The American Economic Engine

Jan. 15, 2003

THE AMERICAN ECONOMIC ENGINE

Mr. DORGAN. Mr. President, there has been a generous amount of discussion this morning about the plan to put the economy back on track. I have been interested in listening to it. Some of it is interesting, some informative, some entertaining, some fiction, some right at the bull's-eye of the target. So it is interesting to try to sort it all out.

Let me give some of my perspective on it, if I might.

First, we had a colleague on the floor saying today, quite properly: The Federal Government does not create jobs. So if someone is saying somehow the Federal Government can create jobs, they are misinformed. It is not the Federal Government that creates jobs.

Well, that is true. It is the case that the Federal Government is not going to create 100,000 jobs next month. In a growing economy, jobs will be created by entrepreneurs, by people with capital, who take risks, who hire people, who rent the space, have the idea, create the product, and go market it. That is who creates the jobs. There is no question about that.

But it is also the case that the Federal Government creates the conditions under which an entrepreneur, someone with an idea, someone with the notion to build a manufacturing plant somewhere, can succeed. Because if we do not have a fiscal policy that helps create economic growth and expansion and opportunity, there will not be new opportunities for the people with the ideas on what we ought to do to expand and build.

I find it interesting that the only discussion we ever hear about on the floor of the Senate is the good deeds of those who invest the capital in this country. My hat is off to them. This country cannot work without investment. This economic engine cannot work without capitalism and risk takers. No question about that.

But understand something else. This economy does not work without the American worker either. And that element of what makes this economy work ought not to be ignored on the floor of the Senate, as it is every single time some of my colleagues come to talk about the magic ingredients that make this economic engine the wonder of the world.

There is a hero of mine who I have spoken about on the floor of the Senate once previously. A few years ago, a man named Robert Naegele sold his business in Minnesota. Mr. Naegele was President of a business that created rollerblades.

All of us know what rollerblades are these days. They are in-line skates. When many of us were little children, and we rollerskated, there were four little wheels on the bottom of four shoes and we just had a devil of a time standing up, in most cases. But in recent years, those four little wheels were replaced by in-line wheels on something called rollerblades created by the Rollerblades Company.

I happen to rollerblade. I have a pair of rollerblades, and I like to rollerblade with my son and daughter. They are a whole lot better at it than I am. I like rollerblades, so I know about rollerblades.

The man who was President of that company decided to sell that company. When he sold that company, he made millions and millions and millions of dollars because that company had been enormously successful. I want to tell you what he did.

Without telling anyone, the employees of that company, come Christmas time, began to get Christmas cards from Robert Naegele and his wife, and with each Christmas card was a check. One employee who worked there 11 years got a check for $21,000. Robert Naegele and his wife said—and they had 280 employees in that company—with a note, along with a Christmas card: I sold this company, and I made a lot of money. But I want you to understand that the company would not have been a great company, and would not possibly have grown to what it was, without your dedication and hard work. I want to give you something back for what you did for the company.

And there it was: For an employee who had been there 11 years, there was a check for $21,000. And they said: Oh, by the way, I have already prepaid the income taxes on it for you.

When I read about that in the newspaper, I called Mr. Naegele, and I said: What a wonderful thing for you to do. He said: No, it was not wonderful. It was an understanding I had that, yes, I contributed to the success of that company, but that company would not have been a company without the men and women who worked on the line and who made that company successful as well.

I tell that story only to make sure everyone in this Chamber understands this is not a one-way street, this notion of what makes an American economic engine unique and what makes it work. It is not just those who invest the capital. It is those who invest the capital, yes, but not just them. It is the labor force that is remarkable in this world. To believe that workers are expendable tools, like a pair of pliers or a screwdriver you throw away when you don't need them, is, in my judgment, to begin dismantling this economic engine of ours. There are some companies that have done that, at their risk and at their peril.
My only point is that it takes all of us to make this work. It takes good government policy. It takes entrepreneurs, risk takers and investors. It takes skilled laborers, managers and engineers. It takes all of us to make this American economy work.

I get a little tired sometimes of hearing people say: No, no. There is only one element that makes it work; that is the people at the top who make the investments. They say: So, therefore, when we talk about tax cuts, let's reward those at the top. Let's just pour it into the top, and somehow—in the classic notion of tired politics—it will trickle down and help everyone.

