Kent Conrad

Mr. CONRAD

Mr. CONRAD. Mr. President, I ask unanimous consent for 30 additional seconds.

Mr. CONRAD. Mr. President, I support a significant tax cut for all Americans. I proposed and voted for a $900 billion tax cut. I think that is a level we can afford, one that will accommodate protecting the Social Security and Medicare trust funds, one that will permit us to set aside money to strengthen Social Security for the future, one that will allow us to reserve resources for important domestic priorities. I cannot support this conference report because it does not permit us to protect Social Security and Medicare. It threatens to put us back into deficit. It threatens to put us back into building debt after a decade of getting our fiscal house in order. This morning's Washington Post labels this conference report for what it is, ``Tax Fraud.'' It says: The House-Senate tax cut conferees came up with a way, yesterday, to stuff even more cuts into the bill without appearing to break the cost ceiling that Congress virtuously imposed on itself earlier in the year. They went on to say: Without apparent embarrassment, they adopted the mother of all accounting gimmicks. To keep the supposed 10-year cost of the bill at $1.35 trillion, they will pretend that major provisions expire after nine years. What they have done is alter the calendar. In a bill that is to cover 10 years, they just took off the last year. What is the effect of that? The Washington Post says: This is a permanent tax cut masquerading as temporary. But the masquerade is all that matters. The accounting conventions allow the conferees to claim that they've done what they said they would. Once again what they've really done is mortgage the long-term future for short-term political gain. They go on to say: When the gimmicks are removed from the bill, the true cost is three times what the sponsors pretend--perhaps $4 trillion over [the second] 10 years. Instead of a $1.35 trillion tax cut, which is what was agreed to just weeks ago, the true cost of this bill over the period of the budget is $1.7 trillion. Those who have said they somehow negotiated a reduction from what the President was seeking, to be more fiscally responsible, have come back with a conference report that does not do it. It does not reduce the size of the President's proposal because they take the 10 years, and put it into 9. If you make an honest assessment of the full 10-year cost, you are at $1.7 trillion. The accounting gimmicks do not end there. As the Washington Post indicated, this bill is massively backloaded. It is advertised, in the first 10 years, as costing $1.35 trillion. But in the next 10 years it explodes in cost because they have backloaded provision after provision after provision. The result is that the cost absolutely explodes right at the time the baby boomers start to retire. They are digging a deep hole for the United States. The New York Times labeled it ``The $4 Trillion Tax Cut.'' They said: The tax cut's $1.35 trillion price tag is a deception. The figure was calculated with an array of artificial devices that disguise the true cost. Some of the tax cuts to be enacted abruptly expire before the 11-year period is up. . . . This was written before the last gimmick was inserted, the gimmick of just taking an entire year out. Remember that Republicans, a couple years ago, tried to put 13 months into a 12-month year as a gimmick to disguise the effect of their budget proposals. This time they have taken an entire year off the calendar. The New York Times goes on to say: Other provisions are phased in slowly, with most of them not fully enacted until 2009, 2010 and 2011. This means that although the tax cut technically costs $1.35 trillion in the first decade, its cost in the second decade--when the baby boomers will all be retired--is more than $4 trillion. The tax cut cannot be paid for except by raiding the Social Security and Medicare trust funds. It is a scheme that seems deliberately aimed at wrecking the basic American retirement programs, perhaps to force their dismantling or privatization. I think the New York Times and the Washington Post have it right. We are in a period of surplus now. But we all know that in the next decade we move to massive deficits. That is when this tax cut, because of the way it has been designed, absolutely explodes: from $1.35 trillion, it balloons to $4 trillion in cost over the second 10 years. When one examines the real budget--the defense expenditures the President is asking for, the alternative minimum tax that must be fixed, the education expenditures the Senate is in the midst of approving now--as we consider the education bill, the emergencies, and just the average emergencies we have experienced over the last 10 years, fast forward them to the next 10 years: We are not only going to be raiding Medicare, we are going to be raiding the Social Security trust fund as well. We estimate that this bill, when combined with the real budget reflecting what will actually be spent over the next 10 years, will be raiding the Medicare trust fund by $311 billion and raiding the Social Security trust fund by $234 billion. Make no mistake, this vote has real consequences. It is not just that it is fiscally irresponsible. In fact, this bill is a monument to fiscal irresponsibility. But in addition to that, this bill is not fair. The top 1 percent get more than twice as much of the benefit as the bottom 60 percent. In fact, the bill has been made much worse in terms of its fairness when you compare what left the Senate to what has come back in the conference committee. The top 1 percent get nearly 38 percent of the benefits. The bottom 60 percent get less than 15 percent of the benefits. This bill cannot pass any fairness test, or any fiscal responsibility test. It does not pass the fundamental test we ought to apply to any tax bill. This final tax bill is clearly unfair. The top 20 percent get 71 percent of the benefits. The bottom 20 percent get 1 percent. Seventy-one percent of the benefits to the top 20 percent; 1 percent to the bottom 20 percent. We heard our colleagues say that this bill is much more fair than the Bush proposal. Well, it is a little bit more fair but not much more fair. Seventy-one percent of the benefits in this bill go to the top 20 percent. In the President's proposal, 72 percent of the benefits went to the top 20 percent. One of the things I think is most revealing about this proposal is what happens to the various tax brackets. It is fascinating what has come back from the conference committee. Those who are the wealthiest among us get by far the biggest rate reduction--by far. Those who are in the top 1 percent, who on average earn $1.1 million a year, they get a 4.6 percentage point reduction, which is, in overall percentage, about a 12-percent reduction in their marginal rate. They are getting 4.6 points of reduction in a 39.6-percent bracket. That is about a 12- percent reduction. The other brackets get 3 percentage points. They roughly average between 8 and 11 percent of rate reduction. So those at the very top get the very most. And the final bracket, the 15-percent bracket, where 70 percent of the American taxpayers are, gets no rate reduction--none, zero. You talk about a bill that is weighted to the very top, the very wealthiest; this bill is a testimony for campaign finance reform. Have we learned nothing from the past? We tried this same approach in the 1980s, and it skyrocketed the deficits and the debt, and it took us 15 years to end it.

