[Congressional Record (Bound Edition), Volume 149 (2003), Part 1]
[Senate]
[Pages 327-333]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     STATE OF THE AMERICAN ECONOMY

  Mr. HARKIN. Mr. President, I want to spend some time today here on 
the floor of the Senate discussing the state of the American economy, 
the choices we face, how we got here and hopefully a vision for a 
better future for our middle-class working families.
  What is the state of the Nation's economy? You don't need to look at 
the economic indicators, and the latest unemployment statistics, 
although they could tell you a story. You can just walk on the streets 
of Burlington or Waterloo or any city, or most towns large and small 
anywhere in America. For ordinary people paying taxes, it is tough for 
families right now. People are hurting.
  In the longer view, we face a growing fiscal and economic crisis due 
to a lack

[[Page 328]]

of reasonable economic leadership of this President. We have returned 
to deficit spending and are mortgaging the dreams of the middle class 
with millions to finance a tax cut aimed at the very few. That tax cut 
is squeezing out sensible, middle-class tax relief. It is squeezing out 
funding for health care and education. In the last year, the President, 
even in his budget reduced funding for the Leave No Child Behind Act, 
which just yesterday at the White House he was touting as being a great 
success. It is squeezing out money needed for that.
  Worst of all, the President's fiscal mismanagement threatens Social 
Security and Medicare, and threatens having a real prescription drug 
benefit that is so needed. It threatens the need that we have to raise 
the floor on Medicare payments to States. My State of Iowa is right now 
rock bottom in the Nation in terms of beneficiary funding for Medicare.
  Again, we are facing the retirement of the baby boomers who are 
coming along pretty soon; and, of course, the need to fight terrorism.
  All of these are being squeezed by the misguided and misplaced 
economic policies of this administration. To date, the economic 
leadership of President Bush has been a miserable failure.
  Let us start at the beginning.
  On the day that George W. Bush was sworn as the 43rd President of the 
United States, the 10-year budget surplus was estimated at $5.6 
trillion $3.1 trillion on budget--the largest in American history. That 
year's budget surplus was $236 billion--again, the largest 1-year 
budget surplus in our Nation's history. The economy had created 22 
million new jobs in the previous 8 years. Unemployment stood at 4.2 
percent, a record.
  The Nation's fiscal health in January of 2001 was such that facing a 
slowing economy, we could have passed a substantial stimulus package to 
boost the short-term economy without harming the Nation's long-term 
fiscal health. In kind of simple terms, it is if you or I get sick, and 
if we eat right and exercise, and we are in good health, we can even 
ride out the occasion of a bad flu, for example. But if you haven't 
taken care of yourself, if you haven't eaten right, and you are not in 
good health overall, a simple flu can put you in the hospital or on 
life support. That is the kind of smart economic plan we followed in 
the 1990s. Those fiscally responsible and pro-growth policies made it 
possible for us to deal with the short-term economic slowdown without 
harming our Nation's long-term fiscal health.
  Unfortunately, President Bush chose a different but now an all-to-
familiar economic course--a massive, fiscally irresponsible tax cut 
that does little to create jobs but does benefit largely the wealthiest 
among us. It has little or nothing to do with helping the middle class 
or with creating jobs.
  In this day and age it seems that a Republican candidate running for 
President can never go wrong by proposing a massive, deficit-bloating 
tax plan that largely benefits the wealthy. That is what candidate 
George Bush did in 1999. It was not about the state of the American 
economy, it was about simple Republican politics.
  The Bush tax plan forgot that Americans don't live their lives on the 
right or the left of political parties. They live and work and struggle 
as part of the great American middle class. And they are here every 
day--not just on election day. They deserve economic policies that 
respond to their needs--not the short-term political goals of this 
President, or any other politician or party or political theory. Not 
only is the Bush tax plan rooted in what I call 2000 Republican 
politics, but it is deeply rooted in a failed economic theory called 
