[Congressional Record Volume 154, Number 18 (Tuesday, February 5, 2008)]
[Senate]
[Pages S616-S619]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       ECONOMIC STIMULUS PACKAGE

  Mr. KYL. Mr. President, I wish to turn to the business at hand, which 
is the so-called economic stimulus package. I have not had an 
opportunity to offer my personal views on this issue.
  I do not believe that tax rebate checks and an extension of 
unemployment benefits will boost the economy. Of course, Americans 
deserve to keep more of their hard-earned dollars and Washington should 
spend less of them. But giving people tax rebates and telling them to 
go shopping will do virtually nothing to grow our economy. Our economy 
grows--GDP increases--when new goods and services are produced. A one-
time shopping spree is not going to encourage a business to hire one 
additional worker or invest in one additional machine. Only a permanent 
reduction in tax rates will do that.
  Gross domestic product increased by just 0.6 percent in the fourth 
quarter of 2007. While most economists do not forecast that the U.S. 
economy will enter recession this year, they do estimate it will enter 
a period of below-trend growth in the first half of 2008, with growth 
recovering in the third and fourth quarters.
  The current unemployment rate is 4.9 percent; down from 5 percent in 
December. The drop is due to an upward revision in the number of jobs 
created in December.
  The preliminary estimate is that the number of jobs created in 
January fell by 17,000--the first decline in many months. But note that 
a very small increase in December job creation was revised upward to 
82,000 new jobs. Also, the initial August 2007 jobs reading showed a 
4,000 job decline, but it too was revised upward substantially. The 
January figure could well be revised upward.
  Over the past 30 years, from 1977 to 2007, personal consumption has 
grown steadily and strongly and has not fallen off during economic 
downturns.
  In contrast, during times of economic weakness, private investment 
declines significantly. We are seeing this very thing happen during 
this economic downturn as well.
  The Treasury Secretary negotiated an agreement with the bipartisan 
House leadership. That agreement was fairly simple:
  It provides a rebate of $600 for individuals and $1,200 for married 
filers, and gives parents another $300 for each child. The rebate is 
phased out for individuals with adjusted gross income of more than 
$75,000, and couples with adjusted gross income. of $150,000.
  It also expands the ability of small businesses to expense new 
equipment purchases for 2008 and gives businesses of all sizes the 
ability to write off 50 percent the cost of many new depreciable assets 
placed in service in 2008.
  The House bill was passed on January 29 by a vote of 385 to 35.
  The administration predicts that the proposal would boost the economy 
by about 0.7 percent. In reality, that ``growth'' would be borrowed 
from the future. It would not create new growth.
  While I disagree with the central premise of the House-passed bill--
that we need to stimulate consumer spending--I am impressed that the 
bill was very narrowly focused and that it generally did not include 
new spending.
  While the House bill was not the bill I would have written, I feared 
that it would become far worse in the Senate. It has.
  The bill passed out of the Finance Committee dedicates $10 billion to 
extend unemployment benefits. Our current unemployment rate is 4.9 
percent. Congress has never before extended unemployment benefits when 
the rate is this low. Because extending unemployment benefits has the 
effect of lengthening the traditional spell of unemployment by 1 to 2 
weeks, this provision effectively eliminates any possible stimulative 
effect of the bill.
