[Congressional Record (Bound Edition), Volume 149 (2003), Part 10]
[Senate]
[Pages 12816-12825]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              TAX CUT BILL

  Mr. BAUCUS. Mr. President, sometime in the near future--near is in 
the eyes of the beholder--we are going to vote on the conference report 
to the tax cut bill. When that does come up before the Senate, I will 
oppose the bill and recommend the conference report not be adopted.
  The conference report, which will be before us soon, is, first, not 
fiscally responsible. It is not fair to working Americans, and is not 
likely to succeed in rebuilding the American economy.
  First, fiscal responsibility: Two years ago when we considered the 
2001 tax cut, the Congressional Budget Office projected trillions of 
dollars of surpluses well into the future. In fact, $5.6 trillion was 
projected as budget surpluses over the next 10 years. Today, that same 
neutral, independent body, the Congressional Budget Office, projects 
deficits well into the future, and the rough estimate is about $2 
trillion of deficits, a swing of close to $7 trillion to $8 trillion 
over just 2 years.
  The fiscal environment has dramatically changed since 2002. If that 
is the case, I believe our tax policies should also change. Whereas in 
2001 it made sense to cut taxes, today we should look much more 
carefully at any potential tax cut.
  The fiscal environment has changed very much today compared to where 
it was in 2001. Consequently, we should be carefully examining our tax 
policies and asking whether our tax policies should change accordingly.
  The Senator from Ohio, Mr. Voinovich, kept his word and forced the 
conferees to keep the conference report, at least on its face, within 
the $350 billion Senate agreement. Unfortunately, this tax cut bill 
busts through that $350 billion ceiling through a series of gimmicks 
that hide the true cost of the bill, and in this time of increasing 
deficits, I believe we must live within our limits, and this conference 
report fails to do so.
  Instead, it uses phase-ins and sunsets to shoehorn large tax cuts 
into a small budget window. Republicans have designed a tax cut that is 
one big yo-yo. Now you see it, now you don't. Here again, on again, off 
again. It is one big yo-yo which I will explain in a few minutes.
  The child credit, for example, has increased for the years 2003 and 
2004, and then guess what. It is taken away. That is one yo-yo.
  Part of the marriage penalty is eliminated for the years 2003 and 
2004. Guess what again. The penalty comes back again after 2004.
  The 10-percent bracket is expanded for 2003 and 2004. Then it reverts 
back.
  Even the dividend tax cut disappears after 2008.
  Individual taxpayers and corporate taxpayers, I believe, want 
certainty. They want some predictability. They want to be able to plan 
for their families, and companies want to plan for the future. 
Individuals want to know whether they can plan for vacations, 
education, and companies want to know whether to invest or not invest. 
We certainly do not give them that certainty and predictability in this 
bill.
  As for planning, this bill tells American taxpayers, for example, to 
get married in the year 2003 or 2004, have a child in 2003 or 2004, and 
then get divorced in 2005. This bill is simply full of way too many 
gimmicks.
  Last year, Members of Congress and the President expressed their 
outrage at the accounting gimmicks and manipulations of income and 
expenses by Enron, WorldCom, Adelphia. In fact, legislation was enacted 
last year to put the brakes on the use of accounting gimmicks by 
corporate America.
  If these accounting gimmicks and financial statement manipulations 
are so intolerable in corporate America, then why are they not 
intolerable for the U.S. Congress? Why should Congress be allowed to 
deceive the American public?
  What is really going on here? What is really going on is that the 
majority intends to extend these tax cuts beyond the budget window. 
That is what is really going on here. That is the accounting gimmick. 
That is what is hidden. But if we extend the tax cuts, they will only 
add to the long-term budget problem. That is, if they are extended as 
intended by the majority party, they will add to the fiscal nightmares 
just as we face budget strains brought on by the baby boom generation. 
Congress should come clean with what is really going on, what it is 
really up to.
  Second, this conference report is not fair to working Americans. The 
benefits of this bill are skewed heavily to the elite in this country. 
It mistakenly directs less of its resources to working American 
families--much less. In this sluggish economy, that is also not good 
economic policy. Working American families are more likely to spend tax 
cuts quickly; that is, tax cuts directed at working American families 
will more likely help rebuild the American economy, but that is not 
what this bill does.

[[Page 12817]]

  Take, for example, the tax cuts for dividends. This tax cut alone is 
heavily weighted to the elite. Three out of four American taxpayers 
have no dividend income, and half of those who do have dividend income 
have less than $500 in dividend income. That is about one out of eight 
at $500 or less in dividend income. So the overwhelming majority of 
Americans will get little or no benefit from this provision. But look 
how much this single provision will benefit the elite who do profit 
from it.
  A taxpayer who had a million dollars in dividend income will get a 
tax break of $236,000. In contrast, $118 or less in tax cuts for the 
seven-eighths of taxpayers who receive $500 or less in dividend income 
and $236,000 for the dividend millionaire. That is simply not fair.
  Let's look at priorities. The dividends provision is the single 
largest provision in the bill. That means the bill imposes a penalty on 
wage earners by definition.
  Under the bill, the maximum tax on investment income, that is, 
dividends and capital gains, is 15 percent. The tax on the wages, 
however, continues to be heavy. A single fireman earning $35,000 per 
year pays 40 percent of his marginal income in Federal taxes, 15 
percent in payroll taxes, plus 25 percent in income taxes.
  In contrast, a retired investment banker living off the dividends on 
a $1 million portfolio of stocks pays only 15 percent of his marginal 
income in Federal taxes. Again, this is not fair.
  Whatever happened to the argument that we need to eliminate the 
double taxation of dividends? I thought that is what this bill was 
supposed to be primarily about. This conference report does not do 
that. It does not eliminate the double taxation of dividends. Rather, 
in many cases it would eliminate not only the double taxation of 
dividends, but it eliminates even the one- time taxation of dividends 
income. That means zero taxation on dividends.
  In many cases, as a consequence of the way this conference report is 
written, there will be no taxation on many dividends offered by 
corporations. The corporation will not pay the tax, and the shareholder 
will not pay the tax.
  So this bill lowers the tax for dividends. It lowers the tax for 
capital gains. The bill says it is a priority of the majority party and 
the President, apparently, to ensure that the only people who need to 
pay full freight are those hard-working Americans who earn their income 
in wages.
  The American way is to work hard, to earn income, to do well. There 
is much more opportunity and mobility in America than any other 
country, by far. Foreigners who come to America to live and start a 
business are astounded at the opportunity and mobility in this country 
compared to the country from which they came.
  I do not criticize--in fact, I applaud--anybody who works hard and 
can earn an income and do well in America. At least they have a much 
better chance in this country compared with any other country. So I am 
not being critical of those who make a lot of money. That is great. I 
wish all Americans could make a lot of money. In fact, that is my 
underlying goal, certainly in my home State of Montana, to do what we 
can to get more people to earn more money and get higher paying jobs so 
more Americans are able to make ends meet.
  In this bill, all of America is not being treated alike. We are not 
being treated together as Americans. This bill is tilted very heavily 
toward the elite, the extremely wealthy. They are the ones who get the 
big tax breaks, whereas the average American does not. That is not 
fair. The benefits of this bill should be evenly distributed among all 
Americans. That is not what has happened in this bill.
  I am not being critical of tax breaks for the wealthy. They should 
get tax breaks, but I am saying as Americans we should pass legislation 
that treats Americans equally. That is not what is happening in this 
bill.
  Basically, this bill is not fair. It is not good tax policy, and it 
does nothing to encourage the work ethic that built this Nation.
  I might ask now, how did the conference committee pay for this 
nontaxation of dividends? The conference committee turned to the 
Americans today who otherwise would receive the relief under the 
marriage penalty to, in effect, pay for these tax-free dividends. To 
say it differently, the marriage penalty tax cuts were scaled back to 
pay for the dividend proposal in this bill; that is, couples are going 
to be penalized under this bill to pay for the huge breaks in dividend 
income for the elite of this country.
  What about the marriage penalty for lower income families? No, this 
conference report does not find the resources to speed up the 
elimination of the marriage penalty for recipients of the earned-income 
tax credit, but it does find the money for the dividend tax break. Once 
again, that is not good tax policy. It is not fair. It does illustrate 
priorities but I think the wrong priorities for our country.
  So this bill increases the budget deficit and lays the bill at the 
door of our children and grandchildren. I think those of us who seek 
public office have a moral responsibility to represent people in our 
home States. That moral responsibility is to do our best to leave this 
country in as good a shape or better shape than we found it. We have 
that responsibility because we are not going to be here forever.
  We are going to have children and grandchildren and they will have 
children and grandchildren. We would like the United States of America 
to continually be strong and be the country that most people in the 
world look up to. That is our responsibility because we are not going 
to be here forever. This bill does not fulfill that moral 
responsibility. It leaves a huge additional burden on our children and 
grandchildren. That is another reason to not pass this bill.
  By the time the baby boomers start to retire, when there will be huge 
budget pressures to help reform Medicare, to make sure that our senior 
citizens have the health care benefits they need and, in addition, 
Social Security, make sure that our senior citizens have the retirement 
benefits, at least the basic minimum benefits, a safety net, we should 
not pass this bill because this bill, in effect, makes that problem 
much more difficult. It adds a huge burden that Members of Congress are 
going to have to face when those years come up in about 5, 10, or 15 
years from now.
  This bill increases the budget deficit and lays the bill at the door 
of our children and grandchildren. It inappropriately targets its tax 
breaks at the elite instead of those more likely to spend it. This bill 
is simply not structured to be effective in rebuilding the American 
economy. I believe it would be irresponsible to enact this legislation, 
especially at this time.
  I might add, there is an interesting article--in fact, it is a bit of 
an alarming article--in the Financial Times printed on Wednesday, just 
yesterday. On the front page of the Financial Times, they reported 
their interview of Federal Reserve Chairman Alan Greenspan. Mr. 
Greenspan raised concerns about the impact of further tax cuts and 
spending increases.
  According to the Times, Mr. Greenspan:

