[Pages S4861-S4897]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

JUMPSTART OUR BUSINESS STRENGTH (JOBS) ACT

The PRESIDING OFFICER. Under the previous order, the Senate will
resume consideration of S. 1637, which the clerk will report.
The assistant legislative clerk read as follows:

A bill (S. 1637) to amend the Internal Revenue Code of 1986
to comply with the World Trade Organization findings on the
FSC/ETI benefit in a manner that preserves jobs and
production activities in the United States, to reform and
simplify the international taxation rules of the United
States, and for other purposes.

Pending:

Dorgan amendment No. 3110, to provide for the taxation of
income of controlled foreign corporations attributable to
imported property.
Graham (FL) amendment No. 3112, to strike the deduction
relating to income attributable to United States production
activities and the international tax provisions and allow a
credit for manufacturing wages.
Cantwell/Voinovich amendment No. 3114, to extend the
Temporary Extended Unemployment Compensation Act of 2002.

The PRESIDING OFFICER. The Senator from Louisiana.

Amendment No. 3117

Mr. BREAUX. Mr. President, I call up an amendment that is at the
desk, No. 3117, Breaux-Feinstein.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Louisiana [Mr. Breaux] proposes an
amendment numbered 3117.

Mr. BREAUX. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To limit the amount of deferred foreign income that can be
repatriated at a lower rate)

On page 88, between lines 17 and 18, insert:
``(4) Dollar limitation.--
``(A) In general.--Notwithstanding paragraph (1), the
excess qualified foreign distribution amount shall not exceed
the lesser of--
``(i) the amount shown on the applicable financial
statement as earnings permanently reinvested outside the
United States, or
``(ii) the excess (if any) of--

``(I) the estimated aggregate qualified expenditures of the
corporation for taxable years ending in 2005, 2006, and 2007,
over
``(II) the aggregate qualified expenditures of the
corporation for taxable years ending in 2001, 2002, and 2003.

``(B) Earnings permanently reinvested outside the united
states.--
``(i) In general.--If an amount on an applicable financial
statement is shown as Federal income taxes not required to be
reserved by reason of the permanent reinvestment of earnings
outside the United States, subparagraph (A)(i) shall be
applied by reference to the earnings to which such taxes
relate.
``(ii) No statement or stated amount.--If there is no
applicable financial statement or such a statement fails to
show a specific amount described in subparagraph (A)(i) or
clause (i), such amount shall be treated as being zero.
``(iii) Applicable financial statement.--For purposes of
this paragraph, the term `applicable financial statement'
means the most recently audited financial statement
(including notes and other documents which accompany such
statement)--

``(I) which is certified on or before March 31, 2004, as
being prepared in accordance with generally accepted
accounting principles, and
``(II) which is used for the purposes of a statement or
report to creditors, to shareholders, or for any other
substantial nontax purpose.

In the case of a corporation required to file a financial
statement with the Securities and Exchange Commission, such
term means the most recent such statement filed on or before
March 31, 2004.
``(C) Qualified expenditures.--For purposes of this
paragraph, the term `qualified expenditures' means--
``(i) wages (as defined in section 3121(a)),
``(ii) additions to capital accounts for property located
within the United States (including any amount which would be
so added but for a provision of this title providing for the
expensing of such amount),
``(iii) qualified research expenses (as defined in section
41(b)) and basic research payments (as defined in section
41(e)(2)), and
``(iv) irrevocable contributions to a qualified employer
plan (as defined in section 72(p)(4)) but only if no
deduction is allowed under this chapter with respect to such
contributions.
``(D) Recapture.--If the taxpayer's estimate of qualified
expenditures under subparagraph (A)(ii)(I) is greater than
the actual expenditures, then the tax imposed by this chapter
for the taxpayer's last taxable year ending in 2007 shall be
increased by the sum of--
``(i) the increase (if any) in tax which would have
resulted in the taxable year for which the deduction under
this section was allowed if the actual expenditures were used
in lieu of the estimated expenditures, plus
``(ii) interest at the underpayment rate, determined as if
the increase in tax described in clause (i) were an
underpayment for the taxable year of the deduction.
``(5) Limitation on controlled foreign corporations in
possessions.--In computing the excess qualified foreign
distribution amount under paragraph (1) and the base dividend
amount under paragraph (2), there shall not be taken into
account dividends received from any controlled foreign
corporation created or organized under the laws of any
possession of the United States.

Mr. BREAUX. Mr. President, this is a jobs bill. That is the title of
the bill. Presumably a jobs bill is intended to create jobs and
hopefully is created to create jobs in America. That is the legislation
that is before us. It is absolutely essential that this legislation be
adopted.
But one of the provisions in the legislation gives me great concern.
I offered an amendment in the Finance Committee. It was unanimously
supported by every single Democrat in the Finance Committee and it lost
by a partisan vote because our Republican colleagues at that time did
not feel they could support the amendment I offered. It was unanimously
supported by every single Democrat member of the Finance Committee.
The question deals with how we treat companies that have earnings
they have stashed away in foreign countries. These amounts of money,
many of them, are in fact earned overseas. Companies know if they bring
those earnings back to the United States, the United States, on a
worldwide tax basis, will tax those earnings with a deduction for the
amount of tax they have paid in the country in which they earned those
revenues. They pay the regular corporate rate minus the tax credit they
get for having paid taxes on those earnings in the foreign country.
However, there is no tax consequence to those companies if the money in
fact stays in the foreign country. That is called deferral. We defer
any U.S. tax on foreign earnings as long as the earnings stay in the
foreign country in which they are earned.
The legislation before this body now says we are going to give a very
special break to U.S. companies that have money overseas, in many cases
in tax havens. We are going to let you bring that money back, not as
other companies in the past have brought it back,

[[Page S4862]]

paying U.S. tax minus what they paid overseas, but we are going to cut
you a special sweetheart deal. We are going to give you a sweetheart
deal of an 85-percent tax credit by reducing the amount of taxes you
would pay if you bring it back to the United States--not to pay what
every other corporation pays, 35 percent--we are going to ask you to
pay 5 percent, 5.25 percent. That is an 85-percent tax reward to
companies that have stashed money in tax havens, in many cases
overseas, for the sole purpose of avoiding U.S. taxation.
The IRS has recently cited a number of companies that have these
types of tax shelters and overseas tax havens, such as in The
Netherlands, Barbados, the Cayman Islands and Bermuda--you name the tax
havens. Companies that earn money in one country will bring it over to
a tax haven and keep it there, avoiding U.S. taxes. But some now say
that is such a great idea, we are going to give them a real tax break
and ask them to please bring it back over to the United States. If you
do so, we are only going to tax you at about a 5-percent rate.
That is what the legislation says. The legislation says bring it
back, you get a huge tax reward for keeping money overseas and now
bringing it back to the United States, unlike what other companies have
had to do.
Every person we have talked to says we are going to bring it back to
create jobs. I say, All right, if that is what you are going to do,
bring it back to create jobs in the United States of America, we will
let you do the 5-percent tax break. We will allow you to do it.

My amendment simply says two things are different from the bill
before the Senate. No. 1, it says you can bring it back for job
creation, for hiring more people. If you want to use it for that
purpose, OK. If you want to use it for research and development--
pharmaceutical industry or other electronic types of industry--OK, we
will let you use it for that. If you want to use it for capital
expending, you want to build another plant, OK, we will let you use it
for that. If you want to use it for your underfunded pension funds, OK,
we will let you use it for that.
But we will not let you use it for something as nebulous as financial
stabilization of the company, which is in the bill but not defined.
What does that mean? Buy another Gulfstream? Yes, that might
financially stabilize the company. Stock buybacks? Yes, that might be a
good idea for a few people, but it does not create a lot of jobs, if
any.
Second, there has to be an enforcement mechanism, more than filing a
plan; and there is no responsibility if you do not follow it.
My amendment says: All right, companies, if you bring it back for
those purposes, we want proof you actually use it for those purposes.
You can use the next 3 years to take these billions of dollars and use
it for legitimate purposes, but we would like some proof. We know it by
seeing you have actually spent more in the next 3 years in these areas
than in the previous 3 years. That is very important.
Here is an interesting statistic from the Joint Committee on Tax.
Where is the money like this coming from? From tax havens: Bermuda,
Cayman Islands, Hong Kong, Ireland, Luxembourg, Switzerland. How much
money are we going to let flow into the United States at a 5-percent
rate when it should come in at the regular corporate rate minus what
they pay in the foreign country?
Our legislation, the Breaux-Feinstein amendment, is about
responsibility and accountability, about creating jobs in this country,
not stock buybacks that enrich a few at the expense of jobs in this
country.
There is a legitimate argument we ought to look at the whole tax
system and see whether we should go to a territorial system or not, but
that is not before the Senate at this time.
This legislation is absolutely essential if we are going to maintain
any credibility on creating jobs instead of enforcing or creating tax
havens. We have enough tax havens. We should not encourage more. This
amendment helps stop that.
How much time remains?
The PRESIDING OFFICER. There are 23 minutes.
Mr. BREAUX. We have an hour equally divided?
The PRESIDING OFFICER. Exactly.
Mr. BREAUX. I yield 10 minutes to the distinguished Senator, the
cosponsor of the amendment.
The PRESIDING OFFICER. The Senator from California is recognized.
Mrs. FEINSTEIN. Mr. President, I will try and be brief. I thank the
Senator from Louisiana for his leadership on this, particularly since
this is the last year that he will be in the Senate. I have had the
great privilege of working with him now for 12 years on the centrist
coalition and in other endeavors. He has always strived to bring
parties together and to work across the aisle. Frankly, it is something
that I admire and I want him to know that.
The underlying bill, as I understand it, allows companies to bring
foreign-earned profits back at a greatly reduced rate. The Senator from
Louisiana spelled that out. That is a rate of 5.25 percent. Remember,
the minimum income tax bracket for individuals in this country is 10
percent. So it is at a rate half of what the poorest Americans pay in
Federal income taxes.
Under this amendment, companies could bring foreign-earned profits
back to the U.S. at this reduced rate provided these repatriated
profits promote job growth and benefit employees.
Our amendment is specific. It allows for spending on R&D, acquiring
plants and equipment, deducting increases in wages or the cost of
creating a new job--capped at the Social Security wage limit of
$87,900--and fully funding employee retirement plans.
Why is it necessary to be so specific? It is necessary because J.P.
Morgan, which has conducted a survey of companies that would repatriate
money, determined that most corporations will reuse the repatriated
profits for buying back debt, for increasing levels of liquid assets,
or even retiring equity. This is what a study of the very companies
that are involved have shown. None of these items necessarily produces
new jobs.
One of the things the Senate, as well as Americans, should understand
is that there are a large number of American companies that take
advantage of loopholes in U.S. tax law and pay no taxes. I recently
took a look at a GAO study entitled ``Comparison of the Reported Tax
Liabilities of Foreign and United States Controlled Corporations.'' It
covers the period from 1996 to 2000. Let me give you an idea of what
they find: 61 percent of U.S.-controlled corporations pay no taxes; 71
percent of foreign-owned corporations operating in the United States
reported no tax liability from 1996 to 2000.
This is stunning. I had no idea. So I began to look a little bit at
the history. Let me tell you a little bit about what it was like in
1945. In 1945, income taxes from corporations accounted for 35 percent
of Federal receipts. In 1970, these income taxes accounted for only 17
percent of Federal revenue. So between 1945 and 1970 there was a
dramatic decline. Today, corporate income taxes account for only 7.8
percent of Federal revenues.
We are giving companies that have sequestered profits abroad the
ability to bring those profits back at one-half the tax rate the
poorest American pays, and we have a specific study that shows that for
the most part, these corporations will not use these moneys for areas
that produce jobs.
What Senator Breaux and I have tried to do is to narrow the language
that describes what companies may spend repatriated profits on. We have
narrowed the language to specific spending categories--categories which
produce jobs. I don't think that is too much to ask.
How much will be repatriated? There are various estimates. J.P.
Morgan estimates $300 billion be repatriated. The U.S. Treasury
estimates it will be between $200 and $300 billion. The Homeland
Investment Act Coalition, a coalition of major corporations, estimates
$500 billion will come back to the United States.
Without this amendment, it is likely that corporations will take
advantage of the reduced corporation tax rate and use the repatriated
profits to shore up their finances. The items I have read from the J.P.
Morgan study indicate just that. I will summarize the section of this
J.P. Morgan study.
These were 28 firms in the study. They indicated that 46 percent of
them would pay down outstanding debt with

[[Page S4863]]

the money, 39 percent would finance capital spending, 39 percent would
fund R&D venture capital or acquisition, 18 percent would buy back
stock, 11 percent would use cash for working capital, 11 percent might
pay dividends if double taxation ends, and 4 percent would fund
underfunded pension funds.

I have been told many of these companies would like to use the money
for mergers and acquisitions, which very clearly could result in a
reduction in jobs. I would not like to see this Senate have egg on its
face by giving some of the largest and most profitable corporations in
America the ability to repatriate funds at one-half the tax rate the
poorest Americans pay and have those funds used for mergers and
acquisitions which would result in employees being fired for so-called
efficiency reasons. I think without this language that narrows the use
of this money, that is exactly what could happen.
So I thank the Senator from Louisiana for his leadership. I want to
indicate my strong support for this amendment. I hope Members will vote
for this amendment.
Mr. President, I yield back the remainder of my time to the Senator
from Louisiana.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. SMITH. Mr. President, I believe on our side we have 30 minutes;
is that correct?
The PRESIDING OFFICER. That is correct.
Mr. SMITH. Mr. President, I am going to speak for hopefully less than
5 minutes and then allow my colleague from California to speak. Senator
Ensign and, I believe, Senator Allen may wish to speak to this as well.
Mr. President, this is ultimately about whether we want the dollars
of these American multinational corporations to be brought back to
America or left in places like this. We can either put these dollars to
work here or we can leave them over there.
If you are interested in creating jobs, I think it is important to
remind folks what we are talking about is a minimum of $400 billion
coming back into this country within the 1-year window that is allowed
by this legislation. It has been estimated, on a conservative basis,
that it will create 660,000 jobs. It will reduce the Federal deficit,
over the next 5 years, by $75 billion. If ever there were a win-win,
this amendment on the JOBS bill is a win-win.
As I listen to my colleagues, both of whom I esteem as friends, I am
astounded so much emphasis is put into the dislike of business and what
they might do with this money. I, frankly, have to wonder what is wrong
with companies bringing money back here and being allowed to shore up
the strength of their business. What is wrong with that? That is
exactly what we want them to do. I do not believe, as a former
businessman myself, that it is in this country's interest to
micromanage how they will reinvest it in this country.
Specifically excluded by this legislation is executive compensation.
Executive compensation cannot be the target; but plant and equipment,
shoring up pension plans, buying back stock, these kinds of things that
improve the values of corporations and their competitiveness are
exactly what we ought to be doing if we are actually interested in
creating jobs.
I think it is also very important to point out that our American
companies that compete overseas are competing against German and French
and other companies in those countries that also have foreign earnings.
In these countries--competitor countries--they allow their earnings
abroad to have what they call a free walk back. We are not allowing
them a free walk back. We are saying, for 1 year, the corporate tax
rate will fall from 35 percent to 5.25 percent. The effect will be
immediate. It will be beneficial. It will help our economy. It will
create jobs. But, moreover, it will, for 1 year, create a level playing
field for American corporations as against German or French or Japanese
corporations whose countries have tax codes that allow them to take
their foreign earnings back to their native lands to be put into their
local economies, to strengthen them when they need the strength.
Right now, our economy could use $400 billion. If our deficit could
be reduced by $75 billion, that would be wonderful. If we could create
660,000 jobs on a short-term basis--we hope that money then stays
here--then we have done a tremendous thing for the American worker and
the American economy, and we have done it in a way that does not try to
micromanage every business decision made in the corporate boardrooms of
America.
Mr. BREAUX. Will the Senator from Oregon yield for a question?
Mr. SMITH. I am happy to yield for a question.
Mr. BREAUX. Mr. President, would the Senator point out anything in
the legislation before this body now that would take any action against
any companies if they did not abide by what they said they were going
to use it for? Do they lose their tax deduction? Is there anything in
the legislation, without my amendment, that would say what would happen
to companies if they use it for something totally different from what
their plans say they are going to use it for?
Suppose they decided to use it for something totally unrelated to job
creation. Is there anything, without my amendment, that says what would
happen to those companies?
Mr. SMITH. The Senator, I guess, does not trust they will use it for
what they say they will use it for.
Mr. BREAUX. Trust but verify.
Mr. SMITH. I believe when they establish a plan and get the approval
for their plan they will follow through on that.
Mr. BREAUX. Suppose you have somebody who may not do that. Is there
any provision in the bill that says what will happen to the company
that does not abide by the plan? I believe in trust but verify. If you
don't do what you say you are going to do, you should have
consequences. Is there anything in the bill that says they would lose
their deduction?
Mr. SMITH. I don't think there is a penalty, I say to the Senator. I
am happy to admit that because, frankly, I believe what companies are
trying to do is get their money back here on a basis that allows them
to be competitive with other multinational companies from other
countries. I think what they are interested in doing is a return on
investment to their investors. When they give a return on investment to
their investors, what they are also doing is creating jobs. They are
investing in plant and equipment. And I, for one, do not think it is in
the interest of this country to micromanage the Tax Code any more than
we already do.

So, Mr. President, with that, I will turn the time to my colleague
from California.
The PRESIDING OFFICER. The Senator from California.
Mrs. BOXER. Mr. President, I ask the Senator, may I have 10 minutes?
Mr. SMITH. Yes, you may.
Mrs. BOXER. I thank the Senator.
Mr. President, first of all, let's get matters straight from the get-
go. Senator Breaux never liked this in the first place. And I have
tremendous respect for him. We just do not agree on this tax provision.
As a matter of fact, he voted to strip it out completely when actually
we tried--Senator Ensign and I--to get this in before. We won this 75-
25. Only 25 colleagues voted against us. Senator Breaux was leading the
charge.
Now he says he is just making a correction. Well, I have read his
correction. It is a poison pill for many reasons, which I will go into.
But I think we ought to get it straight. We are being offered an
amendment and told it is enhancing our bill, but it is offered by
Senator Breaux, who never liked it in the first place. I think he would
be the first one to admit it because he was quite open on the point
before.
Now, I am proud to stand with my colleagues today to stop this
amendment. I think it is very important. I am going to call on the 75
Senators from both sides of the aisle who supported us the last time. I
particularly thank Senator Smith because he took the Ensign-Boxer bill
into the committee and he got it into this bill, which was most
important for us. Now we are here to protect that work.
I will say this from the get-go. You could say all you want that we
are building trust into this. Well, there is a little more than trust.
We are not saying in this bill anywhere that I have seen that the IRS
cannot prosecute someone who is not telling the truth. This is not some
plan that is done in the dead of night at the accountant's office.
There is a committee that has

[[Page S4864]]

to put together the plan and they have to show how they plan to use the
funds. If they lie in that, under an audit, as any of us might have,
they have to show that in fact they deserve the deduction. If the IRS
says, no, they did not follow the plan, then they will not get those
deductions, just like all of us. There is nothing in our bill that
absolves these corporations of the usual procedure when you pay your
taxes. So I would like to get that out of the way.
I want to talk about jobs, because, God knows, in my State we have
lost a lot. I want to put up what the various experts are saying, from
liberal to conservative, about this Invest in the USA Act that I am so
proud to coauthor with my friend, Senator Ensign.
What is the potential impact on the U.S. economy? J.P. Morgan says,
as a result of enacting the Invest in the USA Act, U.S. companies will
increase investment profits earned abroad in the United States by $300
billion. Bank of America forecasts the increase will be $400 billion.
Dr. Allen Sinai of Decision Economics estimates that this additional
investment in the U.S. economy will generate 660,000 jobs.
Finally, we are doing something. The highway bill is stalled. A lot
of us are upset about that on both sides of the aisle. That will create
800,000 jobs.
Here we will create 660,000 jobs, and Allen Sinai says that is a
conservative estimate of how many jobs would be created. And guess
what. The Treasury is getting money because these profits are sitting
abroad. They are not coming home. They are not being taxed. And we are
going to tax them at a 5-percent rate, and that is going to bring funds
into the Treasury. There are some estimates that we will receive as
much as $4 billion into the Treasury because of this Invest in the USA
Act.
So how could we take such a good idea and mess it up? That is what we
would do if this amendment passes. We know those funds are not going to
be brought back.
Under the Breaux amendment, let me read to you examples of spending
that is not permitted, and you tell me if you agree with this.
You cannot use the money that you bring back for job training for
workers. You cannot use it for many unemployment benefits. You cannot
use it for worker health, dental and hospital expenses. You cannot use
it for most employee childcare. You cannot use it to reimburse
employees for injuries and accidents. You cannot use it for workers
compensation and black lung benefits. You cannot use it for most
employee meals and lodging. You cannot use it for worker relocation
reimbursement. You cannot use it for employee tuition assistance. You
cannot use it for an environmental cleanup and impact analysis. You
cannot use it for employee travel reimbursement.
You can buy jets with it under the Breaux amendment, but you can't
use it for employee travel reimbursements. You can buy limousines with
it, but you can't reimburse for the rental of parking spaces for your
employees.
Here we have an amendment that we have crafted that is actually a
bill that is incorporated into the underlying bill, which gives the
business community a chance for 1 year to bring these funds home that
are parked outside our shores, funds that are sitting out there and not
being brought back. We are going to see what happens. We are told by
economists from the left to the right it is going to mean job creation.
We want to make sure it is used for the things that these corporations
need.
Instead, you have the Breaux amendment which is micromanaging this
deal in such a way that it will affect things as important as job
training for workers. Let's just say a business is changing its work
product and they have a new way to deal with their workers. They have
to teach them how to use new computers and new programming,
machinery. They cannot use the money they bring back to job train.

Senator Feinstein called this a perfecting amendment. It is not
perfecting. It is a poison pill.
I am very proud to be part of this group in the Senate that has been
pushing for this for all this time. Any statement that we are not going
to go after cheaters is ridiculous because we have highlighted in our
bill the fact that the company has to set up a committee. They have to
print a plan. They have to say how they are spending their money. And
if they undergo an audit, they are going to have to stand behind it.
The question is whether you want accumulated foreign earnings
invested here or abroad. The answer that we get from our colleagues is
going to be very important. We can send a wonderful message today if we
stand with this underlying language that we are serious about job
creation. We are serious about getting this capital back. I believe we
are doing a very wise thing.
I yield the rest of my time to the Senator from Oregon, Mr. Smith.
Mr. SMITH. Mr. President, I emphasize the point that Senator Boxer
made in answering Senator Breaux. We did not include special penalties
in this bill, but the truth is, when you file your tax returns, you
have to own up to what the plan is. You have to live up to that. If you
don't, you lose the deduction.
Can the IRS impose other penalties? Of course it can. But it then has
to make the case against the person. When people file their tax
returns, they know they are shooting with real bullets on this stuff.
I have every confidence that people will be honest about this and
utilize the revenues for the purposes intended in creating jobs.
Mr. President, how much time remains?
The PRESIDING OFFICER. Fourteen minutes 45 seconds.
Mr. SMITH. I would like to yield 9 minutes to Senator Ensign and 4 or
5 minutes to Senator Allen and, if I could, have 30 seconds to wrap up.
Mr. BREAUX. How much time do I have remaining?
The PRESIDING OFFICER. Fourteen minutes 44 seconds.
Mr. BREAUX. Are we going to rotate? Are we just going to hear one
side?
Mr. SMITH. It would be fine with us to let the Senator speak.
Mr. BREAUX. Mr. President, I will take 2 minutes off the time.
I wonder if anybody in this body remembers Enron. Let's trust that
they are going to do right. They are a U.S. corporation that created
more tax shelters than the IRS could count. It took a group of
Philadelphia lawyers 2 months to even add up the number of tax shelters
they had around the world. They had so many the IRS couldn't even
follow it.
If you are going to give people who have tax shelters and a stash in
income in foreign tax havens a huge benefit to bring the money back
into this country, we ought to make sure they are going to use it for
job creation. Without my amendment, they have to file a plan that says
this is what they are going to spend it on. Suppose they don't spend
one nickel more than they did last year on job creation. Suppose they
don't spend one nickel more on capital expenditures than they did last
year. Suppose they don't spend one more nickel on pensions for the
workers than they did last year, but they comply with what they said
they were going to do in their little plan. They are fine. They don't
have to spend one nickel more under the committee bill, with all this
money they are going to bring back at a 5-percent tax rate, in terms of
creating jobs than they did before.
The Breaux-Feinstein amendment says: If you want to bring it back for
that purpose, you have to show us that is what you are using it for.
That, in fact, you have spent more money in the next 3 years than you
would have the previous year on job creation. That is not too much to
ask.
When we are giving a multinational corporation an enormous tax gift
of having to pay not 35 percent but only 5 percent, at least get a
requirement that they are using it for something to do with job
creation and that they spend at least something more than they did the
year before. Without the Breaux-Feinstein amendment, there is no
requirement that they spend one nickel more on job creation than they
did previously after bringing this money back.
Guess what. You talk about an incentive to locate overseas. There
will be a whole group of people saying: We did it for 1 year. Let's do
it next year, a third year; let's continue this. How about making this
5 percent permanent so we can put all the jobs overseas, knowing
Congress is going to take care of us every time there is a downturn in
the economy and there is another amendment to extend the 5-percent tax
break

[[Page S4865]]

1 more year. We will just move everything over to the Caymen Islands.
We will move everything ever over to a Third World country. Because,
guess what, Congress is going to let us bring it back at 5 percent
because the pressure will be there, because the economy is not doing
well, and all the jobs go overseas. The only thing the Breaux-Feinstein
amendment says is, if you are going to bring it back for job creation,
prove it, tell us you spent a little bit more than you would have
ordinarily. Without Breaux-Feinstein, there is no requirement that they
spend one nickel more than they did before. That is a big difference in
what we are trying to accomplish.

