[Congressional Record (Bound Edition), Volume 147 (2001), Part 4]
[House]
[Pages 5475-5479]
[From the U.S. Government Publishing Office, www.gpo.gov]



                   DOMESTIC AND FOREIGN POLICY ISSUES

  The SPEAKER pro tempore (Mr. Pence). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from California (Mr. Sherman) 
is recognized for 60 minutes as the designee of the minority leader.
  Mr. SHERMAN. Mr. Speaker, I want to thank the House for giving me the 
last hour before our adjournment for the Easter and Passover recess. I 
want to cover four issues, and hopefully I can do so in less than the 1 
hour allotted: first, taxation and the energy crisis in California; and 
then two foreign policy issues, our airmen being held in China, and our 
sanctions policy and

[[Page 5476]]

our use of economic tools in order to achieve our national security 
purposes.
  Mr. Speaker, 2 months ago the President of the United States stood 
where you sit now and asked us to pass his tax program for a particular 
waitress. He described this waitress as having an income of $25,000, 
two kids, no spouse, and said that is the reason that we need his 
program. And he was compassionate in that description; unfortunately, 
not compassionate to that waitress or the other waitresses that work 
with her. You see, under the President's tax program, that waitress 
with two kids does get a little bit of tax relief, perhaps 2 percent of 
her income, perhaps a cheap 25-cent tip left under the table or under 
the plate. But he carefully selected the one waitress in the entire 
restaurant that gets anything at all.
  You see, under the President's plan as passed by this House, if that 
waitress had had an income of $23,000, she gets not 1 penny, not even a 
1-cent insult tip. If the waitress, the exact waitress he described 
with two kids and $25,000, spends anything for child care, then she 
gets no additional benefit at all, not 1 penny from the President's 
program. And if that waitress has an income of $23,000, $25,000 or 
$26,000 and has 3 kids instead of 2 kids, not 1 penny.
  So we were told to pass a tax program to help hard-working waitresses 
supporting kids, and virtually every waitress in the restaurant goes 
home without even a 1-cent tip.
  This House has added, this President's rhetoric has added an insult 
on top of that injury. There is injury to those waitresses from a tax 
program that this House adopted that the President asked us to adopt, 
because we are going to see higher interest rates, and every waitress 
in that restaurant is going to be having a harder time buying an 
automobile, or if she is very fortunate and can almost afford a house, 
perhaps will not be able to do so. A worse economy and fewer patrons of 
that restaurant, all of this will injure those waitresses that get not 
one penny of tax relief from the plan.
  Added to the injury is the insult. The President has again and again 
before audiences across the country said that his plan provides tax 
relief to every taxpayer, and his overwhelming implication is if you do 
not get anything from his plan, it is because you are not a taxpayer. 
If he does not give you anything, it is because you do not deserve 
anything.
  I ask the waitresses of this country to look at their paycheck stubs 
and see if there is a deduction for FICA. Then at that point, realize 
either your employer is lying to you when they take the money out of 
our paycheck for FICA, or the President is lying when he says that the 
waitresses of this country do not pay taxes because they do pay taxes 
to the Federal Government, and they get in almost every case not one 
penny of tax relief, but just a slap across the face with the insult 
that they are not taxpayers and do not deserve any relief from the 
Republican plan.
  Mr. Speaker, never was this illustrated quite so clearly as today 
when we took up another piece of the President's tax plan, and that was 
a complete abolition of the estate tax. Mr. Speaker, most people of 
this country pay income tax, but the working poor generally pay only 
FICA tax. And there are some who are very wealthy who, because of the 
way that they have structured their investments, pay no income tax, but 
they pay estate tax. Three major taxes for the Federal Government: one, 
a burden on the poor; another a burden on most of us; and the third 
affects only those at the top 2 percent.
  The President has decided if you do not pay income tax, but you pay 
estate tax, you deserve tax relief because you are in the richest 2 
percent, and he wants to help you. But if you pay no income tax, and 
you pay only FICA tax, you get not one penny, as I have said several 
times.
  So what is this estate tax package? It is a package passed today, 
which, if we made it immediately effective, would cost $663 billion 
over a 10-year period. With all of the rhetoric on this floor, you 
would think that we would have made it effective immediately. Speaker 
after speaker talked about how this tax is terrible, and yet the bill 
we adopted does almost nothing to reduce the tax on those with assets 
of 2-, 3- or $5 million, almost nothing for the next several years.
  Why is that? Because, Mr. Speaker, in order to sneak this tax cut in, 
it is passed today, but does not become effective really for over 10 
years. So a tax cut which is bad economic policy for today, which is 
such bad economic policy that no one would stand here in the well and 
say it ought to be effective today for today's economy, becomes 
effective in the year 2011 economy at a time when it is going to do the 
economy even more harm.
  You see, Mr. Speaker, right now we have a surplus. It is not as big 
as some would say. It is certainly not permanent, but we have a 
surplus. Eleven years from now we do not know whether we have a surplus 
or not. But we do know that 11 years from now is about the beginning of 
the baby-boomer retirement that will put whole new strains on the 
Federal budget as a huge number of people sign up for Social Security. 
So a policy that is so fiscally irresponsible that no one will speak in 
favor of its immediate adoption will become locked in 11 years from now 
when we are more vulnerable to fiscal irresponsibility.
  Why this tax cut in the estate tax? Well, the estate tax affects only 
the wealthiest 2 percent of Americans. If you care about the other 98 
percent, then we should have voted that down so that we could pay off 
the national debt, resume economic growth at a reasonable rate, and 
reduce interest rates without causing inflation.
  Now, one thing I want to clarify in how I discuss an estate of 4- or 
$5 million is that we are talking about the net estate. So if you have 
a $10 million farm, assets of land and equipment worth $10 million, you 
in most cases do not have a $4 million estate because most farmers in 
that situation owe at least $6 million to the bank. You look only at 
the estate net of, of course, funeral and health costs of the deceased, 
but also net of all the liabilities. So a lot of people out there 
think, ``Oh, I have got assets of $10 million, I am going to be subject 
of the estate tax,'' have got to first subtract the liabilities. So 
only the wealthiest 2 percent of families in this country will pay any 
estate tax at all.
  But we on the Democratic side put forward an alternative, an 
alternative that would turn to 1.8 out of that 2 percent and say, no 
tax at all; immediate tax relief. And you continue to enjoy the income 
tax reductions caused by a ``step-up in basis'' so that the heirs to 
assets are able to value those assets on the date that they acquired 
them or the date of the decedent's death, so higher depreciation 
deductions are available to someone who inherits an apartment building 
or inherits farm equipment. Lower capital gains tax is paid by those 
who inherit stocks and bonds, or those who sell off part of the land 
that they inherit.