I had a fellow from North Dakota once who wrote to me and said: I read about all this trickle-down stuff. He said: I haven't even gotten damp yet, and I have been waiting a long time.

The fact is, this is not just trickle down or percolate up; it is thinking smart about what makes this economy work. But most of what I hear on the floor of the Senate about these issues is pretty tiring. Most of it implies there is a ship of state, and in this ship of state there is an engine room, and in the engine room there are dials and knobs, gauges and levers. And if we can just adjust them all just right, through our infinite wisdom—the wisdom of Mr. Greenspan and the Congress and the Treasury Secretary—somehow the ship of state will just move right on forward.

The fact is, those gauges, dials, knobs, and levers in the engine room of this ship have very little to do with what happens to this economy. Almost exclusively, what happens to the American economy has to do with the confidence of the American people. Do they think tomorrow is going to be better? Are they confident about the future? Because if they are, they will do things that manifest that confidence. They will build a house, buy a car, take a trip, make a purchase—the kinds of things that cause the expansion-side of the business cycle. If they are not confident, they do exactly the opposite. They defer the purchase, don't take that trip, don't buy the car, don't buy the house, and the economy contracts. This is all about confidence.

The question I have is this: What kind of confidence can the American people have in this economy if all we do on the floor of the Senate, and if all we do from the megaphone at the White House, is say: Do you know what our fiscal policy is? More and more and more tax cuts, notwithstanding deficits, because we don't care about deficits.

One year and three-quarters ago, we had a debate on the floor of this Senate. And the President said: Let's cut taxes $1.7 trillion because we have surpluses as far as the eye can see. And this is money that belongs to the people. Let them keep it.
Some of us said: Yes, let's have a tax cut, but let's be a little more conservative. What if something happens? What if the economy runs into a ditch? What if something unusual happens and these surpluses don't develop?

The President had his way. We passed the tax cut, and within a matter of months, in March 2001, the recession began. On September 11, we had a devastating terror attack which cut a hole in the belly of the economy. Then we began a war on terrorism which cost a lot of money. Then we have the Iraq problem which costs a lot of money and probably will cost a great deal more. Then we had corporate scandals, maybe unprecedented in the history of this country, that shook the confidence of the American people. The huge budget surpluses have turned into large budget deficits, and very quickly.

What is the solution to that? What is the solution to restore the confidence of the American people in their future? More tax cuts, the President says; more tax cuts, some of my colleagues say. Who will get those tax cuts? Well, the President. According to something in the Washington Post yesterday, the people have computed the President will get a $44,500 tax cut per year. What will the corporal get who is going to central Asia today? What about the private loading up on a C-5 being sent overseas? How much will they get?

The fact is, we have an economy in trouble. The solution for the trouble this economy is in is not to exacerbate the Federal budget deficit and drive it sky high.

The easiest thing in the world is to come to the floor and say: I am for tax cuts.

Let me say, before anybody else does, if you are for tax cuts, my preference would be that no one would have to bear the burden of a tax. Wouldn't that be wonderful? You can't "out tax cut" me. That is my preference. I support no taxes, except I believe there are certain things we ought to do for people in this country.

For kids, some young kid going into a Head Start program today has a name. It is John or Carolyn or Robert or Martha. That young little kid comes from a family in a difficult situation. So we put together a Head Start program to nurture and enrich and help that young child. Is that worth doing? You are darn right it is. It is investing in that kid. It is worth doing for that child. It saves us money. If I believe we should do that—and I do—then I say we will have to levy a tax to pay for that.

When we decide we will have to increase defense spending by $45 billion in this fiscal year, as the President recommended and as Congress agreed, I say we have to pay for that. Or should we perhaps have our children pay for it and say: Not us, we don't want to pay for it; we do want to spend it, but we don't want to pay for it?

We send qualified teachers into the classroom and say: We want you to implement a new program called Leave No Child Behind, but we don't want to pay for it. We want to impose this new program which we promised to pay for, but instead, we want tax cuts and refuse to pay for the program.

My point is, we have to make choices. My choice is that, yes, we should have a tax cut. It ought to be a short-term, 1-year stimulus to try to put the economy back on track. I don't believe we ought to at this point make the same mistake we did in the last Congress and say, let's have a $670 billion tax cut over 10 years, the bulk of which will go to people at the top of the income ladder.

