Nick Smith

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I was going to spend my 1 minute talking about the dangers of changing the CPI until we come up with provisions to make sure we protect the Social Security trust fund. I was not able to go to Hershey because my wife, Bonnie, and I had grandchildren a few days before, and they were twins. My daughter Elizabeth and her husband, Fred Burnett, now have twins. Their names are Selina Anastasia and James Azariel Burnett. So I am glad to announce that. But on the issue of civility, on the Committee on the Budget we have talked about the serious problems of dealing with Medicare and Social Security, tremendous financial obligations and problems for the future. So I would just urge all my colleagues that the greatest enemy of solving these problems is demagoguery, because it is so easy in campaigns to scare people. I think it is so vital that we work together in solving very tough problems.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I am a member of the Committee on the Budget. Last week Alan Greenspan, the Chairman of the Federal Reserve, came before our committee. Today Secretary Rubin, Secretary of the Treasury, came before our committee. They made, I think, a very important point that everybody should be aware of. That is that Social Security has very serious problems for the future. Mr. Speaker, I would just like to talk about some of the things that are happening in Social Security that means that the benefits for existing retirees are threatened as well as the potential for retirement benefits for workers that are going to retire in the future. In terms of the Federal budget, Social Security uses up now 22 percent of the total Federal budget. What is happening is we have a system in Social Security where existing workers pay their taxes in to support the retirement benefits of existing retirees, a pay as you GOPAC. That is the way it is today. That is the way it always has been since Social Security started in 1935. What is happening is there is a fewer number of workers. The birth rate is going down, so we are seeing a fewer number of workers paying in their taxes to support an increasing number of retirees. For example, in 1945, there were 42 people working paying in their taxes to support the benefits of each retiree. By 1950, that went down to 17 individuals working paying in their taxes to support each retiree. Today there are three people working, paying in their taxes to support each retiree. What has happened at the same time is an increasing number of retirees. The life span is much longer. When we started Social Security, the average age of death was 61, even though the retirement age was 65. And today the average age of death is almost 74 years. If you are fortunate enough to live to be 65 years old, then the average age of death is 84 years old. So a tremendous increase in the number of retirees which is going to be compounded by the fact that the baby boomers, that huge population growth after World War II, are going to start to retire in about 2011. So everybody is guessing we are going to run out of money, there is not enough money coming in to pay the outgo after 2011. Dorcas Hardy, a former Social Security Commissioner, estimates that we are going to run out of money as early as 2005. Let me give you an example of the increased cost of Social Security. This year on average we are paying out for Social Security benefits $700,000 a minute. By 2029, we will be paying out $5,600,000 a minute. Today $700,000, by 2029 it is going to be $5,600,000. A tremendous increase in cost. How do we solve the problem? I have introduced a bill last session that makes 12 modest changes for future retirees, that holds safe existing retirees, but it slightly slows down the increase in benefits for higher income retirees. It adds an additional year that you are going to have to work to be eligible for retirement. It has some changes in the bend points. It makes changes in the requirements of a spouse receiving Social Security benefits that did not work, but the point is how do we make the changes. How are we going to come to grips with changes in a program that has been called the third rail, that if politicians start touching this like they did Medicare, they are going to be chastised in the next election. I urge my colleagues to come forward. Let us start taking our heads out of the sand. Mr. President, I ask you, Secretary Rubin, I ask you, colleagues, I ask you, let us start dealing with this program. If we delay the solutions of solving Social Security, that simply means that the solutions are going to be much more drastic. It is important that we start today working on these solutions for Social Security. I invite my colleagues to examine my bill. Let us run this idea up the flag pole. Let us come up with better solutions, but let us not put this decision off by simply appointing a commission that is going to come back 2 or 3 or 4 years later with three different proposals on how to solve it.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, on the Committee on the Budget, just an update of what is happening. Alan Greenspan, the chairman of the Federal Reserve, came in day before yesterday. As we know, June O'Neill of CBO is coming in today. They are both saying there is a difference in the rosy scenario or a more conservative expectation of what is going to come in in revenues. Let us take the hard course. Let us take the more conservative estimate. Let us start cutting spending. I know it is a tough job. We talk about all these expenditures. Let me give my colleagues one example: Social Security. We are accumulating an additional $380 billion a year increased actuarial debts or unfunded liability in Social Security. The longer we put off those decisions, the more drastic those solutions are going to have to be in the future. I figured it by minute because it is big dollars if you figure the $370 billion we are spending a year. Every minute on Social Security we are spending $700,000. By 2030 every minute we are going to be spending $5,700,000. Let us get at it and solve these problems.