Robert Bennett

Mr. BENNETT

Mr. BENNETT. I ask unanimous consent that I be allowed to speak following the Senator from Montana in opposition.

Mr. BENNETT. No. This is the tax increase that was enacted.

Mr. BENNETT. That is correct.

Mr. BENNETT. I happen to have another chart. I will get to that if the Senator will be patient. I appreciate his willingness to listen. Back to 2004, we see once again the impact of the soft patch. We see that if we are going to look at this and say, what can we do to get this money back, the first thing we can do, the best thing we can do, is get rid of this. Fifty-one percent of the whole comes from the weak economy. Another good thing we can do is hold down this: 24 percent comes from increased spending. For those who said, we will solve our deficit problem if we just repeal the tax cut--and we have heard that rhetoric on the floor--no, that is the least effective way to get this back where it belongs. I am glad people who have said let's repeal the tax cut are backing away from that position. Here is another way of demonstrating how the projections went wrong and the impact of the spending. These were the revenues in that boom time. And then we began to see the revenues start to slack off just as outlays that were increasing at one level began to increase very sharply. Here again is the responsibility of where we are. Here is the chart answering the question about the impact of the President's growth plan. This shows the total taxes that will be paid in the next 11 years, $29.3 trillion. And the President's growth plan says we will have $725 billion, or 2.4 percent of that amount, that will come out of the overall pie. If you add the $725 billion to the $29.3 trillion that will still be paid, you come up with $30 trillion. It is obvious that the $30 trillion is a nice round figure, which will be wrong. It will once again be wrong on the high side or wrong on the low side, but no one with any certainty can look out 11 years and add up the exact amount of tax revenue that will come in. It is simply not humanly possible. The best estimate that can be made says: Well, it will be, and it is rounded off, at $30 trillion. So you take $30 trillion, and we are talking about 2.4 percent of that. The net effect of this over the next 11 years is, if I might use a phrase we are all familiar with, within the margin of error. It is clear that the estimate of what this will be cannot be that close, to a 2.4 percent accuracy. It is within the margin of error. We are not talking about a major impact. Seven hundred twenty-four billion sounds like a huge amount of money, and of course it is. But when it is stretched out over 11 years and when it is compared to $30 trillion, then you put it in perspective. Many people say: Why should we be cutting taxes at all? Let's err on the prudent side and get that money in. The fact is, of course, that we cannot assume that if we set the tax burden at a certain level, the economy will yield that kind of tax revenue. I was in Ireland with a group of my colleagues last summer, and the Irish economy was booming, growing more rapidly than any other economy in Europe. We said to the Prime Minister of Ireland: To what do you attribute your growth? He said: We attribute it to the fact we cut our corporate tax rate to 10 percent, and we immediately started booming. I will concede immediately that is a simplistic answer and there must have been other reasons involved, but I will not concede that the decision to cut the corporate tax rate to 10 percent was a trivial one or that it did not have a major impact on seeing that the Irish economy became the strongest economy in Europe. I think it is not an accident that they have the lowest tax rates and the highest rate of growth. I think there is some correlation between those two, while conceding that there are other aspects. Let's look at the historic tax burden we have had in the United States measured in the only way that really makes any sense; that is, as a percentage of the economy. For those who say: Oh, no, that does not matter, let me repeat again a personal experience that I think demonstrates it does matter. As I have said before, before I came to the Senate, I ran a business. When I was hired as the CEO of that business, the total debt of the business was $75,000. When I stepped down as the CEO of that business prior to running for the Senate, the total debt of that business was $7.5 million. If you are going to measure my stewardship by the size of the debt, you can say Bennett was a lousy steward and we are good to get rid of him because he took a little tiny debt of $75,000 and ran it up to $7.5 million, and now we have to pay off that debt and he left us in this terrible hole. Let me add a few more facts. When I took over as the CEO of the company, they were doing about $300,000 a year in total business; $75,000 in debt represented 25 percent of the sales and, indeed, threatened the survival of the business because the business could not service a $75,000 debt on $300,000 in sales. Indeed, the business was losing money at $300,000 a year in sales and could not survive unless we did something. When I stepped down as the CEO of the business, we were doing over $75 million in sales, and the $7.5 million in debt represented 10 percent of the sales instead of 25 percent of the sales. Furthermore, we were earning enough money, our margins were strong enough that we had over $7 million in the bank. You say: Why didn't you pay off the debt? Because the debt represented primarily mortgages on real estate that had prepayment penalties on them. We had borrowed the money to build the facility. We needed to run the business, and it was cheaper for us to