       [E]xpressed dismay at what he characterized as a breakdown 
     in budget discipline in Washington. He reminded lawmakers 
     that the U.S. Government was facing a ``significant'' budget 
     problem as the baby-boom population ages and draws on more 
     healthcare and retirement benefits.

  Mr. Greenspan added that he would:

       [L]ike to see that addressed more seriously than it is.

  In his words:

       The silence is deafening.

  I will not be part of that silence. I strongly urge Members of this 
body to do what is right, to consider what they are doing today.
  In return for a short-term gain, they will be creating a long-term, 
much greater problem if they vote for this bill. I urge my colleagues 
to vote against the conference report.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. GRAHAM of Florida. Mr. President, I, too, wish to speak on the 
tax bill which will soon be before us. I rise

[[Page 12818]]

in opposition. There are many reasons to oppose this reckless proposal. 
I will mention three.
  No less an authority than Warren Buffett pointed out in written op-
eds and television appearances the obvious fact. The obvious fact is 
that this legislation, as it relates to the tax-free status of 
corporate dividends, will create zero new jobs. Why will it create zero 
new jobs? It will do so because there is no additional money in the 
system to generate new jobs. If the corporations that are induced to 
pay dividends or increase the dividends that they are currently paying 
as a result of the tax-free status to the stockholder remove those 
funds from the corporate treasury, there is actually less chance that 
it will be invested in productive matters.
  Since generally only the wealthiest of Americans will benefit by this 
proposal to make the remainder of dividends which are subject to 
taxation free of taxes, the practical effect is going to be to have 
these high-income Americans put the money into some account, not to 
spend it, and create the demand that our economy needs. Conversely, if 
the funds stay at the corporate level, the corporation has ongoing 
needs which are likely to be met by those funds. If the economic theory 
behind the nontaxability of dividends is that it will stimulate the 
economy--and the title of this bill indicates that is the objective--it 
is likely to have just the opposite effect.
  The second concern which causes me to speak this evening is the fact 
that this legislation belies congressional concern for honest 
accounting. We have spent a lot of time in the last few months berating 
corporate America for its inappropriate and in some cases duplicitous 
accounting procedures. Now we are about to pass legislation which makes 
those shenanigans pale in comparison to what we are about to do.
  It is hard to believe this Senate has already passed a version of 
this tax cut which said for the first year taxation of dividends could 
be cut by 50 percent; for the second year taxation of corporate 
dividends would be cut 100 percent; for the third year corporate 
dividends tax could be cut by 100 percent; and in the fourth year we 
would go back to the current level of taxation of corporate dividends--
an absurd proposition. Clearly, the only rationale for such cooked 
accounting books is to allow what appears at the most superficial level 
to be a $350 billion tax cut, in fact, balloon into a tax cut of 
between $800 billion and $1 trillion. This is according to the Center 
for Budget and Policy Priorities.
  I wanted to talk about a third reason. That is that this agreement, 
filled with many irresponsible policies and tax cuts, undermines our 
efforts to adequately fund homeland security. As a candidate for the 
Presidency, George Bush, when asked what would be his priorities for 
the use of the $5 billion surplus that lay ahead in the 10 years after 
January 20, 2001, said the first would be to meet our priority domestic 
challenges--at that time, he particularly focused on providing a 
prescription drug benefit for Medicare; certainly today he would 
include homeland security--the second, to pay down the national debt, 
and third, if there was any money left over, to return it to the 
American taxpayers in the form of tax reductions.
  Subsequent events have made the President's choices easier. We do not 
have a $5 billion surplus to consider allocating among domestic 
priorities, paying down the national debt and, if funds are left over, 
returning them to the American taxpayer because there is no surplus. 
The surplus has magically, in 28 months, been converted into one of the 
largest deficits that our Nation has ever suffered. And the 10-year 
projection of those deficits is $2 trillion. When you add those two 
numbers together, the $5 trillion surplus that was thought to be in 
hand as recently as January of 2001, and now the $2 trillion addition 
to our national debt that we face over the next 10 years, we have in 
excess of a $7 trillion swing in our Nation's fiscal well-being in the 
course of barely over 2 years.
  One of the areas in which this change in fiscal fortune has been 
particularly pronounced has been homeland security. The Transportation 
Security Administration has told the appropriators that the agency is 
facing a $913 million shortfall. This situation is so dire that the 
administration is now requesting authority to shift funds from one 
security program to another.
  Our Nation's seaports stand out as an example of the administration's 
blind eye to the vulnerabilities faced by our Nation. Our Presiding 
Officer represents a State with one of America's great seaports. 
Because of the vulnerability of our Nation's 361 seaports, Congress 
passed the Maritime Transportation Security Act in November of last 
year. The Senate attempted to include in that legislation provisions 
that would guarantee the funding of maritime security. That effort, 
regrettably, failed.
  But the failure did not stop there. The administration has ignored 
the need to improve security at our Nation's seaports, requesting 
little to no seaport security funds in fiscal years 2002, 2003, and 
again in 2004. The majority of funding which has been made available in 
seaport security grants has come at the action and the behest of 
Congress: $92 million in fiscal year 2002 through an emergency 
supplemental; $125 million in fiscal year 2002 through yet another 
supplemental; and $150 million in fiscal year 2003 in the omnibus 
appropriations bill. Of these amounts, only $92 million, those funds 
appropriated by the emergency supplemental in fiscal year 2002, has 
actually been distributed.
  Recently, in my State of Florida, two of our ports received 
approximately $11 million of this $92 million. While this funding is a 
step in the right direction, it is clearly inadequate. According to the 
Coast Guard, port security improvements are estimated to cost $963 
million in the first year and $4.4 billion over the next 10 years. The 
need is clear. The fiscal year 2002 $92 million garnered grant request 
that totaled $695 million, the local governments, administrators, and 
users of our seaports, found there were needs of $695 million but we 
decided that $92 million was sufficient funding to meet those needs.
  For the next $125 million--these are the funds that were appropriated 
in the supplemental appropriations of fiscal year 2002--for $125 
million in funds available, there were $997 million of requests. 
According to information from the intelligence community, the threat is 
clear.
  Although a great deal of information is necessarily classified, the 
Associated Press is reporting today that the FBI arrested a New York 
City cabdriver who had conducted surveillance on bridges in Miami, FL, 
after he attempted to buy enough explosives to blow up a mountain from 
an undercover law enforcement agent, as well as purchasing bulletproof 
vests and night vision goggles.
  Few can forget the recent tragedy of October 6, 2002, when the 
supertanker Lindberg was attacked by a small boat packed with 
explosives off the coast of Yemen.
  Despite these threats, the administration has consistently reduced 
levels of funding for homeland security. For example, the White House 
refused to designate $2.5 billion in homeland security money as a 
budgetary emergency in fiscal year 2002. This resulted in a loss to the 
Transportation Security Administration of $480 million.
  This should not be an either/or choice. We should not have to decide 
whether to protect our airports or protect our seaports. We should not 
have to decide whether to go on the offensive against international 
terrorists by effectively carrying the war to where they are as opposed 
to adequately defending the homeland from terrorist attacks.
  Why are these programs, vital to our homeland security, struggling 
for funding, while we enact tax cuts which are projected over the next 
10 years to cost $1 trillion? Why are we doing this? This tax cut is 
supposed to stimulate the economy. As Mr. Buffett has so eloquently 
pointed out, the major component of the tax cut, which is the removal 
of taxation on corporate dividends, is unlikely to stimulate even the 
first job. But imagine the impact on our economy if we had to close 
America's seaports due to a terrorist