Mr. CONRAD. Mr. President, some have said: But we are paying down the debt. Make no mistake, we are paying down the publicly held debt, but the gross debt is going up, because the debt to the trust funds is skyrocketing under this proposal. Let me just end. This is a chart that shows what is happening to the gross Federal debt. It is $5.6 trillion today. At the end of this period, it is going to be $6.7 trillion. The debt is not going down, the debt is going up. This bill ought to be defeated.

Mr. CONRAD

Mr. CONRAD. Mr. President, we have just passed a massive tax cut bill. I opposed that legislation. I opposed it because I believe it is fiscally irresponsible. It is not just a conclusion that I reach, but the New York Times said that overall it amounts to another gross abdication of fiscal responsibility. I wish that were not the case. I wish we could have passed a tax cut that I could have supported. I proposed a tax cut of $900 billion in the context of a budget resolution that would have preserved every penny of the Social Security surplus for Social Security, every penny of the Medicare trust fund for Medicare, that would have taken the remainder and divided it in thirds: One-third for a tax cut; one-third for high-priority domestic needs, including a prescription drug benefit, money to strengthen our national defense, and resources to improve education. And even with that additional funding for domestic priorities, we would have continued to reduce the role of the Federal Government. This $900 billion plan was not a tax-and-spend proposal. It would have continued to take down the role of the Federal Government from 18 percent of our national income to 16.5 percent of our national income-- the lowest level of Federal spending as a share of our national income since 1951. Then, with the final third, we would have used that money to strengthen Social Security for the future because we know it is not enough just to save the Social Security trust fund money for Social Security. We also need additional resources to strengthen Social Security for what is to come because every Member in this Chamber knows, when the baby boomers start to retire, the story changes from surpluses to deficits. One reason I believe this bill is fiscally irresponsible is that it is back-end loaded. It goes from a $1.35 trillion tax cut in this decade to a $4 trillion tax reduction in the second decade, right at the time the baby boomers begin to retire. I predict now that what we have put in place today will not stand. It will not stand because it is part of an overall budget approach that does not add up. It is going to have to be changed. I opposed this bill not only because it is fiscally irresponsible, but because it is fundamentally unfair. The top 1 percent of income earners in this country, people who, on average, earn $1.1 million a year, get 33 percent of the benefits. Contrast that with the bottom 60 percent of American taxpayers who get half as much. That does not strike me as fair. Additional evidence of unfairness is contained in what was done in the rate reductions that are part of this legislation. We have five income tax brackets in current law. This bill would reduce the rates for four of the five brackets. The one bracket that would get no rate relief is the bracket that applies to the vast majority of the American taxpayers. Seventy percent of the American taxpayers are in the 15-percent bracket, and they get no rate relief, none. I do not know how one justifies that. In addition to that--in addition to being fiscally irresponsible, in addition to being unfair--this bill flunks the test of stimulus. The senior Senator from Florida made the case, I think, very powerfully and very persuasively. We know the economy is weak now. We ought to provide fiscal stimulus now. Fiscal stimulus can be in the form of either tax reduction or expenditure. But what did we do? We have only $10 billion of fiscal stimulus in this year. In the Senate, we passed $85 billion of fiscal stimulus for this year. Somewhere the vast majority of it got left on the cutting room floor. It makes no economic sense. You provide fiscal stimulus when the economy is weak. And the economy is weak now. We ought to provide fiscal stimulus now. This bill does not do it. The final point I want to make is on the alternative minimum tax because currently only 1.5 million--actually somewhat less than 1.5 million--taxpayers are affected by the alternative minimum tax. That is something we passed years ago to make certain the super rich did not avoid taxes altogether. Now we are going to see, under this legislation, nearly 40 million people affected by the alternative minimum tax. As I have said before, boy, are these people in for a surprise. They thought they were getting a tax reduction, and they are going to wake up and find that not only do they not get a tax reduction, they are getting a tax increase. Under the bill passed today more than 1 in every 4 taxpayers in America are going to be swept up into the alternative minimum tax. This is not going to happen. It is not going to happen because it cannot happen, just like much of the rest of this bill is not going to happen. It is not going to happen because it is part of an overall budget that does not add up. That is the unfortunate reality of what has happened today. It is part of an overall budget plan that simply does not pass the fiscal responsibility test. I regret that. I think we could have passed responsible tax reduction, tax reduction that is fair, that is weighted more toward middle-income people in this country than toward the wealthiest among us. And I want to be quick to say, I have nothing against those with great wealth. That is a great opportunity that exists in America. That is part of what makes this country economically strong. But when we are taking the people's money, we have to make judgments about where it should go. I do not think it is fair to take the people's money and give a third of what is provided for in this tax cut to people who, on average, are earning $1.1 million a year. That is not fair. That is not right. I especially do not think it is fiscally responsible to put in place a tax cut of this magnitude in light of the obvious flaws in the budget that serves as a basis for it. That basis is a 10-year forecast, a 10-year projection that everybody in this Chamber knows is not going to come true. Even the people who made the forecast say it is not going to come true. They wrote an entire chapter in the book saying there is only a 10-percent chance it is going to come true; a 45-percent chance it is going to be less money. That forecast was written 10 weeks ago, and since then the economy has weakened. This is unwise. This is not the way we ought to do business. We ought not to lock in a 10-year plan based on a 10-year projection whose makers tell us is highly unlikely to occur. It makes no sense. This Congress meets every year. We should have passed a more modest tax cut and reserved more money for long-term and short-term debt reduction, so we could be certain we are keeping on course to reduce this national debt. Unfortunately, the gross national debt of the United States will not be reduced at the end of this 10-year period. It will not be. According to the Congressional Budget Office, the gross debt of the United States is going to be increased under this 10-year plan, from $5.6 trillion today to $6.7 trillion 10 years from now. That is an increase in the gross indebtedness of the United States. That is not the direction we should be taking. We ought to have embarked on a policy not only to pay down our short- term debt, the publicly held debt that is paid down under this scenario, but to pay down our long-term debt, our gross debt.

