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TAXPAYER REFUND ACT OF 1999
(Senate - July 28, 1999)

Text of this article available as: TXT PDF [Pages S9460-S9523] TAXPAYER REFUND ACT OF 1999 Mr. LOTT. I ask unanimous consent the Senate begin consideration of the reconciliation bill, which is the Tax Relief Act, and that the first 3 hours of debate be equally divided in the usual form for purposes of opening statements only. The PRESIDING OFFICER. The clerk will report the bill by title. The legislative assistant read as follows: A bill (S. 1429) to provide for reconciliation pursuant to section 104 of the concurrent resolution on the budget for fiscal year 2000. There being no objection, the Senate proceeded to consider the bill. Mr. ROTH. Mr. President, I yield myself 30 minutes. Mr. President, I don't think there is any parent who hasn't had the experience of sending a child into a store with a $20 bill to buy a carton of milk, a loaf of bread, or perhaps a dozen eggs, and the child returns with the few essentials. In a demonstration of maturity and responsibility, the child returns the change to his or her parent. There is no question who the change belongs to. After all, the parent earned the money; it is needed to support the family; the family will certainly have important uses for it later. The child understands this. So does the parent. Most often, the change is returned to the household budget to take care of other important needs. Washington needs to demonstrate the same responsibility when it comes to determining what to do with the change that is left over from running the government. There are surplus revenues in the Treasury. As with a child emerging from the grocery store, there is change--big change--left over after Congress has met the necessities of running government. In trying to balance the budget in 1997, Congress miscalculated the revenues that would be generated by the economy. At the same time, the hard work, the thrift, investment, and risk-taking of Americans combined to create an unexpected windfall of revenue. Now the question Washington seems to be grappling with concerns who rightly deserves the windfall. It is a question any parent or child can answer. American families, those who created the wealth in the first place, those who need their precious resources to meet future basic needs at home, are rightly entitled to the revenues they have earned, revenues Washington did not plan for to meet the expense of government, from which Washington had budgeted. Now, as the child returning change for the $20, we must hand back the money. We must do it in a broad-based way that is fair to those who provided the funds to Washington in the first place. We must do it through broad-based tax relief that helps individuals and families at all income levels meet real needs. The broad-based tax relief plan that passed out of the Finance Committee with bipartisan support will do just that. It will benefit nearly every working American. It will help restore equity to the Tax Code and provide American families with the resources they need to meet pressing concerns. It will help individuals and families save for self- reliance and retirement. It will help parents prepare for educational costs. It will give the self-employed and underinsured the boost they need to pay for health insurance. It will begin to restore fairness to the Tax Code by eliminating the marriage tax penalty. Let me state exactly how the plan works and why it has received bipartisan support. This tax cut package will provide broad relief by reducing the 15-percent tax bracket that serves as the baseline for all taxpayers to 14 percent. In other words, no matter which tax bracket a family may be in, by cutting the 15-percent bracket, everyone will benefit as they will pay 14 percent on their first portion of taxable income. At the same time, this plan expands the 14 percent bracket, dropping millions of Americans who are now paying taxes at 28 percent down to the lower bracket. For a middle-income family of four, these two changes will mean a tax savings of over $450 a year. And these provisions have already found bipartisan support. To restore equity to the Tax Code, this plan targets another bipartisan objective by eliminating the marriage tax penalty. For too long, husbands and wives who have worked and paid taxes have been penalized by their dual incomes. I have heard of some couples who have actually chosen not to marry because of the tax penalties their marriage would incur. This plan will fix that by giving working married couples the option of filing combined returns, using separate schedules to take advantage of the single filer tax rates and the single filer standard deduction. This is a change that is long overdue. American families have been suffering under the unfair burden of the marriage tax penalty for too long. A simple example shows us why: Robert and Diane are two single Americans who have fallen in love and want to marry. They are not considered wealthy. In fact, Robert is a hardworking foreman at an auto factory. Susan, his fiancee, is an experienced nurse. Each makes roughly $50,000 a year. Now, under current law--when the file their separate tax returns--they each take a personal exemption and the standard deduction, giving them a taxable income of $43,000. After applying the tax rates for singles, they each owe tax of about $8,745. If, however, Robert and Diane follow their hearts--get married and start a family--they realize that their total combined income would be $100,000. Should they marry, they would no longer be considered middle- class individuals, but many would regard them as a wealthy family, and under current law their combined income would be reduced by their two personal exemptions and by the standard deduction for married couples. And here is where they would hit their first marriage penalty problem, discovering that their new standard deduction is significantly less than the combination of the two standard deductions they receive as singles. But the marriage penalty does not end there. In fact, it gets worse. With their combined income, Robert and Diane--now considered by many to be wealthy--would have a taxable income of $87,400. This is where they would hit their second marriage penalty problem. The lowest tax rate bracket for married couples is less than twice as wide as the lowest tax rate bracket for singles. In other words, more of their income would now be taxable at higher rates. The result would be a total tax bill of $18,967, almost $1,500 more than they would have paid as singles. That steep increase would come at a time when they could least afford it, a time when just starting out as a married couple they would be looking to buy a home, raise a family, and save for education. The legislation we introduce today--this broad-based tax relief-- completely eliminates the marriage penalty for Robert and Diane. The Senate Finance Committee bill will allow Robert and Diane to file a joint return, but to calculate their tax liability as if they had remained single. They would each get the benefit of the more generous standard deduction and of the more generous rate brackets. Under this new approach, they would pay a total tax of $17,490 which is the combination of what they had each paid before. This saves them almost $1,500. But in restoring equity to the tax code, we do not stop with the marriage penalty. Another important measure contained in this broad- based tax relief plan is the elimination of the alternative minimum tax for middle-income families--families like David and Margaret Klaassen. Most of us know their [[Page S9461]] story. The Tenth Circuit recently affirmed that under the current law, the Klaassens are required to pay the alternative minimum tax despite the fact that it may not have been Congress' intent to impact families like the Klaassens when Congress passed the AMT. David and Margaret Klaassen are the parents of 10 dependent children. They had an adjusted gross income of $83,000 and roughly $19,000 of itemized deductions relating to state and local taxes, medical expenses, interest, and charitable contributions. Their reported adjusted gross income was $63,500, and with 12 personal exemptions their taxable income was $34,000, resulting in regular tax of $5,100. That would seem fair. And the Klaassens paid the bill. However, the IRS flagged the return and determined that the family was liable for the alternative minimum tax, a provision in the code that was passed to make sure that wealthy individuals and families do not escape at least some liability through tax shelters and other tools they might use to minimize their liability. The IRS determined an AMT deficiency of $1,100. For AMT purposes, the Klaassens were disallowed a $3,300 deduction for State and local taxes. In addition, $2,100 in medical expenses were disallowed because of the 10-percent floor for AMT purposes. And finally, the Klaassens' entire $29,000 deduction for personal exemptions was disallowed because of the AMT. These adjustments resulted in alternative minimum taxable income of $68,000--twice the taxable income that the Klaassens had without the AMT. This simply is not fair. It is not what Congress intended. The Finance Committee bill will help return fairness to the tax code by allowing families to receive the full benefits from their personal exemptions. This will also restore taxpayers' ability to receive their $500 per child tax credits, and other benefits that were intended to be available to middle-income families. These are changes that are long overdue. Again, they have strong bipartisan support. But our broad-based Taxpayer Refund Act of 1999 does so much more. This plan will also help individuals and families find self-reliance and security in retirement through expanded individual retirement accounts, as well as through enhanced 401(k) plans, 403(b) plans and 457 plans. These are critical programs--programs that along with Social Security and personal savings help individuals prepare for their golden years. For savings through the workplace, there are 401(k) plans, 403(b) plans and 457 plans, each of which can be sponsored by different types of employers. For individual savings, there is either the traditional IRA or the Roth IRA. And all these different savings vehicles have different limits on how much individuals can save. However, our current system can do more, and the limitations that we placed on retirement savings in times of budgetary restraints should be reexamined in light of the current surplus. For example, the IRA contribution limit has not changed since 1982. Had it simply been indexed for inflation, it would be almost $5,000 today. What an opportunity that would present middle-class families to prepare for their futures. And that's exactly who benefits from IRAs-- middle- and lower-income Americans. Fifty-two percent of all IRA owners earn less than $50,000. This same group makes about 65 percent of all IRA contributions, and right now they are limited by the $2,000 cap on contributions. IRS statistics also show that the average contribution level in 1993 for people with less than $20,000 in income was $1,500. Clearly, if the average contribution of modest-income taxpayers is $1,500, this demonstrates that many of these Americans want to make contributions of more than the $2,000 limit. This tax relief bill will incrementally increase the amount that people can contribute to IRAs from $2,000 to $5,000. In the area of employer-provided savings vehicles, the current maximum pre-tax contribution to a 401(k) plan or a 403(b) annuity is $10,000. In addition, the maximum contribution to a 457(b) plan is $8,000. Finally, the maximum contribution to a SIMPLE plan is $6,000. These limits are indexed for cost-of-living increases. There has traditionally been a differential in contribution limits among the various types of plans: IRAs having the lowest limits; SIMPLE plans having a greater limit, but not as much as a 401(k) plan; and 401(k) and 403(b) plans having the highest limits, but the greatest number of regulations. Since the IRA limit will be raised to $5,000, the bill will increase limits for 401(k) and 403(b) plans to $15,000 and for SIMPLE plans to $10,000; thereby continuing the differential. The limit for 457(b) plans for government employees will increase to $10,000. There is no question, with rising concerns about security and self- reliance in retirement, that these changes are needed. They will go a long way toward helping individuals and families achieve their economic goals. But the benefits this legislation has for retirement planning do not stop here. There are other provisions that will add new retirement vehicles, provide greater ability to transfer retirement savings between plans, promote retirement plans for small businesses, and simplify the retirement plan system for both employers and employees. One provision will allow employees 50 years old or older to make catch-up contributions to their retirement plans. This will be most important for women, benefiting those who may have started their retirement savings late or who may have taken time off to raise children. Whatever the reason, once these individuals have reached 50, they will be eligible to make additional contributions to their retirement plans that are equal to 50 percent of their plans' maximum allowable contribution. In other words, their total annual contribution could be 150 percent of the normal contribution. Beyond restoring equity to the tax code and helping Americans prepare for retirement, the Taxpayer Refund Act of 1999 will also help individuals and families gain access to health care--particularly those who are self-employed, or who are not covered by their employers--this legislation will enhance the tax deductibility of health insurance. It does this by accelerating the full deductibility for health insurance for the self-employed and by providing the same benefit on a phased-in basis to employees who are not covered by their employers. In detail, the Taxpayer Refund Act of 1999 will provide an above-the- line deduction for health insurance and for long-term care for which the taxpayer pays at least 50 percent of the premium. It will allow long-term care insurance to be offered in cafeteria plans and provide an additional dependency deduction to caretakers of elderly family members. To benefit small businesses, this legislation will accelerate the 100 percent deduction for health insurance of self-employed individuals beginning in 2000. To help make education more affordable for families and students, the Taxpayer Refund Act of 1999 strengthens educational savings opportunities by making college tuition plans tax-free. In other words, families--including grandparents, aunts, and uncles--can invest their after-tax income into a child's educational future. And when that money is used by the child, it will be tax-free on buildup and withdrawal. This legislation also increases student loan interest deduction income limits for single taxpayers by $10,000 and adjusts the beginning income limits for married couples filing joint returns to twice that of a single taxpayer. Beyond these important changes, this tax relief plan promotes education by making deductions for employer provided assistance permanent, and by allowing employer assistance to be used for graduate-level courses. Again, these are necessary changes--changes that will help families meet their priorities. Another important component of this tax relief package involves its treatment of estate and gift taxes. Here, our objective is to protect families, farmers, and small business men and women who have worked their whole lives to build a future for their posterity. Members of the Senate Finance Committee can recall the heartrending testimony of Lee Ann Goddard Ferris whose 71-year-old father died in a tragic farming accident in Lost River Valley, Idaho. For more than 60 years, her family had worked the land. They owned over 2,600 acres--2,600 acres that had been purchased through [[Page S9462]] decades of toil. In Lee Ann's own words, ``My father's death was the most devastating event that any of us has ever gone through. The second most devastating event was sitting down with our estate attorney after his death. I'll never forget his words. The estate attorney said, `There is no way you can keep this place, absolutely no way.' '' Still suffering from her father's accidental death, Lee Ann couldn't believe what she was hearing. ``How can this be?'' she asked. ``We own this land. We have no debt! We just lost my father, and now we are going to lose the ranch?'' According to Lee Ann, ``Our attorney proceeded to pencil out the estate taxes . . . and we all sat in total shock.'' Where is the fairness, Mr. President? Here a family works for more than half a century to build a ranch, only to hear that estate taxes would rob them of their legacy, their heritage, their home. ``This tax situation has put a tremendous strain on my mother,'' Lee Ann testified. ``Mother worries constantly and has had many sleepless nights. I don't know if any of you could ever imagine how hard it has been on her. She doesn't have her husband anymore. She worked hard her whole life and gave up a lot of material things to put her after-tax dollars back into the land to pay it off. Now, unless this tax law is changed or abolished, she will have to leave her home, which she loves, and our family will not have a base from which to carry on.'' With this legislation, Congress will do something to protect these families. The Taxpayer Refund Act of 1999 turns the unified estate tax credit into a true exemption, and it increases the exemption from $1 million to $1.5 million. This legislation also significantly reduces the actual estate tax rate, and it increases the annual gift tax exclusion from $10,000 to $20,000 by the year 2006. Each of the measures I have outlined as part of the Taxpayer Refund Act of 1999 is vitally important to the well-being of all families; each is a key component of this tax relief package. Again, our purpose is to be broad-based--to provide the most meaningful tax relief possible--to do it in a way that families can meet their individual needs--and to present a plan that can receive strong bipartisan support. With this major tax relief package--$792 billion over 10 years--we meet all of these criteria. And, in the process, we leave over $500 billion to meet pressing concerns here in Washington, such as preserving and strengthening Medicare. We are able to do all this and to keep the budget balanced for a simple reason: the work, the investment, and the job creation achieved by Americans everywhere have succeeded in creating long-term economic growth. It is not right that the reward for this success is that today our taxes are the highest percent of our gross national product than at any other time in postwar history. These same Americans--the authors of this success story--are rightful heirs to the wealth they are creating. After paying for the Government programs for which Congress has planned and budgeted, the change must now be returned to the taxpayer. This legislation not only returns the change by cutting taxes, it increases access to healthcare; it makes education more affordable; it helps taxpayers prepare for self-reliance and retirement; it keeps their home, farm, and family business safe from death taxes. These are objectives that are shared by everyone. They are objectives that can be embraced by Senators and Congressmen on both sides of the political aisle. They are objectives that can be made realities by being passed into law. Mr. President, I reserve the remainder of my time. I yield the floor. Mr. MOYNIHAN addressed the Chair. The PRESIDING OFFICER (Mr. Burns). The Senator from New York. Mr. MOYNIHAN. First, I congratulate our revered chairman, Senator Roth, for the manner in which he has presented the Taxpayer Refund Act of 1999, for the manner in which he brought our committee together in consultation and deliberation, and who, indeed, produced a measure which was bipartisan. It has many elements which would commend our support across the aisle--certainly mine. But it is not to that issue that I will speak today, but to the question of the doctrine. I would like to put this debate in a doctrinal perspective, which is to say, the development in the 1960s which holds that the only way to restrain the growth of Government is to deliberately create a protracted fiscal crisis. This begins, of course, with a view of Government that is so very different from what traditional conservatism would hold. It is a new and radical idea. I will discuss how it emerged. But first I will cite an article from this morning's New York Times op-ed page by Gertrude Himmelfarb, one of our preeminent historians and an avowed conservative. She writes so much of what goes on. She says: In their eagerness to do away with the nanny state, some conservatives risk belittling, even delegitimizing, the state itself. A delicate balancing act is required: to dismantle or diminish the welfare state while retaining a healthy respect for the state itself. For good government is the precondition of civil society, providing a safe space within which individuals, families, communities, churches and voluntary associations can effectively function. But, as I say, the debate on this tax bill is not just a debate about tax policy; for it is far less a debate on taxes than a debate on economic and budget policy and the large understanding of the role of Government in our society, the role of Government in an advanced market economy. At the outset of this debate, we should be mindful of some painful mistakes we have made in the not too distant past and which we evidently mean to repeat. In August of 1993, just 6 years ago, we began to correct a colossal budget mistake. The President signed into law a deficit reduction act without precedent in size that dramatically changed the budget outlook--turning deficits of $290 billion a year, as far as the eye could see--to anticipate my friend David Stockman--into the surpluses we now project of $200 billion and more--surpluses on budget--leaving aside the Social Security revenue stream. At the time of its passage, it was estimated that the 1993 legislation, the Omnibus Budget Reconciliation Act of 1993, would reduce the deficit by $505 billion over the 5 years, 1994 through 1998. The Office of Management and Budget, in its fiscal year 2000 edition of ``Analytical Perspectives,'' estimated that the total deficit reduction has been more than twice this. I quote: ``The total deficit reduction has been more than twice this--$1.2 trillion.'' That suggests the extraordinary quality of that moment when we stood on this floor and waited for the final vote that would allow the Vice President to cast the determining vote, 51-50. The act was passed without one Member of the Republican Party of either House of the Congress. In 1997, we had a more bipartisan effort in the Balanced Budget Act of 1997. Again, we see larger revenue benefits than were originally anticipated. As for the fiscal year that ends this September, the OMB projects a budget surplus of $99 billion and the Congressional Budget Office projects a surplus of $120 billion. With the end of the fiscal year just 2 months away, we can expect, with great confidence, a budget surplus for the second consecutive year. What explains this huge gap, this pleasant surprise between budget expectations and outcomes in recent years? As is often the case in economic analysis, there are interrelated factors which cannot always easily be disentangled but which provide clues. To begin with, we appear to be in what has been described by our now- Secretary of the Treasury, Lawrence Summers, at his confirmation hearing as a ``virtuous cycle.'' I put a question to him, and he responded: Senator, I think it very important that, as you suggest, we do reduce the national debt by the full amount of the Social Security surpluses, which would continue this virtuous cycle by reducing interest rates, which makes possible more growth, which makes more tax collections, which makes larger surpluses, which makes lower debt, which reduces interest rates, which starts the cycle going again. That is an enormously important process. The Honorable Robert Rubin, who was Mr. Summers' distinguished predecessor, often spoke of a term which is not in ordinary usage, but it is a term [[Page S9463]] known by Secretaries of State and by persons who deal in securities, in markets. Mr. Rubin would use the term the ``risk premium on interest rates.'' That is to say, the extra charge if a person is lending money, if they are not certain of the fiscal stability of the Federal Government, in this case, and, thence, of the economy at large. It was, first of all, this risk premium that we broke in 1993, the fear that down the line, if these deficits of $290 billion in the previous year went on and on--the debt had quadrupled over the previous twelve years--that the day would come, again, to use an economist's term, when we would ``monetize'' the debt through inflation. We would get rid of it by wiping out the value of the dollar. That is that premium, that risk premium on interest rates. We began to see this effect. I was here on the Senate floor on February 10, 1995. I remarked: . . . the economy performed better than expected, in part, because Congress adopted a credible deficit reduction plan. In part, also, because, as Secretary of the Treasury Rubin remarked to the Finance Committee this Wednesday [that is, Wednesday, February 8, 1995], the deficit reduction program squeezed the risk premium on interest rates out of real long- term interest rates. If financial markets do not believe the deficit is under control, they will levy a risk premium on capital lending. In 1993 and 1994, we clearly persuaded the markets that we were finally serious. From a slightly different perspective, the Congressional Budget Office also took note of the importance of reducing interest costs. For most of the post-World War II period, interest costs have been the second or third largest item in the budget, behind Social Security and national defense. In commenting on this, the CBO said, of the effects of that 1993 legislation: Remarkably, the biggest single change lies in . . . interest--now projected at 3.3 percent of GDP in 2003 compared with 4.5 in the earlier report, a testimonial to the efforts to rein-in the debt's growth [which had taken place]. For the record, CBO, in its latest budget update issued earlier this month, now projects interest costs at just 1.7 percent of GDP in the year 2003, a reduction by half from its September 1993 projection when we had just passed that legislation of that year. Outlays for net interest peaked at $251 billion 2 fiscal years ago. They are now projected to decrease to $222 billion, and if we can just keep from squandering the surplus, we will repay the debt incurred in those years and that interest cost will again go down, almost to disappear. Now, I do not mean to suggest that the budget outlook is solely due to changes in budget policies. Factors other than deficit reduction are at work, making for a strong, sustained economic expansion. The economy brings higher receipts and lower outlays for unemployment and other such programs that automatically expand in a recession. Last week, in testimony before the House Committee on Banking and Financial Services, Alan Greenspan, our world-renowned Chairman of the Board of Governors at the Federal Reserve, provided some insights into what is sustaining this period of remarkable growth. Observing the absence of production bottlenecks, shortages, and price pressures that inevitably occur in an expanding economy, he noted a number of the possible explanations for the good fortunes involved; notably, just-in- time inventories and such like; but they have come about fortuitously at a time when the deficit was under control, deficits were declining, and the prospects were much better all around. The question is, Can we not keep this? Can we not sustain the extraordinary economic expansion on which we have embarked? Unemployment is now at 4.3 percent. May I say, as someone who in the Kennedy administration was Assistant Secretary of Labor for Policy Planning, we would have said, sir, that a 4.3-percent unemployment rate was unsustainable. It would lead to an outbreak of inflation. Yet here we have it, 4.3 percent, real economic growth at 4 percent. We are in the ninth year of an expansion, and we have no inflation. This is something that is going to require that the economic textbooks be rewritten. But we have done it, and a lot of it comes about from what we did on the Senate floor in August of 1993 and which our great hope on this side of the aisle is that we not undo in this short time that has passed. Alan Greenspan, in that testimony, was very clear. He said tax cuts are to be reserved for recessions. That will be the most effective means we can have to regenerate the economy and keep the long-term growth path moving high. The New York Times editorialized this past Sunday, on the Oracle of the Fed: Mr. Greenspan is treated reverently on Capitol Hill, but it appears that the Republicans do not want to heed his advice to run a surplus and pay down the national debt, while saving a tax cut for when it is needed. How come this sudden resurgence just now, when it would seem so clear that a quite opposite policy has had such very desirable effects? Well, sir, I go back, as I said I would earlier, to matters of political doctrine. We don't talk much of doctrine on the Senate floor, but there are times for it. In 1995, for example, we debated a constitutional amendment requiring a balanced budget. I presented a series of papers in which I tried to describe the idea of ``starving the beast,'' as the term was; that is to say, depriving the Federal Government of the revenues needed, putting it simply, to govern. The argument is quite simple. It goes back to the 1970s when a number of theorists on the conservative wing of the Republican Party determined that it was not going to be possible for the Federal Government ever to be controlled in its size as long as it had the revenues to sustain, or even to increase, that size. And so it came about that a policy doctrine developed which argued that deficits, if sizable enough, had acquired a new utility--deficits that had presumably been the horror of conservative financial thought now became something attractive because they could be used to reduce the size of Government itself. E.J. Dionne, Jr., in an op-ed article in yesterday's Washington Post, clearly recognizes this idea is still afoot. He writes: The long-term goal, about which Republican leaders are candid, is to put Government in a fiscal straitjacket for years