[[Page 12819]]

incident. Just as a point of reference, the cost last year of a labor 
strike at the seaports on the west coast was estimated at more than $1 
billion a day. What will be the economic price for closing all 361 of 
our seaports?
  A recent Booz Allen Hamilton port security analysis concluded that if 
the Government were unable to open U.S. seaports within 20 days after 
an attack, the New York Stock Exchange would have to halt all trading.
  In June of 2002, a White House press release on homeland security 
stated:

       The President's most important job is to protect and defend 
     the American people.

  Regrettably, this rhetoric has not been matched by performance. It is 
wrong that the price of these tax cuts may be our homeland security.
  It does not have to be. In October, during the debate on the Iraq war 
resolution, I spoke about how the lives of millions of Americans are 
literally in our hands. We will determine whether the level of security 
is that which our Nation is committed to do by the President's 
statement that the most important job is to protect and defend the 
American people, or if the only thing that stands between the American 
people and additional and more lethal terrorist attacks is the rhetoric 
of the President.
  We are making the false choice in favor of tax cuts as opposed to 
Americans' security here at home.
  I urge my colleagues to oppose the conference agreement on this tax 
bill, to oppose creating the artificial impression that this is going 
to actually improve the economy by creating new jobs, to oppose the 
criticism that will legitimately be raised against the Congress for 
setting one standard in terms of proper accounting for corporate 
America but applying quite a different standard to ourselves.
  We should oppose this conference report because it is denying to 
America the resources necessary to truly protect our people.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Mr. President, I compliment our colleague from Florida on 
an outstanding statement. The Senator from Florida, who sits next to me 
on the Senate Finance Committee, has long been a voice of fiscal 
responsibility. His record is clear. I very much hope people across the 
country were listening to his excellent statement.
  I also want to take a moment to thank our ranking member on the 
Finance Committee, the Senator from Montana. Earlier this evening, he 
gave outstanding statement describing the problems with what is being 
proposed here. This is not a growth package. This is not a package that 
is going to lift the economy. In fact, the evidence is increasingly 
clear that, in the long term, this is going to hurt economic growth in 
this Nation.
  The ranking member also made clear the unfairness of this package. 
This is as unfair a package as I have seen in the 17 years I have 
served in the Senate.
  All of those who vote for this package are going to have a lot of 
explaining to do in the future because, as a former tax commissioner, I 
guarantee you are going to see one scandal after another as a result of 
the passage of this tax bill.
  This is going to provide lots of fodder for lots of writers, as they 
examine the consequences of this tax bill because it is going to 
produce, I predict on the floor of the Senate tonight, some of the most 
perverse tax outcomes we have ever seen as a result of legislation to 
pass the Congress.
  As Warren Buffett observed, in commenting on the President's proposed 
repeal of taxes on dividends, his receptionist was going to pay a rate 
of taxes 10 times what he pays. He is the second richest man in the 
United States, and his receptionist is going to pay taxes at a rate 10 
times what he pays.
  Let me be clear. The measure we will vote on tomorrow morning is not 
quite the same measure as he was critiquing in his op-ed piece in the 
Washington Post. Instead of his paying one-tenth of what his 
receptionist pays, it may be down to one-eighth of what his 
receptionist pays.
  I tell you, this is a scandal, and it is going to explode, and it is 
going to explode right in the faces of those who vote for it.
  Here is the reality. We were told 2 years ago by the President that 
we could expect almost $6 trillion of surpluses--$5.6 trillion, to be 
absolutely precise--over the next decade. Now we know, instead of 
nearly $6 trillion of surpluses, if we enact the President's plan, we 
can look forward to $2 trillion of deficits. That is the hard reality 
confronting this Nation.
  This chart shows what is happening to budget deficits year by year. 
The President said, once we went into deficit, after he told us, you do 
not have to worry about that, that is not going to happen: My program 
with big tax cuts is going to lift the economy; it is going to produce 
more jobs, more economic growth; we are going to be able to pay off the 
debt; we are going to be able to protect Social Security, protect 
Medicare.
  Here are the results. The deficits are exploding. The deficit this 
year, on an operating basis, is going to be between $500 and $600 
billion. It is going to be about $400 billion before you deal with 
Social Security. Under the President's plan, every penny of Social 
Security surplus money is going to be taken this year to pay for tax 
cuts and other expenses of the Government--every single dime.
  The President said the deficits will be small and short lived. Wrong 
again. These deficits are massive, and we see no end in sight. We have 
$550 billion of deficits on a $2.2 trillion budget? That is large by 
any calculation. We do not see deficits on an operating basis below 
$300 billion a year anytime for the next decade.
  The President told us 2 years ago, if we adopted his plan, we would 
be able to virtually eliminate the national debt. He said he would be 
able to retire all of the debt that was available to retire. He said by 
2008 we would be down to $36 billion of publicly held debt. Now, after 
adopting his plan, we see that by 2008 we will not be down to $36 
billion.
  Instead, the debt is going to be $5.2 trillion. That is the publicly 
held debt. That is just part of the story. The gross debt of the United 
States is even worse. The gross debt of the United States at the end of 
this year will be approximately $6.7 trillion. If we adopt the 
President's plan, at the end of this decade it is going to be $12 
trillion. The deficits and debt are exploding. They are exploding at 
the worst possible time.
  Why is it the worst possible time? Here is the reason it is the worst 
possible time.
  This chart shows the Medicare trust funds, the Social Security trust 
funds, and the cost of the tax cut the President has proposed. The blue 
bar is the Medicare trust fund, the green bar is the Social Security 
trust fund, and the red bars are the tax cuts. You can see that right 
now the trust funds are throwing off big surpluses. In fact, just this 
year, Social Security will produce a surplus of $13 billion. But look 
at what happens later on in this decade and in the next decade when the 
baby boomers start to retire. Then the trust funds turn cash negative. 
At the very time they go cash negative, the cost of the tax cuts 
explodes, dragging us deep into deficit and debt in a way that is 
totally unsustainable--over $1 trillion a year in deficits.
  This isn't my projection. These are the President's own projections. 
This is page 43 of his analytical perspectives from the budget.
  Here is his long-term outlook on the deficit as a percentage of the 
gross domestic product. Economists like to use that measurement because 
it is an apples-to-apples comparison over time. It takes out the effect 
of inflation.
  This is the President's projection of where we are headed. If we 
adopt his tax plan and his spending plan, we never get out of deficits. 
These deficits that look relatively small compared to where we are 
headed according to the President are, in fact, record deficits. The 
deficit we are going to run this year is going to be the largest 
deficit ever in the history of America. The previous largest deficit we 
ran on a unified basis where all the money is

