[Congressional Record (Bound Edition), Volume 149 (2003), Part 8]
[House]
[Pages 10658-10665]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              {time}  1715
               DEMOCRATS EXAMINE WAYS AND MEANS TAX PLAN

  The SPEAKER pro tempore (Mr. Hensarling). Under the Speaker's 
announced policy of January 7, 2003, the gentlewoman from Ohio (Mrs. 
Jones) is recognized for 60 minutes as the designee of the minority 
leader.
  Mrs. JONES of Ohio. Mr. Speaker, I came here to talk about the 
proposed tax cuts, but as I sat here on the floor and listened to my 
colleagues, I would be remiss if I did not respond to a couple of 
issues that they raised. One of them was that they accused the 
Democratic Party of wanting the economy to stay in the dumps just so 
that we could be successful. I dare either of the gentlemen that just 
finished speaking

[[Page 10659]]

to find any member of the Democratic Party that would want this economy 
to stay in the dumps just so we can be successful. But the Democratic 
Party is going to be successful on the issues and that is what I want 
to talk about.
  Let me do one more thing, though. One of the things that was 
discussed, and this is called misrepresentation. One of my colleagues 
who spoke before me said that the Democrats were holding up the 
appointment of Justice Estrada at a time when justice needed to be 
dispensed in the District of Columbia and at a time when law and order 
was out of place and that he could be there trying cases. I just want 
to remind my colleague that Justice Estrada was being considered for an 
appellate court, not a trial level court and that justices on the 
appellate court do not do trial of fact. So that is again a 
misrepresentation that people make when they are trying to make one 
party different than the other. But I am not going to spend my time 
today in response to some of those things. I would just suggest that 
everyone needs to pay attention and listen to the real words that 
people are saying.
  Mr. Speaker, I rise today to express my concerns about the Chair of 
the Committee on Ways and Means' plan that was unveiled this week, 
marked up in a lively session of the Committee on Ways and Means 
yesterday and will be considered on this floor shortly. In my own city, 
the City of Cleveland, 53,900 people have lost their jobs since this 
President took office. That is 4.7 percent of the workforce. In my 
State, the State of Ohio, 167,000 people have lost their jobs since 
this President took office. That is 3 percent of the workforce. The 
Committee on Ways and Means considered over the past couple of days the 
plan of Chairman Thomas. Unlike the Democratic stimulus plan that will 
be fast acting, fair and fiscally responsible, let me say those three 
Fs again, fast acting, fair and fiscally responsible, the Republican 
plan is another in a series of GOP tax plans that is economically 
irresponsible, narrowly tailored to benefit the wealthiest percentage 
of the population, and will not provide the immediate stimulus our 
economy needs in the form of job creation and productivity growth.
  The chairman's bill has been referred to as a compromise to the 
President's so-called economic stimulus plan, perhaps with the hopes 
that Democrats would respond favorably to any compromise to the 
President's fiscally reckless plan. While Chairman Thomas' bill does 
indeed have a different approach to some of the proposals offered by 
the President, the end result is still the same. It is poorly timed, 
shortsighted and narrowly designed to benefit only a small percentage 
of the population.
  This compromise reminds me of an old witticism: You can hang a sign 
on a pig saying that it is a horse but it is still a pig. The gentleman 
from California has hung a sign on a bad economic policy and proclaimed 
it to be a fix that our economy needs. But just like the pig with the 
sign around its neck proclaiming it to be a horse, this plan has 
problems.
  Let me talk about just a few of them. The treatment of dividends and 
capital gains. The GOP plan is not fair. The President's proposal for 
exempting dividends from being taxed was the centerpiece of his 
economic stimulus plan. While the Thomas bill does not contain that 
proposal and I believe it does not contain that proposal because in 
committee meeting after committee meeting, I kept saying to members of 
the committee and witnesses before the committee, do you understand the 
impact that the dividend tax cut will have on low-income housing 
credits? Do you understand the impact that a dividend tax cut will 
have, in fact, on annuity programs? And I think he finally got it. 
While the Thomas bill does not contain the same dividend tax cut 
proposal that was presented by the President, it revolves around 
reducing the tax on capital gains and dividends as the cornerstone to 
sound economic policy.
  Under current tax laws, capital gains are taxed at 20 percent. 
Dividends are treated and taxed as income at the applicable tax rate. 
The Thomas plan will lower the capital gains tax rate to 15 percent and 
also provides that all dividends be taxed at the same rate. Unlike the 
President's plan, the Thomas plan provides dividend tax relief 
regardless of how much Federal income tax is paid by a corporation. In 
this regard, the Thomas plan does not have as great an adverse impact 
on low-income housing tax credits and other corporate tax benefits that 
would have resulted under the President's plan. But this is the least 
egregious aspect of the plan and it is overshadowed by so many more 
unwise proposals.
  The chairman's dividend capital gains proposal will cost 
approximately $300 billion of the total $500 billion cost of the plan. 
He boasts that this is less than the nearly $400 billion cost of the 
President's dividend proposal. But he is relying on accounting gimmicks 
and unrealistic expiration dates. Many of the aspects of his plan are 
set to expire in 2006. But will these provisions really be allowed to 
expire? Most likely not. The more realistic outcome is that they will 
become a part of the ever-increasing number of tax provisions that are 
extended every few years. A more realistic estimate of the Thomas 
plan's economic impact on the Treasury must assume that its provisions 
will be extended beyond 2005. Under this realistic assumption, the $550 
billion cost of the Thomas plan not only exceeds the $726 billion cost 
of the Bush plan but suddenly results in a total cost of about $1 
trillion through 2013, as indicated in the chart that I am about to 
show my colleagues.
  This chart breaks down certain elements of the Thomas plan as 
compared to the Bush plan and concludes with the result of the Thomas 
plan being even more expensive than the Bush plan. For example, under 
the Bush plan, the dividend and capital gains tax cut would have been 
$396 billion. Under the Thomas plan, $296 billion of the tax cuts do 
not expire. However, the top bracket rate reductions effective only for 
2003 will be the same and the child tax credit increases will be the 
same. But here is where we have to take a look and go further. Under 
the Thomas plan, we widen the 10 percent bracket effective 2003. It is 
$45 billion. Under the Thomas package, it is $18 billion. But if the 
tax cuts do not expire, it will go back up to $45 billion as proposed 
in the President's plan.
  Tax breaks for married couples. Under the Thomas proposal, it expires 
in 2005. The impact under the Bush proposal is $55 billion. The Thomas, 
$45 billion. But if this 2005 date is extended, the tax break for 
married couples will cost us $55 billion.
  Again, let us take a look at the business expensing. Proposed to 
expire in 2005, it would only cost $9 billion under the Thomas plan but 
if in fact these cuts do not expire it will be $29 billion.
  I could go on. I know people get tired of a lot of numbers but I need 
to show the comparison of the tax cut packages.
  Let us put up chart 2. IRS data shows that households with incomes 
over $500,000 get, on average, 41 percent of their income from capital 
gains and dividends. On the other hand, households with incomes between 
40 and $75,000 get only 4 percent of their income from those sources. 
The gentleman from California's claims will not be the panacea for our 
struggling economy. For example, if you make over $500,000, according 
to this, 40 percent of your income comes from capital gains and 
dividends. If you make only between zero and $20,000, your income from 
capital gains or dividends is only 4 percent. So clearly the package as 
proposed by the gentleman from California is going to benefit folks who 
make over $500,000. I do not know where many of you come from, but 
clearly this is not a package that will benefit the bulk of Americans.
  The same IRS data shows that the $500,000 income and higher 
households enjoy average capital gains and dividends of $70,000 while 
the 40 to $75,000 households have average capital gains and dividends 
of $2,000. Under the GOP plan, millionaires will receive over $100,000 
from the new tax structure. But if you make $50,000, you will receive 
about $400. Or if you are in the lowest income strata, the new tax 
structure will give you back just $53.