I reserve the remainder of my time.
The PRESIDING OFFICER. The Senator from Virginia is recognized.
Mr. ALLEN. Mr. President, I rise today to join with Senators Smith,
Ensign, and Boxer in opposition to the Breaux-Feinstein amendment. In
the midst of this JOBS bill, we are trying to make sure manufacturers
in this country can compete internationally. I am one who is always
arguing, whether it is tax policy, regulatory policy, our laws in the
United States ought to make America more desirable and conducive toward
investment and job creation.
The underlying provision--the idea of repatriation or reinvesting in
the United States helps make the United States more conducive and more
attractive for investment and jobs. Let's use some common sense. If you
are a company that does business overseas, and you have profits
overseas, whatever country you are in you are going to have to pay
taxes. If you bring that money back into this country, you are going to
be paying 35 percent in taxes. You are going to pay one way or another,
whether to that country or to the United States.
However, if you take those profits and keep investing them in China,
in South Korea, in Malaysia, or in the Philippines, or wherever else it
may be, you are going to continue investing them over there if you are
going to be subjected to this 35-percent tax.
The idea is, for 1 year, reduce that tax burden to 5.25 percent,
bring those profits back into this country, invest them in the United
States in a variety of ways that actually helps your business; thus, it
creates more jobs. This is a law that I certainly think ought to be
passed, not diminished or micromanaged or pestered with this amendment.
Studies, for example, by the Joint Committee on Taxation have
determined that the provision we are supporting in the bill would
inject approximately $135 billion into our economy for jobs, capital,
investment, and economic growth. The Joint Committee on Taxation also
said it would bring in an additional $4 billion in tax revenues to the
U.S. Treasury. Of course, the profits are coming back; therefore, they
are going to be taxed. Whereas, if you do not change this law, that
money will stay overseas.
J.P. Morgan economists talked about job creation--660,000 new jobs
created, $75 billion in debt reduction, and an increase in capital
spending of up to $78 billion, by bringing approximately $300 billion
in foreign earnings back into this country.
The Breaux amendment has several problems. One, it is a poison pill--
as was said by other speakers--limiting benefits in such a way that it
makes it impracticable. Two, it requires that money be spent for narrow
purposes only; third, it requires companies to spend it in 3 years;
fourth, it excludes amounts brought back from Puerto Rico and other
possessions. That last one would treat Puerto Rico and our possessions
worse than investments made in the rest of the world.
Senator Boxer brought up examples of what would not be permitted with
the Breaux amendment. In addition to the job training, they could not
spend it on job training to upgrade the skills and capabilities and
productivity of their workers in the United States. They could not fund
startup businesses. Why would we not want them to fund startup
businesses? Why would we want to prohibit the injection of new capital
into cash-starved projects?
Mr. President, the point is that the amendment would limit the job
creation incentive and, unfortunately, not have the full potential to
make this country more desirable for jobs and investment. I
respectfully urge my colleagues to defeat the Breaux amendment, support
Senator Smith in his efforts, and those of Senator Ensign and others,
who have fought gallantly and wisely for more jobs and investment in
the United States of America.
I yield the floor.
Mr. BREAUX. Mr. President, how much time remains?
The PRESIDING OFFICER. There are 11 minutes 47 seconds.
Mr. BREAUX. I thank the Chair. I will take 2 additional minutes.
Again, I don't have any basic argument with those who say we ought to
let the money come back that has been sitting in tax savings into this
country. I will even go along with saying you can bring it back at 5
percent, if you are going to use it for job creation or research and
development, for capital expenditures. And If you are going to use it
to rebuild your pension fund for workers, OK, let's do it for 1 year at
5 percent. But, by gosh, can't we at least have some standards to be
able to enforce it?
Under the committee bill, without the Breaux-Feinstein amendment,
there is no obligation that they spend one nickel more on job creation
than they did last year or the year before. The only thing they have to
do is say, if last year we spent $10 billion on capital expenditures,
guess what. We will spend $10 billion this year. They don't have to
spend one nickel, one penny more on capital expenditures or job
creation or research and development in order to get this huge break.
They can spend exactly what they spent last year--no requirement, zip,
zero. Yet we are going to give them one of the biggest tax breaks.
We already passed tax cuts of $3 trillion for job creation. Are we
much better off today after all of that, some of which I supported?
That is a debatable issue. Let's not make the same mistake and say we
are going to give them an 85-percent tax cut if they are doing business
overseas and if they bring some of that money back and spend it on job
creation. And by the way, there is no requirement that you do anything
more than you did last year. What kind of nonsense is that, as far as
trying to create more jobs in this country, instead of providing a huge
incentive to locate overseas, bring workers overseas, and we are going
to have Congress let us bring it all back at 5 percent? How unfair is
that to the people who play by the rules, to other companies who do
business and hire people in this country.
There is no requirement, without the Breaux-Feinstein amendment, that
companies that bring this money back at a 5-percent rate spend one dime
more than they have in the past on the creation of jobs. They can spend
what they spent last year. In fact, they can spend less than they spent
last year. The only thing they have to show is they have a plan--no
enforcement, nothing.
The Senator from Nevada has a sign up that says 660,000 jobs. Suppose
they decide not to create one more job than they did last year. They
will still get the 5-percent tax break. There is no requirement that
they create six jobs. If they created six last year, they can do that
this year. They only have to show that the money is used for job
creation. They can take all the money they spent on capital
expenditures last year and not spend any of it next year. They can just
use this overseas money and not do one thing more than they did the
year before. There is no enforcement that they do what the plan says.
There is no penalty if they don't. They don't lose their tax deduction.
They still get it and they do not have to spend one nickel more in any
category without the Breaux-Feinstein amendment.
We say: Look what you did in the last 3 years, and what you are going
to do in the future 3 years, and see if you did more than you did in
the past. If you did, you get the 5-percent break. But, by golly, if
you don't, you don't get it. I think that is fair. I withhold the
remainder of my time.
The PRESIDING OFFICER. The Senator from Nevada is recognized.
Mr. ENSIGN. Mr. President, I want to first talk about the underlying
legislation and then talk about the Breaux-Feinstein amendment.
Allen Sinai is one of the most respected economists in the United

[[Page S4866]]

States--not a Republican or a Democratic economist--a bipartisan
economist. These 660,000 jobs he said this underlying bill will create
is based on our language. He is not saying what Senator Breaux just
said, that they are not guaranteed to bring the jobs back. He is doing
an independent analysis based on the money coming back into the United
States and based on that determining how many jobs it will create, and
this is a very conservative number.
What else will this underlying bill do? It will reduce the deficit,
according to his study, also by $75 billion over 5 years because of the
economic stimulus that will occur in the United States. The money that
will come back--there have been studies--the first J.P. Morgan study
was around $300 billion. They have updated their numbers. It is
expected to be around $500 billion. Allen Sinai's numbers, once again,
an independent economist, was based on the $300 billion figure. We
heard $300 billion all the way up to $600 billion will come back to the
United States. That is more money than all of the IPOs, initial public
offerings, on the stock market from 1996 to 2002. That is a lot of
economic activity.
We hear a lot today about outsourcing. Lou Dobbs talks about it
almost every night--outsourcing, outsourcing, outsourcing. This bill is
insourcing. This insources jobs to the United States. Mr. President,
$500 billion will create a lot of jobs in the United States.
Here is the language, by the way, Senator Breaux is talking about in
our bill when he says there really is not any kind of enforcement
mechanism:

. . . described in domestic reinvestment plan approved by the
taxpayers, president, CEO or comparable official before the
payment of such dividends and subsequently approved by the
taxpayers board of directors, management committee, executive
committee, or similar body, which plan shall provide for the
reinvestment of such dividends in the United States,
including as a source of funding of worker hiring and
training, infrastructure, research and development, capital
investments or for the financial stabilization of the
corporation for purposes of job retention or creation.

Why is that language important in our bill and how is that enforced
today? We are in a post-Enron environment. The markets look at the
governance of corporations. The IRS certainly looks at it. With
Sarbanes-Oxley on the books, CEOs are very sensitive to complying with
federal laws such as this. Companies are required to develop a plan,
and they have to stick with the plan, otherwise the stock markets will
punish their stocks if they are not doing this. That is one of the ways
the markets actually enforce what is going on.
I want to point out some of the other items that other countries do
on a comparative basis. These are just corporate tax rate comparisons.
The United States has the highest of all of these countries, and these
are countries with which we deal and compete. The United States has the
highest corporate tax rate of any of the countries--Korea, Indonesia,
Japan, EU, average, Ireland, 12.5 percent. That makes a little more
sense in terms of why they are competing a little better than we are.
In fact, in Ireland, they call it the Celtic Tiger because their
success has been so incredible as a result of lowering their tax rates
to attract capital.
The money right stranded overseas now will not come back in the
United States without our bill. That is the bottom line. People say it
is not fair to allow the money to come back in at lower tax rates than
American companies are paying today in the United States. The bottom
line is, fine, if it is not fair, then do we just want to leave this
money overseas? The money is not going to come back to the United
States to create jobs without our bill.

How do other countries treat this money that comes back into their
countries compared to what the United States does currently? The United
States is up to a 35-percent tax. France, Germany, Canada, Australia,
the United Kingdom--zero, and they have no restrictions on how the
money can be spent. It just comes back and gets reinvested in their
countries. That is why we are saying let's bring it back within that 1-
year period of time, and we will charge you 5.25 percent, which is
still higher than all of these countries. The companies want to bring
that money back to invest in the United States.
By the way, paying down debt is not allowed under the Breaux-
Feinstein amendment. If you are a company and you are burdened with
debt and now you have to lay off people, doesn't it make sense to allow
them to pay the debt down instead of laying off people? That just makes
common sense to anybody who has ever been in business. If you are in
tough financial times, having money from overseas come back and
reducing your balance sheet debt for the companies located in the
United States makes sense. It makes them more financially solvent.
Mr. SMITH. Mr. President, will the Senator yield for a question?
Mr. ENSIGN. Yes, I will yield.
Mr. SMITH. Mr. President, we talk about 660,000 jobs for the whole
country. Isn't it also true that California stands to gain 75,000 new
jobs, and Louisiana stands to gain nearly 10,000 new jobs; Nevada, over
5,000 new jobs; Oregon, nearly 30,000 jobs; and Virginia, nearly 14,000
new jobs that can be created in a very short period of time. Doesn't it
really go to our individual States to show just how dramatic a benefit
this brings to America and our States?
Mr. ENSIGN. Mr. President, I say to the Senator, I think those are
very conservative estimates at a time when we are talking about jobs.
The rest of the economy is doing well, and the job numbers are picking
up. This can be the extra boost the U.S. job market needs.
These are the items not allowed under the Breaux amendment when it
comes back: debt reduction I just talked about, job training, and
tuition reimbursement, better health care benefits for workers,
childcare for employees getting back to work, and materials for new
manufacturing.
There are a lot of items the money would not be allowed to be used
for under the Breaux amendment. This really is a poison pill. The
companies are telling us if the Breaux-Feinstein amendment is adopted,
it basically kills their incentive to bring the money back.
Let's have some common sense here. If money is overseas and it is
being invested over there because tax rates are too high to bring it
back to the U.S., let's lower the tax rates so the capital comes back
to the United States to create jobs. That is the bottom line; it will
create jobs in the United States. It will make American business more
competitive in this global marketplace.
If my colleagues are worried about outsourcing, defeat the Breaux
amendment and keep the provision in the bill. The Invest in the USA Act
is a great piece of legislation. That is why on the floor of the Senate
last year it received 75 votes to 25 votes against it. With 75 votes,
in a bipartisan manner, we adopted our bill last year. We need to keep
this provision intact in the underlying bill.
I encourage all Senators who voted last year with us to stay with us
on this point and defeat the poison pill of the Breaux-Feinstein
amendment.
I reserve the remainder of our time.
Mr. BREAUX. Mr. President, how much time do we have?
The PRESIDING OFFICER. Eight minutes four seconds.
Mr. BREAUX. I yield myself 3 minutes.
It is interesting that they said Louisiana would gain 10,000 jobs if
this passed. We probably lost 50,000 jobs with people moving overseas.
So with this legislation, we are still 40,000 jobs short.
What we are doing in this legislation is rewarding companies that
operate overseas. We say, if you operate overseas and you hire foreign
workers in foreign countries and put your money in a tax haven, somehow
that is good policy, and we are going to let you take those earnings
and only pay 5-percent tax on that. What kind of logic is that? That is
a huge incentive to continue to hire workers overseas knowing Congress
is going to let you bring earnings back, not at 35 percent, which every
other company that hires U.S. workers in my State or any other State
has to pay. No, if you do it overseas, you are only going to have to
pay 5 percent if you give us a plan that tells us you will use the
money for the financial stabilization of the corporation, whatever the
heck that means.

[[Page S4867]]

If we are going to create so many jobs and if we are going to reduce
the deficit, when you look at this and score it impartially, why does
the Joint Committee on Taxation say this is going to cost the Treasury
$3.7 billion? If we are going to create so many more jobs and so many
more people are going to pay taxes, why does this provision in the
current bill cost the U.S. taxpayers $3.7 billion? That is the score
from the Joint Committee on Taxation when they looked at this
provision. It is not going to reduce the deficit. It is going to cost
the taxpayers almost $4 billion.
When someone makes the point that the IRS will audit these companies,
audits are down on corporate America by over 60 percent. They are doing
60 percent fewer corporate audits. One wonders why Enron got away with
everything? Because the Treasury does not have the wherewithal to do
the audits they need.
The principal argument I have with the Breaux-Feinstein amendment is
simply this: If people say they are going to bring it back at a 5-
percent rate and they are going to use it to create more jobs, I say,
OK, let them do it, but let's have some mechanism to ensure they really
do create more jobs than they created in the past. That is all the
Breaux-Feinstein amendment really says. It says: Show us, Mr. Corporate
America, that, in fact, you are creating more jobs than you did before.
And if you did, fine, you are off the hook; you get a 5-percent tax
rate, but if you do not create any more than you did in previous years
or you create less, then something is wrong with this proposition, and
we are not going to let you pay only 5-percent taxes.
It is an enforcement mechanism. I agree, use it for pensions, use it
for research and development, use it for capital expenditures, use it
for job creation, but please show us that it was used for that purpose.
The PRESIDING OFFICER. The Senator has used 3 minutes.
Mr. BREAUX. I reserve the remainder of my time.
Mr. SMITH. The time remaining on our side is 1 minute 40 seconds?
The PRESIDING OFFICER. One minute forty-eight seconds.
Mr. SMITH. I yield 1 minute to the Senator from California, and I
will use the remainder.
The PRESIDING OFFICER. The Senator from California is recognized for
1 minute.
Mrs. BOXER. As we wind down this debate, I thank Senators Smith,
Ensign, and Allen. I think we have had a good debate. I want to thank
Senator Breaux for his passion. My colleague, Senator Feinstein, and I
do not see this eye to eye.
Here is how I would sum it up: On May 15, 2003, the Senate voted 75
to 25 for the Ensign-Boxer-Smith Invest in the USA Act. It was a very
clear statement that we want to see job creation. What we are proposing
is a 1-year only chance for corporations that have parked their foreign
earnings abroad, and that have no intention of bringing them back, to
bring it back at a lower tax rate. It would infuse our Treasury with
about $4 billion in revenue, and Allen Sinai, a respected economist,
says it will create 660,000 jobs.
The PRESIDING OFFICER. The Senator's time has expired.
Mrs. BOXER. I hope we will vote against the Breaux-Feinstein
amendment and once and for all make this important bill the law of the
land.
Mr. BREAUX. Parliamentary inquiry: What is the status on remaining
time?
The PRESIDING OFFICER. Thirty-nine seconds for Senator Smith and four
minutes fifty-four seconds for Senator Breaux.
Mr. BREAUX. I will close on my amendment.
The PRESIDING OFFICER. The Senator from Louisiana.
Mr. BREAUX. Mr. President, I close on this amendment with the
following comments: In this legislation, we are giving U.S. companies
that hire foreign workers in foreign countries and putting their money
that they earned in tax savings the opportunity, the gift, to bring
back to this country those earnings and not pay what every other U.S.
corporation pays in taxes but to give them an 85-percent tax cut
because they operated overseas and hired foreign workers and made
products in foreign countries. We are going to give them an 85-percent
tax cut over current law if they bring the money back over here.
The argument is that somehow that is going to create more jobs over
here. But there is no requirement that a single additional job be
created. They do not have to create one more job or spend one more
dollar on research and development than they did last year under the
current bill without the Breaux-Feinstein amendment.
The Breaux-Feinstein amendment seeks to install responsibility that
says: All right, if corporations want to bring it back for those
purposes, even though it is going to cost the taxpayer $3.7 billion--
some people outside of Washington may think that is a lot of money; I
think it is a lot of money--$3.7 billion is the cost of this
legislation without the Breaux-Feinstein amendment. The bottom line is
there is no guarantee that they will spend one dollar more on creating
a job, capital expenditures, or research and development than they did
last year. The Breaux-Feinstein amendment says, yes, corporations can
do this and we will give them this huge tax break if they spend more on
job creation and create more jobs than they did in the past. That is
our only requirement, and that is not too much of a requirement.

They already say that is what they are going to do. The only thing
our amendment says is, yes, they have to do that, and if they do not
they are not going to get the break.
Without the Breaux-Feinstein amendment, they do not have to create
one single additional job more than they did in previous years. We have
an enforcement mechanism that says: Look, if they do not spend it for
what they say they are going to spend it, then they are not going to
get the tax break. They are going to have to give it back. They are
going to have to be treated as any other company that does business in
this country.
They call this a poison pill. I think it is more a vitamin pill to a
deficient bill to try and help improve it to give it some strength, to
give it some credibility, to say, yes, we agree, let's do it for this
purpose, but please have a requirement that it is actually used for
that purpose.
The legislation does not have that. The only thing they have to do is
come up with a description, a domestic reinvestment plan that does not
require it be spent. It certainly does not require that they spend more
in the future than they did in the past. But if the corporations put
what they are thinking about doing in a domestic investment plan, then
they are OK, but there is no requirement that they spend a nickel more
than they did in the past. That is the real principle that we are
trying to address with the Breaux-Feinstein amendment. I think it makes
sense.
It still allows money to come back, but it only requires that they,
in fact, use those dollars for what they said they were going to use
them. If they do that, if they create more jobs, do research and
development, make capital expenditures, do things that they say they
are going to do with it, let's please have some mechanism in the
legislation that really requires them to do what they say they are
going to do.
The history of this country with regard to recent scandals in
corporate America show that we have to be vigilant and diligent, and we
have to have some pretty clear parameters about what people can and
cannot do. This legislation, without the Breaux-Feinstein amendment,
falls short in that particular provision.
I reserve the remainder of my time.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. SMITH. Mr. President, if Senator Breaux were offering a
perfecting amendment, I would take it. But he is offering a poisonous
amendment. What his amendment would effectively do is limit the ways
that these dollars can be used in America to create American jobs.
The more it is limited, the more jobs will be limited. So if my
colleagues vote for his amendment, they are voting against job creation
in their State.
The Senator says he wants a guarantee. My mother used to say the only
guarantees in life are death and taxes. What is in this bill are
penalties to the Tax Code. If my colleagues want to make sure these
things are spent the way they are described, then these

[[Page S4868]]

companies have to follow the plan they lay out before the IRS. If they
do not, they lose the deduction and the penalties attached in the Tax
Code will attach to them as well.
I urge my colleagues to vote against the Breaux-Feinstein amendment.
This bill is important to create American jobs.
Mr. BREAUX. How much time remains?
The PRESIDING OFFICER. Fifty seconds.
Mr. BREAUX. Mr. President, we are saying if corporate America wants
to get this huge tax gift, OK, let's do it. But let's make sure they
use it for the right purpose. Let's make sure they actually use it for
job creation. Breaux-Feinstein simply says they have to show that they
spend more in future years, the next year, and the next year than they
did in the previous years in terms of job creation and doing what they
said they were going to do.
Without the Breaux-Feinstein amendment, the only thing a company has
to do is file a plan. If they do not follow the plan, well, too bad;
they do not get audited, too bad. There is no requirement that more
money is spent to create jobs, and we are talking about a jobs bill
that creates jobs in this country, I thought, not in a foreign country.
I do not think we can go back home to our constituents and say we are
going to give corporate America an 85-percent break for money they
earned overseas. If they want to bring it back for job creation, OK,
but let's make sure that is what it is used for.
The PRESIDING OFFICER. The Senator's time has expired. All time has
expired. The amendment is set aside.
The Senator from Nevada.
Mr. REID. I know the Senator from New Mexico wishes to speak as in
morning business for 5 minutes, and certainly we would have no
objection to that. I just want to lay out for Members what is going to
transpire in the next few hours. The two managers are necessarily
absent this morning but they have instructed us what should be done on
this legislation. We have completed debate on the Breaux amendment. We
are next going to move to the amendment that has been filed by the
Senator from North Dakota, Mr. Dorgan.

Following that, unless the majority decides they want to offer an
amendment, we are going to finish debate on the Graham amendment, which
is also laid down.
We had an agreed-upon time on the Dorgan amendment, but as a result
of the fact that we have been told a Senator may offer a second-degree
amendment to his amendment, it would be difficult for us to agree to a
limit on that. So debate will go forward on the Dorgan amendment, and
those who are trying to determine whether they are going to offer an
amendment can do so and at that time perhaps we can work out a time
agreement. If they don't offer a second-degree amendment, that will be
easier.
On the amendment of the Senator from Florida, Mr. Graham, he needs a
half hour himself on that amendment, which we understand. There may be
a few others who wish to take some time. We could agree to 45 minutes,
maybe, to an hour, on our side. I doubt if the full hour will be used.
So it is my understanding that the leadership, when debate is
completed on those amendments, would set a time for voting on all three
amendments or maybe even four would be pending.
That is where we are. I think it indicates we are moving on this bill
fairly rapidly. As Senator Daschle and I indicated this morning, on our
side we are winding down our amendments. We have a few others that will
be offered, not many. We hope the majority will also make a decision in
the near future as to whether they want to finish this bill. We want to
finish this bill. We hope the majority does also.
Mr. SMITH. Point of clarification?
Mr. REID. Yes.
Mr. SMITH. It was my understanding that it was 70 minutes on the
Dorgan amendment and my request is that that include the debate,
equally divided, on the Republican substitute?
Mr. REID. It would include debate on the substitute?
Mr. SMITH. On what will be offered on this side.
Mr. REID. Mr. President, I, first, didn't ask unanimous consent that
that would be the case. During the time Senator Domenici is speaking,
we will take a look at that. I just wanted to notify Senators what we
were trying to accomplish. Senator Dorgan is on the floor and we will
make a decision.
Mr. SMITH. That is fine.
Mr. REID. I ask unanimous consent that Senator Domenici be recognized
for 5 minutes as in morning business and sometime during the day the
Democrats be allotted the same privilege, 5 minutes as in morning
business.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from New Mexico is recognized.

Energy

Mr. DOMENICI. Mr. President, I wish I could have come to the floor
earlier but sometimes you are surprised to hear arguments that you
never expected. All Senators on that side of the aisle who have come
down here to rail against President Bush about high gasoline prices
need to take a look in the mirror and blame themselves. I have been
down here for months trying to get a comprehensive energy bill passed
that will promote a policy of greater energy security and independence.
Some of these very Senators are blocking these efforts.
The Energy bill is not a silver bullet to lower prices for gasoline
or for natural gas. No such thing exists. There is no silver bullet. It
is disingenuous for Democrats to imply that one exists. They know
better.
Our bill is long term, to deal with our supply and manage our demand.
That is the only responsible strategy. We need more domestic oil and
more natural gas production. The Energy bill provides the open door for
that to occur. We need alternative fuel sources. The Energy bill
promotes for sources such as wind and solar. It promotes clean coal
technology, and, yes, eventually, nuclear power. We need this broader
portfolio to reduce risks of overdependence on one source. The occupant
of the chair knows that as well as anyone. One source of energy is
disaster for this great country. Natural gas, as the sole energy to
produce electricity, is a disaster.
Senator Schumer said: ``Don't think there is nothing we can do about
high oil prices.''
He is right. He suggests remedies--stop filling the SPR. That is
wrong. But I do agree we can do something about oil, natural gas, and
gasoline prices. Changes to our Strategic Petroleum Reserve, the SPR,
are short term, shortsighted, and bad policy.
The SPR is a national security asset. It is there to serve for an
emergency, in an emergency situation, when there is a severe energy
disruption. It is not a price control mechanism. If we alter the SPR
practices, then we can assume that OPEC will alter their production
output. This leads to more volatility in the market and a disastrous
result.
President Clinton tried to use SPR to deal with high oil prices. He
failed. Gasoline prices--believe this--dropped by one penny. That is
all, a single penny. Risking our national security by depleting or
playing around with the SPR got us a total impact of one penny.
I know we are all concerned about high gasoline prices. On average,
gasoline demand in the United States is about 9 million barrels a day.
That is roughly 378 million gallons of gasoline a day. Some parts of
the country are experiencing $2-a-gallon price, and others have prices
in the $1.70 range.
According to the Energy Information Administration, the national
monthly average regular gasoline pump prices are expected to peak at
about $1.87. One of the reported reasons that we hear for high gasoline
prices is the high oil price demanded by OPEC. In 2003, we imported 42
percent of our total petroleum imports from OPEC countries. Supplies
from OPEC provides about 26 percent of our domestic crude oil.
Senator Wyden introduced a resolution about OPEC. I agree with some
points of his resolution. The resolution says the President should
communicate with members of OPEC and maintain strong relations. Of
course, that is a given. We need to work together in a cohesive fashion
in our relations with exporting countries and send a strong message
that we want reliable supplies at fair prices.

Senator Wyden's resolution also says that Congress should take short-
term and long-term approaches to reducing

[[Page S4869]]

and stabilizing oil prices. If we pass the Energy bill now, in the
short term, then in the long term we will see the benefits of lower oil
prices.
The last part of Senator Wyden's resolution lists some things that
can be done to lower oil prices. I particularly agree that we consider
lifting regulations that interfere with the ability of the U.S.
domestic oil and coal, hydroelectric, biomass, and other alternative
fuels to supply a greater percentage of the energy needs of the United
States. That is an excellent description of the Energy bill pending
before the Senate. Isn't it interesting, instead of passing the bill,
we recommend resolutions that do the same thing but the resolution will
not accomplish the same thing. We all know that.
If Senator Wyden is serious that he wants these things, he should be
voting to pass the Energy bill that includes the very list contained in
his resolution.
I thank the Senate for listening. I am ready at any time to come down
and debate the Energy bill and its content, because it is time we quit
talking and start doing. It is time those on the other side look in the
mirror. In the mirror, they will see they are responsible for what is
happening because they will not help us pass an energy bill.
I yield the floor.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, after consideration during the speech of
Senator Domenici, we believe the action of the Senate will be as
follows: Senator Dorgan will speak on behalf of his amendment. Senator
Mikulski will speak on behalf of that amendment. It will take probably
a half hour for them to do it, but that is not in the form of a
unanimous consent request.
Following that debate, we will move off that amendment because the
majority is finding what vehicle they are going to use for a second-
degree amendment. When they finish, when Senators Dorgan and Mikulski
finish, we will move immediately to the Graham amendment. At that time,
we will lock in a 2-hour time agreement. It is probably likely that
each side will not use its full hour.
Following that, it will be the desire of the majority to have a vote
on the Breaux amendment and then on the amendment of the Senator from
Florida. We will have two amendments and then go back to the amendment
by the Senator from North Dakota.
I ask that we go to the Dorgan amendment. The Senator is on the
floor. Following debate on that, I ask unanimous consent that we go to
the Graham amendment.
The PRESIDING OFFICER (Ms. Murkowski). Without objection, it is so
ordered.
Mr. REID. And that there be 2 hours equally divided on the Graham
amendment, with no second-degree amendments in order.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from North Dakota.
Mr. DORGAN. Madam President, tempted as I am to respond to the last
comments just offered by the Senator from New Mexico, I will refrain
and do that at a later time. Suffice it to say it provides little
benefit to come to the Senate and say, they are responsible for us not
having an energy bill. We all understand why we do not have an energy
bill. I was one who signed the conference report, worked on the bill,
voted for the bill in the Senate. We do not have an energy bill because
it failed by two votes. It failed by two votes because the majority
leader of the other body insisted on a retroactive waiver for liability
of MTBE. He was told it would kill the bill, and it killed the bill.
I don't have much patience with Members who point to one side or the
other and say they killed the Energy bill. The Energy bill should be in
the Senate right now and should have been in the Senate last week. We
ought to do an energy bill. I said I would refrain from commenting. I
just commented.
There is no Republican or Democrat way to pay inflated gas prices.
The way you pay inflated gas prices is stick the hose in the tank and
you have to fork over a bunch of bills when you are done filling the
tank. We ought to get a bill through here. My colleagues on both sides
of the aisle believe that. In my judgment, it ought to be a priority.