to come. In fairness, I think this is more to be encountered on the House side than in this body, but it still would be the cumulative effect, in fact, of the tax cuts that have been proposed in both bodies. I can remember the onset of this. In the late 1970s, it was clear. One could write about it, and one did. Then came the administration of President Reagan in which, in effect, the policies were carried out--or they began to be carried out. In a television address, 16 days before his inauguration, President Reagan said: There will always be those who tell us that taxes could not be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice or breath, or we can cut their extravagance by simply reducing their allowance. There you have President Reagan in his most agreeable and heart- warming quality. He thought this could be done because he thought there would, in fact, be reductions in Government. There were none. Moreover, very shortly, his economic advisers realized the economic analysis they had used to project revenue increases from tax reductions weren't going to work, and they faced a prospect of deficits of, as David Stockman once said, ``$200 billion as far as the eye can see.'' Haynes Johnson, in his superb book, ``Sleepwalking Through History: America Through the Reagan Years,'' writes: The Reagan team [not the President] saw the implicit failure of supply side theory as an opportunity, not a problem. Now, this we have to absorb. They saw the failure of supply side theory--which said that the more you cut taxes, the higher the revenues will be--as an opportunity, not a problem. The secret solution was to let the Federal budget deficits rise, thus leaving Congress no alternative but to cut domestic programs. But in the end, they were not cut. Some grew. There was a view, and certainly a respectable one, that defense had to be increased. We now, incidentally, suggest there be a 20-percent reduction in defense spending over the next 10 years. The Reagan administration increased defense spending, and they had a perfectly good argument for doing that-- [[Page S9464]] but not simultaneously with huge tax cuts. There, very shortly thereafter, had to be tax increases. But the course was set for the 1980s and the deficit doubled, from under a trillion dollars to about $3.7 trillion now in publicly held debt. So I rise again to say, as I have done before, that what we did in 1981 with that tax cut--for which I voted because the Office of Management and Budget, seeing our huge inflation continuing, projected surpluses in the future--was so ruinously wrong. We now have a debt that will level off at about $6 trillion, while the debt held by the public will fall by $2 trillion, or more, depending on the size of this tax cut. The other important reason, which I will close on, is that the 1997 balanced budget amendment left us with what the Washington Post this morning calls an ``accounting illusion,'' that we can reduce the spending on domestic programs by 20 percent in real terms over the next 10 years. The illusion is coming apart already. Just the other day, the House of Representatives determined that the money to pay for the decennial census in the year 2000 required an emergency appropriation outside of those limits. We have had that census for many years. That census is provided in the Constitution. It has taken place every decade since 1790. All of a sudden, we have made it into an emergency. In this morning's Washington Post, our former majority leader, our beloved colleague, Robert C. Byrd, has an article called ``Time for Truth In Spending.'' He said: What we need to jettison is the political rhetoric. What we need to impose is truth in spending. And he set down a few principles. He said: First, watch our investments carefully and manage them prudently. We should continue our best efforts to manage the economy and watch out for inflation. Second, do not spend our money before we make it. Before the surplus is spent, whether on tax cuts or continuing important priority programs, wait for the money to be in the bank. We are proposing to spend a surplus, sir, that does not exist. Third, pay our debts. The United States should take advantage of this opportunity to retire the national debt. Fourth, cover the necessities. Congress should not shortchange the Nation's core programs, such as education, health care, veterans, and the like. Fifth, put aside what we need for a rainy day. Congress should take steps to reserve the Social Security and Medicare surpluses exclusively for future costs of those programs. Sixth, don't go on a spending spree. Resist the temptation to create costly new government programs. Finally, take prosperity in measured doses. Congress should reduce taxes without pulling the rug out from under projected surpluses. I can think of no wiser counsel. In that regard, and with great respect for the chairman of the committee, I would suggest that the budget reconciliation process was devised to expedite consideration of deficit reduction measures. The bill before us uses those same expedited procedures to secure enactment of a deficit-increasing measure. Section 313(b)(E) of the Byrd rule provides that any provision in any reconciliation bill which would decrease revenues used beyond the budget window--in this case beyond the year 2009--may be automatically stricken from the bill upon a point of order being raised. Section 1502 of the bill before us provides for permanent continuation of tax cuts in the years beyond 2009, causing revenue losses of hundreds of billions of dollars. Accordingly, sir, at the appropriate time, I intend to raise the Byrd rule point of order against section 1502 of the bill. I thank the Chair for his cordial consideration of my remarks. I see my friend, the chairman of the Budget Committee, is on the floor. I yield the floor. Mr. DOMENICI. Mr. President, I ask the distinguished chairman of the Finance Committee if he will yield up to 20 minutes. Mr. ROTH. I am happy to yield to the distinguished chairman of the Budget Committee up to 20 minutes. The PRESIDING OFFICER. The Senator from New Mexico is recognized for 20 minutes. Mr. DOMENICI. Mr. President, before my friend, Senator Roth, leaves the floor, let me say to the Senate that Senator Roth has come through again for the Senate and for the people of this country. His tax bill is clearly one that recognizes fairness, that puts the money where it ought to be put, gives back to the American people some of their money, and it does it in a way that clearly is prudent and responsible. It will be very difficult when we are finally finished explaining this bill for the President of the United States to veto this bill. We are going to talk about that a little later in the day. Since he has challenged us, we will tell the American people loud and clear what he is going to be doing when he vetoes this bill. Mr. President, I rise today to discuss the budget blueprint that Congress has passed for the first decade of the 21st century. It embodies three major things: Social Security, first and foremost. Much will be said about it. But nobody can deny that with this refund to the American taxpayers, we have left intact every single penny of surplus that belongs to the Social Security trust fund, and we will even debate on the floor locking it up so it is very hard to spend. The budget before us and that we adopted demanded that 100 percent of all the funding that Social Security recipients will need will be exclusively set aside for that purpose. Second, it sets aside enough money to meet the demands of Medicare for the next 10 years. Medicare is fully funded under the budget that was adopted by the Congress this year. That means there are no cuts. The program is fully funded for the decade. As a matter of fact, the President cut Medicare in the first 5 years of his budget. We did not do that. Then we would have a rainy day fund to implement any Medicare reform that Congress might enact. I will allude to that soon. Third, after all the bills of the decade have been paid, after Social Security recipients have their money set aside, after we have funded every penny anticipated for Medicare, and have an ample rainy day fund available, if we want to do something on prescription drugs, then we would send back the excess to the American taxpayers--to the working families--and those in middle- and low-income brackets will get a very substantial tax reduction. The budget resolution recognized economic conditions now, and the projected economics including the planning for an inevitable recession that might occur in the future. It outlined a decade-long, phased-in tax cut. Only a very small tax cut was envisioned in the first 2 years of this budget timeframe because the economy is already operating above optimum capacity. We want to keep inflation subdued and interest rates low. The budget expected Congress to pass a tax bill that was very small in the first 2 years and grew as the decade wound its way through into the next millennium. I congratulate again the chairman of the Finance Committee and the members of that committee for producing the kind of tax cut for our budget for the 21st century. I think it is appropriate, prudent, and fair. Chairman Roth has produced a tax cut that starts small and ends up larger, reflecting economic conditions. He has produced a tax cut that targets help to those who really need it--those with children in school, those with elderly and ill parents who need long-term care, those who are trying to save for their own retirement instead of Government reliance, and many more items of that nature and of that significance. Yes. The same old class warfare arguments like tired, defeated soldiers of past wars have begun to stagger across the Senate debate again--and they will be here before us again--that we are only helping the rich. We are told we must spend the surplus. That is essentially the argument against our tax refunds--we must spend the surplus. We must grow Government. It is the same old debate. One party wants to give money to programs. And we want to give money to the people. That is exactly the way it has been, and that is exactly the way it is on this floor. I believe there is a degree of arrogance in those who argue against tax cuts. They say to working families: I [[Page S9465]] know what to do with your money better than you do. Give it to me so I can spend it. Can you imagine the arrogance of that position? They have grand schemes now with the surpluses. Republicans, through their dedicated efforts, and Dr. Greenspan and his fantastic ability to manage the money supply in our country, and to control interest rates, have given the Nation this enormous surplus. The President of the United States thinks they have the money to implement new, grand schemes and to grow government. That is the issue. A government big enough to give you everything is a government that takes everything away in the form of high taxes. I didn't originate that quote. I can't imagine and I can't fathom anything more frightening to the average taxpayer than the sight of a grand government schemer rushing toward a $1 trillion pile of extra taxpayer dollars. Republicans say it is the best of times for tax cuts. Democrats say it is the worst of times. Everyone quotes Dr. Alan Greenspan. The Taxpayers Refund Act before the Senate is the best of plans. It lowers rates. It encourages savings. It eliminates the worst of a bad Tax Code. It eliminates the marriage penalty for many Americans. It begins the death of a death tax. It ends the alternative minimum tax, to rescue the full benefit of child care, foster care, education, and other needed tax credits for families who otherwise unavoidably would end up in the alternative minimum tax brackets. They are sick of this. They are worried about it. You will get more mail on this issue because it is grossly unfair to give credits and then take them away--to run across the land saying: We are delighted to have given you a credit for your children's education only to find that middle-income Americans by the hundreds of thousands are falling into this alternative minimum tax trap. I say: Tax cuts, if not now, when? The Democrats say not now. I say: If not tax cuts now, then what? The President's answer is: Spend it all. It does not matter what he says he wants to spend it for; he wants to spend it all. Can you imagine if we did not have this surplus? What will the President be doing--asking for tax increases to pay for these programs he thinks we need? I doubt that. I doubt that very much. I support prudent tax relief, and I must say this is prudent tax relief. It is synchronized to our business cycle and the condition of the economy. It improves our tax policy and moves us toward a system that taxes income that is consumed instead of income that is earned. It moves America toward a tax system that allows business to deduct investments in the year they are made. It encourages investment in retirement, education, and health care. Congress' budget allocates 75 percent of the projected surplus over the next 10 years for paying down the debt and long-term priorities. If the surplus were a dollar, two quarters would go for Social Security, one quarter for high-priority spending--education, research, and defense--and the remaining quarter for tax cuts. Without tax cuts, who would spend the surplus? Not the American people. The Government in Washington would spend it. Without tax cuts, we will ``grow'' Government. There can be no denial of that. The President plans to grow Government substantially rather than give back anything to the American people. He now says he would veto a $500 billion tax cut. What about $200, Mr. President? That means giving the American people back about 6 cents of the surplus, at $200. Can we afford that? I believe we can afford 25 cents out of every $1 of surplus. Democrats say the question is: tax cuts versus Social Security. Tax cuts or Medicare. Tax cuts or domestic spending. Tax cut versus debt reduction. The right answer: It is not ``this'' versus ``that.'' The correct answer is, we can do all of the above. The size of the surplus lets us do it all. That is the reality. Save Social Security, reform Medicare, provide adequate funding for domestic and defense spending, pay down the debt, and give the American people who earned the money a decent tax cut. Do that in a manner that phases in, which will probably be very complimentary to the American economy. Even with the tax cuts and refunds we are talking about, our surplus will steadily climb as a share of GDP and our national debt will ultimately be paid off, falling dramatically from 40 percent of GDP this year to only 12 percent in 2009. Under the proposal we make, the external debt--the debt to the public--will go from 40 percent of the gross domestic product to only 12 percent by the end of the decade. I am amazed the President's political advisers allege this budget is reckless. Nothing is reckless about steadily rising surpluses and paying down our debt by more than 50 percent over the next decade. In fact, our plan lowers the level of debt more than the President's plan. Some may wonder why. That is because the President spends heavily in the first 5 years. We have tiny tax cuts. Thus, he incurs more debt than we do at that time, and he cannot make it up in a decade. I have been amazed by the administration and other opponents who claim our tax cut will lead to higher interest rates because the economy will overheat. That is just not true. The Fed is most concerned not with the economy as it is today but what it will be in 18 months and thereafter. Our tax cut is slow, a total of $28 billion over the years 2000 and 2001. I repeat, if they are worried about stimulus, it is $28 billion in tax cuts. It is almost unrecognizable in terms of impact one way or the other on the American economy. It saves 92 percent of the projected surplus during these first 2 years. As a result, our budget surpluses will rise sharply from 1.4 percent of the gross domestic product to 2 percent by 2001. It is clear that the budget plan is not expansionary, which some people now talk about. It truly is not. Ask any economist to look at it in its true sense, phased in as it is, and ask if it is an expansionary budget. I cannot imagine this tax bill would be defeated on such a preposterous economic observation. In House testimony last week, Chairman Greenspan cautioned against expecting any rapid stimulus as a result of this tax relief package. I can assure the American people that Congress' tax plan will not overheat the economy. As a matter of fact, Chairman Greenspan cautioned against expecting a rapid stimulus as a result of this package, given the long phase-in of the tax cuts. I can anticipate the response of my Democratic colleagues who are likely to say: If your plan is so ideally suited for the economy, why did Alan Greenspan argue we should let surpluses run for a while before cutting taxes? Listen carefully. I have two responses. First, I believe the Congress is doing exactly what the Chairman advised. Our budget plan delivers only $28 billion in tax cuts over the next 2 years. Most of that relief is scheduled to arrive only after surpluses have mounted on a consistent basis. Second and more important, Chairman Greenspan is advising what policies would be best in an ideal world. However, he is fully aware that ideal may not be politically feasible. Let me read a quote he made last week which I think was insightful: There is nothing that I can see that would be lost by allowing the process to delay unless, as I have indicated many times, it appears that the surplus is going to become a lightning rod for major increases in outlays. That's the worst of all possible worlds from a fiscal policy point of view. That, under all conditions, should be avoided. I have great sympathy for those who wish to cut taxes now, to preempt the process. And indeed if it turns out they are right, I would say moving on the tax front makes a good deal of sense to me. The worst of all fiscal policies will materialize if the President gets his way. The President proposes to increase spending by more than $1 trillion over the next 10 years. Most of this new spending would go to create 80 new, often repetitious, often local-government- prerogative-infringing Government programs, with services already being handled at the local or private sector. The President's spending proposals are the worst of all proposals from the standpoint of what is good for America during the next 2 years. That time horizon must concern the Federal Reserve. The President proposes to use $53 billion of the surplus for new spending. It [[Page S9466]] is nearly twice as large as our tax cut in the next 2 years. Thus, the President's plan would be far more stimulative than the Congress' measured tax cut. I ask my colleagues on the other side of the aisle if they are worried about interest rates rising because the economy is overheating, why support the President's Government-growing agenda over tax cuts? The money is there. We have a surplus. The last question is the $792 billion question: Who is going to spend it? When faced with the President, who wants to spend the surplus, Congress has no choice but to cut taxes. However, we have to be careful. While we are still saving the majority of the surplus for shoring up our long-term fiscal health, we must be careful in that regard. To sum up, I leave two messages today. Our budget is prudent, and it is synchronized for where we are in the business cycle. Be skeptical of the administration's criticism of our tax plan. They want to grow Government well in excess of Congress' tax cut. Most of the spending has nothing to do with Social Security or Medicare. This is what should most concern the American people when faced with the surplus, excluding Social Security funds, and I have already indicated what will happen to them. The Republicans want to give it back to the people who earned it and worked so hard. The big question then is, Who is going to spend the surplus? With tax cuts, the answer is you; without tax cuts, the answer is big government. I yield the floor. Several Senators addressed the Chair. The PRESIDING OFFICER. The Senator from Nevada. Mr. REID. Mr. President, the minority yields 10 minutes to the Senator from Minnesota. The PRESIDING OFFICER (Mr. Bunning). The Senator from Minnesota. Mr. WELLSTONE. Mr. President, 3 weeks ago, President Clinton visited some of the poorest communities in our country and he spoke eloquently of our obligations to America's most disadvantaged children. Now, with our economy booming and record surpluses, we have a chance to do better for all of our children. This budget fails America's children. I want to speak as loudly and boldly as I can about this reconciliation bill, first about the Republican proposal, and then about what we are proposing as Democrats. If you look at the non-Social Security surplus, about three-quarters of it really assumes cuts in future domestic spending. The Republican proposal on the floor does not restore any of these cuts. In fact, they add another cut of roughly $200 billion. The Republican plan would require a 38-percent cut in domestic spending in the year 2009, and the Republican tax bills are loaded with corporate welfare for multinational corporations, banks, insurance companies, Wall Street securities firms, and tax giveaways for the wealthy. That is a disappointment. It is a very harsh budget. But even the Democratic plan fails to fully fund or restore these cuts. Senate Democrats have reserved $290 billion of the surplus to soften the blow on our discretionary priorities like education, but we still allow cuts of several hundred billion dollars. In our plan, with our $300 billion of tax cuts, we do not make up the assumed cuts in our domestic priorities either. Since defense spending will go up, and there will be spending for transportation which also will go up significantly over the next 10 years, our other domestic priorities will be squeezed even more. How can we, as Democrats, say we are for addressing the needs of America's children, for fighting poverty, for fully funding Head Start, for equal access to quality education, for helping working families afford the cost of health care and child care, for cleaning up the environment, for community policing, and for veterans' health care, when we are assuming domestic spending cuts of several hundred billion dollars? Something has to give. To use the old Yiddish proverb, you can't dance at two weddings at the same time. I do not understand this. There are 14 million children who are poor in our country--14 million. There are 6.5 million children who live in households with income of one-half the poverty level. Close to one out of every four children in our country under the age of 3 are growing up poor. Close to 50 percent of children of color under the age of 3 are growing up poor. And now we are being told by both parties--the Republican Party much more so than the Democratic Party--but both parties, that we cannot afford to renew our national vow of equal opportunity for every child? Where in these proposals do we, as a Senate representing the United States of America, live up to our national vow of equal opportunity for every child? Right now, in Early Head Start, for children age 3 or younger, 1 percent of the children who could be helped and given a head start are able to get this assistance. We are funding this program at a 1 percent level. For the Republicans, you have $800 billion of tax cuts. You make no investment in any of these areas. Your budget and your proposal will lead to Draconian, really brutal cuts in these programs. Not only will we not be doing anything to make sure poor children have a chance in America, to make sure that there is equal opportunity for every child, but the proposal of the majority party will be making cuts in these programs. And to the Democratic Party, my party, we have a better proposal. It is less harsh. But there has to be some connection between the convictions we profess and the budgets we propose, and a willingness to fight for them. At some point, the chasm between our words and our actions becomes too wide. If we do not fight hard enough for the things we stand for at some point, we have to recognize we really do not stand for them. We really do not stand for them. I cannot believe with record economic performance, that the Republican Party can come to the floor of the Senate with a proposal that calls for $800 billion of tax cuts, most of them flowing to our wealthiest citizens, but with a proposed 38-percent cut in Head Start, child care, community policing, and cleanup of the environment. And to my party, I cannot believe the Democrats come out with a proposal where we, too, are essentially proposing cuts in some of these key domestic priorities. Why did we become involved in politics? What do we believe in? What are our values? Can we not at least make some investment to make sure every child, no matter the color of skin or income of family, urban or rural, or boy or girl, will have a chance to reach her full potential and his full potential? What ever happened to the Democratic Party's strong commitment to equal opportunity for every citizen? I do not see it in these proposals. We ought not to be talking about tax cuts that benefit the most affluent citizens, when we cannot even live up to our national vow of equal opportunity for every child. I hope we will do better as we move forward in this debate. I yield the floor. The PRESIDING OFFICER. The Senator from Nevada. Mr. REID. The Senator from West Virginia is yielded 45 minutes. The PRESIDING OFFICER. The Senator from West Virginia. Mr. BYRD. Mr. President, recently both the Office of Management and Budget and the Congressional Budget Office released their so-called ``Mid-Session Reviews'' on the state of the Federal budget. Both of these new forecasts project even better performance for the nation's economy in the coming ten years than they had predicted just a few months ago. In fact, the Congressional Budget Office projects unified budget surpluses totaling just under $3 trillion over the next ten years. Of the $3 trillion, approximately $2 trillion results from surpluses being paid into the Social Security trust fund. The remaining $1 trillion--or $996 billion to be exact--is what is called the ``on budget'' surplus. That is the non-Social Security trust fund surplus. The question before Congress is what do we do with this good news--our government is about to be awash in money, if these projections come true. Before we get too far along with our grandiose plans for massive tax cuts, a dose of reality is in order. Sometimes a dose of castor oil is in order. We may not like it so much, but it has to be taken. So a dose of reality is in order. [[Page S9467]] These future budget surpluses are, of course, based on ``pie in the sky'' projections. But I don't think ``pie in the sky'' is quite right. The projections are so far out into the Stratosphere--more than a decade away--that we would need the Hubble Telescope to track them down. Mr. President, the fact is that they have not yet occurred, the money is not yet in hand--and may well never occur--for a number of reasons. First, one needs to keep in mind that budget projections for even 1 year are likely to be missed by a substantial margin over the normal 5- year period of congressional budgets. Estimates of deficits and surpluses have been off by billions of dollars. This year, for the first time, instead of 5-year budget projections, we have 10-year budget projections upon which all of the surpluses are being forecast, and upon which tax cut proposals by Democrats, Republicans and the administration are being based. Does anyone really believe that these 10-year projections will be any more accurate than the usual 5-year numbers? In looking at these incredible amounts of surpluses and tax cuts, I would think that one needs more of an astrologer than an economist to read the tea leaves and to come up with these figures. Mr. President, consider these facts: CBO's estimate of revenues over the period 1980 through 1998 was off by an absolute average of $38 billion per year. The estimates were off by an average of $38 billion per year during the period 1980 through 1998. That is a pretty fair piece of change! This isn't just chicken feed. Some years, the estimates were closer to the projection than other years, but, as I say, the average difference one way or the other, was $38 billion per year. Similarly, for outlays, the projections over the past two decades were off the mark by an absolute average of $36 billion per year. The resulting deficit projections by the Congressional Budget Office over the period 1980 through 1998 were off by an absolute average of $54 billion per year. Extend that figure over 10 years, and that is what we are doing now in this bill, and we can see that $540 billion of the $1 trillion projected surplus could melt away faster than last year's snowball. So what about these latest ``rosy'' forecasts of budgetary surpluses for the next 10 years? It is obvious that we need to be very careful when relying on such projections to make decisions about whether and if we can afford a tax cut. CBO officials would be the first to tell you that they have widely missed the mark in their budgetary forecasts, as would the folks at OMB. No one on the face of God's green Earth can predict accurately for even 1 year, much less for 5 or 10 years, what revenues will come into the Treasury, or what expenditures will go out of the Treasury. That is because no one knows what the unemployment rate will be next year, or the inflation rate, interest rates, whether there will be a recession or the duration or virility of such recession. In virtually every CBO report, the following cautionary footnote can be found: ``Cyclical disturbances could have a significant effect on the budget at any time during the projection period. A recession would temporarily push down taxable incomes, thus reducing federal revenues. A recession would also cause a boost in spending for unemployment insurance and other benefit programs. CBO estimates that a relatively mild recession (similar to the one in the early 1990s) that began this year could reduce the projected surplus by $55 billion in 2000.'' Mr. President, there is no reason to believe that CBO's current forecast of the budgetary picture over the next 10 years will be any more accurate than have been its previous forecasts over the past two decades. With that dose of reality in mind, let's now turn our attention to the Republican tax cut proposal now before the Senate. Earlier in my remarks, I noted that the Congressional Budget Office projects an on- budget surplus of $996 billion over the coming 10 years FY 2000-2009. The