                              {time}  1830

  So a Democratic proposal that provided immediate relief for every 
family with $4 million in net assets and provided all taxpayers 
permanently with that reduction in their income tax from a step-up in 
basis, that was all voted down. Why? Because instead the Republican 
side demanded that we embrace something that would exempt the as of yet 
unborn Bill Gates, Jr. from any tax at all on what we would hope would 
be billions of dollars of inheritance. In order to provide that those 
with assets of $100, $200, $300 million will pay not a penny in tax, 
the interests of those with $2, $3, $4 and $5 million were sacrificed 
by a Republican Party that talks the talk of small business but walks 
the walk of huge fortunes.
  The Democratic alternative provided immediate tax relief, immediate 
complete insulation on taxes for the first $4 million that a family 
owns, racheting that up to $5 million over the next 10 years. The 
Republican plan provided virtually no tax relief to a family with 2 or 
3 or $4 million in assets if a death occurs next year or the year after 
that or the year after that. They have decided to ignore those who die 
soon or

[[Page 5477]]

die in the next few years and their heirs. They have decided to ignore 
those who need the reduced income taxes of that step-up in basis 
because their running business is worth 2 or $3 million and need the 
higher tax deductions, income tax deductions, all to embrace the needs 
of those with assets of over $10 million, over $20 million. What is 
amazing is that they were able to sell some of the small business 
groups on it. They have talked the talk of tax relief for those with a 
few million dollars. They have walked the walk of the huge fortunes.
  We are well on our way to a series of tax bills that we cannot 
afford, that will probably add up to $3 trillion in tax cuts over the 
next 10 years, and much of the cost of those bills is going to be 
hidden by the fact that many of their provisions do not even become 
effective until more than 10 years from now. What we ought to do if we 
are fiscally responsible is simply pass those tax provisions that 
become effective this year or next year.
  If the Republican side were to come down to this floor and say, here 
is what we want the tax law to look like for 2001, here is what we want 
it to look like for 2002, pass that, and then wait a year and see where 
the economy is, they could probably get almost total support in the 
House. It is their insistence on locking this country in to an economic 
plan that it cannot afford, an economic plan that guarantees slow 
growth or recession, that virtually guarantees higher interest rates. 
It is that insistence that is causing dissension both here in the House 
and fortunately greater dissension in the Senate. Keep in mind that 
under the tax plan the Republicans have put before us, 79 percent of 
the package does not even become effective until more than 5 years from 
now. Instead of providing the tax relief we can afford and the stimulus 
that some say we need, it simply locks in the greatest cuts for the 
wealthiest people many, many years from now.
  Mr. Speaker, I would now like to focus on what some regard as a 
regional problem, perhaps just the problem of one State, but it is 
actually the problem of the entire country, and, that is, the 
electrical energy crisis and related natural gas crisis in my home 
State of California. First, let me dispel the idea that it was all the 
fault of the extreme environmentalists, tree huggers in California, who 
would not allow any plants to be built and now we are reaping what we 
have sown. Nothing could be more clearly disproven in so many different 
ways.
  First, no Federal agency was issuing a loud warning 2 or 3 years ago. 
No experts from the private sector, no experts from the utility sector 
were saying that we were headed for a particular problem. There are 
geniuses on Wall Street that could have quintupled and requintupled and 
made tenfold and twentyfold on their money by selling short the stock 
of California utilities.
  Yet none of them saw this coming. Now, we are told that no plants 
were sited in California. Keep in mind, many have been approved in the 
last 2 years. But during the 8 years in which Republican Pete Wilson 
was governor of our State, not a single plant was sited.
  But let us say that you come here with an extreme prejudice against 
California and you think both Republicans and Democrats in California 
have somehow brought this upon our State. Electricity can be 
transported for a few hundred miles. If you want to serve the 
California market, you cannot do so from a plant in Pennsylvania. But 
you can do so from a plant in Nevada or Arizona.