[[Page 12820]]

put into the same pot and all the expenses come out of that pot--the 
largest deficit we ever had on the unified basis was $290 billion. On a 
unified basis this year, the deficit is going to be over $400 billion. 
That is here. As a percentage of gross domestic product, you can 
calculate it yourself--$400 billion on a $1.5 trillion economy. That is 
about 3.6 percent or 3.7 percent of gross domestic product deficit. But 
look at where we are headed. Again, this is the President's assessment 
of where we are headed if we adopt his plan.
  Deficits as a percentage of gross domestic product of over 12 
percent. Twelve percent on the economy of today would be a deficit of 
over $1.2 trillion this year.
  Who is going to loan us the money? America is going to become a 
deadbeat. Why has the dollar plunged 20 percent in value in just the 
last several months? Why are economists saying it is poised to plunge 
perhaps another 10 percent? What are the implications for foreigners 
who are buying dollar-denominated investments today when they see the 
dollar dropping like a rock? Do you think they want to hold American 
bonds? Do you think they want to hold American stocks when the value of 
the dollar is dropping like a rock? What happens to the American 
economy if they start to pull their money out of our stock market and 
out of our bond market? Do you want to see interest rates jump and see 
equity values plunge? Just have this dynamic continue, and it will 
rattle the eyeteeth of the markets in this country. The idea that this 
is going to increase markets--I am afraid it is going to be painful.
  This year alone, revenues are running $100 billion below forecasts--
forecasts made only 7 months ago. Yet it is running $100 billion below 
what was forecast. If that continues, we are going to have the lowest 
revenue as a percentage of our gross domestic product since 1959, the 
lowest revenue in 44 years.
  Remember when the President told us 2 years ago when revenue was the 
highest percentage of gross domestic product it has been in 40 years, 
he said we had to have a big tax cut to give the money back to the 
people. And we did. Now revenue is poised to be the lowest it has been 
in more than 40 years, and the President's answer is the same: Let's 
have another big tax cut. Give the money back to the people. He says it 
is the people's money. He is right about that. That is exactly whose 
money it is. It is the people's money.
  Do you know what else? It is the people's debt. It is the people's 
Social Security. It is the people's Medicare. And this President is 
running up the debt in an unprecedented way and at the worst possible 
time. He is running up the debt right before the baby boomers start to 
retire.
  If there is any question about his running up the debt, we are going 
to have it in our face tomorrow. We are going to have it before us 
tomorrow. He is asking not only for one of the biggest tax cuts ever, 
but he is asking for one of the biggest increases in debt ever. In 
fact, it is the biggest increase in debt in the history of our country.
  The last time he increased the debt, it was a $450 billion increase 
in June of 2002. But by April of 2003, the President is back asking 
Congress to increase the debt by $984 billion in one fell swoop--almost 
$1 trillion of added debt.
  This is an economic plan that is not working. It is failing. It is 
dangerous to the future of our country. The plan before us isn't going 
to work.
  How can I be so sure? I just said we have a $10.5 trillion economy, 
and this tax cut will provide $55 billion of lift in a $10.5 trillion 
economy. That is less than one-half of 1 percent of gross domestic 
product. If all of it translates into increased economic activity, the 
most it can affect is one-half of 1 percent of gross domestic product.
  This is a $350 billion package. At least it is advertised to be, 
despite the gimmicks it has. It is the most gimmick-laden package we 
have ever considered on the floor of the Senate. It costs $350 billion. 
Only 16 percent of it is effective this year to give stimulus to the 
economy. It is an upside-down plan. It provides too little lift now 
when we need it, and it costs too much in future years when we can't 
afford it. It is totally an upside-down plan.
  If you took out the gimmicks, all the sunsets, and the phase-ins, and 
the dodging around that is in this plan, it doesn't cost $350 billion. 
It costs $1 trillion.
  Those who are the most fervent advocates of this plan have no 
intention to sunset the various elements of this tax plan. If you do 
not sunset it, the true cost is $1 trillion.
  We go to the question of, Will this stimulate the economy? This is 
the answer of the people who were hired by the White House and hired by 
the Congressional Budget Office to answer that question. This is their 
answer, as shown on this chart. This black line is the President's 
policy. The green line is the base; that is, if you do nothing.
  What this shows is, you get that one-half of 1 percent increase in 
GDP in the early years, but after 2004 this plan is worse than doing 
nothing--worse than doing nothing in terms of economic growth. Why?
  Well, the people who do that analysis--and, again, they are hired by 
the White House; they are hired by the Congressional Budget Office to 
do this kind of analysis--this is what they say:

       Initially the plan would stimulate aggregate demand 
     significantly by raising disposable income, boosting equity 
     values, and reducing the cost of capital. However, the tax 
     cut also reduces national saving directly while offering 
     little new, permanent incentive for either private saving or 
     labor supply. Therefore, unless it is paid for with a 
     reduction in Federal outlays--

which it is not--

     the plan will raise equilibrium real interest rates, ``crowd 
     out'' private-sector investment, and eventually undermine 
     potential GDP.

  That is what Macroeconomic Advisers say. They are not alone.
  This is from the Joint Committee on Taxation with a macroeconomic 
analysis of the House bill, which is the basis of the conference 
agreement we will have before us to vote on tomorrow:

       The simulations indicate that eventually the effects of the 
     increasing deficit will outweigh the positive effects of the 
     tax policy, and the buildup of private non-residential 
     capital stock will likely decline.