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TAXPAYER REFUND ACT OF 1999
(Senate - July 28, 1999)

Text of this article available as: TXT PDF [Pages S9460-S9523] TAXPAYER REFUND ACT OF 1999 Mr. LOTT. I ask unanimous consent the Senate begin consideration of the reconciliation bill, which is the Tax Relief Act, and that the first 3 hours of debate be equally divided in the usual form for purposes of opening statements only. The PRESIDING OFFICER. The clerk will report the bill by title. The legislative assistant read as follows: A bill (S. 1429) to provide for reconciliation pursuant to section 104 of the concurrent resolution on the budget for fiscal year 2000. There being no objection, the Senate proceeded to consider the bill. Mr. ROTH. Mr. President, I yield myself 30 minutes. Mr. President, I don't think there is any parent who hasn't had the experience of sending a child into a store with a $20 bill to buy a carton of milk, a loaf of bread, or perhaps a dozen eggs, and the child returns with the few essentials. In a demonstration of maturity and responsibility, the child returns the change to his or her parent. There is no question who the change belongs to. After all, the parent earned the money; it is needed to support the family; the family will certainly have important uses for it later. The child understands this. So does the parent. Most often, the change is returned to the household budget to take care of other important needs. Washington needs to demonstrate the same responsibility when it comes to determining what to do with the change that is left over from running the government. There are surplus revenues in the Treasury. As with a child emerging from the grocery store, there is change--big change--left over after Congress has met the necessities of running government. In trying to balance the budget in 1997, Congress miscalculated the revenues that would be generated by the economy. At the same time, the hard work, the thrift, investment, and risk-taking of Americans combined to create an unexpected windfall of revenue. Now the question Washington seems to be grappling with concerns who rightly deserves the windfall. It is a question any parent or child can answer. American families, those who created the wealth in the first place, those who need their precious resources to meet future basic needs at home, are rightly entitled to the revenues they have earned, revenues Washington did not plan for to meet the expense of government, from which Washington had budgeted. Now, as the child returning change for the $20, we must hand back the money. We must do it in a broad-based way that is fair to those who provided the funds to Washington in the first place. We must do it through broad-based tax relief that helps individuals and families at all income levels meet real needs. The broad-based tax relief plan that passed out of the Finance Committee with bipartisan support will do just that. It will benefit nearly every working American. It will help restore equity to the Tax Code and provide American families with the resources they need to meet pressing concerns. It will help individuals and families save for self- reliance and retirement. It will help parents prepare for educational costs. It will give the self-employed and underinsured the boost they need to pay for health insurance. It will begin to restore fairness to the Tax Code by eliminating the marriage tax penalty. Let me state exactly how the plan works and why it has received bipartisan support. This tax cut package will provide broad relief by reducing the 15-percent tax bracket that serves as the baseline for all taxpayers to 14 percent. In other words, no matter which tax bracket a family may be in, by cutting the 15-percent bracket, everyone will benefit as they will pay 14 percent on their first portion of taxable income. At the same time, this plan expands the 14 percent bracket, dropping millions of Americans who are now paying taxes at 28 percent down to the lower bracket. For a middle-income family of four, these two changes will mean a tax savings of over $450 a year. And these provisions have already found bipartisan support. To restore equity to the Tax Code, this plan targets another bipartisan objective by eliminating the marriage tax penalty. For too long, husbands and wives who have worked and paid taxes have been penalized by their dual incomes. I have heard of some couples who have actually chosen not to marry because of the tax penalties their marriage would incur. This plan will fix that by giving working married couples the option of filing combined returns, using separate schedules to take advantage of the single filer tax rates and the single filer standard deduction. This is a change that is long overdue. American families have been suffering under the unfair burden of the marriage tax penalty for too long. A simple example shows us why: Robert and Diane are two single Americans who have fallen in love and want to marry. They are not considered wealthy. In fact, Robert is a hardworking foreman at an auto factory. Susan, his fiancee, is an experienced nurse. Each makes roughly $50,000 a year. Now, under current law--when the file their separate tax returns--they each take a personal exemption and the standard deduction, giving them a taxable income of $43,000. After applying the tax rates for singles, they each owe tax of about $8,745. If, however, Robert and Diane follow their hearts--get married and start a family--they realize that their total combined income would be $100,000. Should they marry, they would no longer be considered middle- class individuals, but many would regard them as a wealthy family, and under current law their combined income would be reduced by their two personal exemptions and by the standard deduction for married couples. And here is where they would hit their first marriage penalty problem, discovering that their new standard deduction is significantly less than the combination of the two standard deductions they receive as singles. But the marriage penalty does not end there. In fact, it gets worse. With their combined income, Robert and Diane--now considered by many to be wealthy--would have a taxable income of $87,400. This is where they would hit their second marriage penalty problem. The lowest tax rate bracket for married couples is less than twice as wide as the lowest tax rate bracket for singles. In other words, more of their income would now be taxable at higher rates. The result would be a total tax bill of $18,967, almost $1,500 more than they would have paid as singles. That steep increase would come at a time when they could least afford it, a time when just starting out as a married couple they would be looking to buy a home, raise a family, and save for education. The legislation we introduce today--this broad-based tax relief-- completely eliminates the marriage penalty for Robert and Diane. The Senate Finance Committee bill will allow Robert and Diane to file a joint return, but to calculate their tax liability as if they had remained single. They would each get the benefit of the more generous standard deduction and of the more generous rate brackets. Under this new approach, they would pay a total tax of $17,490 which is the combination of what they had each paid before. This saves them almost $1,500. But in restoring equity to the tax code, we do not stop with the marriage penalty. Another important measure contained in this broad- based tax relief plan is the elimination of the alternative minimum tax for middle-income families--families like David and Margaret Klaassen. Most of us know their [[Page S9461]] story. The Tenth Circuit recently affirmed that under the current law, the Klaassens are required to pay the alternative minimum tax despite the fact that it may not have been Congress' intent to impact families like the Klaassens when Congress passed the AMT. David and Margaret Klaassen are the parents of 10 dependent children. They had an adjusted gross income of $83,000 and roughly $19,000 of itemized deductions relating to state and local taxes, medical expenses, interest, and charitable contributions. Their reported adjusted gross income was $63,500, and with 12 personal exemptions their taxable income was $34,000, resulting in regular tax of $5,100. That would seem fair. And the Klaassens paid the bill. However, the IRS flagged the return and determined that the family was liable for the alternative minimum tax, a provision in the code that was passed to make sure that wealthy individuals and families do not escape at least some liability through tax shelters and other tools they might use to minimize their liability. The IRS determined an AMT deficiency of $1,100. For AMT purposes, the Klaassens were disallowed a $3,300 deduction for State and local taxes. In addition, $2,100 in medical expenses were disallowed because of the 10-percent floor for AMT purposes. And finally, the Klaassens' entire $29,000 deduction for personal exemptions was disallowed because of the AMT. These adjustments resulted in alternative minimum taxable income of $68,000--twice the taxable income that the Klaassens had without the AMT. This simply is not fair. It is not what Congress intended. The Finance Committee bill will help return fairness to the tax code by allowing families to receive the full benefits from their personal exemptions. This will also restore taxpayers' ability to receive their $500 per child tax credits, and other benefits that were intended to be available to middle-income families. These are changes that are long overdue. Again, they have strong bipartisan support. But our broad-based Taxpayer Refund Act of 1999 does so much more. This plan will also help individuals and families find self-reliance and security in retirement through expanded individual retirement accounts, as well as through enhanced 401(k) plans, 403(b) plans and 457 plans. These are critical programs--programs that along with Social Security and personal savings help individuals prepare for their golden years. For savings through the workplace, there are 401(k) plans, 403(b) plans and 457 plans, each of which can be sponsored by different types of employers. For individual savings, there is either the traditional IRA or the Roth IRA. And all these different savings vehicles have different limits on how much individuals can save. However, our current system can do more, and the limitations that we placed on retirement savings in times of budgetary restraints should be reexamined in light of the current surplus. For example, the IRA contribution limit has not changed since 1982. Had it simply been indexed for inflation, it would be almost $5,000 today. What an opportunity that would present middle-class families to prepare for their futures. And that's exactly who benefits from IRAs-- middle- and lower-income Americans. Fifty-two percent of all IRA owners earn less than $50,000. This same group makes about 65 percent of all IRA contributions, and right now they are limited by the $2,000 cap on contributions. IRS statistics also show that the average contribution level in 1993 for people with less than $20,000 in income was $1,500. Clearly, if the average contribution of modest-income taxpayers is $1,500, this demonstrates that many of these Americans want to make contributions of more than the $2,000 limit. This tax relief bill will incrementally increase the amount that people can contribute to IRAs from $2,000 to $5,000. In the area of employer-provided savings vehicles, the current maximum pre-tax contribution to a 401(k) plan or a 403(b) annuity is $10,000. In addition, the maximum contribution to a 457(b) plan is $8,000. Finally, the maximum contribution to a SIMPLE plan is $6,000. These limits are indexed for cost-of-living increases. There has traditionally been a differential in contribution limits among the various types of plans: IRAs having the lowest limits; SIMPLE plans having a greater limit, but not as much as a 401(k) plan; and 401(k) and 403(b) plans having the highest limits, but the greatest number of regulations. Since the IRA limit will be raised to $5,000, the bill will increase limits for 401(k) and 403(b) plans to $15,000 and for SIMPLE plans to $10,000; thereby continuing the differential. The limit for 457(b) plans for government employees will increase to $10,000. There is no question, with rising concerns about security and self- reliance in retirement, that these changes are needed. They will go a long way toward helping individuals and families achieve their economic goals. But the benefits this legislation has for retirement planning do not stop here. There are other provisions that will add new retirement vehicles, provide greater ability to transfer retirement savings between plans, promote retirement plans for small businesses, and simplify the retirement plan system for both employers and employees. One provision will allow employees 50 years old or older to make catch-up contributions to their retirement plans. This will be most important for women, benefiting those who may have started their retirement savings late or who may have taken time off to raise children. Whatever the reason, once these individuals have reached 50, they will be eligible to make additional contributions to their retirement plans that are equal to 50 percent of their plans' maximum allowable contribution. In other words, their total annual contribution could be 150 percent of the normal contribution. Beyond restoring equity to the tax code and helping Americans prepare for retirement, the Taxpayer Refund Act of 1999 will also help individuals and families gain access to health care--particularly those who are self-employed, or who are not covered by their employers--this legislation will enhance the tax deductibility of health insurance. It does this by accelerating the full deductibility for health insurance for the self-employed and by providing the same benefit on a phased-in basis to employees who are not covered by their employers. In detail, the Taxpayer Refund Act of 1999 will provide an above-the- line deduction for health insurance and for long-term care for which the taxpayer pays at least 50 percent of the premium. It will allow long-term care insurance to be offered in cafeteria plans and provide an additional dependency deduction to caretakers of elderly family members. To benefit small businesses, this legislation will accelerate the 100 percent deduction for health insurance of self-employed individuals beginning in 2000. To help make education more affordable for families and students, the Taxpayer Refund Act of 1999 strengthens educational savings opportunities by making college tuition plans tax-free. In other words, families--including grandparents, aunts, and uncles--can invest their after-tax income into a child's educational future. And when that money is used by the child, it will be tax-free on buildup and withdrawal. This legislation also increases student loan interest deduction income limits for single taxpayers by $10,000 and adjusts the beginning income limits for married couples filing joint returns to twice that of a single taxpayer. Beyond these important changes, this tax relief plan promotes education by making deductions for employer provided assistance permanent, and by allowing employer assistance to be used for graduate-level courses. Again, these are necessary changes--changes that will help families meet their priorities. Another important component of this tax relief package involves its treatment of estate and gift taxes. Here, our objective is to protect families, farmers, and small business men and women who have worked their whole lives to build a future for their posterity. Members of the Senate Finance Committee can recall the heartrending testimony of Lee Ann Goddard Ferris whose 71-year-old father died in a tragic farming accident in Lost River Valley, Idaho. For more than 60 years, her family had worked the land. They owned over 2,600 acres--2,600 acres that had been purchased through [[Page S9462]] decades of toil. In Lee Ann's own words, ``My father's death was the most devastating event that any of us has ever gone through. The second most devastating event was sitting down with our estate attorney after his death. I'll never forget his words. The estate attorney said, `There is no way you can keep this place, absolutely no way.' '' Still suffering from her father's accidental death, Lee Ann couldn't believe what she was hearing. ``How can this be?'' she asked. ``We own this land. We have no debt! We just lost my father, and now we are going to lose the ranch?'' According to Lee Ann, ``Our attorney proceeded to pencil out the estate taxes . . . and we all sat in total shock.'' Where is the fairness, Mr. President? Here a family works for more than half a century to build a ranch, only to hear that estate taxes would rob them of their legacy, their heritage, their home. ``This tax situation has put a tremendous strain on my mother,'' Lee Ann testified. ``Mother worries constantly and has had many sleepless nights. I don't know if any of you could ever imagine how hard it has been on her. She doesn't have her husband anymore. She worked hard her whole life and gave up a lot of material things to put her after-tax dollars back into the land to pay it off. Now, unless this tax law is changed or abolished, she will have to leave her home, which she loves, and our family will not have a base from which to carry on.'' With this legislation, Congress will do something to protect these families. The Taxpayer Refund Act of 1999 turns the unified estate tax credit into a true exemption, and it increases the exemption from $1 million to $1.5 million. This legislation also significantly reduces the actual estate tax rate, and it increases the annual gift tax exclusion from $10,000 to $20,000 by the year 2006. Each of the measures I have outlined as part of the Taxpayer Refund Act of 1999 is vitally important to the well-being of all families; each is a key component of this tax relief package. Again, our purpose is to be broad-based--to provide the most meaningful tax relief possible--to do it in a way that families can meet their individual needs--and to present a plan that can receive strong bipartisan support. With this major tax relief package--$792 billion over 10 years--we meet all of these criteria. And, in the process, we leave over $500 billion to meet pressing concerns here in Washington, such as preserving and strengthening Medicare. We are able to do all this and to keep the budget balanced for a simple reason: the work, the investment, and the job creation achieved by Americans everywhere have succeeded in creating long-term economic growth. It is not right that the reward for this success is that today our taxes are the highest percent of our gross national product than at any other time in postwar history. These same Americans--the authors of this success story--are rightful heirs to the wealth they are creating. After paying for the Government programs for which Congress has planned and budgeted, the change must now be returned to the taxpayer. This legislation not only returns the change by cutting taxes, it increases access to healthcare; it makes education more affordable; it helps taxpayers prepare for self-reliance and retirement; it keeps their home, farm, and family business safe from death taxes. These are objectives that are shared by everyone. They are objectives that can be embraced by Senators and Congressmen on both sides of the political aisle. They are objectives that can be made realities by being passed into law. Mr. President, I reserve the remainder of my time. I yield the floor. Mr. MOYNIHAN addressed the Chair. The PRESIDING OFFICER (Mr. Burns). The Senator from New York. Mr. MOYNIHAN. First, I congratulate our revered chairman, Senator Roth, for the manner in which he has presented the Taxpayer Refund Act of 1999, for the manner in which he brought our committee together in consultation and deliberation, and who, indeed, produced a measure which was bipartisan. It has many elements which would commend our support across the aisle--certainly mine. But it is not to that issue that I will speak today, but to the question of the doctrine. I would like to put this debate in a doctrinal perspective, which is to say, the development in the 1960s which holds that the only way to restrain the growth of Government is to deliberately create a protracted fiscal crisis. This begins, of course, with a view of Government that is so very different from what traditional conservatism would hold. It is a new and radical idea. I will discuss how it emerged. But first I will cite an article from this morning's New York Times op-ed page by Gertrude Himmelfarb, one of our preeminent historians and an avowed conservative. She writes so much of what goes on. She says: In their eagerness to do away with the nanny state, some conservatives risk belittling, even delegitimizing, the state itself. A delicate balancing act is required: to dismantle or diminish the welfare state while retaining a healthy respect for the state itself. For good government is the precondition of civil society, providing a safe space within which individuals, families, communities, churches and voluntary associations can effectively function. But, as I say, the debate on this tax bill is not just a debate about tax policy; for it is far less a debate on taxes than a debate on economic and budget policy and the large understanding of the role of Government in our society, the role of Government in an advanced market economy. At the outset of this debate, we should be mindful of some painful mistakes we have made in the not too distant past and which we evidently mean to repeat. In August of 1993, just 6 years ago, we began to correct a colossal budget mistake. The President signed into law a deficit reduction act without precedent in size that dramatically changed the budget outlook--turning deficits of $290 billion a year, as far as the eye could see--to anticipate my friend David Stockman--into the surpluses we now project of $200 billion and more--surpluses on budget--leaving aside the Social Security revenue stream. At the time of its passage, it was estimated that the 1993 legislation, the Omnibus Budget Reconciliation Act of 1993, would reduce the deficit by $505 billion over the 5 years, 1994 through 1998. The Office of Management and Budget, in its fiscal year 2000 edition of ``Analytical Perspectives,'' estimated that the total deficit reduction has been more than twice this. I quote: ``The total deficit reduction has been more than twice this--$1.2 trillion.'' That suggests the extraordinary quality of that moment when we stood on this floor and waited for the final vote that would allow the Vice President to cast the determining vote, 51-50. The act was passed without one Member of the Republican Party of either House of the Congress. In 1997, we had a more bipartisan effort in the Balanced Budget Act of 1997. Again, we see larger revenue benefits than were originally anticipated. As for the fiscal year that ends this September, the OMB projects a budget surplus of $99 billion and the Congressional Budget Office projects a surplus of $120 billion. With the end of the fiscal year just 2 months away, we can expect, with great confidence, a budget surplus for the second consecutive year. What explains this huge gap, this pleasant surprise between budget expectations and outcomes in recent years? As is often the case in economic analysis, there are interrelated factors which cannot always easily be disentangled but which provide clues. To begin with, we appear to be in what has been described by our now- Secretary of the Treasury, Lawrence Summers, at his confirmation hearing as a ``virtuous cycle.'' I put a question to him, and he responded: Senator, I think it very important that, as you suggest, we do reduce the national debt by the full amount of the Social Security surpluses, which would continue this virtuous cycle by reducing interest rates, which makes possible more growth, which makes more tax collections, which makes larger surpluses, which makes lower debt, which reduces interest rates, which starts the cycle going again. That is an enormously important process. The Honorable Robert Rubin, who was Mr. Summers' distinguished predecessor, often spoke of a term which is not in ordinary usage, but it is a term [[Page S9463]] known by Secretaries of State and by persons who deal in securities, in markets. Mr. Rubin would use the term the ``risk premium on interest rates.'' That is to say, the extra charge if a person is lending money, if they are not certain of the fiscal stability of the Federal Government, in this case, and, thence, of the economy at large. It was, first of all, this risk premium that we broke in 1993, the fear that down the line, if these deficits of $290 billion in the previous year went on and on--the debt had quadrupled over the previous twelve years--that the day would come, again, to use an economist's term, when we would ``monetize'' the debt through inflation. We would get rid of it by wiping out the value of the dollar. That is that premium, that risk premium on interest rates. We began to see this effect. I was here on the Senate floor on February 10, 1995. I remarked: . . . the economy performed better than expected, in part, because Congress adopted a credible deficit reduction plan. In part, also, because, as Secretary of the Treasury Rubin remarked to the Finance Committee this Wednesday [that is, Wednesday, February 8, 1995], the deficit reduction program squeezed the risk premium on interest rates out of real long- term interest rates. If financial markets do not believe the deficit is under control, they will levy a risk premium on capital lending. In 1993 and 1994, we clearly persuaded the markets that we were finally serious. From a slightly different perspective, the Congressional Budget Office also took note of the importance of reducing interest costs. For most of the post-World War II period, interest costs have been the second or third largest item in the budget, behind Social Security and national defense. In commenting on this, the CBO said, of the effects of that 1993 legislation: Remarkably, the biggest single change lies in . . . interest--now projected at 3.3 percent of GDP in 2003 compared with 4.5 in the earlier report, a testimonial to the efforts to rein-in the debt's growth [which had taken place]. For the record, CBO, in its latest budget update issued earlier this month, now projects interest costs at just 1.7 percent of GDP in the year 2003, a reduction by half from its September 1993 projection when we had just passed that legislation of that year. Outlays for net interest peaked at $251 billion 2 fiscal years ago. They are now projected to decrease to $222 billion, and if we can just keep from squandering the surplus, we will repay the debt incurred in those years and that interest cost will again go down, almost to disappear. Now, I do not mean to suggest that the budget outlook is solely due to changes in budget policies. Factors other than deficit reduction are at work, making for a strong, sustained economic expansion. The economy brings higher receipts and lower outlays for unemployment and other such programs that automatically expand in a recession. Last week, in testimony before the House Committee on Banking and Financial Services, Alan Greenspan, our world-renowned Chairman of the Board of Governors at the Federal Reserve, provided some insights into what is sustaining this period of remarkable growth. Observing the absence of production bottlenecks, shortages, and price pressures that inevitably occur in an expanding economy, he noted a number of the possible explanations for the good fortunes involved; notably, just-in- time inventories and such like; but they have come about fortuitously at a time when the deficit was under control, deficits were declining, and the prospects were much better all around. The question is, Can we not keep this? Can we not sustain the extraordinary economic expansion on which we have embarked? Unemployment is now at 4.3 percent. May I say, as someone who in the Kennedy administration was Assistant Secretary of Labor for Policy Planning, we would have said, sir, that a 4.3-percent unemployment rate was unsustainable. It would lead to an outbreak of inflation. Yet here we have it, 4.3 percent, real economic growth at 4 percent. We are in the ninth year of an expansion, and we have no inflation. This is something that is going to require that the economic textbooks be rewritten. But we have done it, and a lot of it comes about from what we did on the Senate floor in August of 1993 and which our great hope on this side of the aisle is that we not undo in this short time that has passed. Alan Greenspan, in that testimony, was very clear. He said tax cuts are to be reserved for recessions. That will be the most effective means we can have to regenerate the economy and keep the long-term growth path moving high. The New York Times editorialized this past Sunday, on the Oracle of the Fed: Mr. Greenspan is treated reverently on Capitol Hill, but it appears that the Republicans do not want to heed his advice to run a surplus and pay down the national debt, while saving a tax cut for when it is needed. How come this sudden resurgence just now, when it would seem so clear that a quite opposite policy has had such very desirable effects? Well, sir, I go back, as I said I would earlier, to matters of political doctrine. We don't talk much of doctrine on the Senate floor, but there are times for it. In 1995, for example, we debated a constitutional amendment requiring a balanced budget. I presented a series of papers in which I tried to describe the idea of ``starving the beast,'' as the term was; that is to say, depriving the Federal Government of the revenues needed, putting it simply, to govern. The argument is quite simple. It goes back to the 1970s when a number of theorists on the conservative wing of the Republican Party determined that it was not going to be possible for the Federal Government ever to be controlled in its size as long as it had the revenues to sustain, or even to increase, that size. And so it came about that a policy doctrine developed which argued that deficits, if sizable enough, had acquired a new utility--deficits that had presumably been the horror of conservative financial thought now became something attractive because they could be used to reduce the size of Government itself. E.J. Dionne, Jr., in an op-ed article in yesterday's Washington Post, clearly recognizes this idea is still afoot. He writes: The long-term goal, about which Republican leaders are candid, is to put Government in a fiscal straitjacket for