[Congressional Record (Bound Edition), Volume 147 (2001), Part 12]
[House]
[Pages 16724-16726]
[From the U.S. Government Publishing Office, www.gpo.gov]



                 NEGATIVE IMPACT OF PRESIDENT'S TAX CUT

  The SPEAKER pro tempore (Mr. Akin). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from New Jersey (Mr. Pallone) 
is recognized for 60 minutes as the designee of the minority leader.
  Mr. PALLONE. Mr. Speaker, I want to respond, if I can, briefly, to 
some of the comments that my colleague from Colorado made with regard 
to the economy.
  Mr. Speaker, I do realize that we in Congress all have an obligation, 
certainly, to work for economic recovery, and there is, of course, a 
great deal of concern about the economy right now because of some of 
the indications we have had over the last week with regard to the stock 
market, with regard to some of the unemployment figures that have come 
through.
  But, Mr. Speaker, I would be remiss if I did not point out, and this 
is really the gist of my comments this evening, I do not intend to use 
the full hour, but I need to spend a little time reiterating once again 
the negative impact of President Bush's tax cut, the tax cut that was 
supported by the majority of the Republicans, who are the majority here 
in the House of Representatives, and which I think has had a very 
negative impact and certainly over the long term will have a very 
negative impact on the economy. And my fear that it is going to lead to 
President Bush suggesting and the Republican majority suggesting at 
some point, if it has not happened already, that we dip into the 
Medicare and the Social Security Trust Funds in order to pay for 
ongoing expenses with the Congressional budget, with the Federal 
budget.
  Mr. Speaker, before we had the 4 weeks when we as Members of Congress 
were back in our districts during August, during the summer, we had 
been told over and over again by the President and the Republican 
leadership that there was no need to worry about this tax cut, this 
huge massive tax cut that primarily benefited wealthy Americans, 
because we could have the tax cut and we would also be able to make 
sure that, even with the tax cut, that we would have enough money left 
over to pay for the national priorities that President Bush outlined, 
an education bill, a new defense initiative to make sure that the 
military was ready in the event of war, and also a Medicare 
prescription drug benefit. We could have the tax cut and we would also 
be able to have money left over for those national priorities.
  We were also assured by the President and the Republican leadership 
that even with this massive tax cut that primarily favored the well-to-
do, that we would have enough money for Social Security, that we would 
not dip into the Social Security and Medicare Trust Funds.

                              {time}  2000

  Well, Democrats have been saying for over a year that none of those 
things were true; that the nature of the tax cut, the fact that it was 
so big, that what the President and the Republicans were proposing was 
so big, that it would basically make it impossible to not dip into the 
Medicare and Social Security trust funds and that there would not be 
any money left for any of those other priorities.
  Well, we are there today. We went home at the end of July, early 
August, we came back, and lo and behold, the numbers have come back 
about the budget and what money is available; and the Congressional 
Budget Office, among other agencies, have told us that none of those 
things are true, that we probably have already dipped into the Social 
Security and Medicare trust funds because of this massive tax cut that 
the President insisted on as the sort of milestone and the main thing 
that we wanted to accomplish in the first year of his Presidency.
  Just as some information, Mr. Speaker, the Congressional Budget 
Office, this is from about a week or so ago,

[[Page 16725]]