  I do not know how many of our own experts we have to have tell us 
that we are going down the wrong path, but let's say you don't put any 
stock in the people we have hired to advise us. Let's say you don't 
trust the Joint Committee on Taxation. Let's say you don't trust 
Macroeconomic Advisers.
  How about 250 of the most prominent CEOs in America, the Council on 
Economic Development? They say current budget projections seriously 
understate the problem. While slow economic growth has caused much of 
the immediate deterioration in the deficit, the deficits in later years 
reflect our tax-and-spending choices. And the inevitable conclusion: 
deficits do matter.
  Those who are running around this town now telling us that deficits 
do not matter are the folks who, for years, made political careers in 
saying deficits did matter. Well, deficits do matter. Anybody who tells 
the American people they don't is shoveling smoke.
  The final point they made is the aging of our population compounds 
the problem. They could not be more right.
  Of course, they are not alone. Here are 10 Nobel laureates in 
economics, 10 people who have had the greatest achievement, the 
greatest recognition in economics. What do they say?

       The tax-cut plan proposed by President Bush is not the 
     answer to our problems. Regardless of how one views the 
     specifics of the plan, there is wide agreement that its 
     purpose is permanent change in the tax structure, not the 
     creation of jobs and growth in the near term.

  ``Not the creation of jobs and growth in the near term.'' They need 
to change the title of this bill from the ``Jobs and Growth Package'' 
to the ``Not Jobs and Growth Package'' because that is what it is 
because it explodes the deficits and debt. It is all financed with 
borrowed money. The dead weight of those deficits and debt will reduce 
economic growth, not improve it.
  The economists go on to say--again, 10 Nobel laureates--

       Passing these tax cuts will worsen the long-term budget 
     outlook, adding to the Nation's projected chronic deficits.


[[Page 12821]]


  It is not just them. This is the head of the Federal Reserve Board, 
Chairman Alan Greenspan, who endorsed the President's last round of tax 
cuts. Now he is saying we have to start paying attention to the growth 
of these deficits.
  He says:

       There is no question that as deficits go up, contrary to 
     what some have said, it does affect long-term interest rates. 
     It does have a negative impact on the economy, unless 
     attended to.

  But he said more. He said the tax cuts that the President is 
proposing should be paid for. The President has no proposal to pay for 
these tax cuts. He is not offsetting them by reducing spending. In 
fact, he is increasing spending by over $600 billion above the baseline 
at the same time he is recommending $1.6 trillion of additional tax 
cuts, when we already have record deficits.
  My grandmother told me: If somebody tells you something is too good 
to be true, it probably is. When the President told us, 2 years ago, 
you could have it all, you could have a major defense buildup, you 
could have a massive tax cut, you could protect Social Security and 
Medicare fully, and in addition, you would be able to pay off the 
national debt, that sounded awfully good. But do you know what? It was 
not true. It was not close to being true.
  We have already seen that instead of paying off the debt by 2008, it 
is going to be over $5 trillion. We also know now, instead of 
protecting Social Security, the President's plan is going to take and 
loot virtually every penny of the Social Security surplus every year 
for the rest of the decade. This year, he is going to take every dime. 
Next year, he is going to take every dime; the next year, every dime; 
the next year, every dime.
  There are real consequences to the decision that is going to be made 
on this floor tomorrow. These are consequential decisions.
  Chairman Greenspan said: If, however, in the process of cutting taxes 
you get significant increases in deficits, which induce a rise in long-
term interest rates, you will be significantly undercutting the 
benefits that would be achieved from the tax cuts.
  Again, it is not just Chairman Greenspan or 10 Nobel laureates or any 
of the others we have cited. Here are people at McKinsey & Co., one of 
the foremost consulting firms in the Nation, in fact, in the world. Mr. 
Koller and Ms. Foushee noted in a recent report that, as of last year, 
owners of 61 percent of all common stock were not subject to tax. They 
were not even subject to tax.
  Anybody who is listening: If you have a 401(k), you do not pay taxes 
on dividends. In fact, 61 percent, according to their analysis, of all 
common stock owners were not subject to tax. So markets are driven by 
investors who are not concerned with the tax treatment of dividends. 
Thus ``the proposed tax cut'' on dividends ``seems unlikely to have a 
significant or lasting effect on U.S. share prices.''
  It is not just consultants from one of the most prominent consulting 
firms or 10 Nobel laureates or the Chairman of the Federal Reserve who 
are warning us about the danger of the direction we are taking. But 
here is Warren Buffett. I think he is the second most wealthy man in 
America. He calls this ``dividend voodoo.'' He calls dividend tax 
relief ``welfare for the rich.'' He said:

       When you listen to tax-cut rhetoric, remember that giving 
     one class of taxpayer a ``break'' requires--now or down the 
     line--that an equivalent burden be imposed on other parties.

  Now, obviously, that is true because we are in deficits. Remember, 
all of this money that is going out for a tax cut is being borrowed. In 
whose name is it being borrowed? It is being borrowed in all of our 
names.
  This is not out of surplus funds. This is out of borrowed funds. 
Every dime of this tax cut is being financed with borrowed money. When 
the President says it is the people's money, he is right. It is also 
the people's debt. That is how this is being financed. It is being 
financed by debt. Mr. Buffett goes on to say:

       Government can't deliver a free lunch to the country as a 
     whole. It can, however, determine who pays for lunch. And 
     last week the Senate handed the bill to the wrong party.
       Supporters of making dividends tax-free like to paint 
     critics as promoters of class warfare. The fact is, however, 
     that their proposal promotes class welfare. For my class.

