally thousands of families 
in rural North Carolina will be saved from bankruptcy.
  Rather than having to quit the farm, this buyout gives our farmers 
the ability to compete in the free market, and if farmers want to 
continue to grow leaf, they can compete worldwide without the 
artificial cost increase.
  Many will also use this opportunity to invest in new equipment and 
transition to other crops. This tobacco buyout will help not only the 
farmers and their families, but their hard-pressed communities. It is 
the retailers, equipment dealers, chemical and fertilizer dealers, and 
a whole array of small local businesses that will also benefit from the 
tobacco buyout. These are the very small businesses that create the 
majority of new jobs in tobacco-producing States--jobs that are much 
needed.
  With our action today, we come to the end of an era in tobacco 
policy. We stop conceding tobacco production to countries such as China 
and Brazil. We stop foreclosures to thousands of farmers, and we stop 
the negative economic ripple effect throughout rural communities in the 
Southeastern States. For that, we can all be extremely proud.
  To those who have worked so hard on the tobacco quota buyout, on 
behalf of the thousands of farm families in North Carolina and 
throughout the Southeast, a heartfelt thank you. What has been 
accomplished is a legislative miracle and a monumental achievement. It 
has been a great privilege to work with you.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER (Mr. Cornyn). The Senator from Massachusetts.
  Mr. KENNEDY. I ask the Chair--I believe I have 30 minutes--when I 
have 2 minutes left to notify me.

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