[[Page 10660]]

We heard the earlier speakers talk about the benefit of putting the 
money back in the taxpayer's pocket. How much is $53 going to buy? 
Especially when you think about collectively if we took all of our $53 
and left them in the pot, perhaps our senior citizens might have an 
opportunity to get a prescription drug benefit. Perhaps we might be 
able to fund the No Child Left Behind program. Perhaps we might be able 
to fund health care for more Americans. And perhaps we might be able to 
extend the unemployment compensation to Americans across this country.
  Let me go to this chart very quickly. For example, taxpayer year 
2003, if you made between 10 and $20,000, you are getting $53. If you 
made between 75 and $100,000, you are going to get $1,600. But if you 
are part of that fortunate few that this tax plan favors, you will get 
probably $105,000 from this particular tax cut. Those taxpayers who 
will reap the highest gains from the Thomas plan account for .5 percent 
or one-half of 1 percent of taxpayers. Let me say that again. Those 
taxpayers who will reap the highest gains from the Thomas plan account 
for just .5 percent or one-half of 1 percent of taxpayers. Yet they 
will receive over 57 percent of all of the capital gains and dividends.
  When we talk about a plan being fair, this plan is not fair. Quite 
the opposite is true for taxpayers in the 45 to $75,000 income bracket 
who comprise 21 percent of all taxpayers and account for 24 percent of 
income from all sources. Yet they will only receive 7 percent of the 
capital gains and dividends.
  Let us try chart 4. Finally, the Thomas plan will benefit the 
wealthiest one-half of 1 percent of taxpayers nearly universally, as 94 
percent of that group of taxpayers receives dividends or capital gains 
whereas just one-third of the 45 to $75,000 income range taxpayers have 
investments that yield dividends or capital gains. For example, if we 
look at chart 4, we can see how much income is derived from capital 
gains and dividends based on income levels. It is a little different 
orientation from the chart I showed you that was chart 2. For example, 
if in fact you make over $500,000, you are coming above almost 100 
percent, you will receive that amount from your capital gains or 
dividend income as compared to people at the lower bracket.
  The Republican Party will claim that the majority of senior citizens 
will benefit from dividends and capital gains taxes being reduced, but 
only 26 percent of seniors in this country receive dividend income that 
would be affected by this proposal. Let me say that again. Only 26 
percent of seniors in this country receive dividend income that would 
be affected by this proposal. Republicans cite the fact that more and 
more people have a vested interest in the stock market. Yeah, we sure 
had a vested interest in the stock market and look what happened: 
Enron, Global Crossing, WorldCom, the list goes on, and that they would 
now benefit from this proposal. Maybe this proposal should have come 
around before all of us lost the money we lost in the stock market. 
While they are correct in the assertion that over 50 percent of the 
population is in the market, Republicans distort or ignore the manner 
by which people do participate in the market.