  Mr. Buffett is referring to himself and other extraordinarily wealthy 
individuals.
  Where is a big chunk of the money coming from? Here it is. We are 
going to run, in Social Security, $2.7 trillion in surpluses over the 
next decade. Under the President's plan, $2.698 trillion is being taken 
to pay for these tax cuts and other expenses. This is the biggest raid 
on Social Security that has ever been conducted. It is being done right 
on the eve of the retirement of the baby boom generation. What a 
profound mistake.
  This plan is also deeply unfair. As Mr. Buffett said: His class is 
the biggest beneficiary. But he has that right. For those earning over 
$1 million a year, their tax cut for this year alone will be over 
$93,000. Let me say that again. If you are fortunate enough to be 
earning over $1 million a year in 2003, this package will give you on 
average a tax cut this year of over $93,000. If you are a middle-income 
person, if you are in the 20 percent of taxpayers who are right in the 
middle of the income distribution, your average benefit will be $217. 
Do you think that is fair? Our friends on the other side will say: 
Well, rich people pay more taxes. Indeed, they do. That is how our tax 
system works. But they don't pay that disproportionate a share of the 
taxes. No. No. They pay about 23 or 24 percent of the taxes. They are 
getting almost 40 percent of the benefit out of this plan. That is what 
is going on here. Don't let anybody tell you this is a fair plan, 
evenly distributed, based on what people pay in taxes, because it is 
not. It is not even close to being evenly distributed.
  It doesn't end there. This tax bill produces gimmick after gimmick 
after gimmick to hide its true cost. This is a ``now you see it, now 
you don't'' tax plan that comes and goes. Taxes are lower. Taxes are 
raised. Taxes are jumping all around because they have to hide the true 
cost of this plan.
  Here is how they propose fixing the standard deduction marriage 
penalty. The marriage penalty is eliminated when you get to a standard 
deduction for joint filers of $9,500. So for 2003 and 2004, they are at 
$9,500. Then in 2005, they drop it down to $8,265, representing a huge 
tax increase for those couples for 2005. Then they jump it up to $8,740 
for 2006; $8,883 for 2007; then in 2009 and 2010, it goes back up to 
$9,500. Then look what happens in 2011, 2012, 2013. I mean this thing 
is embarrassingly bad. Then it goes down to the standard deduction to 
$7,950--meaning another big tax increase for people facing the marriage 
penalty. They don't just do it with the marriage penalty.
  Here is what they do with the child tax credit: it was $600 in 2002; 
they increase it to $1,000 in 2003 and 2004. Then they cut it to $700 
for 4 years. Then they raise it to $800. Then in 2010 they raise it to 
$1,000. Then they cut it in 2011, 2012, and 2013 back down to $500.
  Does this make any sense to anybody watching or listening; this kind 
of tax policy? The ranking member calls this a yo-yo tax plan. It is at 
least a yo-yo. And it doesn't end with the marriage penalty or the 
child tax credit. Here is the 10-percent bracket. It shrinks for 2 
years, then disappears altogether in 2011. Look at this plan. I don't 
know. It is not a pretty thing. From $12,000, it goes up to $14,000 for 
2 years, then back down to $12,000 for 3 years, then it jumps for 3 
years up to $14,000. Then it goes down to zero for 3 years. Who is 
kidding who about this plan?
  This thing is absurd on its face. Here is the small business 
expensing limit. From $25,000 in 2002, they increase it to $100,000 for 
2003, 2004, 2005. Then they cut it back to $25,000 all the rest of the 
time. Top rate on dividends, same pattern, jumping all around: 38.6, 
then they cut it to 15 percent for 6 years. Then they jump it back up 
to 35 percent for 5 years.
  Our ranking member has called it a yo-yo tax plan. There is the yo-
yo, up and down and all around. Economists say this is going to create 
such confusion, such chaos, such a lack of predictability in the tax 
system that in and of

[[Page 12822]]

itself, the unpredictability will cost the economy substantially.
  The top rate on capital gains, same thing, jumping all around: 20 
percent, then down to 15 percent for 6 years, then it is back up to 20 
percent for 5 years.
  This is a tax policy that not even a mother would love, if this were 
a child.
  We can do better than this. This is a policy that is irresponsible 
fiscally. It is ineffective in terms of stimulus, and it is totally 
unfair. Those are the best things I can think to say about it.
  This is a tax policy that is going to plunge us right off the cliff 
into deficits and debt as far as the eye can see, and it is going to 
hurt this economy.
  I urge my colleagues to vote against the conference report. I thank 
the Chair and yield the floor.
  The PRESIDING OFFICER. The Senator from New Jersey.
  Mr. CORZINE. Mr. President, as always the Senator from North Dakota 
has made an eloquent presentation, a graphic presentation, an 
intellectually honest presentation of where we stand with regard to the 
economic policies before us in the Senate. I appreciate his strong 
effort in trying to educate our colleagues and the public with a 
graphic demonstration of many of the weaknesses which I will discuss 
tonight with regard to the conference report, the so-called tax relief 
program.
  Tomorrow, this body will in all probability pass two pieces of 
legislation which will have tremendous economic impact on the American 
people and our economy. In my view, they will have a negative economic 
impact. I do not consider this a jobs and growth package. I believe it 
is antigrowth, and I will go through some of the reasons that is the 
case.
  One thing for sure is, I know when we pass that debt limit tomorrow--
that $984 billion debt limit, just a little smidgen under $1 trillion. 
It's like pricing something at $99.95, just under $100. It is so we 
don't have to say it is by $1 trillion we are increasing the debt limit 
tomorrow. We are increasing, for every single American who is watching 
this tonight, their debt load $3,500. That is how much we are 
increasing it as we spend out that debt limit increase over the next 
year or 15 months.
  By the way, that is $28 billion of debt we are laying on the people 
of the State of New Jersey. I think they ought to know that. That is a 
huge cost and a big implication over time. I don't want to talk about 
the debt limit tonight because we will have time to go through that 
tomorrow. It is really indicative of the problem; it is not the 
problem. The underlying economic policy is what has allowed that to 
happen.
  The conference report that will be before us--I hope we get a chance 
to read it so we don't have $70 billion errors that show up after the 
fact because of how we have framed it. But I know from the outlines of 
what we have been able to see this is going to have a dramatic impact 
on the future of our economy and the quality of life for every 
American, because in this tax program we are making enormous choices. I 
think this legislation is going to lead to--well, we already have 
massive deficits. I am hearing estimates from people in the private 
sector that we are now well over $400 billion this year--north of 4 
percent GDP. That is deepening the debt as we go forward. I think this 
will weaken the economy in the long term. I will try to say some of the 
reasons why. I almost certainly know it is going to reduce the quality 
of life for the people of the United States.
  Before I talk about the economic implications, I think this needs to 
be framed in the context of the values we are speaking to while we go 
through this tax cut legislation. It says a lot about us as Senators, 
Americans, and about what our priorities are.
  Here we have a huge set of tax breaks for the privileged few, some 
would say elite: $93,000 is the estimate for people making over $1 
million, with 53 percent of all taxpaying Americans only getting $100 
or less. Let's hear that again. Less than 1 percent of taxpayers make 
over a million dollars, but they get a $93,000 tax break, and 53 
percent of the taxpaying Americans get less than $100.
  What are we trading that off against with our ability to invest back 
in America? I don't think investing in America is really the issue. The 
administration is calling for deep cuts in education. We are not 
fulfilling our mandate on Leave No Child Behind. We gave them the test, 
but not the money. We are talking about limiting the benefits for our 
veterans. We are cutting back on the number of people who have access 
to veterans hospitals and clinics in my home State--a number of 
veterans who have access to a prescription drug benefit they were 
promised. We are talking about limiting the dollars we can invest in 
homeland security.
  We are now at level orange, and every State and community now has 
their law enforcement and local folks on overtime, running up huge 
tabs. In New Jersey, I think the figure is about $1.2 million a week, 
with the way they calculated it the last time. If it is wrong, it is a 
lot more. These are incredible burdens we are putting on them. Frankly, 
I think what really is a mistake is that we are going to lose our 
ability to protect Social Security and make sure Medicare is there for 
future generations. We have 37 million Americans now who are over 65 
and in another 10, 15 years, we will have about 75 million, give or 
take. We will not, with tax policies that we have in place today, be 
able to secure Social Security and Medicare as we know it today. You 
are going to hear the term ``reform'' all the time. All that is about 
is not having the capacity to deal with the demands Medicare is going 
to place on our system of Social Security in the years ahead. Some of 
us think there is a real attempt to undermine the basic social safety 
net programs that are very much a part of the values of the American 
way of life.
  Maybe the President and my colleagues on the other side of the aisle 
believe in this tax cut, or that tax breaks for a very limited number 
of folks are more important than education. I don't think people feel 
that way in New Jersey. Maybe they believe it is more important to 
force cuts in Social Security or guaranteed benefits on Social Security 
down the road. Maybe we need to privatize it because we don't have the 
resources. I don't think I am hearing that from constituents in New 
Jersey, and that is not what I will fight for on the floor as we go 
ahead.
  Most of my constituents strongly disagree with those priorities and 
the values of placing these tax breaks that are heavily loaded and 
benefiting those who are already doing well in our society versus 
having the ability to invest back in America the way I think so many 
believe--at least my constituents. I think it will be a hard sell when 
they get the fundamental facts out about what this tax cut program is 
all about.
  Having said what I had to say about values, the problem with this 
legislation goes well beyond those issues. The key problem is very 
simple. I don't think it works. I just think it is flat out not 
intended to revive our economy. There is no indication it is going to 
create jobs. Actually, it might well do the opposite because we are 
undermining the tax base of our State and local governments. They have 
to raise taxes. We are taking money off the balance sheets of 
corporations by giving them encouragement to pay dividends. I don't 
know how companies go out and hire people, invest in plant and 
equipment, or put projects together on research and development when 
they don't have cash. I think that is actually what drives and gives 
incentive to the corporations to operate. So I have a hard time 
understanding even the theory of this program.
  I know the administration and my colleagues on the other side of the 
aisle disagree. I know they have a theory about how these tax breaks 
work. They seem to really believe that huge windfalls or large tax 
breaks for a limited number of investors eventually will trickle their 
way through the system to working Americans. They seem to believe 
cutting taxes will actually increase flows of revenue to the Federal 
Government. They have to believe that. I believe they are sincere; they 
must be. I didn't come to the floor to question anybody's motivations 
or sincerity. But their arguments don't