earn interest on the money in the bank than it was to pay the prepayment penalty on the mortgage. I frankly think I did a pretty good job at that company. I think my stewardship was proper, if you measure it solely on the basis of the debt, though I took a $75,000 debt and ran it up to $7.5 million. If you take the total value of the company, it was failing, and at the point of extinction with a $75,000 debt, it had a market cap of $200 million or $300 million with the $7.5 million debt. Applying that same principle, and I think it is legitimate to do so, we should look at our debt now not in terms of how big is it in numbers, but how big is it with respect to the size of the economy, and it is now at a level with respect to the size of the economy less than it was at the time of the Eisenhower administration. The highest point of our debt as a percentage of gross national product was in 1945 at the end of the Second World War. We were running a total debt of close to 1\1/2\ times the size of the economy. Adding in the Social Security trust funds and all of the rest of it, it is about 60 percent. We are way below a level that at one time in our history we demonstrated we could survive with. Putting that same calculation to the issue of taxation, here is a demonstration of taxes as a percentage of GDP. We have drawn a line at 20 percent of GDP. When did taxes get higher than 20 percent in our history? Once back in 1945, again responding to the Second World War when we had a debt that was three times GDP, and we immediately brought the taxes down to 15 percent and started to see the economy growing in such a fashion that the debt started coming down in dramatic fashion as a percentage of GDP. With the tremendous surge of tax revenue that came primarily as a function of the high-tech run up in the late nineties and the realization from capital gains when, in this Chamber, we cut the capital gains tax rate so people started cashing in their dot-com stocks and paying enormous capital gains revenues to the Treasury, even though the rate went down, the rate went down but the realizations went up. We saw, once again, for the first time since the Second World War the total tax take as a percentage of GDP go above 20 percent. To me that was the more compelling argument than the one that even the President made when he said: We are taking too much of your money; we need to give it back to you. I said how does it fit overall in the economic pattern? Historically, when the tax take begins to get up to this 20-percent line, it is a signal that you have too much burden on the economy and you need to bring the tax take down below 20 percent. That is why I supported the President's decision and supported the President's position in the Tax Code that said: OK, let's bring it down. You always see tax revenues drop in a time of recession. We had the tax cut, and then it was followed by the recession. This is the estimate of what will happen under current law if we do not do something about making the tax cut permanent. We will be in a historic area until the tax cut expires and goes back up, at which point we will bounce back over 20 percent of GDP. I want GDP to grow more rapidly than Government expenditures. If GDP grows more rapidly than Government expenditures, we have no need to worry about the future. But if it does not, we cannot tax our way to prosperity. We cannot tax our way to a balanced budget. There have been a lot of quotations of Alan Greenspan around here. I happen to be a great Greenspan supporter. Sometimes I am a little surprised to think I can understand him. I have been in the Senate now 10 years and on the Banking Committee, and he has appeared before us every year. I am on the Joint Economic Committee, and he appears there every year. For the first few years, I did not break the code, but I think I am now beginning to understand Greenspan speak. This is a point he made to a group of us that I think is essential to this debate: You can set expenditures at almost any level you want. You cannot set revenues at any level you want. Revenues are a function of the economy, and if you do something wrong in fiscal policy that causes the economy to fail, you are not going to get the revenues you may project. One can, on the spending side, commit themselves to long-term, built- in obligations that they cannot then cover if the revenues are not there. This is the ominous number on this chart. If we can get the revenues back up by getting the economy back up, back to the first chart--get this part of it solved, the weakness in the economy--then we will be just fine. Now we come to the amendment. After all of the presentation, we come to the question of how big should the growth package be? Should it cost $724 billion over 11 years or can we get rid of this part of the softness for only $350 billion over the next 11 years? I think that is the wrong question to ask because it is a mathematical question to which there is no correct answer. As I said at the beginning, all of these projections are wrong. All of them will be revised. No one can, with certainty, make a prediction of what is going to happen in 11 years in this economy and be anywhere near close. So the question to ask is, Will the proposals the President has made actually produce a structural change within the economy that has a chance of dealing with the softness in the economy? I go back to the other thing I said, which is this particular recession was an investment recession. So the fundamental question to ask is, Will the proposals the President has made address the investment side of the soft patch we are in? Well, we had a tax cut. Part of it addressed the consumer side and we thought: that is