Jon Kyl

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent to speak for 15 minutes.

Mr. KYL

Mr. KYL. I wish to talk about the so-called Ending Offshoring Act, a bill that the Wall Street Journal suggested this morning should be called ``The Send Jobs Overseas Act.'' I ask unanimous consent to have that article printed at the conclusion of my remarks.

Mr. KYL. Mr. President, this bill provides a temporary payroll tax holiday for multinational U.S. employers who hire a new U.S. worker. But not just any worker. To be eligible, the business must prove that the employee is replacing an employee who had been performing a similar job abroad. The bill, which is not fully offset, proposes to partially pay for this tax holiday for multinational corporations with new tax hikes on multinational corporations--tax hikes that could undermine job creation in America. How would the tax increases be applied? The bill would disallow tax deductions associated with expanding operations overseas and would limit tax deferral of income U.S. multinational companies earn abroad by selling products in the United States. Currently, when a foreign subsidiary of a U.S. parent company earns such income, it is not taxed by the United States until it is sent back to the U.S. parent company. Even though most foreign countries only tax income earned within their borders, the U.S. taxes income earned anywhere in the world by U.S. citizens and companies. The deferral policy aims to keep U.S. companies competitive with their foreign counterparts, since we also have the second highest corporate tax rate in the world. So deferral is not a ``tax benefit,'' as some of the bill's proponents claim. This bill wrongly assumes that all foreign expansion stems from ``greed'' and that foreign expansion only hurts American workers. I will explain why that's simply not the case and why this bill could, in fact, hinder job creation in America and actually send American jobs overseas permanently. The first point I want to illustrate is how limiting tax deferral could hurt American jobs. Limiting deferral would subject U.S. multinational companies to higher taxes, cutting into their profits and giving foreign competitors a huge advantage in the global marketplace. We have to keep in mind: American companies with overseas operations support and create U.S. jobs. A new paper from the McKinsey Global Institute shows that America's multinational companies make huge contributions to our economy: They account for 19 percent of all private-sector jobs in the United States, 25 percent of all private wages, 48 percent of total export goods, and 74 percent of nonpublic research and development spending. In fact, Johnson & Johnson estimates that about one in five U.S. employees hold jobs that support their international operations. Let me provide an example of how foreign expansion can create jobs here at home: A few years ago, PepsiCo embarked on an aggressive expansion program in Eastern Europe, largely by buying up existing bottlers and snack chip producers, upgrading plants and equipment, and improving distribution while increasing their marketing efforts in these countries, achieving large gains in sales as a result. As a result of this expansion, PepsiCo's employment abroad increased, but that did not cost any Americans their jobs. Pepsi merely took over existing plants and their workers. In fact, PepsiCo's foreign expansion created jobs here in the United States. To support their overseas operations, the company needed to expand their logistics, marketing, and other support operations, all well-paying jobs at their U.S. headquarters. As a result, expanding operations abroad increased employment here in the United States. The advisers for the McKinsey report provided the jobs statistics that show the correlation between companies' expansion abroad and employment here at home: From 1988 to 2007, employment in foreign affiliates rose to 10 million from 4.8 million. During that same period, employment in U.S. parent companies rose to 22 million from 17.7 million. The reason is, as the Pepsi example shows, that much of the expansion abroad by U.S. multinationals has complemented, rather than replaced, U.S. operations. In 2008, a Washington Post editorial highlighted a study that made this same point. The study looked at U.S. manufacturers that expanded abroad between 1982 and 2004 and, as the Post wrote, ``found that they tended to grow domestically as well, hiring more U.S. employees, paying them more and spending more on research.'' The study concluded that ``the average experience of all U.S. manufacturing firms over the last two decades is inconsistent with the simple story that all foreign expansions come at the cost of reduced domestic activity.'' New taxes could encourage some companies to locate more or all of their operations abroad, where they could remain more profitable, since many countries do not tax income earned outside their borders. That could really happen. There is nothing that says corporations have to be located in the United States. U.S. multinational corporations will have little incentive to invest and hire here if tax policy prevents them from realizing attractive returns. The McKinsey report cautions that policymakers have to be diligent about enacting policies that maintain U.S. economic competitiveness: The United States retains many strengths that make it one of the most attractive markets for multinational companies' participation and investments. But numerous fast-growing emerging markets [such as China, Brazil, and India] and some advanced economies are making huge strides in increasing their attractiveness, and are thereby influencing how multinationals decide where to participate and invest. Thus, the United States has entered a new era of global competition for multinational activity. . . . Many of the executives we spoke with emphasized the need to ensure they are competing on a level playing field. So let us not give foreign competitors a new edge by raising taxes on American companies that create new American jobs. A second point: Many American companies establish operations abroad, not ``to export jobs'' for reasons of ``greed,'' as some of the bill's supporters charge, but to break into foreign markets, add new customers, or cater to a larger market abroad. The Pepsi example I just discussed illustrates this point. According to the Department of Commerce, only 10 percent of foreign subsidiary sales are into the United States. So 90 percent of the subsidiaries' sales are in foreign markets. This statistic shows that the vast majority of companies are not moving manufacturing overseas only to sell goods back to the United States at a savings, but rather to cater to their customers. A third point: Rather than picking winners and losers shouldn't we create an environment in which all companies become even more competitive? One way to do this would be to lower the U.S. corporate tax rate, which is the second highest in the world. A recent article in National Review points out that ``by mid-2009, the U.S. corporate tax rate, including federal and state corporate taxes, was 39.1 percent. In Western Europe, the corresponding rates ranged from 34.4 in France, to 26.3 in Sweden, to 12.5 percent in Ireland.'' The author of this article points out that on the most recent World Bank list of places to pay business taxes, the U.S. ranks 61st out of 183 countries, behind France, Sweden, Holland, Switzerland, Norway, and the UK. This high corporate tax rate distorts business decisions, such as locating investments; hinders capital formation; and suppresses wages. Rather than increase taxes on certain companies, we should bring the rate down to help correct these distortions. Let me quote a couple of lines from the Wall Street Journal editorial I mentioned before. They confirm: The U.S. already has one of the most punitive corporate tax regimes in the world and this tax increase [proposed in the legislation before us] would make that competitive disadvantage much worse, accelerating the very outsourcing of jobs that Mr. Obama says he wants to reverse. Paul Volcker, the handpicked individual of the White House on the tax reform panel, whose report recently was received by the President, said in the report: The growing gap between the U.S. corporate tax rate and the corporate tax rates of most other countries generates incentives