years to come. In fairness, I think this is more to be encountered on the House side than in this body, but it still would be the cumulative effect, in fact, of the tax cuts that have been proposed in both bodies. I can remember the onset of this. In the late 1970s, it was clear. One could write about it, and one did. Then came the administration of President Reagan in which, in effect, the policies were carried out--or they began to be carried out. In a television address, 16 days before his inauguration, President Reagan said: There will always be those who tell us that taxes could not be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice or breath, or we can cut their extravagance by simply reducing their allowance. There you have President Reagan in his most agreeable and heart- warming quality. He thought this could be done because he thought there would, in fact, be reductions in Government. There were none. Moreover, very shortly, his economic advisers realized the economic analysis they had used to project revenue increases from tax reductions weren't going to work, and they faced a prospect of deficits of, as David Stockman once said, ``$200 billion as far as the eye can see.'' Haynes Johnson, in his superb book, ``Sleepwalking Through History: America Through the Reagan Years,'' writes: The Reagan team [not the President] saw the implicit failure of supply side theory as an opportunity, not a problem. Now, this we have to absorb. They saw the failure of supply side theory--which said that the more you cut taxes, the higher the revenues will be--as an opportunity, not a problem. The secret solution was to let the Federal budget deficits rise, thus leaving Congress no alternative but to cut domestic programs. But in the end, they were not cut. Some grew. There was a view, and certainly a respectable one, that defense had to be increased. We now, incidentally, suggest there be a 20-percent reduction in defense spending over the next 10 years. The Reagan administration increased defense spending, and they had a perfectly good argument for doing that-- [[Page S9464]] but not simultaneously with huge tax cuts. There, very shortly thereafter, had to be tax increases. But the course was set for the 1980s and the deficit doubled, from under a trillion dollars to about $3.7 trillion now in publicly held debt. So I rise again to say, as I have done before, that what we did in 1981 with that tax cut--for which I voted because the Office of Management and Budget, seeing our huge inflation continuing, projected surpluses in the future--was so ruinously wrong. We now have a debt that will level off at about $6 trillion, while the debt held by the public will fall by $2 trillion, or more, depending on the size of this tax cut. The other important reason, which I will close on, is that the 1997 balanced budget amendment left us with what the Washington Post this morning calls an ``accounting illusion,'' that we can reduce the spending on domestic programs by 20 percent in real terms over the next 10 years. The illusion is coming apart already. Just the other day, the House of Representatives determined that the money to pay for the decennial census in the year 2000 required an emergency appropriation outside of those limits. We have had that census for many years. That census is provided in the Constitution. It has taken place every decade since 1790. All of a sudden, we have made it into an emergency. In this morning's Washington Post, our former majority leader, our beloved colleague, Robert C. Byrd, has an article called ``Time for Truth In Spending.'' He said: What we need to jettison is the political rhetoric. What we need to impose is truth in spending. And he set down a few principles. He said: First, watch our investments carefully and manage them prudently. We should continue our best efforts to manage the economy and watch out for inflation. Second, do not spend our money before we make it. Before the surplus is spent, whether on tax cuts or continuing important priority programs, wait for the money to be in the bank. We are proposing to spend a surplus, sir, that does not exist. Third, pay our debts. The United States should take advantage of this opportunity to retire the national debt. Fourth, cover the necessities. Congress should not shortchange the Nation's core programs, such as education, health care, veterans, and the like. Fifth, put aside what we need for a rainy day. Congress should take steps to reserve the Social Security and Medicare surpluses exclusively for future costs of those programs. Sixth, don't go on a spending spree. Resist the temptation to create costly new government programs. Finally, take prosperity in measured doses. Congress should reduce taxes without pulling the rug out from under projected surpluses. I can think of no wiser counsel. In that regard, and with great respect for the chairman of the committee, I would suggest that the budget reconciliation process was devised to expedite consideration of deficit reduction measures. The bill before us uses those same expedited procedures to secure enactment of a deficit-increasing measure. Section 313(b)(E) of the Byrd rule provides that any provision in any reconciliation bill which would decrease revenues used beyond the budget window--in this case beyond the year 2009--may be automatically stricken from the bill upon a point of order being raised. Section 1502 of the bill before us provides for permanent continuation of tax cuts in the years beyond 2009, causing revenue losses of hundreds of billions of dollars. Accordingly, sir, at the appropriate time, I intend to raise the Byrd rule point of order against section 1502 of the bill. I thank the Chair for his cordial consideration of my remarks. I see my friend, the chairman of the Budget Committee, is on the floor. I yield the floor. Mr. DOMENICI. Mr. President, I ask the distinguished chairman of the Finance Committee if he will yield up to 20 minutes. Mr. ROTH. I am happy to yield to the distinguished chairman of the Budget Committee up to 20 minutes. The PRESIDING OFFICER. The Senator from New Mexico is recognized for 20 minutes. Mr. DOMENICI. Mr. President, before my friend, Senator Roth, leaves the floor, let me say to the Senate that Senator Roth has come through again for the Senate and for the people of this country. His tax bill is clearly one that recognizes fairness, that puts the money where it ought to be put, gives back to the American people some of their money, and it does it in a way that clearly is prudent and responsible. It will be very difficult when we are finally finished explaining this bill for the President of the United States to veto this bill. We are going to talk about that a little later in the day. Since he has challenged us, we will tell the American people loud and clear what he is going to be doing when he vetoes this bill. Mr. President, I rise today to discuss the budget blueprint that Congress has passed for the first decade of the 21st century. It embodies three major things: Social Security, first and foremost. Much will be said about it. But nobody can deny that with this refund to the American taxpayers, we have left intact every single penny of surplus that belongs to the Social Security trust fund, and we will even debate on the floor locking it up so it is very hard to spend. The budget before us and that we adopted demanded that 100 percent of all the funding that Social Security recipients will need will be exclusively set aside for that purpose. Second, it sets aside enough money to meet the demands of Medicare for the next 10 years. Medicare is fully funded under the budget that was adopted by the Congress this year. That means there are no cuts. The program is fully funded for the decade. As a matter of fact, the President cut Medicare in the first 5 years of his budget. We did not do that. Then we would have a rainy day fund to implement any Medicare reform that Congress might enact. I will allude to that soon. Third, after all the bills of the decade have been paid, after Social Security recipients have their money set aside, after we have funded every penny anticipated for Medicare, and have an ample rainy day fund available, if we want to do something on prescription drugs, then we would send back the excess to the American taxpayers--to the working families--and those in middle- and low-income brackets will get a very substantial tax reduction. The budget resolution recognized economic conditions now, and the projected economics including the planning for an inevitable recession that might occur in the future. It outlined a decade-long, phased-in tax cut. Only a very small tax cut was envisioned in the first 2 years of this budget timeframe because the economy is already operating above optimum capacity. We want to keep inflation subdued and interest rates low. The budget expected Congress to pass a tax bill that was very small in the first 2 years and grew as the decade wound its way through into the next millennium. I congratulate again the chairman of the Finance Committee and the members of that committee for producing the kind of tax cut for our budget for the 21st century. I think it is appropriate, prudent, and fair. Chairman Roth has produced a tax cut that starts small and ends up larger, reflecting economic conditions. He has produced a tax cut that targets help to those who really need it--those with children in school, those with elderly and ill parents who need long-term care, those who are trying to save for their own retirement instead of Government reliance, and many more items of that nature and of that significance. Yes. The same old class warfare arguments like tired, defeated soldiers of past wars have begun to stagger across the Senate debate again--and they will be here before us again--that we are only helping the rich. We are told we must spend the surplus. That is essentially the argument against our tax refunds--we must spend the surplus. We must grow Government. It is the same old debate. One party wants to give money to programs. And we want to give money to the people. That is exactly the way it has been, and that is exactly the way it is on this floor. I believe there is a degree of arrogance in those who argue against tax cuts. They say to working families: I [[Page S9465]] know what to do with your money better than you do. Give it to me so I can spend it. Can you imagine the arrogance of that position? They have grand schemes now with the surpluses. Republicans, through their dedicated efforts, and Dr. Greenspan and his fantastic ability to manage the money supply in our country, and to control interest rates, have given the Nation this enormous surplus. The President of the United States thinks they have the money to implement new, grand schemes and to grow government. That is the issue. A government big enough to give you everything is a government that takes everything away in the form of high taxes. I didn't originate that quote. I can't imagine and I can't fathom anything more frightening to the average taxpayer than the sight of a grand government schemer rushing toward a $1 trillion pile of extra taxpayer dollars. Republicans say it is the best of times for tax cuts. Democrats say it is the worst of times. Everyone quotes Dr. Alan Greenspan. The Taxpayers Refund Act before the Senate is the best of plans. It lowers rates. It encourages savings. It eliminates the worst of a bad Tax Code. It eliminates the marriage penalty for many Americans. It begins the death of a death tax. It ends the alternative minimum tax, to rescue the full benefit of child care, foster care, education, and other needed tax credits for families who otherwise unavoidably would end up in the alternative minimum tax brackets. They are sick of this. They are worried about it. You will get more mail on this issue because it is grossly unfair to give credits and then take them away--to run across the land saying: We are delighted to have given you a credit for your children's education only to find that middle-income Americans by the hundreds of thousands are falling into this alternative minimum tax trap. I say: Tax cuts, if not now, when? The Democrats say not now. I say: If not tax cuts now, then what? The President's answer is: Spend it all. It does not matter what he says he wants to spend it for; he wants to spend it all. Can you imagine if we did not have this surplus? What will the President be doing--asking for tax increases to pay for these programs he thinks we need? I doubt that. I doubt that very much. I support prudent tax relief, and I must say this is prudent tax relief. It is synchronized to our business cycle and the condition of the economy. It improves our tax policy and moves us toward a system that taxes income that is consumed instead of income that is earned. It moves America toward a tax system that allows business to deduct investments in the year they are made. It encourages investment in retirement, education, and health care. Congress' budget allocates 75 percent of the projected surplus over the next 10 years for paying down the debt and long-term priorities. If the surplus were a dollar, two quarters would go for Social Security, one quarter for high-priority spending--education, research, and defense--and the remaining quarter for tax cuts. Without tax cuts, who would spend the surplus? Not the American people. The Government in Washington would spend it. Without tax cuts, we will ``grow'' Government. There can be no denial of that. The President plans to grow Government substantially rather than give back anything to the American people. He now says he would veto a $500 billion tax cut. What about $200, Mr. President? That means giving the American people back about 6 cents of the surplus, at $200. Can we afford that? I believe we can afford 25 cents out of every $1 of surplus. Democrats say the question is: tax cuts versus Social Security. Tax cuts or Medicare. Tax cuts or domestic spending. Tax cut versus debt reduction. The right answer: It is not ``this'' versus ``that.'' The correct answer is, we can do all of the above. The size of the surplus lets us do it all. That is the reality. Save Social Security, reform Medicare, provide adequate funding for domestic and defense spending, pay down the debt, and give the American people who earned the money a decent tax cut. Do that in a manner that phases in, which will probably be very complimentary to the American economy. Even with the tax cuts and refunds we are talking about, our surplus will steadily climb as a share of GDP and our national debt will ultimately be paid off, falling dramatically from 40 percent of GDP this year to only 12 percent in 2009. Under the proposal we make, the external debt--the debt to the public--will go from 40 percent of the gross domestic product to only 12 percent by the end of the decade. I am amazed the President's political advisers allege this budget is reckless. Nothing is reckless about steadily rising surpluses and paying down our debt by more than 50 percent over the next decade. In fact, our plan lowers the level of debt more than the President's plan. Some may wonder why. That is because the President spends heavily in the first 5 years. We have tiny tax cuts. Thus, he incurs more debt than we do at that time, and he cannot make it up in a decade. I have been amazed by the administration and other opponents who claim our tax cut will lead to higher interest rates because the economy will overheat. That is just not true. The Fed is most concerned not with the economy as it is today but what it will be in 18 months and thereafter. Our tax cut is slow, a total of $28 billion over the years 2000 and 2001. I repeat, if they are worried about stimulus, it is $28 billion in tax cuts. It is almost unrecognizable in terms of impact one way or the other on the American economy. It saves 92 percent of the projected surplus during these first 2 years. As a result, our budget surpluses will rise sharply from 1.4 percent of the gross domestic product to 2 percent by 2001. It is clear that the budget plan is not expansionary, which some people now talk about. It truly is not. Ask any economist to look at it in its true sense, phased in as it is, and ask if it is an expansionary budget. I cannot imagine this tax bill would be defeated on such a preposterous economic observation. In House testimony last week, Chairman Greenspan cautioned against expecting any rapid stimulus as a result of this tax relief package. I can assure the American people that Congress' tax plan will not overheat the economy. As a matter of fact, Chairman Greenspan cautioned against expecting a rapid stimulus as a result of this package, given the long phase-in of the tax cuts. I can anticipate the response of my Democratic colleagues who are likely to say: If your plan is so ideally suited for the economy, why did Alan Greenspan argue we should let surpluses run for a while before cutting taxes? Listen carefully. I have two responses. First, I believe the Congress is doing exactly what the Chairman advised. Our budget plan delivers only $28 billion in tax cuts over the next 2 years. Most of that relief is scheduled to arrive only after surpluses have mounted on a consistent basis. Second and more important, Chairman Greenspan is advising what policies would be best in an ideal world. However, he is fully aware that ideal may not be politically feasible. Let me read a quote he made last week which I think was insightful: There is nothing that I can see that would be lost by allowing the process to delay unless, as I have indicated many times, it appears that the surplus is going to become a lightning rod for major increases in outlays. That's the worst of all possible worlds from a fiscal policy point of view. That, under all conditions, should be avoided. I have great sympathy for those who wish to cut taxes now, to preempt the process. And indeed if it turns out they are right, I would say moving on the tax front makes a good deal of sense to me. The worst of all fiscal policies will materialize if the President gets his way. The President proposes to increase spending by more than $1 trillion over the next 10 years. Most of this new spending would go to create 80 new, often repetitious, often local-government- prerogative-infringing Government programs, with services already being handled at the local or private sector. The President's spending proposals are the worst of all proposals from the standpoint of what is good for America during the next 2 years. That time horizon must concern the Federal Reserve. The President proposes to use $53 billion of the surplus for new spending. It [[Page S9466]] is nearly twice as large as our tax cut in the next 2 years. Thus, the President's plan would be far more stimulative than the Congress' measured tax cut. I ask my colleagues on the other side of the aisle if they are worried about interest rates rising because the economy is overheating, why support the President's Government-growing agenda over tax cuts? The money is there. We have a surplus. The last question is the $792 billion question: Who is going to spend it? When faced with the President, who wants to spend the surplus, Congress has no choice but to cut taxes. However, we have to be careful. While we are still saving the majority of the surplus for shoring up our long-term fiscal health, we must be careful in that regard. To sum up, I leave two messages today. Our budget is prudent, and it is synchronized for where we are in the business cycle. Be skeptical of the administration's criticism of our tax plan. They want to grow Government well in excess of Congress' tax cut. Most of the spending has nothing to do with Social Security or Medicare. This is what should most concern the American people when faced with the surplus, excluding Social Security funds, and I have already indicated what will happen to them. The Republicans want to give it back to the people who earned it and worked so hard. The big question then is, Who is going to spend the surplus? With tax cuts, the answer is you; without tax cuts, the answer is big government. I yield the floor. Several Senators addressed the Chair. The PRESIDING OFFICER. The Senator from Nevada. Mr. REID. Mr. President, the minority yields 10 minutes to the Senator from Minnesota. The PRESIDING OFFICER (Mr. Bunning). The Senator from Minnesota. Mr. WELLSTONE. Mr. President, 3 weeks ago, President Clinton visited some of the poorest communities in our country and he spoke eloquently of our obligations to America's most disadvantaged children. Now, with our economy booming and record surpluses, we have a chance to do better for all of our children. This budget fails America's children. I want to speak as loudly and boldly as I can about this reconciliation bill, first about the Republican proposal, and then about what we are proposing as Democrats. If you look at the non-Social Security surplus, about three-quarters of it really assumes cuts in future domestic spending. The Republican proposal on the floor does not restore any of these cuts. In fact, they add another cut of roughly $200 billion. The Republican plan would require a 38-percent cut in domestic spending in the year 2009, and the Republican tax bills are loaded with corporate welfare for multinational corporations, banks, insurance companies, Wall Street securities firms, and tax giveaways for the wealthy. That is a disappointment. It is a very harsh budget. But even the Democratic plan fails to fully fund or restore these cuts. Senate Democrats have reserved $290 billion of the surplus to soften the blow on our discretionary priorities like education, but we still allow cuts of several hundred billion dollars. In our plan, with our $300 billion of tax cuts, we do not make up the assumed cuts in our domestic priorities either. Since defense spending will go up, and there will be spending for transportation which also will go up significantly over the next 10 years, our other domestic priorities will be squeezed even more. How can we, as Democrats, say we are for addressing the needs of America's children, for fighting poverty, for fully funding Head Start, for equal access to quality education, for helping working families afford the cost of health care and child care, for cleaning up the environment, for community policing, and for veterans' health care, when we are assuming domestic spending cuts of several hundred billion dollars? Something has to give. To use the old Yiddish proverb, you can't dance at two weddings at the same time. I do not understand this. There are 14 million children who are poor in our country--14 million. There are 6.5 million children who live in households with income of one-half the poverty level. Close to one out of every four children in our country under the age of 3 are growing up poor. Close to 50 percent of children of color under the age of 3 are growing up poor. And now we are being told by both parties--the Republican Party much more so than the Democratic Party--but both parties, that we cannot afford to renew our national vow of equal opportunity for every child? Where in these proposals do we, as a Senate representing the United States of America, live up to our national vow of equal opportunity for every child? Right now, in Early Head Start, for children age 3 or younger, 1 percent of the children who could be helped and given a head start are able to get this assistance. We are funding this program at a 1 percent level. For the Republicans, you have $800 billion of tax cuts. You make no investment in any of these areas. Your budget and your proposal will lead to Draconian, really brutal cuts in these programs. Not only will we not be doing anything to make sure poor children have a chance in America, to make sure that there is equal opportunity for every child, but the proposal of the majority party will be making cuts in these programs. And to the Democratic Party, my party, we have a better proposal. It is less harsh. But there has to be some connection between the convictions we profess and the budgets we propose, and a willingness to fight for them. At some point, the chasm between our words and our actions becomes too wide. If we do not fight hard enough for the things we stand for at some point, we have to recognize we really do not stand for them. We really do not stand for them. I cannot believe with record economic performance, that the Republican Party can come to the floor of the Senate with a proposal that calls for $800 billion of tax cuts, most of them flowing to our wealthiest citizens, but with a proposed 38-percent cut in Head Start, child care, community policing, and cleanup of the environment. And to my party, I cannot believe the Democrats come out with a proposal where we, too, are essentially proposing cuts in some of these key domestic priorities. Why did we become involved in politics? What do we believe in? What are our values? Can we not at least make some investment to make sure every child, no matter the color of skin or income of family, urban or rural, or boy or girl, will have a chance to reach her full potential and his full potential? What ever happened to the Democratic Party's strong commitment to equal opportunity for every citizen? I do not see it in these proposals. We ought not to be talking about tax cuts that benefit the most affluent citizens, when we cannot even live up to our national vow of equal opportunity for every child. I hope we will do better as we move forward in this debate. I yield the floor. The PRESIDING OFFICER. The Senator from Nevada. Mr. REID. The Senator from West Virginia is yielded 45 minutes. The PRESIDING OFFICER. The Senator from West Virginia. Mr. BYRD. Mr. President, recently both the Office of Management and Budget and the Congressional Budget Office released their so-called ``Mid-Session Reviews'' on the state of the Federal budget. Both of these new forecasts project even better performance for the nation's economy in the coming ten years than they had predicted just a few months ago. In fact, the Congressional Budget Office projects unified budget surpluses totaling just under $3 trillion over the next ten years. Of the $3 trillion, approximately $2 trillion results from surpluses being paid into the Social Security trust fund. The remaining $1 trillion--or $996 billion to be exact--is what is called the ``on budget'' surplus. That is the non-Social Security trust fund surplus. The question before Congress is what do we do with this good news--our government is about to be awash in money, if these projections come true. Before we get too far along with our grandiose plans for massive tax cuts, a dose of reality is in order. Sometimes a dose of castor oil is in order. We may not like it so much, but it has to be taken. So a dose of reality is in order. [[Page S9467]] These future budget surpluses are, of course, based on ``pie in the sky'' projections. But I don't think ``pie in the sky'' is quite right. The projections are so far out into the Stratosphere--more than a decade away--that we would need the Hubble Telescope to track them down. Mr. President, the fact is that they have not yet occurred, the money is not yet in hand--and may well never occur--for a number of reasons. First, one needs to keep in mind that budget projections for even 1 year are likely to be missed by a substantial margin over the normal 5- year period of congressional budgets. Estimates of deficits and surpluses have been off by billions of dollars. This year, for the first time, instead of 5-year budget projections, we have 10-year budget projections upon which all of the surpluses are being forecast, and upon which tax cut proposals by Democrats, Republicans and the administration are being based. Does anyone really believe that these 10-year projections will be any more accurate than the usual 5-year numbers? In looking at these incredible amounts of surpluses and tax cuts, I would think that one needs more of an astrologer than an economist to read the tea leaves and to come up with these figures. Mr. President, consider these facts: CBO's estimate of revenues over the period 1980 through 1998 was off by an absolute average of $38 billion per year. The estimates were off by an average of $38 billion per year during the period 1980 through 1998. That is a pretty fair piece of change! This isn't just chicken feed. Some years, the estimates were closer to the projection than other years, but, as I say, the average difference one way or the other, was $38 billion per year. Similarly, for outlays, the projections over the past two decades were off the mark by an absolute average of $36 billion per year. The resulting deficit projections by the Congressional Budget Office over the period 1980 through 1998 were off by an absolute average of $54 billion per year. Extend that figure over 10 years, and that is what we are doing now in this bill, and we can see that $540 billion of the $1 trillion projected surplus could melt away faster than last year's snowball. So what about these latest ``rosy'' forecasts of budgetary surpluses for the next 10 years? It is obvious that we need to be very careful when relying on such projections to make decisions about whether and if we can afford a tax cut. CBO officials would be the first to tell you that they have widely missed the mark in their budgetary forecasts, as would the folks at OMB. No one on the face of God's green Earth can predict accurately for even 1 year, much less for 5 or 10 years, what revenues will come into the Treasury, or what expenditures will go out of the Treasury. That is because no one knows what the unemployment rate will be next year, or the inflation rate, interest rates, whether there will be a recession or the duration or virility of such recession. In virtually every CBO report, the following cautionary footnote can be found: ``Cyclical disturbances could have a significant effect on the budget at any time during the projection period. A recession would temporarily push down taxable incomes, thus reducing federal revenues. A recession would also cause a boost in spending for unemployment insurance and other benefit programs. CBO estimates that a relatively mild recession (similar to the one in the early 1990s) that began this year could reduce the projected surplus by $55 billion in 2000.'' Mr. President, there is no reason to believe that CBO's current forecast of the budgetary picture over the next 10 years will be any more accurate than have been its previous forecasts over the past two decades. With that dose of reality in mind, let's now turn our attention to the Republican tax cut proposal now before the Senate. Earlier in my remarks, I noted that the Congressional Budget Office projects an on- budget surplus of $996 billion over the coming 10 years FY 2000-2