                              {time}  1730

  The majority of this participation is through a 401(k) plan or 
pension plans and other retirement accounts that are exempt from this 
taxation anyway, and most of the people who receive money are in a pool 
wherein those dollars accrue to their retirement plan or a pension plan 
but not to them individually.
  Let me talk about deficits for a moment because one of the things 
that I said when I started was that any plan that stimulates the 
economy, it must be fast, it must be fair, and then it must be fiscally 
sound.
  The GOP plan is not fiscally responsible. While the Thomas bill 
claims to offer a compromise to President Bush's irresponsible plan on 
the subject of dividend tax reform, which it really does not, it 
certainly does not compromise on the subject of being fiscally 
irresponsible and harmful to the longer-term state of the economy. 
Republican lawmakers in general, and the gentleman from California (Mr. 
Thomas) is certainly no exception, are under the frightful illusion 
that deficits do not matter. Did the Members hear that? Deficits do not 
matter. Even Mr. Greenspan has said that deficits are important, but 
Republicans are now saying they do not matter. Keep in mind when we had 
a low deficit, our economy was doing better. Keep in mind that as we 
continue to have greater deficits, I anticipate that our economy will 
have more trouble.
  The Republican economic plans push for tax cuts that will put the 
Federal Government in a position of having to borrow $1.5 trillion over 
the next 10 years. Let us count that, $1.5 trillion over the next 10 
years, with no balanced budget in sight. The resulting debt load on the 
fiscally ignorant Republican plans being presented to us will be about 
$50,000 per American household. Talk about putting our grandchildren 
and our children in debt.
  When asked to account for this fiscal lunacy, the Republicans claim 
that the tax breaks offered now will compel people to save more in 
anticipation of leaner times to come. The speculative statement on the 
psyche of the American taxpayer just does not make any sense. By 
borrowing this additional $1.5 trillion over the next 10 years and 
saddling American households with $50,000 of that debt load, 
Republicans are placing a cumbersome tax burden on future generations 
of children. To cover the interest costs alone on that debt will 
require us to zero out all unemployment compensation plus other 
programs such as SSI to the tune of $400 billion, the refundable earned 
income child tax credit of $357 billion; food stamps, $274 billion; 
family support, $259 billion; and student loans, State's children's 
health insurance, and veterans' pensions, $149 billion.
  Cutting any of these programs is neither compassionate nor is it 
conservative, but it will be a reality if this fiscal recklessness gets 
enacted into law.
  I have now just seen that my colleague from the great State of 
Louisiana (Mr. Jefferson) has joined me as we do this Special Order. I 
yield to him.
  Mr. JEFFERSON. Mr. Speaker, I would like to thank the gentlewoman 
from Ohio for yielding to me and for the wonderful work that she is 
doing in this area and for the Special Order that she has taken out 
this evening to explain to the American taxpayers and to the American 
people just what is at risk by these Republican policies.
  I know she has covered a great deal of territory already, but I want 
to just talk about things perhaps that have not yet been discussed or, 
if they have been, discussed tangentially. And that is the issue of 
what the government ought to be doing with respect to tax policy. I had 
the good fortune, the gentlewoman might remember, of doing a great deal 
of work on this tax policy. Having spent time in school to work on it 
and having gotten a master's of laws in taxation and having studied the 
issues of what tax policy ought to be involved with, what I found out 
was this: that there is a legitimate concern on the part of government 
to have a tax policy that is fair in the first place, to have a tax 
policy that is simple in the second place, to have one that does not 
intrude into the private sector decisionmaking of people in the third 
place; and perhaps if we find a social policy we all agree on, we found 
it legitimate to use the Tax Code sometimes to encourage certain 
behavior on the part of the public.
  The one thing on the fairness I think the gentlewoman has spoken very 
well about how this policy violates the Federal standard of fairness 
any number of ways, and I want to talk about one last way it does a 
little later; but the one thing that I think it does that people ought 
to recognize, and it has effects for the deficit, for the interest 
burden, all the rest, is that it puts the government into a position 
where it is going to compete with the private sector for money. It is 
going to drive up demand for money because we are going to have to 
borrow money. There is only so much of it out there. We have to borrow 
money to fund the government's

[[Page 10661]]

