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Mr. DORGAN. Mr. President, we have heard a couple of very spirited defenses this afternoon on behalf of jobs in China, which I pose is a wonderful thing if you live in China and have a job in China. The issue here is what about jobs in our country. What about the people who woke up this morning unemployed in America looking for work who could not find it? Who is standing on this floor speaking for those folks?
I have heard a lot of discussion about support for jobs in China, Mexico, or elsewhere. But who is standing up talking about the jobs at home?
Let me describe what this issue is about, if I may.
I think this issue is something most Americans understand because they have heard it over and over. In recent years, we have seen millions and millions of manufacturing jobs gone from America because the very manufacturing plants that were open in this country to manufacture goods that had a label on it that said made in America are gone from America. They are now in China, they are in Mexico, they are in Thailand, they are in South Korea, and elsewhere. Let me talk about those jobs and why they have left this country.
Listening to my colleagues--and, of course, the Chamber of Commerce, the National Association of Manufacturers, all of the usual suspects who get in the same tub and make the same thumping sounds--one would believe that what has happened is that we have actually increased manufacturing jobs in this country and that moving American jobs overseas does not hurt anybody; it helps our country. Of course, that is just patently untrue.
My colleagues were talking about something called deferral. That is not something people sit around a coffee shop talking about--deferral. It means, in certain cases under this bill, those companies that shut their American manufacturing plant, get rid of all their workers, and move the manufacturing to China or Mexico, for example--let's take China--actually get a tax break from our country that says if they are on one side of the street and their competitor is on the other side of the street, and they close their plant, fire their workers, scat out of town, go to China, hire people there, manufacture the same product, ship it back here, their country will be generous enough to say: Good for you, we will give you a tax break for doing it. That is what is called a deferral.
In the narrow scope of what is in this amendment they object to, deferral says if they leave this country with their jobs, shut them down here, move over there, manufacture there with foreign workers, and then ship the product back into this country to compete against the business men and women who stayed here, who manufacture here, who employ people here, they are not going to get a tax cut anymore. It is just not going to happen.
My colleagues say we have to have this principle called deferral. What about having every American have the opportunity for deferral? How about every American having the opportunity to defer their income taxes until it is more convenient for them? No, not everybody gets these things. Just the interests at the very top.
Then when we tried to narrow it a little bit because it gives a pernicious incentive to move jobs overseas, we have people standing up saying: We support those companies that are moving American jobs overseas. We support those jobs in China. God forbid you want to interrupt this process.
My colleague says: In 1962, there was this carefully crafted tax agreement on deferral--48 years ago. Do not interrupt that after 48 years. We made this careful agreement 48 years ago.
Let me tell my colleagues what has happened since then. I have shown this on the Senate floor before. In the last 48 years, the tax system has changed a little bit. This is a five-story white house on Church Street in the Cayman Islands called the Ugland House. The first time I showed this chart--by the way, this is enterprising reporting by David Evans from Bloomberg--there were 12,748 companies in this building. It is only a five-story small white building on Church Street in the Cayman Islands. It was inhabited by 12,748 corporations. A little crowded, I would say. Were they there? No, they just got their mail there. Why did they get their mail there? So they could slip under the American Tax Code and not pay taxes to the U.S. Government.
When I first showed this chart some years ago, it was 12,748 corporations. But there was room for more. Now there are 18,857 entities that call this building home. Is that unbelievable? They must enjoy each other's company, or at least their mail must fraternize.
Mr. President, more than 18,000 companies claim that little building. We made this careful agreement in 1962 on deferral? How dare you deal with the Tax Code in a way that you would upend that 1962 agreement. Everything has changed. There is not a ghost of a chance in 1962 that American companies would have even thought of trying something that audacious--just gather together in a mailbox in a white building someplace to avoid paying your obligation to this country.
I have shown this as well. Wachovia Bank (formerly First Union Bank) bought a sewage system in Bochum, Germany. Why? Did they have sewage specialists on their staff? I don't think so. Did they put out television advertisements: Come do business with Wachovia Bank because we know about sewers or we want to buy sewers in foreign cities? No, they did this to avoid paying U.S. taxes. This is Wachovia Bank. They did not pay $175 million in U.S. taxes because they bought a sewage system from a German city.
Did they move the sewage pipes? No. Do they know anything about sewers? No. They bought it from the German city and leased it back so they could depreciate it and not have to pay U.S. taxes. Unbelievable.