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TAXPAYER REFUND ACT OF 1999
(Senate - July 28, 1999)

Text of this article available as: TXT PDF [Pages S9460-S9523] TAXPAYER REFUND ACT OF 1999 Mr. LOTT. I ask unanimous consent the Senate begin consideration of the reconciliation bill, which is the Tax Relief Act, and that the first 3 hours of debate be equally divided in the usual form for purposes of opening statements only. The PRESIDING OFFICER. The clerk will report the bill by title. The legislative assistant read as follows: A bill (S. 1429) to provide for reconciliation pursuant to section 104 of the concurrent resolution on the budget for fiscal year 2000. There being no objection, the Senate proceeded to consider the bill. Mr. ROTH. Mr. President, I yield myself 30 minutes. Mr. President, I don't think there is any parent who hasn't had the experience of sending a child into a store with a $20 bill to buy a carton of milk, a loaf of bread, or perhaps a dozen eggs, and the child returns with the few essentials. In a demonstration of maturity and responsibility, the child returns the change to his or her parent. There is no question who the change belongs to. After all, the parent earned the money; it is needed to support the family; the family will certainly have important uses for it later. The child understands this. So does the parent. Most often, the change is returned to the household budget to take care of other important needs. Washington needs to demonstrate the same responsibility when it comes to determining what to do with the change that is left over from running the government. There are surplus revenues in the Treasury. As with a child emerging from the grocery store, there is change--big change--left over after Congress has met the necessities of running government. In trying to balance the budget in 1997, Congress miscalculated the revenues that would be generated by the economy. At the same time, the hard work, the thrift, investment, and risk-taking of Americans combined to create an unexpected windfall of revenue. Now the question Washington seems to be grappling with concerns who rightly deserves the windfall. It is a question any parent or child can answer. American families, those who created the wealth in the first place, those who need their precious resources to meet future basic needs at home, are rightly entitled to the revenues they have earned, revenues Washington did not plan for to meet the expense of government, from which Washington had budgeted. Now, as the child returning change for the $20, we must hand back the money. We must do it in a broad-based way that is fair to those who provided the funds to Washington in the first place. We must do it through broad-based tax relief that helps individuals and families at all income levels meet real needs. The broad-based tax relief plan that passed out of the Finance Committee with bipartisan support will do just that. It will benefit nearly every working American. It will help restore equity to the Tax Code and provide American families with the resources they need to meet pressing concerns. It will help individuals and families save for self- reliance and retirement. It will help parents prepare for educational costs. It will give the self-employed and underinsured the boost they need to pay for health insurance. It will begin to restore fairness to the Tax Code by eliminating the marriage tax penalty. Let me state exactly how the plan works and why it has received bipartisan support. This tax cut package will provide broad relief by reducing the 15-percent tax bracket that serves as the baseline for all taxpayers to 14 percent. In other words, no matter which tax bracket a family may be in, by cutting the 15-percent bracket, everyone will benefit as they will pay 14 percent on their first portion of taxable income. At the same time, this plan expands the 14 percent bracket, dropping millions of Americans who are now paying taxes at 28 percent down to the lower bracket. For a middle-income family of four, these two changes will mean a tax savings of over $450 a year. And these provisions have already found bipartisan support. To restore equity to the Tax Code, this plan targets another bipartisan objective by eliminating the marriage tax penalty. For too long, husbands and wives who have worked and paid taxes have been penalized by their dual incomes. I have heard of some couples who have actually chosen not to marry because of the tax penalties their marriage would incur. This plan will fix that by giving working married couples the option of filing combined returns, using separate schedules to take advantage of the single filer tax rates and the single filer standard deduction. This is a change that is long overdue. American families have been suffering under the unfair burden of the marriage tax penalty for too long. A simple example shows us why: Robert and Diane are two single Americans who have fallen in love and want to marry. They are not considered wealthy. In fact, Robert is a hardworking foreman at an auto factory. Susan, his fiancee, is an experienced nurse. Each makes roughly $50,000 a year. Now, under current law--when the file their separate tax returns--they each take a personal exemption and the standard deduction, giving them a taxable income of $43,000. After applying the tax rates for singles, they each owe tax of about $8,745. If, however, Robert and Diane follow their hearts--get married and start a family--they realize that their total combined income would be $100,000. Should they marry, they would no longer be considered middle- class individuals, but many would regard them as a wealthy family, and under current law their combined income would be reduced by their two personal exemptions and by the standard deduction for married couples. And here is where they would hit their first marriage penalty problem, discovering that their new standard deduction is significantly less than the combination of the two standard deductions they receive as singles. But the marriage penalty does not end there. In fact, it gets worse. With their combined income, Robert and Diane--now considered by many to be wealthy--would have a taxable income of $87,400. This is where they would hit their second marriage penalty problem. The lowest tax rate bracket for married couples is less than twice as wide as the lowest tax rate bracket for singles. In other words, more of their income would now be taxable at higher rates. The result would be a total tax bill of $18,967, almost $1,500 more than they would have paid as singles. That steep increase would come at a time when they could least afford it, a time when just starting out as a married couple they would be looking to buy a home, raise a family, and save for education. The legislation we introduce today--this broad-based tax relief-- completely eliminates the marriage penalty for Robert and Diane. The Senate Finance Committee bill will allow Robert and Diane to file a joint return, but to calculate their tax liability as if they had remained single. They would each get the benefit of the more generous standard deduction and of the more generous rate brackets. Under this new approach, they would pay a total tax of $17,490 which is the combination of what they had each paid before. This saves them almost $1,500. But in restoring equity to the tax code, we do not stop with the marriage penalty. Another important measure contained in this broad- based tax relief plan is the elimination of the alternative minimum tax for middle-income families--families like David and Margaret Klaassen. Most of us know their [[Page S9461]] story. The Tenth Circuit recently affirmed that under the current law, the Klaassens are required to pay the alternative minimum tax despite the fact that it may not have been Congress' intent to impact families like the Klaassens when Congress passed the AMT. David and Margaret Klaassen are the parents of 10 dependent children. They had an adjusted gross income of $83,000 and roughly $19,000 of itemized deductions relating to state and local taxes, medical expenses, interest, and charitable contributions. Their reported adjusted gross income was $63,500, and with 12 personal exemptions their taxable income was $34,000, resulting in regular tax of $5,100. That would seem fair. And the Klaassens paid the bill. However, the IRS flagged the return and determined that the family was liable for the alternative minimum tax, a provision in the code that was passed to make sure that wealthy individuals and families do not escape at least some liability through tax shelters and other tools they might use to minimize their liability. The IRS determined an AMT deficiency of $1,100. For AMT purposes, the Klaassens were disallowed a $3,300 deduction for State and local taxes. In addition, $2,100 in medical expenses were disallowed because of the 10-percent floor for AMT purposes. And finally, the Klaassens' entire $29,000 deduction for personal exemptions was disallowed because of the AMT. These adjustments resulted in alternative minimum taxable income of $68,000--twice the taxable income that the Klaassens had without the AMT. This simply is not fair. It is not what Congress intended. The Finance Committee bill will help return fairness to the tax code by allowing families to receive the full benefits from their personal exemptions. This will also restore taxpayers' ability to receive their $500 per child tax credits, and other benefits that were intended to be available to middle-income families. These are changes that are long overdue. Again, they have strong bipartisan support. But our broad-based Taxpayer Refund Act of 1999 does so much more. This plan will also help individuals and families find self-reliance and security in retirement through expanded individual retirement accounts, as well as through enhanced 401(k) plans, 403(b) plans and 457 plans. These are critical programs--programs that along with Social Security and personal savings help individuals prepare for their golden years. For savings through the workplace, there are 401(k) plans, 403(b) plans and 457 plans, each of which can be sponsored by different types of employers. For individual savings, there is either the traditional IRA or the Roth IRA. And all these different savings vehicles have different limits on how much individuals can save. However, our current system can do more, and the limitations that we placed on retirement savings in times of budgetary restraints should be reexamined in light of the current surplus. For example, the IRA contribution limit has not changed since 1982. Had it simply been indexed for inflation, it would be almost $5,000 today. What an opportunity that would present middle-class families to prepare for their futures. And that's exactly who benefits from IRAs-- middle- and lower-income Americans. Fifty-two percent of all IRA owners earn less than $50,000. This same group makes about 65 percent of all IRA contributions, and right now they are limited by the $2,000 cap on contributions. IRS statistics also show that the average contribution level in 1993 for people with less than $20,000 in income was $1,500. Clearly, if the average contribution of modest-income taxpayers is $1,500, this demonstrates that many of these Americans want to make contributions of more than the $2,000 limit. This tax relief bill will incrementally increase the amount that people can contribute to IRAs from $2,000 to $5,000. In the area of employer-provided savings vehicles, the current maximum pre-tax contribution to a 401(k) plan or a 403(b) annuity is $10,000. In addition, the maximum contribution to a 457(b) plan is $8,000. Finally, the maximum contribution to a SIMPLE plan is $6,000. These limits are indexed for cost-of-living increases. There has traditionally been a differential in contribution limits among the various types of plans: IRAs having the lowest limits; SIMPLE plans having a greater limit, but not as much as a 401(k) plan; and 401(k) and 403(b) plans having the highest limits, but the greatest number of regulations. Since the IRA limit will be raised to $5,000, the bill will increase limits for 401(k) and 403(b) plans to $15,000 and for SIMPLE plans to $10,000; thereby continuing the differential. The limit for 457(b) plans for government employees will increase to $10,000. There is no question, with rising concerns about security and self- reliance in retirement, that these changes are needed. They will go a long way toward helping individuals and families achieve their economic goals. But the benefits this legislation has for retirement planning do not stop here. There are other provisions that will add new retirement vehicles, provide greater ability to transfer retirement savings between plans, promote retirement plans for small businesses, and simplify the retirement plan system for both employers and employees. One provision will allow employees 50 years old or older to make catch-up contributions to their retirement plans. This will be most important for women, benefiting those who may have started their retirement savings late or who may have taken time off to raise children. Whatever the reason, once these individuals have reached 50, they will be eligible to make additional contributions to their retirement plans that are equal to 50 percent of their plans' maximum allowable contribution. In other words, their total annual contribution could be 150 percent of the normal contribution. Beyond restoring equity to the tax code and helping Americans prepare for retirement, the Taxpayer Refund Act of 1999 will also help individuals and families gain access to health care--particularly those who are self-employed, or who are not covered by their employers--this legislation will enhance the tax deductibility of health insurance. It does this by accelerating the full deductibility for health insurance for the self-employed and by providing the same benefit on a phased-in basis to employees who are not covered by their employers. In detail, the Taxpayer Refund Act of 1999 will provide an above-the- line deduction for health insurance and for long-term care for which the taxpayer pays at least 50 percent of the premium. It will allow long-term care insurance to be offered in cafeteria plans and provide an additional dependency deduction to caretakers of elderly family members. To benefit small businesses, this legislation will accelerate the 100 percent deduction for health insurance of self-employed individuals beginning in 2000. To help make education more affordable for families and students, the Taxpayer Refund Act of 1999 strengthens educational savings opportunities by making college tuition plans tax-free. In other words, families--including grandparents, aunts, and uncles--can invest their after-tax income into a child's educational future. And when that money is used by the child, it will be tax-free on buildup and withdrawal. This legislation also increases student loan interest deduction income limits for single taxpayers by $10,000 and adjusts the beginning income limits for married couples filing joint returns to twice that of a single taxpayer. Beyond these important changes, this tax relief plan promotes education by making deductions for employer provided assistance permanent, and by allowing employer assistance to be used for graduate-level courses. Again, these are necessary changes--changes that will help families meet their priorities. Another important component of this tax relief package involves its treatment of estate and gift taxes. Here, our objective is to protect families, farmers, and small business men and women who have worked their whole lives to build a future for their posterity. Members of the Senate Finance Committee can recall the heartrending testimony of Lee Ann Goddard Ferris whose 71-year-old father died in a tragic farming accident in Lost River Valley, Idaho. For more than 60 years, her family had worked the land. They owned over 2,600 acres--2,600 acres that had been purchased through [[Page S9462]] decades of toil. In Lee Ann's own words, ``My father's death was the most devastating event that any of us has ever gone through. The second most devastating event was sitting down with our estate attorney after his death. I'll never forget his words. The estate attorney said, `There is no way you can keep this place, absolutely no way.' '' Still suffering from her father's accidental death, Lee Ann couldn't believe what she was hearing. ``How can this be?'' she asked. ``We own this land. We have no debt! We just lost my father, and now we are going to lose the ranch?'' According to Lee Ann, ``Our attorney proceeded to pencil out the estate taxes . . . and we all sat in total shock.'' Where is the fairness, Mr. President? Here a family works for more than half a century to build a ranch, only to hear that estate taxes would rob them of their legacy, their heritage, their home. ``This tax situation has put a tremendous strain on my mother,'' Lee Ann testified. ``Mother worries constantly and has had many sleepless nights. I don't know if any of you could ever imagine how hard it has been on her. She doesn't have her husband anymore. She worked hard her whole life and gave up a lot of material things to put her after-tax dollars back into the land to pay it off. Now, unless this tax law is changed or abolished, she will have to leave her home, which she loves, and our family will not have a base from which to carry on.'' With this legislation, Congress will do something to protect these families. The Taxpayer Refund Act of 1999 turns the unified estate tax credit into a true exemption, and it increases the exemption from $1 million to $1.5 million. This legislation also significantly reduces the actual estate tax rate, and it increases the annual gift tax exclusion from $10,000 to $20,000 by the year 2006. Each of the measures I have outlined as part of the Taxpayer Refund Act of 1999 is vitally important to the well-being of all families; each is a key component of this tax relief package. Again, our purpose is to be broad-based--to provide the most meaningful tax relief possible--to do it in a way that families can meet their individual needs--and to present a plan that can receive strong bipartisan support. With this major tax relief package--$792 billion over 10 years--we meet all of these criteria. And, in the process, we leave over $500 billion to meet pressing concerns here in Washington, such as preserving and strengthening Medicare. We are able to do all this and to keep the budget balanced for a simple reason: the work, the investment, and the job creation achieved by Americans everywhere have succeeded in creating long-term economic growth. It is not right that the reward for this success is that today our taxes are the highest percent of our gross national product than at any other time in postwar history. These same Americans--the authors of this success story--are rightful heirs to the wealth they are creating. After paying for the Government programs for which Congress has planned and budgeted, the change must now be returned to the taxpayer. This legislation not only returns the change by cutting taxes, it increases access to healthcare; it makes education more affordable; it helps taxpayers prepare for self-reliance and retirement; it keeps their home, farm, and family business safe from death taxes. These are objectives that are shared by everyone. They are objectives that can be embraced by Senators and Congressmen on both sides of the political aisle. They are objectives that can be made realities by being passed into law. Mr. President, I reserve the remainder of my time. I yield the floor. Mr. MOYNIHAN addressed the Chair. The PRESIDING OFFICER (Mr. Burns). The Senator from New York. Mr. MOYNIHAN. First, I congratulate our revered chairman, Senator Roth, for the manner in which he has presented the Taxpayer Refund Act of 1999, for the manner in which he brought our committee together in consultation and deliberation, and who, indeed, produced a measure which was bipartisan. It has many elements which would commend our support across the aisle--certainly mine. But it is not to that issue that I will speak today, but to the question of the doctrine. I would like to put this debate in a doctrinal perspective, which is to say, the development in the 1960s which holds that the only way to restrain the growth of Government is to deliberately create a protracted fiscal crisis. This begins, of course, with a view of Government that is so very different from what traditional conservatism would hold. It is a new and radical idea. I will discuss how it emerged. But first I will cite an article from this morning's New York Times op-ed page by Gertrude Himmelfarb, one of our preeminent historians and an avowed conservative. She writes so much of what goes on. She says: In their eagerness to do away with the nanny state, some conservatives risk belittling, even delegitimizing, the state itself. A delicate balancing act is required: to dismantle or diminish the welfare state while retaining a healthy respect for the state itself. For good government is the precondition of civil society, providing a safe space within which individuals, families, communities, churches and voluntary associations can effectively function. But, as I say, the debate on this tax bill is not just a debate about tax policy; for it is far less a debate on taxes than a debate on economic and budget policy and the large understanding of the role of Government in our society, the role of Government in an advanced market economy. At the outset of this debate, we should be mindful of some painful mistakes we have made in the not too distant past and which we evidently mean to repeat. In August of 1993, just 6 years ago, we began to correct a colossal budget mistake. The President signed into law a deficit reduction act without precedent in size that dramatically changed the budget outlook--turning deficits of $290 billion a year, as far as the eye could see--to anticipate my friend David Stockman--into the surpluses we now project of $200 billion and more--surpluses on budget--leaving aside the Social Security revenue stream. At the time of its passage, it was estimated that the 1993 legislation, the Omnibus Budget Reconciliation Act of 1993, would reduce the deficit by $505 billion over the 5 years, 1994 through 1998. The Office of Management and Budget, in its fiscal year 2000 edition of ``Analytical Perspectives,'' estimated that the total deficit reduction has been more than twice this. I quote: ``The total deficit reduction has been more than twice this--$1.2 trillion.'' That suggests the extraordinary quality of that moment when we stood on this floor and waited for the final vote that would allow the Vice President to cast the determining vote, 51-50. The act was passed without one Member of the Republican Party of either House of the Congress. In 1997, we had a more bipartisan effort in the Balanced Budget Act of 1997. Again, we see larger revenue benefits than were originally anticipated. As for the fiscal year that ends this September, the OMB projects a budget surplus of $99 billion and the Congressional Budget Office projects a surplus of $120 billion. With the end of the fiscal year just 2 months away, we can expect, with great confidence, a budget surplus for the second consecutive year. What explains this huge gap, this pleasant surprise between budget expectations and outcomes in recent years? As is often the case in economic analysis, there are interrelated factors which cannot always easily be disentangled but which provide clues. To begin with, we appear to be in what has been described by our now- Secretary of the Treasury, Lawrence Summers, at his confirmation hearing as a ``virtuous cycle.'' I put a question to him, and he responded: Senator, I think it very important that, as you suggest, we do reduce the national debt by the full amount of the Social Security surpluses, which would continue this virtuous cycle by reducing interest rates, which makes possible more growth, which makes more tax collections, which makes larger surpluses, which makes lower debt, which reduces interest rates, which starts the cycle going again. That is an enormously important process. The Honorable Robert Rubin, who was Mr. Summers' distinguished predecessor, often spoke of a term which is not in ordinary usage, but it is a term [[Page S9463]] known by Secretaries of State and by persons who deal in securities, in markets. Mr. Rubin would use the term the ``risk premium on interest rates.'' That is to say, the extra charge if a person is lending money, if they are not certain of the fiscal stability of the Federal Government, in this case, and, thence, of the economy at large. It was, first of all, this risk premium that we broke in 1993, the fear that down the line, if these deficits of $290 billion in the previous year went on and on--the debt had quadrupled over the previous twelve years--that the day would come, again, to use an economist's term, when we would ``monetize'' the debt through inflation. We would get rid of it by wiping out the value of the dollar. That is that premium, that risk premium on interest rates. We began to see this effect. I was here on the Senate floor on February 10, 1995. I remarked: . . . the economy performed better than expected, in part, because Congress adopted a credible deficit reduction plan. In part, also, because, as Secretary of the Treasury Rubin remarked to the Finance Committee this Wednesday [that is, Wednesday, February 8, 1995], the deficit reduction program squeezed the risk premium on interest rates out of real long- term interest rates. If financial markets do not believe the deficit is under control, they will levy a risk premium on capital lending. In 1993 and 1994, we clearly persuaded the markets that we were finally serious. From a slightly different perspective, the Congressional Budget Office also took note of the importance of reducing interest costs. For most of the post-World War II period, interest costs have been the second or third largest item in the budget, behind Social Security and national defense. In commenting on this, the CBO said, of the effects of that 1993 legislation: Remarkably, the biggest single change lies in . . . interest--now projected at 3.3 percent of GDP in 2003 compared with 4.5 in the earlier report, a testimonial to the efforts to rein-in the debt's growth [which had taken place]. For the record, CBO, in its latest budget update issued earlier this month, now projects interest costs at just 1.7 percent of GDP in the year 2003, a reduction by half from its September 1993 projection when we had just passed that legislation of that year. Outlays for net interest peaked at $251 billion 2 fiscal years ago. They are now projected to decrease to $222 billion, and if we can just keep from squandering the surplus, we will repay the debt incurred in those years and that interest cost will again go down, almost to disappear. Now, I do not mean to suggest that the budget outlook is solely due to changes in budget policies. Factors other than deficit reduction are at work, making for a strong, sustained economic expansion. The economy brings higher receipts and lower outlays for unemployment and other such programs that automatically expand in a recession. Last week, in testimony before the House Committee on Banking and Financial Services, Alan Greenspan, our world-renowned Chairman of the Board of Governors at the Federal Reserve, provided some insights into what is sustaining this period of remarkable growth. Observing the absence of production bottlenecks, shortages, and price pressures that inevitably occur in an expanding economy, he noted a number of the possible explanations for the good fortunes involved; notably, just-in- time inventories and such like; but they have come about fortuitously at a time when the deficit was under control, deficits were declining, and the prospects were much better all around. The question is, Can we not keep this? Can we not sustain the extraordinary economic expansion on which we have embarked? Unemployment is now at 4.3 percent. May I say, as someone who in the Kennedy administration was Assistant Secretary of Labor for Policy Planning, we would have said, sir, that a 4.3-percent unemployment rate was unsustainable. It would lead to an outbreak of inflation. Yet here we have it, 4.3 percent, real economic growth at 4 percent. We are in the ninth year of an expansion, and we have no inflation. This is something that is going to require that the economic textbooks be rewritten. But we have done it, and a lot of it comes about from what we did on the Senate floor in August of 1993 and which our great hope on this side of the aisle is that we not undo in this short time that has passed. Alan Greenspan, in that testimony, was very clear. He said tax cuts are to be reserved for recessions. That will be the most effective means we can have to regenerate the economy and keep the long-term growth path moving high. The New York Times editorialized this past Sunday, on the Oracle of the Fed: Mr. Greenspan is treated reverently on Capitol Hill, but it appears that the Republicans do not want to heed his advice to run a surplus and pay down the national debt, while saving a tax cut for when it is needed. How come this sudden resurgence just now, when it would seem so clear that a quite opposite policy has had such very desirable effects? Well, sir, I go back, as I said I would earlier, to matters of political doctrine. We don't talk much of doctrine on the Senate floor, but there are times for it. In 1995, for example, we debated a constitutional amendment requiring a balanced budget. I presented a series of papers in which I tried to describe the idea of ``starving the beast,'' as the term was; that is to say, depriving the Federal Government of the revenues needed, putting it simply, to govern. The argument is quite simple. It goes back to the 1970s when a number of theorists on the conservative wing of the Republican Party determined that it was not going to be possible for the Federal Government ever to be controlled in its size as long as it had the revenues to sustain, or even to increase, that size. And so it came about that a policy doctrine developed which argued that deficits, if sizable enough, had acquired a new utility--deficits that had presumably been the horror of conservative financial thought now became something attractive because they could be used to reduce the size of Government itself. E.J. Dionne, Jr., in an op-ed article in yesterday's Washington Post, clearly recognizes this idea is still afoot. He writes: The long-term goal, about which Republican leaders are candid, is to put Government in a fiscal straitjacket for years