operations. When we do that, we drive up the demand for money; and when 
we do that, we drive up interest costs. No question about it. And so 
this government is going to compete with the private sector. It has to 
because there is not enough money to fund this tax policy. We are going 
to put a tax policy together and borrow money to pay for it. It does 
not make any sense at all. But the biggest problem is that it is 
inescapable that it is going to drive up demand for money out of this 
economy, and we are going to borrow money from our banks here and make 
it tough on our country, and we can also borrow money from foreign 
governments and make it tough for steel. So this is an antitax policy, 
logically thinking, when we go this route.
  The second thing, there has been a debate for many years about 
whether it is a good idea or a bad idea to tax capital gains or a bad 
idea or a good idea to tax dividends, dividend income. All of this has 
been the subject of debate for many years. And one of the reasons why 
people have avoided dealing with it is because it is so expensive to 
fix it, to deal with it, to try to come up with a solution for it. So 
every time we have a tax reform session, people gripe one side or the 
other about these questions; but they never deal with it because they 
are so horrendously expensive.
  Here we have now a President in the middle of a recession, certainly 
in a huge downturn in our economy, talking about restructuring the Tax 
Code, essentially is what is happening here, in the middle of a 
recession. This is not about stimulus for the economy. This is not 
about giving people jobs. It really is all about restructuring the 
system that some people think penalizes rich people more than it 
should, and there are all sorts of debates, as I said, about that and 
we can come down a lot of different ways on the question. But this is 
no time to do tax reform when we need a stimulus package for the 
government and for our people. This is no time to take these issues 
that we fought over for many years, not new issues, and bring them to 
the floor now under the cloak of a stimulus package and of job 
creation. This is not what it is.
  And the last question I have that I want to just raise with the 
American people is this one: everybody at the upper levels gets a tax 
break from this President's proposal. The folks at the very highest 
level, 38.6 percent, get a 3.6 percent tax break and down the line to 
those who are at around the 25 percent rate; and they all get a 2 
percent tax breakdown to 25. The folks who are on the bottom, the 15 
percent tax rate, that bracket, and the 10 percent bracket get nothing. 
They get no help. They get no break under this President's plan. They 
are not touched at all. So those folks do not have any unearned income 
to speak of, very little, minimal, 7 percent, less than that of income, 
the whole group, and almost all of it, 2 percent of the folks, are 
getting that in that little bracket. They are just a handful of people 
in that bracket. So what we are doing is moving from a system where we 
are taxing unearned income one way and to a system where we are only 
going to tax wages of working people. So as we lower the capital gains 
taxation from 20 to 15 and the upper brackets by 2 percent in some 
cases, 3 percent in one case, we do nothing for the folks at the very 
end.
  So my question is if we are going to give a tax break, why not give 
it to everyone, an income tax break? Then there are other folks who do 
not pay income taxes. In my district there are 35 percent of the folks 
who work every day, 40 hours a week or more, who never make enough to 
pay income taxes; but they are paying the payroll tax through the nose, 
and the difficulty is we do not touch that issue either. These folks 
get no break under the President's system.
  It is just unfair for them not to get a break, but beyond that, it is 
nonsensical for a stimulus package not to include these people because, 
as the Members know, these are the ones who actually would spend their 
money if they got the money from the government, got something back 
from the refundable credit on the payroll taxes or refundable credit in 
some other cases. They would use their money to buy the refrigerator 
they need or the child's clothes for school or something that is a 
household need that they cannot now meet because they do not have much 
money. So if we really wanted to stimulate the economy and we wanted to 
stimulate consumption, which is what this is all about, either 
consumption by the State governments or local governments or by 
individuals or businesses, in this case individuals, we would put money 
in the hands of the people who actually spend it and consume some of 
the goods and services out there in the country that they need to 
consume.
  So apart from all of the issues that the gentlewoman has raised, and 
they are wonderful issues and ones that we have heard a great deal 
about in our caucus and in our debates in the Congress, and they are 
the central ones in this debate, but I wanted to bring these other 
issues out to discuss them because I cannot find one way that this deal 
makes any sense for the American people, and I do not understand, 
frankly, how the other side can put these proposals forward with a 
straight face.
  On every level I have been able to examine, it does not make any 
sense, and I hope that when the American people have the time to 
examine this argument that we are making here, examine the issues here, 
that they will come to the same conclusion that the gentlewoman and I 
have come to, that this policy is a bad policy for America. It does not 
stimulate the economy. It is a terrible intrusion into the tax system 
that is going to end up with the private sector competing with the 
government or the other way around, and it is going to drive up the 
cost of interest in the long term, and of course it is an issue of 
getting involved in a structural tax debate that we have had on the 
table for I do not know how long and we are now trying to fix under the 
cloak of a stimulus package.
  So I want to again thank the gentlewoman from Ohio (Mrs. Jones) for 
what she has done this evening in giving us a chance to talk about 
these issues, and I want to implore the American people to really 
examine this very closely because it is a critical point in the history 
of our country. We are about to make decisions now that are going to 
saddle our children and grandchildren for years to come, and people 
really ought to pay attention to what is happening in this House.
  Mrs. JONES of Ohio. Mr. Speaker, it is very interesting, has the 
gentleman been able in this plan anywhere to find any benefit for 
unemployed workers who are out of money who would spend their money 
right away if they were able to get any of this money?
  Mr. JEFFERSON. Mr. Speaker, of course not. It is not mentioned in the 
package, and as most of the experts have said, this is the greatest 
multiplier effect of most of the things we can put on the table to do, 
and that is to put money into the hands of people again who have been 
out of work, who have been strapped, who do not have enough money to 
pay for the things that they need to take care of in their households, 
who we know will consume if they get the money.
  Stimulating the economy is all about stimulating consumption. It is 
not about anything else. And if we are not smart enough to give people 
money they can use now, and these are not people who are sitting around 
looking for welfare, looking for a handout from the government; these 
are hard-working people who have worked for many years, in most cases, 
who now because of economic hard times and down turns in the economy, 
layoffs all over the place, have ended up without a job. These are 
folks who are actively seeking work, going out looking for a job every 
day, going to the unemployment offices, unemployment services, looking 
for help, looking for a job, and they have not been able to find work 
because this economy has lost 2.6 million jobs in the last couple of 
years. So it is just hard to find a job out there.
  This ought to be in this package. If the other side were serious 
about stimulating the economy, this is the best way to stimulate 
consumption, and the fact that it is not in the bill argues that they 
are not really serious about getting this done.
  Mrs. JONES of Ohio. Mr. Speaker, what else was very interesting, I 
saw

[[Page 10662]]

the other day, was an article that was discussing not only the fact 
that the low-income workers are not getting any benefit from the tax 
plan, that the IRS is now making proposals that people who get an 
earned income tax credit must have more documentation to show that they 
are raising their granddaughter's children or raising their cousin's 
children and on and on and on as if they are the tax cheaters instead 
of people who are at the top of the ladder who have something to cheat 
about.
  Mr. JEFFERSON. Mr. Speaker, one of the smartest things we did in this 
Congress was to pass the EITC and the next smartest thing we did was to 
expand it in the last few years to make sure we had more people 
covered. And it is a way to reward people for working. It was always 
designed to take low-income people and encourage them to stay on jobs 
that did not pay much because the welfare was competing quite 
handsomely with folks who were making such a low income until they 
might as well have stayed home if they were just looking at it on the 
basis of what is the better thing to do, stay home with the children, 
stay home and do whatever, or go to work. EITC is a conservative idea.
  Mrs. JONES of Ohio. Mr. Speaker, just to be clear for everybody, the 
gentleman is a tax man. Will the gentleman tell them what it is.
  Mr. JEFFERSON. The earned income tax credit is a conservative idea. 
It is an idea to reward people for working, to award poor people 
staying on the job instead of choosing welfare. It ought to be embraced 
by the Republicans full throttle, and it ought to be as simple as it is 
to do anything else under the tax regime. Not that things are all that 
simple, but one of the major tenets of tax policy is to keep it as 
simple or to make it as simple as we can.