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, last Thursday, February 27, wife, Bonnie, and I were blessed with two new grandchildren. Their names are Selina Anastasia and James Azariel Burnett. They are the first children of my daughter, Elizabeth Burnett, and her husband, Fred Burnett. Bonnie and I join James and Selina's other grandparents, Charles and Bonnie Burnette of Rustburg, VA, in welcoming them to the world. Selina and James, like my other grandchildren, will have a tough time paying back all the money that the Federal Government is borrowing. If we don't change our ways, they will have to pay $187,000 each over their lifetimes to cover their share of the interest on the national debt. I ask all the parents and grandparents now in Congress to work with me to minimize the debt that James, Selina and all the other children and grandchildren will have to pay back. If we continue to overspend, their chances for a good job and a high standard of living will be substantially reduced.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, it was interesting in the Committee on the Budget this morning that Dr. June O'Neill, the Director of the Congressional Budget Office, came with their analysis of the President's budget. One of the conclusions of the CBO was that the President's budget is not going to be in the surplus by the year 2002, but under their projections will run a $50 billion deficit in the year 2002. So I would ask that we make a humble, respectful request to the President to resubmit a budget that balances by the Congressional Budget Office scoring. Another thing that Dr. O'Neill said was that if we continue spending the way we are today, we need an immediate 50-percent increase in income tax rates to keep the budget in balance. If we put off any decision until the year 2017, we would have to have an 87-percent increase in the income tax. That means that families' take-home pay would be cut in half, and what they can spend on health care and on clothes and on food and on transportation would end up being cut in half. I want to quickly give a presentation of what is happening in what has become the largest spending item, and that is Social Security. As you see by this chart, Social Security now takes up 22 percent of the Federal budget. And what has happened is Congress, I would suggest, made a mistake by requiring everybody to contribute to Social Security, and not putting any of that money in savings and investment. Instead, since it started in 1935, Social Security has been a pay-as-you-go program where existing workers pay in their taxes to support the benefits of existing retirees. If I get my charts correct, this shows what is going to happen to Social Security if we make no changes, and that is that there is going to be less money coming in in this pay-as-you-go program. In 2011, Dorcas Hardy, a former commissioner, says there is going to be less tax money coming into Social Security than is required for the payouts as early as 2005. That's not very far in the future. So if we are going to preserve Social Security not only for future retirees but for existing retirees, we simply got to start taking our heads out of the sand and be willing to face this very tough question on what we're going to do to preserve Social Security, to preserve Medicare, to preserve some of the important programs that Government has developed to help people, and not put the burden on future generations and ask them to pay an 87- percent increase in their taxes. Here is the problem on Social Security. It was developed as a pay-as- you-go system where existing workers pay for existing retirees. But what has happened is there are fewer workers paying for the support of that retiree. In 1950, we had 17 workers earning money, paying their taxes to support each retiree. Today, there are three workers. In another 35 years there are going to be only two workers working and paying the taxes to support each retiree. Now here is what the average retired couple has already gotten back: Over four times what they and their employer put into the Social Security taxes, plus compound interest. This chart shows that if you happened to retire in 1940, it took just 2 months to get everything back that you and your employer put into Social Security taxes. If you retired in 1960, it took 2 years. Look what is going to happen to the workers that are starting to retire today, to the workers that are 35 and 45 and 50 years old. They are going to have to work 26 years after retirement. They are going to have to live 26 years after retirement in order to collect the benefits that they and their employer put into Social Security. We have got to have a change. I have developed a proposal that I think we should run up the flagpole in order to start coming up with solutions to save Social Security. My proposal allows some private investment, but at the same time does not take away benefits from anybody over 58 years old. So I think we have to tell people ahead of time what is happening. Part of the solution is a private investment. Part of the solution is slowing down benefits for the higher income recipients. Mr. Speaker, I ask that we deal with these serious problems as soon as possible and not put it off for another decade.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on the subject of the special order given today by the gentleman from New Jersey [Mr. Pappas].

