[Congressional Record (Bound Edition), Volume 147 (2001), Part 2]
[Senate]
[Pages 1563-1566]
[From the U.S. Government Publishing Office, www.gpo.gov]



                              THE SURPLUS

  Mr. TORRICELLI. Mr. President, in these times of extraordinary 
budgetary wealth, it is easy to forget it was less than a decade ago 
that a now famous comment was made that the U.S. Government would have 
deficits as far as the eye could see. Indeed, in 1992 when the Clinton 
administration began, the annual deficit was $290 billion and was 
projected to grow to $455 billion this year. Today, not only has that 
annual deficit been eliminated but the budget surplus is $237 billion, 
for the first time in generations, 3 successive years of budget 
surpluses, leading to the extraordinary ability of the U.S. Treasury by 
next year to have reduced the

[[Page 1564]]

aggregate historic debt of the United States by $600 billion.
  It is now realistic to discuss the elimination of all outstanding 
U.S. Government debt--not in another generation, perhaps not even in 
another decade, but in our own time, on our own watch.
  This extraordinary change of the national finances has led to the 
recognition that the Federal Government could generate a $3.1 trillion 
surplus, even while excluding the accumulating Social Security surplus 
that we mutually agree needs to be held in reserve. This is clearly a 
once-in-a-lifetime opportunity. Any generation of Members of the Senate 
only could have dreamed of the chance to reorganize the finances of the 
Federal Government with surpluses that were even a fraction of these 
magnitudes.
  The choices before the Senate are obviously considerable. We arrived 
at these massive surpluses for a combination of reasons: Our taxes, 
extraordinary work by the American people, rising productivity and 
technology, but also because for a long time our people simply went 
without some benefits. Like a company that improves its bottom line by 
not investing in its personnel, our country cast a blind eye for some 
time to real human needs and human investments in order to balance our 
budget.
  First and foremost among those things that the country simply ignored 
for a period of time was the medical needs of our people. Modern 
medicine is obviously revolutionizing health care. Despite the fact 
that prescription drugs are an integral part of the health care of any 
citizen, 35 percent of Medicare beneficiaries, or 15 million senior 
citizens, have no prescription drug coverage and are either choosing 
between their rent and food or paying their prescription drug bills or 
simply doing without at the cost of compromising the quality of their 
lives, or life itself. It remains first on the national objectives to 
be corrected in these new circumstances.
  Second, arguably, the United States has the finest system of higher 
education in the world. But no one could defend the current quality of 
our elementary or high schools. They are literally bursting apart at 
the seams: Aging schools, postponed improvements in their 
infrastructure, the need for higher standards, to retain good teachers, 
and get even better teachers.
  It is axiomatic that in this time of revolutionary technology and 
international competition, it will be impossible to maintain the 
standard of living in the United States or our national strength or 
even democratic character without improving the quality of instruction 
in our schools. Mr. President, 2,400 schools will need to be rebuilt by 
the year 2003 to accommodate rising enrollments alone, and 130,000 
teachers will need to be hired over the next decade. This, too, was 
postponed.
  Third, until most recently, this generation postponed its obligation 
to maintain the quality of life by maintaining the quality of the land 
of our country. What began with Theodore Roosevelt in preserving our 
national monuments and lands and open space for our generation was 
postponed as we fought to balance our budget. No State in the Nation is 
a better example of this phenomenon than my own native State of New 
Jersey. Forty percent of the land is already developed; 10,000 acres 
are lost per year. There is an epidemic of sprawl. America is losing 50 
acres of open space every hour of every day, all year long.
  These three, from my own personal perspective, are on top of a long 
list of postponed national ambitions that need to be debated in the 
context of broad and meaningful tax reduction, which I support. 
Prescription drug benefits, new teachers and schools, preserving of 