going to stimulate the economy. We sent out checks, 300 bucks for everybody who had filed a tax return. We discovered that it was not stimulative. Why not? Because it was aimed at the consumer side. It was not aimed at the investment side. And it did not produce any major structural change to give us the kind of growth we needed. It did not even hit the consumer side to the point that we projected because many consumers we now know did not spend it. They used it to pay down personal debt, which is a very logical thing for many people to do. But it upset all of the projections we made of what would happen. So as I see it, the President's proposal has two big groups. The first group is a collection of tax cuts: the marriage tax penalty, the elimination of the death tax, the child credit. That is about half of the $720 billion that we are talking about. I think those are all salutary. I think those will all help, and I am prepared to vote for them. Then we come to the other half, which is the elimination of the double taxation on dividends. If we pass this amendment, the conventional wisdom is that the elimination of double taxation on dividends is dead, that it will never come out of the Finance Committee. Let me focus on why the passage of the President's proposal with respect to the elimination of double taxation on dividends will go directly to the heart of the softness on this chart and why it is the investment solution to deal with an investment recession. If we go back to the excesses of the late 1990s and look at them now historically, we find that one of the things that drove the excesses on the stock market, and indeed got us into trouble as far as corporate management is concerned, was the tremendous desire to drive up stock prices. Stock prices were driven up by driving up earnings estimates. Enron, WorldCom, and the rest of these companies did everything they could to create the notion that they had tremendous earnings. They drove it up partly by leverage. Leverage, by definition, means borrowing, and they were borrowing because they could deduct the interest. They could get the money, they could deduct the interest, they could produce the leverage, and in the case of Enron they could lie about it. Make no mistake, there was tremendous greed and chicanery going on, but the whole system was geared towards debt as the primary source of capital. If you go to the equity market and try to entice people to give you sound equity investments, you have to say to them, we cannot pay you a return on your investment because dividends are taxed at an effective 60-percent rate, so your only return on investment will be if you can sell your shares to somebody else at a higher price than you bought them. Sound like tulips? Yes, there is some similarity. The greater fool theory--the bigger fool theory: I buy this stock hoping that there is a bigger fool than me out there who I can sell it to at a higher price. That is not really the way the stock market works, but that is the way it seemed to work in the late 1990s. Remember when Alan Greenspan warned us against irrational exuberance in the stock market? The Dow was at 6,000. Today, it is over 8,000, and we are saying it is the worst economy in 50 years. It got to 12,000 before tulip time finally hit and it backed down. If we change the situation so a company can go to the equity market and say, if you give us equity capital instead of going to the debt market to get debt capital, we can give you a return on your equity capital that will only be taxed once, we can give you a return that will make it logical for you to hang in with us over the long term, even if the stock does not go up immediately in the short term, you can hold the investment because you are going to get your dividends and your dividends are only going to be taxed once. This is a structural change that the economy badly needs. This is a structural change, once again to quote the guru that has been talked about, that Alan Greenspan has endorsed as good for the economy. This is a structural change that can begin to address the question of the weaknesses in the economy that can have long-term consequences. And this is a structural change that will make us more competitive with the rest of the world because the rest of the world does not tax dividends at the same rate we do. That is what this debate really should be about. It should not be about numbers: Is 350 too little or is 350 too much? Is 724 too big or is 724 too little? It should be about whether these proposals work. I believe they will. If we have identified that they will work, then the question is, How much money do we need to put in the budget to allow them to go forward? So the number comes after the decision of whether the program makes sense rather than the number driving the program. In my opinion, this is a gamble well worth taking. Back to the total tax take that we are talking about, where the 2.4 percent of the estimate is within the margin of error, this is not a serious gamble. In my opinion, if one were to say, OK, we are going to cut this in half at 350 so the 2.4 percent goes down to 1.2 percent, that is really what we are talking about, 1.2 percent of a $30 trillion pie when the evidence is overwhelming, in my view, that the dividend thing will work. How does it have to work in order to pay for itself? It has to make the economy 1.2-percent more efficient. The studies out of the business roundtable from the econometric model down at the University of Maryland say this will add 2 points to GDP growth. What will happen to this $30 trillion pie if it grows at 2 points higher than the present estimate? It is a gamble worth taking. That is why I oppose this amendment.