Mr. CONRAD. Mr. President, I ask unanimous consent to proceed for 10 minutes.

Mr. CONRAD

Mr. CONRAD. I ask for the yeas and nays.

Mr. CONRAD. Madam President, this amendment is about fairness and simplification. Under the bill before us, the very wealthiest taxpayers get the biggest percentage point reduction in their marginal rates, but the vast majority of taxpayers, the 70 million, who represent 70 percent of the taxpayers in this country, get no rate reduction. This chart I show you tells the story. The 15-percent rate, which is where the vast majority of American taxpayers are, get no rate reduction. Those at the very top get the biggest rate reduction. My amendment reduces the unfairness. It reduces the size of the tax cut for the top 3 percent of income earners. Specifically, my amendment leaves in place the first percentage point reduction for the top two tax rates but cancels the next two scheduled reductions, and it uses the savings from this change to increase the standard deduction by $1,500 for singles; for couples the standard deduction will be increased by twice this amount, or a full $3,000 when fully phased in. This amendment is about fairness and simplification. I urge my colleagues to support it.

Mr. CONRAD. Madam President, I ask for the yeas and nays.

Mr. CONRAD. Mr. President, this amendment improves our debt reduction by ending the repeal of the estate tax. The estate tax is ended just before we begin the second decade, right at the time the baby boomers start to retire and the cost of this tax bill then explodes to about $4 trillion. My amendment is simple. It continues all of the provisions to increase the unified credit so that a couple could pass $8 million with no estate tax. In addition, we preserve stepped up basis so that you pay future taxes on the basis of the value of the property when you inherit it, not on the basis of what your grandfather paid or what your father paid. I believe this is a sound amendment and one that deserves the support of our colleagues.

Mr. CONRAD. I send the amendment to the desk.

Mr. CONRAD. Mr. President, I ask for the yeas and nays.

Mr. CONRAD. Mr. President, every single plan to strengthen Social Security that has been proposed by any Member on either side of the aisle costs money. Unfortunately, we don't have the money in this budget. This bill is dramatically backloaded. It costs $1.3 trillion this decade. It costs more than $4 trillion next decade, at the very time the massive surpluses now turn to substantial deficits then. My amendment says: Take $350 billion out of this tax cut and reserve it to strengthen Social Security. We all know it costs money. We ought to reserve it now. We ought to strengthen Social Security for the future. I urge my colleagues' support.

Mr. CONRAD. I am pleased to do so.

Mr. CONRAD. Mr. President, anybody who knows and cares about Social Security reform, knows that it costs money.

Mr. CONRAD. Could we have order in the Chamber, Mr. President.

Mr. CONRAD. Mr. President, I remind colleagues 1993 was fundamentally different than this year. In 1993 we were using the reconciliation process for the reason intended. The reason intended for the reconciliation process was to reduce deficits. That was a plan to reduce deficits. This is a plan that many of us believe is totally outside the reconciliation process, totally outside of what was intended for reconciliation. This is not a deficit reduction package; this is a tax cut. It ought to be handled in the way other legislation is handled, with Senators having the right to debate and to amend. We are under a very truncated process that takes away the minority's fundamental rights in this body. If we want to talk about the institution and what is critical for the functioning of this institution, and the fairness towards the minority and minority rights, then that is right at the heart of what is occurring here today because the rights of the minority have been truncated. The rights of the minority have been abridged. The rights of the minority have been left out. That is why we are in a process in which the only way we can express ourselves is to offer amendment after amendment so we can make the case that we believe holds against this tax bill. There is a fundamental and profound difference between what is happening today and 1993, when reconciliation was used for deficit reduction. That was precisely what reconciliation was designed to be used for. It is not and was never designed to be used for a tax cut. The rights of the minority have been, in our view, limited. All of us will pay a price in the future if we allow ourselves to be turned into a House of Representatives where Senators lose their fundamental right to debate, their fundamental right to amend. I thank the Chair.

Mr. CONRAD. Mr. President, I ask unanimous consent for 3 minutes to answer the Senator from Texas.

Mr. CONRAD. Mr. President, pursuant to section 904 of the Congressional Budget Act, I move to waive the applicable sections for consideration of the pending motion, and I ask for the yeas and nays.

Mr. CONRAD. Madam President, this amendment is about fairness and simplification. If we look at the bill before us, it gives the biggest rate reduction to the highest income-tax payers of all. Only seven-tenths of 1 percent of the taxpayers are in the 39.6- percent bracket, but they get 20 percent more rate reduction than the 36-percent bracket, than the 31-percent bracket, than the 28-percent bracket. And in the 15-percent bracket, where the vast majority of taxpayers are in this country, 70 percent of the taxpayers get no rate relief--none. My amendment simply takes the additional rate relief that the very wealthiest receive, the additional six-tenths of 1 percent--that is 20 percent more than the other brackets--and shifts it to the lowest 70 percent of the tax filers in this country. It says: Let's give fairness when we are giving tax relief.

Mr. CONRAD. I move to lay that motion on the table. The motion to lay on the table was agreed to. Amendment No. 744

Mr. CONRAD

Mr. CONRAD. I have amendments as discussed, for which we just received the scoring, so the amendments are being redrafted and will be here momentarily. I would like to talk about the bill if I may, and I ask for 10 minutes.