for U.S. corporations to shift their income and operations to foreign locations with lower corporate tax rates to avoid U.S. rates. That is what is causing people to move abroad, the higher corporate tax rates here. Yet the bill before us would raise those rates even higher on companies that do business abroad. One Volcker recommendation is to lower the corporate tax rate to closer to the international average which would ``reduce the incentives of U.S. companies to shift profits to lower-tax jurisdictions abroad.'' So rather than raising taxes to try to punish U.S. companies that do business abroad, we should be reducing the tax rate to encourage them to stay here. The Wall Street Journal concludes: CEO Steve Ballmer has warned that if the President's plan is enacted, Microsoft would move facilities and jobs out of the U.S. Thus proving the point. In fact, the chairman of the Senate Finance Committee, my colleague Max Baucus, said in Congress Daily: I think it puts the United States at a competitive disadvantage. That's why I'm concerned. A concluding comment from the editorial: The lesson here is that tax rates matter in a world of global competition and the U.S. tax regime is hurting American companies and workers. In conclusion, we are talking again about taxing Americans more at a very time when we should be finding ways to reduce the tax burden on Americans; in this case, so they can compete better with foreign competitors. I return to the issue before us and, unfortunately, it apparently isn't going to be resolved before Congress leaves, and that is taxing small businesses as well. The proposal of the President and those on the other side of the aisle to raise taxes on American small business men and women and thereby threaten job creation is exactly the wrong medicine at this time. The proposed payroll tax holiday won't help small businesses at all. We have been coming to the floor for weeks saying: Don't increase taxes on any American. So far all we have seen is efforts by the majority in one way or another to find a way to increase taxes on segments of the American economy. That is precisely what is being proposed in the legislation before us. I reiterate, now is not the time to be raising taxes on anyone, let alone companies that account for such a high number of new jobs. Let's tailor our policies to help these companies employ even more American workers. Exhibit 1 [From the Wall Street Journal, Sept. 26, 2010] The Send Jobs Overseas Act Democrats may be dodging a vote on the Bush-era tax cuts, but that doesn't mean they don't want to raise taxes before November. Witness this week's showdown in Congress over increasing the tax on the profits of American companies with foreign subsidiaries to punish firms that relocate plants overseas. How much more harm can this crowd do before it's run out of town? Like so many others, this tax increase is being promoted by President Obama, who declared last week that ``for years, our tax code has actually given billions of dollars in tax breaks that encourage companies to create jobs and profits in other countries. I want to change that.'' Democrats around the country are making this issue their number one campaign theme, since they can't run on health care, stimulus or anything else they've passed into law. Think about this: One of the two major parties in the world's supposedly leading economy is trying to hold on to its majority by running against foreign investment and the free flow of capital. This is banana republic behavior. We're all for increasing jobs in the U.S., but the President's plan reveals how out of touch Democrats are with the real world of tax competition. The U.S. already has one of the most punitive corporate tax regimes in the world and this tax increase would make that competitive disadvantage much worse, accelerating the very outsourcing of jobs that Mr. Obama says he wants to reverse. At issue is how the government taxes American firms that make money overseas. Under current tax law, American companies pay the corporate tax rate in the host country where the subsidiary is located and then pay the difference between the U.S. rate (35%) and the foreign rate when they bring profits back to the U.S. This is called deferral--i.e., the U.S. tax is deferred until the money comes back to these shores. Most countries do not tax the overseas profits of their domestic companies. Mr. Obama's plan would apply the U.S. corporate tax on overseas profits as soon as they are earned. This is intended to discourage firms from moving operations out of the U.S. The real problem is a U.S. corporate tax rate that over the last 15 years has become a huge competitive disadvantage. The only major country with a higher statutory rate is Japan, and even its politicians are debating a reduction. A May 2010 study by University of Calgary economists Duanjie Chen and Jack Mintz for the Cato Institute using World Bank data finds that the effective combined U.S. federal and state tax rate on new capital investment, taking into account all credits and deductions, is 35%. The OECD average is 19.5% and the world average is 18%. We've made this case hundreds of times on this page, but perhaps Mr. Obama will listen to his own economic advisory panel. Paul Volcker led this handpicked White House tax reform panel whose recent report concluded that ``The growing gap between the U.S. corporate tax rate and the corporate tax rates of most other countries generates incentives for U.S. corporations to shift income and operations to foreign locations with lower corporate tax rates to avoid U.S. rates.'' As nations around the world have cut their rates, the report warns, ``these incentives [to leave the U.S.] have become stronger.'' Companies make investment decisions for a variety of reasons, including tax rates. But as long as the U.S. corporate tax is more than 50% higher than it is elsewhere, companies will invest in other countries all other things being equal. One Volcker recommendation is to lower the corporate rate to closer to the international average, which would ``reduce the incentives of U.S. companies to shift profits to lower-tax jurisdictions abroad.'' Mr. Obama believes that by increasing the U.S. tax on overseas profits, some companies may be less likely to invest abroad in the first place. In some cases that will be true. But the more frequent result will be that U.S. companies lose business to foreign rivals, U.S. firms are bought by tax- advantaged foreign companies, and some U.S. multinational firms move their headquarters overseas. They can move to Ireland (where the corporate tax rate is 12.5%) or Germany or Taiwan, or dozens of countries with less hostile tax climates. We know this will happen because we've seen it before. The 1986 tax reform abolished deferral of foreign shipping income earned by U.S. controlled firms. No other country taxed foreign shipping income. Did this lead to more business for U.S. shippers? Precisely the opposite. According to a 2007 study in Tax Notes by former Joint Committee on Taxation director Ken Kies, ``Over the 1985-2004 period, the U.S.-flag fleet declined from 737 to 412 vessels, causing U.S.-flag shipping capacity, measured in deadweight tonnage, to drop by more than 50%.'' Mr. Kies explains that ``much of the decline was attributable to the acquisition of U.S.-based shipping companies by foreign competitors not subject to tax on their shipping income.'' Mr. Kies concludes that the experiment was ``a real disaster for U.S. shipping'' and that the debate over whether U.S. companies can compete in a global market facing much higher tax rates than their competitors was answered ``with a vengeance.'' Now the White House wants to repeat this experience with all U.S. companies. Two industries that would be most harmed would be financial services and technology, and their emphasis on human capital makes them especially able to pack up and move their operations abroad. CEO Steve Ballmer has warned that if the President's plan is enacted, Microsoft would move facilities and jobs out of the U.S. The lesson here is that tax rates matter in a world of global competition and the U.S. tax regime is hurting American companies and workers. Mr. Obama would add to the damage. His election-eve campaign to raise taxes on American companies making money overseas may not be his most dangerous economic idea, but it is right up there.