Mr. BENNETT

Mr. BENNETT. Mr. President, will the Senator yield for a question?

Mr. BENNETT

Mr. BENNETT. Mr. President, acting as the leader, I yield myself 7 minutes, with the understanding that following me, the Senator from Iowa will be recognized.

Mr. BENNETT. Mr. President, I have listened to the debate and wanted to make a few observations. I understand the Senator from Iowa is prepared to perhaps be a little more erudite than I. But I have heard personal references, and I must come share a few personal references, not specifically on this amendment but on the subject of Medicare. The statement has been made that Medicare is a great success story. Medicare is a disaster. Everybody who deals with it understands that except the Congress. We have to understand that Medicare, in order to work properly, is going to have to be overhauled from top to bottom as quickly as possible. Taking the assumption that the present Medicare system is working well and all we need to do is add a little here and add a little there will further compound the disaster. Let me give two examples that I hope will help illustrate this. The first is a town meeting where a woman came to me and said: Can you do something to fix Medicare? I said: Well, tell me what the problem is. She said: I am a professional woman. I am a college graduate. I think I am fairly intelligent. I handle my mother's affairs. My mother is in her eighties. She is on Medicare. I have finally figured out how to deal with Medicare. I throw away everything unopened, and at the end of the month I call the Salt Lake clinic and say: How much do I owe you for my mother? Trying to wade through the paperwork is so daunting, I can't even begin to understand anything they send to me. The assumption that my 85-year-old mother would be able to handle any of it is absurd. I tried. I struggled. I got the manuals. Finally, I discovered the way to deal with Medicare is to throw away everything unopened and once a month call the Salt Lake clinic and say: How much do I owe you for my mother? This is a family and a circumstance where money is not a problem. Simply coping with the paperwork is overwhelming. Second example: I have a daughter of whom I am enormously proud. She graduated with her master's degree from George Washington University after her bachelor's at Boston University. She got a job in a nursing home. She is a speech therapist. She is also a very enthusiastic young lady. She called me after about 4 days on the job. Dad, she said--exploding over the telephone--you are a Senator. You have to fix Medicare. I said: Now calm down. Tell me what your problem is. She said: Medicare is a disaster. Medicare is terrible. Let me tell you my experiences. And she began describing some of the problems she had in giving proper care to the people in this nursing home and always being told, no, you can't do that until you check to see whether or not Medicare will cover it. She said: I thought that would be a fairly simple thing to find out. So I go down the hall and say: Will Medicare cover this procedure? It takes days to get an answer to that question. Then she said: Dad, do you know who the highest paid person in this facility is--with a salary higher than the administrator, higher salary than the doctors, higher salary than the nurses, higher salary than any of the health professionals? It is the woman who understands Medicare. She gets paid more than anybody here because that skill is in greater demand and shorter supply than professional medical skills. She called me back sometime later and said: I have had patients die while we waited to get an answer as to whether or not Medicare would cover it. Their family said, ``Don't touch my grandmother; don't do anything until we find out whether Medicare would cover it.'' It was so arcane and difficult to work through all of the paperwork and come up with the answer--well, maybe they would have died anyway; they were old and in a nursing home. People die in nursing homes. But this was a very traumatic experience for my daughter, who was convinced that the kind of therapy she was trained to provide, she was prepared to provide, which could have extended the life of that particular patient. So as we get carried away with the rhetoric around here about what we have to protect and not protect about Medicare, let us begin to understand the truth about Medicare. Medicare is the best Blue Cross/ Blue Shield fee-for-service indemnity plan of the 1960s--frozen in time. We don't practice medicine the way medicine was practiced in the 1960s