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, this is Ryan Hemker from Quincy, MI, coming in from my Michigan Seventh Congressional District as a page, so Ryan is going to help me flip these charts. Social Security is developing into an issue which more and more people are realizing has very serious consequences. We are talking about the question now of should we continue to dip into the Social Security trust fund to use for current other Government spending. What I want to talk about is how do we keep Social Security solvent, and is there a currently a real problem with Social Security? As we see by this first chart, Social Security is now the largest spending item in the Federal budget. This past year it was $347 billion larger than the defense bill, larger than the other 12 discretionary spending bills, of course larger than Medicaid or Medicare or the other entitlements. Interest on the public debt, and that interest includes the money that has been borrowed from the Social Security trust fund, now takes up 15 percent of the Federal budget. Let us go to the next chart. The next chart shows part of the problem. Our birth rate is going down and people are living longer, and that means that the expense that we are paying into the cost of Social Security is going up. Since those figures in billions are so huge, I brought it down to a minute out of every day. Right now we are spending $661,000 a minute, $661,000 a minute to pay Social Security benefits. But spending per minute in the year 2030 is going to be $5,717,000. It is going from $600,000 to over $6 million in these next few years. That is because more and more people are living longer, the birth rate is going down, and as the next chart shows, we are seeing that for Americans, when Social Security started in 1935, the average age of death was 63 years old. Now the average age of death is 74 years old, but if you happen to reach 65 and start collecting those benefits, then the average age of death for that person that reaches 65 years old goes up to 84 years old. As people live longer and the baby boomers retire to expand that senior population, we see the increase on this chart, that seniors are increasing at the rate of 108 percent between now and 2040, where workers that are paying in to pay for those benefits with their Social Security taxes are only increasing at the rate of 23 percent. Let me stop and pause here a minute to stress the fact that this is a pay-as-you-go program. Current workers pay their taxes to pay the benefits for current retirees. That is the way it is now. That is the way it always has been. There is no savings account. We talk about the trust fund, but the trust fund is only the surplus in every month when those Social Security taxes come in. If you subtract the benefits that are paid out, you have a little surplus, especially since we started increasing the Social Security taxes in the last 15 years. That surplus is what goes into the Social Security trust fund. Now there is $540 billion in that trust fund, and it is a problem, because we are even using that money for other Government expenditures. I have proposed legislation that stops the Government from using that surplus money. That is a start. As we see on the number of people, the number of workers that are working, that are paying in their taxes to support each retiree, in 1950 we had 17 workers paying in their taxes to support each retiree. In 1996 we had three workers. By the year 2029, we are only going to have two workers that are going to be asked to pay enough taxes to support each retiree. Look, anybody under 55 years old had better seriously look at changing the Social Security system. It needs changing. Politicians can no longer bury their heads in the sand and pretend the problem does not exist. Just let me flip through these charts. Right now we expect to take in less tax revenues than is required for the payout in 2011. However, Dorcas Hardy suggests that it could happen, and we could essentially be in bankruptcy or having less money than required for the payouts as early as 2005. We cannot wait to solve this problem. After that, the red part shows how huge the deficits are going to be, up to $400 billion a year in today's dollars. So far we have relied on tax increases to cover the problems of Social Security, so we have gone from 2 percent of the person's payroll, and now we are up to over 12 percent. In fact, if we look at the tax increases since 1970, we have had tax increases 36 times. There has to be a change. I ask everybody to take a look at my bill. It is not the perfect solution. Let us take it up the flagpole, start shooting at it, but let us no longer ignore the real problem with Social Security.