to come. In fairness, I think this is more to be encountered on the House side than in this body, but it still would be the cumulative effect, in fact, of the tax cuts that have been proposed in both bodies. I can remember the onset of this. In the late 1970s, it was clear. One could write about it, and one did. Then came the administration of President Reagan in which, in effect, the policies were carried out--or they began to be carried out. In a television address, 16 days before his inauguration, President Reagan said: There will always be those who tell us that taxes could not be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice or breath, or we can cut their extravagance by simply reducing their allowance. There you have President Reagan in his most agreeable and heart- warming quality. He thought this could be done because he thought there would, in fact, be reductions in Government. There were none. Moreover, very shortly, his economic advisers realized the economic analysis they had used to project revenue increases from tax reductions weren't going to work, and they faced a prospect of deficits of, as David Stockman once said, ``$200 billion as far as the eye can see.'' Haynes Johnson, in his superb book, ``Sleepwalking Through History: America Through the Reagan Years,'' writes: The Reagan team [not the President] saw the implicit failure of supply side theory as an opportunity, not a problem. Now, this we have to absorb. They saw the failure of supply side theory--which said that the more you cut taxes, the higher the revenues will be--as an opportunity, not a problem. The secret solution was to let the Federal budget deficits rise, thus leaving Congress no alternative but to cut domestic programs. But in the end, they were not cut. Some grew. There was a view, and certainly a respectable one, that defense had to be increased. We now, incidentally, suggest there be a 20-percent reduction in defense spending over the next 10 years. The Reagan administration increased defense spending, and they had a perfectly good argument for doing that-- [[Page S9464]] but not simultaneously with huge tax cuts. There, very shortly thereafter, had to be tax increases. But the course was set for the 1980s and the deficit doubled, from under a trillion dollars to about $3.7 trillion now in publicly held debt. So I rise again to say, as I have done before, that what we did in 1981 with that tax cut--for which I voted because the Office of Management and Budget, seeing our huge inflation continuing, projected surpluses in the future--was so ruinously wrong. We now have a debt that will level off at about $6 trillion, while the debt held by the public will fall by $2 trillion, or more, depending on the size of this tax cut. The other important reason, which I will close on, is that the 1997 balanced budget amendment left us with what the Washington Post this morning calls an ``accounting illusion,'' that we can reduce the spending on domestic programs by 20 percent in real terms over the next 10 years. The illusion is coming apart already. Just the other day, the House of Representatives determined that the money to pay for the decennial census in the year 2000 required an emergency appropriation outside of those limits. We have had that census for many years. That census is provided in the Constitution. It has taken place every decade since 1790. All of a sudden, we have made it into an emergency. In this morning's Washington Post, our former majority leader, our beloved colleague, Robert C. Byrd, has an article called ``Time for Truth In Spending.'' He said: What we need to jettison is the political rhetoric. What we need to impose is truth in spending. And he set down a few principles. He said: First, watch our investments carefully and manage them prudently. We should continue our best efforts to manage the economy and watch out for inflation. Second, do not spend our money before we make it. Before the surplus is spent, whether on tax cuts or continuing important priority programs, wait for the money to be in the bank. We are proposing to spend a surplus, sir, that does not exist. Third, pay our debts. The United States should take advantage of this opportunity to retire the national debt. Fourth, cover the necessities. Congress should not shortchange the Nation's core programs, such as education, health care, veterans, and the like. Fifth, put aside what we need for a rainy day. Congress should take steps to reserve the Social Security and Medicare surpluses exclusively for future costs of those programs. Sixth, don't go on a spending spree. Resist the temptation to create costly new government programs. Finally, take prosperity in measured doses. Congress should reduce taxes without pulling the rug out from under projected surpluses. I can think of no wiser counsel. In that regard, and with great respect for the chairman of the committee, I would suggest that the budget reconciliation process was devised to expedite consideration of deficit reduction measures. The bill before us uses those same expedited procedures to secure enactment of a deficit-increasing measure. Section 313(b)(E) of the Byrd rule provides that any provision in any reconciliation bill which would decrease revenues used beyond the budget window--in this case beyond the year 2009--may be automatically stricken from the bill upon a point of order being raised. Section 1502 of the bill before us provides for permanent continuation of tax cuts in the years beyond 2009, causing revenue losses of hundreds of billions of dollars. Accordingly, sir, at the appropriate time, I intend to raise the Byrd rule point of order against section 1502 of the bill. I thank the Chair for his cordial consideration of my remarks. I see my friend, the chairman of the Budget Committee, is on the floor. I yield the floor. Mr. DOMENICI. Mr. President, I ask the distinguished chairman of the Finance Committee if he will yield up to 20 minutes. Mr. ROTH. I am happy to yield to the distinguished chairman of the Budget Committee up to 20 minutes. The PRESIDING OFFICER. The Senator from New Mexico is recognized for 20 minutes. Mr. DOMENICI. Mr. President, before my friend, Senator Roth, leaves the floor, let me say to the Senate that Senator Roth has come through again for the Senate and for the people of this country. His tax bill is clearly one that recognizes fairness, that puts the money where it ought to be put, gives back to the American people some of their money, and it does it in a way that clearly is prudent and responsible. It will be very difficult when we are finally finished explaining this bill for the President of the United States to veto this bill. We are going to talk about that a little later in the day. Since he has challenged us, we will tell the American people loud and clear what he is going to be doing when he vetoes this bill. Mr. President, I rise today to discuss the budget blueprint that Congress has passed for the first decade of the 21st century. It embodies three major things: Social Security, first and foremost. Much will be said about it. But nobody can deny that with this refund to the American taxpayers, we have left intact every single penny of surplus that belongs to the Social Security trust fund, and we will even debate on the floor locking it up so it is very hard to spend. The budget before us and that we adopted demanded that 100 percent of all the funding that Social Security recipients will need will be exclusively set aside for that purpose. Second, it sets aside enough money to meet the demands of Medicare for the next 10 years. Medicare is fully funded under the budget that was adopted by the Congress this year. That means there are no cuts. The program is fully funded for the decade. As a matter of fact, the President cut Medicare in the first 5 years of his budget. We did not do that. Then we would have a rainy day fund to implement any Medicare reform that Congress might enact. I will allude to that soon. Third, after all the bills of the decade have been paid, after Social Security recipients have their money set aside, after we have funded every penny anticipated for Medicare, and have an ample rainy day fund available, if we want to do something on prescription drugs, then we would send back the excess to the American taxpayers--to the working families--and those in middle- and low-income brackets will get a very substantial tax reduction. The budget resolution recognized economic conditions now, and the projected economics including the planning for an inevitable recession that might occur in the future. It outlined a decade-long, phased-in tax cut. Only a very small tax cut was envisioned in the first 2 years of this budget timeframe because the economy is already operating above optimum capacity. We want to keep inflation subdued and interest rates low. The budget expected Congress to pass a tax bill that was very small in the first 2 years and grew as the decade wound its way through into the next millennium. I congratulate again the chairman of the Finance Committee and the members of that committee for producing the kind of tax cut for our budget for the 21st century. I think it is appropriate, prudent, and fair. Chairman Roth has produced a tax cut that starts small and ends up larger, reflecting economic conditions. He has produced a tax cut that targets help to those who really need it--those with children in school, those with elderly and ill parents who need long-term care, those who are trying to save for their own retirement instead of Government reliance, and many more items of that nature and of that significance. Yes. The same old class warfare arguments like tired, defeated soldiers of past wars have begun to stagger across the Senate debate again--and they will be here before us again--that we are only helping the rich. We are told we must spend the surplus. That is essentially the argument against our tax refunds--we must spend the surplus. We must grow Government. It is the same old debate. One party wants to give money to programs. And we want to give money to the people. That is exactly the way it has been, and that is exactly the way it is on this floor. I believe there is a degree of arrogance in those who argue against tax cuts. They say to working families: I [[Page S9465]] know what to do with your money better than you do. Give it to me so I can spend it. Can you imagine the arrogance of that position? They have grand schemes now with the surpluses. Republicans, through their dedicated efforts, and Dr. Greenspan and his fantastic ability to manage the money supply in our country, and to control interest rates, have given the Nation this enormous surplus. The President of the United States thinks they have the money to implement new, grand schemes and to grow government. That is the issue. A government big enough to give you everything is a government that takes everything away in the form of high taxes. I didn't originate that quote. I can't imagine and I can't fathom anything more frightening to the average taxpayer than the sight of a grand government schemer rushing toward a $1 trillion pile of extra taxpayer dollars. Republicans say it is the best of times for tax cuts. Democrats say it is the worst of times. Everyone quotes Dr. Alan Greenspan. The Taxpayers Refund Act before the Senate is the best of plans. It lowers rates. It encourages savings. It eliminates the worst of a bad Tax Code. It eliminates the marriage penalty for many Americans. It begins the death of a death tax. It ends the alternative minimum tax, to rescue the full benefit of child care, foster care, education, and other needed tax credits for families who otherwise unavoidably would end up in the alternative minimum tax brackets. They are sick of this. They are worried about it. You will get more mail on this issue because it is grossly unfair to give credits and then take them away--to run across the land saying: We are delighted to have given you a credit for your children's education only to find that middle-income Americans by the hundreds of thousands are falling into this alternative minimum tax trap. I say: Tax cuts, if not now, when? The Democrats say not now. I say: If not tax cuts now, then what? The President's answer is: Spend it all. It does not matter what he says he wants to spend it for; he wants to spend it all. Can you imagine if we did not have this surplus? What will the President be doing--asking for tax increases to pay for these programs he thinks we need? I doubt that. I doubt that very much. I support prudent tax relief, and I must say this is prudent tax relief. It is synchronized to our business cycle and the condition of the economy. It improves our tax policy and moves us toward a system that taxes income that is consumed instead of income that is earned. It moves America toward a tax system that allows business to deduct investments in the year they are made. It encourages investment in retirement, education, and health care. Congress' budget allocates 75 percent of the projected surplus over the next 10 years for paying down the debt and long-term priorities. If the surplus were a dollar, two quarters would go for Social Security, one quarter for high-priority spending--education, research, and defense--and the remaining quarter for tax cuts. Without tax cuts, who would spend the surplus? Not the American people. The Government in Washington would spend it. Without tax cuts, we will ``grow'' Government. There can be no denial of that. The President plans to grow Government substantially rather than give back anything to the American people. He now says he would veto a $500 billion tax cut. What about $200, Mr. President? That means giving the American people back about 6 cents of the surplus, at $200. Can we afford that? I believe we can afford 25 cents out of every $1 of surplus. Democrats say the question is: tax cuts versus Social Security. Tax cuts or Medicare. Tax cuts or domestic spending. Tax cut versus debt reduction. The right answer: It is not ``this'' versus ``that.'' The correct answer is, we can do all of the above. The size of the surplus lets us do it all. That is the reality. Save Social Security, reform Medicare, provide adequate funding for domestic and defense spending, pay down the debt, and give the American people who earned the money a decent tax cut. Do that in a manner that phases in, which will probably be very complimentary to the American economy. Even with the tax cuts and refunds we are talking about, our surplus will steadily climb as a share of GDP and our national debt will ultimately be paid off, falling dramatically from 40 percent of GDP this year to only 12 percent in 2009. Under the proposal we make, the external debt--the debt to the public--will go from 40 percent of the gross domestic product to only 12 percent by the end of the decade. I am amazed the President's political advisers allege this budget is reckless. Nothing is reckless about steadily rising surpluses and paying down our debt by more than 50 percent over the next decade. In fact, our plan lowers the level of debt more than the President's plan. Some may wonder why. That is because the President spends heavily in the first 5 years. We have tiny tax cuts. Thus, he incurs more debt than we do at that time, and he cannot make it up in a decade. I have been amazed by the administration and other opponents who claim our tax cut will lead to higher interest rates because the economy will overheat. That is just not true. The Fed is most concerned not with the economy as it is today but what it will be in 18 months and thereafter. Our tax cut is slow, a total of $28 billion over the years 2000 and 2001. I repeat, if they are worried about stimulus, it is $28 billion in tax cuts. It is almost unrecognizable in terms of impact one way or the other on the American economy. It saves 92 percent of the projected surplus during these first 2 years. As a result, our budget surpluses will rise sharply from 1.4 percent of the gross domestic product to 2 percent by 2001. It is clear that the budget plan is not expansionary, which some people now talk about. It truly is not. Ask any economist to look at it in its true sense, phased in as it is, and ask if it is an expansionary budget. I cannot imagine this tax bill would be defeated on such a preposterous economic observation. In House testimony last week, Chairman Greenspan cautioned against expecting any rapid stimulus as a result of this tax relief package. I can assure the American people that Congress' tax plan will not overheat the economy. As a matter of fact, Chairman Greenspan cautioned against expecting a rapid stimulus as a result of this package, given the long phase-in of the tax cuts. I can anticipate the response of my Democratic colleagues who are likely to say: If your plan is so ideally suited for the economy, why did Alan Greenspan argue we should let surpluses run for a while before cutting taxes? Listen carefully. I have two responses. First, I believe the Congress is doing exactly what the Chairman advised. Our budget plan delivers only $28 billion in tax cuts over the next 2 years. Most of that relief is scheduled to arrive only after surpluses have mounted on a consistent basis. Second and more important, Chairman Greenspan is advising what policies would be best in an ideal world. However, he is fully aware that ideal may not be politically feasible. Let me read a quote he made last week which I think was insightful: There is nothing that I can see that would be lost by allowing the process to delay unless, as I have indicated many times, it appears that the surplus is going to become a lightning rod for major increases in outlays. That's the worst of all possible worlds from a fiscal policy point of view. That, under all conditions, should be avoided. I have great sympathy for those who wish to cut taxes now, to preempt the process. And indeed if it turns out they are right, I would say moving on the tax front makes a good deal of sense to me. The worst of all fiscal policies will materialize if the President gets his way. The President proposes to increase spending by more than $1 trillion over the next 10 years. Most of this new spending would go to create 80 new, often repetitious, often local-government- prerogative-infringing Government programs, with services already being handled at the local or private sector. The President's spending proposals are the worst of all proposals from the standpoint of what is good for America during the next 2 years. That time horizon must concern the Federal Reserve. The President proposes to use $53 billion of the surplus for new spending. It [[Page S9466]] is nearly twice as large as our tax cut in the next 2 years. Thus, the President's plan would be far more stimulative than the Congress' measured tax cut. I ask my colleagues on the other side of the aisle if they are worried about interest rates rising because the economy is overheating, why support the President's Government-growing agenda over tax cuts? The money is there. We have a surplus. The last question is the $792 billion question: Who is going to spend it? When faced with the President, who wants to spend the surplus, Congress has no choice but to cut taxes. However, we have to be careful. While we are still saving the majority of the surplus for shoring up our long-term fiscal health, we must be careful in that regard. To sum up, I leave two messages today. Our budget is prudent, and it is synchronized for where we are in the business cycle. Be skeptical of the administration's criticism of our tax plan. They want to grow Government well in excess of Congress' tax cut. Most of the spending has nothing to do with Social Security or Medicare. This is what should most concern the American people when faced with the surplus, excluding Social Security funds, and I have already indicated what will happen to them. The Republicans want to give it back to the people who earned it and worked so hard. The big question then is, Who is going to spend the surplus? With tax cuts, the answer is you; without tax cuts, the answer is big government. I yield the floor. Several Senators addressed the Chair. The PRESIDING OFFICER. The Senator from Nevada. Mr. REID. Mr. President, the minority yields 10 minutes to the Senator from Minnesota. The PRESIDING OFFICER (Mr. Bunning). The Senator from Minnesota. Mr. WELLSTONE. Mr. President, 3 weeks ago, President Clinton visited some of the poorest communities in our country and he spoke eloquently of our obligations to America's most disadvantaged children. Now, with our economy booming and record surpluses, we have a chance to do better for all of our children. This budget fails America's children. I want to speak as loudly and boldly as I can about this reconciliation bill, first about the Republican proposal, and then about what we are proposing as Democrats. If you look at the non-Social Security surplus, about three-quarters of it really assumes cuts in future domestic spending. The Republican proposal on the floor does not restore any of these cuts. In fact, they add another cut of roughly $200 billion. The Republican plan would require a 38-percent cut in domestic spending in the year 2009, and the Republican tax bills are loaded with corporate welfare for multinational corporations, banks, insurance companies, Wall Street securities firms, and tax giveaways for the wealthy. That is a disappointment. It is a very harsh budget. But even the Democratic plan fails to fully fund or restore these cuts. Senate Democrats have reserved $290 billion of the surplus to soften the blow on our discretionary priorities like education, but we still allow cuts of several hundred billion dollars. In our plan, with our $300 billion of tax cuts, we do not make up the assumed cuts in our domestic priorities either. Since defense spending will go up, and there will be spending for transportation which also will go up significantly over the next 10 years, our other domestic priorities will be squeezed even more. How can we, as Democrats, say we are for addressing the needs of America's children, for fighting poverty, for fully funding Head Start, for equal access to quality education, for helping working families afford the cost of health care and child care, for cleaning up the environment, for community policing, and for veterans' health care, when we are assuming domestic spending cuts of several hundred billion dollars? Something has to give. To use the old Yiddish proverb, you can't dance at two weddings at the same time. I do not understand this. There are 14 million children who are poor in our country--14 million. There are 6.5 million children who live in households with income of one-half the poverty level. Close to one out of every four children in our country under the age of 3 are growing up poor. Close to 50 percent of children of color under the age of 3 are growing up poor. And now we are being told by both parties--the Republican Party much more so than the Democratic Party--but both parties, that we cannot afford to renew our national vow of equal opportunity for every child? Where in these proposals do we, as a Senate representing the United States of America, live up to our national vow of equal opportunity for every child? Right now, in Early Head Start, for children age 3 or younger, 1 percent of the children who could be helped and given a head start are able to get this assistance. We are funding this program at a 1 percent level. For the Republicans, you have $800 billion of tax cuts. You make no investment in any of these areas. Your budget and your proposal will lead to Draconian, really brutal cuts in these programs. Not only will we not be doing anything to make sure poor children have a chance in America, to make sure that there is equal opportunity for every child, but the proposal of the majority party will be making cuts in these programs. And to the Democratic Party, my party, we have a better proposal. It is less harsh. But there has to be some connection between the convictions we profess and the budgets we propose, and a willingness to fight for them. At some point, the chasm between our words and our actions becomes too wide. If we do not fight hard enough for the things we stand for at some point, we have to recognize we really do not stand for them. We really do not stand for them. I cannot believe with record economic performance, that the Republican Party can come to the floor of the Senate with a proposal that calls for $800 billion of tax cuts, most of them flowing to our wealthiest citizens, but with a proposed 38-percent cut in Head Start, child care, community policing, and cleanup of the environment. And to my party, I cannot believe the Democrats come out with a proposal where we, too, are essentially proposing cuts in some of these key domestic priorities. Why did we become involved in politics? What do we believe in? What are our values? Can we not at least make some investment to make sure every child, no matter the color of skin or income of family, urban or rural, or boy or girl, will have a chance to reach her full potential and his full potential? What ever happened to the Democratic Party's strong commitment to equal opportunity for every citizen? I do not see it in these proposals. We ought not to be talking about tax cuts that benefit the most affluent citizens, when we cannot even live up to our national vow of equal opportunity for every child. I hope we will do better as we move forward in this debate. I yield the floor. The PRESIDING OFFICER. The Senator from Nevada. Mr. REID. The Senator from West Virginia is yielded 45 minutes. The PRESIDING OFFICER. The Senator from West Virginia. Mr. BYRD. Mr. President, recently both the Office of Management and Budget and the Congressional Budget Office released their so-called ``Mid-Session Reviews'' on the state of the Federal budget. Both of these new forecasts project even better performance for the nation's economy in the coming ten years than they had predicted just a few months ago. In fact, the Congressional Budget Office projects unified budget surpluses totaling just under $3 trillion over the next ten years. Of the $3 trillion, approximately $2 trillion results from surpluses being paid into the Social Security trust fund. The remaining $1 trillion--or $996 billion to be exact--is what is called the ``on budget'' surplus. That is the non-Social Security trust fund surplus. The question before Congress is what do we do with this good news--our government is about to be awash in money, if these projections come true. Before we get too far along with our grandiose plans for massive tax cuts, a dose of reality is in order. Sometimes a dose of castor oil is in order. We may not like it so much, but it has to be taken. So a dose of reality is in order. [[Page S9467]] These future budget surpluses are, of course, based on ``pie in the sky'' projections. But I don't think ``pie in the sky'' is quite right. The projections are so far out into the Stratosphere--more than a decade away--that we would need the Hubble Telescope to track them down. Mr. President, the fact is that they have not yet occurred, the money is not yet in hand--and may well never occur--for a number of reasons. First, one needs to keep in mind that budget projections for even 1 year are likely to be missed by a substantial margin over the normal 5- year period of congressional budgets. Estimates of deficits and surpluses have been off by billions of dollars. This year, for the first time, instead of 5-year budget projections, we have 10-year budget projections upon which all of the surpluses are being forecast, and upon which tax cut proposals by Democrats, Republicans and the administration are being based. Does anyone really believe that these 10-year projections will be any more accurate than the usual 5-year numbers? In looking at these incredible amounts of surpluses and tax cuts, I would think that one needs more of an astrologer than an economist to read the tea leaves and to come up with these figures. Mr. President, consider these facts: CBO's estimate of revenues over the period 1980 through 1998 was off by an absolute average of $38 billion per year. The estimates were off by an average of $38 billion per year during the period 1980 through 1998. That is a pretty fair piece of change! This isn't just chicken feed. Some years, the estimates were closer to the projection than other years, but, as I say, the average difference one way or the other, was $38 billion per year. Similarly, for outlays, the projections over the past two decades were off the mark by an absolute average of $36 billion per year. The resulting deficit projections by the Congressional Budget Office over the period 1980 through 1998 were off by an absolute average of $54 billion per year. Extend that figure over 10 years, and that is what we are doing now in this bill, and we can see that $540 billion of the $1 trillion projected surplus could melt away faster than last year's snowball. So what about these latest ``rosy'' forecasts of budgetary surpluses for the next 10 years? It is obvious that we need to be very careful when relying on such projections to make decisions about whether and if we can afford a tax cut. CBO officials would be the first to tell you that they have widely missed the mark in their budgetary forecasts, as would the folks at OMB. No one on the face of God's green Earth can predict accurately for even 1 year, much less for 5 or 10 years, what revenues will come into the Treasury, or what expenditures will go out of the Treasury. That is because no one knows what the unemployment rate will be next year, or the inflation rate, interest rates, whether there will be a recession or the duration or virility of such recession. In virtually every CBO report, the following cautionary footnote can be found: ``Cyclical disturbances could have a significant effect on the budget at any time during the projection period. A recession would temporarily push down taxable incomes, thus reducing federal revenues. A recession would also cause a boost in spending for unemployment insurance and other benefit programs. CBO estimates that a relatively mild recession (similar to the one in the early 1990s) that began this year could reduce the projected surplus by $55 billion in 2000.'' Mr. President, there is no reason to believe that CBO's current forecast of the budgetary picture over the next 10 years will be any more accurate than have been its previous forecasts over the past two decades. With that dose of reality in mind, let's now turn our attention to the Republican tax cut proposal now before the Senate. Earlier in my remarks, I noted that the Congressional Budget Office projects an on- budget surplus of $996 billion over the coming 10 years FY 2000-2009. The

