Cass Ballenger

Mr. BALLENGER

Mr. BALLENGER. Once again, Mr. Speaker we find ourselves debating the renewal of most-favored-nation status for the People's Republic of China. It has become an annual exercise, one that exposes the deep division in our Nation over our relationship with the most populous nation in the world. I am reluctantly going to vote against the resolution of disapproval, House Joint Resolution 79, authored by my esteemed colleague from New York, Mr. Solomon. I am reluctant because China is governed by an authoritarian regime which represses its people and brutally cracks down on dissent. I, like so many of my colleagues, want to take action to force China to change, to become democratic and to ensure that all the people of that nation have the opportunity to participate fully in economic social, political, and religious freedom. But, how do we accomplish this? Will terminating MFN status achieve these ends? I must reluctantly conclude that it will not. I believe that the United States can do more to advance the cause of human rights and foster religious, economic and political freedom if we continue to engage the Chinese in economic cooperation. Social freedoms--like freedom of religion--are a direct result of economic liberalization. If we remove all of China's trade privileges, we are not only isolating that country, but we are losing any opportunity to improve human rights there. Let's not forget that many of the students that took to Tiennamen Square to protest against their Government were educated in the United States. Termination of MFN status would curtail the education of Chinese students in the United States and thus hinder future democratization in China. I also believe that by terminating MFN we will hurt the American worker and consumer. Perhaps as much as $9 billion in United States exports to China might be affected by removing MFN privileges. In one company alone in my congressional district, 500 jobs would be at risk. However, we must continue to pursue human rights in China and around the globe as an important foreign policy objective. Currently, some of my colleagues are drafting positive steps to influence more directly the domestic situation in China. An expansion of Radio Free Asia and other democracy-building efforts in China are among United States policy options. In addition, Congress is discussing the restriction of visas for Chinese nationals involved in Human rights violations and/or arms proliferation. It is my believe that these aggressive efforts to promote human rights are more likely to encourage constructive change in China. Mr. Speaker, we must stay engaged with China to effect the economic and political situation there. Terminating MFN status will only be a useless gesture that will hurt the American worker. I urge my colleagues to vote down House Joint Resolution 79.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, on Friday, June 20, I missed rollcall votes 221, 222, 223, and 224. Had I been present I would have voted ``no'' on rollcall vote 221; ``aye'' on rollcall vote No. 222; ``aye'' on rollcall vote No. 223; and ``aye'' on rollcall vote No. 224.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, there are actually some Democrats who are outraged that those who pay no Federal income tax will not benefit from the tax credits that are contained in the Republican tax cut plan. Let us think about this for a minute. If one pays no Federal income tax, should I be upset because I am not getting a tax cut? This, in my view, is what we call the mother of all entitlement mentalities. It is kind of like complaining about not having a headache because some great new aspirin product is not going to do anything for you. Talk about not fair. So let us see if I got this straight. It is about 9 o'clock on the night of April 14 and I am filling out my 1040 and I finally get through the form, and at first I am happy as a lottery winner when I find that there is no income tax this year being paid by me. Fat zero. Then I realize hey, wait a minute. This is not fair. If Congress passes a tax cut, I will not get one because I do not pay any taxes. Suddenly now I am sad. I guess I am not as lucky as I thought.