[[Page 12823]]

stand up to serious analysis and scrutiny by anyone who stands back and 
asks: Does this work? What does history tell us? It contradicts these 
views; it directly contradicts the basic principles of economics as 
expressed in the past by some of the administration's own policymakers, 
which I will cite as we go down the road.
  We have tried radical supply-side economics before; we tried them 
back in the 1980s. We certainly got the massive deficits. Then we had 
the crash of 1987, and we had all kinds of serious dislocations and a 
sustained period of slow economic growth in the late 1980s and early 
1990s. We tried them just 2 years ago when President Bush and Congress 
pushed through the first tax cut. Where are the results? Tell me what 
has happened to employment since we passed the first tax cut. I think 
it is something like we have lost 2 million jobs since then. We have 
had 2.7 million private sector jobs lost since we have been 
implementing and debating these kinds of policies. So it didn't work 
the first time, and we are going to try the second time.
  We have to also understand our fiscal position does have something to 
do with what happens in the economy. We have moved, in the 2 years and 
4 months since this administration has been in office, from a projected 
surplus of $5.6 trillion to a deficit projection of $1.8 trillion.
  It is mind-boggling how big these numbers are, but a $7 trillion 
swing in the cash position of the Federal Government is a big deal. It 
is not just a little bit of money. That is not $1. That is $1 trillion, 
$2 trillion, all the way up to $7 trillion of negative cash swing for 
the Federal Government in 2 years and 4 months.
  If you were running a business and you had that kind of cash swing, I 
guess you would be scrambling to find someone to lend you money. Maybe 
that is what we are seeing with respect to our dollar today, which has 
had a 20-percent depreciation. Maybe people are a little less 
enthusiastic about holding dollar assets outside the United States.
  As I said, we lost 2.7 million private sector jobs. Two million 
people today have been unemployed for over 6 months. Frankly, this 
administration is on track for the worst job creation record in over 50 
years, and we are trying to do the same thing over and over.
  The history is clear, at least to this reader of history. Large tax 
breaks, privileged few, massive deficits, and massive debt simply do 
not work. They do not make the pie expand; they make it shrink. They do 
not lift all boats; they drain the economy and hurt everyone, 
including, by the way, many of those who get the bulk of the tax 
breaks.
  I do not understand why we thought policies were so bad in the 1990s. 
There was a great expansion of wealth at all levels across the economic 
spectrum in this country. Probably more millionaires were made in the 
1990s than any time in the history of the United States.
  That is the history that I know, and it should not come as a surprise 
because economists have been arguing against these kinds of policies 
for years. Which economists? The Senator from North Dakota talked about 
the 10 Nobel Prize winners, and there are 450 economists from academic 
institutions across America, 250 business folks, economists such as 
Alan Greenspan, major economists on Wall Street--across the economy--
who speak out against these policies. I will add, and this is the hard 
one, economists from the Bush administration.
  Let me read from the book authored by President Bush's nominee--I 
guess he has not yet been confirmed by the Senate, but the nomination 
has been reported out of the Senate Banking Committee--to be head of 
the Council of Economic Advisers, Greg Mankiw. He is a great economist 
from Harvard. He wrote the textbook for Economics 101 that is being 
used at most colleges across America today. It is called ``The 
Essentials of Economics.'' I usually bring it with me and read it but I 
did not do that tonight.
  In this book, obviously written before joining the Bush 
administration, Professor Mankiw, in effect, points out the fundamental 
fallacies of this tax policy, this fiscal policy. I will take, for 
example, the argument from many administration officials that deficits 
do not matter. This happens to be on page 401. I do not have the book. 
I used to cite it regularly. Professor Mankiw says:

       When the Government reduces national savings by running a 
     budget deficit--

  I think that is what we are doing now--

     the interest rate rises and investment falls because 
     investment is important for long run economic growth. 
     Government budget deficits reduce the economy's growth rate.

  That is Professor Mankiw at page 401 of his textbook, ``The 
Essentials of Economics.''
  What about claims that cutting taxes will actually lead to higher 
levels of revenue? That is the supply-side dynamic scoring. What does 
Professor Mankiw say about that? This is another quote:

       Some supplysiders push their arguments to ridiculous 
     extremes claiming, for instance, that tax cuts would generate 
     so much growth that they would be self-financing. The 
     experience of the Reagan years puts this theory to rest.

  Professor Mankiw is obviously right about the bankruptcy of supply-
side economics, at least from my perspective. Fortunately, he is wrong 
about one thing. The Reagan years did not prove it to somebody or a 
whole bunch of folks because we are trying it all over again. It is 
alive and well right here in Washington, DC, and we are not following 
what I think are the essentials of economics, and we are practicing 
ideological economics, politics, as opposed to dealing with the real 
world as I think most folks know it.
  The truth is deficits do matter. They matter for our economy, just as 
they matter for ordinary American families, just as they do for our 
State and local governments, just as they do for everyone who operates 
in an economic context.
  According to one analysis, by lowering national savings and 
increasing long-term interest rates, the incomes of working Americans 
would be reduced by about 2 percent, or about $1,000 per person. That 
is the economic analysis that is often an accepted rule of thumb. While 
the tax breaks would go primarily to the few of the best-off Americans, 
most Americans will suffer from this reduction in their income. Most 
Americans will.
  Keep in mind, the Federal debt does not come free. It leads to 
increases in interest payments that must be paid by ordinary American 
taxpayers. Over 10 years, spending on interest on additional debt, what 
might be called a debt tax, in my view--and I would like to get that 
out--of the increase of the deficit that is projected in the years 
ahead would amount to $2.4 trillion for the tax cut that we are going 
to probably sign off on tomorrow.
  That, by the way, is $30,000 in interest burden for a family of four. 
I don't know, that sort of offsets a lot of this talk about the kind of 
benefit this is supposedly going to have in the pockets of individuals. 
Somehow or another, those interest expenses for the Federal Government 
are going to have to get paid by the taxpayer. Somehow or another they 
are going to have to show up. For a family of four, that is the 
interest burden.
  The impact of higher interest rates is not limited to higher taxes 
that our taxpayers will have to pay to service the Federal debt. It is 
also going to impact the debt payments they are going to have to make. 
It has been estimated that for every 1-percent increase in the deficit 
as a percentage of GDP, other things being equal, interest rates go up 
to where they would have been otherwise one-half to 1 percent.
  We have a weak economy right now, so we have very low interest rates. 
Maybe they would be lower if we did not have huge deficits, and if we 
happened to get back into a more rapidly growing economy, then the 
increase in interest rates will be very rapid and the cost for ordinary 
families will be very real.
  For instance, on a $100,000 30-year mortgage, the increase in 
mortgage payments by that 1-percent increase would be a $860 per year 
payment. That is out of pocket. That is a tax.