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: the Senator from Kentucky (Mr. Bunning), the Senator from Texas (Mr. Cornyn), the Senator from Georgia (Mr. Chambliss), the Senator from Idaho (Mr. Crapo), the Senator from Wyoming (Mr. Enzi), the Senator from South Carolina (Mr. DeMint), the Senator from South Carolina (Mr. Graham), the Senator from Utah (Mr. Hatch), the Senator from Texas (Mrs. Hutchison), the Senator from Georgia (Mr. Isakson), the Senator from South Dakota (Mr. Thune), the Senator from Alaska (Ms. Murkowski), the Senator from Idaho (Mr. Risch), and the Senator from Arizona (Mr. Kyl).

Mr. KYL

Mr. KYL. Mr. President, today, Senators Merkley and Burr and I are introducing the Animal Crush Video Prohibition Act of 2010. The bill would criminalize the creation, sale, distribution, advertising, marketing, and exchange of animal crush videos. Representative Gallegly has sponsored a House companion bill, the Prevention of Interstate Commerce in Animal Crush Videos Act, H.R. 5566. Animal crush videos often depict obscene, extreme acts of animal cruelty designed to appeal to a specific, prurient sexual fetish. These crush videos were the target of a 1999 Federal statute that the United States Supreme Court struck down earlier this year in U.S. v. Stevens. In Stevens, the Supreme Court overturned the 1999 Act banning depictions of animal cruelty on the basis that it was unconstitutionally overbroad, in violation of the First Amendment. The Stevens case did not involve crush videos and the Court specifically stated that it was not deciding whether a statute limited to crush videos would be constitutional. Instead it left the door open for Congress to enact a narrowly tailored ban on animal crush videos. Our legislation would ban animal crush videos that fit squarely within the obscenity doctrine, a well-established exception to the First Amendment. The Senate Judiciary Committee received testimony earlier this month on the obscene nature of crush videos. Dr. Kevin Volkan, a psychology professor with an expertise in atypical psychopathologies, testified about the sexual nature of crush videos and the specific paraphilias associated with them. He stated that in his professional opinion the crush videos contain elements of specific forms of paraphilia in varying degrees and that people, usually men, watch crush videos for sexual gratification. The Humane Society's two crush video investigations also confirm the inherent sexual nature of many crush videos. Those investigations also found a growing market for custom- made videos for those with crush paraphilia. The United States also has a long-history of prohibiting speech that is essential to criminal conduct. In the case of animal crush videos, the videos themselves drive the criminal conduct depicted in them. Every State and the District of Columbia have laws criminalizing the animal cruelty depicted in the videos, but these laws are hard to enforce. The acts of extreme animal cruelty are committed secretively and anonymously. The nature of the videos also makes it difficult to determine when and where the crimes occurred or that the crime occurred within the relevant statute of limitations. These prosecutorial difficulties are confirmed by the Association of Prosecuting Attorneys. Given the difficulty in prosecuting the underlying conduct using state law, the integral connection between the video and the criminal conduct, and the recent proliferation of animal crush videos on the Internet since the Stevens decision, it is necessary for Congress to enact a new Federal law targeting the interstate distribution network for animal crush videos. This measure will also take an important step by banning non- commercial distribution of animal crush videos. We believe this is necessary given the nature of the Internet and the propagation of file- sharing and peer-to-peer networks that exist today. Similar to other Federal criminal statutes that prohibit non-commercial distribution, there is an exception for law enforcement purposes. I want to thank Senators Leahy and Sessions and their staffs for their assistance in addressing this important issue and holding a hearing on the topic in the Senate Judiciary Committee. I also want to thank the Humane Society for bringing this issue to Congress' attention and working tirelessly to address it. I urge my Senate colleagues to support this legislation and work with me to swiftly enact it.

Mr. KYL

Mr. KYL. Mr. President, today, Senators Merkley and Burr and I are introducing the Animal Crush Video Prohibition Act of 2010. The bill would criminalize the creation, sale, distribution, advertising, marketing, and exchange of animal crush videos. Representative Gallegly has sponsored a House companion bill, the Prevention of Interstate Commerce in Animal Crush Videos Act, H.R. 5566. Animal crush videos often depict obscene, extreme acts of animal cruelty designed to appeal to a specific, prurient sexual fetish. These crush videos were the target of a 1999 Federal statute that the United States Supreme Court struck down earlier this year in U.S. v. Stevens. In Stevens, the Supreme Court overturned the 1999 Act banning depictions of animal cruelty on the basis that it was unconstitutionally overbroad, in violation of the First Amendment. The Stevens case did not involve crush videos and the Court specifically stated that it was not deciding whether a statute limited to crush videos would be constitutional. Instead it left the door open for Congress to enact a narrowly tailored ban on animal crush videos. Our legislation would ban animal crush videos that fit squarely within the obscenity doctrine, a well-established exception to the First Amendment. The Senate Judiciary Committee received testimony earlier this month on the obscene nature of crush videos. Dr. Kevin Volkan, a psychology professor with an expertise in atypical psychopathologies, testified about the sexual nature of crush videos and the specific paraphilias associated with them. He stated that in his professional opinion the crush videos contain elements of specific forms of paraphilia in varying degrees and that people, usually men, watch crush videos for sexual gratification. The Humane Society's two crush video investigations also confirm the inherent sexual nature of many crush videos. Those investigations also found a growing market for custom- made videos for those with crush paraphilia. The United States also has a long-history of prohibiting speech that is essential to criminal conduct. In the case of animal crush videos, the videos themselves drive the criminal conduct depicted in them. Every State and the District of Columbia have laws criminalizing the animal cruelty depicted in the videos, but these laws are hard to enforce. The acts of extreme animal cruelty are committed secretively and anonymously. The nature of the videos also makes it difficult to determine when and where the crimes occurred or that the crime occurred within the relevant statute of limitations. These prosecutorial difficulties are confirmed by the Association of Prosecuting Attorneys. Given the difficulty in prosecuting the underlying conduct using state law, the integral connection between the video and the criminal conduct, and the recent proliferation of animal crush videos on the Internet since the Stevens decision, it is necessary for Congress to enact a new Federal law targeting the interstate distribution network for animal crush videos. This measure will also take an important step by banning non- commercial distribution of animal crush videos. We believe this is necessary given the nature of the Internet and the propagation of file- sharing and peer-to-peer networks that exist today. Similar to other Federal criminal statutes that prohibit non-commercial distribution, there is an exception for law enforcement purposes. I want to thank Senators Leahy and Sessions and their staffs for their assistance in addressing this important issue and holding a hearing on the topic in the Senate Judiciary Committee. I also want to thank the Humane Society for bringing this issue to Congress' attention and working tirelessly to address it. I urge my Senate colleagues to support this legislation and work with me to swiftly enact it.

Mr. KYL

Mr. KYL. The following Senator is necessarily absent: the Senator from Alaska (Ms. Murkowski).

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: the Senator from Texas (Mrs. Hutchison) and the Senator from Alaska (Ms. Murkowski).