  It also included a slightly smaller tax rebate--$500 per individual, 
$1,000 per couple, $300 per child. Unlike the House bill, the rebate 
would be available to senior citizens and disabled veterans who 
otherwise have no earned income. While I generally oppose the idea of 
rebate checks, this change from the House bill is probably one on which 
we can agree. But we should understand that fully 42 percent of the 
rebate approved by the Finance Committee is classified as ``spending'' 
because it would go to individuals with no tax liability.
  The Finance bill also seeks to ensure that illegal immigrants cannot 
legally obtain tax rebates, something we all support.
  The Finance package also includes the same business tax breaks as the 
House bill but adds a 5-year carryback for net operating losses. This 
is an important provision that I helped to have included in the Finance 
bill and I would support adding it to the House bill.
  From this point, the Finance Committee bill really becomes a 
Christmas tree. All kinds of legislative ornaments have been attached:
  $3 billion for utilities wind and solar energy production;
  $1.6 billion for energy-efficient homes, not particularly wise, given 
the glut of new homes on the markets;
  $323 million for manufacturers of energy-efficient appliances;
  $247 million for tax breaks for wealthier investors in marginal oil 
and gas wells;
  $153 million to for energy-efficient commercial buildings; and
  $100 million for coal companies owed interest by the Federal 
government from a court case.
  Interestingly, the committee defeated an amendment I offered to patch 
the AMT for 2008.
  The committee defeated an amendment offered by Senator Ensign to 
provide another repatriation window, during which companies could bring 
back overseas earnings at a much-reduced tax rate.
  The committee also denied me an opportunity to offer a package of 
individual and business tax provisions that expired at the end of 2007 
and other provisions that expire at the end of this year, including:
  the teacher tax deduction,
  the tuition deduction,
  the R&D tax credit,
  accelerated depreciation for leaseholds and restaurants, and
  extending foreign tax changes that help U.S. multinationals compete--
active financing and the CFC look-through.
  At best, proposals for short-term, demand-side stimulus will borrow 
economic growth and consumer spending from the future, and will appear 
to create a small boost for the economy.
  My real worry is that we are doing a disservice to all Americans if 
we tell them that increasing consumer spending is a panacea to our 
economic problems.
  We would be far wiser to recognize that our short-term challenge now 
is deflated home values and a glut of housing, along with insufficient 
liquidity in the capital markets--none of which will be fixed by this, 
or the House-passed, stimulus bill.
  The only viable remedy is to focus on policies that encourage 
sustainable economic growth by encouraging work, investment, and 
entrepreneurship.
  We are scheduled to see across-the-board hikes in income tax rates 
and investment tax rates, as the current rates automatically expire, 
reverting to the pre-2001 and pre-2003 higher rates--and we know from 
economists that the only way to encourage sustainable economic growth 
is to encourage work, savings, and investment through lower marginal 
rates.
  No one is willing to see the child tax credit cut in half, the 
marriage penalty spring back to life, or a host of other popular 
provisions disappear.
  Washington is slowly coming to the realization that our corporate tax 
rate of 35 percent hurts American competitiveness. Only one OECD 
country--Japan--has a higher rate.
  In fact, I filed an amendment to cut the corporate rate to 25 percent 
when the Finance Committee considered the economic stimulus bill. Larry 
Kudlow had this to say about my amendment:


[[Page S617]]


       In my view, this would be the single best pro-growth 
     measure that Washington could take. It would help create 
     healthy businesses, create jobs, and raise real wages. It 
     also would boost the dollar. The minute such a bill is 
     signed--the very minute--the incentive effects would take 
     place.

  Last year, the Treasury Department released a study of American 
competitiveness and determined that our high corporate tax rate is in 
fact a barrier to encouraging businesses to locate in the U.S.
  Also in 2007, Charlie Rangel, the chairman of the House Ways and 
Means Committee, unveiled a comprehensive tax reform proposal which 
included a reduction in the corporate tax rate to 30 percent. There 
seems to be a growing consensus across party lines that our corporate 
tax rate should be reduced.
  Another idea that has been gaining traction is reducing the corporate 
capital gains rate. This would have a tremendous ``unlocking effect.'' 
It simply makes no sense to tax corporate capital gains at 35 percent; 
such a high tax rate only encourages companies to hold on to 
unproductive assets.
  For years and years, investors and Government officials have debated 
whether the Treasury Department has the necessary authority to index 
capital gains for inflation without Congress needing to act 
legislatively. I believe there is a case to be made that Treasury does 
have the authority, and I hope the President will take this bold step 
in his final year.
  Forty-two percent of the cost of the Senate Finance Committee 
economic stimulus ``rebate'' goes to Americans with no tax liability.
  The percentage of Americans who actually pay taxes continues to 
shrink and our ability to raise revenue by increasing taxes on ``the 
wealthy'' is a losing proposition.
  In 2004, 37 percent of all Federal personal income taxes were paid by 
the top 1 percent of taxpayers; the bottom half of taxpayers, by 
adjusted gross income, pay just 3.3 percent of Federal personal income 
taxes. We run the very real risk of developing a system whereby a 
majority of Americans do not have a stake in limiting the size of our 
Federal Government because they do not have to pay for it.
  Congress should consider some research explained in a recent Wall 
Street Journal column by Art Laffer. Art Laffer explains that the 
highest income earners are the most sensitive to tax increases and the 
most likely to plan to avoid tax increases. He found that over the last 
25 years, as the top income tax rates fell, the share of income taxes 
and the dollar-value of taxes paid by the top 1 percent of taxpayers 
increased dramatically. Over that same period, as income tax rates fell 
for the bottom 75 percent of taxpayers, both the share of Federal 
income taxes paid and the dollar amount of income taxes paid fell too.
  Laffer points out that the temptation to cut taxes in the lower 
brackets--or only retain the current rate structure for the lower 
brackets--while raising taxes for taxpayers in the top brackets is 
completely counterproductive. The only tax cuts that seem to result in 
increased revenues are those that affect the wealthiest taxpayers 
because they have the ability to defer income, invest in tax deferred 
accounts, invest in tax-exempt bonds, and otherwise plan around taxes.
  Art Laffer closes his article with this statement:

       Mark my words: If the Democrats succeed in implementing 
     their plan to tax the rich and cut taxes on the middle and 
     lower income earners, this country will experience a fiscal 
     crisis of serious proportions that will last for years and 
     years. . .

  While Congress is focusing on stimulating consumer spending and 
short-term economic fixes, we must remember that it makes far better 
sense to plan for long-term, sustainable economic growth. We must not 
let this deviation into Keynesian economics become an excuse for 
massive increases in government spending, tax policies geared toward 
short-term consumer spending; we must not ignore the importance of 
long-term savings and investment and we must remember to reward hard 
work with permanently low income tax rates.
  As George Melloan wrote recently:

       Ironically, even the brilliant John Maynard Keynes disowned 
     [Keynesian Economics]. After meeting with a group of 
     Washington ``Keynesians'' in 1944, he said he was the only 
     non-Keynesian in the room. His brainchild . . . had been 
     converted from its originally intended limited application to 
     an all-purpose economic panacea by politicians, academics, 
     and journalists.

