Orrin Hatch

Mr. HATCH

Mr. HATCH. Will the Senator yield on that point?

Mr. HATCH. It does.

Mr. HATCH. Mr. President, this has to be one of the most hypocritical White Houses in this century. And that is really saying something. Frankly, I think it is abominable, absolutely abominable. And my colleagues on the other side of the aisle are attempting to retry Mr. Dale right here in the Senate. Senator Levin, the distinguished Senator from Michigan, is even suggesting that Billy Dale should have been found guilty. Fortunately--fortunately--our system calls for a more equitable fair process. Mr. Dale has been tried by a jury of his peers, and he was acquitted in less than 2 hours. I think there is a principle called double jeopardy. I am really amazed that after this man was smeared by the White House--for greedy purposes, to help their buddies, the Thomasons, and their relative, Ms. Cornelius--was put through an abysmal trial that cost him $500,000. And this outfit is acting like something should not be done. I found the White House critical in this issue, and that is an understatement. The fact is, these people were smeared. They were treated improperly. They were abused. The FBI was abused, and it was all done for the purposes of greed, so they could take care of their buddies. The fact of the matter is, if you look at what has happened here, it is just pathetic. A memorandum we got from the White House admits to the wrongdoing: You all may dimly remember the Travel Office affair in which a number of White House staff, many immature and self- promoting, took impulsive and foolhardy actions to root out problems at the beginning of the Clinton administration and gallantly recommended they take over its operation. Those comments were from the White House itself. Now, let me read from the Watkins memorandum. This is an interim White House memorandum. I ask unanimous consent to have this printed in the Record.

Mr. HATCH. Will the Senator yield? I will move to table the Reid amendment, but it would be a vote up or down.

Mr. HATCH. Fine with me.

Mr. HATCH. You are going to filibuster the bill over that issue? This is legitimate. You filed an amendment; we filed a second-degree amendment.

Mr. HATCH. The Justice Department was not subpoenaed for that document. If anybody was, it was the White House. Why would they have that document?

Mr. HATCH. The parliamentary situation is that the Reid-Levin amendment has been filed. We filed a second-degree amendment. Their amendment would go to the Court of Claims. Frankly, I do not see any reason why, if we went on my amendment, why you have to have a vote on your amendment.

Mr. HATCH. And the Reid amendments, back to back, following the end of the debate. Let me say this: The proponents have taken 2 hours; I believe I can finish in about an hour, and I will try to do it in less time than that, but I do have to rebut what they have had to say because I think it has been outrageous.

Mr. HATCH. I will be happy to yield for a question, and then retain my right to the floor.

Mr. HATCH. I ask unanimous consent that reading of the amendment be dispensed with.

Mr. HATCH. But you do not know?

Mr. HATCH. I suggest the absence of a quorum.

Mr. HATCH. I appreciate my colleague yielding. My question is this. I know the Senator did not get it from the White House directly or from the Justice Department directly, because the Senator told me where he got it. The Senator got it from the House of Representatives, which I presume whomever they got it from got it from the White House or the Justice Department. Those are the only two places it could have been obtained. I am not accusing the Senator from Nevada, although I question--I question--whether a document that so one sided should be used especially a document that is confidential. I question whether that sort of document should be used on the floor of the Senate.

Mr. HATCH. How much time is remaining?