Mr. KYL

Mr. KYL. Mr. President, we continue to have a discussion about whether there should be a tax increase on Americans and, if so, which ones. We are not sure whether the Senate is going to vote on one of those propositions before the elections, but there appears still to be a chance we would do that. I found it of interest that a couple surveys--one of economists and one of Americans generally--throw more cold water on the idea that we should be raising taxes on any Americans. I wish to report, first of all, a CNBC poll which just came out today. The headline is ``Most Americans Want All Bush Tax Cuts Extended.'' Well, that is another way of saying: We should not raise taxes on any Americans. I will just quote from two lines: In the new poll released this week, 55 percent said that ``increasing taxes on any Americans will slow the economy and kill jobs''. . . .Only 40 percent said the Bush-era tax cuts should be canceled for higher earners. . . . One other interesting statistic is that the poll showed that ``55 percent of Americans said [President] Obama's overall economic plans have made things worse so far.'' This poll is consistent with every other we have seen. Most Americans do not believe we should be raising taxes on anyone--on the wealthy, on businesses, on others, on anyone. I think most of them get the fact that if you start raising taxes, particularly in the middle of a recession, you are going to kill economic recovery and certainly slow the creation of more jobs. Well, that was also the opinion of a group of economists who were surveyed by CNN. They surveyed 31 different economists and had a variety of options. They asked: What should the Senate and the House do? In this survey, 18 of the economists said we should not raise taxes on anyone--in other words, extend the tax rates that have been in effect for the last 10 years for everyone, continue to extend them. There were only three of the economists, incidentally, who said: No, we should differentiate, extend for some but not extend for others. In other words, it is OK to go ahead and raise taxes on the so-called wealthy. I noted also today that the National Taxpayers Union released a letter with 300 economists saying the same thing, that we should not raise taxes on anyone. Finally, I noted in comments I made Monday that Secretary Geithner had said what we should be doing to preserve jobs in America is to promote savings and investment. That is, of course, precisely what we should be doing. Unfortunately, that is exactly the opposite of what would happen if we raised the taxes on the so-called upper two brackets because that is how small businesses, by and large, pay their taxes. Fifty percent of the approximately $1 trillion of business income will be reported on returns that have a marginal rate in the top two brackets. That is another way of saying, if you increase the tax in those top two brackets, you are going to dramatically impact small businesses that create about 25 percent of the total workforce here in the United States. In testimony before the Finance Committee, on which I sit, the former Director of CBO, Doug Holtz-Eakin, testified that an increase in the top effective marginal income tax rate would reduce the probability that a small business entrepreneur would add to his or her payrolls by roughly 18 percent. I suggest it may even be more than that. What I would like to do is quote from comments from a few small business folks as to the effect of the tax increase on them. If the tax increase were to be voted on by this body and the House of Representatives and adopted into law or if the current tax rate is not extended for everyone, here is what a few small business folks say would happen to them. Some of these examples come from the Chamber of Commerce, some from the National Federation of Independent Business. For example, Mark Clinton of Decisive Management in Little Rock, AR: Last year, he says, he paid about half his business's income back in taxes. He has a small business that meets this threshold I mentioned before, and he said any tax increase would effectively kill his business. I thought it was interesting. He gets frustrated, he said, when he hears the top-tier tax cuts referred to as tax cuts for ``the rich.'' He said: These are employers who work hard to balance their budgets and make ends meet. They need money to sustain their businesses. Do you want someone who is broke as your employer? No. You want someone who is able to pay their bills and pay your salary. Here is another example of someone who says he would be hurt if his taxes are raised: Jim Murphy, from the firm EST Analytical, in Cincinnati, OH. If taxes go up above the $250,000 threshold, the bottom line of his business will suffer and he will be forced to make serious business decisions to make up for the lost income. He just recently lifted a pay freeze that has been in place for almost 18 months. His company suspended the 401(k) contributions at the same time, and that likely will have to continue into the future. So instead of potentially hiring more people, he is definitely not going to make any new hires. He said that the threat and uncertainty of health care costs going up next year is also a great concern. So instead of purchasing needed capital equipment and generating economic activity for other businesses, I will have to make do with what we have. I will just mention a couple more. Ron Hatch of Hatch Furniture in Yankton, SD, said his business, which is a furniture store, has struggled. He has seen his business fall by 25 percent. He had to close one of his two stores. His business is heavily dependent on capital, and he says any tax increase would inhibit his ability to compete and force him to lay off more workers. If the current tax rates are allowed to expire, he says he might well have to go out of business. Steve Ferree, who owns a Mr. Rooter Plumbing in Gladstone, OR, says he has been lucky his business has been able to survive so far but that increasing his tax rates, the rate at which he pays--just what we are talking about here--would directly impact his business. He would not be able to consider hiring a new employee or buying new equipment should the tax hike take effect. There are several from the printing industry. I will just quote from one. Mike Nobis of JK Creative Printers in Quincy, IL, makes the point that the tax increases hurt his clients which then, in turn, hits him. He talks about the fact that his clients are having to cut back their budgets and that this has had an impact on him. He said that increasing taxes will be especially hard-hitting for his clients. As a result, he is going to continue to lose customers, and with that loss of customers combined with the tax increase hitting his own budget, he will be hit from both sides. The looming tax increase and uncertainty with forthcoming health care mandates have left him in a position where he is hesitant to take on risks and grow his business. Another example from the printing industry: Frank Goodnight of Diversified Graphics in Salisbury, NC. Another from the real estate industry--a lot of examples there--Curt Green from Curt Green & Co. in Texarkana, AR. Let me close with two examples that show other indirect effects. Steve Walker from Walker Information in Indianapolis, IN, talks about one of the indirect consequences of his firm having to pay more in taxes, his small business. It is a family business. He said: We have always taken care to give back to our community in Indianapolis and central Indiana. Here is a direct quote: If Congress increases taxes, it will directly affect the extent of our charitable work, in addition to impacting our company's bottom line. I look at pretax dollars as a pie chart. Right now, Uncle Sam gets 35 percent. If Uncle Sam gets 39.6 percent, then 4.6 percent will come from other uses. For us, those uses are as follows: Reinvest in the business, give to charity, and meet capital obligations. Meeting capital obligations are fixed, so the impact of a tax increase will reduce the amount available for charity first and investment capital second. I have already made plans assuming that some sort of tax increase is coming. And he talks about how that will drop his contributions to United Way, for example. He concludes by saying: I think Congress needs to have a much greater appreciation for the direct and indirect consequences a massive tax increase would have on businesses and the communities that we and our employees live and work in. Finally, noting a physician who has a business in Chicago, Dr. Herb Sohn of Strauss Surgical Group makes another point not just about marginal income tax rates but capital gains and dividends as well. Remember that these taxes would also be increased under the Democrats' proposal. He says that increases in dividends and capital gains taxes will prevent his patient care business from expanding to provide quality care to more patients. He talks about having practiced medicine since the early 1970s in the Chicago area. His focus is on his patients, but he says: Unfortunately, the impending tax increases will impair our ability to focus on patients and their care. The increases in capital gains taxes and dividend tax rates will impact our business, derailing our opportunities to expand our operations. Finally, he notes that he is structured as a passthrough entity. And that is how a lot of these small businesses pay their taxes. That is why they are impacted by an increase in the top two marginal income tax rates. He says: If Congress increases the marginal income tax rates, that means we will have less money to expand and reinvest in our business, which, again, is focused on patient care. He concludes by saying: I'm not a tax expert, but I do have a straightforward diagnosis on this issue--Congress needs to keep all the tax rates at their current levels and not slap us with a bigger tax bill. My point is this: The American people, by a wide margin, believe we should not increase taxes on anyone. Economists, by a wide margin, agree. We should not increase taxes on anyone. And the several examples of owners of small businesses who would be the first to be impacted by an increase in the upper two marginal income tax brackets have made it very clear--every one of them--that it will have a direct impact on their ability to hire people, to expand their businesses, or to continue in business, and an indirect impact on the customers they serve, who then, in turn, would have less business for these small businesses. All in all, it is a bad idea to even think about increasing taxes on any Americans, let alone small businesses. We should make it clear right now that these folks do not have anything to worry about; they are not going to be hit with a big tax hike.