   I wish to summarize, in 3 or 4 minutes, what I think is at work 
here.
  My view, contrary to the President and to some others in my party, is 
that tax rebate checks and extension of unemployment benefits will not 
boost the economy. Obviously, Americans deserve to keep more of their 
hard-earned dollars, and obviously Washington should spend less of 
them, but giving people tax rebates and telling them to go shopping 
will do virtually nothing to grow our economy.
  Our economy grows; that is to say, the gross domestic product 
increases, when new goods and services are produced. A one-time 
shopping spree is not going to encourage business to hire one 
additional employee or invest in one additional machine. Only a 
permanent reduction in tax rates will do that.
  I will share a couple statistics relating to the state of our economy 
now, particularly as it relates to unemployment.
  The current unemployment rate is 4.9 percent. That is down from 5 
percent in December. The drop is due to an upward revision of the 
number of jobs created in December. The preliminary estimate is that 
the number of jobs created in January fell by 17,000, which is the 
first decline in months. But note that a very small increase in 
December job creation was revised upward to 82,000 new jobs, and the 
initial August 2007 jobs reading showed a 4,000-job decline, but it 
also was revised substantially upward. So the January figure could also 
be revised upward.
  The point is unemployment is at a relatively low level in this 
country, and it would be a huge mistake for us to exacerbate the 
unemployment situation by extending unemployment benefits, as the 
Senate Finance Committee does.
  In addition, personal consumption is growing strongly and steadily, 
as it has over the last 30 years. It has not fallen off at all. What 
has fallen off, and this happens during times of economic weakness, is 
private investment, which has declined significantly, and that is what 
should be addressed but is not addressed, in the so-called stimulus 
package. Rather, what is addressed in the stimulus package is, of 
course, consumer spending which, in this case, is not the solution to 
the problem.
  At best, proposals for short-term, demand-side stimulus will borrow 
economic growth and consumer spending from the future and will appear 
to create a small boost to the economy right now, but they are 
borrowing it from the future. Of course, we are also borrowing $150 
billion in order to accomplish this result.
  My worry is we are doing a disservice to all Americans if we tell 
them an increase in consumer spending is a panacea to our economic 
problems. It is not. We would be far wiser to recognize our short-term 
challenge now is depleted home values, a glut of housing, along with 
insufficient liquidity in the capital markets, and none of this is 
fixed by the stimulus bill before us. The only viable remedy is to 
focus on policies that encourage sustainable economic growth by 
encouraging work, investment, and entrepreneurship.
  One of the first things we have to address is to make sure we do not 
suffer a tax increase. That would be the worst thing that would happen, 
and we are headed for that if Congress does not take action to take 
that from taking place, which is automatically built into our tax laws. 
In 2 years, unless Congress does something, we will have the largest 
tax increase in the history of the country. So we should be signaling 
right now that is not going to happen.
  We should also get in line with the other countries in the world and 
reduce our corporate income tax rate which, except for Japan, is the 
highest in the world. That would do something immediately to help.
  We should also index taxes, such as the capital gains tax, for 
inflation. For years, investors and Government officials have debated 
whether the Treasury Department has the authority to do this. I believe 
it does have the authority to do it administratively and that we ought 
to do it. But if the administration doesn't do it, then the Congress 
ought to do it.

  The bottom line is there is a variety of things we could do to 
actually stimulate economic growth to provide for

[[Page S618]]

the long-term productivity increases in capital expansion and job 
creation that provide that kind of economic growth. That is what will 
solve the problem, not a one-time rebate for people who would far 
rather have a job than a $500 check. So while we are focusing on 
stimulating consumer spending and the short-term economic fixes, my 
view is it would make far better sense to plan for the long term and to 
do those things which provide for actual sustainable growth.
  We cannot let this deviation into so-called Keynesian economics 
become an excuse for massive tax increases and Government spending or 
tax policies geared toward short-term consumer spending. We must not 
ignore the importance of long-term savings and investment, and we must 
remember to reward hard work with permanently low income tax rates. As 
George Melloan recently wrote:

       Ironically, even the brilliant John Maynard Keynes disowned 
     Keynesian Economics. After meeting with a group of Washington 
     ``Keynesians'' in 1944, he said he was the only non-Keynesian 
     in the room. His brainchild had been converted from its 
     originally intended limited application to an all-purpose 
     economic panacea by politicians, academics, and journalists.