Amendment No. 3110

Having said that, I have come to the Senate floor to speak to an
amendment I offered yesterday on behalf of myself and Senator Mikulski.
The amendment is supported and cosponsored by other Members of the
Senate.
Senator Mikulski and I offer an amendment that deals with the issue
of the embedded tax incentive in our Tax Code that actually
incentivizes companies to shut down their U.S. operation, move jobs
overseas, and then send the product from those jobs back into the
United States. Let me describe the amendment and let me describe why I
believe it is important. The amendment offered by myself and Senator
Mikulski is also cosponsored by Senator Harkin, Senator Feingold,
Senator Kennedy, and Senator Edwards.
This amendment partially repeals a tax subsidy called deferral. This
subsidy is only partially repealed because it is repealed for those
U.S. companies that move their operation to a foreign subsidiary,
produce the same product, and ship the product back into this country.
They lose deferral on that kind of economic activity.
The amendment has several other provisions that require notification
of communities, agencies, and workers when jobs are going to be lost
and jobs are going to be offshored. It requires the Department of Labor
to supply statistics on jobs sent overseas.
The key part is to shut down the perverse provision in tax law that
incentivizes the movement of jobs overseas. If you look at this Tax
Code, which itself is a Byzantine set of complexities, there is not a
section that says: In this part of the Tax Code, this chapter is
entitled ``Incentive for Sending U.S. Jobs Overseas.'' There is no such
part of the Tax Code. There is no chapter, title or provision that says
this is the benefit you get from sending jobs overseas. But that
benefit does exist in the Tax Code, and I intend to describe how and
why it exists.
Mr. REID. Will the Senator yield?
Mr. DORGAN. I am happy to yield.
Mr. REID. We now have agreement that we can have those two votes. I
have already indicated that following the remarks of Senator Dorgan and
Senator Mikulski, we would move to the Graham amendment No. 3112 and
the time would be equally divided, 2 hours equally divided. Following
the debate on that, I ask we move to vote in relation to the Graham
amendment No. 3112. Prior to that, we vote on the Breaux amendment No.
3117. There will be 2 minutes equally divided prior to each of the
votes.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from North Dakota.
Mr. DORGAN. Madam President, this is a picture of a little red wagon.
On the side of this little red wagon it says ``Radio Flyer.'' Most of
us understand what this little red wagon is because we have actually
had one of these red wagons. I had one. My guess is the person now
occupying the Chair has had a little red wagon. Even in Nevada they
have little red wagons. Senator Reid, no doubt, has ridden in one of
these. I didn't know until recently much about the red wagons, but that
they were wonderful and fun, and if you turn the front wheels too
sharp, sometimes they tip over.
This little red wagon is enjoyed by these two young children as it
has been enjoyed for decades and decades. This wagon is called the
Radio Flyer. It comes from a company created in 1917 by an Italian
immigrant woodworker named Antonio Pasin. He had a one-room workshop in
New York City where he made wooden wagons by hand. He called them
Liberty Coasters, after the Statue of Liberty. He later renamed them
``Radio Flyers'' because he always had an admiration for airplanes.
That is how Radio Flyers came on the side of little red wagons sold all
over the country.
The company was inherited by Antonio's children and then inherited by
his grandchildren located in Chicago, IL. For almost a century, they
turned out these marvelous little red metal wagons made here in this
country by working men and women who are proud to make them--that is,
until earlier last month. They announced these little red wagons would
now be made in China. These American Flyers, these red wagons, will now
be sent to our country to be enjoyed by our children, but they will no
longer be made in America;

[[Page S4870]]

they will be made in the country of China. That is an American icon,
moving to China.
Huffy bicycles. Huffy bicycles have 20 percent of the American
marketplace. Everybody knows about Huffy bicycles. Buy them at Sears,
Kmart, Wal-Mart. In fact, for many years, Huffy bicycles had a little
decal between the handle bars and the front fender. That decal was of
the American flag, made by proud men and women working in a
manufacturing plant in Ohio. Those men and women made $11 an hour, but
they don't work there anymore. They lost their jobs. They came to work
one day to find out they were fired. Why? Because Huffy bicycles were
moving to China. Why were they moving to China? Because $11 an hour was
too much to pay an American worker when you could hire a worker in
China for 33 cents an hour.
By the way, when you move the little red wagon to China and you move
Huffy bicycles to China, you also get a tax break. By the way, if you
just close your manufacturing plant in the United States and move it to
China, you get a tax break.
Huffy bicycles are not here anymore. They are in China. They are made
by people who make 33 cents an hour. They work 7 days a week, 12 to 14
hours a day. Both of these companies get a tax cut for going to China.
How does that work? How do they get a tax cut for doing that? We have
something in our Tax Code called deferral. It is a foreign language to
most people unless you are an accountant who works in all these areas.
Deferral. It says: Tell you what, if you have two bicycle manufacturers
side by side in the same town competing for the same marketplace, they
pay the same wage; they hire the same number of workers; they produce
the same number of bicycles, one of them decides to move to China or
just move overseas, the bicycle manufacturer that stays in your
hometown in this country will pay higher taxes than the bicycle
manufacturer that leaves because the bicycle manufacturer that leaves
to go produce in China is not going to have to pay U.S. income taxes on
its income until and unless it is repatriated into this country. That
is called deferral. So it will earn income that is untaxed under
something called deferral.

We are told from the latest estimates we received recently that this
deferral benefit for companies that move overseas to produce the same
product and ship it back into our marketplace in the U.S. is over $6
billion in 10 years.
Now I am not talking about an American company, for example, that is
in the suburbs of Toledo, OH, and it decides: I am going to move a
manufacturing operation to Sri Lanka or Indonesia so I can, less
expensively, produce a product to market in Japan or South Korea. That
is not what I am talking about. That is not what this amendment Senator
Mikulski and I are offering is talking about. We are talking about an
American company that decides it should be benefited with rewards from
our tax system for producing a product overseas that is going to come
back into our marketplace to be sold in this country.
It is unfair to U.S. domestic companies to compete against another
company that decides to send its production overseas, get rid of its
American workers, and then end up competing against its former
competitors that stayed in this country, but compete in a way that
provides this company that left this tremendous advantage because they
now pay lower taxes. They got a tax incentive for leaving.
We are going to hear, I think, a lot of obfuscation about this issue
and huffing and puffing and blue smoke in the air over all this. But I
think there is a simple proposition to understand. If two companies
that make bicycles exist in the same city, and one goes to China to
make bicycles to ship back to the United States, the one that left gets
a tax break. That is in current law. You can either vote to support
current law and say, ``I support continuing to give this insidious tax
break to those who want to move offshore to ship back into this
marketplace,'' or you can decide this is wrong.
Those companies that stay here, those companies that produce here,
ought not to have to compete against others that now have a lower tax
rate because they left. That is a simple proposition. There is a lot
more we should do, but we don't do it in this bill. I will give you
some examples.
Companies that want to run subsidiaries through tax havens, what we
ought to do is decide if you don't have a business operation, you just
want to run your business accounting through a tax-haven country, we
are going to treat you as if you never left this country. That is what
we ought to do.
And this last goofy provision that is in the underlying bill says to
companies, Oh, by the way, you left, and you now have deferred income,
for which you have never paid a tax; why don't you bring it back here
and pay a 5-percent tax on it. What an incredibly goofy idea. You think
there would be some embarrassment about putting that in the bill, but
there is not. There is no embarrassment, apparently. But Tom Paxon,
many years ago, wrote this song ``I'm Changing My Name to Poland.''
That is when Poland got some sort of bailout loan from the United
States. ``I'm Changing My Name to Poland.'' Maybe the American people
ought to get the same benefit that is being proposed in this bill of a
5-percent income tax rate. If it is good enough for people who have $10
billion in deferred income overseas, to repatriate it and pay a 5-
percent rate, why shouldn't every single American working family pay
the same 5-percent rate? Are they unworthy? Are they less worthy? Why
not give them the same opportunity?

There are a dozen things we ought to do to this Tax Code to make it
fair. With respect to this issue of international provisions in the Tax
Code, we do one, narrow thing. It is very simple. In my judgment, no
one here will be able to say I did not understand it. It is very
simple. If you are an American corporation and you decide to produce
overseas for the purpose of selling into our country, we are not going
to give you a tax break any longer for continuing to do it. We are not
going to give you a tax break.
Now let me just go through a couple of things that describe the
circumstances that exist in this country. Imports from foreign
affiliates of U.S. corporations have doubled since 1993. Is a lot of
this happening? You bet. Is it happening in a much more accelerated
way? Of course. And the perverse thing is, we have a Tax Code that
incentivizes this to happen.
Here is employment in U.S. manufacturing. It has fallen by 2.7
million jobs since the year 2000. You see what is happening to the
manufacturing sector in this country. No country is going to long
remain a world economic power without a robust, healthy manufacturing
sector.
I used Radio Flyer wagons--and Huffy bicycles. I could have used any
number of products to describe what is happening to the manufacturing
base of the country. And our Tax Code subsidizes it. It says: If you
have a plant, shut it down and move. We will give you a tax cut.
Employment in foreign affiliates as a percent of U.S. manufacturing
has gone from 23 percent to 34 percent. I do not need to make the case
any more than this, except to say when we do this--and I often come to
the floor to talk about trade issues--it relates to a whole myriad of
issues. I mentioned Radio Flyers and Huffy bicycles going to China. I
have not visited the plants where they are made.
I regret, and am enormously disappointed, after a century of making
little red wagons in our country, the company that makes them has
decided to make them elsewhere. I regret bicycles that were made here
are made in China. But let me describe the circumstance of all of these
issues. And I have talked about this before. This is a Washington Post
article. It is about labor provisions in China. This gets to the issue
of fair trade. But this is not just fair trade. It is also the perverse
tax incentive that says: Oh, by the way, ship your jobs overseas.
It says:

On the night she died, Li Chunmei must have been exhausted.
Co-workers said she had been on her feet for nearly 16
hours, running back and forth inside the Banain Toy Factory,
carrying toy parts from machine to machine.

This was the busy season, before Christmas. They worked 7 days a
week. The exact cause of her death remains unknown. They found her
after the lights went out:

Her roommates had already fallen asleep when she started
coughing up blood. They

[[Page S4871]]

found her in the bathroom a few hours later, curled up on the
floor, moaning softly in the dark, bleeding from her nose and
mouth. Someone called an ambulance, but she died before it
arrived.
The exact cause of [her] death remains unknown. But what
happened in this industrial town in southeastern Guangdong
province is described by family, friends and co-workers as an
example of what [Chinese] newspapers call ``guolaosi.'' The
phrase means ``over-work death''. . . .

They actually have a term for it in China.
So these people, who used to make Radio Flyers, the people who used
to make Huffy bicycles are supposed to compete with that? We are
supposed to believe this is the way competition works in the world? I
do not think so.
But aside from that, aside from the perversity of setting up a
competition in circumstances where kids are worked to death, and paid
pennies, and live 12 to a room, work 7 days a week, 12 hours a day,
aside from that, we, in this Tax Code, have an incentive that says: If
you do this, you pay less in taxes. If you do this, move your jobs
elsewhere, you actually get a tax break. My colleague Senator Mikulski
and I think that is perverse, as I have said.
This proposal is very carefully targeted. It ends tax deferral only
where U.S. multinationals produce goods abroad and ship those goods
back into the U.S. marketplace. For others who might be surprised by
this amendment, let me say to them, it is not new. President John F.
Kennedy tried to shut down deferral--a much larger proposition than
ours in this amendment. Richard Nixon supported shutting down deferral.
The House of Representatives actually voted in the 1980s to shut this
down. This is not new.
I might also say, the Senate has previously voted on an amendment
very similar to this about 8 years ago. But if we are dealing with
international taxation--and we certainly are with respect to the
underlying bill brought to the floor by the Finance Committee; and we
are doing it in some ways that are quite disappointing, some ways that
are fine--if we are dealing with that subject, we cannot fail to deal
with the subject of incentives that now exist for companies to
eliminate U.S. jobs and shipping those U.S. jobs overseas.
I am not someone who believes our country ought to put up walls. We
have a global economy; I understand that. I don't think the rules for
globalization have nearly kept pace with globalization. That is why you
can't hold discussions on trade anywhere where there is a population
center these days, so they take them to Qatar, someplace where there
are no hotel rooms.
The fact is, we are now increasingly a global economy. But as we
globalize, the rules must keep pace. As we globalize this country, this
world economic power needs to be concerned about its future, its job
base, and its manufacturing base. Precious little attention is paid to
it. We will have Members come to the floor this afternoon aggressively
supporting the proposition that deferral is good for our country, good
for our taxpayers, good for our job base. Nonsense. Sheer nonsense. It
is not good under any set of circumstances for us to say if you have
two companies, one that stays in America, and one that leaves our
country, both to produce products to sell in our marketplace, that we
will advantage the company that left. We will give an advantage to the
company that fired its workers and left to take its jobs to Sri Lanka
or to Indonesia or Taiwan or China or Bangladesh. It makes no sense. It
never has. And it makes no sense today to decide that we will provide
significant financial incentives to those who make the decision to shut
down American jobs, shut down manufacturing plants, move them overseas,
and reward them for doing so.
This country ought to stand up for its economic interests, not to the
detriment of others but for its economic interests. That is what this
amendment does. It is about jobs. It is about economic strength. It is
about a manufacturing base that needs to be strong and vibrant and
growing. And it is about fairness. Finally and most importantly, it is
about common sense.
I come to this Chamber from a very small town, 300 people in
southwestern North Dakota, a sparsely populated State. One heavy dose
of common sense here would be that we would pass this amendment and say
that this defies logic. Go to the cafe in my hometown and ask folks: Do
you think it makes sense for us to have an embedded provision in the
American Tax Code that rewards a company that leaves and puts the
company that stays at a competitive disadvantage? Try defending that.
If you will defend that in any cafe, any city in this country, let me
be there while you do it so I can tell the other side of this story.
There will come a point when this Congress--perhaps it is today when
we start down this road--has to decide to stand up for the economic
interests at home, take care of matters at home. This is a first step.
Let me end where I began, with bicycles and wagons, just as a symbol.
Both have now decided that they will not produce in the United States.
They will produce instead in China. Those jobs, these wheels, these
pedals, those handlebars, and this red paint used to be applied by
American workers. They are not any longer. I am not saying we ought to
keep every job here. I am not saying it is not a global economy. But I
am saying we can take the first commonsense step to say we will no
longer have an embedded perverse incentive to reward companies to move
their jobs overseas. If we can't take that step, this is going to be a
mighty short journey for this country's economy.
At a time when we worry about jobs, people worry about security; they
sit around the supper table at night and talk about their lives ``What
kind of job do I have? Do I have job security? Does it pay well?'' At a
time when we discuss these things and know we have lost 2.7 million
manufacturing jobs in a few recent years, the question for this
Congress is: Will you decide to end the perverse incentive in the Tax
Code that actually ships jobs elsewhere? Yes or no. There is not
``maybe'' as a potential answer. It is yes or no. That is what we will
vote on this afternoon.
My colleague, Senator Mikulski, comes from a wonderful State, a
different State than mine. She comes from more of an industrial State,
the State of Maryland. But she has worked with me tirelessly in
creating this amendment. I know she has a lot to say as well on behalf
of American workers. Let me yield the floor to my colleague from
Maryland.
The PRESIDING OFFICER. The Senator from Maryland.
Ms. MIKULSKI. Madam President, I ask unanimous consent to print in
the Record letters in support of the Dorgan-Mikulski amendment from the
boilermakers and the shipbuilders, from the electrical workers, from
the U.A.W., and from the AFL-CIO.
There being no objection, the material was ordered to be printed in
the Record, as follows:
International Brotherhood of Boilermakers, Iron Ship
Builders, Blacksmiths, Forgers & Helpers,
Fairfax, VA, May 4, 2004.
Dear Senator: Today, the Senate is expected to vote on the
Dorgan-Mikulski amendments to S. 1637, which would end tax
deferral for U.S. companies that outsource manufacturing
facilities and jobs to foreign countries, only to ship
foreign made goods back to the United States. On behalf of
the International Brotherhood of Boilermakers, Iron Ship
Builders, Blacksmiths, Forgers and Helpers, I strongly urge
you to support the Dorgan-Mikulski amendment and end the
``Runaway Plant/U.S. Job Export'' subsidy.
The Dorgan-Mikulski amendment will help stop the flow of
good-paying manufacturing jobs out of the United States. In
the last 3 years, 2.7 million jobs that could support the
typical American family have disappeared. Part of this
decline is due to tax incentives that encourage companies to
shift their operations abroad. Under current law, a U.S.
company that shifts a manufacturing operation to a foreign
based subsidiary can indefinitely defer paying U.S. taxes on
its profits until it sends those profits back to the U.S. as
dividends.
U.S. taxpayers should not subsidize manufacturing
expatriates. This unfair and arcane tax provision rewards
U.S. companies that move American jobs offshore and puts
taxpaying domestic companies at a severe disadvantage, while
costing American taxpayers $6.5 billion over 10 years.
Multinational companies should not be encouraged to move jobs
abroad and avoid paying their fair share of taxes on income
gained from the U.S. market.
Repealing the jobs exports tax subsidy will allow American
manufacturers to compete fairly. This amendment not only
repeals this ill-advised job export subsidy, but it uses
those savings to accelerate the tax cuts provided in S. 1637
for domestic manufacturing.
Corporations will be held accountable to the communities
they leave behind. Workers

[[Page S4872]]

and their families deserve to know when their jobs are being
sent abroad. This amendment will shed new light on corporate
practices by requiring companies to disclose to workers and
the public whenever they lay off more than 15 workers to send
jobs overseas.
Once again, I urge you to remedy the unfair tax incentive
that sends American jobs overseas by supporting the Dorgan-
Mikulski amendment to S. 1637. Thank you for your attention
to this important matter.
Sincerely,

Bridget P. Martin,

Assistant to the International President,
Director of Government Affairs.
____

International Brotherhood

of Electrical Workers

Washington, DC, May 4, 2004.
Hon. Daniel K. Akaka,
U.S. Senate, Hart Office Building,
Washington, DC.
Dear Senator Akaka: Today, the Senate is expected to vote
on the Dorgan-Mikulski amendment to S. 1637, which would end
tax deferral for U.S. companies that outsource manufacturing
facilities and jobs to foreign countries, only to ship
foreign made goods back to the United States. On behalf of
the 780,000 members of the International Brotherhood of
Electrical Workers (IBEW), I strongly urge you to support the
Dorgan-Mikulski amendment and end the ``Runaway Plant/U.S.
Job Export'' subsidy.
The Dorgan-Mikulski amendment will help stop the flow of
good-paying manufacturing jobs out of the United States. In
the last 3 years, 2.7 million jobs that could support the
typical American family have disappeared. Part of this
decline is due to tax incentives that encourage companies to
shift their operations abroad. Under currnet law, a U.S.
company that shifts a manufacturing operation to a foreign
based subsidiary can indefinitely defer paying U.S. taxes on
its profits until it sends those profits back to the U.S. as
dividends.
U.S. taxpayers should not subsidize manufacturing
expatriates. This unfair and arcane tax provision rewards
U.S. companies that move American jobs offshore and puts
taxpaying domestic companies at a severe disadvantage, while
costing American taxpayers $6.5 billion over 10 years.
Multinational companies should not be encouraged to move jobs
abroad and avoid paying their fair share of taxes on income
gained from the U.S. market.
Repealing the jobs exports tax subsidy will allow American
manufacturers to compete fairly. This amendment not only
repeals this ill-advised job export subsidy, but it uses
those savings to accelerate the tax cuts provided in S. 1637
for domestic manufacturing.
Corporations will be held accountable to the communities
they leave behind. Workers and their families deserve to know
when their jobs are being sent abroad. This amendment will
shed new light on corporate practices by requiring companies
to disclose to workers and the public whenever they lay off
more than 15 workers to send jobs overseas.
Once again, I urge you to remedy the unfair tax incentives
that sends American jobs overseas by supporting the Dorgan-
Mikulski amendment to S. 1637. Thank you for your attention
to this important matter.
Sincerely,

Edwin D. Hill,

International President.
____

Washington, DC, May 4, 2004.
Dear Senator. The AFL-CIO urges to support the Dorgan-
Mikulski amendment to S. 1637. The amendment would eliminate
foreign tax deferral for companies that export jobs.
Under current tax law, companies that manufacture in the
United States must pay corporate taxes, but American
companies that manufacture abroad can indefinitely defer
their taxes on that income. The Dorgan-Mikulski amendment
would eliminate deferral so companies are taxed the same
whether they produce and invest in the United States, or
invest abroad and export back to the United States. This
change would save taxpayers nearly $7 billion and eliminate a
major incentive in the tax code to ship jobs overseas.
The amendment comes at a critical time for American
workers. More than 2.8 million manufacturing jobs have been
destroyed since President Bush took office. According to a
recent survey of American CEOs, 47 percent of them plan to
ship more manufacturing jobs overseas this year. The US tax
code should not encourage companies to export jobs, which is
why the Senate should adopt the Dorgan-Mikulski amendment.
Thank you for considering our views on this important
issue.
Sincerely,
William Samuel,
Director, Department of Legislation.
____

International Union, United Automobile, Aerospace &
Agricultural Implement Workers of America-UAW
Washington, DC, May 4, 2004.
Dear Senator: This week the Senate will be considering
amendments to the FSC/ETI tax replacement legislation. The
UAW wishes to share with you our views on this important
measure.
The UAW strongly supports the Specter-Bayh manufacturer's
tax equity amendment. As currently structured, the FSC/ETI
bill provides a deduction that only certain U.S.
manufacturers are able to utilize. Unfortunately, this
deduction does not provide any benefit to many capital-
intensive industries--including major auto and steel
companies--because they do not have sufficient
``manufacturing'' income due to their extremely high
``legacy'' health care and pension costs. The net result is
that domestic portion of the FSC/ETI bill fails to provide
any assistance to a major portion of our manufacturing base
that is crucial to maintaining thousands of good paying jobs.
To correct this deficiency, the Specter-Bayh amendment
would allow manufacturers to elect either to take the
deduction currently in the bill, or in lieu of that to
receive a tax credit equal to 10 percent of their health care
expenditures for active and retired workers aged 55-64. This
election would effectively allow auto and steel companies to
receive a tax benefit equivalent to that received by other
domestic manufacturers. In addition, it would provide
significant relief for their ``legacy'' costs, and enable
them to increase investments and create additional jobs for
American workers. The UAW urges you vote for the Specter-Bayh
amendment and to insist that it be incorporated into the FSC/
ETI bill.
The UAW also urges you to support amendments to reduce or
eliminate tax breaks for the overseas operations of
multinational corporations. This includes the Dorgan-Mikulski
amendment on runaway shops, the Harkin amendment disallowing
deductions for outsourcing, and the Hollings amendment
striking the international provisions in the bill. These
amendments would eliminate tax breaks that are exacerbating
the loss of manufacturing jobs in this country. Instead of
subsidizing companies that ship jobs overseas, the UAW
believes Congress should target assistance to domestic
manufacturers who create jobs for American workers.
Thank you for considering our views on these important
issues.
Sincerely,

Alan Reuther,

Legislative Director.

Ms. MIKULSKI. Madam President, I want to thank the Senator from North
Dakota for his passion and vigor in presenting this amendment. I also
thank him for his story about the Red Ryder, a good old wagon. I had a
Red Ryder wagon. Growing up in a blue-collar neighborhood in Baltimore
during World War II, my father had a little neighborhood grocery store.
And one of the ways the groceries got delivered was in this good old
red wagon we had. I could use the wagon for a couple things.
Dad would sometimes say: Barb, take the wagon down to Mrs. Smith or
Yankowski or Coalino. It was a very ethnic neighborhood. They called in
and ordered late. Run down those oranges and take the wagon.
I loved that red wagon. I was also a Girl Scout during World War II.
Dad would let me use the wagon to go around the neighborhood to collect
newspapers because we were recycling a variety of things for the war
effort. I felt like a little soldier on the move with my red wagon and
my little Girl Scout uniform, along with other kids from the troop. I
was the kid with the wagon. I loved that wagon. I loved that
neighborhood so much because in that neighborhood there were men sent
off to World War II, saving Western civilization, saving the world.
We were the neighborhood of factories. We made liberty ships. We
turned out a liberty ship, one ship every 3 weeks. We put out turbo
steel to make the tanks. Glenn L. Martin made the seaplanes that helped
win the battle of the Pacific. We were in the manufacturing business.
We were in the war effort business. And this little girl in her Girl
Scout uniform with the little red wagon made in the USA felt she was
doing her bit.
Guess what. Those jobs now are leaving. Our shipyard jobs have left.
Our steel mills have shrunk to miniscule levels. We don't make ships.
We don't make steel. We don't make clothing. We are really down. The
blue-collar Baltimore of World War II and Korea and Vietnam just isn't
what it used to be.
Where did those jobs go? Those jobs are on a slow boat to China. They
are on a fast track to Mexico. And other jobs are in a dial 1-800
anywhere. And why did they go? They went because there were tax breaks
that rewarded those corporations to move not only the red wagons but so
much of this manufacturing overseas.
Today, as we know, if you are in business and in the good old United
States of America, you get a tax break if you move those jobs overseas.
I think it is wrong to give companies incentives to send millions of
jobs to other countries when millions of Americans are losing their
jobs. It is wrong to put companies

[[Page S4873]]

who stay in America at a competitive disadvantage because they have
their business and hire their workers at home, pay their share of
taxes, and provide health care to their employees.
We should be rewarding these companies with good guy tax breaks for
hiring and building their businesses right here in the United States.
We should be giving good guy bonuses to American corporations who are
providing health care to their workers and to their retirees. But, no,
we give tax breaks to those people who want to take their jobs and
evacuate to another country.
It is time we look at our Tax Code and call for a patriotic Tax Code.
I want a patriotic Tax Code. We walk around the floor of the Senate, we
go to rallies. We love to be in parades. We wear our flags because we
want to stand up for our troops--and stand up for our troops we
should--but we have to stand up for America.
We have to stand up for America by having a strong economy. That is
why I want a patriotic Tax Code. This amendment we are proposing is
about patriotism. It is about economic patriotism. We have to start
putting our might and our muscle and our votes behind this in the
Senate.
What does a patriotic Tax Code do? I think it would focus on bringing
our jobs back home and bringing our money back home. That is what a
patriotic Tax Code would do. The Dorgan-Mikulski amendment is step one.
It ends these huge tax breaks for manufacturing companies that send
jobs overseas, only to sell the products they make right here in the
United States of America. The current Tax Code lets these companies
move the jobs and not pay taxes on the profits, even though they earn
the profits by their sales of those products in the United States.
Our amendment tells these companies if you want to export jobs out of
America, you need to pay the taxes on your profits. Our amendment says
the Tax Code can no longer be used to boost corporate rewards at the
expense of American workers. I have watched those jobs I have talked
about leave. A couple months ago, we were hard hit on the eastern
shore. There is a company headquartered in Maryland called Black and
Decker. It makes many of the wonderful tools you use in your home. It
was started by a Maryland family. The jobs were in America. Now the
headquarters is in America, but the jobs are not here. The eastern
shore jobs at that major manufacturing facility have left. Over a
thousand people were laid off; 1,000 people in a little community like
Talbot County. That is a tremendous impact. The impact has been felt by
the whole community. People lost their jobs, and people had to cut back
in terms of their homes, the way they shop at their grocery store; and
there is great shrinkage in the United Fund. I could go on about that.
Those jobs left this country.
At the same time, there are other examples. Take Maytag. Oh, gosh,
every woman in America loves Maytag and that friendly guy who comes to
service them. Well, I hope he speaks a foreign language to try to read
the manual, because those Maytags are made somewhere else. By the way,
they used to be made in Illinois. So those 1,500 jobs left. They were
washed out, if you will, in this country.
Then there is Levi Strauss, which closed six U.S. plants, cutting
over 5,000 jobs. So the jeans that made America famous are now being
made in other countries.
We could go on to furniture that used to be made in our Southern
States, like Virginia and North Carolina. Many of you might have read
in the paper over the weekend what is happening in Roanoke, VA, where
many people have lost their jobs in manufacturing, in metal working, in
furniture, and in other materials. Their divorce rate is so high that
almost 50 percent of the people in Roanoke, VA, are now divorced. It is
becoming the divorce capital, with the highest divorce rate in the
Nation. Why did that happen? You can look at the divorce rate and chart
it along with the decline in those manufacturing jobs. We have seen it
in manufacturing. There is the exit of the service jobs now. A lot of
people in manufacturing who lost their jobs busted their backs and
their butts to send their kids to higher education, community college,
or college. They said go to college, kids, learn technology; it is the
new field. You are not going to be laid off like me. You are going to
have a future. America will be the tech country of the world. Well,
guess what happened. Now the tech jobs are going. In the next few
years, the IT sector will move over 500,000 jobs overseas. People are
saying train--you have to be kidding. Even our State governments are
outsourcing jobs by hiring companies to do call centers overseas. I
joined with Senator Dodd to stop the outsourcing of Federal jobs
overseas to call centers.