  If anybody foresaw an extreme shortage of electricity and even a 
modest increase in the price of electricity in California and the other 
western States, they did not have to build a plant in California. They 
could have built one in Arizona, Nevada, Oregon or Washington. So you 
would have to believe that the environmental extremists are in control 
not only of California but of Nevada and Arizona, Oregon and 
Washington, Nevada and Arizona being two of the most pro-business 
States, two of the most Republican-voting States in this country.
  The fact is no one wanted to build a plant in California, and no one 
wanted to build a plant in those other western States I mentioned. No 
one foresaw this problem until quite recently, with the exception of 
perhaps a few academics whose voice was not loud enough for anyone to 
hear. So it is obvious that this is not a problem we brought upon 
ourselves. We embraced the free market. The free market operated not 
only in California but in adjoining States as well, and the free market 
let us down. It did not cause those plants to be sited in California or 
the other adjoining States.
  So California did not cause this problem. But we are told it is 
California's problem and it is up to California to solve it. Let us 
analyze the problem and let us see whether California should be called 
upon to, quote, ``solve its own problem,'' or whether instead the 
Federal Government has handcuffed California so that it cannot solve 
this problem without a change of Federal policy.
  Let us look first at natural gas. Now, the price of natural gas in 
North America has more than doubled in the last couple of years. That 
is supply and demand, and that is a relatively competitive market with 
lots of producers and lots of consumers. Still, the doubling of that 
commodity and more in the last couple of years has put a strain on 
consumers and utilities around this country. But imagine, if you will, 
that on top of that doubling, there was a tenfold increase in the cost 
of moving natural gas from Texas and New Mexico where it is produced 
into California. The cost went from less than 50 cents to over $5. The 
cost of natural gas in California is double what it is in the rest of 
the country.
  Why did that happen? Why that doubling? Because FERC partially 
deregulated, actually deregulated enough for smart lawyers to find a 
way to totally deregulate the price of moving natural gas from Texas to 
California. And now natural gas costs more to move from Texas to 
California than it costs to buy it in Texas. The transportation cost 
exceeds the commodity cost. Why? FERC.
  Mr. Speaker, it has been said that California has been shafted. Mr. 
Speaker, California has been FERCed. That is F-E-R-C-e-d, hopefully not 
to be confused with any term of similar sound.
  The next focus has got to be on the cost of generating electricity. 
In the spot market, the wholesale price has gone up ten and twentyfold. 
We are told that this is somehow California's fault. I have disproved 
that. But the question is, can California solve this problem? As it 
happens, Federal law prohibits California from imposing even temporary 
cost-based controls on the cost of electricity at the wholesale level. 
So here we are with plants in our own State capable of generating most 
or all of the electricity we need in most or all of the months of the 
year and California has been told, ``It's your problem. Solve the 
problem. Oh, by the way here is a Federal law that says you can't solve 
the problem by regulating the wholesale price of electricity,'' which 
by the way is about the only way to solve it in the short term.
  Take off the Federal handcuffs or stop laughing at California and 
saying it is our problem and up to us to solve it. California could 
save 1 or 2 percent of its electricity needs simply by adjusting the 
way we use Daylight Savings Time. But the Federal Government will not 
even let us adjust our own clocks. The handcuffs are on. The Federal 
Government puts the handcuffs on California and then says, ``It's your 
problem. Go solve it. Just don't try to do anything that might be 
effective because it will be prohibited by Federal law.''
  Federal law must reregulate the price of moving natural gas from New 
Mexico to California. And if the Federal Government does not want to do 
it, then perhaps that right could be granted to the State of 
California. I realize the pipelines that I am talking about do not run 
through the State, but a Federal grant of that power to California 
would probably be constitutional. The Federal Government does not want 
to regulate the wholesale price of electricity generated by plants in 
California. Fine. Let California do it. Let Oregon do it for its 
plants. Let Washington do it for plants in the