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, ``America deserves a raise.'' That is a slogan I quite agree with. I have a proposal that will give millions of taxpayers exactly that. It is called tax cuts. This is a method that probably has never occurred to those who coined the slogan, ``America deserves a raise,'' but tax cuts are the best way to give taxpayers a raise. Now, of course, the politicians really would not be giving anybody anything. The money people earn is already theirs to begin with. Government would only be letting them keep more of what they work so very hard to get. Mr. Speaker, taxpayers do deserve a break. They should be able to keep more of their own money. They would then have the power to live their lives as they see fit, more freedom to realize their dreams, to build for the future and to provide for themselves and their families. Yes, Mr. Speaker, America deserves a raise.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, what do we call a tax cut for people who do not pay taxes? I call it welfare. And once again, the Democrats want more welfare spending instead of tax cuts for working Americans. It has been 16 years since working Americans got their taxes cut. We tried in the last Congress to pass tax cuts, but the President vetoed our efforts. This year, with the budget agreement, we seem to have paved our way to lower taxes. But now some folks want to give people who do not pay taxes a tax cut. It is this kind of logic that drives working Americans crazy about Washington. It is like giving a car to someone who cannot drive or a drowning man a drink of water. Mr. Speaker, let us give tax cuts to people who pay taxes. America deserves a tax cut now.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, during the 104th Congress, after the conflict over the Balanced Budget Act of 1995, the President came down to this very Chamber to plead, to beg, that we never, never, ever shut down the Government again. Well, apparently there has been another change of heart over at the White House. Apparently the White House actually sees value in shutting down the Government. They believe this so passionately that they are willing to block disaster relief for flood victims in the Dakotas and Minnesota. The Gekas-Wynn provision would maintain 100 percent of 1997 funding levels for the Government programs in the event that the President and Congress could not agree on appropriations bills. But somehow, incredibly, the President is rejecting this commonsense proposal. Why? Would the President really block disaster funding in order to shut down the Government? Apparently the answer to that question is yes.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, had I been present for rollcall votes 137 and 138 on May 16, 1997, I would have voted ``no'' on rollcall vote 137, an amendment to separate the Summer Youth Employment Program from the Disadvantaged Youth Block Grant Program included in the bill. I would have voted ``yea'' on rollcall vote 138, a vote on final passage of the Employment, Training, and Literacy Enhancement Act of 1997. As a cosponsor of this legislation, I support this program consolidation measure.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, consider for a moment a rich person. A rich person has two basic choices as to what he can do with his money, he can save it or he can spend it. Now suppose that he has $100,000 of income that he is completely free to dispose of as he wishes. If he spends that $100,000 on a luxury car or a new yacht, that is very good for the economy. In fact, it is very, very good for the economy to have as many rich people as possible. But while spending $100,000 is a good thing for the economy, if he saves the $100,000 instead by investing in stock, for example, that is even better for the economy. Why is that? Because businesses that wish to expand to modernize and to grow need that investment money. When a company expands or a new company is started, jobs are created. So I want to give rich people an incentive to save more of their money instead of spending it. That is why it is so important for the economy to cut the tax on savings and investment. It is all about jobs.