``supply-side economics.'' Supply-side economics is nothing more than a 
dressed up fancy name for what we called back in the 1920s and the 
1930s trickle-down economics. In fact, former President Bush called it, 
I think, what it really is. He once termed it voodoo economics.
  You can call it anything you want, but, in the end, it spells 
disaster for America's long-term fiscal health. At its core, trickle-
down economics says that if we just slash marginal tax rates, 
particularly for the wealthiest Americans, they will get so much money 
that it will trickle down, and the economy will grow so rapidly that 
this tax cut will, to a significant extent, pay for itself.
  Well, it is a nice theory for those who are not weighted down by the 
burden of reality. It does not work in widely held economic theory and 
it did not work in practice when former President Reagan tried it in 
1981. That is a fact.
  Many will claim that the 1981 tax cut was good for the economy. In 
fact, the economy dropped like a rock. When it passed in August 1981, 
unemployment was 7.4 percent. By the end of the year, it had climbed to 
8.5 percent. A year after passage, it was continuing to rise, reaching 
a peak of 10.8 percent.
  In Iowa, we faced the worst farm and small-town prices since the 
Great Depression. I have a chart in the Chamber that depicts what 
happened after the 1981 tax bill was passed. It shows the unemployment 
rate going up and up and up and up and up all the time. That was the 
result of that 1981 tax bill.
  While the economy did get back on track, it did thanks to a sharp cut 
in interest rates by the Federal Reserve in 1982. But the adverse 
effects of this misguided tax policy remained. The Federal deficit 
climbed from 2.7 percent of the gross domestic product to over 5 
percent--double. More importantly, over time, the Government's publicly 
held debt multiplied fivefold as well.
  This failed philosophy is now being put into practice for the second 
time with the first Bush tax cut and now with this proposed second tax 
cut. That is why I call those who support this failed economic program 
``red ink'' Republicans. Maybe, as we move ahead if this is the course 
Republicans choose, I say to the Presiding Officer, we should replace 
the symbol of the Republican Party with something more fitting. Rather 
than an elephant that is supposed to have a great memory, perhaps the 
symbol of the Republican Party ought to be a big bottle of red ink, 
because every chance that these ``red ink'' Republicans get, they leave 
us swimming in red ink in this country. They did it in 1981. They are 
doing it again now--deficits, deficits, deficits as far as the eye can 
see.
  This chart shows what happened during the 1980s. The deficits 
climbed. Then, in 1993, we enacted the Clinton economic program. Look 
what happened to the deficits. Down they came. Down they came, until we 
had the largest surplus on record.
  Then we hit 2001, and another trickle-down economic tax plan, with 
deficits soaring again. And again, we are swimming in red ink in this 
country. The trickle-down, red-ink tax cut in 1981 did not get folks to 
work then, and it isn't now.
  Just look at how many of my Republican friends reacted to the recent 
appointment of Stephen Friedman to the chairmanship of the President's 
National Economic Council. Many vocally opposed Mr. Friedman's 
appointment because, of all things, he was a member of the Concord 
Coalition, a bipartisan organization focused on doing away with the 
deficits. They certainly did not want anyone like that as the Chairman 
of the President's National Economic Council.
  I think the case of Mr. Friedman signals the modern day Republican 
Party's total abandonment of fiscal discipline. It began in 1981. It 
continued through the 1990s as Republicans, to a person here in the 
Congress, opposed President Clinton's economic plan, a plan that 
balanced the budget, brought us a surplus, created 22 million new jobs, 
and gave us the longest economic expansion in America's history.
  Now these ``red ink'' Republicans are still at it today. We heard all 
kinds of arguments in 1993--I was here--from my friends on the other 
side of the aisle about how terrible this 1993 recovery plan was going 
to be. Why, it was just going to be awful. It was going to destroy this 
country. And yet, as I said, it created one of the longest economic 
expansions in our Nation's history. Not one Republican voted for it.
  One trickle-down Republican after another united in one prediction: 
that the 1993 bill was going to ruin the economy.