[[Page 12824]]

  Consider what you are going to be paying in additional dollars on car 
loans, something approaching $100 a year if you had a $10,000 car loan; 
multiply it out by 30,000, you get $300 or $400 on car loan payments, 
and then on a $20,000 student loan or maybe it is a $100,000 student 
loan, and you get another $500. Cumulative, if the economic analysis is 
right by people who have been doing this over and over, we have 
families paying something like $2,000 more in higher interest costs 
than they would pay if we did not have these kinds of deficits.
  The Bush debt tax would take a real bite out of family budgets. 
Remember, 53 percent of Americans are going to get $100 or less, and I 
just went through how somebody could end up paying $2,000 more in 
interest expense, which I call a debt tax.
  This bill will not really result in tax cuts for many, if not most, 
Americans, and it will result in a massive tax burden shift with a 
handful of elite investors paying far fewer Federal taxes and other 
taxpayers eventually having to make up the difference somehow or 
another.
  Somehow or another it often is at the State and local level. Rising 
property taxes, sales taxes, State income taxes, and gas taxes all are 
likely to be going up. I should not say likely; they are going up. New 
Jersey property taxes at the local level went up 7 percent this year. 
Across the river in New York City they went up 18 percent.
  We are putting a burden on State and local governments that is going 
to more than make up for anybody's average--pick the number. We are 
going to end up paying more in taxes at the State and local level than 
anybody could argue someone is making on the kinds of tax breaks we are 
doing, other than the very top income earners in America.
  This does not do very much for average Americans, for people who are 
middle income, working hard, trying to make things happen with a solid 
budget. This is a massive tax shift from those who are doing well to 
middle-income folks, lower income folks.
  Four out of five Americans pay more in payroll taxes than they pay in 
income taxes. Why we did not think about payroll taxes or wage tax 
credits is hard for me to understand. That is where the real tax burden 
is. If we are going to protect Social Security and Medicare as we go 
forward, I wonder where we are going to get those dollars. Probably 
right back in the payroll taxes.
  In my view, this is not a tax cut; it is a tax shift. Frankly, this 
should not come as a surprise to anyone. One does not need an economics 
degree to be skeptical about promises based on the premise that we have 
a free lunch; that if we cut taxes, revenues are going to grow so much 
that we do not have to worry about our budget deficit.
  The truth is, we pass these tax breaks out to a very narrow segment 
of society. Everybody else ends up paying. I suppose there might be an 
argument for the Bush debt tax if it were being used somehow to create 
jobs and strengthen the economy, but it will not. According to one 
respected firm, Economy.com, the White House plan, which is similar to 
the legislation before us in many ways, causes the loss of 750,000 jobs 
over the next 10 years. That is on top of the 2.7 we have already lost.
  In my view, the Republican plan will depress economic growth not only 
because it will dramatically increase Federal debt but because of its 
failure to address the worst fiscal crisis facing our States in 50 
years.
  I am glad we put $20 billion into this program. I am glad that in the 
negotiations we have provided some help. But with the dividend 
exclusion and the capital gains tied to State income tax rates, in most 
instances they are going to be losing, if it were pure dividend 
exclusion, $10 billion. I do not really know how this is going to apply 
to the States, but it is not going to be a healthy benefit to our State 
governments.
  Unfortunately, there are a lot of people who do not care. Again, 
there is this ideological policy as opposed to an economic policy. I 
will only quote one leading supporter of this proposal who is very 
strong in supporting most of the things the administration does, and 
that is Grover Norquist. He has stated, I guess, what we are trying to 
practice: I hope the State goes bankrupt.
  Well, some of my colleagues may hope that States go bankrupt. I do 
not think many of them do. The truth is, when States face problems, it 
is not just State officials who suffer. It is working families. It is 
kids on CHIPS, the Children's Health Insurance Program. It is Medicare 
beneficiaries. It is our hospitals. It is our roads. It is all that 
holds us together as a society.
  I go full circle and come back. This is about values as well as about 
economic numbers: Who gets what and what is going to happen to the 
economy? I think we are missing it and missing it big time in 
understanding that for the benefit of a very few, we are actually 
walking away from helping those in whom I think many of us believe we 
ought to be investing.
  I could go on and on about other elements, but I see the ranking 
member who has fought so hard for reasonable economic policies, Senator 
Baucus. He has talked about this as a yo-yo or shell game, whatever one 
wants to call it, with sunsets. We have made sunsets, which should be a 
beautiful thought in American minds, into something that is almost 
silly in the context of this particular package. The $350 billion is 
really $800 billion to $1 trillion. I am sure those who have proposed 
this think this is a program that is going to stay on the books. If we 
are going to stay with this program, including even some of the middle-
class income tax breaks on marriage penalty, child tax credits and 
other things, this will amount to $800 billion to $1 trillion.
  This is bad fiction. This is not even a fair representation of the 
reality of the cost. So not only is it bad economic policy, I think it 
also challenges the basic values that we should be representing in the 
Senate. It is not even truthful.
  Some could argue that it is Enron-like accounting. I think it is not 
the right way to deal with the American people to say we have a $350 
billion tax cut when we really have a $1 trillion tax cut, at best. It 
may be a little less, may be a little more, depending on how things 
work out.
  This is going to bring on a new age in tax shelters, a new 
opportunity that people are going to be working on. They are probably 
working on it right now on Wall Street. The differential between earned 
income and dividend and capital gains income creates an enormous 
bonanza of opportunity for the creative mind to translate current 
earnings, wage earnings, into capital gains.
  There will be more midnight oil burned in the next 3 months figuring 
out tax shelter strategies than we have ever been able to imagine. From 
what I understand--again I have not seen the detail of it--we took out 
all of the closing of loopholes that were a positive part of the Senate 
bill. I find some of the values that we are reflecting there an 
enormously disturbing element from what I understand about this 
conference report.
  The saying is, fool me once, shame on you. Fool me twice, shame on 
me. I think that is what we are doing with this proposal. I do not 
think it does what it says it is going to do about growing the economy. 
I do not think it reflects our values. I sure do not think the American 
people are getting a tax break. What they are getting is a debt tax 
laid on them that is going to overwhelm any of the benefits. In the 
long run, we threaten ourselves and our ability to invest in education, 
invest in Social Security.
  I do not get it. I think it is a bad thing to do. I hope my 
colleagues will have a good night's sleep, think a little bit about how 
some of this works, come back and be honest with the American people, 
rid ourselves of some of these gimmickries, and get on with an 
effective fiscal policy and economic policy that really does work for 
working families.
  I yield the floor.
  Mr. BAUCUS. 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.

[[Page 12825]]


  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, the order is what?
  The PRESIDING OFFICER (Mr. Talent). We are in morning business.

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