  I hope we will not fall into the same trap this year, in 2008, but 
recognize there are some significant things we could do to stimulate 
the economy to ensure that the average American family is not burdened 
with increasing taxes. The first step in that direction is not to go 
another $150 billion in debt by offering people rebate checks and an 
extension of unemployment compensation but, rather, by signaling to 
them we are serious about ensuring there will not be a big tax increase 
in this country.
  The ACTING PRESIDENT pro tempore. The Senator from Texas.
  Mr. CORNYN. Mr. President, when I returned after the Christmas 
recess, along with all my colleagues, it was with high hopes that we 
would be able to work together to solve America's problems in a 
bipartisan way. There were some promising indications that would indeed 
be possible when the Speaker of the House of Representatives and the 
Republican leader in the House and the President of the United States 
came together to deal with one of the emerging crises in our country, 
which is the economic downturn caused by the subprime lending crisis 
and a downturn in the housing markets.
  Unfortunately, we have begun to see that bipartisan cooperation 
fraying and some downright foot-dragging that causes me a lot of 
concern. I can't help but think if I am concerned, there are a lot of 
other people, not only in this body but across the country, who are 
concerned by the contradiction between what Members of Congress 
sometimes say and what actually happens. Sometimes we can get caught up 
in the Senate rules regarding cloture and how the amendment process 
works, and that is the kind of thing Senators and our staff like and we 
live with. Frankly, the one thing the American people can sense from a 
hundred miles off is hypocrisy--saying one thing and then doing 
another.
  I heard it suggested one time that the opposite of the definition of 
progress must be Congress. It sounds to me like something Mark Twain or 
Will Rogers might say, to say that Congress is the opposite of 
progress. But we have had two examples of important legislation we 
should be acting upon in a timely way that have been dragged down by 
inexplicable delay, and I think it is important that we focus on that.
  We have heard from the Republican leader this morning regarding his 
concerns that the bipartisan stimulus package, which, as Speaker Pelosi 
said, needed to be targeted, timely, and temporary, has now gotten 
bogged down in an attempt to add additional spending on that bill in a 
way that invites additional amendments on the floor of the Senate. That 
means further delay. Add to that a conference committee, which will 
then delay it even further, and that means the American people, who 
were expecting rebate checks on their taxes, will have to wait longer, 
and the chances that this stimulus will in fact be effective in helping 
to avert a recession makes it much less likely that it will have any 
impact whatsoever. So delay is costly in terms of our chances for 
having a positive impact on averting this recession.


                                  FISA

  Another area I want to talk about briefly has to do with our national 
security and our ability to listen to al-Qaida terrorists talk to each 
other either on the telephone or by e-mail or text messages. Last week, 
we spent an entire 3 days basically doing nothing while we tried to get 
the FISA reauthorization bill--the Foreign Intelligence Surveillance 
Act bill--passed on a bipartisan basis. Now you would think this is 
something we ought to be able to come together on in a bipartisan way. 
The bill that came out of the Intelligence Committee passed by a 
bipartisan vote of 13 to 2. But then it comes to the floor of the 
Senate and it becomes locked down in attempts to block this bipartisan 
legislation.
  There has been the suggestion that we haven't had enough time to 
consider this legislation. Well, I think it is worth noting, as this 
chart does, the history of this important legislation.
  You will remember that it was April of 2007 that the Director of 
National Intelligence suggested we needed significant reforms in our 
ability to listen in to conversations between terrorists overseas who 
were determined and committed to trying to kill innocent Americans and 
our allies. So the Director of National Intelligence last April said we 
need an update in this important law to make sure we aren't deaf to the 
threat or blind to the threat in a way that will endanger American 
lives.
  In May of 2007, there was a significant decision made by the Foreign 
Intelligence Surveillance Court which suggested that phone calls 
between two foreign nationals, circuited through the United States, had 
to get an order through a lengthy application process in order to 
listen in. The Director of National Intelligence suggested to us that 
we were missing as much as two-thirds of the actionable intelligence 
necessary to listen in to our enemies in order to detect, deter, and 
hopefully prevent terrorist attacks on our soil and against our troops 
in Iraq and Afghanistan.
  In July of 2007, the Director of National Intelligence briefed 
Congress on the urgent need to update this law in light of these gaps. 
To its credit, the Senate did get together on a bipartisan basis, at 
least for a while, in August of 2007 to pass a 6-month piece of 
legislation. Why it was 6 months, I don't know. It should have been 
permanent. That legislation was the Protect America Act, which would 
have expired February 1 but for a 2-week extension that was recently 
agreed to. So the Senate can get its act together and do what it knows 
we have to do to protect American lives and to keep our Nation secure.
  In October of 2007, the Intelligence Committee, as I noted earlier--
the committee that is given the responsibility of oversight of our 
intelligence community and for keeping our intelligence laws up to 
date--passed a strong bipartisan bill supported by the Director of 
National Intelligence that would give the intelligence community all 
the tools consistent with our laws that it needed in order to keep 
America safe. It passed by 13 to 2--strong bipartisan support.
  The Judiciary Committee then, in November of 2007, a committee on 
which I sit, unfortunately passed an alternative piece of legislation 
strictly along partisan lines that was designed to be a substitute. In 
December 2007, we tried to take up this issue because, again, it was 
going to expire, and we saw that our Democratic friends basically 
blocked the Intelligence Committee bill in December of 2007.
  On January 23, after we returned from the Christmas holidays and the 
New Year's break, we returned to the Foreign Intelligence Surveillance 
Act legislation with the knowledge, as I said, that it was going to 
expire by February 1 if we didn't act. Well, frankly, because of the 
meltdown here in the Senate and our inability to pass basic legislation 
that is necessary to keep America safe, because of the gamesmanship 
that is going on, we had to pass a temporary extension which is now set 
to expire February 15.
  I don't understand why it is that the Senate seems to be incapable of 
getting its business taken care of. When we come back with such high 
hopes that we are going to see a change in attitude and that we will be 
working together in a bipartisan way to solve the problems that 
confront our country--whether it is our economy or national