[[Page 329]]

  Well, let's take a look at what happened, after that 1993 bill was 
passed, in terms of unemployment. Unemployment was high. We passed the 
bill and unemployment came down. It came down, in fact, to the lowest 
point in our Nation's recent history; down to about 4 percent in the 
late 1990s.
  Now we come to the end of 2000. We have our country on course. We 
have a record surplus. We have predicted surpluses for this decade of 
over $5 trillion; a healthy basis on which we could now begin to 
address the needs of the baby boomers as they start to retire, reduce 
the public debt, get our economy on a sound keel, and then, when the 
baby boomers retire, we will have the wherewithal to meet those needs 
of Social Security and Medicare. That is where we were at the beginning 
of the Bush Presidency in 2001.
  That was until President Bush sent down his tax proposal of 2001. The 
Congress passed it and sent it to the President. The price tag was 
supposed to be $1.35 trillion, but the actual cost was much higher. It 
was only by using some accounting gimmicks and tricks that would even 
make Ken Lay of Enron blush. The actual cost goes much higher.
  The 2001 tax bill was structured in another interesting way. In 2001, 
those in the top 1 percent of income--with incomes averaging over $1 
million got under 10 percent of the benefits. For 2002 and 2003, they 
get under 20 percent of the benefits. By 2006, they are scheduled the 
get over a third of the benefits. And in 2010, they get over 50 percent 
of the benefits.
  This truly is trickle-down economics. The top 1 percent's share of 
the Bush tax cuts--see, it is a kind of little trick. It starts out 
low, but look what happens when we go through the decade. And we wind 
up in a decade where over 50 percent of the Bush tax cut goes to the 
top 1 percent, the wealthiest people in this country.
  What did President Bush tell us at the time in trying to pass this 
bill?
  I quote here from a speech he gave at Western Michigan State:

       Tax relief is central to my plan to encourage economic 
     growth, and we can proceed with tax relief without fear of 
     budget deficits, even if the economy softens. Projections for 
     the surpluses in my budget are cautious and conservative. 
     They already assume an economic slowdown in the year 2001.