Mr. BALLENGER

Mr. BALLENGER. Mr. Chairman, although I plan to vote for House Concurrent Resolution 84, which contains the balanced budget agreement of 1997, I want to express a few concerns with it and the other budget options. I believe the major short comings in the budget which was negotiated between congressional leaders and the White House are: The spending increases, which will cause the deficit to rise until 2001 at which time it will fall below the 1997 level of $67 billion; the savings are back loaded, so that they will not be realized until near the end of the agreement; the Clinton funding priorities which amount to an expansion of the Federal Government; and the net tax cuts of $85 billion amount to less than 1 percent of expected total tax collections of $9 trillion. Specifically, on the tax front, the latest predictions are that the budget agreement will result in a reduction of the Federal capital gains tax rate from the current 28 percent to as high as 21 percent, which may be targeted to a limited number of investments. My concerns over the small tax cuts which are to be expected from the budget agreement are the primary reason I also will support the budget substitute being offered by a Republican group, the Conservative Action Team [CAT's], to which I belong. This budget would freeze spending at the current levels while transferring the $109.3 billion this would save in nondefense, nontransportation discretionary spending to greater tax relief. Although the CAT's budget is not expected to receive the votes of a majority of the House, I believe it represents the best alternative if we are truly committed to a smaller Federal Government and returning to every American more of their hard-earned tax dollars. I want to touch briefly on the other four substitute budgets. While the Congressional Black Caucus [CBC] is a serious participant in the budget debate, I cannot support the CBC's substitute primarily because it does not include any tax cuts, effectively delaying this debate until the budget is balanced in 2002, and cuts defense spending by $189.9 billion. The Brown of California substitute not only postpones tax relief and reduces defense spending, it increases total spending over 5 years by $25 billion more than House Concurrent Resolution 84. The Kennedy of Massachusetts budget substitute essentially abandons broad-based tax relief in favor of additional funding for health programs, while dismantling the Medicare compromise in House Concurrent Resolution 84. The budget substitute proposed by the bipartisan leadership of the House Transportation and Infrastructure Committee seeks to allocate an additional $12 billion for transportation priorities. It offsets this funding by across-the-board reductions of just over one-third of 1 percent in all discretionary spending and proposed tax relief. Regardless of the size of the proposed across-the- board cuts included in this substitute, I fundamentally oppose the assumption that all discretionary spending in the Federal budget should be treated equally. Particularly disturbing is the cumulative size of the cuts which would fall on our Nation's military, and the suggestion that there is room in the limited tax relief for a proportional burden. Therefore, I will vote for House Concurrent Resolution 84 with reservation and hope that it will bring us to a balanced budget on schedule in 2002, once and for all.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, I come before the House today to introduce legislation to promote more employee ownership in America. I believe this is a modest proposal which can be deemed technical and clarifying in many respects. Entitled ``The ESOP Promotion Act of 1997,'' this bill is virtually the same, except for one new provision, as legislation I introduced in the 102d, 103d and 104th Congresses with bipartisan support. Nearly 100 sitting members of this House have cosponsored this legislation over the years and, if former members are included, the number is over 200. Mr. Speaker, let me make the point that the last Congress repealed a modest tax law incentive that aided the creation of Employee ownership through Employee Stock Ownership Plans [ESOP's]. Since this provision affected the creation of about 25 to 40 new ESOP's a year, I believe it was a step backward by the last Congress. This action was taken in the Small Business Job Protection Act of 1996, Public Law 104-188, or the minimum wage bill, a legislative battle in which I was very involved. So, I now encourage my colleagues in the 105th Congress to stand up for employee ownership and to create a positive record for one of the most positive economic trends in America today--ownership by employees of stock in the companies where they work through an ESOP. Allow me to explain each section of my bill: Section 1: Names the bill ``The ESOP Promotion Act of 1997.'' Section 2: Corrects and clarifies the provision in last year's Small Business Job Protection Act that permits a subchapter S corporation to sponsor an ESOP. Last year's provision was added by Senator John Breaux in the Senate Finance Committee, and has been part of my ESOP bills since 1990. The effort to have these small businesses offer employee ownership to their employees started in 1987. Many private sector groups, representing both professionals and businesses, support permitting subchapter S corporations to sponsor ESOP's. Unfortunately, the provision adopted last year was not perfected and literally is not workable. In addition, it does not permit the subchapter S corporation to sponsor an ESOP under the same ESOP promotion rules the C corporations do. Section 2 extends the ESOP rules to subS ESOP's, and makes the technical changes necessary to have ESOP's operation in the context of a subchapter S company. Section 3: From 1984 until 1989 there was a provision of the tax code, former Internal Revenue Code section 2210, that cost the Federal Treasury no more than $5 million per year, that was an effective way to create more employee ownership. The former law permitted certain small estates that had closely held stock owned by the descendent at time of death to transfer that stock, or some of it, to an ESOP of the closely held company, and the company would pay the estate tax on the value of the stock. No estate tax is being avoided here; it is just shifted from the estate to an American, closely held corporation that has employee ownership through an ESOP. Section 4: This section actually is a simplification of how the current law provision permitting deductions on dividends paid on ESOP stock operates. Under current law, an ESOP sponsor may deduct the value of dividends paid on ESOP stock if the dividends are passed through