Mr. KYL

Mr. KYL. Madam President, I had hoped we could begin consideration of the annual National Defense Authorization Act, NDAA, today but, hopefully, we will consider it as our first business when we reconvene after the election. I filed three amendments that deserve serious consideration by the Senate, two of them dealing with the New START treaty. It is important to deal with these amendments before consideration of the treaty. Amendments Nos. 4636 and 4638 deal with modernization of the U.S. nuclear deterrent, which is directly related to the reductions called for by the treaty; and, the Bilateral Consultative Commission, of which much has been written concerning the implications for the Senate's prerogatives in the treaty making function. Amendment No. 4637 deals with a matter of great concern, China's reckless disregard for the international nonproliferation regime. I will ask that the article, ``NSG Makes Little Headway at Meeting'' from the Arms Control Association Web site be printed in the Record. Regarding amendments Nos. 4636 and 4638, I will first briefly discuss amendment No. 4636 concerning START and modernization of the U.S. nuclear deterrent. In section 1251 of the fiscal year 2010 National Defense Authorization Act, the administration was required to provide a comprehensive plan for the nuclear weapons stockpile, nuclear weapons complex and delivery platforms. The report--hereinafter the 1251 Plan-- was delivered to the Senate with the new START treaty on May 13, 2010. While the 1251 Plan identified certain administration proposals to maintain and modernize our nuclear deterrent, it became quickly apparent that the plan, prepared on a tight schedule, did not provide a fully detailed picture of what is needed to modernize the U.S. nuclear deterrent and how much it will cost. Of course, additional decisions and revised budget estimates will continue to be made over the next decade of the 1251 Plan's scope. That is why the 1251 Plan and the corresponding budget will require regular updating--a point often repeated by the Directors of the national nuclear weapons laboratories. As Dr. George Miller, Director of Lawrence Livermore National Laboratory, testified: It is important to note that the nature of NNSA's work requires program flexibility because technical issues arise in the stockpile and requirements evolve. The scope of work and budgets will need to be correspondingly adjusted. Annual updates . . . could provide a mechanism to outline the program's funding requirements and projections. My amendment No. 4636 codifies that recommendation and resolves the issues of evolving requirements and costs by requiring the President to provide a detailed update to the 1251 Plan report annually, for the duration of the new START treaty, describing revisions or adjustments to the plan as well as progress on satisfying the requirements of section 1251. Reductions in the nuclear force posture are tied to the submission of that update. As the Secretary of Defense has stated, there are 7 years to implement the treaty reductions; thus, a 1-year notice-and-wait requirement should not cause any difficulty. Additionally, the unbiased input of the directors of the NNSA laboratories and facilities will accompany the report as validation that adequate resources are being provided by the administration in support of sustainment and modernization activities. This is quite similar to the annual stockpile assessments as those familiar with that process will recognize. This amendment fosters improved project management, a detailed commitment to sustaining the U.S. nuclear deterrent, and reflects strong bi-partisan support for nuclear weapon complex modernization. I appreciate the broad support expressed for modernization. As Secretary Gates stated in his October 2008 Carnegie Endowment speech: [t]o be blunt, there is absolutely no way we can maintain a credible deterrent and reduce the number of weapons in our stockpile without either resorting to testing our stockpile or pursuing a modernization program. Concerning amendment No. 4638, the purpose is equally clear: to maintain the role of the Senate in treaty making. The Bilateral Consultative Commission authority is very broad. As Jack Goldsmith and Jeremy Rabkin observed in an August 4 Washington Post op-ed piece, ``New START Treaty could erode Senate's foreign policy role'': This treaty . . . does, however, create a Bilateral Consultative Commission with power to approve `additional measures as may be necessary to improve the viability and effectiveness of the treaty.' The U.S. and Russian executive branches can implement these measures and thus amend U.S. treaty obligations--without returning to the U.S. Senate or the Russian Duma. The time to deal with this concern is now. The Lugar Resolution of Ratification approved by the Senate Foreign Relations Committee makes a genuine effort to address concerns; I hope to work with the ranking member to further improve his Resolution. But more can and should be done in binding legislative language, such as my amendment. These provisions are essential if we are interested in protecting the Senate's constitutional role and our missile defense and conventional prompt global strike capabilities. As Messrs. Goldsmith and Rabkin observed: If the administration does have a problem with them, the Senate should worry--about the commission's power to limit missile defense, the executive's attempt to limit the Senate's constitutional role in the treaty process, or both. I am pleased to have the support of Senator Sessions, the ranking member on the Senate Judiciary Committee and a senior member of the Senate Armed Services Committee, who has cosponsored this amendment. I ask unanimous consent that the Goldsmith-Rabkin article be printed in the Record in addition to the article from the Arms Control Association.

Mr. KYL. The following Senator is necessarily absent: the Senator from Alaska (Ms. Murkowski).