maybe it is 2 weeks now, the Congressional Budget Office confirmed what 
the Democrats have been saying for over a year, that the Bush tax cut 
is so big it forces the government to invade Social Security and 
Medicare trust funds. According to CBO, the government will be taking 
$30 billion from the Social Security Trust Fund and $170 billion from 
the Medicare trust fund over the next 5 years. The President talked 
about how in 2001, this fiscal year, we were going to have the second 
biggest surplus in history. But this year alone, the government is 
actually in deficit and must tap Medicare and Social Security to fund 
just routine government operations.
  If we listen to what President Bush is saying, he pretty much has 
said, well, we may have to tap into the Social Security trust fund. He 
has talked about, well, maybe if the economy continues to deteriorate, 
that will be necessary. So I do not think there is any question, Mr. 
Speaker, that we are headed down that road.
  It is a scary road because, first of all, I should point out before I 
talk about the negative consequences of this, the fact of the matter 
is, it could be a lot worse than even what the CBO is estimating now, 
because we have to remember that the Congressional Budget Office, in 
their making these projections that I talked about, these are baseline 
estimates, which basically assumes that there are no changes in 
spending. In other words, the CBO numbers do not assume that any of the 
other things that President Bush has talked about spending in this 
budget are going to happen, and it also assumes that the economy will 
pretty much stay the way it is rather than get any worse. If the 
economy worsens or if we tried to implement some of the things that the 
President has talked about, we could dip even further into the Social 
Security and Medicare trust funds.
  I know that the gentleman from Colorado (Mr. McInnis), the gentleman 
who just spoke, said he does not really want to hear about this because 
after all, we are supposed to be united and we are not supposed to be 
bickering over who caused this problem. Well, it is not a coincidence. 
The Bush tax cut is the reason. In only 8 months, the President, 
President Bush has taken us from a situation where we had a healthy 
surplus that was basically built up under the 8 years of President 
Clinton's administration and was a major contributing factor to the 
fact that the economy was booming, and in just 8 months, this fiscal 
situation has dramatically reversed itself because of the policies of 
President Bush.
  Now, I am not saying that I do not want to help solve the problem, 
but I have to lay the blame where the blame deserves to be placed. 
Things were good. The Federal Government was, for the first time, in 
surplus in the last 6 years of the Clinton administration. Now, in 8 
months of the Bush administration, we are in a deficit once again.
  Now, let me talk a little bit if I can, Mr. Speaker, about the 
consequences of this, because there are a lot of different 
consequences. There are various aspects as to what we are faced with 
here in terms of Federal policy and the negative consequences. I only 
mention it, not because I want to dwell on the negative, but because I 
want us to understand where we are so that we can do something about it 
in the future.
  First of all, let me say I do not care what the other side says about 
this, the fact of the matter is that because we are now in this deficit 
situation, because of the Bush tax cut, we have destroyed any 
opportunity to spend any money on the national priorities that the 
President and others have talked about.
  If we listen to President Bush, he still talks about his education 
initiative and how there is going to be money now that is going to go 
back to the States and local school boards and to the schools 
throughout the country that are going to beef up education. Let me 
assure my colleagues that the money is not there to pay for it. It is 
not going to happen. It is not going to happen unless we take the money 
from the Social Security trust fund. So I do not think it is going to 
happen.
  Number two, the President keeps talking about his defense priorities. 
The gentleman from Colorado (Mr. McInnis) just mentioned a missile 
defense system. Well, I do not particularly like what the President is 
talking about in terms of a missile defense program; but whatever he is 
talking about: he talks about more money for the soldiers, he talks 
about more money for weapons, he talks about all of these billions of 
dollars that are going to be necessary to put us in a state of military 
preparedness. The money is not going to be there.
  Mr. Speaker, these things are not going to happen. President Bush's 
tax cut destroyed any opportunity to spend money on education or on 
defense. Most of all, because these are the things that I hear most 
about from my constituents, I happen to have a district that has a 
higher proportion of senior citizens; and when I am home, as I was this 
weekend, they still talk to me about the high cost of prescription 
drugs and how they cannot afford it and how they would like to have 
Medicare include a prescription drugs program, which I have been a big 
supporter of. We have a health care task force on the Democratic side 
of the aisle. We have been working collectively to come up with a 
prescription drugs Medicare program, and we have endorsed several 
programs on the Democratic side that President Clinton talked about 
what he wanted to do to provide a prescription drugs program. Well, 
President Bush can tell us whatever he wants, but the money is not 
there, because of his tax cut, to pay for this Medicare prescription 
drug program.
  Mr. Speaker, I doubt that any of these national priorities that the 
President has identified: education, defense, or a prescription drug 
benefit under Medicare, will ever happen because of this tax cut and 
because of the situation that we face today.
  Now, let me go on and talk a little more. It is not only that now, 
because of the tax cut, the Bush tax cut and the potential deficit that 
we do not have any money to spend on other priorities, but what is 
happening now is going to have a negative impact on the economy; and 
the fact of the matter is that what we do not have a surplus. And we 
are in a deficit situation. We hurt the economy; and we make it very, 
very difficult to have any economic recovery. If my colleagues on the 
Republican side are telling us that now they want to focus on what we 
can do to bring the economy back, certainly bypassing this tax cut and 
putting us in a deficit situation, they have made it much, much harder 
for us to achieve any economic recovery.
  Now, my colleagues do not have to take my word for it. Basically, we 
know that over the last year or so, the Federal Reserve has 
aggressively lowered short-term interest rates, but long-term interest 
rates have barely moved. They are still high. It was interesting, 
because at a July Senate Banking Committee hearing, we had Alan 
Greenspan, the Fed Chairman, and he very specifically indicated that 
the Bush tax cuts impact on the surplus in future years has prevented a 
decline in long-term interest rates.
  The reason, a major reason why the economy was doing well during the 
Clinton era was because when President Clinton created a situation 
where there was a Federal surplus, it meant that the interest rates 
were low on their own, even without the Federal Reserve action; and it 
basically made it so that money was available. The Federal Government 
was not borrowing as much and taking money out of the system for 
lenders who wanted to use it to lend money to companies or factories so 
that they could build new factories and come up with new means of 
production and create more jobs. That drain that comes, the drain on 
the economy that comes from a Federal deficit is going to have a 
terribly negative impact on the economy and make it much more difficult 
for us to recover because the long-term interest rates will remain 
high, because it will be more difficult to borrow and raise capital for 
new production and create new jobs.
  At this Senate Committee on Banking and Financial Services hearing,