  President Bush gave that speech on March 27, 2001:

       . . . we can proceed with tax relief without fear of budget 
     deficits. . . .

  We went from a surplus, the largest on budget surplus in our Nation's 
history of $83 billion, to over a $300 billion deficit just two years 
later; a shift of over $400 billion in just two years. $\1/2\ trillion 
in surpluses wiped out in 2 years of this Presidency. And he said there 
would be no fear of budget deficits. Well, maybe the President doesn't 
fear budget deficits; maybe like President Reagan.
  Maybe they don't care, but the middle class in America, the baby 
boomers about ready to retire better fear it because it is eating right 
into Social Security. That is exactly what it is doing.
  Then he says, ``projections for the surpluses in my budget.'' Can you 
believe that his budget actually projected surpluses when in the very 
first year it plunges us into the biggest deficits we have ever had?
  I can only say that if I were President and my economic advisers had 
given me this plan and written this speech for me, which I assume they 
probably did for him, and it turned out the way it turned out, I would 
fire the whole lot of them. Obviously, they didn't know what they were 
talking about. Either that or they knew what they were doing, they knew 
what they were talking about, and they were pulling the wool over the 
eyes of the American people. I tend to think that is really what it was 
about. It was a scheme to reward those who had done the most to help 
this President get elected, a massive tax cut for the wealthiest in our 
country.
  Two years after this quote, here is the Bush economic record: The 
estimated 10-year budget surplus of $5.6 trillion is wiped out; this 
year's on-budget deficit, $319 billion as estimated by the CBO. The 
economy has shed 2 million jobs, the worst record of negative job 
creation of any President in more than 50 years.
  I must hand it to this President. All this was done in 2 years. It is 
amazing. The latest unemployment is about 6 percent. This is where we 
came from: 4.5 percent in April, 2001 when the bill became law. After 
18 months, it is still going up. Hang on.
  That is why we need a short-term stimulus to stop the rise in 
unemployment. Quite frankly, the President's program of slashing taxes 
on dividends will not do that. I will explain that.
  The Center on Budget and Policy Priorities noted that:

       The tax cut would cost the Treasury approximately $4 
     trillion in the decade after 2011, the same period when the 
     baby boomers will begin to retire in large numbers and the 
     cost of Social Security and Medicare and Medicaid and long-
     term care will rise substantially as a result. Yet it is 
     during that same decade, after 2010, that the cost of a 
     permanent tax cut would explode as all of its revenue losing 
     provisions would then be fully in effect.

  As I pointed out, after it goes fully into effect, well over half of 
it goes to the top 1 percent of our country. And yet those who rely on 
Social Security and Medicare and long-term care are the ones put at 
risk.
  Continuing:

       [If] the tax cut takes full effect as scheduled and 
     continues after 2010, the long-term cost will substantially 
     exceed the 75-year deficit projected within Social Security. 
     In fact, if the tax cut were just scaled back so that three-
     fifths of it took effect while the funds of the other two-
     fifths were used to strengthen Social Security, the entire 
     75-year projected deficit of Social Security could be 
     eliminated.

  There you have it. You have your priorities. Do you want to shore up 
and secure Social Security for the next 75 years, or do you want to 
give the top 1 percent of our country more tax breaks?
  That is the course we face. That is the course we have to change: 
Going from an $86 billion budget surplus to a $318 billion deficit, a 
shift of over $400 billion.
  The economic record of this President is one of fiscal mismanagement, 
economic stagnation, rising unemployment, and jeopardizing the jobs and 
the futures of our middle-class families and jeopardizing the long-term 
health of Social Security and Medicare. That is why we have to change 
course now.
  I said, we need to begin with a stimulus package to stop the rise in 
unemployment. In the coming debate, the President has already accused 
some of us on our side of playing ``class warfare.'' But it is the 
President's own tax cut of 2 years ago that already declared class 
warfare, class warfare on the middle class. Take from the middle class, 
give to the wealthiest 1 percent. If that is not class warfare, I don't 
know what is.
  Middle-class families are not getting their fair share of tax relief. 
They are not seeing their incomes rise. Many are losing their jobs. And 
every day hundreds of thousands of working families go without any 
health insurance. Millions of Americans are already without any health 
insurance coverage whatsoever; every day hundreds of thousands more are 
added to the rolls.
  For some reason the President cannot see the pain that his economic 
policies are causing. The President's refusal to see his own mistakes 
reminds me of that scene from the Caine Mutiny. The ship was sailing 
through a typhoon. It was in danger of floundering, but stubbornly and 
rigidly, Captain Queeg tells the helmsman to hold course, because Queeg 
refused to listen. He refused to see the danger ahead. He could not 
save the ship.
  Just like the crew of the Caine, our first loyalty is in saving the 
ship, not protecting the captain, not blindly following what the 
captain says when we plainly know what lies ahead. That is why it is 
time for us to change America's economic course. We need to provide an 
immediate stimulus to put people to work.
  The President made his proposal. It is more of the same--more tax 
cuts for the wealthiest, little for working and middle-class families. 
The centerpiece of the President's new proposal is the elimination of 
dividend taxes at an estimated cost of $364 billion over 10 years.

