Paul Kanjorski

Mr. KANJORSKI

Mr. KANJORSKI. I just spent 6 days a week ago traveling across America with the President, and I went to Hazard, Kentucky; I went to the delta of Mississippi; I went to East St. Louis in Illinois; I went to the Indian tribes of South Dakota; the hispanic community of Phoenix, Arizona; and to Watts in Los Angeles. And I went there trying to find out what policy the government could pursue to help these people, and I came away with a lot of observations. One observation is regardless of how many people tell us that this economy has helped all people, it has not. This economy has been very helpful to the upper 5, 10, 15, 20 percent of the American population. We are part of that population.

Mr. KANJORSKI. If we enact this tax code, most of us, and I think when I say most of us, most of the economists agree, we will be out of a balanced budget in a very short period of time.

Mr. KANJORSKI. We have not lived in too many balanced budgets.

Mr. KANJORSKI. The mechanism on taxes, first of all, only apply to the change of the rate on personal income tax, not to the estate tax, not to any of the others. They are set. Once they are passed they are set. But also every time the Federal Reserve would increase interest rates by 1 percent, it costs the American government $55 to $60 billion. Every 1 percent. To see interest rates go up to 8 or 9 percent, as has happened many times in your lifetime and mine, if that were to occur--

Mr. KANJORSKI. Your problem is and what Mr. Greenspan argued to us the other day in his appearance on the Humphrey-Hawkins report, is that at some point when this economy starts turning down, you are going to have to provide a mechanism to encourage it to return from recession to recovery. That is when you cut taxes. So we may have to go into deficit spending when that happens. But why would you spend and put more money out for consumption when we cannot create any more product and we do not have any more people to employ? So what we are all worried about is through this type of fiscal policy, you are going to have more money chasing the same amount of goods and the same amount of people that are available and start to exacerbate inflation. We have a tremendous impact on fiscal policy in the policy of taxation. But we have an independent body downtown called the Federal Reserve, and they control the monetary policy of this country. Basically Mr. Greenspan says that if you shove more money out there to buy more goods and there are not those more goods, the price of those goods are going to go up and the cost of that labor that is limited is going to go up, you are going to cause inflation and we are going to have to raise the interest rate to counter, with monetary policy, that inflation. Let us look at what that does.

Mr. KANJORSKI. No. Artificially for a year in capital gain, you will get more capital gains revenue in because it will exacerbate the market.

Mr. KANJORSKI. Because that money is a revenue in and it buys bonds.

Mr. KANJORSKI. From my standpoint clearly not until we reduce the increase in debt back to the Reagan years. I would like to go to zero.

Mr. KANJORSKI. No, it is always going to do that as long as we keep running deficits, as we have run deficits. Next year if the deficit does not go down and it goes up, you are going to need more interest for the debt. It will keep going up. Every $100 billion, you are going to need $6 billion more, every year ad infinitum. Let me give you an example what we are all worried about. I join guys like Alan Greenspan. I cannot say he favors or believes in everything I believe, but we do agree on one point. He says this is not the time to cut taxes. This is the time to pay off the debt.

Mr. KANJORSKI. We are down to 4.2 percent and right now if you go to some employers or some workshops, you find the level of performance of employees has fallen because we are tapping the very minimally trained people in our force, which is very healthy, but sometimes services and activities fall as a result of that because we are getting people in the workforce that never worked before. That means we are at maximum capacity of production and we are at maximum employment. Now, what a tax cut does--

Mr. KANJORSKI. The estate tax?

Mr. KANJORSKI. No.

Mr. KANJORSKI. We know that Benjamin Franklin put an accumulation, I do not know whether it was $100--

Mr. KANJORSKI. You are claiming by inheritance to do away with the rule on perpetuity in families. If you cannot do it in a trust estate.

Mr. KANJORSKI. You and I are lawyers. You know the rule against perpetuities. What is the rule against perpetuity?

Mr. KANJORSKI. How is this country going to imbue its free market system and its democratic government around the world if people think there is no way that we have equality? That is not to say we should confiscate this wealth.

Mr. KANJORSKI. Sure. We can index that. Secondly, we can certainly raise the exemption a great deal so that the hundreds of thousands of Americans that have become millionaires in the last 6 years under the Clinton administration do not lose what they have earned over those years. I can understand that. We want to encourage people to contribute and to make wealth, but what we do not want to do, it seems to me, and I would like to argue this point, I think we have to find a mechanism that one great man can come along in a family and then for the next 200 years of his survivors, contributing nothing, can end up being the wealthiest people in the world. I do not think we want to do that. I heard another figure today that impressed me and why we have to think about this. It is not pressing today that we think about it, but as Americans, to have public policy. The wealth of three Americans, three of our wealthiest Americans today, are greater than 600 million people living in the world today. Three people have the accumulated wealth of 600 million.

Mr. KANJORSKI. It all depends. If we want economic kings or czars in the world.

Mr. KANJORSKI. My argument is, I do not know how they would do, but I think that is open to a very strong argument.

Mr. KANJORSKI. No, no, no. Because his children are not going to have an estate tax.

Mr. KANJORSKI. Without an estate tax, that growth will constantly compound ad infinitum. So that if you carried that to the extreme, you get to the Benjamin Franklin example, that all the money in the world would be owned by one person.

Mr. KANJORSKI. I think the estate tax certainly should be adjusted for small businesspeople, for farmers and for people that are in net worths of even a couple of million dollars. But let me ask you this. Assume that an individual has a net worth of $100 billion and assume that person has a life expectancy of 45 years, and if there is no estate or income tax, what do you think that person's accumulation of wealth will be and the next generation of that wealth in perpetuity? What am I suggesting? If you apply that formula to just Bill Gates, and I hate to cite Mr. Gates because he has made a great contribution to America, but I am sure he is already thinking that because he has indicated that he does not want to keep that in a family. But if you did apply it, probably by his 75th or 80th birthday, he will have a net worth value, at just growth of 10 percent a year, of $2 trillion.

Mr. KANJORSKI. No and yes. Like all things, there are not simple answers. I wish there were.

Mr. KANJORSKI. Absolutely. I tell you right now, if you reduce the capital gains tax in 1999, you will have more revenue in 2000. Why? Because everybody that has had their stock go up 100 percent or 200 percent in the last 4 years, they are not going to be stupid. They are going to sell and pay less taxes than they would this year and take a benefit, so you are going to get that up-front tax revenue.

Mr. KANJORSKI. Absolutely.