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, in the week of February 27, we are expected to take up the issue of the balanced budget amendment. There has been a lot of talk about Social Security. How this amendment is going to affect Social Security and how changes in that amendment that might better portray what is really happening at the Federal Government. I wanted to talk a few minutes about what the problem is in Social Security. That problem with Social Security is not having enough money coming in to pay the benefits of retirees as we operate on, if you will, a pay-as-you-go system, where existing workers pay the benefits of existing retirees. That is the way it started in 1935 when we passed the Social Security bill. That is the way it has always been, and that is the way it is today. If we look at the problems of the birth rate going down while the number of retired people increase--and they are increasing because they are living longer--we see what happens to the deficits of Social Security. Some suggest, such as Dorcas Hardy, the previous Social Security commissioner, that we are going to be short of Social Security funds as early as 2005. It presents a serious problem to this Congress. Every retiree should be concerned about what might happen to those benefits if we delay some solution. Every worker in America, especially those under 45 years old, had better be going to the candidates that run for Congress and say, look, take your heads out of the sand and do something to protect Social Security. This chart in front of me shows the kind of deficits we are going to have; in other words, the amount of money by which benefit payments will exceed revenues that have to borrow or shift from the general fund. As I go around to my town hall meetings and into high school and college government classes, one statistic that I give them is the price that Social Security is costing a minute today. That price is $600,000 a minute. But in 2030, it is going to be $5,700,000 a minute. So the number of retirees increases because they are living longer. When we started Social Security, the average age of death was 63. Now if you are lucky enough to hit 65, the estimate is that you are going to live to be 86 years old. This represents the decrease in the number of workers that pay in their taxes to support each retiree. In 1945, there were about 42 people working, paying in taxes to support each retiree. By 1950, that was down to 17 people working. By today, there are only three people working. The estimate is by 2030 there are only going to be two people working. I have developed a Social Security proposal that has been scored by the Social Security Administration that keeps Social Security solvent. It does this in several ways. No. 1, it keeps the Government from reaching into the surpluses in the Social Security fund and spending those for other Government purposes. It allows a very modest investment in private savings accounts. The reason we do that is because Treasury is now paying a return, a real interest rate return, of 2.3 percent. If we compare that to the 9-percent the private sector has been getting over the last 80 years, we see the Social Security system is losing out. So every proposal that came out of the President's advisory council included some kind of private investment. What we also do is increase the retirement age by 1 year. That brings in additional revenues. The amount of those additional revenues can be eligible for private investments. We do not affect current retirees in this bill because they, after all, made their plans based on existing law; but gradually over the next 25 years, we make these changes. Look, we have just got to, make an aggressive, conscientious effort to deal with these kinds of entitlement spending, whether it is Medicare, or whether it is Social Security, because the fact is, we are going broke. If we do not make changes now, those changes in the future are going to have to be much more drastic. It is going to interrupt our economy. It is going to interrupt the well-being of retirees. So let's act now.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4041) to authorize the Secretary of Agriculture to convey a parcel of unused agricultural land in Dos Palos, CA, to the Dos Palos Ag Boosters for use as a farm school.