                              {time}  1745

  The fewer resources one has, and we know poor people have fewer 
resources than the people who are wealthier, the simpler we ought to 
make it for them. That is why we invented this short form of tax 
reporting; that is why you have this easy way to do your standard 
deduction, because you figure that these are the people who are not 
going to have a lot of money for tax preparation or access to 
accountants and lawyers and all the rest of it. So you make it as 
simple as you can for people who you know are going to be principally 
their own tax preparers, and you hope they can understand it without 
having to expend much money to do it. Up the line, people who have all 
these various deductions and exemptions they can take and all the rest, 
they are folks who usually can pay for the lawyers and accountants and 
the rest and get it all figured out and worry about saving money.
  So I think the gentlewoman is dead right, that instead of making it 
more complicated for the poorest people in this country who are going 
to work every day, who are working hard every day, and who we have 
encouraged through the EITC to stay on the job rather than to accept 
welfare, we ought to make it simple for them to get their reporting 
done.
  Mrs. JONES of Ohio. I thank the gentleman so much for his leadership 
and insight on this issue. I appreciate his assisting me with this 
special order.
  Mr. JEFFERSON. I thank the gentlewoman for what she is doing.
  Mrs. JONES of Ohio. Mr. Speaker, let me continue to speak on some of 
these issues. Again, let me reinforce the statement that I made at the 
beginning. We believe that a stimulus package must be fast, it must be 
fair and it must be fiscally responsible. The Republicans ignore the 
tried and true logic that long-term deficits are bad for future 
economic and job growth.
  The Federal Reserve Chairman, Alan Greenspan, has repeatedly voiced 
his assessment that persistent budget deficits hurt economic growth 
over the long term because of the drain they cause on private savings 
that could, and should, be used for capital formation.
  The Thomas bill ignores the dilemma it will create when the 
expiration of unemployment benefits and state cuts in Medicare occur. 
Just as it makes no sense to down a few more drinks before hitting the 
road, it makes no sense for a country that is currently running a $436 
billion trade deficit and depends on $474 billion in borrowing from 
abroad to adopt a budget that will borrow an additional $1.5 trillion 
over the next 10 years.
  Even the Congressional Budget Office, now headed by a Republican 
appointee, has found that the Republican budgets will have little 
positive effect on the country's economic growth. The tax cut being 
offered do not come anywhere close to paying for themselves by 
expanding the economy as Republicans claim they will.
  Deficits do matter. Sound economic policy recognizes that sometimes 
deficit spending, to a certain degree, makes short and long-term sense. 
But in this current climate, the proposed deficit spending will not 
result in a short-term stimulus because only a small percentage of the 
tax cuts being offered would take effect this year.
  In the long term, American taxpayers can expect to see an increase in 
taxes and interest rates and a drop in funding for education, Social 
Security and other social initiatives, as more of their earnings go 
simply toward paying off the interest on an increased deficit. Let me 
repeat that. American taxpayers can expect to see an increase in taxes 
and interest rates and a drop in funding for education, Social Security 
and other social initiatives, as more of their earnings go simply 
toward paying off the interest on an increased deficit. This deficit 
matters, and this deficit makes no economic sense.
  Yes, deficits matter. Chairman Greenspan has recognized this 
fundamental truth, cautioning repeatedly about the perils of increasing 
deficits without corresponding spending cuts. Yet the Republicans have 
taken every opportunity to distort his comments to suit their wayward 
economic agenda.
  Let us take a look at chart 5. The President has stated that we have 
deficits because we have been through a war. This is a shameless 
untruth. The Congressional Budget Office and the President's own budget 
acknowledge that deficits started well before the conflict in Iraq and 
are projected to continue indefinitely because of the President's own 
fiscal policies. Even without taking into account any of the costs of 
the Iraq war, the CBO has projected in early March that the President's 
budget would result in a $1.8 trillion deficit over the next 10 years.
  Let me refer to chart 5 on deficit projections. This chart has three 
projections. The dark line shows how the deficit will continue to 
increase under current economic conditions. The other line shows what 
will happen to the deficit under optimistic and pessimistic conditions. 
However, the optimistic scenario is unlikely because increased deficit 
spending and more tax cuts will not create an economy of growth and job 
creation.
  For example, the dark line, as I said previously, shows how the 
deficit will continue to increase under current economic conditions. In 
other words, it is going to go from where it is right now, down to 
2050, down this far to minus maybe about 14 percent.
  Under the best economic conditions, based on the deficit spending we 
are doing, there will still be a deficit of about minus 0.3 percent. 
Then if you look under the lowest productivity growth, it will even be 
further. It moves further into the minus spending, down to minus 15 
percent.
  So the reality is that no matter what the economy does with the 
deficit spending we are doing right now, we are going to be in bad 
shape, and our children will continue to pay and pay and pay.
  This bill claims to be about jobs, retaining them and creating them. 
Last week it was announced that the Nation's unemployment rate reached 
6 percent. In the last 2 years, over 2 million jobs have been lost 
nationwide. Districts with heavy manufacturing industries have seen an 
even bigger job loss rate than the national average.
  This Congress needs to pass a bill that will bring those who lost 
their jobs back to work and keep them at work. But will the bill that 
has been introduced by the gentleman from

[[Page 10663]]