Mr. KYL

Mr. KYL. Mr. President, I would like to speak a bit about the two competing philosophies of economic growth. The first version I will discuss is the so-called Keynesian economics, which has been the basis of the Obama administration's economic policy since January 2009 and, I would add, with little to no success in reviving our economy and reducing unemployment. Keynesian economics relies on the theory that in recessionary times, increased government spending can take the place of private sector activity, hence the administration's nearly $1 trillion stimulus package, the Cash for Clunkers Program and a litany of other government programs, transfer payments, and temporary tax credits. This administration's insistence on enacting these temporary Keynesian policies to stimulate consumption is misguided and has ultimately failed. As the Wall Street Journal editorialized in a piece called ``The Obama Economy:'' Never before has government spent so much and intervened so directly in credit allocation to spur growth, yet the results have been mediocre at best. In return for adding nearly $3 trillion in Federal debt in 2 years, we still have 14.9 million people unemployed. What happened? Well, I will mention three problems with Keynesian economics that I think help to answer that question. First of all, someone without a job is not going to be fooled into spending more money because of a one- time payment that he or she received from the Federal Government. People only change their spending habits when they know they will have a greater consistent income over time, such as when they receive a raise at work. In fact, the evidence has shown that people either save one-time rebates or shift future consumption forward but do not permanently increase their work effort or incentive to invest, which is what is needed to jump-start economic growth. Second, Keynesian economics assumes the government has the foresight to determine in advance which spending programs would best create economic growth. Well, the obvious problem with this assumption is, Congress does not spend taxpayers' money wisely. We see time and time again how straightforward pieces of legislation get loaded up with special projects which are costly and of questionable value to the public. This has been one of the problems with the stimulus package. Third, if the problem is lack of consumption and Americans are too broke to spend, how can the government spend for us? We are the government. It is our tax money that is being spent. We have to pay it back if it is borrowed. The authors of a textbook entitled ``Economics: Public and Private Choice,'' write: There are no free lunches. Regardless how they are financed, activities undertaken by the government will be costly. When governments purchase resources and other goods and services to provide rockets, education, highways, health care, and other goods, the resources used by the government will be unavailable to produce goods and services in the private sector. As a result, private-sector output will be lower. In short, there is a major misconception that consumption fueled by government spending actually creates economic growth. It doesn't. It just moves money around. Taking it from the private sector to be spent by the government removes critical capital that is needed to create jobs. I noticed, in catching up on reading some of the newspapers over the weekend, that Treasury Secretary Geithner weighed into this debate a little bit. Recall that over the last several weeks there has been a debate about whether we should prevent all taxes from going up or simply prevent a tax increase on the so-called middle class. The idea is that middle-class families spend whatever money they have available. That plays into this Keynesian economic notion that it advances spending so we should let them keep more of their money but that wealthier people--the people in the top two brackets--don't spend their money and, therefore, they do not contribute to economic growth. But of course it totally misses the point that money saved is money ultimately invested. If it is invested, it is either put in a bank, which can then lend more money to people who need to borrow or it is directly invested in stocks or bonds or some other enterprise which generally results in the acquisition of more equipment or the hiring of more people, both of which are essential to reducing unemployment and getting the economy back moving again. Well, Treasury Secretary Geithner was testifying before the Congress about the possibility of imposing penalties on China because of its currency policies. According to an article in Friday's Washington Times--on the front page: While taking his toughest stance to date on China's need to speed up the pace of currency reform, Treasury Secretary Timothy F. Geithner echoed China's point that doing that by itself will not eliminate the gigantic $230 billion trade deficit with China or restore millions of manufacturing jobs lost in the recession. Continuing to quote from the article: ``Americans also must save more and invest more while consuming less of the world's bounty,'' he said, ``to bring a better balance to trade.'' He is right. America does need to save more and invest more. That is the way you restore not just the manufacturing jobs lost in the recession but a lot of the other jobs as well. Reporting on the same story in another newspaper, Secretary Geithner is quoted as saying: We are concerned . . . that the pace of appreciation has been too slow. The most important things we can do to make manufacturing stronger in the United States are going to be about the policies we pursue in the United States. I think he is right and that the policies we have to pursue are the policies of savings and investment--exactly what he said. It may be fine for the U.S. economy to spend more money, but the reality is, each of our families and our businesses are better off if we save and invest at this important time in our history. So let there be no mistake; the Secretary's promotion of savings and investment is contrary to this Keynesian notion that all we have to do is spend more money and the economy will get better. There is a need to save and a need to invest. That is what enables businesses to create more jobs. I think it is very important to remind everyone that economic growth stems from combining three separate inputs--labor, capital, and technology. These three factors of production result in output that we can then consume. Without labor, without capital--that is the savings and investment part--and technology, which enhances our productivity, there can be no consumption. Focusing on policies that stimulate consumption targets the wrong side of the equation. In order to get the economy going, we need to focus on the inputs, and that is where the second philosophy of economic growth comes in. Some people refer to it as supply-side economics. The fundamental principle of supply-side economics is that people work harder and take more risks when there are more opportunities for economic gain and less government intrusion. Translating this economic philosophy into policy means reducing government consumption by cutting spending; thus, leaving resources in the private sector. It also means not raising taxes on anyone, especially in these difficult economic times--certainly not on the very employers that we count on to hire more workers. Who employs 25 percent of our workplace? Small businesses. Who would bear the brunt of tax increases in the upper two brackets? Small businesses. So the last thing we should be doing is raising taxes on anyone, most especially our small businesses to which we are looking to produce more jobs. There is plenty of evidence that the economic theory I am talking about works in practice. We have abundant evidence of what works and what does not. A recent study was conducted by Harvard economists Alberto Alesina and Silvia Ardagna, who recently studied more than 100 fiscal adjustments in 21 separate countries over the past 40 years. The countries are all in the OECD. These are the more economically advanced countries of the world. The fiscal adjustments that led to economic expansions were generally based around spending cuts. By contrast, the adjustments that led to economic recessions were based around tax increases. Thus, spending cuts, not tax hikes, appear to be the more effective strategy for deficit reduction. Using data from more than 90 different OECD countries, Alesina and Ardagna also compared the relative benefits of spending increases and tax cuts. Their conclusion: Tax cuts are a much better way to spur economic growth. Unfortunately, the current administration and Congress have done the exact opposite of what these two economists from Harvard have proposed. They have dramatically increased Federal spending and are now threatening to implement a massive tax hike, exactly the wrong prescription. I believe it is long past time for Congress to consider an alternative strategy, a strategy that rejects misguided income tax increases and, instead, focuses on targeted spending reductions; a strategy that lowers our corporate tax rate, which is the second highest of all of the OECD countries; a strategy that blocks unelected Federal bureaucrats from imposing new energy taxes on small businesses and middle-class households; a strategy that restructures our three biggest entitlement programs--Social Security, Medicare, and Medicaid-- to prevent a future fiscal crisis; a strategy that reins in overall health care costs through market-oriented, consumer-driven reforms; a strategy that promotes free trade across the globe and strengthens our bilateral relationships in the process; a strategy that embraces clear, transparent fiscal regulations to end taxpayer bailouts and discourage excessive leveraging. These are just some of the recommendations that come from the Republican side of the aisle. I note that they track very closely a piece that four economists and George Shultz, a former Cabinet member--in fact, two different Secretaries in the Cabinet of the President of the United States--George Shultz, Michael Boskin, John Cogan, Allan Meltzer, and John Taylor. They wrote a piece in the September 16 Wall Street Journal called ``Principles for Economic Revival.'' These principles track very closely the principles I have just identified and provide what I think is a very good blueprint for moving forward. Just a final note. I would note parochially that starting in the third paragraph of their piece: ``The Noble Prize-winning economist Edward Prescott'' is from Arizona State University. I visited with Dr. Prescott, and I can affirm the things he teaches in his classes as well as what he teaches by his writings are the principles upon which we can build economic growth. They are what I said in the very beginning of my remarks. They are the principles of incentive for more economic output and reward. He talks, in this piece, about the way higher tax rates on labor are associated with the reductions in the labor output, and therefore the productivity of the country, the wages of the people, and the economic condition of the country. Also, the authors have a very interesting chart in this Wall Street Journal piece called ``The Cost of Washington.'' It is astonishing to see on paper the cost of World War I--in fact, the cost of the Civil War before that, the cost of World War II--pretty high. Then it went back down again. These are all costs as a percent of GDP. Now when we have the biggest gross domestic product ever, dramatically larger even than what we had in World War II, we have costs of the Federal Government that exceed even the cost as a percentage of GDP of World War II. The President's folks, as well as those who advise Congress, have all said this is unsustainable. It is one of the reasons it is time for us, as I said, to get back to principles for economic revival and focus on reducing unnecessary spending and making certain that, especially in these times, we resist the notion of raising taxes on any Americans. I ask unanimous consent this Wall Street Journal op-ed be printed in the Record.