open space, and the quality of our environment--they are a part of this 
debate. The resources that go to one are not available for the other.
  This Congress, unlike many that came before us that dealt with the 
question of comprehensive tax relief, must commit itself to balance, to 
balance the resources that are necessary for national goals and the 
resources that are required for comprehensive and meaningful tax 
relief.
  The question of tax relief itself also involves issues of balance. I 
begin this discussion with a profound belief that tax relief is not 
only affordable, it is owed to the American people. There are many 
contributors to the national surplus. This Congress and President 
Clinton deserve considerable credit for reducing spending and some 
enhanced efficiencies. The American people deserve most of the credit 
for the new productivity of this economy and its efficiency through 
their hard work.
  But it is also true--indeed, it is inescapable--that a significant 
portion of the Federal surplus is a direct result of high tax rates 
that have produced increased revenue, and the American people deserve a 
dividend on their high taxes of all these years.
  Rates were increased and they were too high, and now they are simply 
not necessary. The projection of a $3.1 trillion surplus should end 
forever the argument about whether the U.S. Government can afford 
broad-based tax relief. It is right, it is necessary, and it is 
affordable.
  The question becomes the character of this Congress; whether we not 
only have the judgment to balance our educational, environmental, and 
medical needs against the need for broad-based tax relief but whether 
the tax relief itself can be comprehensive and balanced to a variety of 
national objectives.
  President Bush has proposed a $1.6 trillion restructuring of the tax 
brackets. It is largely a reflection of the broad-based tax relief 
offered by Senators Coverdell, Breaux, Kerrey, and myself in the last 
Congress. It is deeper and it is broader, but it is based on the 
principle of lowering rates generally and specifically moving middle-
income American families into the lowest bracket possible. That is 
simple but it is direct and it is right.
  But the tax debate must include more than simply lowering rates in 
the broadest fashion possible for most Americans. There are other 
specific national objectives to be achieved through the Tax Code. I was 
pleased to see that Senator Lott has joined in my efforts to include in 
this tax reduction a further cut in capital gains rates. The business 
community has made clear its own desire to see the R&D tax credit made 
permanent and reform of the international tax laws.
  Those in my State of New Jersey, home of the pharmaceutical industry 
and increasingly of high technology, and involved in a disproportionate 
amount of international trade, are grateful for the help of our economy 
and growing employment base. Both political parties have pledged 
themselves to end the marriage penalty and to eliminate the estate tax 
for at least small businesses, family farms, and to fix the alternative 
minimum tax, which is a rising burden on middle-income people.
  Indeed, with a surplus of this magnitude, there is no shortage of 
legitimate ideas. All of these concepts for tax reform and tax 
reduction have one thing in common: They are justifiable, they have a 
rationale, and they should be considered. But they also have this in 
common: None should be considered to the exclusion of other ideas, and 
each should be balanced.
  This is a moment the country is not going to visit again for a long 
time. This should be considered at length, seriously, and done right. 
Let me begin with several ideas that I believe are critical, in 
addition to the clear objective of restructuring the tax brackets 
themselves.
  First is the affordability of higher education. There is no greater 
burden on middle-income families, on working couples, than the 
prospect, the daunting challenge of a college education for their 
children. With the possible exception of buying a home, it is the 
principal financial burden in life for most Americans. For those less 
fortunate, there are a variety of scholarship and loan programs. The 
very wealthy will never have to be concerned. But most Americans find 
themselves in neither situation, and we are facing the prospect where 
the middle class will simply be out of range of a quality graduate 
education or even a college education. Both our sense of