[[Page 16726]]

just to again reiterate that what I am saying is not pie in the sky, we 
had a little dialogue between the Federal Chairman Greenspan and 
Senator Schumer from New York. And if I could just repeat this, this 
was the Senator, or I do not know if I can use the word ``Senator,'' 
but a member of the other body who said, and I quote, ``One thing you 
mentioned, Mr. Greenspan, you thought that rates hadn't come down 
enough was that the rate of decline of Treasury debt had not been as 
great as we thought. Is that due to the tax cut?'' The Senator said. 
And Federal Chairman Greenspan said, ``I think it is basically due to a 
series of things. One, the tax cut.'' Senator Schumer says, ``Right. So 
the tax cut did have a negative effect on this?'' And Alan Greenspan 
says, ``Oh, yes, no question.''
  So the Bush tax cut is not only making it difficult to spend any 
money on education, defense, Medicare prescription drugs, and may kill 
all of those things; but in addition, it is having a negative impact on 
the economy and it is going to be very, very difficult to achieve the 
kind of economic recovery that now the President and my Republican 
colleagues are saying should be a priority.
  Lastly, and this I guess is the most obvious one, but I want to go 
into it a little bit. What is happening here now in terms of us going 
back into a deficit and, inevitably, it seems, spending the money from 
the Social Security and the Medicare trust fund, is that the money is 
not going to be available in the Medicare and Social Security trust 
funds to pay benefits.
  Right now, the seniors that I represent, Medicare is probably the 
most important Federal program that they have available to them. Social 
Security is the most important program, because it is just, if not more 
important, because of the fact this they depend on the income from 
Social Security.
  Well, right now we are okay. But we all know that in a few years, 
there will not be as much money available for Medicare and Social 
Security because the number of people who will become seniors, the so-
called baby boom generation of which I am a part, when they get to be 
65, there are going to be more of them and there is going to be a need 
for more money to pay out their retirement Social Security benefits and 
take care of their Medicare and take care of their health care needs.
  So the reason that the Congress a few years ago started to build up 
this surplus in the trust funds for Medicare and Social Security was 
because they knew that maybe by 2020 or 2030, 20 or 30 years from now, 
if not sooner, but certainly by then, that there would be a lot more 
seniors and we would need more money to build up in this trust fund to 
pay out the benefits. Well, if we now dip into the Medicare and Social 
Security trust fund, this so-called surplus, that money is not going to 
be there.
  Now, what the Democrats have been doing when Clinton was President 
was they recognized this and they said, okay, let us take a certain 
percentage of this surplus and general revenues that we have and let us 
dedicate it towards Social Security and Medicare. In other words, we 
had a Social Security and Medicare trust fund that had a surplus on 
their own, but President Clinton said, let us take money from the 
surplus we are building in general revenues from tax revenues and let 
us apply that to the Social Security and Medicare trust funds so that 
even more money would be available in 2020 or 2030 when we needed it. 
Well, that is all gone. There is nothing now; there is no general 
revenue surplus available to apply it to Social Security and Medicare. 
Instead, we are now taking from those trust funds to pay for general 
operations to operate the government.
  Mr. Speaker, it is pretty easy to figure out what is going on here, 
but the reality is very dire, because now there is a serious question 
about whether or not the Social Security and Medicare money will be 
available for people my generation when they get to be seniors.

                              {time}  2015

  Now, what I am going to mention now does not necessarily relate to 
the budget and to what the President did with his tax cut.
  But ironically, in the middle of all of this, at the very time when 
President Bush's tax cut is having this negative impact and threatening 
Social Security and Medicare, we have the President, President Bush, 
setting up this commission, this Social Security commission that over 
the summer, including during the August break, started to provide all 
of this information about how they want to privatize Social Security. 
They may want to raise the age again when one gets Social Security.



  There is all this potential tinkering with the Social Security system 
that I think is going to make the situation even worse, because if we 
privatize Social Security, or say to people that they can take a 
certain amount of their money outside the system and invest it in the 
stock market or in something else, there again, that is taking money 
away from the Social Security system that is not going to be available 
for the baby boom generation when they get to be 65.
  Mr. Speaker, we no longer have the situation which we had under 
President Clinton and the Democrats where the general revenue surplus 
is being applied to boost up Social Security and Medicare. We now have 
a situation where President Bush's tax cut is probably going to make 
Congress, or maybe we are already doing it, dip into the trust funds 
for Social Security and Medicare.
  At the same time, we have this commission out there that President 
Bush is instituting that is proposing to take even more money out of 
the Social Security and Medicare trust funds so that people can invest 
money in the stock market or whatever. I cannot imagine a worse 
situation.
  Mr. Speaker, I recognize and I agree with my colleague, my Republican 
colleague who spoke before me, the gentleman from Colorado, that I do 
not want to just come here and talk about how bad things are. But if we 
do not recognize why they are getting bad, then we are never going to 
correct them.
  This Congress has to think about ways of dealing with the fact that 
this tax cut has really hurt the economy, threatened Social Security, 
and makes it impossible for us to invest in other national priorities 
such as education, prescription drugs under Medicare, and defense 
needs.
  Until we recognize the fact that this is the cause or a major cause 
of the problem, I do not know how we are going to correct it. I am not 
going to just stand here and put my head in the sand and say this is 
just happening through natural causes. This is happening because of the 
President and the Republican leadership's tax policy. That is why we 
are in the situation that we are in, and we need to recognize it before 
we can move on.

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