Mr. CONRAD. I thank Senator Reid on behalf of the leadership for the time. Madam President, the New York Times said it best of all: ``More Tax- cut Follies.'' They made the point that while some of the provisions have been improved over what President Bush proposed, nonetheless, overall this bill amounts to ``another gross abdication of fiscal responsibility.'' That sums it up. That is what this tax bill is, an abdication of fiscal responsibility. Sometimes I wonder if we learn anything from history. If we look back at the Reagan, Bush, and Clinton administrations, we can go back to the time of the Reagan administration where we saw a proposal for a massive tax cut, a massive defense buildup, and an overall package that did not add up. The results were to absolutely explode the budget deficit of the United States. We went from an $80 billion deficit to over $200 billion. We quadrupled the national debt. Then President Bush came in and the deficits doubled again to nearly $290 billion. It was not until 1993, when we put in place a plan that actually raised income taxes on the wealthiest 1 percent and cut spending that we were able to get back on a path to fiscal responsibility, balancing the books. Then in 1997 we passed a bipartisan plan that finished the job that put us into surplus. Madam President, it seems we are forgetting those lessons completely. We are now headed back to deficits, back to debt based on a rosy scenario, based on a massive tax cut, based on a massive defense buildup. The numbers we have not yet seen; they are not even part of the budget resolution; that is the fatal flaw of the budget resolution. We don't have the defense numbers. We don't have the money to strengthen Social Security even though President Bush says we should. We don't have the money to fix the alternative minimum tax. We don't have the money for item after item. The reason is, that when we get all those items together, we will find that the overall package does not add up. The Philadelphia Inquirer said it well: ``Tax-slashers at Work: Once Started, They Can't Seem to Stop.'' Just like the frat brothers, the Senators are going through weird contortions. In the bipartisan mess of a bill that the committee worked on yesterday, one gimmick is to phase in ballyhooed tax breaks over periods as long as a decade. With other tax breaks, the bill does the opposite trick: Providing tax relief right away, then supposedly ending it a few years down the road. That is called backloading, and this bill is loaded with it. The bill costs $1.35 trillion in the years 2001 to 2011. But look what happens in the second 10 years. It explodes. The cost goes up to over $4 trillion. That is because item after item is back-loaded. The estate tax is one example. The cost in the first 10 years is $1.45 billion. Look at what happens in the second 10 years when they completely eliminate the estate tax. The cost goes up to $790 billion right at the time the baby boomers retire. The same thing happens with the estate tax rate. The 2011 repeal masks massive costs. We can see the cliff effect of the estate tax. It does not end there. It continues with the marriage penalty but in a different way. With the marriage penalty, they don't put it into place until the year 2004. There is no marriage penalty relief until then. Then they increase relief so it takes full effect in the year 2008. But it doesn't stop there because they have done the same thing with the alternative minimum tax. They hide backloading by sunsetting the alternative minimum tax relief right in the middle of the period. It is bizarre. They start out by providing alternative minimum tax relief, and then they take it away. What will happen with the alternative minimum tax? We are going to go from 1.5 million people being affected by the alternative minimum tax to, when this bill passes, nearly 40 million people. It is just not the back end loading that makes no sense; it is the lack of fairness. This bill we have before the Senate gives the top 20 percent of taxpayers 70 percent of the benefits. It gives the bottom 20 percent 1 percent of the benefits. It doesn't strike me as fair. But the evidence of unfairness goes on and on. The top 1 percent gets twice as much of the benefits as the bottom 60 percent. The top 1 percent of taxpayers who earn on average $1.1 million a year get 33.5 percent of the benefits. The bottom 60 percent of American taxpayers get 15 percent of the benefits, one-half as much. The evidence of the unfairness in this bill is in item after item. Perhaps the most interesting part of this bill is the various rate brackets. There are five rate brackets. Every one of them gets rate relief except one. What do you think the one is? The one is the 15- percent bracket where 70 percent of American taxpayers are; 70 percent of American taxpayers get no rate relief under this bill. But as you go up the income ladder, you get more and more generous relief. The big bucks, the big benefits go to those at the very top. The biggest, highest income folks get the biggest rate relief of all. It is not fair. We have heard discussion in this Chamber that it is a big improvement over what President Bush proposed. There is some improvement but not much. Under the Bush plan, the top 20 percent of taxpayers got 72 percent of the benefits. Under this plan, the top 20 percent get 70 percent of the benefits. The other thing that has been said about this bill is it is a stimulus to lift the economy. There is precious little stimulus in this bill. We passed in the Senate $85 billion of stimulus. What came back from conference and what is in this bill is $10 billion, $10 billion in nearly a $9 trillion economy. There is precious little stimulus in this bill. As I pointed out, this bill is flawed in even more ways. The number of taxpayers affected by the alternative minimum tax explodes under this bill. Boy, are those folks in for a big surprise. Today, 1.5 million people are caught up in the alternative minimum tax. Under this bill, at the end of the 10-year period nearly 40 million people will be affected by the alternative minimum tax. Those folks, nearly 1 in 4 American taxpayers, are not getting a tax cut. They are going to get a tax increase. They are going to have it as a result of the flaws of this bill. There has been a lot of talk that this bill is reducing the debt. It is reducing the publicly held debt. That is this red line on this chart. It will go from $3.4 trillion today down to about $800 billion. But another part of the debt is increasing. That is the debt that is owed to the trust funds of the United States. You can see that this debt is going to go from about $2 trillion to over $5.5 trillion. And the overall, the gross debt of the United States is actually increasing from $5.6 trillion today, to $6.7 trillion at the end of this 10-year period. So all the talk about paying down debt, one part of the debt is being paid down, but the overall debt is actually increasing. Here is the sad history of Federal debt. This is what has happened to it from 1950 to 1999. In 1981, the last time we followed the fiscal policy that is embraced by this bill, we saw the debt of the United States absolutely explode to $5.6 trillion, which is where it is today. At the end of this period, the gross debt of the United States is going to be $6.7 trillion. Here we are passing a massive tax cut. Shame on us. Shame on us for pushing this debt onto our kids. We are the ones who ran up this debt. This was during our time. This was on our watch. This is while we were in charge and we ran up this debt and it is going to continue.