[[Page 330]]

  According to the tax policy center, about 45 percent of these 
benefits will go to the wealthiest 5 percent of taxpayers. Sound 
familiar? It should. We did the same thing 2 years ago.
  Here are the facts: A 100-percent reduction in dividend taxes, plus 
the other components of the Bush economic plan, would provide for those 
who make more than a million dollars a year over $88,000 in tax cuts 
this year, 2003. For my fellow average Iowan making between $20,000 and 
$30,000 a year, they will get $204 in 2003. So I guess the President is 
right. Everybody gets a little something--yes, average working families 
get the crumbs from the table and the wealthy get the smorgasbord. But, 
looking ahead, most of the benefits that went to average taxpayers 
dissolve. But, the linchpin of the plan that mostly goes to the top 5 
percent, that continues on for the long haul
  That is class warfare. It is a direct frontal assault on the middle 
class in America. But not only is the Bush plan class warfare, it 
mortgages our future by raiding the Social Security and Medicare trust 
funds. And now it will shortchange key investments in education, health 
care, and homeland security. I predict--and I will come to the floor 
next week and apologize if I am wrong--that the appropriations bills 
that will be brought up by the Republican side to be added to the 
continuing resolution for this year will have cuts in education 
compared to what the Appropriations Committee approved last summer. I 
predict that there will be cuts in education.
  Quite frankly, in the budget for this year that the President sent up 
for fiscal year 2003, he actually proposed cutting funding for Leave No 
Child Behind. Secretary Paige was on television today saying that was 
wrong. Next time I see Secretary Paige, next time he comes before our 
committee for a hearing, I am going to get the White House's own budget 
book and lay out the programs for Leave No Child Behind and show him 
what the President's budget was. There was a cut of $90 million in the 
Bush budget this year for the Leave No Child Behind programs. Why? So 
we can pay for all these tax cuts for the wealthiest in our society.
  Trickle-down economics. We need to get a prescription drug benefit 
through for the elderly, but there will not be any money for it. Why? 
Because we are going to have a tax benefit, doing away with taxes on 
dividends, which benefit the wealthiest 5 percent. We will not have any 
money left for prescription drug coverage. So we have to change course. 
We cannot blindly follow the captain in his misguided economic policies 
for America. We must stimulate job growth now and it must not come at 
the expense of Social Security.
  I think the following elements should be addressed and should be 
passed to get our economy going. First, extend the unemployment 
insurance benefits. We need to do that now. We have considerable 
reserves and now those facing long-term unemployment need help. Of 
course, if they get that money, they spend it quickly and it helps the 
economy. Now, we did pass an extension this week that is short, but we 
need to do more.
  Secondly, we need to provide fiscal relief for the State. States all 
across the country, including my own, are facing huge deficits that 
they have to eliminate under their State constitutions. That means 
there are going to be big cuts in crucial services--often health care 
for the poor or the working poor, education for our children, housing, 
help for the homeless, things that States have to spend a lot of money 
on. Well, they will not have it. So we are going to need to step in to 
provide these crucial services.
  Third, we need to quickly put people back to work on things we need. 
I have been trying for years to get the Congress to address the need of 
rebuilding and modernizing schools all over America. We did succeed in 
getting a billion dollars into that program in the last Clinton budget 
for 2001. The results of that are now coming in from States all over 
America. That money was used to rebuild and modernize schools all over 
America.
  Our experience in Iowa--I can only speak about that because that is 
all I have the data for right now--was that for every dollar that we 
put into rebuilding and modernizing schools in Iowa, it translated into 
well over $20 of economic activity. It put people to work, it got money 
into the economy, and guess what we got out of it. We got new schools, 
new classrooms, better equipped classrooms for our teachers to teach 
in.
  There are many projects in this country that are truly needed. We can 
have people working on these within months. I was told when they were 
using this money to build a new school in Iowa with this money that not 
only did it put people to work immediately, but the whole chain--
everything from the electricians ordering electrical parts, lights and 
wiring, to those who put in the wallboard, ordering that, and the 
lumber and the tile and everything that goes into that. As one small 
restaurant owner told me, for the year and a half they were building 
the school, he even had people come in there buying lunches, so it even 
helped that local economy. This is what we need to do to get people 
back to work right away.
  Fourth, we need to pass a short-term middle-class tax cut that will 
improve our short-term economy without further harming our long-term 
fiscal health. I say that we should consider a short-term payroll tax 
holiday, paid through the general fund, that will put money in the 
hands of people more likely to spend it right now. If we had a payroll-
tax holiday, people could get their money directly through the regular 
payroll checks, that will speed up its delivery and the likelihood that 
it will be spent now.
  We need to stimulate the economy right now and this would help 
working people left out of the tax rebates in 2001.
  Fifth, we must cut wasteful spending and close tax loopholes. I have 
outlined a series of cuts in Government spending that would do that. I 
say to my friends on the other side that we can have a significant 
stimulus package and we can take care of the unemployed, provide tax 
relief for middle-class families for this year, and reduce the size of 
Government at the same time.
  One of the first things we have to do is have competitive bidding in 
Medicare. Now, we have cut down the waste, fraud, and abuse in Medicare 
over the past 10 years. It has gone from $20-some billion a year to 
around $11 billion or $12 billion. We have a ways to go. But the one 
thing that would save money right now and cut wasteful spending would 
be good old-fashioned competitive bidding in Medicare. We ought to do 
it and we ought to do it soon.
  I believe that the stimulus package should entirely be in the 
people's hands this year. The cost should not exceed $100 billion. And, 
that it could be more than fully paid for over the course of ten years 
through the implementation of reductions in spending by things like 
requiring competitive bidding on durable medical equipment and by 
eliminating the tax rate cut that only goes to the one percent of those 
with the highest incomes, averaging over a million dollars a year. We 
also need to eliminate allowing Benedict Arnold companies and 
individuals that make their home overseas in order to escape paying 
their fair share of taxes.
  Well, this, I believe, is the course of action we ought to take and 
not continue on the disastrous course we were set upon 2 years ago. And 
now we are asked to make it even worse with the new President Bush 
proposing tax relief for the wealthy. We need a strategy that adheres 
to these good principles: benefit working and middle-class families, 
focus on job creation, restore fiscal discipline. In short, America's 
new economic strategy must take into account the economic realities, 
not failed trickle-down theories or cynical political strategies purely 
for election purposes.
  When it comes to the economy, I will paraphrase President Bush in his 
acceptance speech at the Republican National Convention almost 3 years 
ago: You have had your chance. You have not led. We will. That is what 
we need to do.