The Tax Code has changed, I say to my friends. It is a punch board of gimmicks allowing people to do things they could not previously have done before, and the most significant enterprise is to move American manufacturing jobs overseas and get a tax break for doing it.
This amendment is very misunderstood based on the discussions by the two previous speakers. There is discussion on the floor of the Senate about what is the motivation for moving jobs overseas--to serve, for example, a foreign constituency; want to move jobs to China to be able to sell into Thailand or Korea. The tax deferral piece of this amendment does not affect you. You can win that argument we are not having, if you wish, but you are misstating what the amendment suggests. The deferral part of this amendment does not do anything of the kind.
This amendment is narrow--narrower than I would have it, as a matter of fact. But it says if you are going to get rid of your American workers, close your plant, move those jobs elsewhere, and then ship back into this country to compete with the American businesses that stayed here, you do not get the advantage of deferring the payment of U.S. taxes. It is just very simple.
The question today is not just who is going to stand up for American jobs on this floor, who is going to stand up for American businesses that stayed here, manufactured here, hired workers here, paid the rent here, who is going to stand here and support that? I have not heard it yet.
Let me go through some points. Before I do, let me mention one other thing. One of my colleagues just said: There are some things you cannot make here. So if you make them abroad, we do not want to punish you in our Tax Code from selling them in this country.
They previously used bananas. I want my colleagues to understand, we actually have a banana exemption. We do not actually spell out bananas, but because the specter of fruit was raised the last time this was discussed, we included a banana exemption.
Of course, we do not grow bananas in the United States. If somebody ships them back here, they will not be affected by this amendment either.
There are a lot of points raised that have nothing at all to do with what we are describing in terms of public policy.
Let me go through a few items. Some people may not know this. I described previously in unsuccessful attempts to try to do what we are doing that in New Jersey, there are a lot of folks who loved their jobs and they worked for a company call Fig Newton. Some actually shoveled fig paste. By the way, the company's name was Nabisco, which stands for National Biscuit Company. But it was not quite so national because Nabisco, the National Biscuit Company, decided the pay they had to provide for people to shovel fig paste in New Jersey was way out of line, so they just took Fig Newtons right off to Mexico. If you want Mexican food, buy some Fig Newtons. It goes on and on. The list is so long.
I want to mention, as I have mentioned before, some of these same stories because it is important to understand what motivates people who want to stand up for American jobs.
Pennsylvania House Furniture--I was in Pennsylvania this weekend--was made in this country for over 100 years with fine Pennsylvania wood. It was a wonderful company making high-end furniture. One day it was sold to La-Z-Boy. La-Z-Boy decided: We are going to move Pennsylvania House Furniture to China, and we are going to ship Pennsylvania wood to China and have Chinese workers put the wood together and ship it back to be sold in the United States. It had nothing to do with whether the folks at Pennsylvania House Furniture were slothful, indolent workers not doing their job. It had nothing to do with that.
What it had to do with is La-Z-Boy did not want to manufacture Pennsylvania House Furniture in the United States. They wanted to acquire 50-cent an hour labor, 12 hours a day, 7 days a week in China.
On the last day at work at the Pennsylvania House Furniture manufacturing company, these craftsmen--nearly 500 craftsmen--as the last piece of furniture came off the line, they turned the cabinet over, and then they all gathered round to sign their name on the bottom of the cabinet. These wonderful American craftsmen signed that cabinet. Somebody has a piece of furniture they are probably not aware has all the names of those workers who were fired as those jobs went to China.
Why did they do that? Because they cared about their jobs and were proud
of their work, but they could not compete with 50-cent-an-hour labor.
Stanley Furniture in Virginia is a furniture company that was started by Tom Stanley, a young dairy farmer in Virginia. He started it in a city that now is named Stanleytown. A couple of months ago, it was decided that Stanleytown was going to have some pretty bad news. Stanleytown was going to find out that these jobs were no longer going to be in Stanleytown. Stanley Furniture, another fine furniture manufacturer, was going to China.
Let me read from the Journal of Commerce of this year:
Stanley Furniture's decision to close its plant in the small town that bears its name fell like a hammer blow on southern Virginia and resounded across an industry, increasingly now moving overseas. More than 500 workers will lose their jobs this year as the manufacturer shuts down its Stanleytown, VA, plant, where the company has made furniture since 1924.
So it goes--moving jobs overseas. Let me, if I might, go through a couple of others.