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

Mr. KYL. Mr. President, I ask unanimous consent the order for the quorum call be rescinded.

Mr. KYL

Mr. KYL. Mr. President, I suggest the absence of a quorum.

Mr. KYL

Mr. KYL. The following Senator is necessarily absent: the Senator from Alabama (Mr. Sessions).

Mr. KYL. The following Senator is necessarily absent: the Senator from Louisiana (Mr. Vitter).

Mr. KYL. The following Senator is necessarily absent: the Senator from Louisiana (Mr. Vitter).

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KYL. Mr. President, I would like to speak to the bill pending before us briefly, first to respond to a criticism that Republicans had been filibustering this bill, and, therefore, that somehow revealed an antagonism on the part of Republicans toward small business. The charge is so ludicrous that one would think it does not even need to be responded to. Republicans have been the champions of small business in this debate about taxes. I will have more to say about that in a moment. Why was it that the majority of Republicans did not want to proceed with the proposal that the majority leader put before the Senate? A very simple reason. The majority leader, once again, precluded Republicans from offering any amendments. The entire history of the Senate is a history of tradition and comity and the opportunity for the minority to be able to offer amendments and debate. When repeatedly the majority leader does what they call, in the Senate parlance, filling the parliamentary tree, which means he precludes the minority from offering any amendments, naturally Republicans are going to object to that. We said repeatedly we would be delighted to debate this bill, just let us offer some amendments. No, was the answer; you cannot do that. Well, we are on the bill now, and I think it is pretty clear that what this debate boils down to is what is the best way to help the small businesses who are the job creators. In fact, about one-quarter of all of the jobs in this country are created by small business, and what we know is that especially the small business folks are the first ones to hire in bad economic times, hoping to bring the economy out of a recession. Why are they not hiring today? Well, on Monday I came to the floor and I pointed out one of the reasons. One of the entrepreneurs in our country wrote an op-ed in the Wall Street Journal in which he totaled up all of the expenses that he has every time he hires someone. I believe, if memory serves me correctly, it cost him about $78,000 every time he hired somebody who had a $44,000 salary. That is in the extra taxes that he would have to pay and the cost of regulations just to comply with Federal law for hiring one additional person. It is no wonder that small businesses do not hire at this point. So what is the Democratic response? Let's raise their taxes. Let's make it even more difficult for small businesses to hire people. We believe that is the wrong solution, and rather than looking at the kind of bill that is on the Senate floor today that creates yet another kind of TARP bank lending authority, something the American people are a little bit fed up with, we believe we should leave tax rates where they are so that businesses have some certainty that they are not going to be raised. At least do not make it worse. I noted that the distinguished assistant majority leader earlier this morning inadvertently confused tax cuts with tax increases. I have done the same thing many times. But the reason I wanted to point that out is because I think there has been so much talk on the Democratic side about tax cuts for the rich that the Members on the other side have almost gotten to believe that. The truth is, nobody is proposing tax cuts for the rich. Nobody is proposing tax cuts for anyone. My colleague from Illinois corrected himself and said: No, I mean tax increases. That, of course, is what the question is. Should there be tax increases on anyone? The Republican position is no. At least in times of recession or bad economic times, do not raise taxes on anyone. Do not raise taxes on families who are struggling to make ends meet, and do not raise taxes on businesses, especially the small businesses that are the best job creators. So our view is, do not raise taxes. But the Democratic view is, well, let's raise taxes on some but not on others. That is this class warfare concept that I was critical of Monday. In America we do not believe in class warfare. We think everyone ought to have a chance to succeed, and if someone succeeds, we applaud it and we hope we are in the position the next week or the next year. But, instead, there seems to be a view that, well, rich people can afford it, so let's raise their taxes. Again, economists generally--including Peter Orszag, the immediate past Director of OMB under President Obama--have made it clear that raising taxes on anyone, including the entrepreneurs, those people who pay in the higher tax brackets, is a bad thing for job creation especially in bad economic times. So why would we do it? Well, the concern is we have to be worrying about the deficit. Well, this is a fine time to be worrying about the deficit and a fine way to do it. We spend $1 trillion on a new health care bill, we spend $1 trillion on a stimulus bill, we spend all of this other money bailing out this and that in our economy, and now another new TARP lending program spending trillions of dollars, a budget that doubles the national debt in just 5 years, doubles all of the debt accumulated from George Washington through George Bush, we are going to double that in 5 years under the Obama budget. I would suggest that we ought to start worrying about the spending. If we are worried about the deficit, let's stop the spending spree. Let's do not try to make up a little bit of that by deciding to tax a bunch of people who are the very folks who are going to hire the employees that are going to help bring us out of the recession. Am I just sort of fancifying this or do real small businesspeople have this view? Well, let me just read about--I think there are three, maybe four folks here. These are some of the folks, some of the 750,000 small business owners in the United States whom we are counting on to create jobs and who would see an increase in their marginal income tax rate under the Democratic proposals. I just want to quote from what a few of these folks say. Here is the chief operating officer of a company called Logical Advantage in North Carolina. His name is John Fread. He says marginal tax rates will mean his company will not be able to hire the new sales representative it needs, and it may force layoffs. He says: We founded Logical Advantage in 2003 with a couple of card tables and laptops and a staff of three. We've been successful and have since expanded our business. One of the keys to our growth has been our determination to reinvest our profits in our firm. We're organized as a pass-through business, (meaning the company's taxes are paid at the individual income tax rate),-- That is why this marginal rate is so important-- and if our marginal income tax rates go up, we'll be left with less money to put back into our company. This would mean we would not be able to hire an additional sales representative. Then he also closes with this: Also, since our employees bill their services hourly, we use profits to keep our employees employed between projects and avoid layoffs. Without this additional cash, we'll have no choice but to do layoffs. My advice to Congress would be to keep the current tax rates in place and do all they can to avoid raising our taxes because that will lead to fewer jobs. So here is an entrepreneur, a small business owner, who says he wants to create jobs, save the jobs he has. He wants to expand, but an increased tax burden will prevent him from doing so. No, we are not talking about tax cuts for the rich. Nobody is talking about tax cuts. We are talking about keeping his taxes from going up. That is what we want to prevent. Kevin Linehan of Bravadas Fairfax, LLC, a small clothing and accessories business, says--and I hope I am pronouncing that correct-- Bravadas is the way I see it here. Anyway, he says the shaky economy has forced him to cut his staff and payroll by 40 percent and slice his inventory by 30 percent, not an uncommon situation in this economic downturn. He wants Congress to know that if the top two marginal rates increase, he will not be able to hire the new employees he needs, increase his inventory, or