when Medicare was created. We don't even come close anymore. Yes, we need a prescription drug benefit because prescription drugs do things now that they had nothing to do with in the 1960s. But instead of pasting it on to the existing circumstance and creating a new set of forms and eligibilities and more demand for that highest paid person in the nursing home, let us as a Congress face the fact that we need to start from a clean sheet of paper, all over again, with all of the money we are putting into it--which is sizable--and say let's create a whole new system. This budget doesn't do that, but this amendment that is being offered will make things worse in that regard. I only hope that somewhere along the line we can begin to face the fact that Medicare is 40 years old, whereas the practice of medicine is changing so constantly that we could say it is only 40 months old. Let's start with a clean sheet of paper. Let's not try this Band-Aid approach. Let's not just put this here, and put that there, and tell our constituents we are giving them something when, in fact, we are perpetuating an existing problem and ultimately making it worse.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. Res. 88 which was submitted earlier today by Senator Hatch.

Mr. BENNETT. Mr. President, I ask unanimous consent that the resolution be agreed to, the preamble be agreed to, the motion to reconsider be laid upon the table, and that any statements relating to this matter be printed in the Record.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that the resolution and preamble be agreed to en bloc, the motion to reconsider be laid upon the table, with no intervening action or debate, and that any statements relating to this measure be printed in the Record.

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. Res. 89, which was introduced earlier today by Senators Dayton and Coleman.

Mr. BENNETT

Mr. BENNETT. Mr. President, I listened with interest to my friend from Montana. While I had not prepared a response, I feel, nonetheless, moved to make a response. My colleague from Montana made the point that Saddam Hussein must be removed and then suggested that we need more time and we should be willing to grant more time. This is, indeed, the position of many people in the United Nations. They keep saying just another week, just another month if necessary. The Senator from Montana used that same timeframe. In my opinion, we do not have that option. In my opinion, we have two options, not three. The two options are either to go ahead or to come home. The option of staying in place and allowing the inspections to go on for an indeterminate period of time is not a viable option. The reason for that is that our troops are not where they are on anything like a permanent status. They are there at the indulgence of foreign governments that have allowed them to come in with the firm understanding that they will be there very briefly. In the countries where they are currently bivouacked, they are simply there, on the edge of moving forward. If we now say to those countries, the host countries that are harboring our troops, we are going to leave them there for an indefinite period of time while the inspectors continue to poke around Iraq, I expect that country after country will say: No. We did not bargain for American troops in these numbers on our territory for an indefinite period of time. If you are not moving ahead into Iraq, withdraw your forces and go home. And if we do withdraw our forces and go home, it is clear Saddam Hussein will not be removed until he dies. And he may very well die in his bed, because once the United States has sent the signal to the world that we are prepared to do whatever is necessary to remove this brutal dictator and then we back down and bring our troops home, we can never put them back in those places again. No host government currently allowing American forces on its soil will say OK, now that Saddam Hussein has nuclear weapons, you can come back and be on our soil and make us a target for those nuclear weapons. No. We have two choices. We can either move ahead or we can come home. It is not the most sympathetic character in Shakespeare. A comment made by Lady Macbeth becomes appropriate here. ``If it were done when 'tis done, then 'twere well it were done quickly.'' If we are going to remove Saddam Hussein, we must do it quickly. And if we are not, we should not leave our troops in their present posture for an indefinite period of time while inspectors poke around on a scavenger hunt in Iraq.