When my colleague says, all of these senior citizens are really going to do well because they get all these dividends—nonsense. You know what is happening with dividends. Very few people have much in dividends except the people at the very top of the income ladder. In fact, most dividends are not double taxed. A substantial amount of retained earnings is never paid out in dividends. A substantial portion of that which is paid out in dividends to older folks goes into a 401(k) plan. There is no tax on those dividends.

It seems to me if we will do what we ought to do on fiscal policy, let's answer the question, What will give people confidence about the future? What kinds of policies can we embark upon? Not Republican or Democratic policies; I don't think either side has a lock on wisdom. What can we do that says to the American people: We are serious about a couple things: One, we are serious about paying for that which we intend to spend for health care, education, defense, homeland security, and more; we are serious about deciding who will pay for that which we are to spend; second, we are serious about policies that will stimulate the economic growth of this country, to say to people, we believe in the future and you should, too?

We want you to understand that the policies we put in place will be judged by everyone—by the stock market, the bond market, the people who are going to invest, people who run businesses on Main Street. We are not going to throw a bunch of money at it and say, we don't care about the deficit. We are going to have tax cuts, and we will do it in a 1-year economic growth plan, and we will do it in a way that makes the most sense.

If it were up to me, we would do a rebate to people who pay income taxes and payroll taxes. And, incidentally, that is one other issue. Everyone who comes to the floor and has a burr under their saddle about this issue says: The only taxes people pay are income taxes. At least that is the only tax they will talk about. That is rubbish. The fact is, a whole lot of folks pay more in payroll taxes than they do in income taxes. Everybody who has a job, from the minimum wage up, pays a payroll tax. You can't get out of it. You have to pay a payroll tax. Three-quarters of working families pay more in payroll taxes than they do in income taxes.

Whenever someone talks about tax relief, they only want to talk about taxpayers, meaning those who pay income taxes. What about talking about all taxpayers?

My belief is we ought to provide a tax rebate. I would propose $500 for individuals, $1,000 for couples. I would also propose something that stimulates the investment side, an investment tax credit targeted to capital goods and equipment. I would do this on a 1-year basis to help put the economy back on track. And then if it grows, if it creates the new jobs and produces the new revenue, we can provide additional tax cuts. But you cannot provide tax cuts with borrowed money. You cannot inspire confidence in the American people if you are saying to them: We will borrow additional money in order to provide these additional tax cuts, and we will borrow the money so that your children pay the burden of it, and we will provide the tax cuts, the bulk of which will go to the top end of the income level. That simply makes no sense.

There has been a lot of discussion about class warfare. Frankly, I don't think class warfare is something that is worth our time. I don't think it is reasonable to do it. But class warfare can be committed in several different ways.

If I say, I would like to provide a tax cut only to those Americans who earn more than $1 million a year—I don't believe this, but let me propose it hypothetically—because, frankly, it is my impression, speaking in the vernacular, that those are the people who contribute most to our country and, therefore, let's only provide tax cuts to people earning over $1 million a year, I happen to think that is a proposal that just reeks of class warfare.

So who commits class warfare? The people who come out here and say to me: You say that tax cuts should only go to people who make more than $1 million a year because you believe they are the real producers in our country. Are you nuts? They would say: Are you nuts? What about the working people out here who deserve tax cuts as well?

So when they come out and criticize that, are they committed to class warfare? Is that what it is about?

That is what is happening. Someone proposes a tax cut that is fundamentally unfair, and then, the minute you complain about it, they say: Class warfare. Shame on you.

The fact is, we have plenty of wisdom, plenty of knowledge in this Chamber from all corners to put together a sensible, thoughtful plan that would give the American people hope that we know what we are doing.

The easiest approach by far, the simplest approach by far, which is fundamentally wrong, is to stand up in every corner of the Chamber and say, the deficit be damned. It doesn't mean a thing. Our policy is singular. It is to provide more and more and more tax cuts. And then what we will do is cut domestic discretionary programs on education, health care, Head Start, kindergarten, kids, and so on. And when somebody comes to the floor and says, maybe we should just make the priorities a bit different and continue to invest in these kids who walk into Head Start centers because it is a great thing to do, then someone can come to the floor and say: Big spenders. We want to give the money back, and you want to spend it.