Mr. HATCH. Mr. President, let me just say a few words, and then I will again yield the floor. I would like not to use all of my time, if my colleagues are willing to yield back. The distinguished Senator from Michigan has repeatedly stated time and time again that Mr. Dale put money into his own account. No one disputes that. That is the way it was done through the years, and there was nothing illegal about doing that, either. The White House Travel Office is run for the benefit of the White House and the media. As part of that job, Mr. Dale had to have access to funds on short notice. No one has complained about that fact. Most importantly, the media did not care that Mr. Dale put their money, the media's money, into his account. However, Mr. Dale does deny, and the jury agreed, that he did not steal or convert that money or those funds, and was found not guilty of the charges that were levied against him. In fact, one of the distinguished members of the media testified for him, Sam Donaldson, one of the most well-known people in the press today, a person for whom I have a lot of respect. The fact of the matter is that the Justice Department can indict anybody they want to. Grand juries generally do what the prosecutors tell them to do. That is no big deal. I find it unconscionable that after having been tried, having incurred legal expenses of half a million dollars, and then having a jury of his peers acquit him that my colleagues here on the Senate floor are suggesting that they think Mr. Dale is still guilty. I do not find that in good form. Frankly, it really is a sin, especially when you go to the real facts of how this man and his partners, his colleagues in the Travel Office, were screwed by the White House, for greedy purposes, by people who just got the White House, thought they had total power, and wanted to move their friends into the lucrative Travel Office business. I am specifically speaking of Mr. and Mrs. Thomasson and a personal relative of the President. Not only did they do that, but they even used White House counsel to intimidate the FBI in this matter. They did an inadequate accounting in this matter. It was anything to get rid of these people so they could put their cronies into this lucrative position. These people had served the White House for years, various Presidents, and had done so with the respect of all prior White Houses. The White House itself, in the memo I read earlier, found in the material sent by the White House, said they had messed this up, and they had acted improperly. This is from the White House: You all may dimly remember the Travel Office affair, in which a number of the White House staff--many immature and self-promoting--took impulsive and foolhardy actions to root out problems at the beginning of the Clinton administration and to then gallantly recommend that they take over its operation. That was straight out of a document provided by the White House. The fact is that I don't think anybody who looks at this fairly could deny that these people deserve to be treated fairly. This is a question of fairness. It is a question of justice. It is a question of making amends for a White House that acted improperly, and did so, for the most part based on personal greed. To clarify the record, I have done some investigation in the interim period here. I want to discuss, for a minute, the exposure of the plea agreement and the prosecution memo. I believe these are the accurate facts. We have checked with the parties concerned. The White House called us and said they were not responsible. I don't want to accuse the White House. I just said it has to be the Justice Department or the White House, one or the other. That is all it could be. In fact, the plea agreement was leaked from the Department of Justice or the White House to U.S. News and World Report. In addition, the Department of Justice, when they did produce that document to Chairman Clinger's committee, failed, in violation of their own regulations, to treat that document in a sensitive and confidential manner. The second document, the prosecution memorandum, was produced after the trial to the House of Representatives. Once again, someone on the Democrat side of the House of Representatives leaked this very confidential memo. Once again, it is my contention that this Administration and their friends in Congress would do anything to harass Mr. Dale. It is hypocritical. It is hypocritical for the White House to take care of their own people and not be willing to right this wrong. I can't imagine anybody who looks at the facts, clearly, coming to any other conclusion other than that this is an injustice to these people, a terrible ordeal to Mr. Dale and his family, and it ought to be rectified. That is what the Congress is trying to do at this point. That is certainly what I am trying to do. I think that is what any fair-minded person would try to do. To come in here and make a case that they don't believe that Mr. Dale was innocent, after he was proven innocent, after a jury of his peers found him to be innocent, after members of the media, whose money was involved, testified he was innocent, is pretty astounding to me. Once again, I oppose the motion of the Senator from Nevada to strike the language to reimburse the legal expenses of the seven White House Travel Office employees who were victimized by the Clinton administration for nothing more than political favoritism. The only crime that Mr. Dale and his colleagues committed was having the bad fortune of holding a job which political cronies of the White House wanted. The politicization of the Department of Justice and the FBI in bringing numerous investigations, and finally a bogus prosecution against Mr. Dale, is unconscionable and it should not be tolerated. My colleagues on the other side of the aisle claim that such a payment is unprecedented, in response to which, I say, the circumstances by which Billy Dale was persecuted and smeared, and the others fired, is unprecedented. It deserves unprecedented treatment and resolution. And it should be treated as such. This is a meritorious case. If I have ever seen one, this is one. What was done to these people should never have occurred in this manner. House Republicans and House Democrats recognize this fact. Why can't Senate Republicans and Senate Democrats recognize this fact? I think everybody in this body really knows this to be the fact. If we in Congress are to reimburse legal fees on a case-by-case basis when the case merits it, then that is a good thing. I have never seen a case more worthy than this particular case. Now, there is no reason to go to the court of claims in this matter. Let's just do what is right. There is no doubt in my mind that part of the reason why our colleagues on the other side want the court of claims to decide this matter is so they get it beyond the election. Frankly, this should not involve the election. This is doing what is right. If I were the President, I would say, if you could get rid of this, do what's right, pass the bill, and let it be forgotten. But I will tell you some people who are never going to forget this, even if this bill passes and the President signs it into law, and that is Billy Dale and the people with him. No amount of reimbursement of attorney fees, no amount of compensation, no amount of money, compensatory, punitive, or otherwise, will make up for what they have been through. I can tell you right now that Billy Dale undoubtedly has lost 8 or 10 years of his life because of this ordeal, and so would anybody in this body. I want you to know that if we have any self-respect at all, this body will do what is right here. I am asking my colleagues to do what's right here. I hope there are some on the other side that will see their way clear to do what's right in this matter. That is what I ask. If my colleagues are prepared to yield back their time, I will yield back mine.