Mr. SMITH of Michigan. Mr. Speaker, I yield back the balance of my time.

Mr. SMITH of Michigan. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, it is 22 acres of land, it will be sold at market value and any other provisions that the Secretary of Agriculture deems appropriate. Mr. de la GARZA. Mr. Speaker, this bill will give some kids a chance to learn how to farm the old-fashioned way: through hard work and sweat. They will work hard, planting their crops, watering them, guarding them against the many threats faced by all farmers--the weather, disease, insects. And they will feel the satisfaction of bringing in the harvest. This bill will help these students learn to appreciate the hard work that goes into producing our Nation's food, and it may even get a few of them off to a good start as farmers.

Mr. SMITH of Michigan. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, we expect this to be very short, very quick. The bill as introduced by the gentleman from California [Mr. Condit] on September 10 is a noncontroversial land sale that has the support of the local community, the Department of Agriculture, the Democrats and the Republicans. Mr. Speaker, I include the following letter for the Record: U.S. Congress, Congressional Budget Office, Washington, DC, September 26, 1996. Hon. Pat Roberts, Chairman, Committee on Agriculture, House of Representatives, Washington, DC. Dear Mr. Chairman: As you requested, the Congressional Budget Office has reviewed H.R. 4041, a bill to authorize the Secretary of Agriculture to convey a parcel of unused agricultural land in Dos Palos, California, to the Dos Palos Ag Boosters for use as a farm school. The bill was introduced in the House of Representatives on September 10, 1996. Based on information provided by the Farm Service Agency (FSA), which owns the land, CBO estimates that enacting H.R. 4041 would have no significant impact on the federal budget. Because the bill could affect direct spending, pay-as-you-go procedures would apply; but any such effect would be negligible. The bill would direct the Secretary of Agriculture to convey a parcel of about 22 acres of land in Dos Palos, California, to the Dos Palos Ag Boosters. As consideration for the conveyance, the transferee would pay to the Secretary an amount equal to the fair market value of the parcel, as determined by the Secretary. The transferee would also be required to pay the cost of a survey to determine the exact acreage and legal description. According to the FSA, the land is worth less than $100,000. The agency acquired the parcel through liquidation and then leased the land out. That lease has since expired. Under new procedures, FSA now is required to sell such land at its appraised value (if possible) upon expiration of a lease, so this land would likely be sold in the near future under current law. CBO estimates that receipts from the sale of this land would not be significantly different under H.R. 4041. H.R. 4041 contains no private-sector or intergovernmental mandates as defined in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4) and would impose no significant costs on state, local, or tribal governments. If you wish further details on this estimate, we will be pleased to provide them. The staff contact is Craig Jagger. Sincerely, June E. O'Neill, Director. Mr. Speaker, I reserve the balance of my time.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, as we draw this 104th Congress to a close, I think it is appropriate to remember where we were 2 years ago, before Republicans became a majority in this House. The Democrats were not talking about a balanced budget. In fact, the President's balanced budget at that time, 2 years ago, had a $200 billion deficit every year into the foreseeable future. In 1995, the new Republican majority came in and insisted that Government do what Americans have to do in their personal family budgets--that being--balance the Federal budget. The Democrats, the President, did their focus groups, they took the polls. They decided, Americans do want a balanced budget. They think it is reasonable. Two years ago, nobody on the liberal side of the aisle was talking about a balanced budget, and now everybody is talking about it. That is progress. The liberals and big Government advocates try to belittle this Republican Congress, and criticize the Contract With America. We are going to celebrate our 2-year anniversary of the Contract With America today. Let us just remember that most of the brag items of accomplishments that President Clinton mentioned in his acceptance speech were passed by the Republican-controlled 104th Congress. Mr. Speaker, I include for the Record the Contract With America items signed into law in the last 2 years.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on the legislation just considered.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. If the gentleman will yield, you know it is so disconcerting that government is so hell bent on having more control over peoples' lives is disrupting and making those lives worse by having a bigger government and by having more and more taxes, because it hurts those jobs. You know, I am an economist by education, but I always through the school of economics might be better in social studies because it is human reaction, economics is human reaction. If we want more and better jobs in this country, we have to decide what products the people in this country and other countries want to buy, and we have got to make a quality product at a competitive price. When we tax investment and saving more than any of these other countries because in government's eagerness to be bigger and do more things for more people, we have increased the tax. You know, we heard a lot of discussion: How are we going to pay for the Dole Tax cut? It is $540 billion. It is interesting to note that this liberal Congress in the last 5 years, not in the last 1\1/2\ years of Republican control, but in the last 5 years has increased taxes $540 billion, and so that tax increase is now being offset with a suggestion: ``Let's reduce taxes by $540 billion.'' The liberal press says, ``Well, how are you going to pay for it?'' I like the Speaker's reaching in the pocket and bring out six pennies, because we have go a pinch pennies if we are going to pay for the tax cut. But the fact is that if we can cut down the waste and the fraud and the abuse of Federal Government by just 6 cents out of a dollar, we are going to pay for that tax cut. I mean, Mr. Speaker, if I could ask the American people right now how much fraud and abuse and waste do you think is in government, you know we could have a bidding process. We could say, I bet most of the people of America think we could cut out 10 percent, or even 15 percent. But what we are talking about is pinching pennies in the Federal Government, just like every family has to do, and cutting down this budget by 6 percent and reducing those taxes by 15 percent, leaving more money in every citizen's pocket. That is what we are interested in, take-home pay. We have got to have more and better jobs, but at the same time, if we can reduce those taxes by 15 percent, what we are talking about is for a family, for a man, a husband and wife and two kids, making $30,000, they will have $1.264 more in their pocket if we have this tax cut, and that is just what government and a liberal Congress has taken out of their pockets in the last 5 years. So let us offset it, let us move ahead. It is ridiculous having bigger and bigger government that not only taxes more but takes over more of your freedom and more of your liberty.