I notice the Hershey company--speaking of Pennsylvania--Hershey company's York Peppermint Pattie is that silver pattie with the ``York'' in the middle and the advertisement that says: ``The cool, refreshing taste of mint dipped in dark chocolate will take you miles away''--in this case, of course, to Mexico because Hershey decided it is time to move. So York Peppermint Pattie moves 260 jobs to Monterey, Mexico--part of a longer term job strategy by Hershey, they said. Well, that is a peppermint pattie. America's manufacturing strategy probably doesn't depend on peppermint patties--who knows.
I have previously mentioned a series of American manufacturers, and I have used this one often because they announced with great fanfare some years ago that they were going to leave America altogether. Not another piece of underwear was going to be made by Fruit of the Loom in the United States. The dancing grapes, for all their advertisements, must have been unhappy. Their advertisements were always happy and upbeat, with guys dressed as grapes and such marching in the meadow. They can't have been very happy when Fruit of the Loom said: We are not going to make underwear in America anymore.
Radio Flyer's little red wagon. This was a 100-year-old company in Chicago. All gone. Now made in Mexico.
Here is another company. I have been talking about this one for a long time. Last week, my colleague from Ohio talked about this company--Huffy Bicycles. You can buy them at Walmart and Kmart and Sears. They were made in Ohio--except, no more. No more. All those workers lost their jobs. All those jobs are in China. All those jobs are done by people who make 50 cents an hour, working 7 days a week, 12 to 14 hours a day. Huffy said to the workers in Ohio: You know what, you can't compete, so you are done. On the last day at work, where they parked their cars in the parking lot, those workers who were fired that day left a pair of empty shoes in the places where their cars were parked. It was the only thing they could do to say: You can move our jobs to China, but you can never replace American workers.
So I could go on and on, but I want to describe what so many here in this Chamber wish to ignore. This is a quote from Mr. Paul Craig Roberts, one of the top Treasury officials in the Reagan administration. Here is what he said this year:
Outsourcing is rapidly eroding America's superpower status. Only fools will continue clinging to the premise that outsourcing is good for America.
Only fools will cling to that premise. And I agree with him.
Again, another quote from Mr. Paul Craig Roberts:
In order to penetrate and to serve foreign markets, U.S. corporations need overseas operations. However, many U.S. companies use foreign labor to manufacturer abroad the products that they sell in American markets. If Henry Ford had used Indian, Chinese, and Mexican workers to manufacturer his cars, Indians, Chinese and Mexicans could possibly have purchased Fords but not Americans.
Again, he is absolutely right. It seems to me the question is, Will America remain a world-class economic power without a world-class manufacturing capability? Does anybody really believe that could be the case? You are going to decimate and erode a manufacturing base in this country and then say: Things will be just fine; don't worry about it. We can all sell hamburgers to each other and things will be just great? We know better than that. What is happening before our eyes is a hollowing out of America's manufacturing capability.
There is a lot of discussion about what do we do about jobs, what do we do about trying to create new jobs in the country, and that has to do with what is called the faucet. If we are trying to put new jobs in the tub, they say, turn on the faucet. That is fine, and I support a range of policies that try to turn on the faucet to create more jobs in this country. But what about the open drain? As we work on the faucet, what about the drain, when Stanley Furniture says: Well, I know you are trying to create jobs, but we are out of here; or Etch A Sketch in Bryan, OH, says: Yeah, we know every kid plays with Etch A Sketch. We know we have always made it in America. But we were told by Walmart that if we couldn't produce it for $9.99 or less, they wouldn't sell it. If they don't sell it, we are out of business, so we are closing down our plant and moving to China.
The list goes on and on. The question is, What do we do about all of this? My colleagues--too many of them--say: Let's do nothing. Let's act as if nothing is really going on. In fact, let's come in here and say: You know, we made an agreement in 1962 on some deferral tax issue, and let's stick with it.
One of my colleagues earlier today said: You know, we have to worry about American corporations because they pay some of the highest tax rates in the industrial world. Well, that is a little like Penn and Teller talking about fiscal policy, and only one speaks and the other is silent. It is true that our corporate tax rates, I believe second from the top of the OECD countries. But there is another truth. The other truth is that our corporations in America pay an effective tax rate that is right near the bottom. What is the difference? One is a statutory rate--that is what the law says you should pay--and the other is how much you pay, which is right near the bottom. Why? Because we have a punchboard of gimmicks to allow that to happen. I have described a couple: American banks and other companies buying German sewer systems, buying German railcar systems, streetcars, buying German city halls for the purpose of sale-leasebacks so they can avoid paying taxes to the United States. It is pretty unbelievable, when you think about it.