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate proceed to a period for morning business.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate now proceed to the immediate consideration of S. Res. 87, introduced earlier today by Senator Nelson of Florida.

Mr. BENNETT. Mr. President, I ask unanimous consent that the resolution and preamble be agreed to en bloc, the motion to reconsider be laid upon the table, with no intervening action or debate, and that any statements relating to this measure be printed in the Record.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that the resolution be agreed to, the preamble be agreed to, the motion to reconsider be laid upon the table, and that any statements relating to this matter be printed in the Record.

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate now proceed to the immediate consideration of S. Res. 86, which was submitted earlier today.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that notwithstanding the Senate's adjournment, the Budget Committee have from 11 a.m. until noon on March 14 to report legislative matters.

Mr. BENNETT

Mr. BENNETT. Mr. President, I take this opportunity to pay tribute to Lloyd Ogilvie, our Chaplain. I have told him of the deep affection that I and my wife Joyce have for him and Mary Jane. I wish I could reach as deeply into the writings of Robert Burns as he is able to and come up with exactly the right epigram. I will point out that he and I share the common experience of living in Scotland as young men. He, there while he was studying for the ministry, and I, there while I was serving as a missionary for my church. In that experience, each of us gained deep respect for the Scottish people and Scottish traditions. That is why you find me today sporting the tartan of my family, the Wallace tartan. My father served in this body as Wallace Bennett, coming from a long line of Wallaces, including one William Wallace. Whether it was the William Wallace who morphed as Mel Gibson onto the silver screen or not, I am not sure. Lloyd Ogilvie has made his mark here in a tremendous way, and he deserves all of the wonderful things everyone has said about him. I simply quote a hymn that we sing often in our church. I don't think it is unique to our church, but we sing at this time when young men go out in the circumstance I have just described--go off to a foreign land or to a foreign part of the world to preach the gospel. We sing to them: God be with you till we meet again; When life's perils thick confound you; Put His arms unfailing round you; God be with you till we meet again. This is what I say to Mary Jane and Lloyd Ogilvie, from all of us. God be with you till we meet again.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate proceed to executive session to consider the following treaties on today's Executive Calendar: Nos. 2, 3, and 4. I further ask unanimous consent that the treaties be considered as having passed through their various parliamentary stages up to and including the presentation of the resolutions of ratification; that any statements be inserted in the Record as if read; and that the Senate take one vote on the resolutions of ratification to be considered as separate votes; further, that when the resolutions of ratification are voted upon, the motion to reconsider be laid upon the table, the President be notified of the Senate's action, and that following the disposition of the treaties the Senate return to legislative session.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that the concurrent resolution be agreed to, and the motion to reconsider be laid upon the table.

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. Con. Res. 20, which was submitted earlier today by Senators Lott and Dodd.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate now proceed to the immediate consideration of S. Res. 84, which was submitted earlier today by Senators Lott and Dodd.

Mr. BENNETT. Mr. President, I ask unanimous consent that the resolution be agreed to, and the motion to reconsider be laid upon the table.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of H. Con. Res. 85, which is at the desk.