I had the CEO of one of the country's largest companies come to see me last week. He came to me about something completely unrelated to fiscal policy, but as he was leaving, he said: One more thing I want to mention. Mr. Senator, I don't need a tax cut. I make a great deal of money. If I get a tax cut, I don't have the foggiest idea what I would spend it on. I guess I would just save it. He said, "You should know that I am not asking for a tax cut from you and I don't need one." I said, "You will go down in the annals of history in my service in Congress as one of the few people who has ever told me you don't need a tax cut. Good for you."

I think most Americans would love to have the burden of taxes removed from their shoulders. If there is a sensible way to do it, let's do it. But let us not decide to borrow money and saddle our children with increased debt in order to give a tax cut to that executive who told me he didn't want one and didn't need one. So what I would like to see us do is take a look at the President's plan. He wants to have a 10-year, $670 billion tax cut on the heels of a $1.7 trillion tax cut, while now staring deficits right square in the face for years and years to come. I would like us to say, look, this doesn't make sense. As one of the senior White House people was quoted in the Washington Post saying, this is a political document. What I would like to say to the President and to Mr. Rove and others is this is about people getting laid off, people going home at night saying I have lost my job, telling their family they don't have a job any longer.

How do you put the economy back on track to create new jobs? This is about restoring and creating confidence in the American people about the future. The way we will do that, in my judgment, is not to have one side or the other say it is my way or the highway. I think the way to do that is to have the thoughtful people in the Chamber sit down together and decide the principles by which we ought to embark on this journey. One, let's not blow a hole in the Federal deficit. That ought to be a principle. Two, it ought to work to try to expand the economy and create more confidence in the American people. Three, it ought to be fair. Four, it ought to be temporary. We ought not to make the mistake we made in the last Congress of laying something in law, in the process here that lasts 10 years, when we know if we were confronting the choice we confronted a year and three quarters ago, knowing we are going to have a recession, the September 11 terrorist attack, a war on terror, unprecedented corporate scandals, and a technology bubble burst—and, by the way, do you want to continue to do this, because if you do, surpluses will turn to deficits, we know the Senate would not make the same decision they made then.

Let us not make the same mistake. My feeling is let's have a tax cut to try to put the economy back on track, but let's make it temporary and get the best of the ideas that exist here. Let's do it not with a mind to what the good politics might be, but with the mind of what is the sound economic principle by which we try to jump-start this economy.

One final point. It is interesting to me that we have people trying to say, well, I don't know, Jimmy Carter is at fault, or Bill Clinton, or Calvin Coolidge, or whoever is at fault for whatever they are talking about. In fact, we have a business cycle and it has contractions and expansions. Those movements are influenced by what people perceive to be their sound or unsound fiscal policy. The plain fact is, you cannot, in my judgment, come to this town and say here is my plan and here is what it will produce, and then when it doesn't produce it, say, by the way, I had nothing to do with it. We can do better than that—Republicans and Democrats contributing the best that is available on both sides. We can, in a principled way, with temporary relief, put the economy back on track. I think ultimately by doing that, we can relieve the burden on the taxpayers' shoulders. But, unfortunately, what is being proposed these days is something that will add the burden on our children of additional taxes in the years ahead, who will be required to pay off the deficits as a result of a fiscal policy that doesn't work.

So I think we are making some progress, because for months everybody was saying the economy is doing fine, thank you. But we understand it is not. The question is, what do we do together to make this work? We will have that debate in an extended way in the months ahead. I know my colleague—I should say a word about Senator Grassley, who is on the floor. He and I perhaps agree on some things and disagree on others. I must say we have worked on a lot of things together, especially in agriculture. When I say we ought to get the best everybody has in the Senate, I have great respect for Senator Grassley's abilities in these areas. While we may disagree and a debate might break out, look, the American people are best served by debate. In the Washington Post one day, a fellow was talking about a dispute between Republicans and Democrats and he lamented. He said this thing has degenerated into a debate about principle. I thought, well, I sure hope so. I hope that is the case. That is why I came here. So there is room for us to have disagreements from time to time.

But let me say that, as we do, I have great respect for those who have strong feelings on the other side, and through aggressive debate we will produce something I think wholesome and healthy for the American economy and the American people.

I yield the floor.