[[Page 5478]]

State of Washington. Take off the handcuffs. Better yet, lend a hand. 
FERC should regulate the price of pipeline usage and the cost at the 
wholesale level of electricity.
  I do want to comment a little bit about the shortage of electricity 
in California in one respect and, that is, the term ``closed for 
maintenance.'' I thought closed for maintenance meant, ``We got to fix 
the plant. We got guys working on it.'' I have come to learn closed for 
maintenance means closed to maintain an incredibly high price for each 
kilowatt.
  Last summer, without any shortages that came to anyone's notice, or 
with the notice of very many, California demanded and needed and got 
from its existing plants 45,000 megawatts of electricity. This last 
winter and spring when we needed 33,000 megawatts, the plants are 
closed for maintenance. The electricity cannot be generated. What 
changed was not the plants. The plants were adequate to give us 45,000 
megawatts of electricity last summer. What changed was the law, the 
incentives. The incentives went to closed for maintenance, the lights 
went out, the prices went up.
  Mr. Speaker, I hesitate to phrase it this way, but this 
administration is waging war on California. Maybe it is because we did 
not vote for them. Maybe it is because they see our governor as a 
challenger in 2004. I think it is a war being waged for the same reason 
the ancients waged war and that was to get war booty. In this case 
incredibly high profits for certain companies based in Texas, both the 
pipeline companies that own the natural gas pipelines and the companies 
that own the generation facilities that sell that electricity to the 
utilities in California.
  The question, though, is not why is the Bush administration waging 
war on California but why does this Congress allow for that war to be 
waged? All Americans are going to suffer from this war. If we do not 
regulate natural gas pipelines, the wholesale value of electricity, and 
allow California to adjust its clocks, then it will not just be my 
district or my State that suffers. This entire economy is wired 
together. The markets drop in Tokyo and all of a sudden the markets 
drop on Wall Street and people's 401(k)s are down. If you think you 
live outside of California and you are not tied to our State, imagine 
how much more tied you are to California than you are to Tokyo.