That is why I stand here today with my colleague from North Dakota to
call on us to think about economic patriotism, think about a patriotic
Tax Code that, first of all, gives rewards to American companies that
keep jobs here, and also a tax code that gives good bonuses to those
companies that provide health insurance to their workers and also look
out for their retirees.
Then the other thing is to end the despicable process and breaks and
rewarding those companies who move not only the little red wagons, but
very big manufacturing items overseas. That is why I want to stand up
today for what I believe is the right thing to do. I call upon my
colleagues to think about where America is going in the 21st century.
Where are we going to be? Are we going to create more opportunity? Are
we going to create more jobs that pay living wages, that have a benefit
structure you can reward? Or are we going to resemble the economy of a
third world country?
I really want to have a tax code that brings our jobs back home,
brings our money back home, stands up for America. So pass the Dorgan-
Mikulski amendment and take your first step toward economic patriotism.
The PRESIDING OFFICER. The Senator from North Dakota is recognized.
Mr. DORGAN. Madam President, thanks to the Senator from Maryland for
her comments and her hard work on this amendment. I hope we will be
able to pass this amendment. I expect we will vote on it later today. I
wanted to make a couple of additional points.
First of all, on this broader issue of deferring tax, Presidents
Kennedy, Nixon, and Carter all tried in vain to actually end deferral.
In 1975, the Senate voted to end it. In 1987, the House voted to end
it. But in each case, of course, it never got to the President's desk
for signature. So we have this thing called deferral. That sounds less
ominous than it really is.
With respect to the products manufactured abroad to be sold in our
marketplace by U.S. corporations, this deferral is a title that says
there is a tax break for U.S. companies to move jobs overseas in order
to sell back into our marketplace. There is now $640 billion in foreign
earnings that have not been repatriated. Many of them, of course, are
parked in tax havens indefinitely--$640 billion.
My colleague also talked about some products. What is more American
than Levis? Well, Levis are gone. Before, when you put on a pair of
pants, you were putting on an American pair of pants. Not anymore. You
are putting on Mexican or Chinese pants.
Then there is Fruit of the Loom. It is one thing to lose your shirt,
but Fruit of the Loom is gone. They used to be manufactured here. They
are manufacturing them in Mexico and, I believe, some in China. By the
way, if you want to order up Mexican food, order Fig Newtons. We all
grew up with them. Fig Newton cookies used to be American. Now this
cookie is made in Mexico. Next time you order Mexican food, ask whether
they will bring you some Fig Newtons.
The point is, we are not only shifting these jobs out of our country
for the purpose of manufacturing to sell back into our country, our Tax
Code says please do this and we will give you a $6.5 billion benefit
over the coming 10 years.
If the Congress cannot take this baby step in addressing this
perversion, then the Congress cannot find its way through public policy
in a way that reflects any modicum of common sense.
I wanted to mention that while I think there is much to criticize in
the underlying bill, there is a provision in the underlying bill that
addresses so-called ``inversion.'' I commend the committee, Senator
Grassley, and Senator Baucus for that position. The inversion is a
circumstance where a U.S. corporation says I want to renounce my
American citizenship for

[[Page S4874]]

the purpose of saving tax money. Well, we have seen some of that. My
colleague from Maryland asks, where is the economic patriotism? The
committee, in my judgment, did the right thing with respect to this
issue of inversions in the underlying bill. I congratulate them for
that.
My hope is we will this afternoon have some additional debate on this
amendment. I don't know what is going to be offered as a substitute,
but, hopefully, we will have votes on both, and we will be able to
continue and complete this debate this afternoon. I hope when the dust
settles Congress will have done something that meets some basic
commonsense test.
My understanding is Senator Graham of Florida is going to be involved
in the coming 2 hours. He is in the Chamber. Let me at this point yield
the floor with the understanding I will continue this discussion this
afternoon when we return to this amendment.
I yield the floor.

Amendment No. 3112

The PRESIDING OFFICER (Mr. Hagel). Under the previous order, there
will now be 2 hours of debate equally divided on the Graham amendment
No. 3112.
The Senator from Florida.
Mr. GRAHAM of Florida. Mr. President, I first thank my colleagues,
Senator Dorgan and Senator Mikulski, who have raised the issue of will
it be American jobs the JOBS bill will create. That is a core question
which is raised by the amendment I have brought to the Senate. We are
about to spend $170 billion over the next 10 years with the stated
objective being to create jobs for American men and women. The question
is: How effective will this legislation be in achieving that goal? Is
it worth $170 billion under these conditions to be spent or is there
not a better way to allocate that same amount of money that will have a
greater likelihood of actually creating jobs in the United States?
I would like to put this into some context. The context is where have
we been in the recent past and where are we today in terms of jobs for
American men and women.
The manufacturing sector of the American economy has lost 2.8 million
jobs since January of 2001. It may well be this administration will end
up as the first administration in 70 years, since the administration of
President Herbert Hoover, to preside over a net decline in private
sector employment in the United States.
The unemployment rate has increased 36 percent since January of 2001.
The number of long-term unemployed has increased 175 percent. There
have been policies and expectations advanced to reverse that situation.
The President said, for instance, in his 2003 Economic Report that
based on the steps Congress had taken since his administration
commenced, in the year 2003 there would be 1.9 million new jobs created
in America. The actual increase in jobs in America was 100,000.

The administration has stated the weak employment situation is the
result of a dramatic increase in productivity. They argue this
increased productivity has raised our standard of living. There are a
lot of Americans out there who have not seen this rising tide of
standard of living.
Since this administration took office, real earnings growth has
slowed dramatically, particularly for those at the lower income scale.
Real earnings at the middle of the income distribution rose only two-
tenths of 1 percent per year in 2000, 2001, 2002, and 2003.
To put this in comparison, this is a marked deterioration from the
successes of the 1990s. Between 1996 and 2000, real earnings growth for
those in the middle income was 1.7 percent per year.
We also find ourselves with another growing deficit, and that is a
growing trade deficit. The U.S. trade deficit, the excess of goods and
services we buy from others over the amount of goods and services we
sell to others, has varied over the years, generally in tandem with the
economy. For example, in 1981, we had a slight trade surplus. In 1986,
the trade deficit had risen to a then record of 2.8 percent of gross
domestic product. Remember that number, in 1986, a record historic
trade deficit in the United States of 2.8 percent of gross domestic
product.
In 1991, our trade deficit had fallen back to a mere two-tenths of 1
percent of our gross domestic product. We see in the last several
years, as there has been deterioration in jobs within America, there
has also been a deterioration in our international trade balance. For
2003, our trade deficit reached a new record of 5.5 percent of GDP.
Compare that with the record of 1986 of 2.8 percent of gross domestic
product.
I present this information as the context within which to consider
the legislation which is before us and the amendment I have offered--
the need for strategic, energetic, and efficient stimulation to our
economy, particularly our manufacturing economy and particularly to
that part of the manufacturing economy which has been so damaged by the
deterioration of our international trade.
The current impasse on this JOBS bill which has caused several weeks
delay may turn out to be a blessing in disguise. The delay has provided
the Senate with an opportunity to reassess the fundamental merits of
this legislation and then to consider what might be better alternatives
for working men and women in this country.
I see this bill, the JOBS Act, as having five goals.
The first goal is to meet our obligation under the World Trade
Organization by repealing the existing laws, rules, and regulations
and, therefore, reverse the retaliatory sanctions which are being
imposed by European countries on products of the United States, many of
which have nothing to do with the underlying current international tax
incentives for American manufacturers. That is goal No. 1.
Goal No. 2 is to avoid enacting a provision that makes it more
advantageous than it is today for U.S. companies to move jobs abroad.
Goal No. 3 is to enact provisions that encourage job creation in the
United States of America.
Goal No. 4 is to simplify the Tax Code.
Goal No. 5 is to minimize extraneous tax matters that detract from
the purpose of this legislation--jobs in America.
Let me review the degree to which this legislation achieves these
five very important goals.
Goal No. 1, comply with the adverse WTO ruling. The World Trade
Organization, of which the United States is a charter member, has ruled
the extraterritorial income tax incentive enacted in 2000 violates the
WTO prohibition against export subsidies. The extraterritorial income
tax incentive, acronymed ETI, was enacted to replace a similar export-
related tax benefit, the foreign sales corporation regime, which also
came under fire by the WTO.
Under the ETI regime, a taxpayer can exclude a portion of its income
related to goods sold, leased, or rented for direct use or consumption
or disposition outside the United States. The amount excluded under the
ETI law is 15 percent of the net income derived from the transaction.
The WTO's ruling is unfortunate because it perpetuates an unfair
advantage which the European businesses have in relation to the United
States firms selling into that market.
Nevertheless, because we rely on the WTO to make sure other countries
adhere to international trade rules, we must abide by its decision. It
is the rule of trade law.
In addition to meeting our trade obligations, we need to enact this
bill to rescue those companies and their employees from the punitive
tariffs which are currently being imposed on U.S. exports into the
European Union. Currently, those tariffs equal 7 percent of the price
of a product being exported to Europe. That tariff will increase 1
percent per month for each month we delay in repealing these offending
provisions.
What is most unfortunate is the companies that had benefited from the
ETI provisions which have now been ruled illegal often do not make the
products which are now the subject of European sanction and
retaliation. Innocent businesses and their employees are caught in this
crossfire. The JOBS Act meets this first goal by repealing the ETI
provisions in our Tax Code. Repealing these provisions will increase
Federal income tax receipts by $45 billion over the next 10 years.
Goal No. 2: Avoid exacerbating the current tax incentives for further
outsourcing of jobs by U.S. corporations. The JOBS Act does a poor job
in

[[Page S4875]]

meeting this objective. The provisions in title II of the bill, by
definition, are designed to lower the tax burden on U.S. companies'
foreign operations. The effect of that: To make it even more attractive
to move operations and jobs outside the United States to a foreign base
of operation.
The total cost of the changes we are making in this underlying law,
which will have the effect of increasing the incentives to leave the
United States, is $37 billion over the next 10 years. As stunning as it
is, we are about to spend $37 billion to give additional incentives for
firms to move jobs out of the United States.
I will provide a couple of examples of how specific provisions will
affect U.S. multinational investment decisions. First I will say to
anyone who is listening that if they would like to take a nap, this
would be a good time to do it because it gets real tough going at this
point.
Example one, there is a provision in this bill that changes the tax
treatment of payments between affiliated foreign companies. The law
today is that the U.S. tax on income earned by a foreign subsidiary of
a U.S. multinational is deferred until that income is paid to the U.S.
parent in the form of a dividend. Dividends paid by one foreign
subsidiary to another foreign subsidiary are treated as though they
were paid to the U.S. parent and are therefore subject to U.S. tax.
The JOBS Act changes this treatment by continuing the deferral of
U.S. tax on dividends paid by one foreign subsidiary to another located
in a different country. The effect of this legislation will be to make
it more attractive for a U.S. multinational to invest excess cash in a
foreign subsidiary in any country except the United States of America.
Payment to the U.S. parent would trigger the tax, but payment to an
affiliated foreign subsidiary would remain tax deferred.
An example: If an American firm operating businesses in several
foreign countries--let's say one of those was India and another was
China--if the Indian subsidiary earned substantial profits and the
company was making the decision will I use those profits to reinvest in
India, will I use those profits by bringing them back to the United
States in the form of a dividend to invest in the United States, or
will I move those profits to China, today the last two choices have the
same tax implications. U.S. tax will be paid if the money was brought
back home or if the money was sent to China. Under this legislation,
the only time the tax will be paid is when it comes back to the United
States. If the exact same dollars go in the form of a dividend from
India to China, there is no tax.

We are creating a very substantial new incentive for American
companies to use their income earned outside the United States
frequently, as Senators Dorgan and Mikulski have just said, to create a
platform to export back into the United States. We are increasing the
incentive to do so.
This bill includes a ``temporary period'' during which dividend
payments from foreign affiliates to a U.S. parent receive a substantial
reduction in their tax rate. The regular corporate tax rate is 35
percent. It would be reduced for an American corporation which has set
up a subsidiary in a foreign country, has earned a profit in that
foreign country, is going to send that profit back to the United
States. Instead of being subject to the normal tax of 35 percent, they
would only be subject to a tax of 5.75 percent.
This provision reduces Federal revenues by $3.8 billion over the next
10 years. What are American working men and women going to get for
their $3.8 billion? The rationale for this proposal is that reducing
the tax rate will encourage U.S. multinational companies to expatriate
income held offshore in order to make investments in the United States
that will create jobs.
Let me just point out one little practical fact. In order to take
advantage of this; that is, for a U.S. firm operating outside the
United States to be able to repatriate a substantial amount of funds
during a narrow window of opportunity, it has to be a firm that has a
substantial amount of cash on hand in order to be able to take
advantage of that. If they have been investing the profits they have
earned offshore to expand their offshore operations, they will have
limited means by which to avail themselves of this opportunity.
My concern is that what we are really creating is a tax incentive for
tax shelters because it is those tax shelters, as opposed to companies
that are actively engaged in the production of goods and services, that
are the most likely firms to take advantage of this window. They are
the least likely firms to create jobs in the United States.
Another concern about this temporary window proposal is it will not
be very temporary. How many times have we heard in the Senate, when a
tax cut has been passed but might not go into effect for several years
in the future, and then today someone says, let's reconsider: was that
really a wise thing to do, to cut the tax rates beginning in the year
2009? Should we not reevaluate that in the context of our current
deficit situation and the war and the other challenges America faces?
What is the response to that reasonable question? The response is, of
course we should not consider it because if a tax is precluded that is
already on the books from staying on the books or going into effect at
a future date, do my colleagues know what has just happened? They have
raised taxes, and that is the ultimate charge that can be made against
an American politician.
Imagine what it is going to be like when this temporary window is
ready to expire and the same argument is made; if one does not vote for
extending this window, preferably if they do not vote for making this
window permanent, as the President is urging that we do, taxes have
been raised.
Now, this is not a fanciful suggestion. In fact, this very bill
includes 21 tax provisions which when they were enacted were for a
specific time period, which has long since passed. Every year, as we
get close to these tax provisions that are about to expire, we pass
legislation to extend them for yet a few more years.
For instance, in this bill we have a number of items that were
intended to be for a specific duration that we are now going to extend
substantially into the future. These include items such as the
deduction for electric vehicles, deduction for teachers' school
expenses--other items which may in and of themselves be worthy. But
they are illustrative of the difficulty of ever saying that something
which was supposed to be temporary is, in fact, temporary.
If extended, the effect of this repatriation proposal will be to
create a permanent reduced tax rate for U.S. multinationals' foreign
investment, a tax rate which is 85-percent less than the tax rate that
same corporation would pay on income earned inside the United States.
So we have a dismal failure on goal No. 2, which is to avoid giving any
further incentives to U.S. multinationals outsourcing jobs.
Goal No. 3 is to encourage the creation of jobs in the United States.
The primary provision for this encouragement is the creation of a U.S.
job provision in the form of a manufacturers' deduction. As currently
constituted, this manufacturers' deduction, which is in this
legislation, will reduce Federal revenues by $65 billion over the next
10 years. What are we getting for our $65 billion? The deduction is
computed as a percentage of the employer's income from production
activities located within the United States.
The fact the deduction is based on income, however, creates the
perverse effect of rewarding manufacturers that locate at least a
portion of their operations in a low-cost jurisdiction outside the
United States. When fully phased in, the deduction equals 9 percent of
the profit earned from production activities conducted in the United
States. To qualify for the deduction, the item must be produced, in
whole or a significant part, within the United States. The deduction
has some limitations. It is limited to an amount that equals 50 percent
of the wages paid by the employer. To the extent that the taxpayer has
manufacturing operations outside the United States, the deduction is
further reduced by the fraction representing the ratio of the firm's
U.S. activity to its worldwide activities. These limitations, which are
frequently referred to as haircuts, are supposed to assure that the
incentive is targeted at U.S. production.
However, they do not always work in that manner. Let me show a couple
of charts as to how this provision, the 9-percent manufacturers'
deduction, is likely to work in real life.

[[Page S4876]]

The first chart is a simple explanation of how the deduction is
computed. In this example, the firm has all of its production
operations located inside the United States. It earns $100 in sales for
its products. It incurs costs totaling $70 to produce them. The costs,
$70, are distributed as follows: materials cost $40, wages inside the
United States cost $27, other wages, $3. That is a total of $70.
The company's profit is $30. Its manufacturers' deduction is computed
as a percentage of that income. At the fully phased-in rate of 9
percent, the deduction would equal $2.70 to that firm.
Let's look at how the manufacturers' deduction is computed if the
taxpayer outsources a share of its manufacturing in order to reduce
labor costs. Chart No. 2 illustrates the effect of this change.
In this example, 80 percent of the firm's manufacturing occurs
offshore, which results in a 90-percent reduction in its manufacturing
wages. The firm still earns the $100 that it did in the first example;
that is $100 on the sale of its product, but its costs are
substantially lower than the $70 in the first example. In this case,
the materials continue to cost $40, manufacturing wages in the United
States have dropped to $5 since a substantial amount of the cost of
production, not including materials, has now moved outside the United
States to a low-wage area. Foreign manufacturing wages are $7. So what
this firm used to pay $27 to get--the manufacturing labor to assemble
its products--is now getting it for $12. The other wages in the United
States continue at $3.
The firm's profit, therefore, is dramatically improved by moving its
operation or a substantial portion of its operation outside the United
States. It now earns a profit, instead of $30, of $45.
Under the general rule, the manufacturers' deduction would be 9
percent of $45, which would be $4.05. However, there is this separate
limitation that you cannot have a deduction that is more than half your
U.S. wages. In this instance, U.S. wages for manufacturing are $5,
other wages paid in the United States are $3, for a total of $8; 50
percent of $8 is $4. So the firm would get a $4 tax deduction as a
result of this procedure.
The result is this: As a result of moving significant parts of its
operation outside the United States, this firm was able to qualify for
a greater tax incentive under this bill than they would if they had
kept their operation in the United States. They get a $2.70 deduction
by keeping the operation in the United States; they get a $4 deduction
by moving it offshore.
Some of the sponsors of this legislation may argue there is another
haircut in these limitations and that is because a firm cannot qualify
for the deduction unless the goods are produced ``in whole or in
significant part by the taxpayer within the United States.'' They will
argue that a firm that utilizes foreign sources to provide 80 percent
of the production activity will not meet that standard.
We cannot be assured of that because nowhere in this legislation is
the term ``in significant part'' defined for most products. In fact, a
firm doesn't have to move anything near 80 percent of its production
offshore to get the benefit of this deduction. In my example, using the
same numbers but modified to reflect one-quarter of production being
moved offshore, this would still yield a greater tax incentive than
keeping 100 percent of the production in the United States.
Let me repeat that. If a firm keeps 75 percent of its production in
the United States, moves 25 percent abroad, under this calculation it
will get a $3.15 deduction against its U.S. income tax versus if it
keeps 100 percent in the United States it will get a $2.70 deduction.
Does that make common sense? It was certainly contemplated that some
portion of the final product's production could occur outside the
United States. Otherwise, the statute would have been drafted without
the reference to ``significant part.'' It would have required that all
the production be in the United States in order to qualify. It would
have been drafted so it applies only to goods solely produced in the
United States.

My concern is the new deduction created by this legislation will
provide U.S. employers with a positive incentive to move a larger
amount of their production offshore. The sponsors will also argue the
extent of offshore production activity is conducted by a subsidiary of
the U.S. taxpayer. The deduction will be reduced proportionately as a
result of the haircut. My example, however, does not assume an
affiliate of the taxpayer is conducting the offshore activity. In fact,
it assumes what is the predominant reality, that manufacturing
businesses inside the United States contract with manufacturers outside
the United States to provide component parts. So there is no affiliated
relationship other than a contract between the U.S. manufacturer and
the foreign producer of the products. The haircut--although it is
widely cited as a means by which these kinds of abuses will be
restrained--does nothing to protect the job of unaffiliated U.S.
suppliers.
As I mentioned earlier, this new incentive will reduce the revenues
of the Federal Government by $65 billion over the next 10 years and
will have the perverse effect of actually creating yet another
incentive to move jobs out of the United States.
As my examples indicate, I don't think this is a piece of legislation
that can be defended as spending American taxpayers' dollars in the
most efficient manner possible to create jobs in America. There is a
better approach. To provide the most effective tax incentive for job
creation, we should link the benefits more specifically to the title of
this bill, JOBS. Our proposal is to exchange the bill's incentive based
on profits with an incentive based on jobs. Our proposal would redirect
the $60 billion raised by repealing the ETI and the $37 billion
currently directed to the international tax changes and use those funds
to create an income tax credit. That credit would be used to partially
offset the payroll taxes paid by U.S. manufacturing employers.
One of the true disincentives imposed by the Federal Government on
job maintenance and creation in the United States is the fact we impose
a 7.6 percent tax on the employer for his employees which then becomes
the payroll tax that then supports Social Security and Medicare. I am
not proposing we do anything to the payments that are made into the
Social Security and Medicare trust fund. Rather, what I am suggesting
is we take the now almost $100 billion we will have over 10 years, and
use it in the form of a credit whereby it incorporates for all of its
employees the first $35,000 of earnings, and will be able to deduct a
credit which would amount to approximately 20 percent of the payroll
taxes paid by the employer, or a 1.66 percentage point against their
corporate income tax.
The employers who qualify for this new incentive are the same ones
who would have benefited under the manufacturers' deduction. The
difference is our proposal bases the incentive on American jobs, not on
profits. The difference is our proposal does not create the incentive.
As this chart indicates, we are creating additional outsourcing of
American jobs if we use the almost $100 billion in the manner the
underlying legislation directs.
It seems to me to be a much better approach to link the benefit to
jobs rather than to link the benefit to profits, and one which has a
much greater likelihood of achieving the goal of creating jobs in the
United States.

A fourth goal of this legislation, and one I have been very
interested in, is the simplification of the Tax Code. Several years ago
I suggested to the Finance Committee attempting to simplify the United
States Tax Code, all 17,000 pages of it, at one time is a task no one
has the life expectancy, nor do their children nor probably their
grandchildren, to see through to accomplishment. Therefore, we ought to
break down the Tax Code into its constituent parts and try to simplify
each part at a time, in a rational, sequenced basis. I further
suggested these international tax rules would be a good place to start.
I am pleased to say under the leadership of Chairman Grassley and
Ranking Member Baucus, we started on that path. The Finance Committee
has established a working group to study our international tax rules
with the goal of simplifying. This product is one of the results of
that effort at simplification. However, I suggest this legislation

[[Page S4877]]

misses the mark by a wide range in terms of simplifying the income tax
law. In fact, it would add another 378 pages to the income tax law. We
are starting with the goal of simplification and we are substantially
increasing the quantity and the complexity of the income tax code.
Goal No. 5 is to minimize extraneous tax matters that detract from
the purpose of this legislation. We are going to spend $170 billion
over 10 years to create jobs in America. We ought to be concerned we
are spending that $170 billion for that purpose and spending it as
effectively as possible.
In an effort to conclude action on this legislation and secure the
maximum number of votes, there has been an open encouragement to
Senators to file amendments to this bill on smaller tax changes they
would like to see adopted. I am confident many of these are worthy and
could be supported on their merits. But we are never going to have a
discussion of their merits because now they are buried in two so-called
managers' amendments inside this legislation. Many of them have
relatively little or zero relationship to creating jobs in the United
States.
Let me mention a few of those. There is a tax break for Oldsmobile
dealers. I am certain they are facing some distress as General Motors
canceled that line of Oldsmobiles. Does it deserve to be in a JOBS bill
and carry a cost of $189 million over 10 years?
There is capital gains relief for owners of horses. I assume that is
good for the owners, and may be good for the horses. It costs $64
million over 10 years.
There is a tax break for the makers of distilled spirits. That might
make some of our people happier, but whether it will get them a job is
less certain. That costs us $484 million over 10 years.
There is a tax-exempt bond proposal for purchase of forest land. I
happen to think purchase of forest land is probably a good idea, but is
it the place to spend $252 million over 10 years to create jobs in
America?
There are tax credits for costs incurred for railroad track
maintenance. Again, it may be a good idea, but it is questionable as to
whether $492 million we will spend over the next 10 years will create a
requisite number of American jobs.
Then there are tax breaks for amounts received under the Student Loan
Repayment Program for the National Health Service Corps. That is $54
million over 10 years.
In the spirit of full disclosure, the bill includes proposals which
myself and my staff have worked with the Finance Committee to include
in this legislation. One such proposal delays the implementation of
regulations governing the exclusion of income from the international
operation of ships and aircraft. That has an $8 million cost over 10
years.
Another provision is the extension of the credit for producing
electricity from biomass. That lowers Federal tax revenues by $4.2
billion over 10 years.
These additional provisions have obviously expanded the cost of the
bill and the purpose of the bill. So the amendment I have offered would
do essentially the following:
One, it would repeal ETI. That is the issue that brought us here in
the first place. Second, it would repeal the changes in international
tax law, many of which will give further incentives to moving jobs
offshore. Third, it will repeal most of the targeted tax cuts. It will
then take the money that has been saved from the ETI, from not adopting
the 9-percent corporate tax deduction, and from the individual items,
and use it to finance a serious effort at reducing the payroll tax cost
to the employer and, thereby, reducing a significant disincentive to
maintaining and hiring people in jobs in America.
I close by describing the choices we are making in this legislation.
We are going to spend $170 billion over 10 years, or rounded to $17
billion per year. What could we do with $17 billion if we did not use
it in a targeted and effective means to create jobs for U.S. men and
women?
Well, $17 billion would reduce this year's projected Federal deficit
by about 4 percent, not an insignificant amount. The $17 billion would
fully fund No Child Left Behind, plus it would fund veterans health
care and the FIRE and SAFER grant programs that provide critical
assistance to our Nation's first responders. All of those could be
purchased for $17 billion.
Mr. President, $17 billion would be more than we spend annually on
Pell grants, to assure access to higher education for our young people.
Now more than ever, we need to make sure the money we spend will
achieve the results we seek. I have set forth the reasons why I do not
believe the incentives in the underlying bill will protect or will
promote U.S. jobs. The proposals in the underlying bill target profits
in the hopes that profits will trickle down and create jobs.
The amendment Senator Dayton and I have offered is a better approach
because it specifically targets U.S. jobs. Firms will get a bigger tax
break to the extent they employ more U.S. workers. Since U.S. jobs are
the goal of this legislation--U.S. JOBS is the title of this
legislation--our approach should be adopted. The working men and women
of America will appreciate this action by the Senate.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, how much time is left under Senator Graham's
amendment on this side?
The PRESIDING OFFICER. On your side, 16 minutes 40 seconds.
Mr. REID. Mr. President, I will claim the 5 minutes we have under
morning business. It is all part of the order of the Senate already.
Then I will yield to my friend from Minnesota.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Nevada.