[[Page 331]]

  President Bush's response was to make permanent the 2001 tax 
windfalls which will blow a hole in the budget to endanger Social 
Security. Add to that another windfall tax benefit to the wealthiest in 
our country. By every measure, it is the wrong course for America. It 
will just ensure the rich get richer, the poor get poorer, and the 
middle class gets stuck with paying both of the bills. It is time for a 
new direction. I am hopeful that in the Senate we can have a real 
debate over the best economic policies for the future of our country.
  When it comes to the economy, the President reminds me of the guy who 
is lost driving but he refuses to pull over and get directions. He just 
keeps going down the same roads over and over. Mr. President, it is 
either time to pull over and get directions or let someone else drive 
because it is obvious, Mr. President, you and your economic team are 
lost. It is time to return to policies we know work: Balanced budgets, 
tax cuts for working families, investment in education and health care, 
not failed trickle-down economics.
  Let's start the debate. Let's have the debate, but more than the 
debate, let's have the votes in the Senate. We can no longer afford to 
delay. We have to step up to the plate and change our course. We are 
now in the midst of a serious economic and fiscal predicament. We have 
to make some adjustments, some course corrections. We cannot cling 
dogmatically and rigidly to the same old policies that did not work 
before, are failing us now, and will jeopardize the future of Social 
Security and Medicare.
  Again, let's have the debate but, more importantly, let's have the 
votes to change the economic course in our country so that our middle-
class families are the ones who benefit. Let's end the class warfare 
declared on the middle class by this President and his failed economic 
policies. Let's recognize that we are all in this together, and the 
best way to keep that ladder of opportunity there so people, yes, on 
the bottom can become middle class and, yes, those in the middle class 
can become rich is to change the failed economic policies of this 
administration.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. LEVIN. Mr. President, will the Senator yield for a unanimous-
consent request?
  Mr. REED. Yes, I yield.
  Mr. LEVIN. Mr. President, I ask unanimous consent that after the 
Senator from Rhode Island speaks for up to 10 minutes, the Senator from 
New York then be recognized for 10 minutes, and then I be recognized 
for up to 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from Rhode Island.
  Mr. REED. Mr. President, the American economy is in serious distress 
and thousands of families across America are suffering. When President 
Bush took office in January 2001, the unemployment rate was 4.2 
percent. In November of 2002, the unemployment rate was 6.0 percent; 
2.2 million more Americans were out of work than when President Bush 
took office in January of 2001.
  The economy is not growing fast enough to generate the jobs that 
continue to employ millions of Americans. Labor market conditions are 
not improving. In fact, tomorrow the Bureau of Labor Statistics will 
report on employment statistics in December, and they are likely to be 
unchanged from November, roughly 6 percent unemployment in the United 
States.
  This is an extremely disappointing economic record, and the Bush 
administration is refusing to take prompt and responsible action to put 
Americans back to work.
  Increasingly, we hear the Republicans trying to deflect this 
situation by claiming this is the Clinton recession, but the National 
Bureau of Economic Research, which is recognized as the authority on 
these matters, indicated that the recession began in March 2001, months 
after President Clinton left office, several months after President 
Bush assumed responsibility for economic policy.
  Indeed, in the last full month of the Clinton administration, the 
unemployment rate was 4.0 percent. In the last full quarter of the 
Clinton administration, the economy was still growing. More to the 
point, rather than assessing responsibility, a President of the United 
States, regardless of responsibility, has to act on behalf of the 
American people, and we are still waiting for prompt and effective 
action from President Bush to remedy the ills of this economy.
  What has the President proposed to get us moving again? He is 
proposing, as the centerpiece of his plan, a massive elimination of 
taxation on dividends, which has several problems.
  First, it would have no immediate stimulative effect on the economy.
  Second, it is grossly unfair. It will accrue to taxpayers with very 
high incomes and provide little or no benefit to the majority of 
taxpayers, including most seniors, and it significantly erodes long-
term budget discipline, which has been the foundation of economic 
growth in this country since the Clinton administration.
  When we began debating a stimulus package over a year ago--because 
even then we recognized the economy was foundering--the four leaders of 
the House and Senate Budget Committees on a bipartisan basis 
established principles for any effective stimulus package. The 
Congressional Budget Office used similar principles in a report in 
January of 2002 evaluating proposed changes in tax policy aimed at 
providing stimulus.
  The President's dividend proposal, when measured by these bipartisan 
principles, fails dramatically.
  First, a tax cut is most effective as stimulus when it puts money 
into the hands of the people who will spend that money almost 
immediately, but based on the administration's own theories, only $20 
billion of the projected direct cost of $364 billion over 10 years will 
be spent in the first year. A small fraction of the ultimate cost of 
this tax plan will be available to be spent in the near term. That is 
when we need stimulus. That is what a stimulus package is all about.
  Second, the dividend proposal is particularly poorly targeted as 
stimulus. Most families have little or no direct ownership in stock. 
They have pension plans, they have Keogh plans, they have retirement 
accounts, but the majority of direct ownership of stock is concentrated 
in the hands of very wealthy individuals, higher income households that 
are more likely to save the money than to immediately engage in 
consumption, to increase demand, to get the economy moving.
  As I mentioned before, a stimulus by its very nature should provide 
immediate effects, but even the $20 billion in projected stimulus for 
2003 is not really stimulus because taxpayers will have to wait until 
they file their returns next year until they actually see this money in 
their hands.
  Stimulus should not undermine long-term economic discipline. We found 
out through the policies of the Clinton administration that sound 
fiscal policy in Washington, leading ultimately to a surplus, was the 
foundation for economic expansion, the longest running economic 
expansion in the history of this country. We are in grave danger of 
losing that economic discipline, of seeing interest rates begin to 
climb and choke off growth.
  For all these reasons, the President's proposal, particularly his 
centerpiece, the dividend proposal, is bad economic policy.
  Some have said these criticisms are just an exercise in class 
warfare. Let me tell my colleagues the facts. Under the President's 
proposal, the 226,000 tax filers with more than $1 million of income--
about .2 percent of tax filers--will receive an average tax cut of 
almost $90,000. A third to a half of that will come simply from this 
dividend proposal.
  In contrast, the 109 million taxpayers with incomes under $75,000--
the middle and working class Americans, 82 percent of taxpayers--will 
receive an average tax cut of $273. Let me once again suggest the 
dimensions here: 226,000 upper-income tax filers versus 109 million 
middle-class and working-class tax filers. The 226,000 receive $90,000 
on average; the 109 million--the rest of us--

[[Page 332]]