The only reason I have mentioned some of the companies over the years when I have talked about this is to give them full credit for what they are trying to do. They and all their neighbors should understand that they want all the benefits America has to offer, but they don't want to sign up for the responsibilities that exist for Americans, including an American company.
I want our corporations to do well. I want American corporations to be profitable. But I will tell you this: If you have two kinds of corporations, and one decides to stay here and manufacture in our country and the other decides to take the jobs and move to a low-wage, lower tax alternative, I want to be helpful to that corporation that stays here, that hires workers here, that keeps the plant open here and is proud to put a made-in-America label on their product.
There is a company called HMC in this country that makes very substantial industrial products. You can see that this is a company everyone admires. Let me tell you what this corporate CEO has said. The CEO of HMC corporation, Robert Smith, said this:
Offshoring in search of higher profits is a mistake because it ignores manufacturing's larger purpose in U.S. society.
Here is something else Mr. Robert Smith said, and I compliment him because you will find precious few who will say it.
It is my belief that every American citizen, not only me, should feel strongly about maintaining one of the most important cultures we have, and that is manufacturing. Now, why is it important? Does anybody think we would have prevailed in the Second World War without the prodigious manufacturing capability of our country? If anybody is interested in that, go read Manchester's ``The Glory and the Dream'' and understand what we did and how we did it in manufacturing war planes and ships and tanks and
trucks. We had the most unbelievable manufacturing capability in the history of humankind.
Some say that none of this matters--why should we pick winners and losers? If the marketplace says we manufacture products in China or Mexico, if, in fact, we actually import more cars from Mexico than we export to the entire rest of the world, so what? Don't worry, be happy. That is the way the U.S. Chamber of Commerce wants it, and it is what the National Association of Manufacturers wants to have happen, apparently--except I know of companies that belong to both those organizations that have called me and written to me and said that they are dead wrong. How about having a chamber in the U.S. Senate stand up for American manufacturing?
I know that when I talk this way and when I say these things, there are people in this room--and the Washington Post would be a good example--who will instantly say: Aha, I hear all that nonsense. This is about protectionism. It is about America becoming protectionist and building walls around its country to keep goods out.
Are you kidding me? Are they nuts when they talk that way? Last month, we had a $50 billion trade deficit in 1 single month. In a recent year, we had a $750 billion trade deficit. You can make a plausible case that our fiscal policy budget deficit is what we owe to ourselves. You can make that case, and we will pay it back to ourselves. You can't make that case with a trade deficit. The trade deficit is what we owe others in the world, and we will repay that with a lower standard of living in this country inevitably.
The question is, When will we start to decide that this trade strategy is not working? We are dealing with other countries that are engaged in managed trade, and yet we are saying it doesn't matter what happens to us. It just doesn't matter.
We, by the way, spent a century doing what other countries wouldn't or couldn't--in most cases, couldn't--and we lifted up this country. We had unbelievable battles.
The other day, I described the battle on workers' rights. In the first book I wrote, I described James Fyler. James Fyler was shot 54 times. I said--and I shouldn't have--that he died of lead poisoning. He died because he was shot 54 times in 1917 in Ludlow, CO. He was shot because he believed that people who worked underground digging for coal ought to work in a safe workplace and ought to be paid a fair wage. And for that, he gave his life.
There are many things we have done over the past century that people have died for to lift up standards in America, and now they are routine--decent wages, fair labor standards, and safe workplaces. We did all that. Other countries, in many cases, have not. So now the question is, Is it important for us to lift up others around the world or to allow ourselves to be pushed down in terms of the standards we have created and fought for over a long, long time? To me, the answer is self-evident: Let's stand up for what this country has done.
I am all for helping others. I want to lift them up, create standards that hopefully can mirror ours. I am not interested at all in having a Huffy Bicycle management team say to the Huffy workers in Ohio: If you can't compete with China's wages and China's workers, you are out of work, and we don't care what you think.
Well, the workers of Ohio said: You know what, we just can't live on 50 cents an hour, and we can't work 7 days a week, 12 to 14 hours a day.
The law won't allow U.S. companies to hire kids, so the company said: That is tough luck. You need to understand that it is a new world out there. If you can't compete, you lose.
Well, this is a race to the bottom in terms of standards.