Chain of Command

Mr. REID. Mr. President, the Presiding Officer stands for many
things, but, in my mind, one of the things you stand for is what is
good about the United States military: A person who put himself in
harm's way, with his brother, and has created a story that is
intriguing and interesting and shows the bravery of the Presiding
Officer in a time of crisis.
Mr. President, you are the role model for the troops we have in Iraq
today. Our men and women there are fighting valiantly, and each day
find themselves in harm's way, in many different avenues.
I came to the Senate floor this morning and talked about how I felt--
this Senator--on last Thursday I had been misled and not treated
fairly. We had a briefing up in 407, and we had the Secretary of
Defense there. As I indicated this morning, we had enough brass to fill
a brass band. We had four-star generals. We had the Chairman of the
Joint Chiefs of Staff. I do not want all the blame focused on Secretary
Rumsfeld. I feel those military officers should have told Democratic
and Republican Senators last Thursday what was going to break on ``60
Minutes'' that night. I feel terribly misled and disappointed in their
not doing that.
I say that because by their not telling us what was going to come
out--certainly all or most of them knew something was going to come
out; and if they did not know, they should have known--each Senator was
blindsided.
Now, Mr. President, the reason I mentioned you as a role model for
the troops in Iraq, Afghanistan, and around the rest of the world is
virtually every man and woman serving in the military does the right
thing. Obviously, from the photographs and information we have, some of
them did not. But I do not want just the enlisted men, so to speak, to
be the scapegoats for what has obviously transpired. There is a chain
of command, and there is responsibility in that chain of command.
I am terribly disappointed what went on in 407 with the chain of
command, and so I do not want my remarks at all to reflect adversely on
the fighting men and women of this country--the Pat Tillmans of our
country. There are lots of Pat Tillmans. We admire and respect him so
much because he gave up a multimillion-dollar contract to go fight in
the war. But lots of other people gave up lots of things to go fight in
these wars, and there are lots of Pat Tillmans. I admire him and his
family and his brother, who went in with him, as your brother went in
with you.
So, Mr. President, I hope the chain of command understands their
responsibility and does not try to pass the buck off on these people
who needed, obviously, supervision and control.

I think also we have to take a look at what is going on in Iraq today
with the so-called security guards who are being hired, because it is
obvious some wrong

[[Page S4878]]

took place there as a result of what they did.
I appreciate my friend from Minnesota allowing me to speak prior to
him. The Senator now has 16 minutes under the order.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. DAYTON. Mr. President, I certainly support the statement of the
distinguished Senator from Nevada.

Amendment No. 3112

Mr. President, we are referring to the JOBS Act, and to Senator
Graham's excellent amendment. I am very proud to be a cosponsor and to
have this opportunity to speak on behalf of the Graham-Dayton
amendment. As Senator Graham pointed out to our colleagues, this bill
is called the JOBS Act. In fact, in the House, they call it the
American JOBS Act because, as we all know, we are missing a lot of jobs
in America today. Over 8 million Americans are out of work. Many have
exhausted their unemployment benefits because they cannot find work
anywhere.
This amendment offered by Senator Graham would make the bill live up
to its name. You could call it the ``Put the Jobs Into the JOBS Act''
amendment. It also would put the truth into that title. Because the
truth now is most of this bill has nothing to do with providing jobs--
at least not American jobs. It provides additional tax cuts to already
profitable corporations, whether they provide jobs or not.
According to a recent Washington Post article on the bill, it is:

One of the most complex, special-interest riddled corporate
tax bills in years, lawmakers, Senate aides, and tax
lobbyists say. The 930 page epic is packed with $170 billion
in tax cuts aimed at cruise ship operators, foreign dog-race
gamblers, NASCAR track owners, bow-and-arrow makers, and
Oldsmobile dealers, to name a few.

Continuing on to quote the article:

Even one of the tax lobbyists involved in drafting it
conceded that the bill ``has risen to a new level of
sleaze.''

I think that is quite instructive in its statement: ``even one of the
tax lobbyists involved in drafting it.'' I am not on the Senate Finance
Committee. I am told that committee, as the Appropriations Committee,
requires many years of seniority before someone can gain access to it,
so I don't know what goes on in the drafting of legislation. But when
the article says tax lobbyists were involved in drafting the bill that
is before us or, as my colleague Senator Graham said, drafting the
additions to this bill that are not before us, that are in the so-
called managers' amendments which are not disclosed to those of us
voting, which are not disclosed to the American people, then there is
something pretty putrid in that process.
In fact, the provisions the article mentions, questionable as they
are, are not even the worst provisions in the legislation. This bill
contains over $39 billion worth of tax advantages to American
businesses and investors for their foreign operations. At a time when
we say we are concerned about losing American jobs to foreign
businesses,--and we should be concerned; we should be alarmed--this
bill would make it more profitable and thus more appealing to expand
foreign businesses instead of ones in the United States. Why in the
world would we want to do that? Most of these provisions are rich man's
tax avoidance games and gimmicks.
For example, U.S. businesses or individuals can claim a tax credit
under U.S. taxes equal to any foreign taxes they have paid. A tax
credit is a dollar-for-dollar reduction in the amount of the tax that
is owed. So this arrangement means the U.S. Treasury gets paid last. If
some company here owes the French Government $100 in taxes and the U.S.
Government $150 in taxes, the company pays the French Government the
$100 it owes and it only pays the U.S. Government $50. If foreign taxes
were treated as a business expense, like any other cost of doing
business, the loss to the U.S. Treasury would be far less severe. But
this bill goes even further in the other direction. This would allow
the company or business or the individual to be able to use those
foreign tax credits for 20 years into the future in order to reduce
their future U.S. taxes owed.
Most U.S. citizens can't do that. A farmer with additional revenues,
profits in a good year, a salesman with high sales and, therefore, high
commissions has to pay higher taxes on his or her income for that year.
They can't finagle their incomes and expenses over the next 20 years to
lower their tax liabilities. As I said, these are rich man's games and
gimmicks.
The other foreign tax breaks are pretty much the same. They are just
more ways to avoid paying U.S. taxes owed on U.S. profits or income,
more special treatment for businesses in other countries, employing
workers in those other countries, jobs, many of which used to be here
in this country for American workers. We are going to reward those
actions even more than we have already, at a cost of $39 billion to the
U.S. Treasury over the next 10 years, at a time when the Federal
Government is running annual deficits of over $500 billion.
This bill purports to be revenue neutral. In other words, the tax
increases equal or offset the tax reductions. Well, yes and no. As
usual around here, with all the smart Members and staffs, and I guess
the tax lobbyists who write their special interest tax cuts into the
bill, some curious revenue increases are cited. Some are actually good
public policy--the elimination of tax shelters, offshore and domestic--
some are questionable. Some of the so-called revenue gains are simply
downright curious.

For example, over $17 billion of revenue gains is cited from
extending customs user fees over the next 10 years. That is something
we obviously should do and will do. There are existing fees now, and we
will extend them over the life of the 10 years that this is scored for
budget purposes. We haven't done it yet. But that is a continuation of
the status quo; yet that is being counted as if it were new tax revenue
for the purposes of this bill to offset some of these new tax breaks
for foreign subsidiaries and operations.
We are adding vaccines for hepatitis A to the list of taxable
vaccines, $87 million over 10 years. I don't myself understand the
reason for that.
We are limiting charitable contributions of ``patents or similar
property'' to their cost basis to the donor. ``Similar property'' is
open to interpretation, but it requires some kind of fairly broad
interpretation because the revenue gains expected over the decade are
$4 billion. These are charitable contributions. So if an artist, for
example, paints a painting, a well-known artist, the cost basis of that
actual picture--the materials, the canvas and the paints and the like--
the actual cost of it is quite low. The value of it might be worth tens
of thousands, hundreds of thousands, even millions of dollars. The cost
basis, if it is just the materials, is going to be a huge disincentive
for people who are in that situation to donate their creations, patents
to nonprofit charitable organizations. We are going to gain $4 billion
from doing that.
Another of the revenue gains repeals the 10 percent rehabilitation
credit for nonhistoric buildings. That is going to generate $1 billion
in revenues. In Minnesota, there aren't many buildings old enough to be
``historic,'' but rehabilitation of other buildings that are
dilapidated is certainly a worthwhile public purpose. Yet we are
incorporating these kinds of tax increases to offset tax breaks we are
providing for foreign business operations. That doesn't make any sense
to me at all.
Senator Graham has discussed very well--and I won't repeat his
comments--the advantages of this amendment over the existing bill for
creating American jobs, jobs in the United States for American workers.
That is what we need. That is what the bill purports to be. That is
what we ought to be doing.
This bill, as it relates to domestic manufacturers, is a general tax
reduction. It requires them to do nothing in return. That is a lot
better than providing tax breaks to foreign operations and subsidiaries
and the investors in them, but it is not good enough. American
businesses reported record profits in the fourth quarter of last year,
$76 billion in the quarter, above the previous record profits of $70
billion in the third quarter of last year. Overall corporate profits
were up 20 percent last year from the year before. Now we are coming
out of a recession.
That is great news for America. That is not uniform across the board,
but that shows a very healthy profit picture for most American
businesses and

[[Page S4879]]

one that, unfortunately, has not translated into the job increases we
would expect to see, given that kind of profitability and coming out of
a recession and employment contraction. That is what this bill should
be focused on.
That is what the Graham amendment does, which is why I am glad to be
a cosponsor. It provides incentive and a reward for providing American
jobs. If do you that, you get the benefit. If you don't do that, you
don't get the benefit because you don't need it right now.
Between 1996 and 2000, 71 percent of the foreign companies doing
business in the United States reported no U.S. tax liability at all.
Sixty-one percent of U.S.-controlled corporations during that time,
those 5 years from 1996 to 2000, also reported no U.S. tax liability.
In the year 2000, 82 percent of large U.S. corporations reported a
U.S. tax liability of less than 5 percent of their income; 76 percent
of large foreign-controlled companies reported U.S. tax liability of
less than 5 percent of their income. These large corporations are not
overtaxed. Some of them are not taxed at all. Now, with these foreign
credits that extend forward for 20 years, not only will they not pay
taxes, they will be owed rebates.
This has to be the theater of the absurd. We are giving away tax
revenues for outyears--especially from 2008 to 2013, which is where
this bill is backloaded--that we don't have, that we are going to be
short of to do the things we have committed to do, that will add up and
extend beyond that to a point in time that it will add to the crisis we
are going to face in the following decade fiscally. We are doing all
that for no reason whatsoever, except that someone said the tax
lobbyists have had their field day and they got this riddled into the
bill.
We are trying to get it out so it can be put to use for the American
workers, and especially those who want to be American workers, who
don't have jobs and have paid taxes on what they have earned, whatever
amount that may be, and are looking for a job and will pay taxes on
that. We should not be getting into more tax avoidance schemes to send
jobs overseas. That is what the Graham amendment would prevent.
I yield the floor.
Mr. GRAHAM of Florida. How much time do I have remaining?
The PRESIDING OFFICER (Mr. Coleman). The Senator has 3 minutes 20
seconds.
Mr. GRAHAM of Florida. First, I want to clarify a statement I made at
the conclusion of my remarks. The individual tax items I referred to
are included in a managers' amendment. They are not part of the
amendment that I have offered as a replacement essentially for the
legislation. They are not dealt with.
Mr. President, we have a very serious issue. I see that we have been
joined by the chairman of the Finance Committee, Senator Grassley. I
got to know a lot about highways last year. I visited on two or three
occasions Ottumwa, IA, which is in the southeast corner of the State.
Senator Grassley knows the statistics a lot better than I do. If I
misstate them, he can correct me.
By the end of World War II, Ottumwa had a population of more than
30,000 people, which was a combination of a strong agricultural economy
and a growing number of industrial plants, many of which provided parts
for other industries, such as a company that provides parts for Deere
Tractor, another Iowa firm. In 2003, the population had slipped to
below 25,000, and much of that job loss was due to the fact those
plants of 150 to 500 people had picked up and left. Maybe they left for
Mexico or for China, but they were not in Ottumwa, IA, anymore.
When you talked to people in that town, whether it was the clerk
registering you into the motel or the person who was bringing you your
dinner, you heard a lot about the pain that was coming from that loss
of a job base, the loss of the future, and the loss of the children of
Ottumwa, as they began to question whether they had a future there.
I don't believe it is the role of the Government to stand up and hold
back the tide of normal economic flows. The fact is, capitalism is a
very aggressive form of economy. Companies go out of business;
companies come into business; companies make decisions as to where they
can be the most successful. I don't believe we should socialize our
economy in an attempt to avoid that. We are not talking about
affirmative socialization. We are talking about, through the Tax Code,
what I would call incentivized socialization. We are trying to affect
the decision that company in Ottumwa makes by saying it will be more
profitable for them to take these 250 jobs and move them out of the
United States.
This legislation, I am sad to say, adds to those incentives. I don't
think that is what we should do in a bill that has as its title
``JOBS.''
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. Mr. President, before I respond in a specific way to
the amendment before us, everything Senator Graham said about Ottumwa,
IA, is accurate, I believe. Obviously, when anyone in America loses a
job, it is a very personal hurt to that individual, particularly if
they liked their job and if they had been in that job for a long period
of time, and particularly if they were older people and not looking to
retrain or even spend the time and investment in retraining.
So considering those personal hurts, and not without proper regard
for the economic consequences of people hurt by being laid off, it is a
simple matter, not only in the United States but all over the world,
that there are less jobs in manufacturing than previously. It is mostly
because of the enhanced productivity in manufacturing. When people can
get machines to do work that individuals do, obviously, that enhances
productivity and it is done for the sole purpose of being more accurate
and cutting down on the number of jobs--also, not to denigrate
productivity, because productivity being enhanced is the only way in
America or anyplace else in the world you are going to increase the
standard of living of Americans.
When you increase productivity, people become more productive, they
earn more money, and their standard of living goes up. We want that for
everybody. So enhancing productivity is very basic to the increasing of
the standard of living.
Now, there are fewer jobs in manufacturing today than there have ever
been. But manufacturing is still a very major component of our economy.
It is still around 15, 16 percent of our economy, I believe. If you go
back 40 or 50 years, it was probably 20 or 21 percent of the economy.
But there was a period of time when we lost 2 million jobs in
manufacturing during the 1980s, and we still had manufacturing as 20
percent of the economy. So manufacturing is very important, but it is
maintaining its importance with less jobs doing the work that needs to
be done to manufacture whatever we want in America.
Now, several times on this issue I have quoted former Secretary of
Labor Reich from the Clinton administration. He is now a professor at
Harvard, I believe. He wrote on December 26 of last year in the Wall
Street Journal about the problems of manufacturing and declining
employment in manufacturing. Secretary Reich pointed out that, yes,
America has 10-percent fewer jobs in manufacturing now than they did in
the previous benchmark. But he also pointed out during that same period
of time, whereas the United States lost 10 percent of their
manufacturing jobs, China had lost 15 percent of their jobs in
manufacturing. So you see, even though we are legitimately concerned
about outsourcing of manufacturing going to China, we are also seeing
China finding ways to be more efficient in their manufacturing.
It is quite obvious, if you look at this historically, that this is
progress: enhancing productivity to raise wages to raise the standard
of living.
This is not the era of Luddites, when people are going to go into
factories and smash machinery because they think it is taking jobs away
from people. If the Luddite philosophy were legitimate, we would still
be making the common pin by hand.
We are producing by machine so we can enhance productivity to enhance
wages to enhance the standard of living. The American people would not
be satisfied today with 96 percent of the American population being on
farms, as it was in 1790 when this country was a brand new country.
Today about 2 percent of the people in the United States are producing
the food for the

[[Page S4880]]

other 98 percent, and each farmer produces for 145 people. The United
States exports about 40 percent of its food and farm products, because
we cannot consume it domestically.
Whether it is in manufacturing or whether it is in farming, if 5
percent of the market is the American people, then we are not going to
have a very high standard of living. The other 95 percent of the market
are the people outside the United States of America. If we still had 96
percent of the people in America involved in farming, we would have a
subsistence level of livelihood.
We have to accept the fact that every month in America, 7 million
jobs go out of existence and 7 million new jobs come into existence. In
that process, people are more productive, make higher wages, and have a
higher standard of living, and not just for some of our people but for
all of our people.
The only people in America who might not have a higher standard of
living are those we have kept down, and this Congress is responsible
for keeping welfare recipients down, keeping them out of mind, out of
sight to the edge of society. But we established a principle of welfare
reform in 1996 to move people from the edge of society in welfare to
the world of work, to the mainstream of American society, because it is
in the world of work where they have opportunities for enhanced
productivity, for enhanced wages that will raise their standard of
living. Except for welfare recipients, people in the world of work are
producing more now than before to enhance their standard of living.
It seems to me that when we have 7 million jobs going out of
existence 1 month and 7 million new jobs coming into existence in the
same month, it says better than anything I can say about how rapidly
our economy is changing, much more rapidly today than ever in the
history of our country. It might even change more rapidly in the
future.
For people who abhor the fact that we are losing manufacturing jobs,
then you have to ask, what do we do to maintain those manufacturing
jobs? The basic bill we are dealing with, the jobs and manufacturing
bill, tries to do it two ways: one, to staunch the bleeding in jobs
leaving manufacturing. It is enhanced now because we have a European
tax on our exports to Europe so that our manufacturers cannot be
competitive in Europe and, hence, people are being laid off.
That European tax on our exports is legal and started in March. We
started debating this bill in March. We could have had this bill passed
in March. We could have had the European tax behind us because once we
pass this legislation, there is no legal basis for their putting the
tax on our exports to their country.

In the same vein, the jobs a manufacturing bill will reduce the level
of taxation on corporations from 35 percent down to 32 percent. One of
the reasons we lose jobs in manufacturing to the global competition is
that our cost to capital is very high in relationship to our global
competition. So in reducing the corporate tax by 3 percent and doing it
in a revenue-neutral way so it does not worsen the deficit, we have an
opportunity to create jobs in manufacturing, make what jobs we have
more secure, and continue to enhance the productivity of workers in
America.
I hope we remember that we do have a rapidly changing society. Our
people welcome an enhanced standard of living that comes from increased
wages, which comes from increased productivity. And they want that to
continue. That is why I am concerned about the amendment of the Senator
from Florida that is before us. That is why I am going to ask my
colleagues to consider my views on this amendment and, hopefully,
disagree with Senator Graham and defeat the amendment and move on and
get this bill passed. That 5-percent tax put on in March, increased to
6 percent in April, and it is 7 percent now in May. It is going to be
12 percent by election time. Are we going to continue to have an
environment where people can be laid off?
Senator Graham may have an idea that is legitimate to discuss, but
right now in the environment we are in, in which there is an increasing
burden put on our exports to Europe, it seems to me we ought to forgo
this discussion, which ought to come at another time when Senator
Graham's amendment could fit in. We need to get this legislation
passed. This legislation is a bipartisan bill. Not often do we get this
bipartisan cooperation in the Senate. We ought to take it and run with
it.
His amendment proposes to enact a new wage tax credit and pay for it
by striking the manufacturing rate cut--that cut from 35 percent down
to 32 percent about which I just spoke--and he would also strike all of
the international provisions that are in this bill, international
provisions to which we try to bring a more rational approach to the
taxation of American business in international trade.
Evidently, the Senator from Florida believes a payroll tax credit
that reduces employer contributions to the Social Security trust fund
will create more jobs than a manufacturing rate cut. Payroll tax
credits have long been controversial. I always thought market demand
and the ability to compete in that market is what created jobs. If an
employer sees an opportunity and goes after that opportunity, then they
will add employees to meet demand, but I do not see how a tax credit
creates market opportunity.
I thought that tax relief, tax reductions, and the lower burden
imposed by having the Government as a silent business partner is what
enhances a company's competitiveness, which then in turn would lead to
more opportunity.
This JOBS bill before us now contains a 3-point reduction in
corporate tax for manufacturing, not across the board. The chart behind
me shows the corporate tax rates on manufacturing income for the
European Union and for the United States. I thought this chart would be
interesting for comparison since the United States and the European
Union are both highly developed wage and skilled countries.
This chart shows that on average the European Union tax rate on
manufacturing is 21 percent, while that in the United States is 24
percent. That is averages. So do not get that confused with the 35 down
to the 32 I am talking about.
It is necessary to pass this 3-point reduction in corporate tax rates
which is in this JOBS bill to keep the United States even with these
European countries. So being a believer that competitiveness breeds job
growth, I fail to see how a wage credit in lieu of a tax cut can
produce more jobs if U.S. manufacturers remain burdened with a
significantly higher rate of tax than their main competitors.
After arriving on the Senate floor, I received a copy of a ``dear
colleague'' letter from Senator Graham of Florida and Senator Dayton of
Minnesota. That letter says production outsourced to a foreign country
qualifies for manufacturing deduction.
That is not right. Our bill does not do that. The 3-point rate cut
only applies to income from U.S.-based manufacturing. It does not apply
to foreign manufacturing of any type. So the fundamental premise of the
Graham amendment is in error.
Senator Graham also implies contract manufacturing qualifies for the
manufacturing deduction. This is not correct. We specifically rejected
allowing a company to take a deduction for manufacturing that someone
else does for them, regardless of whether the contract manufacturer is
located in the United States or offshore.
If we allowed contract manufacturing to qualify, it would be a double
dip. We were lobbied on this and we rejected that. So, again, a
fundamental assumption of the amendment is in error.
The Senator from Florida also criticizes the wage limitation. This
limit is there to ensure manufacturing jobs are created. If they do not
grow jobs, then their manufacturing deduction is diminished. If their
assembly lines are filled with robots instead of people, then the
deduction is limited. So if one wants more hiring, this is the way to
get it done. That is what the wage limit accomplishes.
All of the fundamentals underlying his amendment are in error. I
think they are a mischaracterization of the underlying bill.
There is, however, an even more disturbing aspect of the amendment
before us. Senators have heard me come to the floor many times to talk
about the bipartisan development of the JOBS bill. Its construction
began when Senator Baucus was chairman of the Senate Finance Committee.
Senator

[[Page S4881]]

Baucus held hearings in July 2002 to address the FSC/ETI controversy
within the World Trade Organization.
During this hearing, Senator Graham of Florida, now on the Senate
floor with us, and Senator Hatch as well, expressed concern about how
our international tax laws were impairing the competitiveness of U.S.
companies. After some discussion on forming a blue ribbon commission to
study this problem, we all decided decisive action was more important
than setting up a commission.

During that hearing, Chairman Baucus formed an international tax
working group that was joined by Senator Graham, Senator Hatch, and
this Senator. This bipartisan Finance Committee working group formed
the basis for the bill that is now before us.
There is not one provision in this JOBS bill that was not agreed to
by both Republicans and Democrats, not one. But today a member of that
bipartisan working group offers an amendment that would destroy this
bipartisan consensus on the provisions of the JOBS bill.
Why? The JOBS bill includes the international tax simplification
measures that were recommended in the Joint Committee on Taxation April
2001 report on tax simplification. There was no constituency for these
simplifications. No governmental affairs representative came to our
office to advocate for them.
No, the person who asked for them was the Senator from Florida.
Senator Graham emphasized the desire to include these simplification
measures in the bill, and we did that. The Senator from Florida
preferred simplification over restructuring and wanted the emphasis of
our bill to be on foreign tax credit reforms. We honored his views
because that is what our bill does in the bipartisan spirit of this
legislation.
That Senator expressed concern about the 90-percent foreign tax
credit limit on AMT, the alternative minimum tax, and he wanted the 10-
50 basket problems solved. We did both of these things in this bill.
The Senator from Florida even sought reductions on a number of
foreign tax credit baskets, but the working group decided that was too
significant of an international change to be accepted by the full
Senate. I hope when we vote on this amendment the Senator will back up
our decision on that because this bill was reported out of committee on
a bipartisan 19-to-2 vote. The Senator from Florida voted for this bill
in the Finance Committee.
Today, these priorities are no longer important. To me, this is very
confusing and it is quite a difficult development for me to understand.
As I have said before, we acted in the best of faith to produce a
bill that protects American manufacturing jobs and ensures our
companies remain the global competitors we want them to be. We did this
in a fully bipartisan manner. That is what the American people expect
us to do on such an important issue as manufacturing jobs and our
national economic health.
As a practical matter, the only way to get a bill through this Senate
is to do it in a bipartisan way. But these efforts are apparently not
enough or we would not have this amendment before us.
I hope we can defeat this amendment and move on because Senator
Baucus and I have a real sense of optimism that this week there is very
definitely an optimistic point of view, particularly from the other
side, that this legislation needs to be passed and that considering the
fact we spent considerable time on it in March, and some time on it in
April, and we have had these European taxes going on our exports,
growing 1 percent a month. It is a bad situation.
We hope the optimism we sensed yesterday will be repeated today, and
one way to help us along is to help us defeat this amendment.
I yield the floor.
The PRESIDING OFFICER (Mr. Sununu). Who yields time? Does the Senator
from Iowa yield time to the Senator from Montana?
Mr. GRASSLEY. I yield to the Senator from Montana whatever time he
might consume. I have not asked other people on my side if they want
time.
Mr. BAUCUS. I will not consume it all.
Mr. GRASSLEY. I yield whatever time the Senator may consume.
Mr. BAUCUS. I appreciate that.
Mr. President, I have a couple of points. I very much appreciate the
efforts of the Senator from Florida in the amendment he has offered. He
clearly is trying to address a problem that is very acute in this
country, which is job loss. He is also attempting to address it in a
way a good number of Senators and a good number of people think is a
way to do it, and that is by making the cost of employment to an
employer less expensive.
In our country, it is regrettable, but we have come to the point
where very often payroll taxes are the greatest expense an employee
has. They pay more in payroll taxes, because the employer's half is
imputed to the employee, than income taxes.
We have to work hard to try to find ways so the cost of employment to
employers is a little less expensive than at present. The Senator from
Florida is trying to address that.
I might say, though, his amendment strikes over 60 percent of the
bill. This is a large bill. We don't have many tax bills that come
around.
I remember years ago we used to have a tax bill at the end of the
year. Senator Long was then chairman of the Finance Committee. He would
wait until the end of the year. There would be a lot of provisions and
there would be a good tax bill. I don't think that is going to happen
this year. This is becoming the major bill, and the reason for that is
very clear.
There was no World Trade Organization back 20 years ago. Times have
changed so much. But the World Trade Organization has ruled that our
tax regime, which gives our American companies that export a bit of a
break, is illegal. Other countries have their tax regimes which give
their companies breaks for their exports, and they are legal. But we
set up ours in a way that, regrettably, does not pass muster with the
WTO.
There are a lot of reasons that is the case. Frankly, I think we
Americans were a little naive. A number of years ago we agreed to a tax
regime where companies in other countries could rebate their value-
added tax for exports; whereas because we have a different tax system,
because we did not have a value-added tax system and we tried to set up
a different way to help our companies export, it turned out our way
became illegal under the general rules of WTO. That happened a long
time ago. We cannot recreate history. But basically that is why we are
here today. Our tax regime which gives our companies a bit of a tax
break has been declared illegal under WTO.
We have an obligation now. We can't wait until the end of the year.
We have an obligation now to replace that illegal regime with something
that is legal. We have an obligation now because, as has been stated,
the European Union, pursuant to rules under the WTO, has begun to tax
American exports to Europe. With each passing month that tax becomes
greater and greater. It gets up to 17 percent and that gets pretty
severe after a while. So that is why we are here.
The Finance Committee spent a lot of time trying to figure out what
the basic replacement legislation should be--what is the best way to do
this; what is the best way to help American companies produce jobs,
make products, and also produce jobs in a way that is legal under the
WTO regime.
We worked hard at it, as I said. We talked to lots of different
people around the country. We had several meetings in the Finance
Committee about this issue. We had a big, long, open markup. We came up
with a way which we think, by and large, helps American companies quite
well. What is it? It is very simple. It is a 9-percent deduction for
production by U.S. companies--in the United States, that is. If they
produce the product in the United States, they get a 9-percent cost of
production benefit for that production. It not only applies to big
corporations, standard C corporations, it applies to smaller
corporations generally known as S corporations, partnerships, sole
proprietorships, as well as to any organization that produces some
product in the United States.

That is far better than the old regime we are going to displace
because the old regime, which gave benefits for exports, was not
available to a lot of farmers and ranchers and small businesspeople.