Mr. CONRAD. I ask my colleagues to think carefully and oppose this bill.

Mr. CONRAD

Mr. CONRAD. Mr. President, the Senator from Iowa put up some very interesting charts. The one he has there now says: Tax Relief Act Makes Tax Code More Progressive. Then under that it says: First Year Tax Relief. This isn't a 1-year bill. This is a 10-year bill. That is the problem. I displayed a chart earlier about all the measures that are phased in, all the things that come in later on, that benefit the wealthiest people in our country. He puts up a chart that talks about the first- year tax relief. That is not a fair measurement of what this bill does. That is what is wrong with the analysis. This is what the bill does over the 10 years. It gives 70 percent of the benefits to the top 20 percent, and gives 1 percent of the benefits to the bottom 20 percent. It gives 33 percent of the benefits to the top 1 percent, twice as much as the bottom 60 percent receive. There is no way of disputing this. This is what the bill does. That is exactly what it does. I am not putting up a chart that just has the first year. This is not a 1-year bill. The fact is, this bill is heavily weighted to the highest income people in the country. That is a fact. The chairman of the committee showed a previous chart that talked about how much people pay in income taxes. There is something missing from that chart, too. What is missing is payroll taxes. The fact is, 80 percent of the taxpayers of this country pay more in payroll taxes than they pay in income taxes. Our friends on the other side just want to talk about income taxes. They want to forget about the fact that 80 percent of the people pay more in payroll taxes. It is when you put the full picture in front of people that you see the results and the unfairness of this proposal. That is what reveals the top 1 percent get 33 percent of the benefit but only pay 20 percent of Federal taxes. That is when you include the estate taxes, the payroll taxes, the income taxes. But they don't want to talk about all the taxes people pay. They just want to talk about income taxes because that is the only thing that is being cut here--income taxes. If we were going to be fair, we would be talking about all the taxes people pay. When we look at all the taxes people pay, we find this tax cut measure: 33 percent of the benefit goes to the wealthiest 1 percent and the bottom 60 percent only get 15 percent of the benefit. They justify it saying, the top 1 percent pay more income taxes. Yes, they do. Absolutely, I will stipulate to that. They do pay more income taxes. But they don't pay 33 percent or 35 percent of all Federal taxes. No. They pay about 20 percent of all Federal taxes. Yet they are getting 33 percent of the benefit here. It is not fair. That is why it flunks the fairness test. That is why it ought to be opposed. That is why we ought to defeat this, make it go back to committee and come out with something that is more fair to the American taxpayer. I represent a State where half the people make less than $20,000 a year. They aren't going to get any benefit. They are not going to get any rate reduction--none, zero. Are they going to be surprised. The alternative minimum tax that currently affects 1.5 million people, when this gets in place, it will affect nearly 40 million people. Boy, are they going to be in for a big surprise. I don't think this passes the fairness test. I yield the floor.