[[Page S619]]

security--it seems to last about as long as a winter snow on a warm 
day. It sounds good and looks good 1 day, and then melts away the next 
day. We need to stop squandering these opportunities to work together. 
We need to get some work done.
  Last night, even though the majority leader had previously told us we 
would not be voting on either Monday or Tuesday, in light of the big 
election vote that was going to occur today, he changed his mind, and 
it is his prerogative to do so, so we had a vote on the economic 
stimulus package that the House passed, and which the Republican leader 
said we should take up and pass in a bipartisan way in order to 
expedite that legislation. The motion we voted on last night passed 
overwhelmingly in support of that House legislation by 80 to 4--80 to 
4.
  So why it is we can't, in a similar fashion, take up that legislation 
and pass it without slowing it down by adding on a lot of extraneous 
spending by people viewing this as a Christmas tree on which they want 
to hang their favorite ornament as a way to fund their pet projects; 
Why it is we can't resist that temptation and expedite passage of this 
important legislation is, frankly, beyond me. I wish we would take care 
of the Nation's business. Unfortunately, the majority leader handed us 
his alternative legislation last night, a 70-plus-page bill that is 
completely different both from the Finance Committee bill that was 
passed out of the Senate and the House bill that has been negotiated 
between the Speaker and the White House and the Republican leader in 
the House.
  I think we ought to be aware of high-pressure tactics, and that was 
certainly a high-pressure tactic to try to come up with a brandnew bill 
that nobody has looked at and insist we pass that bill without an 
adequate time to review it and to see what goodies have been inserted 
in this piece of legislation that some of us may object to. So it is my 
sincere hope we will not continue to squander the opportunities we have 
been presented with to work together to pass this economic stimulus 
package on a bipartisan basis, or this Foreign Intelligence 
Surveillance Act reauthorization which has been on the radar for the 
Senate since at least April of 2007. There is simply no excuse for not 
acting on a timely basis to deal with both of these issues.
  Mr. President, I yield the floor, and I suggest the absence of a 
quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. DURBIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. DURBIN. I ask if the Chair would advise me as to the current 
status of morning business.
  The ACTING PRESIDENT pro tempore. The Republicans control 6 minutes 
15 seconds, the Democrats control 29 minutes.
  Mr. DURBIN. I ask unanimous consent that the Republican time be 
reserved; that I be allowed to speak in morning business on the 
Democratic side.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

                          ____________________