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TAXPAYER REFUND ACT OF 1999
(Senate - July 28, 1999)

Text of this article available as: TXT PDF [Pages S9460-S9523] TAXPAYER REFUND ACT OF 1999 Mr. LOTT. I ask unanimous consent the Senate begin consideration of the reconciliation bill, which is the Tax Relief Act, and that the first 3 hours of debate be equally divided in the usual form for purposes of opening statements only. The PRESIDING OFFICER. The clerk will report the bill by title. The legislative assistant read as follows: A bill (S. 1429) to provide for reconciliation pursuant to section 104 of the concurrent resolution on the budget for fiscal year 2000. There being no objection, the Senate proceeded to consider the bill. Mr. ROTH. Mr. President, I yield myself 30 minutes. Mr. President, I don't think there is any parent who hasn't had the experience of sending a child into a store with a $20 bill to buy a carton of milk, a loaf of bread, or perhaps a dozen eggs, and the child returns with the few essentials. In a demonstration of maturity and responsibility, the child returns the change to his or her parent. There is no question who the change belongs to. After all, the parent earned the money; it is needed to support the family; the family will certainly have important uses for it later. The child understands this. So does the parent. Most often, the change is returned to the household budget to take care of other important needs. Washington needs to demonstrate the same responsibility when it comes to determining what to do with the change that is left over from running the government. There are surplus revenues in the Treasury. As with a child emerging from the grocery store, there is change--big change--left over after Congress has met the necessities of running government. In trying to balance the budget in 1997, Congress miscalculated the revenues that would be generated by the economy. At the same time, the hard work, the thrift, investment, and risk-taking of Americans combined to create an unexpected windfall of revenue. Now the question Washington seems to be grappling with concerns who rightly deserves the windfall. It is a question any parent or child can answer. American families, those who created the wealth in the first place, those who need their precious resources to meet future basic needs at home, are rightly entitled to the revenues they have earned, revenues Washington did not plan for to meet the expense of government, from which Washington had budgeted. Now, as the child returning change for the $20, we must hand back the money. We must do it in a broad-based way that is fair to those who provided the funds to Washington in the first place. We must do it through broad-based tax relief that helps individuals and families at all income levels meet real needs. The broad-based tax relief plan that passed out of the Finance Committee with bipartisan support will do just that. It will benefit nearly every working American. It will help restore equity to the Tax Code and provide American families with the resources they need to meet pressing concerns. It will help individuals and families save for self- reliance and retirement. It will help parents prepare for educational costs. It will give the self-employed and underinsured the boost they need to pay for health insurance. It will begin to restore fairness to the Tax Code by eliminating the marriage tax penalty. Let me state exactly how the plan works and why it has received bipartisan support. This tax cut package will provide broad relief by reducing the 15-percent tax bracket that serves as the baseline for all taxpayers to 14 percent. In other words, no matter which tax bracket a family may be in, by cutting the 15-percent bracket, everyone will benefit as they will pay 14 percent on their first portion of taxable income. At the same time, this plan expands the 14 percent bracket, dropping millions of Americans who are now paying taxes at 28 percent down to the lower bracket. For a middle-income family of four, these two changes will mean a tax savings of over $450 a year. And these provisions have already found bipartisan support. To restore equity to the Tax Code, this plan targets another bipartisan objective by eliminating the marriage tax penalty. For too long, husbands and wives who have worked and paid taxes have been penalized by their dual incomes. I have heard of some couples who have actually chosen not to marry because of the tax penalties their marriage would incur. This plan will fix that by giving working married couples the option of filing combined returns, using separate schedules to take advantage of the single filer tax rates and the single filer standard deduction. This is a change that is long overdue. American families have been suffering under the unfair burden of the marriage tax penalty for too long. A simple example shows us why: Robert and Diane are two single Americans who have fallen in love and want to marry. They are not considered wealthy. In fact, Robert is a hardworking foreman at an auto factory. Susan, his fiancee, is an experienced nurse. Each makes roughly $50,000 a year. Now, under current law--when the file their separate tax returns--they each take a personal exemption and the standard deduction, giving them a taxable income of $43,000. After applying the tax rates for singles, they each owe tax of about $8,745. If, however, Robert and Diane follow their hearts--get married and start a family--they realize that their total combined income would be $100,000. Should they marry, they would no longer be considered middle- class individuals, but many would regard them as a wealthy family, and under current law their combined income would be reduced by their two personal exemptions and by the standard deduction for married couples. And here is where they would hit their first marriage penalty problem, discovering that their new standard deduction is significantly less than the combination of the two standard deductions they receive as singles. But the marriage penalty does not end there. In fact, it gets worse. With their combined income, Robert and Diane--now considered by many to be wealthy--would have a taxable income of $87,400. This is where they would hit their second marriage penalty problem. The lowest tax rate bracket for married couples is less than twice as wide as the lowest tax rate bracket for singles. In other words, more of their income would now be taxable at higher rates. The result would be a total tax bill of $18,967, almost $1,500 more than they would have paid as singles. That steep increase would come at a time when they could least afford it, a time when just starting out as a married couple they would be looking to buy a home, raise a family, and save for education. The legislation we introduce today--this broad-based tax relief-- completely eliminates the marriage penalty for Robert and Diane. The Senate Finance Committee bill will allow Robert and Diane to file a joint return, but to calculate their tax liability as if they had remained single. They would each get the benefit of the more generous standard deduction and of the more generous rate brackets. Under this new approach, they would pay a total tax of $17,490 which is the combination of what they had each paid before. This saves them almost $1,500. But in restoring equity to the tax code, we do not stop with the marriage penalty. Another important measure contained in this broad- based tax relief plan is the elimination of the alternative minimum tax for middle-income families--families like David and Margaret Klaassen. Most of us know their [[Page S9461]] story. The Tenth Circuit recently affirmed that under the current law, the Klaassens are required to pay the alternative minimum tax despite the fact that it may not have been Congress' intent to impact families like the Klaassens when Congress passed the AMT. David and Margaret Klaassen are the parents of 10 dependent children. They had an adjusted gross income of $83,000 and roughly $19,000 of itemized deductions relating to state and local taxes, medical expenses, interest, and charitable contributions. Their reported adjusted gross income was $63,500, and with 12 personal exemptions their taxable income was $34,000, resulting in regular tax of $5,100. That would seem fair. And the Klaassens paid the bill. However, the IRS flagged the return and determined that the family was liable for the alternative minimum tax, a provision in the code that was passed to make sure that wealthy individuals and families do not escape at least some liability through tax shelters and other tools they might use to minimize their liability. The IRS determined an AMT deficiency of $1,100. For AMT purposes, the Klaassens were disallowed a $3,300 deduction for State and local taxes. In addition, $2,100 in medical expenses were disallowed because of the 10-percent floor for AMT purposes. And finally, the Klaassens' entire $29,000 deduction for personal exemptions was disallowed because of the AMT. These adjustments resulted in alternative minimum taxable income of $68,000--twice the taxable income that the Klaassens had without the AMT. This simply is not fair. It is not what Congress intended. The Finance Committee bill will help return fairness to the tax code by allowing families to receive the full benefits from their personal exemptions. This will also restore taxpayers' ability to receive their $500 per child tax credits, and other benefits that were intended to be available to middle-income families. These are changes that are long overdue. Again, they have strong bipartisan support. But our broad-based Taxpayer Refund Act of 1999 does so much more. This plan will also help individuals and families find self-reliance and security in retirement through expanded individual retirement accounts, as well as through enhanced 401(k) plans, 403(b) plans and 457 plans. These are critical programs--programs that along with Social Security and personal savings help individuals prepare for their golden years. For savings through the workplace, there are 401(k) plans, 403(b) plans and 457 plans, each of which can be sponsored by different types of employers. For individual savings, there is either the traditional IRA or the Roth IRA. And all these different savings vehicles have different limits on how much individuals can save. However, our current system can do more, and the limitations that we placed on retirement savings in times of budgetary restraints should be reexamined in light of the current surplus. For example, the IRA contribution limit has not changed since 1982. Had it simply been indexed for inflation, it would be almost $5,000 today. What an opportunity that would present middle-class families to prepare for their futures. And that's exactly who benefits from IRAs-- middle- and lower-income Americans. Fifty-two percent of all IRA owners earn less than $50,000. This same group makes about 65 percent of all IRA contributions, and right now they are limited by the $2,000 cap on contributions. IRS statistics also show that the average contribution level in 1993 for people with less than $20,000 in income was $1,500. Clearly, if the average contribution of modest-income taxpayers is $1,500, this demonstrates that many of these Americans want to make contributions of more than the $2,000 limit. This tax relief bill will incrementally increase the amount that people can contribute to IRAs from $2,000 to $5,000. In the area of employer-provided savings vehicles, the current maximum pre-tax contribution to a 401(k) plan or a 403(b) annuity is $10,000. In addition, the maximum contribution to a 457(b) plan is $8,000. Finally, the maximum contribution to a SIMPLE plan is $6,000. These limits are indexed for cost-of-living increases. There has traditionally been a differential in contribution limits among the various types of plans: IRAs having the lowest limits; SIMPLE plans having a greater limit, but not as much as a 401(k) plan; and 401(k) and 403(b) plans having the highest limits, but the greatest number of regulations. Since the IRA limit will be raised to $5,000, the bill will increase limits for 401(k) and 403(b) plans to $15,000 and for SIMPLE plans to $10,000; thereby continuing the differential. The limit for 457(b) plans for government employees will increase to $10,000. There is no question, with rising concerns about security and self- reliance in retirement, that these changes are needed. They will go a long way toward helping individuals and families achieve their economic goals. But the benefits this legislation has for retirement planning do not stop here. There are other provisions that will add new retirement vehicles, provide greater ability to transfer retirement savings between plans, promote retirement plans for small businesses, and simplify the retirement plan system for both employers and employees. One provision will allow employees 50 years old or older to make catch-up contributions to their retirement plans. This will be most important for women, benefiting those who may have started their retirement savings late or who may have taken time off to raise children. Whatever the reason, once these individuals have reached 50, they will be eligible to make additional contributions to their retirement plans that are equal to 50 percent of their plans' maximum allowable contribution. In other words, their total annual contribution could be 150 percent of the normal contribution. Beyond restoring equity to the tax code and helping Americans prepare for retirement, the Taxpayer Refund Act of 1999 will also help individuals and families gain access to health care--particularly those who are self-employed, or who are not covered by their employers--this legislation will enhance the tax deductibility of health insurance. It does this by accelerating the full deductibility for health insurance for the self-employed and by providing the same benefit on a phased-in basis to employees who are not covered by their employers. In detail, the Taxpayer Refund Act of 1999 will provide an above-the- line deduction for health insurance and for long-term care for which the taxpayer pays at least 50 percent of the premium. It will allow long-term care insurance to be offered in cafeteria plans and provide an additional dependency deduction to caretakers of elderly family members. To benefit small businesses, this legislation will accelerate the 100 percent deduction for health insurance of self-employed individuals beginning in 2000. To help make education more affordable for families and students, the Taxpayer Refund Act of 1999 strengthens educational savings opportunities by making college tuition plans tax-free. In other words, families--including grandparents, aunts, and uncles--can invest their after-tax income into a child's educational future. And when that money is used by the child, it will be tax-free on buildup and withdrawal. This legislation also increases student loan interest deduction income limits for single taxpayers by $10,000 and adjusts the beginning income limits for married couples filing joint returns to twice that of a single taxpayer. Beyond these important changes, this tax relief plan promotes education by making deductions for employer provided assistance permanent, and by allowing employer assistance to be used for graduate-level courses. Again, these are necessary changes--changes that will help families meet their priorities. Another important component of this tax relief package involves its treatment of estate and gift taxes. Here, our objective is to protect families, farmers, and small business men and women who have worked their whole lives to build a future for their posterity. Members of the Senate Finance Committee can recall the heartrending testimony of Lee Ann Goddard Ferris whose 71-year-old father died in a tragic farming accident in Lost River Valley, Idaho. For more than 60 years, her family had worked the land. They owned over 2,600 acres--2,600 acres that had been purchased through [[Page S9462]] decades of toil. In Lee Ann's own words, ``My father's death was the most devastating event that any of us has ever gone through. The second most devastating event was sitting down with our estate attorney after his death. I'll never forget his words. The estate attorney said, `There is no way you can keep this place, absolutely no way.' '' Still suffering from her father's accidental death, Lee Ann couldn't believe what she was hearing. ``How can this be?'' she asked. ``We own this land. We have no debt! We just lost my father, and now we are going to lose the ranch?'' According to Lee Ann, ``Our attorney proceeded to pencil out the estate taxes . . . and we all sat in total shock.'' Where is the fairness, Mr. President? Here a family works for more than half a century to build a ranch, only to hear that estate taxes would rob them of their legacy, their heritage, their home. ``This tax situation has put a tremendous strain on my mother,'' Lee Ann testified. ``Mother worries constantly and has had many sleepless nights. I don't know if any of you could ever imagine how hard it has been on her. She doesn't have her husband anymore. She worked hard her whole life and gave up a lot of material things to put her after-tax dollars back into the land to pay it off. Now, unless this tax law is changed or abolished, she will have to leave her home, which she loves, and our family will not have a base from which to carry on.'' With this legislation, Congress will do something to protect these families. The Taxpayer Refund Act of 1999 turns the unified estate tax credit into a true exemption, and it increases the exemption from $1 million to $1.5 million. This legislation also significantly reduces the actual estate tax rate, and it increases the annual gift tax exclusion from $10,000 to $20,000 by the year 2006. Each of the measures I have outlined as part of the Taxpayer Refund Act of 1999 is vitally important to the well-being of all families; each is a key component of this tax relief package. Again, our purpose is to be broad-based--to provide the most meaningful tax relief possible--to do it in a way that families can meet their individual needs--and to present a plan that can receive strong bipartisan support. With this major tax relief package--$792 billion over 10 years--we meet all of these criteria. And, in the process, we leave over $500 billion to meet pressing concerns here in Washington, such as preserving and strengthening Medicare. We are able to do all this and to keep the budget balanced for a simple reason: the work, the investment, and the job creation achieved by Americans everywhere have succeeded in creating long-term economic growth. It is not right that the reward for this success is that today our taxes are the highest percent of our gross national product than at any other time in postwar history. These same Americans--the authors of this success story--are rightful heirs to the wealth they are creating. After paying for the Government programs for which Congress has planned and budgeted, the change must now be returned to the taxpayer. This legislation not only returns the change by cutting taxes, it increases access to healthcare; it makes education more affordable; it helps taxpayers prepare for self-reliance and retirement; it keeps their home, farm, and family business safe from death taxes. These are objectives that are shared by everyone. They are objectives that can be embraced by Senators and Congressmen on both sides of the political aisle. They are objectives that can be made realities by being passed into law. Mr. President, I reserve the remainder of my time. I yield the floor. Mr. MOYNIHAN addressed the Chair. The PRESIDING OFFICER (Mr. Burns). The Senator from New York. Mr. MOYNIHAN. First, I congratulate our revered chairman, Senator Roth, for the manner in which he has presented the Taxpayer Refund Act of 1999, for the manner in which he brought our committee together in consultation and deliberation, and who, indeed, produced a measure which was bipartisan. It has many elements which would commend our support across the aisle--certainly mine. But it is not to that issue that I will speak today, but to the question of the doctrine. I would like to put this debate in a doctrinal perspective, which is to say, the development in the 1960s which holds that the only way to restrain the growth of Government is to deliberately create a protracted fiscal crisis. This begins, of course, with a view of Government that is so very different from what traditional conservatism would hold. It is a new and radical idea. I will discuss how it emerged. But first I will cite an article from this morning's New York Times op-ed page by Gertrude Himmelfarb, one of our preeminent historians and an avowed conservative. She writes so much of what goes on. She says: In their eagerness to do away with the nanny state, some conservatives risk belittling, even delegitimizing, the state itself. A delicate balancing act is required: to dismantle or diminish the welfare state while retaining a healthy respect for the state itself. For good government is the precondition of civil society, providing a safe space within which individuals, families, communities, churches and voluntary associations can effectively function. But, as I say, the debate on this tax bill is not just a debate about tax policy; for it is far less a debate on taxes than a debate on economic and budget policy and the large understanding of the role of Government in our society, the role of Government in an advanced market economy. At the outset of this debate, we should be mindful of some painful mistakes we have made in the not too distant past and which we evidently mean to repeat. In August of 1993, just 6 years ago, we began to correct a colossal budget mistake. The President signed into law a deficit reduction act without precedent in size that dramatically changed the budget outlook--turning deficits of $290 billion a year, as far as the eye could see--to anticipate my friend David Stockman--into the surpluses we now project of $200 billion and more--surpluses on budget--leaving aside the Social Security revenue stream. At the time of its passage, it was estimated that the 1993 legislation, the Omnibus Budget Reconciliation Act of 1993, would reduce the deficit by $505 billion over the 5 years, 1994 through 1998. The Office of Management and Budget, in its fiscal year 2000 edition of ``Analytical Perspectives,'' estimated that the total deficit reduction has been more than twice this. I quote: ``The total deficit reduction has been more than twice this--$1.2 trillion.'' That suggests the extraordinary quality of that moment when we stood on this floor and waited for the final vote that would allow the Vice President to cast the determining vote, 51-50. The act was passed without one Member of the Republican Party of either House of the Congress. In 1997, we had a more bipartisan effort in the Balanced Budget Act of 1997. Again, we see larger revenue benefits than were originally anticipated. As for the fiscal year that ends this September, the OMB projects a budget surplus of $99 billion and the Congressional Budget Office projects a surplus of $120 billion. With the end of the fiscal year just 2 months away, we can expect, with great confidence, a budget surplus for the second consecutive year. What explains this huge gap, this pleasant surprise between budget expectations and outcomes in recent years? As is often the case in economic analysis, there are interrelated factors which cannot always easily be disentangled but which provide clues. To begin with, we appear to be in what has been described by our now- Secretary of the Treasury, Lawrence Summers, at his confirmation hearing as a ``virtuous cycle.'' I put a question to him, and he responded: Senator, I think it very important that, as you suggest, we do reduce the national debt by the full amount of the Social Security surpluses, which would continue this virtuous cycle by reducing interest rates, which makes possible more growth, which makes more tax collections, which makes larger surpluses, which makes lower debt, which reduces interest rates, which starts the cycle going again. That is an enormously important process. The Honorable Robert Rubin, who was Mr. Summers' distinguished predecessor, often spoke of a term which is not in ordinary usage, but it is a term [[Page S9463]] known by Secretaries of State and by persons who deal in securities, in markets. Mr. Rubin would use the term the ``risk premium on interest rates.'' That is to say, the extra charge if a person is lending money, if they are not certain of the fiscal stability of the Federal Government, in this case, and, thence, of the economy at large. It was, first of all, this risk premium that we broke in 1993, the fear that down the line, if these deficits of $290 billion in the previous year went on and on--the debt had quadrupled over the previous twelve years--that the day would come, again, to use an economist's term, when we would ``monetize'' the debt through inflation. We would get rid of it by wiping out the value of the dollar. That is that premium, that risk premium on interest rates. We began to see this effect. I was here on the Senate floor on February 10, 1995. I remarked: . . . the economy performed better than expected, in part, because Congress adopted a credible deficit reduction plan. In part, also, because, as Secretary of the Treasury Rubin remarked to the Finance Committee this Wednesday [that is, Wednesday, February 8, 1995], the deficit reduction program squeezed the risk premium on interest rates out of real long- term interest rates. If financial markets do not believe the deficit is under control, they will levy a risk premium on capital lending. In 1993 and 1994, we clearly persuaded the markets that we were finally serious. From a slightly different perspective, the Congressional Budget Office also took note of the importance of reducing interest costs. For most of the post-World War II period, interest costs have been the second or third largest item in the budget, behind Social Security and national defense. In commenting on this, the CBO said, of the effects of that 1993 legislation: Remarkably, the biggest single change lies in . . . interest--now projected at 3.3 percent of GDP in 2003 compared with 4.5 in the earlier report, a testimonial to the efforts to rein-in the debt's growth [which had taken place]. For the record, CBO, in its latest budget update issued earlier this month, now projects interest costs at just 1.7 percent of GDP in the year 2003, a reduction by half from its September 1993 projection when we had just passed that legislation of that year. Outlays for net interest peaked at $251 billion 2 fiscal years ago. They are now projected to decrease to $222 billion, and if we can just keep from squandering the surplus, we will repay the debt incurred in those years and that interest cost will again go down, almost to disappear. Now, I do not mean to suggest that the budget outlook is solely due to changes in budget policies. Factors other than deficit reduction are at work, making for a strong, sustained economic expansion. The economy brings higher receipts and lower outlays for unemployment and other such programs that automatically expand in a recession. Last week, in testimony before the House Committee on Banking and Financial Services, Alan Greenspan, our world-renowned Chairman of the Board of Governors at the Federal Reserve, provided some insights into what is sustaining this period of remarkable growth. Observing the absence of production bottlenecks, shortages, and price pressures that inevitably occur in an expanding economy, he noted a number of the possible explanations for the good fortunes involved; notably, just-in- time inventories and such like; but they have come about fortuitously at a time when the deficit was under control, deficits were declining, and the prospects were much better all around. The question is, Can we not keep this? Can we not sustain the extraordinary economic expansion on which we have embarked? Unemployment is now at 4.3 percent. May I say, as someone who in the Kennedy administration was Assistant Secretary of Labor for Policy Planning, we would have said, sir, that a 4.3-percent unemployment rate was unsustainable. It would lead to an outbreak of inflation. Yet here we have it, 4.3 percent, real economic growth at 4 percent. We are in the ninth year of an expansion, and we have no inflation. This is something that is going to require that the economic textbooks be rewritten. But we have done it, and a lot of it comes about from what we did on the Senate floor in August of 1993 and which our great hope on this side of the aisle is that we not undo in this short time that has passed. Alan Greenspan, in that testimony, was very clear. He said tax cuts are to be reserved for recessions. That will be the most effective means we can have to regenerate the economy and keep the long-term growth path moving high. The New York Times editorialized this past Sunday, on the Oracle of the Fed: Mr. Greenspan is treated reverently on Capitol Hill, but it appears that the Republicans do not want to heed his advice to run a surplus and pay down the national debt, while saving a tax cut for when it is needed. How come this sudden resurgence just now, when it would seem so clear that a quite opposite policy has had such very desirable effects? Well, sir, I go back, as I said I would earlier, to matters of political doctrine. We don't talk much of doctrine on the Senate floor, but there are times for it. In 1995, for example, we debated a constitutional amendment requiring a balanced budget. I presented a series of papers in which I tried to describe the idea of ``starving the beast,'' as the term was; that is to say, depriving the Federal Government of the revenues needed, putting it simply, to govern. The argument is quite simple. It goes back to the 1970s when a number of theorists on the conservative wing of the Republican Party determined that it was not going to be possible for the Federal Government ever to be controlled in its size as long as it had the revenues to sustain, or even to increase, that size. And so it came about that a policy doctrine developed which argued that deficits, if sizable enough, had acquired a new utility--deficits that had presumably been the horror of conservative financial thought now became something attractive because they could be used to reduce the size of Government itself. E.J. Dionne, Jr., in an op-ed article in yesterday's Washington Post, clearly recognizes this idea is still afoot. He writes: The long-term goal, about which Republican leaders are candid, is to put Government in a fiscal straitjacket for