receive about $273. Now, nearly a quarter of elderly taxpayers will be 
left out of this bounty. Nearly half the heads of households with 
children will be left out of the benefit.
  I have concentrated on the bad economic policy associated with this 
proposal. But it is also terrible budgetary policy. Even without the 
President's new proposal, we have seen a stunning decline in our fiscal 
situation. In January of 2001, we were looking at a projected surplus 
over 10 years of $5.6 trillion. In fact, we were shopping around--not 
really ``we,'' the Republicans--were shopping around for tax cuts 
because they said we will have too much surplus and we will not be able 
to conduct debt operations of the United States. We will have too much 
surplus, and we will not be able to find investments for all this 
money. In a little over 2 years, we have seen those surpluses 
disappear.
  Still, we have educational issues we have to fund and health care 
issues. Ask the average American what they are most concerned about, 
the first concern is health care. Can I get it? If I am a business man 
or woman, can I afford to give it to my employees. Second issue, can we 
maintain education? That is not just an issue for families but for 
States and localities. They are suffering under tremendous budget 
pressure. Their two biggest items of expense are health care and 
education.
  And we have the challenges of international affairs and of homeland 
defense. All of these proposals require expenditures that cannot be 
ignored or deferred. And the President proposes further to weaken our 
fiscal balance, our fiscal foundation.
  And there is another issue. We are within a decade of the baby boom 
generation reaching retirement age, a huge demographic tidal wave. Will 
we be prepared for it? Will we have the resources to take care of 
Medicare and Social Security? Not if we cut taxes as dramatically and 
as inefficiently and inappropriately as the President has asked.
  Now, there is an alternative to the President's proposal. That is a 
proposal that Democrats in both the Senate and House have advocated. 
The plans differ but they are consistent in many respects. They want to 
give tax benefits to middle and working class Americans. They want to 
make sure these benefits are immediate. They can be spent now to 
stimulate the economy and get them going forward. And they are crafted 
in such a way we do not jeopardize any further our fiscal discipline 
here in the United States. These are the proposals we should enact. I 
hope we do.
  Let me conclude by summarizing a major concern I have. We will, in 
the weeks ahead, debate this issue of stimulus and growth. We will take 
votes on stimulus and growth. We will try to adopt economic policy. But 
for me, the real issue is not whether we reduce taxes, the real issue 
for me is whether we are going to have a Social Security system for 
Americans of this generation, of my generation, and of future 
generations.
  This chart is illustrative. Where is all the money coming from in the 
President's proposal, $933 billion? That is not just a direct tax 
benefit, that is all the interest over 10 years that we will have to 
pay because of this deficit. Where does it come from? It comes from the 
Social Security system. I fear that if we enact the President's 
proposal, within months the President will simply say we can no longer 
afford Social Security. We have such a large deficit now we have to 
abandon the system.
  I hope all my colleagues and the American people pay attention to the 
votes in the next several weeks. They are not about growth and stimulus 
but about whether we will have a Social Security system, whether we 
will have an adequate Medicare system, whether we will keep our promise 
over 60 more years to the people of America.
  These are daunting times. We need policies that will work, that will 
be fair, and that will leave us stronger rather than weaker. I hope we 
adopt these policies.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from New York.
  Mrs. CLINTON. Mr. President, I commend my colleague from Rhode 
Island; he has done a superb job in his leadership of the Joint 
Economic Committee, following the economic trends and keeping track of 
all of the evidence that supports the remarks he has completed.
  I join the Senator and my other colleagues in sharing some of my own 
thoughts on this latest tax proposal outlined by the President. I will 
be sure not to call it a stimulus package because it is not. In fact, 
as I understand it, the President and his staff have recently been 
careful not to describe it as one either. Yet, again, the 
administration has opted to use our stumbling economy to stimulate 
budget-busting tax cuts, rather than to use common sense to stimulate 
the stumbling economy.
  There is a conventional wisdom developing in Washington. One can 
almost see it and one can certainly hear it as it emerges from the 
pages of our national newspapers and our television talk shows. That 
conventional wisdom proclaims the boldness of President Bush's economic 
strategy. ``In for a dime, in for a dollar,'' says one of our 
colleagues. ``Big steps get more followers,'' says a White House 
official.
  I am relatively new to the Senate but not to the work of public 
service. So I do have a healthy respect for conventional wisdom and the 
power that it has over how people think and even act about the issues. 
I also know enough to be weary of marching in lock step with the latest 
line. Far too often, what we collectively say and think today is proven 
to be wrong tomorrow.
  I will not deny that the President's plan is, as conventional wisdom 
holds, bold. I looked up the meaning of that word. There is nothing 
that equates ``bold'' with ``good'' or ``bold'' with ``right.'' We 
should not assume that the solution to our deficits or to our faltering 
economy is to in some way take bold action, even if it is wrong. We 
ought to be looking for the right action that will bring about the 
results that all agree are in our country's best interests.
  Winston Churchill once said: Never in the field of human conflict 
have so few given so much to so many. The Bush economic plan turns that 
saying on its head: Never in the field of economics have so few been 
given so much at the expense of so many.
  What is this really all about? I believe fundamentally it is a 
question of values. What do we as Americans value? Every discussion we 
make about our own private money or that we make as a society about tax 
or spending decisions is at bottom a decision about values. People who 
live for today because they will not plan for tomorrow are 
demonstrating their values. They are not willing to put away and save. 
They think somehow it will rain from heaven. We look at them and say 
they are irresponsible.
  Here, when we look at the tax decisions proposed by this 
administration, we have to ask ourselves, What are the values that are 
embedded in these proposals? I believe when it comes down to a choice 
about values, the American people expect us to be making choices that 
reflect their values.
  During the 1990s, we saw the creation of over 22 million new jobs. 
That reflected our value of work and the belief that a good job is by 
far the best kind of outcome for any economic or social policy.
  Over the last 2 years, we have seen what is called negative job 
growth. That means that people are losing jobs and are not able to find 
them. During the 1990s, real median family income grew by over $6,000 
with double-digit income growth for all income brackets, and 
unemployment and welfare rolls hit their lowest level in 30 years. We 
ended the 1990s with the largest surplus and 3-year debt paydown in 
American history. Those reflected solid American values: Pay as you go; 
live within your means, the kind of values with which I was raised, the 
kind of values I think made America a very great nation.
  We are at this turning point. I think someone has to say that a 
strategy of ``in for a dime, in for a dollar'' is not the strategy for 
our Nation.
  Many Americans are counting their pennies. They are worried about 
where