Mr. HATCH. I will reserve the balance of my time then.

Mr. HATCH. What I said was that somebody from either the Justice Department or White House leaked it to the U.S. News & World Report before Chairman Clinger asked for this material.

Mr. HATCH. The U.S. News & World Report.

Mr. HATCH. Would the Senator yield on that for just a question?

Mr. HATCH. I will let it go then.

Mr. HATCH. Can we ask unanimous consent that the 15 minutes, from 9:30 to 9:45 before the vote, be divided equally between Senator Reid and myself or Senator Shelby?

Mr. HATCH. As I understand it, there will be 15 minutes divided equally, and I think that is the way we should go.

Mr. HATCH. The media has never objected. The point I was making is the media, when they knew about it, never objected--never objected at any time. And, in fact, one major representative of the media testified--

Mr. HATCH

Mr. HATCH. Mr. President, I rise today in opposition to the amendment from the Senator from North Dakota. Mr. President, this is another one of those amendments that sounds so easy, so simple, and so straightforward, that it seems that every member of this body should be immediately jumping up on his or her feet and agreeing with what the distinguished Senator from North Dakota is saying. I only wish our world were as simple and the problems so easy to solve as the proponents of this amendment would have us believe. However, today's world is not very simple, especially when we are discussing the world of international business and the tax law. Unfortunately, the assumptions upon which this amendment are based are just plain wrong and the result will be to punish companies for looking out for the best interests of their employees and stockholders. First, let me make it clear, Mr. President, that I have no doubt that the Senator from North Dakota and his supporters are very sincere in their beliefs about this issue, and that the amendment is well intentioned. However, based on the real world that we live in, the amendment is both unnecessary and will prove to be counterproductive. As I understand the amendment, it is based on S. 1597, which the Senator from North Dakota introduced this past March. This bill would deny what my friend from North Dakota calls unwarranted tax breaks to U.S. companies that set up manufacturing operations in a foreign country and export goods from those operations back into the United States. In the floor statement that accompanied the introduction of S. 1597, the Senator from North Dakota implies that a large number of American companies are abandoning U.S. soil and removing their operations, lock, stock, and barrel, to other locations on the globe where they can find cheaper labor and lower taxes. As a result, goes the argument, American jobs are being lost in the process. And, according to the Senator from North Dakota, to add insult to injury, our tax code is rewarding such behavior with special tax breaks. S. 1597, and the amendment before us, is designed to end what he calls unwarranted tax breaks and punish those supposedly unscrupulous companies that are allegedly taking unfair advantage of the rules to gain profit for themselves at the expense of American workers. Well, Mr. President, at first blush, who wouldn't be in favor of cracking down on such awful practices and unfair tax breaks? The only problem is that the scenario set out by the Senator from North Dakota does not reflect what is going on in the real world. It is an oversimplistic solution to a misidentified problem. In the world as oversimplified by the proponents of this amendment, U.S. companies are abandoning loyal American workers to save a few dollars an hour with cheap overseas labor in tax haven countries. In the real world, Mr. President, this is simply not the case. At least two-thirds of the investment and sales of foreign subsidiaries of U.S. companies are in countries where the average labor cost is higher than in the United States. Moreover, the average tax rate paid by U.S. multinational companies is lower in the United States than it is outside the United States. More than 75 percent of all imports to the United States from U.S.