                              {time}  1845

  If California is going down, it is not going to be good for any part 
of this country.
  I want to add a footnote or two here. The first footnote is that many 
of the bad decisions the Federal Government made were made in the 
waning days of the last administration, but I am confident that an 
administration that cared about California would have reversed those 
decisions and this administration should reverse those decisions right 
now.
  Back in October, it was not obvious to many that California was going 
to be suffering just a few months later, but when that suffering began 
it is time to adopt revised Federal policies.
  The second myth I want to dispel is the idea put forward by those who 
worship, do not just understand and usually practice but worship, the 
free market system. The free market system works rather well for most 
things, but if one had to pick something it was not going to work for, 
well think of a good that cannot be stored, cannot be transported but a 
few hundred miles, has no substitutes, is a necessity, to put it in 
economic terms, has a price elasticity of roughly point one, which is 
to say it is a necessity where you need the amount you need and if they 
sell it for less you are not going to use more, and if they charge you 
more it is incredibly difficult to use less. It is a necessity. It 
cannot be stored.
  It is not subject to the regular market forces. If there was ever a 
good that did not fit the absolute worshipping of a free market, this 
is it.
  We are told that the free market must be allowed to run unfettered 
and that California's problem is that we deregulated the wholesale 
price of electricity but we maintained regulation on the retail price. 
So the amount SoCal Edison has to pay the generator companies, most of 
them based in Texas coincidentally, the plants may be in California but 
they are owned by some particular business interests, that the amount 
that SoCal Edison has to pay for the electricity has been deregulated 
but the amount that they sell it to the consumer for has been regulated 
and that that is the problem; that if only we deregulated both sides of 
the equation everything would be fine.
  I ask people to look at San Diego. In San Diego County, we did 
exactly what the worshippers of the free market, and I include myself 
among those who usually want to go with free enterprise and free 
markets, but those who are so blinded by the benefits of free markets 
that they cannot see the exceptions, we are told that if you only 
deregulated the wholesale and the retail that everything would be fine.
  What has happened in San Diego when we did just what they suggest, 
the retail consumer price of electricity went up by four-fold. So you 
are used to paying a $100 electric bill and you get one for $400, the 
price goes four-fold in a couple of months. I ask my colleagues, what 
would happen in their districts if everyone who is used to getting a 
$100 electric bill got a $400 electric bill like that? How many people 
would be sitting in their office and how many of them would say, well, 
thank God, we did what those who are so extreme that they worship the 
free markets have suggested, thank God we went for the most pristine 
possible deregulation?
  How many of them would be thrilled to get that $400 electric bill?