[[Page S4882]]

So it is a good idea. Effectively, it lowers the top corporate rate--
if you are paying 35 percent--by 3 percentage points, down to about 32
percent as your income taxes, corporate income taxes. But if you are a
partnership or if you are some other organization, your taxes are also
lowered because of the 9-percent deduction for domestic manufacturing.
So it does help provide jobs.
What else does it do? It gives the employer who gets the benefit of
this a choice. What is the best way for that company to meet
competition? What is the best way for that company to do well? Whether
it is a big company or small company, what is the best way? Generally,
most believe the management of that company should have the choice of
what works best for them. That is why we said you don't have to use the
money this way or have to use the money that way. But in order to
comply with the World Trade Organization rules, the only restriction,
basically, is it has to be produced in the United States, whether the
product is sold in the United States or whether it is sold overseas.
That was the one restriction we had to apply to stay within the WTO
rules.
We also took the opportunity to address a growing concern that many
American companies face, particularly the larger American companies,
and that is international competition. Other countries do a pretty good
job of taking care of their companies in the sense that they want to
make sure their companies are competitive in the world. They do a
pretty good job. So we have to ask ourselves: Americans, OK, what do we
do so as not to handicap our American companies in international
operations and also in a way that is fair to small business, is fair to
the budget, is fair to lots of other interests in our country; that is,
other considerations in addition to making sure our companies are as
competitive as possible in the international arena.
I don't need to tell you how globalized our economy has become. It is
incredible how, each passing year, we are so much more interconnected
than we were in previous years.
Let me give one small example, the entrance of a good number of
eastern countries into the European Union. Half of the world's
population now is in a buying consumer market. That is a major change.
That is a profound change. Companies worldwide, certainly American
companies, are going to have to compete in that market, as well as the
American market.
In addition, Mr. President, as you well know, various other
countries--whether it is the European Union or even China--are entering
into trade agreements with other countries which give a benefit to
their companies and, by definition, to the detriment of American
companies. It is an extremely competitive world and becoming even more
so. It is more so because of the additional markets, as I mentioned,
more so because of increased advances in technology, particularly
communications technology. With so much information now digitized, so
much information now able to be sent over a broadband communications
system, that is bringing us so much closer together.

We in the committee believed that in addition to helping domestic
manufacturers, as described, we should also simplify a lot of the
international provisions, especially those where American companies are
double taxed. The theory of our system, our worldwide system as opposed
to--well, it is the same theory as other countries' territorial
systems. But the theory of our system is basically avoid double
taxation of American companies. If an American company does business
overseas, clearly that other country--take Germany, for example--wants
to tax the American company's production in Germany. But then that is
an American company, so the American taxpayers have a right to think
that company should pay income taxes to Uncle Sam, too. But we also
want to avoid double taxation.
Basically, the idea in America is to give companies a tax credit on
American taxes for the amount of the taxes they paid in the other
country. That is basically what we do. It is a complicated system, but
it is one that by and large works pretty well.
Then there are some other provisions in this bill. There are energy
tax provisions; also, a minority tax credit. What is my main point? My
main point is we have spent a lot of time in committee on this bill. It
passed the committee 19 to 2. Frankly, the two dissenters were on the
other side of the aisle. They had a different approach they thought
made much more sense to them.

I suggest upfront, even though the amendment has some frailties, this
was never debated in the committee. It was never brought up in
committee. It was for very good reason, as the Senator from Florida was
engaged in another endeavor. He probably still is engaged to some
degree. I very much appreciate that. He was not available and it was
not his fault this amendment was not brought up. He was unable to be
present. It was not brought up in the Finance Committee. It was
undebated in the Finance Committee.
His amendment is a huge change to the bill. It dramatically changes
the bill. It changes the velocity of the bill. We have already
addressed the issue generally but not all of the content of this
amendment, which is drastically changing the bill. That is not an
exaggeration. It is drastic.
For that reason, respectfully I say to my good friend from Florida,
this is not the time for the Senate to proceed with this amendment.
There is a time and place, in the committee, that we should address his
approach. That is, helping reduce the company payroll tax or helping
employers so they do not pay quite so much in wages. We want to help
people get wages but we do not want to burden the employers. Now is not
the time, nor the forum. He should bring that up at a later time.
The PRESIDING OFFICER. The Senator from Iowa controls time. Only the
Senator from Iowa controls time.
Mr. GRASSLEY. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I ask consent all pending amendments be
set aside so the Senator from Colorado can be recognized for the
purpose of offering an amendment, and I also ask consent that the
amendment of the Senator from South Carolina, Mr. Hollings, also be the
next amendment to be in order.
Mr. REID. Mr. President, it is my understanding Senator Hollings
would propose that amendment immediately following the votes on the two
pending amendments; is that right?
Mr. BAUCUS. I have no problem with that. That is my understanding.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Colorado.

Amendment No. 3118

(Purpose: To provide for a brownfields demonstration program for
qualified green building and sustainable design projects, and for other
purposes)

Mr. ALLARD. I ask consent to send an amendment to the desk, which
will take the slot reserved for the Miller-Schumer-Bond amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ALLARD. I ask consent that the pending amendment be temporarily
laid aside, that I offer an amendment; following the reporting of my
amendment, it be laid aside, and the Senate resume debate under the
previous order.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ALLARD. I ask that the clerk report amendment No. 3118.
The legislative clerk read as follows:

The Senator from Colorado [Mr. Allard], for himself, Mr.
Schumer, Mr. Miller, Mrs. Clinton, and Mr. Chambliss,
proposes an amendment numbered 3118.

Mr. ALLARD. I ask unanimous consent that the reading of the amendment
be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendment.'')
Mr. ALLARD. I yield the floor.

Amendment No. 3112

The PRESIDING OFFICER. Who yields time on the preceding amendment?
Mr. BAUCUS. Will the Senator yield me an additional 5 minutes?
Mr. GRASSLEY. I yield the Senator from Montana whatever time he might
consume.

[[Page S4883]]

Mr. BAUCUS. Mr. President, I have a couple more points about the
Graham amendment.
It is advisable the Senate not adopt the amendment. His amendment
would do two things. Basically, it strikes the deduction for domestic
manufacturing and also strikes most of the international tax reform
provisions. These are very important changes that will help Americans
compete internationally.
As I mentioned, the international provisions in the bill that would
be stricken by the Senator's amendment are designed to reduce double
taxation of American companies. We want to do as much as we can to
reduce double taxation of American companies.
Let me give an example. Under current law, an American corporation
would have to pay more to borrow money to build a factory than foreign
corporations would have to pay, even if the factory is in the United
States. This is because of the way we treat interest expenses and so-
called interest allocation. Essentially, we are changing the interest
allocation provision so that a U.S. company with assets overseas is not
penalized, so long as the borrowing is proportionate to the assets in
each of the countries, which is now not the case. That is, right now,
American companies are penalized even if all their borrowing in the
United States is proportionate to worldwide borrowing. That is just not
fair. It is something other country's companies do not have to put up
with. That is one example of how our Tax Code currently puts American
companies at a disadvantage compared to other countries.
The JOBS bill fixes a lot of these problems so Americans can compete
on a level playing field, and it brings the Tax Code in compliance for
the intent to avoid double taxation.
I say to my good friend from Florida and to my colleagues in the
Senate, this is not the time, in my judgment, for that amendment. It
has not been explored, debated, or brought up in committee. It is a
huge change to a very thought through bill. It should not be approved
at this time.
I take a couple of minutes while we have the time to talk about some
of the international provisions generally in the JOBS bill. Let me
state again why I think these provisions are good policy and they help
American companies.
I will mention again the interest allocation provision. It is perhaps
the most significant provision in the international tax title, both in
terms of cost and the number of companies it would help. The interest
allocation provision is one of the many in the JOBS bill that deals
with foreign tax credits. Our foreign tax credit system is designed to
prevent taxpayers from paying tax twice on the same income. When an
American company earns money in France, the French tax that income and
the United States also taxes that income. That is two levels of tax on
the same income. The total tax could be, say, 75 percent or more.
Without adjustments such as the foreign tax credit which is in current
U.S. law, these two levels of taxation would make U.S. companies
completely uncompetitive abroad. There is no question about that.
Foreign tax credits, however, get the company back to a single level
tax and make competition possible. Our foreign tax credit rules are not
perfect and double taxation still sometimes occurs.
A prime example is the interest allocation provisions in the foreign
tax credit rules.
Let me give you an example. Take an American company that pays $100
in foreign taxes and $100 in U.S. taxes on that same income. That
American company would generally claim a $100 foreign tax credit to get
back down to a single layer of tax. But if that American company
happened to take out a loan in the United States to finance a project
here in the United States, it might be limited to an $80 or $90 foreign
tax credit--not because it paid any less in foreign taxes, but because
we treat it as if it were able to deduct some of the interest on that
U.S. loan to reduce its taxable foreign income, even though it could
not do so. That is not right.
The rules are complicated, but the effect is plain. If an American
company wants to borrow money and build a plant in the United States,
it faces an uphill battle. It will pay higher interest expenses than a
comparable foreign company. Our interest allocation rules in current
law are making it easier for its foreign competitors to build that
plant. But our bill fixes that, and it fixes other problems with our
foreign tax credit rules.
For example, companies that pay the alternative minimum tax--the so-
called AMT--currently face limits on the use of the AMT with respect to
foreign tax credits. Unlike non-alternative minimum tax taxpayers, they
are subjected to an artificial, completely arbitrary cap on the use of
their foreign tax credits. It is 90. Arbitrarily limiting their foreign
tax credits just makes these AMT taxpayers pay double. The current AMT
provisions essentially, in many cases, result in double taxation. The
JOBS bill fixes that, too.
The JOBS bill also makes it less likely that a company's foreign tax
credits will expire unused. It is another problem: The foreign tax
credits expire unused, and then the U.S. company could often be placed,
in effect, in a position where it is subjected to double taxation.
Currently, unused foreign tax credits can be carried over for 5
years. The original purpose of this carry-forward rule was to prevent
taxpayers from suffering double taxation because of timing differences
between U.S. and foreign tax laws. That purpose is not being served by
our current law. Any new tax laws in foreign countries have made the
problem worse for American companies. The JOBS bill extends the
carryforward to limit the double taxation that occurs upon the
expiration of foreign tax credits; that is, we are making it less
likely that a U.S. company will be subjected to double taxation.
Each of these provisions simply corrects features of our
international tax laws that frustrate the original purpose of those
laws. Again, the original purpose was to avoid double taxation. The
JOBS bill puts us back on track with the original intent of our
international tax system.
So, as we all know, the international provisions are a lot more
complicated than I have even begun to allude to, but, very briefly,
those are some of the provisions in the bill. They are corrections in
the bill. They reduce double taxation, or eliminate it in many
instances. It helps American companies compete with foreign companies.
That means it is much more likely they will be able to keep jobs in the
United States if they are able to compete more effectively.
Mr. President, for that reason, I urge we do not adopt this
amendment.
I suggest the absence of a quorum, on behalf of the Senator from
Iowa.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 3117

Mr. GRASSLEY. Mr. President, I yield 3 minutes of my time to the
Senator from Nevada and 2 minutes to the Senator from California, Mrs.
Boxer.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. ENSIGN. Mr. President, in a few minutes we are going to be voting
on the Breaux-Feinstein amendment. In the underlying bill is an
amendment that Senator Boxer and I worked on last year. It was voted on
in the Senate and had 75 affirmative votes, 25 negative votes. Seventy-
five Senators said, last year, it is a good idea for money that is
sitting outside the country in bank accounts--in businesses' bank
accounts outside the United States--to come back to the United States
to create jobs and help the American economy.
Right now, if companies bring that money back, they will have to pay
the difference between whatever that country charged and our 35-percent
corporate tax rate. At the top rate, it is 35 percent they are paying.
Therefore, those companies are leaving that money overseas.
Well, with our piece of legislation, it is estimated that somewhere
between $400 billion and $600 billion will come back to the United
States in the next

[[Page S4884]]

12 months. That is a huge amount of money and will be a huge boost to
the American economy. Our economy is really starting to click on along,
and we are really excited about that, but we can do more, and that is
what we want to do. We can put more people to work with our bill.
Independent estimates by Allen Sinai, a well-respected economist,
well respected by Democrats and Republicans, said this bill will create
660,000 jobs in the United States. Frankly, the amendment by Senator
Breaux and Senator Feinstein will gut this amendment. It is a poison
pill. So we are encouraging all of our Senators to vote against it.
There are some important uses of funds for job creation that Senator
Breaux's amendment would stop the money from being used for.
Those legitimate uses of funds include improving health insurance for
employees and preventing investing in new small businesses. They could
buy a new jet under the Breaux amendment, but they couldn't pay for
employees' travel expenses. This amendment makes no sense, and that is
why we should vote it down.
The Senator from Louisiana is against the underlying bill. He is
against the approach we took last year. He voted against it. This is
his effort to try to gut underlying legislation. That is why we are
encouraging all Senators, the 75 who voted for our legislation last
year, to vote against this amendment to make sure that $400 to $600
billion does come back to the United States and helps American workers
get jobs.
Every night we hear on television about outsourcing. This underlying
bill is about insourcing. We are bringing jobs back to the United
States, and we should do that.
The PRESIDING OFFICER. The Senator from California.
Mrs. BOXER. Mr. President, I thank my colleague from Nevada. He
worked so hard and long on this underlying part of the JOBS bill,
called the Invest in USA Act, because it is going to create, as my
colleague said, according to independent analysts, 660,000 new jobs.
Why would we want to ruin a provision people from all parts of the
economic spectrum have told us is going to work? We want to try this
for 1 year. We want to bring back monies that are parked overseas and
tax them at 5.25 percent, because right now we are not getting any
revenues. It is going to mean $4 billion into the Treasury right away,
something we desperately need. It is going to mean, as my colleague
says, insourcing, creating jobs here.
Last year the Senate voted 75 to 25 for the Ensign-Boxer bill. At
that time Senator Breaux was very honest about it. He didn't like it
then. He doesn't like it now. But instead of objecting to it flat out,
he is offering an amendment that in essence kills the whole idea.
I urge my colleagues, if you care about job creation--and I know you
all do--please support us and defeat the Breaux amendment. In my State
alone we are looking at 75,000 jobs.
Senator Breaux is a very effective debater. He says: You are creating
another Enron scandal. What is going to happen to this money? They are
going to say they are using it for jobs, but there is no penalty in
place.
The same penalty is in place as in the IRS Code. The CEO is going to
sign the plan. And if they don't do the plan, they are in for trouble.
That is clear. This is not some plan that is going to be hatched in
some accountant's office. It is right out there above the CEO's
signature.

I hope we defeat this and move on. It is a good underlying bill.
Let's keep it as it is.
The PRESIDING OFFICER. Who yields time?
The Senator from Louisiana.
Mr. BREAUX. I understand there is 1 minute for the proponents of the
Breaux-Feinstein amendment.
The PRESIDING OFFICER. There is 1\1/2\ minutes of debate time on the
Graham amendment. Under the previous order, at the conclusion of debate
on the Graham amendment, a vote will occur on the Breaux amendment,
preceded by 2 minutes of debate equally divided.
Mr. BREAUX. Regular order, Mr. President.
The PRESIDING OFFICER. Is there objection to yielding back the
remaining balance of 1 minute on the Graham amendment?
Without objection, time is yielded back.
Under the previous order, a vote will now occur on the Breaux
amendment, preceded by 2 minutes of debate equally divided. The Senator
from Louisiana.
Mr. BREAUX. Mr. President, it is interesting that the authors, the
Senators who oppose the amendment, say the bill is going to create
660,000 jobs. If it is going to create 660,000 jobs, there is no
problem. The people would be able to bring the money back and pay 5
percent. The Breaux-Feinstein amendment simply says if companies are
going to get a huge, enormous tax break by bringing money out of tax
shelters in foreign countries and saying they want to use it for job
creation, fine. Let's make sure that is what it is used for. Let's have
a standard by which if more jobs are created, they get 5 percent. But
if they don't create more jobs, if they don't spend it for that
purpose, they are not going to get the 5-percent tax break. That is all
it says.
It says, if you spend the money to create more jobs, you can bring it
back at a 5-percent tax rate, and we will allow that to happen. But if
you use it for something else, you will not get a 5-percent tax rate.
You will pay the regular corporate rate like any other American
corporation. Without my amendment, this costs $3.7 billion to the
American taxpayer.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. SMITH. Mr. President, this is a simple choice for our colleagues.
It is either vote for jobs or vote to limit the number of jobs we have
the potential to create. By independent studies, this inclusion,
repatriation in the JOBS bill, will create 660,000 jobs. It will reduce
the deficit by $75 billion over 5 years, and it will bring to each of
our local economies new energy. The choice is to leave it offshore,
doing little good for the American people, or to bring it here, to give
companies for 1 year the chance that a walk-back with their capital
will reemploy the American people and allow them to compete with other
multinational companies from other nations, which nations allow them
that kind of privilege. We are saying, let them do it for 1 year and we
will create 660,000 jobs.
The PRESIDING OFFICER. Under the previous order, the question is on
agreeing to amendment No. 3117.
Mr. BREAUX. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second. The clerk will call the
roll.
The bill clerk called the roll.
Mr. REID. I announce that the Senator from Massachusetts (Mr. Kerry)
is necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 31, nays 68, as follows:

[Rollcall Vote No. 81 Leg.]

YEAS--31

Akaka
Bingaman
Breaux
Byrd
Carper
Clinton
Conrad
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham (FL)
Harkin
Inouye
Johnson
Kennedy
Kohl
Landrieu
Leahy
Levin
Lieberman
Mikulski
Nelson (FL)
Nickles
Reed
Rockefeller
Sarbanes

NAYS--68

Alexander
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bond
Boxer
Brownback
Bunning
Burns
Campbell
Cantwell
Chafee
Chambliss
Cochran
Coleman
Collins
Cornyn
Corzine
Craig
Crapo
DeWine
Dole
Domenici
Ensign
Enzi
Fitzgerald
Frist
Graham (SC)
Grassley
Gregg
Hagel
Hatch
Hollings
Hutchison
Inhofe
Jeffords
Kyl
Lautenberg
Lincoln
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Murray
Nelson (NE)
Pryor
Reid
Roberts
Santorum
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Sununu
Talent
Thomas
Voinovich
Warner
Wyden

NOT VOTING--1

Kerry

The amendment (No. 3117) was rejected.
Mrs. BOXER. Mr. President, I move to reconsider the vote.

[[Page S4885]]

Mr. BAUCUS. I move to lay that motion on the table.
The motion to lay on the table was agreed to.

Amendment No. 3112

The PRESIDING OFFICER. Under the previous order, there will now be a
vote on the Graham amendment preceded by 2 minutes equally divided.
Mr. GRAHAM of Florida. I ask for a recorded vote.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM of Florida. Mr. President, there are two basic issues
addressed in this amendment.
First, there are substantial changes in the international tax
provisions in this legislation. They are going to cost American
taxpayers $37 billion, and the reason is because we are adding to the
already significant incentive for American firms to take their jobs
overseas.
Second, we are going to spend $65 billion to give a blank check to
American manufacturing firms in the form of a tax deduction. The
amendment would substitute and add $35 billion so we would have $100
billion to be given in the form of a credit against the payroll tax to
reduce the form of tax, which is the greatest disincentive to the
creation and maintenance of jobs in the United States.
This is an amendment which truly justifies the title of this bill,
JOBS, and would add the phrase ``in America.''
The PRESIDING OFFICER. The Senator's time has expired.
Who yields time in opposition? Is there objection to time being
yielded back?
Without objection, it is so ordered. All time is yielded back. The
yeas and nays have been ordered.
The question is on agreeing to amendment No. 3112.
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. REID. I announce that the Senator from Massachusetts (Mr. Kerry)
is necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 22, nays 77, as follows:

[Rollcall Vote No. 82 Leg.]

YEAS--22

Akaka
Byrd
Clinton
Dayton
Dodd
Durbin
Edwards
Feingold
Graham (FL)
Harkin
Hollings
Inouye
Kennedy
Landrieu
Lautenberg
Levin
Mikulski
Nelson (FL)
Reed
Reid
Rockefeller
Sarbanes

NAYS--77

Alexander
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bunning
Burns
Campbell
Cantwell
Carper
Chafee
Chambliss
Cochran
Coleman
Collins
Conrad
Cornyn
Corzine
Craig
Crapo
Daschle
DeWine
Dole
Domenici
Dorgan
Ensign
Enzi
Feinstein
Fitzgerald
Frist
Graham (SC)
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Jeffords
Johnson
Kohl
Kyl
Leahy
Lieberman
Lincoln
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Murray
Nelson (NE)
Nickles
Pryor
Roberts
Santorum
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Sununu
Talent
Thomas
Voinovich
Warner
Wyden

NOT VOTING--1

Kerry

The amendment (No. 3112) was rejected.
Mr. REID. I move to reconsider the vote.
Mr. DORGAN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. The Senator from Kentucky.
Mr. McCONNELL. Mr. President, I ask unanimous consent that there now
be an hour equally divided between the two managers or their designees;
provided further that following the use or yielding back of time, the
Senate proceed to vote in relation to the Dorgan amendment No. 3110, to
be followed by a vote in relation to the Allard amendment No. 3118,
with no amendments in order to either amendment prior to the votes.
The PRESIDING OFFICER. Is there objection?
Mr. REID. Mr. President, reserving the right to object, and I will
not object, I have spoken to the managers--well, not actually the
managers of the bill--but I have spoken to the majority side. Prior to
this kicking in, this unanimous consent agreement, I ask unanimous
consent that the Senator from Vermont be recognized for 5 minutes as in
morning business, and, of course, the same time accorded to the
majority.
The PRESIDING OFFICER. Is there objection to that modification?
Without objection, the modified request is agreed to.
The Senator from Nevada.
Mr. REID. Mr. President, on the time we have, 20 minutes of that
would go to Senator Dorgan.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from North Dakota is recognized.
Mr. DORGAN. Mr. President, parliamentary inquiry: How much time was
required on the last recorded vote?
The PRESIDING OFFICER. Approximately 30 minutes.
Under the previous order, the Senator from Vermont is recognized for
5 minutes.
Mr. LEAHY. Mr. President, I thank my friends, the Senator from
Kentucky and the Senator from Nevada, for their courtesy.

ABUSE OF PRISONERS IN U.S. MILITARY CUSTODY

Mr. President, as an American, as a former prosecutor, as a U.S.
Senator who has spoken out in defense of human rights wherever they are
violated, and as the ranking member of the Foreign Operations
Subcommittee that has appropriated hundreds of millions of dollars to
promote respect for the rule of law in countries around the world, I
was outraged and disgusted by the reports of abuse of Iraqi prisoners
by United State military personnel and the civilian contractors working
with them.
Not only has this caused serious harm, both physical and
psychological, to the individuals who were subjected to this
mistreatment, it has tarnished the reputation of all Americans and our
Nation as a whole.
I have listened as top officials at the Department of Defense, the
National Security Advisor, the Secretary of State, and other
administration officials, have said they were ``shocked'' and
``stunned'' by these reports. And I have heard them, in a coordinated
attempt at damage control, say that these were isolated incidents
involving only a handful of individuals whose conduct, while
reprehensible, should not be seen as indicative of a larger failure.
I have no doubt that the vast majority of American men and women who
are risking their lives in Iraq, Afghanistan, and elsewhere are as
disgusted by these abhorrent acts as the rest of us. But I could not
disagree more with those who would characterize these incidents as
aberrations.
While President Bush, Secretary Rumsfeld, General Myers, Secretary
Powell and Condoleezza Rice, may have been shocked by the photographs
that have been on the front page of every newspaper in the world, they
should not have been surprised by the revelations themselves. These
types of abuses have been going on at U.S. military detention
facilities for a long time, and the administration has known about the
incidents in Iraq for 5 months. This fact signals a failure of
leadership at several levels.
The mistreatment of prisoners by the U.S. military in Iraq was not
limited to the crimes that have come to light at the Abu Ghraib prison.
Rather, there was, in the words of the U.S. Army's own inquiry, a
``systemic and illegal abuse of detainees.''
It is revealing, and particularly disturbing, that the U.S. personnel
involved conducted themselves so openly, even posing with the victims
of their sadistic acts.
They obviously felt they had no reason to believe that their
superiors would be upset with their conduct.
The brazenness of these acts, the reported role of U.S. intelligence
officers in encouraging such treatment to ``soften up'' detainees for
interrogations, combined with earlier reports of

[[Page S4886]]

similar abuses in Iraq and Afghanistan, suggests a much larger failure.
And let us be clear. We are not talking only about the individuals
who engaged in these abusive acts.
We are talking about a failure of leadership by an administration
that, well before this latest scandal, had already severely damaged
this Nation's reputation and effectiveness in a war against terrorism
that is increasingly perceived by Muslims around the world as a war
against Islam itself.
The growing anger and hostility toward our troops has been exploited
by Saddam loyalists and extremists who want to take the country
backward. They have committed despicable acts of violence against
Americans, including the desecration of corpses.
The acts described in the investigative report by MG Antonio Taguba,
including beatings, repeated sexual abuse and humiliation, and threats
and simulation of rape and of torture by electric shock, violate the
Geneva Conventions.
They clearly contradict President Bush's pledge on June 26, 2003,
that the United States will neither ``torture'' terrorist suspects, nor
use ``cruel and unusual'' treatment to interrogate them. They also
contradict the more detailed policy on interrogations outlined in a
June 25, 2003, letter to me by Defense Department General Counsel
William Haynes.
Frankly, I regret to say that I was not among those who were shocked
by these revelations. Revolted, yes. Shocked, I was not. I have been
concerned, as have others, about ongoing reports of physical and
psychological abuse and the denial of rights of detainees in U.S.
military custody since September 11, 2001, not only in Iraq but in
Afghanistan and Guantanamo.
These abuses have been well documented by reputable human rights
organizations, as well as by members of the press. Some of the cases
involve allegations of torture or cruel, inhuman and degrading
treatment by U.S. military and intelligence personnel.
Other cases involve allegations of the denial of due process,
incommunicado detention without charge, and the refusal of access to
attorneys.
So when I hear the National Security Advisor, or the Secretary of
Defense, say they are determined to get to the bottom of this, I,
frankly, have to wonder, especially as they have known about this for a
long time.
I first wrote to National Security Advisor Rice a year ago about
reports of cruel and degrading treatment of Afghan detainees.
I have written several times to the general counsel of the Department
of Defense and to the Director of the CIA. I have sought answers to
questions about policy, training, and accountability. Some of my
questions have been answered; many have been ignored despite repeated
requests.
Were Secretary Rumsfeld or Condoleezza Rice not aware of the press
reports, the inquiries by Members of Congress, or the reports of human
rights organizations?
Or was the abuse of nameless, non-White Muslims suspected of being
terrorists, regardless of whether they were guilty or innocent, simply
a low priority until it became a public relations and foreign policy
disaster?
Let me cite just a few, of many, examples:
On December 25, 2002, the Washington Post reported:

``If you don't violate someone's human rights some of the
time, you probably aren't doing your job,'' said one official
who has supervised the capture and transfer of accused
terrorists. ``I don't think we want to be promoting a view of
zero tolerance on this.''

Quote:

Bush Administration officials said the CIA, in practice, is
using a narrow definition of what counts as ``knowing'' that
a suspect has been tortured. ``If we're not there in the
room, who is to say?'' said one official conversant with
recent reports . . . .

One can only wonder if anyone would have been punished, or if we
would have even heard about it, if the photographs of the abuses at Abu
Ghraib had not been published.
On March 4, 2003, the New York Times described the treatment of
Afghan prisoners at the Bagram Air Base after two young prisoners died
in U.S. military custody.
Their deaths were ruled homicides, but the investigations of those
deaths have never been released. Other prisoners described being forced
to stand naked in a cold room for 10 days without interruption, with
their arms raised and chained to the ceiling and their swollen ankles
shackled.
They also said they were denied sleep for days and forced to wear
hoods that cut off the supply of oxygen.
That same day, the Wall Street Journal reported that a U.S. law
enforcement official said:

because the [Convention Against Torture] has no enforcement
mechanism, as a practical matter, ``you're only limited by
your imagination.''

On March 9, 2003, the New York Times reported:

Intelligence officials . . . acknowledged that some
suspects had been turned over to security services in
countries known to employ torture.