[[Page 1565]]

fairness and our economic prospects as a nation are going to be 
radically altered if a quality college education is the province only 
of the upper middle class and the privileged. We will destroy the 
engine of our economic growth while taking basic fairness and social 
mobility out of our society.
  As this chart indicates, over the last decade the cost of sending a 
child to college has increased by 40 percent, two and a half times the 
basic underlying inflation rate, for public universities and for 
private universities. It is not tolerable and there is something that 
this Congress can do about it. If we were to add one single deduction 
to this new Tax Code that this Congress is going to write in the coming 
weeks, in addition to the broad-based relief in the lowering of tax 
brackets for all Americans, it would be 100-percent deductibility of 
college tuition. It makes sense and it should be done now, and nothing 
would add more to the finances of middle-income families.
  Long ago this Congress recognized the need for deductibility of basic 
investments by business to add to its capabilities of productivity and 
efficiency. As a nation, that same investment strategy is reflected by 
average Americans every day when they seek the financial security of 
their families and their productivity as a people by educating their 
children.
  I recognize, because of the variety of deductions and rate 
alterations that are going to be suggested in this Congress, that 100-
percent deductibility for Harvard or Yale or Princeton might not 
initially be possible.
  Because we cannot do everything does not mean we cannot do anything. 
If 100-percent deductibility for the most expensive schools in the 
Nation is not possible, 100-percent deductibility for the cost of going 
to a State university or a more moderately priced school is affordable 
and should be in this legislation.
  Second, the national crisis of savings and retirement: There is no 
arguing that these are extraordinary economic times by almost any 
measure--national competitiveness, efficiency, employment, and quality 
of life. In this panoply of good news, there is at least a single 
measure of a mounting national problem: the national savings rate.
  As this chart demonstrates, from only 20 years ago, when Americans 
were saving 10 percent of their income, for the first time since the 
Great Depression, the Nation now has a negative savings rate.
  The consequences of this are very clear. American families are 
maintaining their standard of living by going into debt further and 
further every year. In the last 23 years, the debt burden on American 
families has quadrupled. We are now last in the developed world in the 
amount of money available to every family in their personal savings.
  Nearly two-thirds of Americans have no stake in the society, no 
accumulated wealth but the value of their home. The consequences of 
this on society are very clear. Most Americans are no more than a 
sickness, a natural catastrophe, a divorce, or the loss of a job away 
from losing a home and everything they have worked for all of their 
lives. A stable society that is prosperous and confident must have 
broad-based savings by its people.
  There is a reason why Americans have stopped saving money. This 
Government has made savings an irrational economic act. A working 
family on a modest income, who puts a few dollars in the bank or in the 
stock market every year hoping for a dividend, a small capital gain, 
some appreciation, faces the prospect of paying taxes on it every 
April. This denies people not only security from the vagaries of 
everyday life, it also denies them the ability to save appropriately 
for their own retirement and ultimately makes them dependent upon 
Government to an extent that should not be necessary.
  Let me be clear because I believe this is so fundamental to this tax 
bill. The Federal Government, in its current circumstances, does not 
need tax revenues from taxing the dividends, interest, or capital gains 
of working-class families who decide to have modest savings and make an 
investment in the country for themselves, their children, or their 
future. We not only do not need their money, we should be encouraging 
them to every extent possible to participate in the growth of the 
country and save their own money: Buy a mutual fund, put money in the 
bank, get in the stock market, make a family investment, and keep your 
money.
  If we provide a $500 exclusion for dividends, savings on interest in 
bank accounts, $2,000 or $3,000 exclusion for capital gains, we can 
eliminate all taxes on savings for 20 million Americans; 20 million 
Americans would be eliminated from the tax rolls with regard to their 
savings account or their brokerage account.
  This Congress could make saving money and getting financial security 
to be a rational economic act again.
  For most Americans, this would translate into the ability to have 
$10,000 in the bank or in the stock market, knowing it is theirs and it 
will not add to their tax liability every April. I believe this second 
element, in addition to a broad-based rate reduction, is a critical 
component of comprehensive tax reform.
  Third, the elimination of the estate tax for small business and 
family farms: There is clearly a general agreement in this Congress by 
Democrats and Republicans that we can eliminate all taxes as we now 
know them on estates for small businesses and family farms. The 
question is whether we can afford to do this for everybody or only for 
90 percent of those Americans who would be eliminated from the estate 
tax rolls if we simply increased the threshold to $5 million or $7 
million.
  We all agree there is a problem. Seventy percent of small business 
owners choose to sell their businesses rather than pass that business 
on to their children and pay the estate tax. The estate tax is 
destroying small business in America, family businesses, the continuity 
of ownership and pride within a business inside a family. As a result, 
only 13 percent of small businesses in existence today will survive to 
the third generation.
  With the loss of family farms, it is even worse, adding not only to 
the loss of continuity of ownership of a family farm but in a State 
such as mine, in New Jersey, more importantly, the destruction of the 
land. People who want to be in farming and want their children to be in 
farming have to sell the farm to a developer and divide the acreage 
because upon their death, their children cannot afford to pay the tax.
  The better alternative, if we cannot afford to eliminate the estate 
tax entirely, is to increase the exemption to such a level that every 
small business and every family farm, for all practical purposes, is 
excluded from the tax.
  Under current law, there is a $2.6 million exemption for qualified 
family farms and small businesses. But in a State such as New Jersey--
indeed, much of the country--if you have significant acreage, you may 
not be a wealthy person--indeed, you may have no cash available at 
all--but your land may be worth more than that, and you cannot afford 
to give it to your child on your death. Therefore, the more effective 
alternative to repeal may be to increase the threshold to $8 million or 
maybe even $10 million. This would deal with the practical problems of 
destroying small businesses and family farms.
  Four, rate reduction. I began this discussion by conceding the 
point--and, indeed, conceding it gladly--that every American deserves a 
tax break regardless of their income because every American, regardless 
of their position, has contributed to the surplus and the new national 
prosperity.
  I say this because my hope is that this discussion of tax reduction 
cannot become a debate about different sections of the country any more 
than it should about different stratums of wealth, a fight of region, 
or class warfare. All Americans helped produce this prosperity, and 
everyone should share in its benefits. But I also want this 
congressional debate to begin with the idea that we all do come from 
different sections of the country and have different concepts of the 
tax burden.
  The issue becomes that we all want these tax reductions to go to 
primarily