-owned foreign subsidiaries is from developed nations, where taxes typically are either higher than or similar to the U.S. rate. While it is true that some U.S. companies have set up manufacturing operations in other countries with lower labor costs, they have generally done so in order to stay competitive with other companies in the same industry that have cheaper labor costs. We live in a global economy, Mr. President. Many products, especially those in the high technology industries, can be as easily assembled in Malaysia as in California. When U.S. companies have taken their low- skill assembly operations overseas, they have done so as a matter of survival. In other words, any jobs lost to Americans by a move of an assembly plant overseas would most likely have been lost anyway--and probably then some. Companies that go out of business because they are no longer competitive pay no wages and create no new jobs and pay no taxes. Companies that can successfully compete in the world marketplace most often expand employment, add security to U.S. workers, and contribute to the U.S. tax base. In the world as oversimplified by the proponents of this amendment, U.S. companies are moving their manufacturing operations to other countries, only to export the majority of the product back to the United States. In the real world, Mr. President, again, this is simply not the case. In 1993, 66 percent of the sales of U.S. foreign subsidiaries were made to customers in the foreign country, 23 percent were made to customers in other foreign countries, and only 11 percent were exported back to the United States. These data show that one of major real-world answers as to why U.S. companies set up manufacturing operations overseas is to be closer to their customers. Many customers demand a local presence of their supplier. Moreover, as a practical matter, local conditions often dictate that the U.S. company manufacture locally in order to be able to take advantage of the business opportunity in that country. For example, how could U.S. software manufacturers sell their products abroad without local operations to customize and service the software? We have seen the same thing happen in the United States, where foreign automobile manufacturers have moved their operations here in order to be closer to their markets. Contrary to what the Senator from North Dakota is asserting, there are often a number of benefits to the domestic job market when a U.S.- based multinational company sets up a subsidiary in a foreign country. The 1991 Economic Report of the President notes that ``. . . U.S. direct investment abroad stimulates U.S. companies to be more competitive internationally, which can generate U.S. exports and jobs. Equally important, U.S. direct investment abroad allows U.S. firms to allocate their resources more efficiently, thus creating healthier domestic operations, which, in turn, tend to create jobs.'' I would also note, Mr. President, that the overseas business operations of U.S.-based multinational companies contributed a record net surplus of $130 billion in 1990 to our balance of payments. This number has very likely gone even higher in the years since 1990. In addition, these U.S.-based multinational companies have been responsible for significant employment in the United States. Much of this employment is generated by the foreign operations of these corporations. For example, in most cases, the research and development work that leads to the assembly operations overseas is performed right here in the United States. Let's look again at the software industry, which is very important to my home state of Utah. Additional sales in foreign countries, generated by subsidiaries of U.S. software companies, lead to increased employment in the United States to support those sales and to continue the research necessary to improve those products. Now, Mr. President, let's discuss just exactly what this amendment would do. At the heart of the so-called tax break that the Senator from North Dakota is trying to partially eliminate is the long-standing tax principle that says a taxpayer doesn't have to pay tax on income until that income is received. One example of this concept that individuals run into every day is the fact that we do not have to pay taxes on unrealized capital gains on property until we sell that property. For instance, if a taxpayer holds 100 shares of stock that he or she bought 20 years ago at $10 per share, and that stock is now worth $100 per share, our tax code does not tax that individual until he or she actually sells the stock and realizes the gain. We have a similar principle in place that applies when a U.S. company sets up a subsidiary in another country. Under the tax law, with some exceptions, the U.S. company does not have to pay tax on the earnings of the foreign subsidiary until the money is