On June 2, 2003, when allegations of possible breaches of the
Convention Against Torture surfaced, I wrote to National Security
Advisor Rice, asking for assurance that the United States is complying
with its obligations under the convention. I received a response from
General Counsel Haynes. His letter contained a welcome commitment by
the administration that it is the policy of the United States to comply
with all of its legal obligations under the convention.
Similarly, Senator Specter wrote to Dr. Rice asking for
``clarification about numerous stories concerning alleged mistreatment
of enemy combatants in U.S. custody,'' and to explain how the
administration ensures that torture does not occur when it sends
detainees to countries that are known to practice torture.
On September 9, 2003, I wrote to Mr. Haynes again for clarification
on a number of points, such as how the administration reconciled his
statement of policy with reports that detainees were sent to countries
where torture is practiced, and the reported use of interrogation
techniques rising to or near the level of torture.
After 2 months with no response, another letter, this one not from
Mr. Haynes himself but from a subordinate, was delivered late at night
on the eve of Mr. Haynes' November 19, 2003, confirmation hearing for a
seat on the Fourth Circuit Court of Appeals. That letter was totally
unresponsive to my questions.
I also raised concerns when the case surfaced of a Canadian-Syrian
citizen, Maher Arar, who was sent by U.S. authorities to Syria, where
Arar says he was physically tortured. Syria has a well-documented
history of torture. In fact, President Bush stated, on November 7,
2003, that Syria has left ``a legacy of torture, oppression, misery,
and ruin'' to its people.
I wrote to FBI Director Mueller on November 17, 2003, for more
information on the case. Later that week, I wrote to Attorney General
Ashcroft with additional questions. Neither of these letters from last
year has been answered.
On January 6, 2004, Human Rights Watch wrote to Secretary Rumsfeld to
express concern about the detention by U.S. forces in Iraq of innocent,
close relatives of a wanted person in order to compel the person to
surrender, which amounts to hostage-taking, classified as a war crime
under the Geneva Conventions.
On January 13, 2004, the Asian Wall Street Journal reported that a
suspect detained by U.S. forces in Iraq said that ``he was ordered to
stand upright until he collapsed after 13 hours,'' and that
interrogators, ``burned his arm with a cigarette.''
On January 18, 2004, the Sunday Times of London reported that a
detainee held by coalition forces in Iraq said that during his 3 months
in detention he was, ``beaten frequently, given shocks with an electric
cattle prod and had one of his toenails [torn] off.''
Throughout this period there were not only continuous press reports
of abuses of Afghan, Iraqi, and other detainees in U.S. military
custody. There were also repeated requests by human rights
organizations, myself, and others, for clarification of the policies
and procedures used in interrogations. What we got, it seems, were, at
best, reassuring statements by officials in Washington that were
repeatedly ignored in the field.
Several things bother me beyond the reports themselves. Not only is
there a long pattern of abuse that has been documented. But with
respect to the

[[Page S4887]]

allegations at Abu Ghraib, Secretary Rumsfeld and General Myers knew of
these incidents and for over a week they not only did not disclose them
to the Congress or the American people, they urged CBS News not to
broadcast the photographs.
Major General Taguba's report was written 3 months ago, and as of
yesterday Secretary Rumsfeld said he still had not read it through.
There has been an appalling lack of appreciation or concern for the
seriousness and frequency of these incidents.
None of us believes that prisoners of war, some of whom are suspected
of having killed or attempted to kill Americans, should be rewarded
with comforts. Harsh treatment may, at times, be justified. But we also
know that many of the people who have been detained, who have been
depicted as terrorists and whose rights have been violated, have turned
out to be innocent of any crime.
The use of torture or the inhuman or degrading treatment of
prisoners, whoever they are, is beneath this Nation. It is also
illegal. That is the law whether U.S. military officers engage in such
conduct themselves, or they turn over prisoners to the government
agents of another country where torture is commonly used, in order to
let others do the dirty work. It is also the law when contractors or
subcontractors of the U.S. military are involved.
It undermines our reputation as a nation of laws, it hurts our
credibility with other nations, and it invites others to use similar
tactics against our troops and other Americans.
Torture is routinely used today in dozens of countries. In fact, some
of those who have complained the loudest about the abuses at Abu Ghraib
are among the world's worst violators of human rights. Their
mistreatment of prisoners is flagrant, it is pervasive, and it is a
matter of state policy.
So I am cognizant of the hypocrisy of some of those who have equated
the U.S. military with Saddam Hussein's regime, which tortured and
murdered hundreds of thousands of people. Nothing could be further from
the truth. But that does not detract from the fact that the Bush
administration's response to the pattern of reports of abuse of
detainees has been woefully inadequate.
It has been negligent, and innocent people have suffered and some
quite possibly have died as a result. This negligence is anything but
benign in the damage it threatens to our national security and foreign
policy interests, at a particularly dangerous time.
What should be done? Human rights groups have suggested a number of
important actions which I believe are long overdue. The administration
should undertake an investigation of the interrogation practices
wherever detainees are held around the world, whether the facilities
are run by the U.S. military or the Central Intelligence Agency, and
make the results public.
The administration should prosecute any military or intelligence
personnel found to have engaged in or encouraged any acts amounting to
torture or inhuman treatment. Administrative penalties are inadequate.
There needs to be a clear signal that these abuses will not be
tolerated.
The administration should ensure that all interrogators working for
the United States, whether employees of the military, intelligence
agencies, or private contractors, understand and abide by specific
guidelines consistent with the policy outlined by General Counsel
Haynes last year, which prohibited interrogation methods abroad that
would be barred in the United States by the U.S. Constitution as well
as by the Geneva Conventions. These guidelines should be publicly
available.
The administration should grant the International Committee of the
Red Cross access to all detainees held by the United States in the
campaign against terrorism throughout the world, whether held in
facilities run by the U.S. military or intelligence services, or held
by other governments at the behest of the United States. The United
States should not be operating undisclosed detention facilities to
which no independent monitors have access.
The administration should make public information about who is
detained by occupation forces in Iraq and Afghanistan, and why, and
enable families of detainees to visit their relatives. Even with
internal safeguards, incommunicado detention is an invitation to abuse.
The administration should videotape all interrogations and other
interaction with detainees so responsible personnel know there will be
a record of any abuses. These videotapes should be regularly reviewed
by supervisory personnel to ensure full compliance with interrogation
and detention standards in U.S. and international law.
The administration should release the results of the investigation
the Defense Department conducted into deaths in custody of two
detainees held at Bagram Air Base in Afghanistan.
The administration should ensure that private contractors working for
the United States in military or intelligence roles operate under
clear, legal procedures so they can be held criminally responsible for
complicity in illegal acts. Under the Military Extraterritorial
Jurisdiction Act, which I worked with Senators Sessions and DeWine to
enact in the 106th Congress, a contractor or subcontractor of the
military can be prosecuted in Federal court if the crime of which he is
accused is a felony when committed in the United States.
The administration should take responsibility and be accountable for
the breakdown of civilian control and loss of lawful authority.
Mr. President, 2\1/2\ years ago, shortly after 2,986 people of some
60 nationalities died in the attacks on the World Trade Center, on the
Pentagon, and in a lonely field in Pennsylvania, there were expressions
of sympathy and good will toward our country unlike any we had
experienced since the end of the Second World War.
I remember how the cover of the French newspaper, Le Monde,
proclaimed ``Today, We Are All Americans.'' The National Anthem was
played at Buckingham Palace.
Today, that sympathy and good will, which offered such promise, has
long since dissipated. In fact, it has been squandered. Squandered by
an administration blinded by arrogance, steeped in condescension, prone
to distortions of the truth, motivated by simplistic notions of ``good
versus evil,'' and having only the most rudimentary understanding of
the Iraqi people, their culture, their faith and traditions.
While we are continually treated with rosy assertions that things are
getting better, the number of U.S. casualties soars.
What was conceived as a campaign against terrorism, focused on al-
Qaida, is increasingly perceived by many of the world's 1.2 billion
Muslims as a war of aggression against Islam by the United States and
our predominantly Christian allies.
I have no doubt that most Iraqis are relieved to be rid of Saddam
Hussein and the horrors of his regime. Most Iraqis abhor violence and
want to rebuild their country.
Nor should there be any doubt about our concern for the safety of the
overwhelming majority of American soldiers and civilians whose motives
are honorable and who are bravely risking their lives.
But the individuals at Abu Ghraib prison, at Bagram Air Base, and
elsewhere who have violated the rights of prisoners, were not acting in
a vacuum. There was a culture that encouraged or allowed it. Discipline
was lacking. Accountability was lacking. And just as those who
committed these crimes should be prosecuted, the civilian and military
officials who failed in their responsibility to ensure that the law was
respected should also be held accountable.
Mr. President, I ask unanimous consent that a May 4, 2004, op-ed in
the Washington Post by Leonard S. Rubenstein, executive director of
Physicians for Human Rights, entitled, ``Stopping the Abuse of
Detainees,'' be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

[From the Washington Post, May 4, 2004]

Stopping the Abuse of Detainees

(By Leonard S. Rubenstein)

Photographs of American soldiers laughing over naked Iraqi
prisoners of war piled atop one another are a revolting
disgrace, all the more so because evidence of torture and ill
treatment of individuals detained by U.S.

[[Page S4888]]

forces in Afghanistan, Iraq and Guantanamo Bay, Cuba, is not
new. The humiliating acts seen in photos may not have been
predictable, but the abuse of detainees was, a product of the
circumstances of detention and the administration's
resistance to independent monitoring and accountability.
Stopping it requires a great deal more than the prosecution
of a handful of offenders.
The problem is that the main purpose of these military
detentions is interrogation, a practice that always has
potential for abuse. Preventing abuse requires compliance
with rules for treatment of prisoners, as well as access for
independent monitors and accountability for violators. But
many detainees in Afghanistan and Iraq have been held
virtually incommunicado, sometimes in undisclosed locations,
under rules that have never been made public. As early as
2002, news reports of abuse or prisoners began to surface,
and new allegations have continued to emerge.
The administration's response has been to stonewall. A year
ago, in response to the first set of allegations of abuse of
detainees, President Bush affirmed that the United States
does not practice or condone torture or cruel, inhuman and
degrading treatment, and that it investigates allegations of
violations. But the actions needed to convert this from a
statement to a commitment have been absent. For the past two
years, human rights organizations have requested the
guidelines used to govern interrogation, the results of
investigations of alleged instances of torture or
mistreatment, information on individuals transferred to third
countries for interrogation, and--most important--access to
the detainees and their medical records to ascertain whether
they have been abused. The administration either denied or
failed even to acknowledge many of these requests, including
those concerning findings of the investigation of the case of
two detainees who died in custody more than a year ago. As
for combatants sent to third countries, among them countries
with a record of torture, the administration claimed to have
obtained assurances that the countries do not torture
detained combatants.
An even deeper problem with the administration's approach
has been its efforts to evade compliance with the Geneva
Conventions, which protect detainees from torture, ill
treatment and humiliation, as well as in-human conditions of
confinement. It has said that captured al Qaeda suspects in
captivity at Guantanamo and Afghanistan are not subject to
the conventions at all. And U.S. officials took a shockingly
casual approach to the treatment of POWs by U.S. surrogates
in Afghanistan, assuming no responsibility for the horrific
conditions of imprisonment for thousands of Taliban fighters
and washing U.S. hands of reports that allies killed possibly
hundreds or thousands of detainees. Some of the holding
centers are even off-limits to the International Committee of
the Red Cross, which is internationally authorized to visit
all security detainees.
The president, the director of the CIA and the secretary of
defense must now do what should have been done 18 months ago.
The message has to be clear that interrogators must be
subject to rules, and if the rules are to be obeyed, the door
to the interrogation room must never be shut. They should
publicly pledge that the United States is bound by the Geneva
Conventions and will be bound by them with respect to every
single military detainee, whether or not it considers them
official prisoners of war. They should immediately account
for the whereabouts and condition of all in detention and
offer the International Committee of the Red Cross, as well
as independent human rights monitors and medical experts,
full access to all prisoners and all medical records that can
reveal abuse. The president should provide to the American
public a full accounting of interrogation practices,
including all records and documents relating to the most
recent violations and past allegations of abuse in
Afghanistan, Iraq, Guantanamo, the United States and other
countries where individuals have been sent.
When some Americans insulted and humiliated their Iraqi
captives, they shamed every American as well. Moreover, they
jeopardized the lives and well-being of U.S. soldiers and
people in custody throughout the world. President Bush
recoiled at the horror of it, but unless revulsion leads to
more concerted action, the abuses will continue.

Amendment No. 3110

The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. My understanding is that we are now turning to the
amendment I have offered along with my colleague, Senator Mikulski; is
that correct?
The PRESIDING OFFICER. Under the previous order, there is a period of
1 hour of debate, 30 minutes allocated to the majority, 30 minutes
allocated to the minority, of which 20 minutes is controlled by the
Senator from North Dakota.
Mr. DORGAN. Mr. President, that 20 minutes begins at this point. Let
me yield myself 2 minutes. Then I will yield 5 minutes to the Senator
from Maryland.
Let me just say, this is the easiest amendment to consider of all of
the issues that we have dealt with on this legislation. It deals with
the question of whether we should shut down the loophole that exists in
current tax law that says to a company, shut your American
manufacturing plant down, fire your workers, move your manufacturing
plant overseas, manufacture the product, ship it back into the U.S.
marketplace and, by the way, we will give you a big tax break. If we
can't begin a baby step in the right direction of saying, we will no
longer subsidize in the Tax Code the movement of U.S. jobs overseas,
then we don't have a ghost of a chance of fixing what is wrong with
this Tax Code.
You have two companies side by side. Both make bicycles. One decides
it will move its plant to China. The other continues to live in
Baltimore and make its bicycles in Baltimore. The difference? The
company that moved overseas gets a tax break. The company that stays in
Baltimore doesn't. It is an insidious, perverse tax incentive that
makes no sense. We ought to end it.
That is what my colleague and I do with our amendment. I will explain
it further at some later moment. I want to offer 5 minutes to the
Senator from Maryland who has to go to the Intelligence Committee.
The PRESIDING OFFICER. The Senator from Maryland is recognized for 5
minutes.
Ms. MIKULSKI. Mr. President, I thank the Senator from North Dakota,
the lead sponsor of this amendment, for yielding me such time. I also
acknowledge his outstanding leadership on trade. Trade is such an
abstract word, but it is another word for jobs. The big question is,
how are we going to keep jobs in the United States?
This, then, takes us to tax policy. Tax policy is more than just
simply collecting revenue; tax policy is a statement of our principles.
The Tax Code in the United States has, since the New Deal, stood for
certain principles: That it should be fair, No. 1, and that the more
wealthy you are, you would bear a little heavier responsibility. Part
of the principle of fairness and of paying taxes is what is called
citizenship. It is called shared responsibility. It is called, how do
you make sure the U.S. Government functions to provide national
security and domestic opportunity and a safety net for seniors. That is
really what it is all about.
The Tax Code is the fundamental principle of how you collect revenue,
and it is tied with citizenship, both individual citizenship and
corporate citizenship. The way we see it is: If you are a good
corporate citizen, you ought to stay in this country and keep your jobs
here. Right now we have a tax code that rewards just the opposite. We
have a tax code that rewards corporations for shipping jobs overseas.
I believe what the Dorgan-Mikulski amendment does is say that, No. 1,
our Tax Code should be patriotic. Our Tax Code should stand up for
America. It should stand up for keeping jobs here. It should stand up
for rewarding good-guy companies that keep jobs here and provide health
benefits to their employees. It should also close the loophole where
people not only take jobs overseas but hide their income in the Bermuda
Triangle or the Cayman Islands.
This deals with one aspect. The amendment Senator Dorgan and I offer,
the economic patriotism amendment, says that right now what we would do
is close the loophole for sending jobs overseas. The Dorgan-Mikulski
amendment ends those huge tax breaks to manufacturing companies that
send jobs overseas, that only sell the products they make back here in
the United States. Right now this Tax Code lets these companies move
the jobs and not pay the taxes on the profits they earn by sales back
home.
Our amendment tells these companies: If you want to export jobs out
of America, you can go, but you can't import these products back in the
United States and be able to shelter your profits. Our amendment says:
The Tax Code can no longer be used to boost corporate earnings at the
expense of American workers. It is actually an amendment that makes
good sense. Why should we reward people who move their jobs overseas
and penalize in the Tax Code the people who keep their jobs here in the
United States and who also tend to provide their employees with health
insurance?
People in my State really cannot believe what is happening. We have
lost

[[Page S4889]]

21,000 manufacturing jobs since 2001. What a bloodless statistic.
Behind every one of those numbers are 21,000 families, 21,000 families
that built ships, made steel, made garments and apparel, even made the
kind of technology we use in high tech. Where did those jobs go? They
went on a slow boat to China. They went on a fast track to Mexico and a
dial 1-800 anywhere. Why are they going? Because the Federal Tax Code
says it is OK.
The Federal Tax Code says, in fact, it is not only OK, we are going
to give you a huge subsidy. I think we need to subsidize the good-guy
corporations. That is what I want to do. I believe that the Dorgan-
Mikulski amendment is a patriotic amendment. It is part of an economic
patriotism that we have to start focusing on in this country. I don't
want my country, in a few years, to have the economic profile of a
Third World country.
Vote for America, vote for patriotic economics, and vote for Dorgan-
Mikulski.
The PRESIDING OFFICER. The Senator from North Dakota is recognized.
Mr. DORGAN. Mr. President, I yield myself such time as may be
necessary.
Again, this is not complicated. Levis used to be American. When you
would slip on a pair of Levis in the morning, you were wearing a pair
of American pants. Not any longer. The manufacturer of Levis has gone
to Mexico and China.
Fig Newtons. If you want some Mexican food, you can get Fig Newtons
from Mexico. That old all-American Fig Newton cookie has gone to
Mexico.
Fruit of the Loom underwear has gone to Mexico.
I have mentioned previously Huffy bicycles. They have gone to China.
Do you know that little red wagon, the Radio Flyer? This one has gone
to China.
The perversity of all of this is, whether it is Fig Newtons, Levis,
Radio Flyers, Huffy bicycles, or Fruit of the Loom underwear, they were
all rewarded for moving their jobs overseas because our Tax Code has
embedded in it a special little deal: Move your jobs overseas and we
will give you a special deal.
We want to change that. According to the Joint Tax Committee, U.S.
taxpayers will pay $6.5 billion between 2004 and 2013 as tax incentives
to U.S. companies that set up offshore subsidiaries to manufacture
merchandise and ship it back into this country. We have lost about 2.7
million manufacturing jobs in this country, and we have a perverse
provision in the Tax Code that says let's even enhance that by
incentivizing those who would close their American factories and move
the jobs overseas.
This is not a new idea. This is a rather narrow amendment, by the
way. We don't end deferral; we just end deferral with respect to U.S.
companies that are manufacturing abroad and selling back into this
country. President Kennedy tried to end the entire deferral system.
President Nixon tried to end it. President Carter tried to end it. The
Senate voted to end it in 1975. The House of Representatives voted to
end it in 1987. In each case, the big economic interests that get
rewarded for shipping American jobs overseas have won. The question is,
will they win today? We are losing jobs. We need to keep jobs in this
country.
This amendment doesn't prevent a company that chooses to move Huffy
bicycles or the little red wagons to China. It doesn't prevent a
company from moving Fig Newton cookies, Fruit of the Loom, or Levis to
Mexico. But it does say if you are going to move those jobs, at least
we are not going to help pay for it with incentives in the Tax Code.
That is a simple enough proposition. This Senate should adopt this
amendment.
I reserve my time.
The PRESIDING OFFICER (Mr. Cornyn). The Senator from Iowa is
recognized.
Mr. GRASSLEY. Mr. President, I want to speak against the Dorgan
amendment. I yield myself such time as I might consume. Before I speak
specifically to the amendment, since I heard the Senator from North
Dakota express his concerns--and legitimate concerns--about jobs going
overseas, I think there might be some suggestion in this amendment that
this bill doesn't deal with moving jobs overseas.
This amendment is all about preserving manufacturing jobs in America
and creating more manufacturing jobs in America, because the basis for
this legislation is that there is no benefit in this bill from the
reduction of the corporate tax from 35 percent down to 32 percent for
any organization that doesn't manufacture in the United States. So it
applies to domestic manufacturers that are manufacturing in the United
States, not domestic manufacturers that manufacture overseas. It also
applies to companies overseas--foreign companies--that would come to
the United States and invest here, create jobs here, and hire people in
America to manufacture here.
There is a lot of concern expressed about moving jobs overseas. I
don't denigrate any of those concerns. But that is what the debate on
this legislation has been all about for 1 whole week during the month
of March, a few days during April, and now again this week. During that
period of time of stalling, we have had a 5-percent European tax put on
our exports to Europe--a percent again in April, and now a third
movement of 1 more percent. That is going to go on every month. Even if
we pass this bill this very minute, this bill probably won't be signed
by the President for another month or so. We are going to continue to
have this terrible European tax put on our exports there.
I emphasize for listeners who ask, how can they do that? Well, it is
legal under international trade agreements. The reason it is legal is
because we are trying to change our tax laws to conform with our
international agreements--international agreements that this body has
already adopted.
So we are dealing with these amendments--probably very legitimate
ones--but we have had amendments put before this bill that have kept
this bill long enough on the agenda so that we are already 77 percent
less competitive than we used to be with our global competition doing
business in Europe.
So why are we here? We are here with this underlying piece of
legislation to preserve and create more jobs in America.
We have heard the Senator from North Dakota make a very impassioned
case for American workers whose jobs have been lost when U.S. plants
move overseas. We have all witnessed this heart-wrenching event. I know
that my home State of Iowa has had plant closings or some parts of
production move overseas. Unfortunately, this amendment will not do one
doggone thing to bring those jobs back. In fact, it could very well
cost even more U.S. jobs.
I will explain my concerns by first examining his amendment. This
amendment repeals deferral for property imported into the U.S. by
foreign subsidiaries of U.S. companies, even without regard to whether
that property was ever previously produced, manufactured, or grown in
the United States. This means the amendment doesn't focus on their
primary complaint that U.S. companies are shutting their plants, moving
production offshore, and selling back into the United States.
The bill does not focus on this scenario. Instead, it overshoots the
mark by hitting all goods sold into the United States by U.S.
companies, even if it is impossible for those goods to first be
produced in the United States.
I will give an example. If a produce company sets up a banana farm in
Costa Rica to import bananas into the United States and around the
world, the income from sales to the United States are not eligible for
deferral. I may be mistaken, but I am not aware of too many banana
farmers in Texas or Florida. So I do not see how deferring taxes on a
banana farm in Costa Rica is going to cost the United States jobs.
Similarly, if a U.S. company wanted to start a mining operation in
some far away land to extract a new and exotic mineral that is not
found here at home, they can sell that anywhere in the world, but they
could not and cannot import that back into the United States without
triggering this amendment.
How about coffee? The only place I know we grow coffee in the United
States is in Hawaii, and that was 25 years ago. Maybe they do not even
grow it there now. We have lots of coffee shops on our streets these
days. If they set up their own coffee plantation

[[Page S4890]]

in Brazil, they would get hit under this amendment that is before us. I
do not know whether we raise coffee anywhere else in the United States,
but we sure do not raise it in Iowa.
It appears the amendment of Senator Dorgan and Senator Mikulski would
allow a U.S. company to sell foreign goods to anyone in the world
except to America. That does not make sense to me.
I have described how the bill would operate, but I do not think that
is the intent of this legislation. What I believe is intended is that
deferrals should be denied if a company closes a U.S. plant, produces
the goods offshore, and then imports the goods back into the United
States. This does not actually happen very often. The latest Department
of Commerce data on U.S. multinationals shows that only 7 percent of
foreign subsidiary sales were into the United States.
Nevertheless, this amendment insists that the rule of deferral in our
tax law is somehow a tax benefit that moves jobs offshore and allows a
company to not pay taxes on foreign income.
Of course, this is not true. Deferral has nothing to do with moving
jobs, and it never forgives taxes that are owed on foreign products of
U.S. companies. The rule of deferral exists to keep U.S. companies
competitive in the global marketplace. Let me repeat. The rule of
deferral exists to keep U.S. companies competitive in the global
marketplace, and it has been that way in our tax laws since 1918. For
85 years it has been the law.
We are going to hear a great deal about deferrals this week. We will
hear wild accusations about how this rule, which has been in place
since 1918, spells doom for American workers. None of this is true. In
fact, just the opposite is true. By enhancing the international
competitiveness of U.S. companies, deferral ensures an ever-growing
base of opportunity for U.S. companies and their employees at home and
abroad.
U.S. multinationals are a critical component of our economy. These
companies operate in virtually every industry and have investments of
more than $13 trillion in facilities located across our great country.