take the risks that would lead to innovation in his business. I am going to quote him. If Congress goes through with the plan to increase the marginal income tax rates for the top two brackets, my business will be hurt. We've already been battered by the recession and had to cut staff and payroll by 40 percent. I have also cut both my advertising and inventory by 30 percent each, and have had to downsize and change locations to save on rent. If Congress raises my taxes, it will be more of the same rather than being able to grow my business, attract new customers and hire new staff. In fact, in this economy I have had to cut back on essentially all new business activity, meaning I've stopped trying to innovate and instead have been forced to focus on only those activities that are the most profitable because I cannot afford to take risks. The more and more the government takes, the more difficult it is for small businesses like mine to be successful and do the things they want us to do, which is to create jobs. Here is a third small businessperson, Ray Pinard. He owns a printing business in Boston. He says if tax rates go up, he would not have the resources to expand his business operation to new areas, and, therefore, to create new jobs. Here is what he wants Members of Congress to know: Keeping the tax burden low is so critical to our business, 48HourPrint.Com. . . . With the economy where it is, now certainly isn't the time to play games by extending tax relief for some but not others. For example, if Congress fails to keep all of the current income tax rates in place and we take a hit, then that will mean we have left capital to grow our team and our operations, not only in the Boston area but at our other facilities in Ohio, Arizona, and New Hampshire, as well. There are thousands of other small businesses out there that will react similarly if their tax burdens increase. I am worried that it will take much longer to get our economic ship righted if our elected officeholders in Congress fail to show leadership on this issue. [Raising taxes] is a job killer. Leave the money in the private sector where it will be put to good use. Despite what the President says, these tax increases will have a very negative impact on job creation, especially for the small businesses, the entrepreneurs I have quoted. These are the people who are on the ground, running businesses, trying to weather the bad economy, hoping to hire new workers. They are telling us that their businesses cannot tolerate new taxes. As this debate continues, I will share more stories from small businesses and other folks who are opposed to the tax increases. It is critical that we appreciate the fact that even the talk about this, even the potential for an increase in taxes, has created a kind of uncertainty that has caused businesses to lock up and not want to make any kind of big decisions because of what they think could happen. I remind my colleagues that this money is not the government's money. It doesn't belong to the Congress or the President. When we talk about taxing people, we are talking about taking their money. It is not the government's money. It is their money. The question is, Will the government do more good spending it or will the private sector, the people who have that money, who earned that money? Will they do more good with it? I think it is obvious that these small business folks I have talked about will put that money to good use for their families and their employees. They will create more jobs with it. That will help more folks. The irony is that will eventually help the economy and will even help the U.S. Treasury, because we have more people paying more taxes at the existing rates, and that means more revenue for the Federal Government. This is a very aspirational country. Almost everybody here looks at opportunity. We all think we can do better. If we work hard, we have a system that will reward hard work. These successful small business folks never cease to amaze me. They come up with an idea, a service, or a product to sell. They go through all the difficulties of doing so, sometimes mortgaging their home, borrowing money. They are the lifeblood of the economy. They are not some bunch of fat cats. They are the people who make the economy work. It bothers me when folks on the other side of the aisle denigrate them as if they are somehow evil people because they end up making enough money to pay taxes in the top tax brackets when, as we pointed out, the reason for that is that as business people who are not corporations, they are subchapter S or other partnership or small business legal entities, they pay taxes as individuals. And because of the income of their businesses, therefore, they are put in the top bracket and somehow, therefore, they deserve to be punished--they can afford it; they are the rich. They are not the rich. They are folks like all of us, struggling to make ends meet, who will hire more people and who don't deserve to be punished for their success. We are supposed to be creating incentives for people to do exactly this. Ironically, the bill we are debating now is a bill that is supposed to help small business folks. We will give these TARP-like funds to the banks and make them lend a certain amount of it to small businesses, and everybody will be better. My guess is, if we let the small businesses keep their money and not raise their taxes, they would be perfectly happy and be able to get along, and they would have the ability to borrow money from the banks without the effect of the legislation before us. I hope we both begin to change our rhetoric, not to attack those people who are the backbone of the economy, people who cannot afford another tax increase, who want to help the economy recover and like to hire more people, and that we would also recognize the most productive way to help them is to simply not raise their taxes. We are not talking about a tax break. I would argue that this TARP-like lending thing is an idea that may be well motivated, but it is not the way to help most of the businesses we are talking about. Just don't raise their taxes. I will return to where I started. Some of us get a little confused. Sometimes we say tax cut when we are talking about tax increases. It may be that we have gotten so used to this rhetoric that somehow somebody is asking for a tax cut for the rich when, in fact, I don't know of anybody who is asking for a tax cut for the rich. Not a single Republican is asking for a tax cut for the rich. All we are asking is don't raise taxes on anybody; it is usually not a good idea, and it is certainly not a good idea in this time of economic downturn. I hope as time goes on, I will have the opportunity to reflect on what more small business folks have written to us, and we will take their pleas to heart. The three people I have talked about today all say: Don't raise my taxes. I am having a hard enough time as it is. If you leave me alone, I might be able to begin hiring more people. Let's take those stories to heart and listen to our constituents and not take the attitude that Washington knows best. It reminds me a little of what the President and one of our colleagues said in a townhall meeting in August when somebody asked about the health care bill. One of our colleagues said: Well, you may not like it now but over time I think you will get to appreciate it. It is the attitude that we know best here; we will make the decisions; you may not like them now, but you will come to think they are okay over time. I think Americans have understood what it takes to make a successful business. They understand what taxation is all about. They understand this isn't the time to raise taxes on anybody, and we ought to get away from this idea that Washington knows best. Let's listen to our constituents. Let's listen to what they are telling us. Don't raise our taxes. I suggest the absence of a quorum.

Mr. KYL. I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KYL

Mr. KYL. I ask unanimous consent that the Senate stand in recess under the previous order, which means that we would return at 3:30.

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: The Senator from Alaska (Ms. Murkowski) and the Senator from New Hampshire (Mr. Gregg).

Mr. KYL. The following Senators are necessarily absent: the Senator from Alaska (Ms. Murkowski) and the Senator from New Hampshire (Mr. Gregg).

Mr. KYL. The following Senators are necessarily absent: the Senator from Alaska (Ms. Murkowski) and the Senator from New Hampshire (Mr. Gregg).