actually returned to the U.S. parent. This principle is commonly known as deferral because the tax is deferred until the earnings are repatriated to the United States, much the same as the tax is deferred to an individual on a capital gain until the sale is accomplished and the gain is realized. What the amendment before us would do is to end deferral to the extent that income is earned on goods shipped back into the United States. What, one might ask, is wrong with this? Wouldn't this be effective in preventing U.S. companies from uprooting their domestic manufacturing operations and moving them overseas? Mr. President, I submit that there are several major problems with this proposal and that it would not be effective. Indeed, I believe this proposal would be counterproductive and result in fewer U.S. jobs. The amendment goes way beyond the problem being described and applies where there is no indication of alleged abuse. For one thing, there is no provision in the amendment to limit the loss of deferral to those situations where actual U.S. employment has been displaced. Indeed, the amendment doesn't even require that there be a showing of increased foreign investment or reduced U.S. employment. Thus, any U.S. company with existing foreign operations could be penalized, even if no U.S. plants closed and even if the U.S. employment actually increased. In addition, this amendment would add a great deal of complexity to an already mind-numbingly complicated part of the Internal Revenue Code. The determination of ``imported property income'' as required by the amendment would require a whole new set of assumptions and recordkeeping, all of which adds to the huge compliance burden already faced by all taxpayers. Moreover, the Internal Revenue Service would have to add more trained personnel to audit this provision, and this at a time when Congress and the American people are demanding cuts in IRS funding. The provisions in the amendment calling for a new foreign tax credit basket would also add more complexity and unfairness from possible double taxation. The administrative expenses of complying with these provisions could easily outweigh the amount of revenue collected from this amendment. Finally, Mr. President, this provision is not likely to achieve its goal of retaining U.S. jobs. Many countries with wages lower than those in the United States also have high corporate income tax rates. Loss of deferral in these countries would not result in any extra U.S. tax liability because the U.S. tax would be offset with the foreign tax credit for income taxes paid in the foreign country. Additionally, because this amendment does not affect the major reason that U.S. companies establish foreign subsidiaries, which as I mentioned is to be closer to its customers, this change would only punish companies that try to better compete in a world market. These firms will still take whatever action is necessary to compete globally. But, if the U.S. begins to punish them for being responsive to world competition and for taking advantage of international business opportunities, the result might be that some companies could move all operations out of the United States to reduce the onerous results of this amendment. At the very least, the increased cost of complying with these unnecessary provisions would leave less money available for companies to expand and create more U.S. employment. In the real world, Mr. President, multinational companies are making business decisions based on a number of economic factors, only one of which is the tax consideration. This amendment tries to simplify a complex world and solve a problem without realizing the real causes of the problem. As a result, the solution doesn't fit and it simply will not work. As a final note, Mr. President, it is important to note that this amendment does not belong on this bill. As my colleague from North Dakota well knows, this is a tax provision that can only be considered, under the U.S. Constitution, on a revenue measure originating from the House of Representatives. The underlying appropriations bill is not such a measure. Therefore, if the Senate were to make the mistake of passing this measure, the House would undoubtedly exercise its prerogative and send this bill back to the Senate under the so-called ``blue slip" procedure. This, of course, would only delay in getting an important appropriations bill passed. I urge my colleagues to oppose this perhaps well-intentioned but seriously misguided amendment.