[[Page 333]]

their next dollar is coming from. They should not feel the values they 
hold dear are being abrogated by irresponsible economic decisions made 
by their Government. Someone needs to point out that it is hard to be 
in for a dime and in for a dollar when what you are really doing is 
passing the buck.
  We are passing the buck right to our States and our cities. We are 
forcing them to make the hard decisions we are avoiding. Looking at a 
State such as New York, we are facing drastic cutbacks. When I talk 
about the services that will be cut, I am not talking about luxuries. I 
am talking about taking police off the street. I am talking about 
closing fire houses. I am talking about increasing tuition so much that 
some kids are going to have to drop out of college because they and 
their families will not be able to afford for them to stay.
  As we look at what the States and cities of our country are laboring 
under, how can we in good conscience turn our backs on them? How can we 
continue to talk about enormous tax cuts that will not stimulate 
anything except red ink, when we are on the brink of facing perhaps 
military actions that will require billions upon billions of our 
dollars?
  Our Governor in New York recently announced that the $2 billion 
deficit we face this year could grow to $10 billion next year. The 
President's tax package basically says: That is your problem, New York; 
not ours. In all of the counties throughout New York, as in States 
around the country, every dime of property tax raised in the counties 
of New York may very well end up going to pay for the Medicaid bills 
that we have.
  Unlike the Federal Government, States have to balance their budgets. 
They cannot just have a gigantic credit card that runs up the costs and 
does not really worry about tomorrow. Our States need help. That is one 
of the reasons why last year I fought for some assistance with the 
Federal Medicaid matches amounts and today I will again join Senator 
Rockefeller and Senator Collins in introducing a similar proposal that 
would bring an additional $20 billion in fiscal relief to States, 
including $2.6 billion for New York.
  Those are all stopgap measures, because if the President's proposal 
is enacted, it will have a dramatic ripple effect through the States, 
because most States tie their tax systems to the Federal system so when 
a change is made in Washington, where some kind of tax is cut, one can 
count on revenues being taken away from the States.
  The President's package was advertised as costing about $674 billion. 
The truer cost is closer to $900 billion and we are still trying to 
calculate the real cost.
  I am not going to, as some of my colleagues have, talk about the 
unfairness of the way this tax is configured. I think that pretty much 
speaks for itself. But I want to say a word about deficits.
  I realize there is a new economic team in town and the President's 
advisers do not think budget deficits are much of a problem. I have to 
respectfully disagree. I cannot understand how a tax cut that pushes us 
deeper into long-term debt and raises our current budget deficit is not 
a values choice. We are choosing to go into debt instead of providing 
help for the States. We are choosing to run up the deficit and 
therefore we cannot keep our promises to our children and our schools 
about funding the education reform we voted for.
  Where will we, for example, come up with the money for the promised 
prescription drug benefit? Where will we come up with the money to keep 
the lights and the heat on in homes that rely on the low income heating 
energy program? I do not understand how these are the choices that 
reflect the values of the vast majority of Americans, and today I raise 
these issues.
  I do not think we should shy away in this Chamber from saying that, 
yes, the proposal may be bold and it may be big but it is boldly wrong. 
It takes big steps in exactly the wrong direction from where our 
country should be headed. We will talk day after day about the real 
choices, trying to illustrate and contrast the value systems that 
underlie the economic policies chosen by this administration compared 
to those that were chosen by the previous administration, because it is 
imperative that the American public understands this is not just about 
photo ops. It is not just about speeches and rhetoric. It is not even 
just about charts. It is about the future of this country and it is 
about the billions of individual choices that Americans will be able to 
make as they seek to demonstrate their own responsible life choices, as 
they seek to acquire greater opportunity for themselves and their 
children, and as they seek to contribute to making our country richer, 
safer, stronger, and smarter in the future.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. LEVIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Crapo). Without objection, it is so 
ordered.

                          ____________________