California (Chairman Thomas) do that? Only if you think that giving 
over $350 billion worth of capital gains and dividend tax exemption to 
the wealthiest one-half of one percent of the population will create 
jobs.
  What kinds of jobs will this create? The only type of job I think 
that would be created would be hiring people to carry the buckets of 
money this wealthiest fraction of the country will receive to the bank. 
But with most of those gains being transferred electronically, even 
those types of jobs will not be available.
  Economists from all slants, conservative and liberal, have reached a 
broad consensus that cutting the tax on dividends will not create jobs. 
In fact, several Wall Street analysts have rated this tactic as one of 
the least effective options in terms of stimulating economic growth.
  The tax cuts being offered by the President and the gentleman from 
California (Chairman Thomas) are not about jobs. Instead, these tax 
cuts are about partying it up now and ignoring the consequences.
  This so-called jobs bill starves the government of revenue so that 
social priorities suffer, priorities like funding promised benefits for 
baby-boomers, cushioning the hardship of the unemployed, enhancing 
educational opportunity and improving homeland security. Just ask any 
mayor or local fire chief or local police chief about what money they 
got from homeland security. They are the first responders, and they are 
still waiting for this government to give them the money they need to 
do their job.
  Other people have noticed that this plan would not create jobs, not 
just those of us here in Washington. This past weekend, the Detroit 
News published an editorial from the President of the Economic Policy 
Institute that empirically described how these Republican plans will 
hurt the economy, will cause more jobs to be lost and dig our deficit 
hole deeper.
  This article cited a recent joint statement signed by 10 Nobel 
Laureates in economics and 450 other economists stating there is 
widespread agreement that the purpose of the President's tax plan is 
for permanent change in the tax structure of the country, not the 
creation of jobs and growth in the near term.
  Let me repeat that: That the purpose of the President's tax plan is 
for permanent change in the tax structure of the country; not the 
creation of jobs and growth in the near term. These individuals single 
out the permanent reduction in the dividends and capital gains tax 
rates as not being credible as short-term stimulus. The Republicans 
claim that their plans will generate more growth in gross domestic 
product and in jobs in the next 2 years, ignoring the horizon beyond 
those 2 years.
  Before I go on to that subject matter, I see that I have been joined 
by another colleague of mine, the gentlewoman from Georgia (Ms. 
Majette). I yield to the gentlewoman.
  Ms. MAJETTE. Mr. Speaker, I am honored to be a new Member of the 
House of Representatives. I know that each of us takes this 
responsibility very seriously. Each of us wants to represent our 
constituents to the best of our ability, and we all want to do what is 
right for our country. Yet this Congress cannot seem to do the right 
thing.
  This so-called tax cut is a perfect example of what I am talking 
about. Virtually every reputable economist agrees that it is the wrong 
thing for our economy. Alan Greenspan agrees that it is the wrong thing 
to do at this time, yet the President has seen fit to have Mr. 
Greenspan serve for another term while choosing not to listen to his 
advice. Republican and Democratic Members of the House are going along 
with the President's tax policy, and that, Mr. Speaker, will sink this 
ship of state into a sea of red ink.
  To me, this tax plan is about simple math and basic accounting. More 
importantly, it is about common sense. If you borrow money, somebody 
has to pay it back. This tax plan will result in the biggest increase 
in debt that our country has ever seen. Somebody is going to have to 
pay it back, and those somebodies are our children and our 
grandchildren.
  Many in our country are worried about the problem of predatory 
lending, but what they should be worried about is predatory borrowing. 
We are causing our children and grandchildren to incur huge debts in 
the future just so we can line the pockets of a precious few today.
  This predatory borrowing will doom the economic fortunes of 
generations to come because we refuse to get our fiscal house in order. 
Do not get me wrong, Mr. Speaker; like anyone else, I could use a tax 
cut, and many of my constituents could use tax relief too. But this is 
not tax relief.
  Do I support relief from the marriage tax penalty? Of course I do. Do 
I support increasing the amount of the child tax credit? Of course I 
do. Do I support giving small businesses relief for their expenses? Of 
course I do. These are all tax cuts that help working families, exactly 
those families who are hurting and who are struggling to make ends 
meet.
  Unfortunately, none of these tax cuts is permanent in this bill, and 
in 3 years most of these cuts will evaporate and working families will 
be right back where they are today.
  But the Republican tax bill does not stop there. This tax bill will 
give huge tax relief to those who need it least, the wealthy; those 
people who already have an annual income of $1 million a year. The 
dividend and capital gains tax cuts, which are made permanent, by the 
way, will pile on debt for our children and our grandchildren.
  Long-term success in this country depends on high quality education, 
on stable and high paying jobs, and access to quality health care. But 
because of these tax cuts for the wealthiest Americans, we are not 
investing in those things that will secure our children's future.
  Not only are we abdicating our responsibility for our children's 
future, we are forcing them to pay the bill. What we need today is a 
renewed commitment to fiscal responsibility. Let us restore the pay-as-
you-go rules that led to the fiscal discipline during the 1990s and the 
first surpluses we saw in decades, surpluses that have totally 
evaporated under this President's economic programs.
  For the first time in decades, we have had the opportunity to begin 
to pay down the massive multi-trillion dollar debt and to begin to 
bring some financial stability to Social Security and to Medicare. But, 
instead, today we are being asked to incur more debt and to cast even 
further doubt on the viability of those programs.
  What we have here is a failure to communicate with the American 
people. So let me just make it plain: This is not really a tax cut we 
are talking about today. Read my lips; this will be the largest tax 
increase that the world has ever seen, only it is a tax increase on our 
children, our grandchildren and our great grandchildren.

                              {time}  1800

  This tax plan is a sham and a shame, and the American people deserve 
better than this.
  Mrs. JONES of Ohio. Mr. Speaker, I would like to thank the 
gentlewoman from Georgia (Ms. Majette) for coming out to help me with 
this hour.
  As I stated before she started, this article cited a recent joint 
statement signed by 10 Nobel Laureates in economics and 450 other 
economists stating that there is widespread agreement that the purpose 
of the President's tax plan is for permanent change in the tax 
structure of the country and not the creation of jobs and growth in the 
near term. Now, if that is what he wants to do is to change the tax 
structure, just step on up there and say it, but do not put it under 
the veil of creating jobs and growth in the near term. These scholars 
single out the permanent reduction in the dividends and capital gains 
tax rates as not being credible as short-term stimulus.
  The Republicans claim is that their plan will generate more growth in 
gross domestic product and in jobs in the next 2 years. In fact, even 
under the most forgiving analysis of these plans, gross domestic 
product and jobs will decline in 2005, 2006, and 2007. Respected 
economic analysts have shown