to the employees in cash, or if the dividends are used to pay the loan used to acquire the stock for the ESOP, and if the employees get more stock equal in value to the dividends. My proposal would permit the deduction if the employee in the ESOP has the option to get the dividends in cash, or if he or she directs that the dividends are reinvested in more stock of the company. Why is this simplication? Because, under a very complex chain of events, that the IRS has approved in a series of letter rulings, the employee can have ``constructive receipt'' of the cash dividend, and then ``constructively'' take the dividend money back to the payroll office and reinvest it. Since the employee has received the dividend in cash, the deduction is allowed, although in reality it was reinvested. My proposal says cut the chase. Where the employee has made clear a desire for the dividends to be reinvested, why have an expensive, confusing system that the IRS has to review after the ESOP sponsor spends dollars on designing the scheme? There is no reason. Section 5: This section would correct what I feel is an anomaly in the current law. Under current law, Internal Revenue Code section 1042 permits certain sellers to an ESOP to defer the capital gains tax on the proceeds of the sale if he or she reinvests the proceeds in the securities of an operating U.S. corporation, and the ESOP holds at least 30 percent of the corporation at the conclusion of the transaction. This provision plays a major role in the creation of over 50 percent of the ESOP companies in America. Currently it benefits owner-founders, and outside investors of closely held companies, but is not available for employees who own stock in the company due to their working for the company. The anomaly arises due to some IRS letter rulings in the mid-1980's, and an out of date provision in section 1042 from 1984. The current law states that if an employee has stock because of exercising a stock option grant from the employer, that stock is not eligible for a 1042 treatment. The IRS has expanded this provision to prohibit all stock, even if bought for full market value by the employee to be ineligible for 1042. My bill erases this prohibition; and for stock that was obtained with an exercise of a tax qualified stock option, if sold to the ESOP, the corporation is not permitted a tax deduction for the value of the option. This makes the provision fair, and prevents a double tax advantage--either the employee takes the 1042 treatment, or the corporation takes a deduction, not both. This provision also corrects another technical anomaly in current law. As presently written, Code section 1042 provides that any holder of 25 percent of any class of stock in a company cannot participate in the ESOP with 1042 stock. My bill would change the measure so that the 25 percent would be measured by the voting power of the stock, or the value of the stock in terms of total corporate value. This kind of measure is used in other sections of the Code. Section 6: My final section is another modest estate tax provision, that in prior years the Joint Committee on Taxation has estimated would cost the Treasury less than $1 million per year. This provision would help create employee ownership in those limited situations where an owner of a closely held business wants to ensure his or her spouse has income from the business during their remaining years, and then after his or her death the stock passes to the ESOP, as if it were eligible as a charity. With plenty of restrictions to ensure that there are no family beneficiaries of the ESOP created with the stock, this does not affect revenue because the decedent can create one of these trusts, called a charitable remainder trust for his or her spouse, and have its corpus go to charity in any event. Mr. Speaker this explains my bill. This bill, except for the two estate tax provisions, was introduced by Senator John Breaux and Senator Orrin Hatch on April 30 this year as S. 673. I urge those of my colleagues who want to encourage employee ownership in America to join me, and to work hard to include these provisions in the tax bill that will soon be considered by the House Ways and Means Committee.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, I am a firm believer that when money is allocated for a specific purpose, it should be used for that purpose. This is not the case with Federal dollars allocated to improving our educational system. A recent study has estimated that 15 percent of every Federal dollar earmarked for education is eaten up by the Washington bureaucracy before the funds even reach the local school districts. To top that off, as a part of a committee project to determine what works and what is wasted in American education, we found that it takes local school districts nearly 480 steps and 26 weeks just to receive a grant from the Federal Government. Local school districts have to put time, money, and staff into obtaining Federal money earmarked for education and then watch as 15 percent of every dollar is spent before the funds even reach the school. After you factor in local costs, imagine how much more Federal money does not get to our children. If the Federal Government is going to be about providing funds for education, let us ensure that the dollars get down to the local school districts and free school districts from costly paperwork tied to Federal funds.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, as we recognize National Teachers Appreciation Week, I want to thank one of the teachers who helped instill in me a hard work ethic and desire to be the best I could be. My seventh grade teacher, Mrs. Annie Yoder, made a real difference in my life, and I owe part of my success to her. Mrs. Yoder, thank you so much for all you did for me and for the many other students that you diligently taught. Education is vitally important to the well-being of our country, and during my visits to classrooms in the 10th District it has become increasingly clear to me teachers are among the most important keys to the success of our educational system. Teachers help lessons come alive and cultivate within all of us the love of knowledge. If knowledge is power, then teachers are the purveyors of this power. For this, we owe them not only our gratitude but respect and support as well. If we want to truly respect and support our Nation's teachers, we must take educational control away from Washington and place it back with teachers and parents and local officials. To all the Mrs. Annie Yoders who have helped make us a better and brighter future, thank you, and I hope we can honor their hard work and dedication by not hindering what they do best, educating America.