Mr. CONRAD. Mr. President, I thank the chairman and the ranking member for the way they have conducted the business of the Finance Committee. It has been, within the Finance Committee, a fair process. I publicly commend them for it. The chairman and the ranking member have both reached out to Members. They have visited us. They have asked us for our opinions. We didn't necessarily agree, but they certainly listened. The markup itself was a model of fairness. I salute the chairman for the way he conducted the markup. I was saying to my wife I don't remember a more fair markup in terms of the way it was handled. I thank the chairman for that as well. With that said, I strongly disagree with this proposal. It is a profound mistake for the country. It is a profound mistake because it is part of a larger budget package that threatens our economic security. This tax cut is part of a budget proposal that has concealed more than it has revealed. This is part of a budget proposal that is not the real budget. As a result, it misleads Members and it misleads the American people. Ultimately, it leads us into a fiscal trap that will be a trap for all of us. When I say this budget--of which this tax cut is one part--conceals more than it reveals, I mean by that, whole chunks of Federal spending that we all know are going to occur have been left out. The President is about to propose a major defense buildup. It is not in this budget. The President has said education is the No. 1 priority, but there is no new money for education in the budget. The President has said we must strengthen Social Security for the future, but there is no money in this budget for that purpose. The reason those things have been left out is quite clear: If they were included, what one finds is that the budget, with this size tax cut, would not add up. What one finds is that when you put in the funding for education, if we really believe that is the top priority and we fund it as we have voted if we follow the President's proposal for a major defense buildup and put that money in the budget, if we follow the President's suggestion to strengthen Social Security and put that money in the budget, and we put it all in one place where people can see whether it adds up or it does not, what one sees is that it simply does not. The result is a massive raid on the Medicare trust fund and the Social Security trust fund, and that will create serious problems for this country going forward. The New York Times said it well in an editorial on May 12. They commended the chairman and ranking member for improvements they have made in the bill over what the President proposed, but their conclusion was: But over all it amounts to another gross abdication of fiscal responsibility. I believe that is true. This bill, in the larger budget context, is a gross abdication of fiscal responsibility. Part of the problem is that all of this is based on a forecast that even the forecasters warn us is uncertain. Those who did the forecast, the Congressional Budget Office, have said to us: You have to understand, this is a 10-year projection. Looking back at our previous forecasts, we can tell you there is enormous variance. In fact, over the last 10 years they have been off by an average of 100 percent a year. That is how far off they have been in their previous forecasts. Some people want to believe this projection is cast in concrete. It is not. It is built on quicksand. That threatens the economic security of our country. Those who made the forecast prepared this chart. It shows in the fifth year we could have anywhere from a $50-billion deficit to more than a trillion-dollar surplus. That is the variance they project, looking back at their previous forecasts and seeing how far off they were. Then they projected those variances to this projection. They warned us in an entire chapter of their forecast how uncertain any 10- year projection is. That is the backdrop for what we do here over the next several days. To me, it counsels caution. It counsels caution on spending, on tax cuts. Let's not bet the farm that any 10-year forecast is going to come true. No company would do it; no private concern would do it; no American family would do it; but we are about to do it here in the Congress. The second critical fact people need to know: The Senator from Iowa said we are paying down all the debt there is to pay down. That is just one part of debt. He is talking about the publicly held debt. The publicly held debt, as we meet here today, is $3.4 trillion. Unfortunately, that is not the total debt of our country because in addition to that publicly held debt--that is debt held by the public-- we also have debt that the general fund of the United States owes to the trust funds of the United States. That debt is every bit as much debt as the debt held by the public. That has the same legal claim on the assets of our country as the publicly held debt. What has been missing from this debate is that the debt held in Government accounts, the debt owed by the general fund of the United States to the trust funds, is going to increase. It is going to increase from about $2 trillion in 2000 to nearly $6 trillion during this same period. In fact, when one puts the two together--the publicly held debt and the debt to the trust funds of the United States--what one learns is the overall debt, the gross debt of our country, is not going down; it is going up. The gross debt of our country is going from $5.6 trillion today--that is a combination of the publicly held debt and the debt owed to the trust funds of our country, which is $5.6 trillion today--to $6.7 trillion at the end of this 10-year period of this tax cut. That is the hard reality. The debt of our country is not going down; the debt of our country is going up. When they described this as fiscally irresponsible, the New York Times made the case that this tax bill is badly backloaded. That means the true cost is hidden in the first 10 years. The cost explodes in the second 10 years because many of the provisions don't take effect until late in the decade, so their full cost is masked. The cost in the first 10 years is $1.35 trillion, as advertised. But that is the tip of the iceberg because the cost in the second 10 years goes up to nearly $4 trillion, right at the time the baby boomers are retiring, at the time the number of people eligible for Social Security and Medicare will double. This ticking timebomb is put right in the middle of that demographic timebomb. As the Comptroller General has warned us, we are headed for a circumstance we have never seen in our Nation's history, a circumstance in which the number of people eligible for Medicare and Social Security will double, and double in very short order. That changes the budget circumstance of our country very dramatically: In this decade, we enjoy substantial surpluses; in the next decade, we face massive deficits. What I proposed, what colleagues on this side of the aisle favored, was to take a substantial part of these surpluses now, reduce the size of the tax cut, cut it about in half, and use that money to prepare for what is to come, to reduce this long-term debt. That would be a wiser course, a more fiscally responsible course, a more conservative course. The back loading is in page after page of the tax bill before us. The marriage penalty and standard deduction provisions don't take effect until 2006 to 2011. The marriage penalty, 15-percent bracket, doesn't take effect--I am told that may have been changed overnight. There are so many changes, and that is one reason some of us thought we ought to at least wait a couple of days to know what we are amending. I am a member of the Finance Committee, and I just learned this morning that apparently this is being moved up a year. It doesn't take away the point that it is backloaded. The indexation of the 10-percent bracket doesn't take effect until 2007. The final rate cut in the upper brackets takes effect in 2007. The pushback on the Pease limit on itemized deductions doesn't take effect until 2009. Repealing the phaseout of personal exemptions takes effect in 2009. The full phase-in of IRA contribution limits doesn't take effect until 2011. The full phase-in of the child credit doesn't take effect until 2011. The repeal of the estate tax doesn't take effect until 2011. This is totally backloaded. That means the total cost is hidden from view in this 10-year period. The Philadelphia Inquirer looked at this plan and wrote this editorial entitled ``Tax Slashers At