[[Page 10664]]

that any positive impact in the first 2 years of this irresponsible 
plan will be followed by a gross domestic product decline of .25 
percent per year, thereafter resulting in a gross domestic product loss 
of 1 percent and 750,000 jobs by 2013.
  There are two reasons why this happens. First, tax cuts without 
spending cuts lead to sustained budget deficits. These deficits in turn 
raise long-term interest rates, suppress investment, and stop 
productivity growth. The second reason is that the administration's 
proposal is ineffective at raising long-term growth. Much of the 
package involves items that are already scheduled to be implemented, so 
their effect is minimal and illusory. Further, many economists, 
including the Nobel Laureates and other scholars mentioned previously, 
believe that dividend exclusion will actually depress investment.
  It is easy to understand why the Republican proposals are so 
ineffective at creating jobs in the near term. First, very little of 
the package stimulates the economy this year when jobs are needed most. 
Let me say this again. Very little of this package stimulates the 
economy this year when jobs are most needed. This stimulus package only 
offers $31 billion toward the short-term growth efforts. All of the 
other dollars, whether it is $550 billion, $726 billion, goes to other 
issues.
  Further, the proposed tax cuts are ineffective at stimulating 
consumption because they are so heavily targeted at the wealthiest 
members of our population who will likely take that extra money and put 
it into savings rather than consume goods and put that money into the 
stream of commerce.
  One of the biggest concerns of Americans today is whether they will 
have a job tomorrow, whether this stagnant economy will engulf their 
job, their savings, and their livelihoods, or whether Congress will do 
something that will secure their employment and economic future. The 
Republican plans do not provide that security to our citizens. It is a 
carrot for the middle class and nothing for the lower class. The 
gentleman from California (Mr. Thomas) has attempted to veil some of 
the aspects of his plan as benefiting the middle class, in essence, 
dangling a carrot in front of them. But when the truth is peeled away 
from his plan, it becomes clear that members of the middle class will 
never get this carrot.
  Republicans have concealed the true nature of their tax cuts and the 
effect those cuts will have on the middle class, using clever gimmicks 
and ruses to trick working families into thinking they will enjoy a 
permanent benefit under their plan.
  For instance, the child tax credit offered in the plan is a hoax. 
Rather than making tax cuts for families the centerpiece of an economic 
stimulus plan, they have made the increase in the child tax credit a 
temporary afterthought so that the amount of the child tax credit will 
drop from $1,000 in 2005 to $700 in 2006 while, at the same time, the 
tax breaks to the wealthiest citizens are being made permanent. They 
are willingly going along with a plan that will sacrifice increases in 
the child tax credits that would add an immediate beneficial impact for 
all of our working families to make room for the President's plan to 
put even more money in the pockets of wealthiest Americans.
  Now, do not misunderstand me. I think wealthy Americans ought to be 
wealthy if they work to get to be wealthy, but they ought to share the 
brunt of tough times, tough economy, with all of us; and they ought to 
forgive or give up the opportunity to get these tax cuts to bring our 
country back to the best.
  The Republican plan jeopardizes Social Security to make room for tax 
cuts for the wealthy. Just as baby boomers are approaching retirement, 
the GOP is offering a plan that will borrow and spend all of the money 
from the Social Security trust fund over the next 10 years. The long-
term cost of the Republican tax cuts is more than three times the 
entire long-term Social Security shortfall. And what does this pay for, 
one might ask? My answer is obvious: tax cuts for the wealthy.
  As I mentioned earlier, it was just announced that the Nation's 
unemployment rate has reached 6 percent. This figure seems to not have 
resonated with Republican Members of Congress. Even with this new high 
in unemployment, with the economic slump continuing, the GOP plan 
allows extended unemployment benefits to expire at the end of this 
month. Nowhere in their plan is there money to extend unemployment 
benefits. Nowhere in their plan are they even thinking about the people 
that are unemployed, other than saying, I am going to promise you a job 
later on based on the trickle-down theory. In just over 3 weeks, 
millions of families across the Nation will be denied desperately 
needed unemployment insurance. Extending these benefits will not only 
help the families of the nearly 4 million out-of-work Americans pay 
their bills, but it will also help the economy by putting money into 
the pockets of consumers who will spend it.
  Remember the ``stream of commerce'' I talked about earlier? That is 
where the money from these unemployment benefits will go. But the 
Republican message to these families is crystal clear. The message to 
these families is, Well, we are going to create you some jobs, but you 
can eat crumbs until we get those jobs in place. The Republican message 
to these families is, We would rather put more money into the pockets 
of the wealthy than to put immediate dollars into your pocket in an 
unemployment plan. The message to these families is, Tough luck.
  Now, let us talk about what the message is to the States. The message 
to the States is the same as the message to the poor: tough luck. 
Despite the fact that economists statistically rate aid to the States 
as one of the most effective immediate economic growth measures 
available for the money, the Republican economic plan, while calling 
for $1.2 trillion in new tax cuts, fails to include a single penny for 
State aid. States are facing the worst fiscal crisis since World War 
II, but the Bush administration is refusing to provide them any aid. As 
a result, States across the country are cutting education and health 
care programs, raising taxes and other fees, and putting a further drag 
on the sluggish economy. And with the GOP's refusal to include any help 
to the States in their economic plan, economic growth is undermined, 
not fostered.
  I have spent most of my time talking about what is wrong with the 
Republican plan, and believe me, I could talk for much longer, but I 
want to take some time now to discuss a Democratic plan that is fair, 
fast-acting, and fiscally responsible. I see that I have been joined by 
the gentleman from Washington (Mr. Inslee), and I would like to yield 
to him.
  Mr. INSLEE. Mr. Speaker, I appreciate the gentlewoman coming here to 
talk about this important issue. I just have two comments to make about 
the majority party's plan. We are talking about a way to get our 
economy going again and to me, the acid test of any economic plan is, 
is it going to work. This should not be based on idealogical 
principles; it should not be based on partisan politics; it should not 
be based on sort of a pie-in-the-sky theory. The question should be: 
Does it work?
  The two points I would like to make is first off, we have very good 
evidence that it does not work. We are all talking about the best way 
to administer medicine, if you will, to the economy; and it kind of 
reminds me, what the majority party is doing reminds me of the 
physicians in the 18th century. When you were sick in the 18th century, 
you went to a doctor; they bled you. They put leaches on you. And if 
you did not get better, they put more leaches on you. And if you still 
did not get better, they would put more leaches on you, and they would 
bleed you some more, because it is all they knew how to do.
  Well, what we saw in the year 2001 when the Republican Party did this 
big tax cut, a trillion dollar tax cut plan, told the American citizens 
it was going to create tens of thousands of jobs, and the economy has 
gone south. It has gone south like it has not at any time since World 
War II. We have had the largest number of job loss; over 2.5 million 
Americans have lost their jobs