years to come. In fairness, I think this is more to be encountered on the House side than in this body, but it still would be the cumulative effect, in fact, of the tax cuts that have been proposed in both bodies. I can remember the onset of this. In the late 1970s, it was clear. One could write about it, and one did. Then came the administration of President Reagan in which, in effect, the policies were carried out--or they began to be carried out. In a television address, 16 days before his inauguration, President Reagan said: There will always be those who tell us that taxes could not be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice or breath, or we can cut their extravagance by simply reducing their allowance. There you have President Reagan in his most agreeable and heart- warming quality. He thought this could be done because he thought there would, in fact, be reductions in Government. There were none. Moreover, very shortly, his economic advisers realized the economic analysis they had used to project revenue increases from tax reductions weren't going to work, and they faced a prospect of deficits of, as David Stockman once said, ``$200 billion as far as the eye can see.'' Haynes Johnson, in his superb book, ``Sleepwalking Through History: America Through the Reagan Years,'' writes: The Reagan team [not the President] saw the implicit failure of supply side theory as an opportunity, not a problem. Now, this we have to absorb. They saw the failure of supply side theory--which said that the more you cut taxes, the higher the revenues will be--as an opportunity, not a problem. The secret solution was to let the Federal budget deficits rise, thus leaving Congress no alternative but to cut domestic programs. But in the end, they were not cut. Some grew. There was a view, and certainly a respectable one, that defense had to be increased. We now, incidentally, suggest there be a 20-percent reduction in defense spending over the next 10 years. The Reagan administration increased defense spending, and they had a perfectly good argument for doing that-- [[Page S9464]] but not simultaneously with huge tax cuts. There, very shortly thereafter, had to be tax increases. But the course was set for the 1980s and the deficit doubled, from under a trillion dollars to about $3.7 trillion now in publicly held debt. So I rise again to say, as I have done before, that what we did in 1981 with that tax cut--for which I voted because the Office of Management and Budget, seeing our huge inflation continuing, projected surpluses in the future--was so ruinously wrong. We now have a debt that will level off at about $6 trillion, while the debt held by the public will fall by $2 trillion, or more, depending on the size of this tax cut. The other important reason, which I will close on, is that the 1997 balanced budget amendment left us with what the Washington Post this morning calls an ``accounting illusion,'' that we can reduce the spending on domestic programs by 20 percent in real terms over the next 10 years. The illusion is coming apart already. Just the other day, the House of Representatives determined that the money to pay for the decennial census in the year 2000 required an emergency appropriation outside of those limits. We have had that census for many years. That census is provided in the Constitution. It has taken place every decade since 1790. All of a sudden, we have made it into an emergency. In this morning's Washington Post, our former majority leader, our beloved colleague, Robert C. Byrd, has an article called ``Time for Truth In Spending.'' He said: What we need to jettison is the political rhetoric. What we need to impose is truth in spending. And he set down a few principles. He said: First, watch our investments carefully and manage them prudently. We should continue our best efforts to manage the economy and watch out for inflation. Second, do not spend our money before we make it. Before the surplus is spent, whether on tax cuts or continuing important priority programs, wait for the money to be in the bank. We are proposing to spend a surplus, sir, that does not exist. Third, pay our debts. The United States should take advantage of this opportunity to retire the national debt. Fourth, cover the necessities. Congress should not shortchange the Nation's core programs, such as education, health care, veterans, and the like. Fifth, put aside what we need for a rainy day. Congress should take steps to reserve the Social Security and Medicare surpluses exclusively for future costs of those programs. Sixth, don't go on a spending spree. Resist the temptation to create costly new government programs. Finally, take prosperity in measured doses. Congress should reduce taxes without pulling the rug out from under projected surpluses. I can think of no wiser counsel. In that regard, and with great respect for the chairman of the committee, I would suggest that the budget reconciliation process was devised to expedite consideration of deficit reduction measures. The bill before us uses those same expedited procedures to secure enactment of a deficit-increasing measure. Section 313(b)(E) of the Byrd rule provides that any provision in any reconciliation bill which would decrease revenues used beyond the budget window--in this case beyond the year 2009--may be automatically stricken from the bill upon a point of order being raised. Section 1502 of the bill before us provides for permanent continuation of tax cuts in the years beyond 2009, causing revenue losses of hundreds of billions of dollars. Accordingly, sir, at the appropriate time, I intend to raise the Byrd rule point of order against section 1502 of the bill. I thank the Chair for his cordial consideration of my remarks. I see my friend, the chairman of the Budget Committee, is on the floor. I yield the floor. Mr. DOMENICI. Mr. President, I ask the distinguished chairman of the Finance Committee if he will yield up to 20 minutes. Mr. ROTH. I am happy to yield to the distinguished chairman of the Budget Committee up to 20 minutes. The PRESIDING OFFICER. The Senator from New Mexico is recognized for 20 minutes. Mr. DOMENICI. Mr. President, before my friend, Senator Roth, leaves the floor, let me say to the Senate that Senator Roth has come through again for the Senate and for the people of this country. His tax bill is clearly one that recognizes fairness, that puts the money where it ought to be put, gives back to the American people some of their money, and it does it in a way that clearly is prudent and responsible. It will be very difficult when we are finally finished explaining this bill for the President of the United States to veto this bill. We are going to talk about that a little later in the day. Since he has challenged us, we will tell the American people loud and clear what he is going to be doing when he vetoes this bill. Mr. President, I rise today to discuss the budget blueprint that Congress has passed for the first decade of the 21st century. It embodies three major things: Social Security, first and foremost. Much will be said about it. But nobody can deny that with this refund to the American taxpayers, we have left intact every single penny of surplus that belongs to the Social Security trust fund, and we will even debate on the floor locking it up so it is very hard to spend. The budget before us and that we adopted demanded that 100 percent of all the funding that Social Security recipients will need will be exclusively set aside for that purpose. Second, it sets aside enough money to meet the demands of Medicare for the next 10 years. Medicare is fully funded under the budget that was adopted by the Congress this year. That means there are no cuts. The program is fully funded for the decade. As a matter of fact, the President cut Medicare in the first 5 years of his budget. We did not do that. Then we would have a rainy day fund to implement any Medicare reform that Congress might enact. I will allude to that soon. Third, after all the bills of the decade have been paid, after Social Security recipients have their money set aside, after we have funded every penny anticipated for Medicare, and have an ample rainy day fund available, if we want to do something on prescription drugs, then we would send back the excess to the American taxpayers--to the working families--and those in middle- and low-income brackets will get a very substantial tax reduction. The budget resolution recognized economic conditions now, and the projected economics including the planning for an inevitable recession that might occur in the future. It outlined a decade-long, phased-in tax cut. Only a very small tax cut was envisioned in the first 2 years of this budget timeframe because the economy is already operating above optimum capacity. We want to keep inflation subdued and interest rates low. The budget expected Congress to pass a tax bill that was very small in the first 2 years and grew as the decade wound its way through into the next millennium. I congratulate again the chairman of the Finance Committee and the members of that committee for producing the kind of tax cut for our budget for the 21st century. I think it is appropriate, prudent, and fair. Chairman Roth has produced a tax cut that starts small and ends up larger, reflecting economic conditions. He has produced a tax cut that targets help to those who really need it--those with children in school, those with elderly and ill parents who need long-term care, those who are trying to save for their own retirement instead of Government reliance, and many more items of that nature and of that significance. Yes. The same old class warfare arguments like tired, defeated soldiers of past wars have begun to stagger across the Senate debate again--and they will be here before us again--that we are only helping the rich. We are told we must spend the surplus. That is essentially the argument against our tax refunds--we must spend the surplus. We must grow Government. It is the same old debate. One party wants to give money to programs. And we want to give money to the people. That is exactly the way it has been, and that is exactly the way it is on this floor. I believe there is a degree of arrogance in those who argue against tax cuts. They say to working families: I [[Page S9465]] know what to do with your money better than you do. Give it to me so I can spend it. Can you imagine the arrogance of that position? They have grand schemes now with the surpluses. Republicans, through their dedicated efforts, and Dr. Greenspan and his fantastic ability to manage the money supply in our country, and to control interest rates, have given the Nation this enormous surplus. The President of the United States thinks they have the money to implement new, grand schemes and to grow government. That is the issue. A government big enough to give you everything is a government that takes everything away in the form of high taxes. I didn't originate that quote. I can't imagine and I can't fathom anything more frightening to the average taxpayer than the sight of a grand government schemer rushing toward a $1 trillion pile of extra taxpayer dollars. Republicans say it is the best of times for tax cuts. Democrats say it is the worst of times. Everyone quotes Dr. Alan Greenspan. The Taxpayers Refund Act before the Senate is the best of plans. It lowers rates. It encourages savings. It eliminates the worst of a bad Tax Code. It eliminates the marriage penalty for many Americans. It begins the death of a death tax. It ends the alternative minimum tax, to rescue the full benefit of child care, foster care, education, and other needed tax credits for families who otherwise unavoidably would end up in the alternative minimum tax brackets. They are sick of this. They are worried about it. You will get more mail on this issue because it is grossly unfair to give credits and then take them away--to run across the land saying: We are delighted to have given you a credit for your children's education only to find that middle-income Americans by the hundreds of thousands are falling into this alternative minimum tax trap. I say: Tax cuts, if not now, when? The Democrats say not now. I say: If not tax cuts now, then what? The President's answer is: Spend it all. It does not matter what he says he wants to spend it for; he wants to spend it all. Can you imagine if we did not have this surplus? What will the President be doing--asking for tax increases to pay for these programs he thinks we need? I doubt that. I doubt that very much. I support prudent tax relief, and I must say this is prudent tax relief. It is synchronized to our business cycle and the condition of the economy. It improves our tax policy and moves us toward a system that taxes income that is consumed instead of income that is earned. It moves America toward a tax system that allows business to deduct investments in the year they are made. It encourages investment in retirement, education, and health care. Congress' budget allocates 75 percent of the projected surplus over the next 10 years for paying down the debt and long-term priorities. If the surplus were a dollar, two quarters would go for Social Security, one quarter for high-priority spending--education, research, and defense--and the remaining quarter for tax cuts. Without tax cuts, who would spend the surplus? Not the American people. The Government in Washington would spend it. Without tax cuts, we will ``grow'' Government. There can be no denial of that. The President plans to grow Government substantially rather than give back anything to the American people. He now says he would veto a $500 billion tax cut. What about $200, Mr. President? That means giving the American people back about 6 cents of the surplus, at $200. Can we afford that? I believe we can afford 25 cents out of every $1 of surplus. Democrats say the question is: tax cuts versus Social Security. Tax cuts or Medicare. Tax cuts or domestic spending. Tax cut versus debt reduction. The right answer: It is not ``this'' versus ``that.'' The correct answer is, we can do all of the above. The size of the surplus lets us do it all. That is the reality. Save Social Security, reform Medicare, provide adequate funding for domestic and defense spending, pay down the debt, and give the American people who earned the money a decent tax cut. Do that in a manner that phases in, which will probably be very complimentary to the American economy. Even with the tax cuts and refunds we are talking about, our surplus will steadily climb as a share of GDP and our national debt will ultimately be paid off, falling dramatically from 40 percent of GDP this year to only 12 percent in 2009. Under the proposal we make, the external debt--the debt to the public--will go from 40 percent of the gross domestic product to only 12 percent by the end of the decade. I am amazed the President's political advisers allege this budget is reckless. Nothing is reckless about steadily rising surpluses and paying down our debt by more than 50 percent over the next decade. In fact, our plan lowers the level of debt more than the President's plan. Some may wonder why. That is because the President spends heavily in the first 5 years. We have tiny tax cuts. Thus, he incurs more debt than we do at that time, and he cannot make it up in a decade. I have been amazed by the administration and other opponents who claim our tax cut will lead to higher interest rates because the economy will overheat. That is just not true. The Fed is most concerned not with the economy as it is today but what it will be in 18 months and thereafter. Our tax cut is slow, a total of $28 billion over the years 2000 and 2001. I repeat, if they are worried about stimulus, it is $28 billion in tax cuts. It is almost unrecognizable in terms of impact one way or the other on the American economy. It saves 92 percent of the projected surplus during these first 2 years. As a result, our budget surpluses will rise sharply from 1.4 percent of the gross domestic product to 2 percent by 2001. It is clear that the budget plan is not expansionary, which some people now talk about. It truly is not. Ask any economist to look at it in its true sense, phased in as it is, and ask if it is an expansionary budget. I cannot imagine this tax bill would be defeated on such a preposterous economic observation. In House testimony last week, Chairman Greenspan cautioned against expecting any rapid stimulus as a result of this tax relief package. I can assure the American people that Congress' tax plan will not overheat the economy. As a matter of fact, Chairman Greenspan cautioned against expecting a rapid stimulus as a result of this package, given the long phase-in of the tax cuts. I can anticipate the response of my Democratic colleagues who are likely to say: If your plan is so ideally suited for the economy, why did Alan Greenspan argue we should let surpluses run for a while before cutting taxes? Listen carefully. I have two responses. First, I believe the Congress is doing exactly what the Chairman advised. Our budget plan delivers only $28 billion in tax cuts over the next 2 years. Most of that relief is scheduled to arrive only after surpluses have mounted on a consistent basis. Second and more important, Chairman Greenspan is advising what policies would be best in an ideal world. However, he is fully aware that ideal may not be politically feasible. Let me read a quote he made last week which I think was insightful: There is nothing that I can see that would be lost by allowing the process to delay unless, as I have indicated many times, it appears that the surplus is going to become a lightning rod for major increases in outlays. That's the worst of all possible worlds from a fiscal policy point of view. That, under all conditions, should be avoided. I have great sympathy for those who wish to cut taxes now, to preempt the process. And indeed if it turns out they are right, I would say moving on the tax front makes a good deal of sense to me. The worst of all fiscal policies will materialize if the President gets his way. The President proposes to increase spending by more than $1 trillion over the next 10 years. Most of this new spending would go to create 80 new, often repetitious, often local-government- prerogative-infringing Government programs, with services already being handled at the local or private sector. The President's spending proposals are the worst of all proposals from the standpoint of what is good for America during the next 2 years. That time horizon must concern the Federal Reserve. The President proposes to use $53 billion of the surplus for new spending. It [[Page S9466]] is nearly twice as large as our tax cut in the next 2 years. Thus, the President's plan would be far more stimulative than the Congress' measured tax cut. I ask my colleagues on the other side of the aisle if they are worried about interest rates rising because the economy is overheating, why support the President's Government-growing agenda over tax cuts? The money is there. We have a surplus. The last question is the $792 billion question: Who is going to spend it? When faced with the President, who wants to spend the surplus, Congress has no choice but to cut taxes. However, we have to be careful. While we are still saving the majority of the surplus for shoring up our long-term fiscal health, we must be careful in that regard. To sum up, I leave two messages today. Our budget is prudent, and it is synchronized for where we are in the business cycle. Be skeptical of the administration's criticism of our tax plan. They want to grow Government well in excess of Congress' tax cut. Most of the spending has nothing to do with Social Security or Medicare. This is what should most concern the American people when faced with the surplus, excluding Social Security funds, and I have already indicated what will happen to them. The Republicans want to give it back to the people who earned it and worked so hard. The big question then is, Who is going to spend the surplus? With tax cuts, the answer is you; without tax cuts, the answer is big government. I yield the floor. Several Senators addressed the Chair. The PRESIDING OFFICER. The Senator from Nevada. Mr. REID. Mr. President, the minority yields 10 minutes to the Senator from Minnesota. The PRESIDING OFFICER (Mr. Bunning). The Senator from Minnesota. Mr. WELLSTONE. Mr. President, 3 weeks ago, President Clinton visited some of the poorest communities in our country and he spoke eloquently of our obligations to America's most disadvantaged children. Now, with our economy booming and record surpluses, we have a chance to do better for all of our children. This budget fails America's children. I want to speak as loudly and boldly as I can about this reconciliation bill, first about the Republican proposal, and then about what we are proposing as Democrats. If you look at the non-Social Security surplus, about three-quarters of it really assumes cuts in future domestic spending. The Republican proposal on the floor does not restore any of these cuts. In fact, they add another cut of roughly $200 billion. The Republican plan would require a 38-percent cut in domestic spending in the year 2009, and the Republican tax bills are loaded with corporate welfare for multinational corporations, banks, insurance companies, Wall Street securities firms, and tax giveaways for the wealthy. That is a disappointment. It is a very harsh budget. But even the Democratic plan fails to fully fund or restore these cuts. Senate Democrats have reserved $290 billion of the surplus to soften the blow on our discretionary priorities like education, but we still allow cuts of several hundred billion dollars. In our plan, with our $300 billion of tax cuts, we do not make up the assumed cuts in our domestic priorities either. Since defense spending will go up, and there will be spending for transportation which also will go up significantly over the next 10 years, our other domestic priorities will be squeezed even more. How can we, as Democrats, say we are for addressing the needs of America's children, for fighting poverty, for fully funding Head Start, for equal access to quality education, for helping working families afford the cost of health care and child care, for cleaning up the environment, for community policing, and for veterans' health care, when we are assuming domestic spending cuts of several hundred billion dollars? Something has to give. To use the old Yiddish proverb, you can't dance at two weddings at the same time. I do not understand this. There are 14 million children who are poor in our country--14 million. There are 6.5 million children who live in households with income of one-half the poverty level. Close to one out of every four children in our country under the age of 3 are growing up poor. Close to 50 percent of children of color under the age of 3 are growing up poor. And now we are being told by both parties--the Republican Party much more so than the Democratic Party--but both parties, that we cannot afford to renew our national vow of equal opportunity for every child? Where in these proposals do we, as a Senate representing the United States of America, live up to our national vow of equal opportunity for every child? Right now, in Early Head Start, for children age 3 or younger, 1 percent of the children who could be helped and given a head start are able to get this assistance. We are funding this program at a 1 percent level. For the Republicans, you have $800 billion of tax cuts. You make no investment in any of these areas. Your budget and your proposal will lead to Draconian, really brutal cuts in these programs. Not only will we not be doing anything to make sure poor children have a chance in America, to make sure that there is equal opportunity for every child, but the proposal of the majority party will be making cuts in these programs. And to the Democratic Party, my party, we have a better proposal. It is less harsh. But there has to be some connection between the convictions we profess and the budgets we propose, and a willingness to fight for them. At some point, the chasm between our words and our actions becomes too wide. If we do not fight hard enough for the things we stand for at some point, we have to recognize we really do not stand for them. We really do not stand for them. I cannot believe with record economic performance, that the Republican Party can come to the floor of the Senate with a proposal that calls for $800 billion of tax cuts, most of them flowing to our wealthiest citizens, but with a proposed 38-percent cut in Head Start, child care, community policing, and cleanup of the environment. And to my party, I cannot believe the Democrats come out with a proposal where we, too, are essentially proposing cuts in some of these key domestic priorities. Why did we become involved in politics? What do we believe in? What are our values? Can we not at least make some investment to make sure every child, no matter the color of skin or income of family, urban or rural, or boy or girl, will have a chance to reach her full potential and his full potential? What ever happened to the Democratic Party's strong commitment to equal opportunity for every citizen? I do not see it in these proposals. We ought not to be talking about tax cuts that benefit the most affluent citizens, when we cannot even live up to our national vow of equal opportunity for every child. I hope we will do better as we move forward in this debate. I yield the floor. The PRESIDING OFFICER. The Senator from Nevada. Mr. REID. The Senator from West Virginia is yielded 45 minutes. The PRESIDING OFFICER. The Senator from West Virginia. Mr. BYRD. Mr. President, recently both the Office of Management and Budget and the Congressional Budget Office released their so-called ``Mid-Session Reviews'' on the state of the Federal budget. Both of these new forecasts project even better performance for the nation's economy in the coming ten years than they had predicted just a few months ago. In fact, the Congressional Budget Office projects unified budget surpluses totaling just under $3 trillion over the next ten years. Of the $3 trillion, approximately $2 trillion results from surpluses being paid into the Social Security trust fund. The remaining $1 trillion--or $996 billion to be exact--is what is called the ``on budget'' surplus. That is the non-Social Security trust fund surplus. The question before Congress is what do we do with this good news--our government is about to be awash in money, if these projections come true. Before we get too far along with our grandiose plans for massive tax cuts, a dose of reality is in order. Sometimes a dose of castor oil is in order. We may not like it so much, but it has to be taken. So a dose of reality is in order. [[Page S9467]] These future budget surpluses are, of course, based on ``pie in the sky'' projections. But I don't think ``pie in the sky'' is quite right. The projections are so far out into the Stratosphere--more than a decade away--that we would need the Hubble Telescope to track them down. Mr. President, the fact is that they have not yet occurred, the money is not yet in hand--and may well never occur--for a number of reasons. First, one needs to keep in mind that budget projections for even 1 year are likely to be missed by a substantial margin over the normal 5- year period of congressional budgets. Estimates of deficits and surpluses have been off by billions of dollars. This year, for the first time, instead of 5-year budget projections, we have 10-year budget projections upon which all of the surpluses are being forecast, and upon which tax cut proposals by Democrats, Republicans and the administration are being based. Does anyone really believe that these 10-year projections will be any more accurate than the usual 5-year numbers? In looking at these incredible amounts of surpluses and tax cuts, I would think that one needs more of an astrologer than an economist to read the tea leaves and to come up with these figures. Mr. President, consider these facts: CBO's estimate of revenues over the period 1980 through 1998 was off by an absolute average of $38 billion per year. The estimates were off by an average of $38 billion per year during the period 1980 through 1998. That is a pretty fair piece of change! This isn't just chicken feed. Some years, the estimates were closer to the projection than other years, but, as I say, the average difference one way or the other, was $38 billion per year. Similarly, for outlays, the projections over the past two decades were off the mark by an absolute average of $36 billion per year. The resulting deficit projections by the Congressional Budget Office over the period 1980 through 1998 were off by an absolute average of $54 billion per year. Extend that figure over 10 years, and that is what we are doing now in this bill, and we can see that $540 billion of the $1 trillion projected surplus could melt away faster than last year's snowball. So what about these latest ``rosy'' forecasts of budgetary surpluses for the next 10 years? It is obvious that we need to be very careful when relying on such projections to make decisions about whether and if we can afford a tax cut. CBO officials would be the first to tell you that they have widely missed the mark in their budgetary forecasts, as would the folks at OMB. No one on the face of God's green Earth can predict accurately for even 1 year, much less for 5 or 10 years, what revenues will come into the Treasury, or what expenditures will go out of the Treasury. That is because no one knows what the unemployment rate will be next year, or the inflation rate, interest rates, whether there will be a recession or the duration or virility of such recession. In virtually every CBO report, the following cautionary footnote can be found: ``Cyclical disturbances could have a significant effect on the budget at any time during the projection period. A recession would temporarily push down taxable incomes, thus reducing federal revenues. A recession would also cause a boost in spending for unemployment insurance and other benefit programs. CBO estimates that a relatively mild recession (similar to the one in the early 1990s) that began this year could reduce the projected surplus by $55 billion in 2000.'' Mr. President, there is no reason to believe that CBO's current forecast of the budgetary picture over the next 10 years will be any more accurate than have been its previous forecasts over the past two decades. With that dose of reality in mind, let's now turn our attention to the Republican tax cut proposal now before the Senate. Earlier in my remarks, I noted that the Congressional Budget Office projects an on- budget surplus of $996 billion over the coming 10 years FY 2000-2