Work. Once started, they can't seem to stop.'' They made this observation about the Finance Committee: Like 20 frat brothers trying to cram themselves into a Volkswagen, U.S. Senators are overstuffing their tax bill. They pointed out: Remember the outrage over the marriage penalty that affects many two-income couples? The Senate bill would only start to address this problem five years from now. By that time, the Bush Presidency--and a lot of marriages--may be over. Mr. President, I am told this may have been moved up and it may not take effect for 4 years instead of 5. I have not seen the details. It doesn't take away from the point that it is backloaded. The Philadelphia Inquirer said: With other tax breaks, the bill does the opposite trick: providing tax relief right away, then supposedly ending it a few years down the road. A tax break for college tuition is slated to die after 2005. Relief for some of those hit by the alternative minimum tax would end after 2006. Their commentary was: Sure, Congress is really going to let a popular tax break for the upper middle class die in an election. The Philadelphia Inquirer says: That is dishonest and cynical. They go on to point out: Another slow phase-in is the repeal of the estate tax over 10 years. If Congress weren't so intent on being generous to billionaires, it could afford to get more relief sooner to the parties sometimes genuinely injured by the inheritance tax: family farms and small businesses. Unfortunately, much of what the Philadelphia Inquirer says is exactly right. Here is the marriage penalty relief delayed under the bill that came out of the committee until 2006. No relief for those married couples who suffer the penalty of the Tax Code that is imposed on some who are married. There was no relief--nothing--for the first 5 years. Then it is phased in. That is the kind of back loading the Philadelphia Inquirer was talking about. Then they talked about sunsetting some provisions. Alternative minimum tax relief is one of them. The alternative minimum tax is something that will affect a dramatically increased number of taxpayers under this proposal. Currently in this country, only 1 and a half million taxpayers are affected by the alternative minimum tax. But under this bill, by the end of the period, nearly 40 million people will be caught up in the alternative minimum tax. Boy, are they in for a surprise. They thought they were getting a tax cut. Nearly one in every four taxpayers in America is going to be caught up in the alternative minimum tax--a complex calculation designed to keep the super-rich from getting by without paying any taxes, because they used excess depreciation, excess deductions, excess exclusions. They were getting, in cumulative total, unfair benefits. That only applies to 1.5 million people today. Under the tax bill that is before us, that is going to mushroom to nearly 40 million people. Does anybody really believe we are going to allow this to happen? I do not. It should not happen. It does happen under this bill, and it is another reason I believe it is misleading. What does this bill do in terms of addressing that issue? It offers some help initially, but then it ends it later in this decade. It is going to stop providing that additional assistance for the alternative minimum tax right at the time the number of people affected by it explodes. This does not pass any kind of test. It does not pass a credibility test. It does not pass a fiscal responsibility test. It does not pass a fairness test. It does not pass any kind of test. But that is what is right in the guts of this bill before us. It does not stop there because with the estate tax, it is the same thing. They hide the true cost because they put off its elimination until the 10th year. That is when they eliminate the estate tax, and then the cost explodes, but they do not capture that explosion because they do not put it in this bill. That is why the New York Times says this is fiscally irresponsible. And they are right. It does not pass the fiscal responsibility test. That is what happens to the estate tax. Under the bill from 2002 to 2011, it costs $145 billion. But what happens in the second decade that is right beyond what is captured in this bill? The cost explodes to $790 billion, right at the time the baby boomers start to retire, right at the time the Federal Government has new responsibilities and obligations that are going to be very costly to meet. And we are going to give a $790 billion cut to the wealthiest 2 percent? Is that fair? We are going to shift that obligation on to all the American people and off the wealthiest 2 percent? It does not strike me as very fair. That is not the only thing that is unfair about this bill. This bill says to the bottom 20 percent of the American people: You get 1 percent of the benefits. Those who have the lowest income in this country, the lowest 20 percent, we say to you: You get 1 percent of the benefits. The top 20 percent, the wealthiest 20 percent, we say: You get 70 percent of the benefits. That does not strike me as fair. I know our Republican friends will say the wealthy people pay more in taxes. They do. That is certainly true. But this bill gives 33 percent of the benefits to the wealthiest 1 percent, the wealthiest 1 percent who, on average, in this country earn $1.1 million a year. I am glad they do. I hope very much that every American has the chance at some point in their life to receive $1.1 million a year in income. That is terrific. That is one of the great things about the American dream. You can start with nothing in this country and you can become a person of means and do great things. You can help people through your own private resources. You can help your family. I am all for that. When it comes to the people's money--we have heard a lot about this, the people's money, let's give it back to the people. To which people are we giving it back? We are giving 70 percent to the wealthiest 20 percent. We are giving 33 percent to the wealthiest 1 percent. Is that really fair? I do not think so. I can tell you, the wealthiest 1 percent do not pay 33 percent of the taxes; they pay about 20 percent of the taxes. Our friends on the other side want to talk about only income taxes, but people do not pay just income taxes. They also pay payroll taxes. And the truth is, the fact is, 80 percent of the people in this country pay more in payroll taxes than they pay in income taxes. Yet this is just an income tax cut, and it is heavily weighted to the wealthiest among us, and it is not fair. There has been a lot of talk that it is more fair than what President Bush proposed, and that is true; it is modestly better than what the President proposed. The President gave 72 percent of the benefits to the top 20 percent. This bill gives 70 percent of the benefits to the top 20 percent. I guess we can say it is better than what the President proposed, but the larger truth is, it is not much better, and it is still not fair. I do not think there is anything that shows the unfairness of this proposal better than what happens to rate reduction at the various tax brackets. In our country, we currently have a 15-percent bracket. Those are couples who earn up to $45,000 in taxable income. That means they are earning $60,000 or $65,000 a year in gross income. Then we have a 28- percent bracket, a 31-percent bracket, a 33-percent bracket, and we have a 39.6-percent bracket. All of these brackets will be benefited by a new 10-percent rate. The new 10-percent rate simply says that a couple on their first $12,000 of income will be taxed at a rate of 10 percent. That is on their first $12,000. So everybody's first $12,000--everybody's--will be taxed at a rate of 10 percent instead of 15 percent, as current law provides. That is a benefit to every single tax bracket because everybody's first $12,000 will be taxed at a lower level. Interestingly enough, this bill also provides rate relief to the various brackets. It gives a 3.6 percentage rate reduction to those who are in the 39.6-percent bracket. In other words, the biggest percentage reduction goes to the wealthiest group, and each of the other brackets gets 3 percentage points of rate relief. Those in the 33-percent bracket, 31-percent bracket, 28-percent bracket, they get 3 percentage points of rate relief, or about 10 percent of their overall tax burden. What happens to those in the 15-percent rate bracket? They get no rate relief. They get none. Everybody else, every other bracket gets rate relief, but not the people