                    Americans Held Hostage, Day Four

  Mr. SHERMAN. Mr. Speaker, I would now like to shift to a discussion 
of foreign policy, starting with the Americans being held on the 
Chinese island of Hainan; America held hostage, day four.
  Let us go through a few of the facts that have been uncontroverted. 
Our plane was in international air space. The Chinese have admitted 
that. Our plane was flying slow, clumsy, large, Turboprop, not looking 
for any trouble; not trying to approach any Chinese planes. Chinese 
fighter planes that are fast and maneuverable deliberately came as 
close as possible to the American plane, and then there was a 
collision.
  I ask us to think about this in our own lives. If one car is just 
proceeding about its business and another one, a hot rod, tries to 
squirm as close as possible, some teenager trying to get just as close 
as possible to an old driver and then there is a collision, who do we 
blame?
  This was not the first time, Mr. Speaker. Again and again and again, 
through formal and informal channels, the United States has, for a 
period of many months, told the Chinese side that their repeated unsafe 
and reckless flying, their interception of our planes and coming not 
just as close as safe but closer than safe, buzzing those planes, 
reckless disregard for the safety of both aircraft, gross negligence, 
would some day lead to an accident; and then it did.
  I do not know why the Chinese instructed their pilots to engage in 
this game, or whether they were so instructed at all. Was it teenage 
hormones? Was it an attempt to intimidate an American plane over 
international waters? Or was it some effort to try to cause a collision 
but one that would kill Americans instead of Chinese airmen?
  I do not know, but there is no moral reason for this intentionally 
dangerous flying, even after repeat warnings. Yet, the Chinese are 
asking us for an apology.
  Mr. Speaker, my people have a word for that. It is called chutzpah. 
Chutzpah is when a young man convicted of brutally killing both of his 
parents goes before the judge and asks for mercy on the basis that he 
is an orphan, and the request for this apology fits in that same 
category of chutzpah.
  International law is clear. That plane cannot be touched. News 
reports are clear. The Chinese side is all over that

[[Page 5479]]

plane looking for every secret, dismantling equipment, in violation of 
international law.
  International law is clear. Our people are to be back here. They 
retain their sovereign immunity when they land in desperation and 
emergency, which I might add in this case was caused by the incredible 
gross negligence, repeated gross negligence, of Chinese fliers. Yet, we 
are being asked for an apology. Reckless flying, ignoring international 
law as to our plane when it is on the ground, holding our Naval airmen 
hostage, and they are asking us for an apology.
  Perhaps the only thing that is more outrageous than all that is that, 
as I speak here, imports from China are being unloaded at American 
harbors in part of the most lopsided pro-Chinese trade relationship 
that any economist could ever imagine. They are allowed access to our 
markets where they sell over $80 billion of goods and we are lucky if 
we can sell $12 billion of goods into China.
  What ought to happen is that we ought to make it clear, we ought to 
today stop the importation of Chinese goods until our Naval airmen are 
back on their ships or in American hands. Oh, but that would mean 
perhaps a few hours or a day of delay in bringing in tennis shoes or 
plastic toys, and the commercial interests that flex their muscle so 
strongly when we dealt with providing China with permanent Most Favored 
Nation status will be back here, or are already back here flexing their 
muscles, and their message is clear. Do not interrupt a single package, 
a single container of tennis shoes, no matter how lopsided the trade 
arrangement is, no matter how absolutely dependent China is, and they 
are utterly dependent on the American market, roughly half, very 
roughly half their exports go to the United States. We are the only 
country that lets them run a huge trade surplus with us and we are the 
only country willing to run a huge trade deficit with them.
  Yet in spite of the fact that we are strong and they are weak, they 
are unified and we are looking only at the commercial interests of a 
few companies.
  So, Mr. Speaker, what I fear is that corporate interests, and just a 
few corporate interests, engaged in this importation frenzy will demand 
that we apologize, demand that we pay the Chinese money. They will 
demand that we be weak because sniveling preserves profits.
  I hope that this administration and this Congress reject that kind of 
thinking.
  Mr. Speaker, I would like to go into my fourth topic but I see it is 
getting late. So I will come back to this floor to deliver a speech 
dealing with the fourth topic I wanted to cover, and that was our use 
of economic sanctions, economic carrots and sticks, in order to achieve 
our international objectives.

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