Mr. SMITH of Michigan. If the gentleman would yield again, it is interesting because it is very personal. When I came to Congress in 1993, first thing, I told my staff, ``Look, stop the delivery of ice,'' and they--after 5 days I said, ``The ice is still coming,'' and they said, ``Well, we can't stop it.'' They said it is in the labor contract, and they are required to deliver two buckets of ice to every congressional office. So I wrote a letter to the Speaker, the Democratic Speaker at that time, and suggested that this was pretty ridiculous, that we had a small refrigerator, we had all the ice we needed. If we wanted cold pop, we had cold pop. But, you know, there are so many examples like that. The post office, the post office is another half a million dollars. Instead of the Government running its own post office and feeding out the stamps and allowing the kind of corruption that existed in the past, when this Congress, when this new Republican Congress, came in, we said the U.S. Postal Service is responsible for running the post office. That saved another half a billion dollars. This, Jim, is so amazing. I wish everybody could know some of the things that have happened. You know, when we took office in our term in Congress, we cut out 270 different agencies and programs. On the first day of the session when we came into session in 1995, on January 5 or something, what we did is did away with 23 subcommittees, four full committees; we cut legislative staff by almost 32 percent in an effort to do exactly what we are talking about, pinch pennies, and that is what we are going to continue to do. And, you know, I for one, and I suspect you for another, and many of us in the Republican Caucus, among the Republican Members of Congress, are not going to vote for a tax increase unless it is paid for with spending cuts, because we are very determined that we are going to have a balanced budget.

Mr. SMITH of Michigan. Would the gentleman yield?

Mr. SMITH of Michigan. I think it is important that we point out that under the Republican budget resolution that we passed, by the end of this 6-year effort to balance the budget we will be back down to 8 percent of GDP. So the effort is there. It takes a lot of conviction. It is not easy for politicians to make those cuts. We have seen so much demagoguing as Republicans have tried to pinch pennies that the demagoguery to criticize Republicans for cutting any of this spending has resulted in an attitude among many Americans that, well, gosh, maybe those Republicans are too cruel and maybe they are putting burdens and pinching pennies for tax breaks for the rich. Jim, I see you have got a chart down there, and I think this tax break for the rich idea is so ridiculous as we try to give middle-class tax breaks, and that is exactly what the Dole plan does, that is exactly what the Republican plan does. But I believe this is a recollection of what happened in the 1980's under Ronald Reagan.

Mr. SMITH of Michigan. I would just say, Jim, it is true that American workers are currently the most productive in the world, but we cannot continue that kind of efficiency and productivity because the other countries are increasing their rate of productivity faster than the United States. Part of these reasons is because we make it so expensive under our Tax Code for people to save and invest. We penalize. I am just reading some of the statistics here, where the average tax in the United States is 28 percent, compared to France at 18 percent, and this is for savings and investment; 28 percent in the United States, 18 percent in France. Canada has 23 percent, and Japan has 20 percent. So here the United States is making it more difficult to save and invest, and like we mentioned before, the capital gains tax relief means if the American family buys a home, for example, and it goes up with inflation but does not go up any faster than inflation, when they sell that house we penalize that family for the increased value of their house because of inflation. So if we have some capital gains tax relief, then we say, look, if that house would only buy the equivalent of, say, five cars when you bought it, it doubles in price over 15 years, but it still only buys five cars, if we are going to tax on increased wealth, then we should not be taxing that inflation. That is what we are trying to do when we talk about capital gains tax relief.

Mr. SMITH of Michigan. I think one example is the taxes that we put on businesses that buy new equipment and machinery to put better tools in the hands of the American work force. So, we call it neutral cost recovery. But the fact is that Government, this Federal Government in an effort to get more taxes out of people says to a business, if you buy machinery and equipment, we are going to penalize you on the way we tax you because we make that business spread out that depreciation over 5, 15, 20 years, and that depreciation and inflation eat up the value of that deduction. So if we were to allow a business to deduct the full amount of their purchase of machinery and equipment and state-of-the-art tools to make our workers more productive, that is going to increase that average weekly income of those workers. If we were to allow a business to deduct the full amount, it would reduce the cost of that equipment by 16 percent. I just use that as one example to show how tax penalties can discourage business efficiency and business productivity.