[[Page 1566]]

middle-income people, which begs the question: What is a middle-income 
family? Is a family of four making $40,000 or $50,000 middle income? 
There are regions of the country where the answer to that might be 
affirmative.
  In the State of New Jersey--indeed, I suspect in New York, 
California, southern Florida, or northern Illinois--the answer most 
decidedly is no. A family of four earning $40,000 to $50,000 a year is 
struggling every single day to pay their mortgage, educate their 
children, feed their children, and clothe them. That is not a life of 
prosperity and ease. It is only marginally sometimes middle income.
  Indeed, in my State, a family earning $70,000 a year is probably a 
police officer married to a nurse or a schoolteacher. This is a family 
of middle-income status that deserves these benefits. So I hope we can 
avoid a discussion of broad-based tax relief that focuses most tax 
benefits significantly below this level of income.
  I want to be accommodating to my colleagues. I want this to be a 
bipartisan and broadly based tax plan, but I will fight to the end to 
assure these levels defining ``middle-income families'' are realistic 
for these police officers, nurses, teachers, and small business people 
who have modest incomes and high expenses in our urban and suburban 
areas of the country.
  Last year, when Senator Coverdell and I introduced the first 
bipartisan broad-based expansion of tax brackets for lower rates, the 
center of our plan--largely now adopted by President Bush--was to 
expand the 15-percent tax bracket to a family of four earning $75,000. 
This would move 7 million taxpayers into the lowest Federal bracket, 
recognizing that no one in this bracket, as I earlier suggested, should 
be paying 28 or 31 percent. This is the centerpiece, in my judgment, of 
any rate reduction.
  Finally, I leave my colleagues with two other concepts that I hope 
will be considered, recognizing that in addition to the education and 
health care and open space agendas of the Nation, and the need for 
broad-based rate reductions, there are two other issues Congress has 
addressed previously where we are not succeeding that could be impacted 
by the tax break.
  First is our urban agenda. We have tried Empowerment Zones and HOPE 
VI grants and a variety of measures to deal with our urban problems. 
Some have succeeded. Indeed, I am proud of many. But my sense is that 
our cities are now at the point where private investment could largely 
follow these Federal initiatives in an urban renaissance. If we could 
change, even marginally, the profitability of urban investment, such 
as, in wide areas of Newark and Jersey City--I recognize private 
housing is beginning to be built, but what is a tentative beginning 
could be an explosion of investment if we could marginally change the 
tax status of the developers.
  So I propose, for home ownership and investment in our urban areas, 
we take these areas of urban Empowerment Zones and do an exclusion on 
capital gains for those who will invest in new housing or new 
investment. Allow the developer to keep $25,000 of capital gains on 
every house they build in an urban enterprise zone as their money, if 
they will take the risk and change the economics of that investment.
  Second, and finally, on brownfields, brownfields is an important 
concept to recycle urban polluted lands into vital economic resources. 
It has been successful, but it must move more quickly.
  Mr. President, I conclude simply by suggesting I want to accelerate 
and increase the tax deductibility for investment in brownfields. I 
leave my colleagues with the thought that I hope this is a good debate 
on tax reduction. I hope it is comprehensive. I hope it is balanced. I 
hope we seize this extraordinary moment to impact the lives of as many 
Americans as possible while assuring our economic future.
  I yield the floor and thank the Presiding Officer for his indulgence.
  The PRESIDING OFFICER (Mr. Allen). I thank the Senator from New 
Jersey.
  The Chair recognizes the Senator from Connecticut, Mr. Lieberman.
  Mr. LIEBERMAN. I thank the Chair and thank my colleague.

                          ____________________