Mr. BALLENGER

Mr. BALLENGER. If I might, I would like to quote from the Wall Street Journal one statement here. An inspector general's report has blown this whistle on the Davis-Bacon Act, and that 1931 law by which the Labor Department drives up the cost of federally subsidized construction by requiring what are in effect union wages. A Federal audit of 800 wage survey forms used to calculate the local prevailing or union wage found that nearly two out of three forms contained significant errors and that deliberate misreporting activity may exist. It is an ideal situation for fraud and abuse, and there is an indictment out in Oklahoma for one of the fellows that our hearing brought to the light of the law enforcement.

Mr. BALLENGER. Well, the truth of the matter is you know as well as I do that if you add this additional labor cost--I mean suppose the President is going to guarantee your interest rate on your bonds that you have. North Carolina sold a billion, $200 million worth of bonds. My own county sold $50 million worth of bonds. Thank goodness I think they are in such financial shape that they will not be desiring of using this thing, but if they were, and those bonds cost 6 percent, and the labor costs were 10 percent higher, you have lost 4 percent because you use Federal assistance. It is unbelievable.

Mr. BALLENGER. Right.

Mr. BALLENGER. Strangely enough, we had heard that there were strange things going on in Oklahoma. Luckily for us, the Secretary of Labor out there had investigated the actual operation of the Davis-Bacon law as far as Oklahoma was concerned.

Mr. BALLENGER. We thank the kind gentleman. I would like to congratulate you on first of all your hearings throughout the country, but second of all, bringing this to, I hope, our TV audience to let them better understand what this is all about.

Mr. BALLENGER. For instance, a wage survey submitted to the Department of Labor, this is in Oklahoma, showed a $20 million renovation occurred at the University of Oklahoma football stadium involving 28 workers. In reality no work was done on the football stadium. Twenty million dollars sent in in the report to say they had done this work and it never happened.

Mr. BALLENGER. Let me give another one. The case showed that 7 asphalt machines, extremely large machines, as big as trucks, were used to pave a parking lot for an Internal Revenue Service building in Oklahoma. Workers supposedly were paid $15 an hour. In reality, the parking lot had only room for 30 cars and it was made of concrete. There was no way that you could use asphalt paving on it. The Department of Labor said that the wages instead of being $15 an hour should have been $8 an hour if it had occurred. But it did not happen.

Mr. BALLENGER. The saddest thing of all is the only people that will have to use this are the poorest school districts in the country. In other words, they do not have the taxing power to back up the bond issues they could sell, so they are going to have to use this 5 percent underwriting of their interest to sell the bonds which means the poorest people in the country will get the worst deal on building schools.

Mr. BALLENGER. Suppose all the money they could save went into buying computers. This is capital outlay, the same deal. In other words, the money that they have to spend on higher construction costs could go into computers, all kinds of equipment that would make the school a better place.

Mr. BALLENGER. The gentleman and I attended a hearing in Oklahoma. What I wanted to bring up, and we have discussed it here in one way or another, but the idea of spending money wisely. I am here to express a concern which our Democrat friends mentioned earlier on the condition of the public schools today. A recent ``Prime Time Live'' segment by Diane Sawyer documented the deteriorating buildings and inadequate structures used to house our children. To combat this appalling situation, President Clinton has proposed a $5 billion mandatory appropriation to guarantee the interest payments for the construction and renovation of elementary and secondary schools. That sounds like motherhood, apple pie, and the greatest thing since sliced bread. But one of the problems that the gentleman and I both know is that once the first dollar of Federal money is accepted, then there is a little thing called the Davis-Bacon law that goes into effect. What is the Davis-Bacon law? What it does is it mandates that you pay higher wages for construction.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, the American people are best served by open competition, whether for goods, services, or for construction. This has always led to lower costs, higher quality, innovation, and efficiency. The Executive order of President Clinton that he has promised his important labor friends ignores all these principles and imposes a near monopoly on the source of construction labor. Under union-only contracts Federal work would be restricted to a small minority of the work force that is unionized and would deny work to the majority of workers who, for religious, economic, or other personal reasons, choose not to work under union control. Mr. Speaker, I urge the President to reject the calls from one narrow interest group for favoritism and to support fair and open competition. Imposing this discriminatory Executive order would be a disservice to working men and women, to the American taxpayer, and to the economy.

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, had I been present for rollcall votes 86, 87, 88, and 89 on Wednesday, April 23, I would have voted ``yea.''

Mr. BALLENGER

Mr. BALLENGER. Mr. Speaker, today, Speaker Gingrich is doing the right thing. The reimbursement that he is paying is not a fine. The committee itself makes it clear that the reimbursement of legal expenses are for costs only. The Committee on Standards of Official Conduct imposed no restrictions on how the reimbursement could be paid. Speaker Gingrich could have used campaign funds to reimburse the committee. Others have done this, the gentleman from Missouri [Mr. Gephardt], the gentleman from Texas [Mr. Frost], former Congressman Rose. Speaker Gingrich could have used the Newt Gingrich trust fund approved by the committee for the stated purpose of paying the reimbursement. Instead, the Speaker chose to do the right thing by reimbursing the taxpayers and taking full responsibility with borrowed money under his own name. I commend Speaker Gingrich for the effort that he is putting forward.