Some say: Well, we can innovate. We are the innovators, yes, that is true. I chair the Congressional-Executive Commission on China, and so I held a hearing last week on counterfeiting and piracy. Do you know what? We innovate, and then we see it stolen. Intellectual property is stolen and produced elsewhere. It is always produced elsewhere. We invented the television set--gone, produced elsewhere; computers--largely produced elsewhere. I could go through a whole list.
The question is, What kind of a country do we want to have? For example, we have done a lot of free-trade agreements. In fact, let me do this. I want to just mention a free-trade agreement with South Korea, and I could go through all of the free-trade agreements and show how unbelievably ignorant our country has been with respect to its own economic self-interest. But let me give one example.
This chart shows the number of cars in South Korea. In South Korea, 98 percent of the cars driven on the streets and roads are made in South Korea. Now, you might think that is really interesting, that they have an appetite for buying those South Korean-made cars. It is not an appetite, it is what that country decides it wants. They do not want South Koreans to buy foreign cars, so 98 percent of the cars on their streets are South Korean cars.
So let's talk about our relationship with South Korea, and it is this: Last year, because we had a recession, we didn't sell as many South Korean cars in our country. At one point, it was close to 800,000 a year. Last year, the South Koreans put 467,000 cars on ships and shipped them to America to be sold here in our country. That is 467,000. Does anybody want to guess how many cars we could sell in Korea last year? Six thousand. So 467,000 to 6,000. Why? Because South Korea doesn't want us to sell American cars in South Korea, and they have dozens of clever devices to stop it.
Our country negotiates a trade agreement with South Korea--guess what, they don't even mention the bilateral automobile problem, not even a word.
Our country did a bilateral agreement with China, a country with which we had a $200 billion trade deficit. We had a huge deficit with China, biggest in the world. Here is what our country said. We said, on bilateral automobile trade we will do this: When you ship a Chinese car to the United States we will only impose a 2.5 percent tariff on your car, but if we ship an American car to be sold in China, you may impose a tariff of 25 percent. You may impose a tariff that is 10 times higher than we would impose in bilateral relationship with a country with which we had a $200 billion trade deficit. If that is not defined as ignorance, then I have missed the definition of ignorance.
Why wouldn't we step up for our economic interest? China, by the way, right now is ratcheting up a very aggressive automobile industry. You are going to see a lot of Chinese cars on the streets in this country in the years ahead.
But I rest my case. I mentioned automobiles. I could mention lots of other issues. I have written books about this. But the fact is, the issue before us today is not somebody coming here and saying, in the 1962 agreement on deferral--or another speaker talking about how if you let people go overseas there will be more jobs here at home.
Let me finally say, this issue of deferral is that in some cases these companies know they never have to pay taxes. The reason? Because they defer and defer on foreign profits. This amendment is only about if you have profits in a foreign subsidiary, from selling back into America, into this marketplace. Some of them can leave to go overseas knowing they will get the advantage of deferral and pay lower taxes than the company that stayed here, but they will get an even better deal. If they hang, we will have somebody in one of these Chambers thumbing their suspenders and shuffling around and harrumphing about maybe what we should do is say all of those people who have money overseas, let's let them bring it back here and pay a 5.25 percent tax rate. You say: Oh, they would never do that. Oh, they sure did. It is the rest of the people who do not get to pay the 5.25 interest. It is just the biggest interests who closed their American companies and moved their companies overseas and produced overseas after they got rid of their American workers. They were told in addition to getting a tax break for doing it, we want to give you something on top of that, the cherry on top of the sundae: If ever you do bring it back, you get to pay a tax rate that is one-half of the lowest tax rate that the lowest income American has to pay. What an unbelievable deal.
Let me say, as I started, if ever someone wishes to hear the strongest defense possible of sending American jobs to China, listen up because in the next few hours we will hear some more of it. We have already heard some.
They don't say it quite this way: We think it is nice that if China is not competitive, and their government decided they don't need to do certain things that we have done to increase standards and lift the American standards, we think it is OK if American jobs migrate elsewhere because we do not believe we have to long remain a world economic power in manufacturing to really be a world economic power.
They could not be more wrong. This is not a big step. This is the smallest of steps that you would take in the direction of saying: You know something, we are going to do something about a very serious problem. We are trying to work the faucet to put more jobs into this country, into this economy, at a tough time. We are also trying to shut the drain in circumstances where our Tax Code rewards those who now leave our country and move their jobs overseas.
If we cannot do that now, then, in my judgment, we can perhaps never do good public policy that lifts this country's economy, stands up for American businesses and American workers.
I yield the floor.
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