[Congressional Record (Bound Edition), Volume 156 (2010), Part 3]
[Senate]
[Pages 3452-3453]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                HIRE ACT

  Mr. KYL. Mr. President, we are going to be taking up the so-called 
HIRE Act starting tomorrow. I wish to address some of the problems with 
it since the procedure under which we have considered this bill does 
not allow any amendments. As a result, we have no opportunity to fix 
problems that are inherent with the bill and will force me to vote 
against it.
  The first provision that should be highlighted is the provision 
called the Build America Bonds. This was created first in the 2009 
stimulus bill. It offers a direct subsidy from the Federal Government 
to States and other governmental entities to cover their cost of 
financing for certain kinds of projects.
  The House-passed bill expands this subsidy by allowing four current 
tax-preferred bonds to qualify for the direct subsidy under this 
program and increases the generosity of that subsidy to cover all of 
the borrowing costs for education projects. This will mean an expansion 
of the already substantial support the Federal Government offers for 
State and local governments, support for which we taxpayers are then 
responsible. The Federal Government gave $44 billion in extraordinary 
stimulus State aid last year and regularly spends $26 billion annually 
in sub-Federal Government subsidies through tax-exempt bond financing. 
This is a significant Federal expenditure for which taxpayers will be 
responsible.
  Here is the key problem, in addition to the additional exposure of 
taxpayers: Because interest rates reflect risks, States with poor 
credit ratings that therefore pay higher interest rates would actually 
be rewarded under this legislation due to the structure of these bonds. 
For example, a State that issues $1 billion worth of debt paying a 5-
percent interest rate would receive a bigger direct payment from the 
Federal Government than a State issuing $1 billion worth of debt paying 
a 4-percent interest rate. Thus, States with lower credit ratings could 
receive larger subsidies, which, of course, encourages greater risk-
taking and creates an incentive for States to issue even more debt than 
they would have without the subsidy.
  The so-called jobs bill would further reward States with poor credit. 
The Senate version of the bill expands the Build America Bonds program 
by giving insurers of certain tax credit bonds for school construction 
and alternative energy projects the option of receiving direct payment 
of up to 65 percent of the interest cost. The House bill would, in 
certain cases, reimburse up to 100 percent of a project's interest 
costs.
  The original Build America Bonds program encouraged States to take 
greater risks. The bill we will consider tomorrow would make the 
problem even worse. One of the lessons from the financial crisis is 
that people should not borrow more than they can afford. Unfortunately, 
it appears many of us have not taken this lesson to heart.
  There is a provision relating to highway extension. Rather than being 
a straight extension of the current highway authorization, this bill 
represents a significant expansion of the Federal Government's funding 
for highway projects. The highway piece first cancels rescissions that 
were scheduled under the last highway reauthorization. It then 
permanently increases the authorization levels for highway spending and 
permanently authorizes interest payments from the general fund to the 
highway trust fund and authorizes

[[Page 3453]]

a one-time transfer of $19.5 billion from the general fund to the 
highway trust fund.
  Although not all of these costs will show up as increasing the 
deficit because of the unique CBO scoring conventions, all told, the 
highway extension under this bill will add $46.5 billion to the debt 
over the next 10 years and will authorize $142.5 billion in additional 
spending over the next 10 years.
  You hear the President talking about not adding to the deficit. All 
of our colleagues wring their hands and say: We have to somehow control 
Federal spending. Yet in this legislation we take up tomorrow we add 
$46.5 billion to the debt over the next 10 years and then authorize an 
additional $142.5 billion of spending over the next 10 years. When will 
it stop?
  There is a provision of the bill that has some merit to it. It is 
called the payroll tax holiday, although I think the way it has been 
constructed is not something we should do. This is the most expensive 
piece of the bill. In fact, the Congressional Budget Office has told us 
that it expects a provision similar to this to create five to nine jobs 
for each million dollars in budgetary cost in 2010. Since this 
provision would cost approximately $13 billion by using the CBO model, 
one would estimate that the provision would create between 65,000 and 
117,000 jobs this year at a cost of $110,000 to $200,000 per job. This 
sounds a lot like the stimulus bill to me, a very inefficient way to 
create jobs, if, in fact, they actually get created.
  The proposed payroll tax holiday comes on the heels of the Senate-
passed health care bill which actually increases the Medicare payroll 
tax from 2.9 percent to 3.8 percent. This actually would relieve 
employers of an element of the payroll tax. So which is it? Do we agree 
that payroll taxes that are increased are unhelpful to job creation?
  According to Timothy Bartik of the Economic Policy Institute:

       The employer tax credit in the Senate jobs bill is likely 
     to create few jobs and at an excessively high cost.

  As I have said, up to $200,000 per job.
  He explains it this way:

       Awarding credits for hires can be very expensive. Over a 
     one-year period, the number of hires, as a percentage of 
     total private employment, is over 40 percent even during a 
     recession. To pay for hires that would have occurred anyway 
     will be expensive and won't necessarily increase total 
     private sector employment. The Schumer-Hatch design tries to 
     avoid some of these large costs in several ways. First, 
     credits are limited to hiring the unemployed, apply only to 
     the rest of 2010, and are only worth 6.2 percent of the new 
     hire's payroll costs. The retention bonus is of modest size 
     and delayed. While these limits control costs, they also 
     hamper the credit's benefits.
       Limiting the credit to hiring someone unemployed at least 
     60 days makes the credit less attractive to employers.
       Not only does the credit become more complicated to claim 
     (which reduces its effectiveness), but it restricts the 
     employer's hiring to a more limited pool of workers.

  Bartik also explains that past experiences--for example, with the 
targeted jobs tax credit, the work opportunities tax credit, and the 
welfare-to-work tax credit--show that tax credits to encourage hiring 
disadvantaged workers usually generate little employer interest and 
have a negligible effect upon employer behavior. He says:

       Employers are happy to claim such credits, if they happen 
     to meet the credit's rules, but they are reluctant to change 
     their behavior in response to such targeted tax credits.

  So even the one provision of the bill that actually has some alleged 
relationship to job creation probably would not and, to the extent it 
does, would cost an extraordinary amount of money per job actually 
created.
  Let me turn to one of the ways in which these expenses are allegedly 
offset: delaying the application of the so-called worldwide interest 
allocation. This is a very bad idea. This delays implementing a 
corporate tax reform we passed in 2004 in order to help American 
businesses properly account for their overseas income and, frankly, be 
more competitive with those abroad.
  The worldwide interest allocation rules were originally improved as 
part of the American Jobs Creation Act of 2004, as I said, and were 
scheduled to take effect in 2009. However, the Housing and Economic 
Recovery Act of 2008 delayed the effectiveness of these rules by 2 
years to 2011. The Worker, Homeownership, and Business Assistance Act 
of 2009 that extended the first-time home buyer tax credit further 
delayed the effectiveness of these rules to 2018.
  The so-called jobs bill would delay this provision through the end of 
the existing budget window to 2021. Repeated delays have the same 
effect as repeal: an increase in the effective corporate tax rate. As I 
said, that does nothing to help our American businesses in their desire 
to compete overseas.
  So these are just some of the reasons why I am not going to be able 
to support the HIRE Act, and I would urge my colleagues, since we are 
not going to have an opportunity to amend it, to oppose it as well.
  Might I ask, Mr. President, how much time I have remaining?
  The PRESIDING OFFICER. The Senator has 5 minutes.

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