[[Page 10665]]

since that ill-conceived plan by the Republican Party. It is the 
largest job loss since Hoover was President of the United States. And 
here we have the doctors to the economy, they want to do it again when 
it was so damaging to the economy in the first place. The deficit has 
skyrocketed. It has gone from a $5 trillion surplus to deficits of $300 
billion, at least, probably more. And so we want to see this sort of 
application of this 18th century medicine again when it did not work 
the first time.
  We should not repeat the mistakes, and the reason it was a mistake 
then, and they are repeating exactly the same failure this time, number 
one, their plan is too late. It is too late because almost 95 percent 
of the benefits are in the years after this year when we need the 
stimulus this year; and, number two, it goes inordinately to people who 
are not going to put the money right back into the economy. So we are 
repeating a failure of 2001, as the doctors of the 18th century 
repeatedly bled people if they did not get better, and they just kept 
bleeding them. And that is what the Republicans are doing to the 
Federal budget.
  The second point I would make is, this is called a tax cut. But it is 
really not a tax cut to Americans over the long term. If anything, it 
is a tax increase. And the reason is that our children are going to 
have to pay and we are paying today the burden of not balancing the 
Federal budget. Right now, because we pay interest on the Federal debt, 
I have some really bad news for Americans. Of every $100 Americans 
paid, they paid $100 on April 15 in taxes, $14 went to pay interest on 
the Federal debt. For that $14, you got no soldiers, no sailors, no 
police officers, no nothing. It went down a black hole. And now it is 
going to increase because the Republicans' own numbers, these are not 
Democratic numbers, the Republicans' own numbers demonstrate another $1 
trillion of indebtedness they will create that American taxpayers are 
going to have to pay at some point, only now they are going to have to 
pay interest on top of that.
  So this really is not a tax cut. At best, it is a tax transfer. It is 
a transfer from us baby boomers on to our children's shoulders, which 
is immoral, number one; and, number two, it is a tax increase by 
increasing the interest payments we have to pay on the Federal debt. It 
is an increase on what we call the debt tax. We all pay the debt tax 
now because we pay interest on the Federal debt. This could be called 
at worst a tax increase and at best a tax transfer to our children. 
Both are wrong; it should be rejected. Let us not repeat the failure of 
2 years ago.
  Mr. Speaker, I appreciate the gentlewoman addressing this important 
issue.
  Mrs. JONES of Ohio. Mr. Speaker, I thank the gentleman for his 
leadership on this issue.
  This past January, Democrats presented a fair, fast-acting, and 
fiscally sound economic plan that would jump-start the economy, create 
jobs immediately, and promote long-term economic growth. The President 
then introduced a highly divisive plan that does not create jobs in the 
short term and endangers our economy by saddling us with these 
deficits. Much-needed immediate action on the economy is being thwarted 
because the Republicans disagree about the President's controversial 
plan and because the President is still pushing for a $550 billion 
package that Members of both parties in both Houses of Congress have 
soundly rejected.
  The past Democratic plans have included $32 billion in immediate tax 
relief to small businesses to generate investments. Only $29 billion of 
the GOP plan is targeted to small enterprise. Finally, the GOP plan 
will negatively affect investment in small business and their access to 
capital because it will increase interest rates and make investment in 
big business more attractive.
  There is no bang, but there certainly are bucks in the GOP plan. At 
least there are bucks for the wealthy. Economists have estimated that 
for every dollar spent on the dividend tax cut, only 9 cents in 
economic growth will be generated. Even the economists that the White 
House relied on for their job growth numbers ``predicted that if the 
tax cuts were not offset within a few years, interest rates would rise, 
private investment would be crowded out, and the economy would actually 
be worse than if there had been no tax changes at all.''
  There is no focus in the GOP plan, there is no fairness in the GOP 
plan, and there is no fiscal responsibility. For the sake of our 
country, our health care and our infrastructure, I call on all Members 
of Congress to reject the Thomas plan just as you rejected the 
President's plan.
  Mr. Speaker, the Democratic plan will create 1 million jobs by the 
end of the year and is paid for through responsible tax policy that 
puts money in the hands of people who need it most.
  The Democratic plan is focused on job creation and long-term growth. 
By providing an immediate stimulus, the plan will create jobs. The 
Democratic plan will not leave States behind--instead it will provide 
$18 billion for Medicaid assistance to the States, $26 billion for 
infrastructure development, homeland security, education, and other 
needs jobs will be retained and created, our economy will revive 
itself. By extending unemployment insurance benefits, money will be put 
in the hands of those who need it most at the time it is needed most. 
Recipients of those benefits will be able to buy needed consumer goods, 
pay their bills, and be able to survive in these tough economic times. 
The Democratic plan will benefit small businesses by creating credits 
for businesses who hire the long-term unemployed and increase the 
expensing limits small businesses are able to claim. Further, it will 
temporarily increase the bonus depreciation for all businesses, which 
will in turn enable businesses to retain more capital for expansion and 
hiring.
  The child credit the Democratic plan has will accelerate to $800 and 
will directly benefit the families of 1.75 million children. Over the 
course of 10 years this will put $50 billion into taxpayers' hands that 
will in turn be used for savings and consumption.
  Today's New York Times cited the President's plan, the House 
Republicans' plan, and the Senate Republicans' plan as putting $400 per 
child into taxpayers' hands as this year's rebate. This is part of the 
``carrot'' that Republicans are dangling in front of the middle and 
lower class taxpayers. And while they may in fact get this money this 
year, Republicans are remaining silent on what they will get next year, 
or 5 years from now, or 10 years from now. The reason for that silence 
is because next year, and 5 years from now, and 10 years from now they 
will not receive anything. Instead, they will be forced to pay more for 
health care, they will be forced to pay more for education, they will 
be forced to pay more for infrastructure development, and they will be 
paying more toward reducing the national debt--a payment that will not 
yield any tangible, graspable benefit.

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