Mr. SMITH of Michigan. Mr. Speaker, will the gentleman yield?

Mr. SMITH of Michigan. Just to expand a little bit on why balancing the budget is important with this whole tax reduction to motivate economic and job expansion, if we can balance the budget at the same time, that means that the demand for borrowing money from the Federal Government will reduce the pressure on interest rates. Right last year the Federal Government borrowed 41 percent of all of the money lent out in the United States. Just think back to your Economics 101. If you lower that demand with Government borrowing 41 percent of the money, if you can balance the budget and have Government borrow less money, it is going to mean interest rates go down. In our Committee on the Budget, Alan Greenspan, chairman of the Federal Reserve, came to our Committee on the Budget and said, look, if Congress balances the budget, we could see interest rates go down up to between 1\1/2\ and 2 percent. That means that if interest rates go down, every business in this country finds that whatever they are going to buy in terms of tools, in terms of expansion, they see a significant reduction in their costs. So interest rates going down means a tremendous stimulant to the economy. A combination, like Zach Wamp says, a combination of stimulating economic and job expansion, at the same time that we start pinching those pennies here at the national level and making sure we balance that budget, is going to see the greatest economic and job expansion this country has ever seen.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, on rollcall No. 404, If I had not been late arriving for the vote I would have voted ``yes.''

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I thank the chairman for yielding me this time and certainly for that introduction. It is so frustrating listening to the debate, pretending that Congress can somehow create more wealth by passing a law saying you increase wages. Do we think $5.15 an hour is that great of an income? Do we think that is the correct rate for people to survive? If anybody thought Congress could do it, why in the world are we not raising it to $10 or $12 or a respectable living for an American family of $14, $16? It is because Government cannot set prices. That is not the way our system works. Let me tell my colleagues how I think it works. I think competition is just as important in the labor force as it is in the total economy of this country. The free market with competition is what has made us so great. If we want to improve the chances of people to increase their salaries, then one thing we need is to have competition in the labor market with better mobility of labor. The bill that we passed yesterday that allows a person working to be assured that their health care can go with them as they go looking for a better job is a good step toward improving mobility of labor. Another area that needs attention if we really wanted to help mobility, to help assure the highest possible wage would be to allow accrued pension benefits earned to go with the worker to the next job. Another thing we could do would be to provide better information regarding jobs and job skills that are and will be in high demand. The pretense by liberals that we can somehow magically pass a law and set prices and wages to improve our standard of living is ridiculous, and is contrary to the economic system that made this country great.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, today thousands of agricultural producers across America cannot sell their products to their own U.S. neighbors because they cannot secure waterborne transportation. My own farmers in Michigan can't sell their grain to livestock producers desperately needing feed in the South because there is no means of coastal transportation. American farmers and industry are forced to purchase foreign goods, rather than those produced in the U.S. because there is no means of transportation within the coastal U.S. for American products. In all parts of the Nation, industry and farmers have watched business opportunities pass them by and go to foreign competitors because of lack of adequate transportation of U.S. goods to U.S. purchasers along our coastal waters. In effect the United States is subsidizing foreign farmers to the detriment of U.S. producers. This system is contrary to the free-market system and the buy- American philosophy. That is why I am introducing reforms to our Federal maritime law, commonly known as the Jones Act to allow more free movement of agricultural commodities and other cargo within our domestic waters. Currently the 1920 Jones Act, borne out of national security concerns, requires the transport of goods within the United States be done on domestic carriers, with domestic crews, under domestic flags. My bill is designed to spur economic activity by increasing the means of transportation for agriculture and others goods within the United States and in turn boost the maritime industry which has suffered dramatically in the last 20 years. My bill that I am introducing today would bring competition to ocean transportation and level the playing field between domestic and foreign carriers by allowing cargo to be carried on foreign ships, while requiring only U.S.-manned crews in compliance with immigration laws, and adherence by foreign carriers to all tax and regulations currently imposed on U.S. ships. Reforming the Jones Act will strengthen the competitive position of American businesses and agricultural producers. Please lend your support to American industry by helping to promote trade and economic activity throughout the United States.