in the 15-percent bracket. Is that fair? I do not think so. How many people are in that 15-percent rate bracket? This is where the real unfairness of this bill is revealed because that is where 70 percent of the American taxpayers are. They get no rate relief. That is where 69 percent of the small businesses are. They get no rate relief. All of the talk that we are going to give marginal rate relief because it is the key to encourage savings and investment, but it only applies to the top rates. It does not apply to the 15-percent rate because this bill does not give them rate relief. It does not give the 70 percent of the American taxpayers rate relief. It does not give the 67 percent of small businesses rate relief. It reserves rate relief for those in the highest brackets. There is something wrong with this bill, and what is wrong is it is not fair. This bill has been sold repeatedly as an economic stimulus bill, one that can provide some lift to our economy in this period of weakness. That is an interesting theory and one I support. I believe we ought to give economic stimulus in this year, and we passed it in the Senate. We voted for $85 billion in tax relief in the year 2001. What is in this bill is not the $85 billion for which we voted. Oh, no, the stimulus in this package, this $1.350 trillion tax cut, is $10 billion. There is almost no stimulus out of this big package for this year. For those who told people we are going to stimulate the economy by giving people money back in their pocket this year, this bill doesn't do it. We voted for $85 billion of stimulus this year in the Senate by an overwhelming vote. That is not what is in this bill. They cut that back down to $10 billion in relief this year. I go back in history and look at the record. We had the same theory at work in the 1980s. That theory was we could have massive tax cuts, we could have massive buildup in the defense spending, and it would all add up. It did not add up. The result was an explosion in debt and deficits. We quadrupled the national debt, saw a dramatic increase in budget deficits, and under President Bush it got totally out of hand. We had a budget deficit of $290 billion the last year of his administration, and in 1993 we passed a package that raised income taxes on the wealthiest 1 percent and cut spending. That package brought us back to balance. That brought us back to fiscal sanity. That brought us back to getting our fiscal house in order. That kicked off the longest economic expansion in our Nation's history. We are about to go back to this theory. We could have a massive tax cut, coupled with a massive buildup in defense expenditure, and somehow it will add up. History tells a great deal. This chart shows the trends in spending and revenues from 1980 to the year 2000, a 20-year snapshot. The red line is the total outlays, the blue line is the total revenues. We can see what happened the last time we had this theory at work. In 1981, a massive tax cut was passed, massive increase in defense expenditure, as this President is proposing. That is what happened to the expenditure line. It went up. Here is what happened to the revenue line with the massive tax cut: It went down. The deficits that were already too large exploded; the national debt exploded. It was only in 1993 when we passed a plan to reverse these lines, to reduce outlays, to increase revenues, that we were able to balance the budget and start reducing the national debt, that we were able to get our fiscal house in order and to put our country on a course to strong economic growth--the greatest, strongest, economic growth in our Nation's history. And now we are going to retest the theory that was tried in 1981: a massive tax cut combined with massive increase in defense expenditure. I pray we don't have the same result. Back in the 1980s, we had time to recover. But now we don't. We had time to recover in the 1980s because the baby boom generation was still relatively young. But now the baby boom generation is aging and they will retire in this next decade. Then everything changes. These surpluses turn to deficits. That is what, to me, counsels caution, that counsels a smaller tax cut, one that is more fairly distributed, one that passes the fiscal responsibility test, one that passes the fairness test, one that does not put America in jeopardy of exploding this debt. Here is where we are on the growth of Federal debt. In 1980, we had a gross Federal debt of $909 billion. Today, as I said earlier, we are up to $5.6 trillion. Under this plan, the debt is going to continue to go up. It will go up to $6.7 trillion. I believe that is a mistake. At this time of surplus we ought to devote more of these resources to debt reduction. We ought to have a tax plan that is smaller, that takes the difference and puts it into strengthening our future economic position by reducing debt now when we have the opportunity, when we have the chance. I believe the tax bill before the Senate flunks every test. It flunks the fiscal responsibility test because it is badly backloaded and because the national debt will grow. It flunks the fairness test because it gives the overwhelming part of the benefit to the wealthiest among us. I can't justify it. I don't think it is fair. We are going to vote on this, perhaps on Monday, maybe as late as Tuesday. This is going to be a defining vote. It is an important vote. It will make a real difference to the future of this country. I regret very much the budget resolution passed by a slim vote in the Senate, 53-47, that put this scenario in place. But it did pass. That is where we are. The great thing about our country is we are a democracy. We decide by votes. The votes of the elected Representatives of the people have decided this will be the course we pursue. I believe this bill is a profound mistake, that it would be far wiser to reduce the size of the tax cut initially, by about half as much as what is proposed, maybe a little more than half, and then wait to see how events unfold. This is an uncertain time. We can see it in the markets; we can see it in unemployment; we can see it in productivity growth not being as strong as we have previously seen. All of that, to me, counsels caution. I hope my colleagues seriously consider opposing this plan. I think it is a risky plan, that it is a dangerous plan. Does that mean it wouldn't work out under any circumstances? No. I think we have to be very direct and very clear. It may work out just fine. It may. Things may turn around. Things may improve. We may have more revenue than we are anticipating and that this tax cut is fully justified--not the fairness of it, but the amount of it. No one can know that. No one can know what the next 10 years hold. We ought to be more cautious. We ought to be more conservative. We ought to reserve more of this forecasted surplus for debt reduction. We ought to reserve more of it to strengthen Social Security for the future. We ought to prepare for the baby boom generation. Then if things work out as forecasted, or if they are better than forecasted, which we all hope will be the case, we can have a tax cut of this size, maybe even bigger. But we shouldn't lock it in now based on an uncertain forecast at a time when the economy is shaky. And we ought not to put in place a tax cut that doesn't give a lift to this economy when it is weak. We ought to provide stimulus now. We can afford to provide a $85 billion tax cut this year and get that money into the pockets of the American people now to strengthen the economy. That is not what this bill does. That is what we voted for in the Senate, but that is not what this bill does. Only $10 billion of this tax cut is effective this year, the year we are in, the time when we know we have economic weakness. I thank my colleagues for this time. I say to the chairman of the committee, thank you for the fairness with which you have conducted the debate. That is the strength of America. We have different points of view. That doesn't mean we don't respect each other. I have great respect for the Senator from Iowa. I work with him frequently. I have great respect for the Senator from Montana. We work together frequently. But on this question we have a principled and profound difference. The great thing about America is we have a chance to express those differences and to vote on them. When we are done, when that is finished, we will go on and again work together on measures that are important to our country and to our individual States. I yield the floor.