As employers, they provided 23 million jobs for Americans in 2001,
nearly 18 percent of the payrolls in the country. With a payroll in
excess of $1.1 trillion, U.S. multinationals create more than 53
percent of the manufacturing jobs in America and employ more than two
U.S. employees for every foreign worker.
During the 10 years between 1991 and 2001, U.S. multinationals
increased domestic employment at a faster rate than the overall
economy. We have a recent study confirming that U.S. multinationals are
significant job creators, and those jobs are not created through
exporting jobs to foreign nations with low labor and low tax costs, as
the amendment infers.
The Department of Commerce data shows that the bulk of U.S.
investment abroad occurred in high-income, high-wage countries. In the
year 2001, 79 percent of the foreign assets and 67 percent of foreign
employment of U.S. multinationals were located in high-income,
developed nations, such as Australia, Canada, Hong Kong, Japan, New
Zealand, Singapore, South Africa, and the countries of the European
Union.
We have to remind ourselves that corporations are comprised of
people. People like good roads, safe water, reliable power grids, and
stable societies. That is the only kind of environment where business
can flourish. So it is only rational that if a U.S. corporation is
going to make a foreign investment, it is going to make the safest
investment possible. That means going to fully developed countries with
thriving markets and highly paid workers.
We also have to remember a simple maxim for why companies go into
foreign markets: You have to be there to sell there.
Today, fully 95 percent of the world's population and 80 percent of
the purchasing power is located outside the United States. In other
words, the United States is 5 percent of the world's population. But if
we want to sell, we go where the people are. Ninety-five percent of the
people are outside the United States. If you want to make sales, you go
where the people are.
We have an instance in which foreign sales growth has outstriped
domestic sales growth. So this increased growth requires increased
foreign involvement. The good news is foreign growth also results in
U.S. job growth.
A recent study confirmed that during the 10 years, 1991 through 2001,
for every job U.S. multinationals created abroad, they created nearly
two jobs in the United States in their parent corporation. That is why
it is critical to our company that U.S. companies remain competitive in
this international marketplace.
Let's review for a moment a more rational explanation for deferral
and how it works to keep our U.S. companies competitive.
The United States taxes all of the worldwide income of its citizens
and corporations. The U.S. income tax applies to all domestic and
foreign earnings of U.S. companies. The United States fully taxes
income earned overseas by foreign subsidiaries of U.S. companies.
However, many foreign countries tax their companies on a territorial
basis, meaning they only tax income earned within their country's
borders and do not impose tax on the earnings of foreign subsidiaries.
Countries that use a territorial system, such as Australia, Belgium,
Canada, Denmark, Finland, France, Germany, Luxembourgian, the
Netherlands, Sweden, and Switzerland, among other countries, have a
great advantage over a U.S. company.
We have to take that into consideration. The tax system is the cost
of operation, and if we do not have a more level playing field for our
companies, how do we expect to compete in this world marketplace?
I will give an example. A U.S. company with a Singapore subsidiary
will pay U.S. tax and a Singapore tax on the subsidiary's income. A
French company with a Singapore subsidiary will pay Singapore tax but
not any tax in Paris. That means the U.S. company in Singapore has a
higher tax burden than the French company in Singapore. Two basic tax
rules answer this problem and seek to put U.S. companies on a level
playing field with foreign competitors from territorial countries.
The first rule says when foreign income is brought home, the U.S.
allows a reduction against U.S. tax for any foreign tax paid on that
income. This foreign tax credit prevents the U.S. from double-taxing
foreign earnings. Does anybody believe in double taxing?
In effect, that would make our companies noncompetitive in this
international marketplace. Like deferral, this too has been on the tax
laws of the United States since 1918. The foreign tax credit is
limited. It may only offset up to 35 percent of the U.S. corporate tax.
If the foreign tax rate is higher, the credit stops where we stop
taxing corporations at 25 percent. If the credit is lower, say 10
percent, then an additional U.S. tax will be owed up to the full 35
percent. In this example, the additional 25 percent of taxes would be
owed to the U.S., which is the difference between the 10 percent and
our 35-percent top rate.
The second basic tax rule is U.S. companies are allowed to defer U.S.
tax on income from the active business operation of a foreign
subsidiary until that income is brought back to the United States, and
that is usually brought back in the form of a dividend paid to the U.S.
parent. This is referred to as the rule of deferral, meaning the U.S.
tax is deferred until the earnings are brought back. This is the rule
this amendment attacks.
It is important to note deferral is not a forgiveness of a tax. It
simply means we impose full U.S. tax tomorrow instead of today. We do
not forgive tax under deferral because we do not want to create
incentives to move operations offshore. The reason we defer tax on
active business operations is so U.S. companies can remain competitive
with foreign companies, from those countries that have a territorial
tax system.
We do not defer tax on passive activities such as setting up an
offshore bank account. We tax passive activities yearly, and active
operations are subject to competitive disadvantage. For example, if we
impose U.S. tax today on the profits of a Singapore subsidiary, then a
U.S. company will pay 35-percent U.S. taxes plus any Singapore taxes,
but the French competitor located next door will only pay the Singapore
tax and not the Paris tax.
If a Singapore tax rate is less than the 35-percent U.S. tax rate,
then the

[[Page S4891]]

French competitor will have a tax advantage. This is because the U.S.
allows the foreign tax credit offset against U.S. income tax imposed on
those foreign earnings but only up to a 35-percent top corporate rate.
If the foreign rate is less than the U.S. 35-percent rate, then
residual U.S. taxes are owed on the difference between the U.S. and
foreign rates.
In another example, if the Singapore tax is 15 percent and the U.S.
tax 35 percent, then the U.S. will impose an additional 20-percent tax
on those Singapore earnings. The French company, however, will only pay
15 percent Singapore tax, no tax in Paris.
If we did not allow deferral of that additional 20-percent tax, then
the U.S. company today would have to pay 20-percent tax compared to the
French company. The question on repealing deferral is whether we want
to hand over the world markets to companies from France and Germany.
This amendment is being offered presumably to save jobs in America,
but when we have a tax system like they want, there is going to be an
incentive for moving those jobs. Repealing deferral means we export our
high U.S. tax rates to U.S. operations around the globe.
The U.S. has one of the highest corporate tax rates in the world.
There are very few countries with higher marginal corporate rates. This
means without deferral, U.S. companies will be at a continual worldwide
disadvantage compared to their foreign competitors. That is why we
defer U.S. tax on active business operations, to allow U.S. companies
to be competitive in the global marketplace.
Some Senators today propose repealing deferral or cutting back. These
proposals would export the high U.S. tax rate to U.S. operations around
the world. That would be fine if all companies around the world were
paying the high U.S. tax rate, but they are not. Companies of foreign
countries are not subject to our tax laws and are usually taxed at a
lower rate.
That brings us back then to the implications of the amendment before
the Senate. Our focus in considering this amendment must be on the
ability of American companies to compete within the United States. The
issue is not whether we tax foreign earnings currently but whether we
cede the U.S. market to foreign competition: You compete or you die.
The Dorgan-Mikulski amendment will increase taxes on U.S. companies,
but their foreign competitors in the United States will not face a
similar tax increase. This can lead to a loss of domestic market share,
or even if market share is maintained losses may be incurred on
domestic sales because of pricing pressures and uncompetitive margins
created by the additional tax burden.
The best measure of an economic impact of their tax increase is the
very concerns Senators Dorgan and Mikulski cite in debating their
amendment, whether U.S. employment levels of the U.S. companies will
drop after this additional tax is imposed. This goes to the issue of
whether salespeople, purchasing agents, line workers, or others could
lose their jobs if the Dorgan-Mikulski tax increase is imposed on
companies' imports.
Keep in mind their amendment would attack imports of bananas from
Costa Rica and coffee from Brazil. That is going to cost U.S. jobs. The
amendment will kill U.S. jobs and the amendment is defeating its own
purpose and should not be supported in the Senate.
If the objective of Senators Dorgan and Mikulski is to ensure
companies do not reduce U.S. employment by round-tripping production,
then it is equally important to ensure their tax increase does not
reduce U.S. employment.
Increasing taxes on U.S. companies will not bring those jobs back to
America. A company will only pay taxes if the company is profitable,
and they will only stay profitable if they remain competitive in their
markets. But in the United States, taxes are a 35-percent cost to
profit, and that is where a competitiveness disadvantage can occur when
the U.S. company is competing against foreign companies that will not
incur this tax increase.

Senator Baucus and I, in trying to develop this bipartisan bill that
is before us, held hearings last July regarding the effects of
international competition within the United States. So I think we have
a right to believe we are very familiar with the domestic effects of
these kinds of rate differentials.
I would like to close with a quote from Joseph Guttentag,
International Tax Counsel for the Clinton administration. He gave this
testimony before the Senate Finance Committee 9 years ago, July 21,
1995. He said this:

Current U.S. tax policy generally strikes a reasonable
balance between deferral and current taxation in order to
ensure that our tax laws do not interfere with the ability of
our companies to be competitive with their foreign-based
counterparts.

I hope a statement from another administration, particularly from a
recent Democratic administration, the Clinton administration, will
carry a lot of weight with both Republicans and Democrats in helping to
defeat this amendment on which we will soon be voting.
I hope Senators will join me in voting against the job losses that
will result from this amendment and this tax increase that comes on
American business with this amendment.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, I was sitting here wondering how someone
would actually support a tax provision that incentivizes the moving of
U.S. jobs overseas. I thought: That is hard to support. I am going to
call this defense the banana defense because my colleague talked a
couple of times now about bananas from, I believe, Costa Rica. So we
will call that the banana defense.
I have great respect for my colleague from Iowa. I enjoy his work and
I think he is a good legislator. But in my judgment, some of the
statements that have just been made are not accurate, and I would like
to at least give a response to them so people understand.
First of all, this is not a tax increase. What a bunch of nonsense.
This eliminates a tax break for those companies who want to move jobs
overseas. This is very simple. If we are going to shut down loopholes
that incentivize the moving of jobs overseas and have people call it a
tax increase, I am sorry; it is not. That is not the purpose of it,
that is not the intention of it, and not the effect of it.
My colleague talks about the 35-percent corporate tax rate. I am
sorry, he knows that is a statutory rate. He also knows very few
corporations pay a 35-percent tax rate.
Mr. President, 61 percent of the U.S. domestic corporations in this
country pay zero--not 5 percent, 20 percent, 30 percent, or 35 percent;
they pay zero. That is according to a recent GAO report. The rest that
do pay do not pay the 35-percent statutory rate. They pay substantially
less than that.
About 40 to 50 years ago, corporations paid 40 percent of the total
taxes paid in this country. They now pay less than 9 percent, and the
American people, individuals, pick up the rest.
My colleague says this defers taxes; it doesn't mean we forgive
taxes. Of course, it does. This very bill brings to the floor of the
Senate the most generous provision I have ever heard of. It says
repatriate all your earnings from overseas that have never been taxed,
and we will let you be taxed at 5.25 percent. You repatriate it and we
will reduce your taxes to 5.25 percent. I say how about my constituents
in North Dakota? Why don't we give all those constituents--regular
people, family farmers--an opportunity to pay a 5-percent tax rate? Why
just the folks who decided to invest overseas? Why not everybody? If 5
percent is good enough for those who have over $600 billion in
unrepatriated income, and you say bring it back and we will cut your
tax rate to 5 percent, let's do it for the folks from Iowa and North
Dakota. Let me get their names and let's give them a 5-percent tax
rate.

This notion we are not forgiving taxes is wrong. Of course we are
forgiving taxes. This bill forgives taxes of those that are big enough
to earn billions overseas, and says to them: If you want to repatriate
it, we will give you a huge, big tax break.
Let me say with respect to the issue of a company that has never been
located here with a manufacturing plant, deciding to manufacture in
China versus here--my proposal, and the amendment we have introduced,
deals only with sales back into this country. So the question that will
be asked by

[[Page S4892]]

someone who is building a manufacturing plant for the purpose of
producing the little red wagon called the Radio Flyer, for a company to
decide where to manufacture this, what the underlying provision in law
does is to say: Make a decision. Either build it here or build it
there. By the way, if you decide to build it there--in this case
China--we will give you a tax break.
My colleague says this bill closes all these things--not true. In
fact, it produces a very generous, juicy, big tax break at 5.25
percent, and in addition it leaves untouched this tax break.
I can quote a good number of economists who say there is embedded in
this tax law a provision that says build it here or build it there.
Make a decision to build it there. Take it offshore. Take it outside
this country.
In my judgment, it ought not be a significant choice for this
Congress to change this. This is a loophole that ought to be closed.
With respect to competition, my colleague talked about
competitiveness. Let me ask this question. Let's assume that you are
the corporation that stays in this country to build a bicycle. Your
manufacturing plant is here. Now you are competing with the Huffy
bicycle company that moved to China. The difference? They pay less in
taxes than you do because you stayed here and they left. What about
that competitiveness? What about the competitive issue of the company
that stayed and now pays higher taxes than the company that left?
Incidentally, this company did leave. They fired the workers. Why?
Because it cost too much at $11 an hour to have them keep making
bicycles in our country.
This cannot be obfuscated so much that we can't see what this
question is before the Senate. Do you want to continue to have a Tax
Code that incentivizes the movement of jobs overseas, or do you want to
close the loophole? This is not an attack on all ``deferral.'' This is
a much narrower amendment. The Senate is going to vote on this, and it
is not going to be able to waltz around and tap dance. This is not
about having an American corporation with a foreign subsidiary in
Bangladesh that is producing a product to ship to South Korea, and
therefore it must be competitive with a company from France. That has
nothing to do with this amendment. So in addition to the banana
defense, we now have the French defense, I guess, or the U.S.
corporation against French competition. I don't understand that. That
is not what this amendment is about. We could debate that at some later
point, but it is not what this amendment is about.
Mr. President, how much time is remaining?
The PRESIDING OFFICER. The Senator has 3 minutes remaining.
Mr. DORGAN. I respect those who disagree with me. They have a right
to disagree. My colleague ended with a quote from someone from the
Clinton administration. Let me quote Will Rogers. He said:

It's not what they know that bothers me. It's what they say
they know for sure that just ain't so.

In this case, this narrow question with respect to deferral simply
asks whether we want to continue to make it beneficial for someone to
close a plant here and move it elsewhere, or to answer the question, if
requested: Should I build it here or build it there, to answer the
question by saying let's build it there because our Tax Code provides a
benefit for me if I build it there. Move a job to China and our tax
bill rewards you. Keep a job here and you actually face unfair
competition because of the provision that is now in law, the one I want
to get rid of. This is very simple. I reserve the remainder of my time.
Mr. KOHL. Mr. President, I rise in support of the amendment of the
Senators from North Dakota and Maryland. I supported this amendment
because it repeals an unfair provision that pulls jobs away from the
American manufacturing sector. I supported this amendment because it
gives a tax break to companies who ship jobs overseas and then compete
with domestic manufacturers. And I supported this amendment because
Wisconsin has seen a steady decline in manufacturing jobs, with many of
these jobs being sent offshore because the U.S. Government would not
tax their profits.
Under current law, a U.S. company that moves its manufacturing
operations overseas may defer paying U.S. taxes on the profits it makes
abroad until those profits are sent back to the U.S. This process,
known as deferral, clearly serves as a reward for foreign investment
and for shifting jobs off American soil. This reward comes at the cost
of American taxpayers; as much as $2.2 billion over 7 years is lost for
this misguided incentive. A tax policy that moves American jobs abroad
at the expense of American taxpayers--clearly this is not something
that Congress should continue to endorse.
In addition to providing an incentive to move overseas, current law
puts domestic manufacturers who keep jobs in the U.S. at a competitive
disadvantage. While foreign companies can reinvest profits abroad
without paying any U.S. taxes, U.S.-based manufacturers investing in
American jobs have their profits subject to U.S. taxes. Multinational
companies should pay the same taxes that domestic companies pay, and
companies keeping jobs in America should not be penalized for doing so.
This is especially true given the continuing job loss in the
manufacturing sector. Wisconsin has been especially hard hit by the
loss of manufacturing jobs to overseas competitors. My State is one
where manufacturing jobs have historically made up the core of our
economy. Due in part to tax incentives such as deferral, Wisconsin has
lost one out of every seven manufacturing jobs since 2000. The State's
economy has not been able to absorb this increase in unemployed
workers, resulting in a stagnant unemployment rate.
The Dorgan-Mikulski amendment would repeal the tax incentive for
American companies to move overseas. Our Tax Code should not endorse
the continued loss of American jobs to companies investing overseas.
The Dorgan-Mikulski amendment is the first part of a prolonged solution
to the continuing loss of American manufacturing jobs. The amendment
would partially repeal deferral, and targets the repeal to apply only
to firms that move production overseas but continue to sell those
products in the U.S. Thus, the amendment would repeal the competitive
advantage that companies moving their production facilities offshore
currently receive.
At a time when the country's manufacturers are struggling, we cannot
continue to give a benefit for those companies who send American jobs
abroad. We must bring equity to the tax code, and bring jobs back to
America.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. Mr. President, I think I have about 3\1/2\ minutes. I
am going to take 1\1/2\ minutes for myself, and then I hope Senator Kyl
will get over here. He asked me for 2 minutes. Then that would use up
our time.
The first reaction to the response to my remarks that I have that I
want to clear up is that the author of the amendment speaks to the
point that it only hits imports coming into the United States if a
company moved overseas. The fact is--it may be a flaw in the way it is
written--this amendment hits all imports coming into the United States.
The second point is, it was stated that this was not a tax increase.
This amendment raises $6.5 billion. In my judgment, when you change tax
law and you bring revenue in, that is a tax increase.
The second issue regarding Huffy moving overseas, the response to
that is, their competition is in China and Taiwan. Companies have to do
what they can to meet the competition. Would they rather have a Huffy
company that existed as a U.S. corporation competing with China and
Taiwan manufacturers or would they rather have the whole company go out
of business? If you do not meet your competition, you do not compete
you die.
Then there was reference to the fact the GAO report says 61 percent
of companies did not pay taxes. That could be true. But that also
includes new companies and it includes companies that maybe are
dormant; in fact, it does include all of those.
Here is the significant thing about this GAO report: It says 96
percent of all large corporations in America pay tax.

[[Page S4893]]

We are back to the issue of what this amendment does or does not do.
It does not do enough.
I have to ask the Presiding Officer if Senator Kyl does not arrive
and I have 1 or 2 minutes remaining, what do I do? I want to save the
time for him, if I can, under the rules of the Senate.
I yield the floor and save my time for Senator Kyl.
Mr. DORGAN. Senator Kyl is here.
Mr. GRASSLEY. Mr. President, I don't have much time remaining, 2
minutes.
The PRESIDING OFFICER. The Senator has 30 seconds remaining.
Mr. GRASSLEY. Could the Senator be kind enough to give him an
additional minute and a half for our side? That is infinitesimal. We
will argue for a minute and a half over it.
Mr. DORGAN. I ask unanimous consent that a minute and a half be added
to the Republican side and a minute and a half be added to our side.
Mr. GRASSLEY. I yield Senator Kyl my remaining time.
Mr. KYL. I thank the Senator from Iowa and I thank the Senator from
North Dakota.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. KYL. Mr. President, it seems to me the amendment of the Senator
from North Dakota does both too little and too much. A lot of thought
went into crafting the bill before the Senate by staff and members on
the Finance Committee. It is hard to get this exactly right. We have
done that. This is very complicated.
What I mean by doing too little and too much is this: The amendment
only affects about 7 percent of the products according to the Commerce
Department; 7 percent of the goods and services these multinational
corporations produce are imported back into the United States. That is
the only part of the new deferral rule that would be affected.
In that sense, it probably does not do much to accomplish the
purposes of the authors of the amendment. But it does too much in the
sense that anything that impedes the competitive advantage of the U.S.
corporations and the quality of their products is going to hurt their
ability to do business.
What we have tried to do with the deferral rules is to even the
balance between the European corporations, for example, and the
American corporations, so our companies are not taxed more than their
competitors. This would, to the extent it changes these deferral rules,
impose a higher tax on American businesses than their European
counterparts are required to pay. In that sense, it changes this
competitive balance. It is exactly what we are trying to get away from.

I urge my colleagues to reject the amendment of the Senator from
North Dakota, acknowledge the work of the Finance Committee which, as I
said, very carefully tried to get this balance right and ensure
American companies would not be at a competitive disadvantage vis-a-vis
their European competitors.
I urge my colleagues to defeat the amendment of the Senator from
North Dakota and support the Finance Committee.
Mr. DORGAN. How much time remains?
The PRESIDING OFFICER. Fifteen minutes total on the minority side
remains. The Senator from North Dakota has 2\1/2\ minutes.
Mr. DORGAN. Mr. President, let me consume the 2\1/2\ minutes. Does
that include the 1\1/2\ minutes?
The PRESIDING OFFICER. It does not.
Mr. DORGAN. Mr. President, Senator Baucus has left the room. Let me
consume 5 minutes, with Senator Baucus's consent, of the minority time
after which I will yield back the time and I believe all time will have
been yielded back on this issue. Is that correct?
The PRESIDING OFFICER. The Senator is correct.
Without objection, it is so ordered.
Mr. DORGAN. Let me make a couple of comments about the facts. First
of all, the number of manufacturing jobs we have lost in this country.
This chart shows the number of manufacturing jobs we have lost since
the year 2000, a little over 2.7 million manufacturing jobs.
One cannot make the case this is not a problem. Of course, we are
losing manufacturing jobs. The number of jobs in foreign manufacturing
affiliates of U.S. firms has grown by a million in an 8-year period.
So, of course, they are gaining jobs. We are losing manufacturing jobs
and they are gaining jobs. It is hard to make the case there is not an
issue here.
Now with respect to the issue of the corporations, 61 percent of whom
pay no taxes according to the GAO, my colleague says, well, probably
some of them are dormant. The U.S. corporations made $2.7 trillion in
gross income on which they paid zero in taxes. If that is dormancy, it
is an interesting state of affairs, in my judgment.
Second, the issue of Huffy bicycles. I have used the issue of Huffy
bicycles and the Radio Flyer wagon to make the point. The point is jobs
are migrating overseas. This Radio Flyer red wagon was made here for a
century and now it is being made in China. This Huffy bicycle was made
here for a long time. Now it is gone. It is made in China. We saw the
little red wagons and Huffy bicycles leave America and move to China.
With respect to Huffy, the workers here made $11 a hour. The company
said that is way too much; I will hire a Chinese worker at 33 cents an
hour, 7 days a week, 12 hours a day.
As we did that, we said, We will give you a tax break. Move this
plant to China and we will give you a tax break. That is what our
amendment would shut down.
I was trying to think how would we construct a defense, or how will I
hear a defense about this, and it started out with trade. The Europeans
are hitting us with these trade sanctions. Yes, well, we are really
weak-kneed on trade. This country has a beef problem with Europe, so we
slap them around. Do you know what we do with the Europeans? We slap
them around with sanctions on truffles, goose liver, and Roquefort
cheese. My God, that will send fear into an adversary.
If Members want to talk trade, spend time talking about trade and
wonder why we do not have a spine and backbone and strong knees to
stand up for this country for a change.

But this is not about trade. This is about an insidious, perverse
little provision in the Tax Code that says, Move your jobs, decide to
build overseas rather than here, and we will give you a little tax
break.
If we cannot take a baby step in doing this, if we cannot close this
loophole, what on Earth can we do?
With respect to the fact it is alleged this is a tax increase, my
guess is almost everything will be alleged to be a tax increase in the
future. It does not matter what you talk about, they will say it is a
tax increase. Is closing a loophole that is fundamentally unfair, that
incentivizes the moving of American jobs overseas, is that really a tax
increase, or is it closing a loophole? Do you want to keep doing this?
Should we take taxpayers' money, incentivize it to say, let's pay
these guys to move bicycles and red wagons overseas? Or, let's pay them
to move Fig Newton cookies to Mexico, or pay them to move tennis shoes
to Indonesia. Is that what we want to do, pay them to do that? That is
what exists in our Tax Code.
This is the simplest possible amendment. If Members want to support
American jobs and want to at least have a neutral Tax Code and want to
stop the perversity of saying let's actually help finance and keep jobs
from moving overseas, then vote for this. If you want to talk about
competition between Bangladesh and France and Costa Rica, and construct
all kinds of interesting theories that have nothing to do with this
amendment, then vote against it. There is nothing wrong with that. I
have lost before. I hope I will not lose today.
This amendment will come up again and again because this country
should not be subsidizing the loss of jobs to other countries. Those
jobs are going in part because they can buy 33 cent an hour labor and
put 12 people in a room and work them 7 days a week and say, if you try
to organize as a group of workers, you are fired. If you complain about
an unsafe work plant, you are fired. So that is the incentive to move
jobs overseas.
On top of that, we actually, in public policy, say we will buy you a
little cherry on top of the sundae. The cherry on top of the sundae is
you actually get a tax break here. The company you are competing
against, that you left back

[[Page S4894]]

in the United States--tough luck for them. They are paying higher taxes
than you are.
It seems to me if we cannot think our way through this short little
maze, this Congress cannot think its way through anything. This is not
organizing a two-car caravan. This is simple. This is easy. And the
choice, when we cast this vote, is not going to be complicated at all.
Either you believe this incentive should not be in the Tax Code or you
believe we ought to continue to subsidize jobs that are moved overseas.
We have more to do. We have a debate on trade that has to come. I
don't expect we will get to the debate on trade because of the Central
American Free Trade Agreement. It should be brought to the floor and
debated, but will not be before the election because, I am guessing,
the President does not want to have that debate--I would love it. Let's
get it here tomorrow, as far as I am concerned.
There is much more to discuss on this issue. With respect to this
alone, the Senator from Maryland and I have offered an amendment that
is painfully simple and I hope will be painless to vote for.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. WARNER. Mr. President, will the Chair advise the Senate with
regard to the time agreements at this point?
The PRESIDING OFFICER. Time has expired on the majority side.
Mr. WARNER. Mr. President, can the Senator from Virginia ask for a
period of 5 minutes to discuss a matter of importance to all Senators?
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Virginia.

Notice Of Hearing And Briefing On Iraq

Mr. WARNER. Mr. President, this morning I had the privilege of
engaging in a colloquy with the distinguished minority leader with
regard to the desire of the Senate to have Secretary Rumsfeld come in
open session and respond to questions from Senators with regard to the
very serious situation of allegations about the mistreatment of
prisoners in Iraq.
Senator Daschle, Senator Frist, and I--Senator Frist and I worked on
it yesterday together; we worked on it again today--Senator McCain,
Senator Levin--I just left him--so there has been a group of us who
have worked on this.
I just finished a conversation with Secretary Rumsfeld, and he has
always been quite willing to come up. It is a question of the time and
the ability to get together a team of witnesses to join him. That has
now been concluded. So the distinguished majority leader and I have set
the time for this to be 11:45 on Friday morning for a session of
approximately 2 hours with the Senate Armed Services Committee.
Following that, the respective leaders of the Senate will have the
usual type of briefing in S-407, at which time other Senators not
members of the Armed Services Committee will have the opportunity to
engage the Secretary in questions with regard to their individual
concerns on this and such other topics as they may have.
I thank my colleagues. Many of you have come to me and spoken about
that, and spoken to Senator Levin, and to our leaders. There is always
a willingness on behalf of the Secretary to come forward. He will be
joined by the Chairman of the Joint Chiefs, the Chief of Staff of the
Army, the Acting Secretary of the Army, and perhaps others, because I
was very insistent and he was quite willing to provide a full array of
witnesses such that the entire spectrum of facts now known and
available can be shared openly with the Senate and the general public.
I thank the Chair. I hope all colleagues can arrange their schedules
to attend these very important meetings.
I yield the floor.
The PRESIDING OFFICER. The minority manager has 8\1/2\ minutes
remaining.
The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield back whatever time I can yield
back. I also suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
All time has expired.
Mr. GRASSLEY. Mr. President, before we move on this amendment, I ask
unanimous consent that there be 4 minutes of debate equally divided
prior to the vote in relation to the Allard amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.

Vote on Amendment No. 3110

The PRESIDING OFFICER. The question is on agreeing to the Dorgan
amendment.
Mr. GRASSLEY. Mr. President, I move to table the Dorgan amendment and
ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The question is on agreeing to the motion.
The clerk will call the roll.
The legislative clerk called the roll.
Mr. REID. I announce that the Senator from Massachusetts (Mr. Kerry)
is necessarily absent.
The PRESIDING OFFICER (Ms. Murkowski). Are there any other Senators
in the Chamber desiring to vote?
The result was announced--yeas 60, nays 39, as follows:

[Rollcall Vote No. 83 Leg.]

YEAS--60

Alexander
Allard
Allen
Baucus
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Cantwell
Chafee
Chambliss
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
DeWine
Dole
Domenici
Ensign
Enzi
Fitzgerald
Frist
Graham (SC)
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Jeffords
Kyl
Lieberman
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Murray
Nelson (NE)
Nickles
Pryor
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Specter
Stevens
Sununu
Talent
Thomas
Voinovich
Warner

NAYS--39

Akaka
Bayh
Biden
Bingaman
Boxer
Byrd
Carper
Clinton
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham (FL)
Harkin
Hollings
Inouye
Johnson
Kennedy
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lincoln
Mikulski
Nelson (FL)
Reed
Reid
Rockefeller
Sarbanes
Schumer
Stabenow
Wyden

NOT VOTING--1

Kerry

The motion was agreed to.

Amendment No. 3118

The PRESIDING OFFICER. There are now 4 minutes of debate equally
divided on the Allen amendment No. 3118.
The Senator from Colorado.
Mr. ALLARD. Mr. President, I rise to speak in behalf of amendment No.
3118. This amendment is important to nearly all States in this time of
energy shortages. It provides for and encourages the use of renewable
energy.
I am pleased to have cosponsorship from Senators Miller, Clinton,
Schumer, and Chambliss.
Passage of the green bonds provision is relevant to the JOBS bill. It
is anticipated to create over 100,000 construction and permanent jobs.
It also promotes the large-scale development and deployment of
renewable energy generation. This will stimulate the market for
renewable technologies, such as solar, helping to bring down the cost
of technology.
I also believe it is important to note that our amendment contains a
provision which pays for its costs.
In closing, I urge all of my colleagues to vote for this amendment.
It is limited only by the amount of total bonding authority and the
fact that each State is allowed only one project. I think every State
can work to take advantage of the benefits that this amendment will
provide.
Madam President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. I ask unanimous consent that this be a 10-minute vote.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ALLARD. I ask that we yield back time from both sides.

[[Page S4895]]

The PRESIDING OFFICER. All time is yielded back. The question is on
agreeing to amendment 3118. The yeas and nays have been ordered. The
clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. REID. I announce that the Senator from Massachusetts (Mr. Kerry)
is necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 76, nays 23, as follows:

[Rollcall Vote No. 84 Leg.]

YEAS--76

Akaka
Alexander
Allard
Allen
Baucus
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bunning
Burns
Byrd
Campbell
Carper
Chafee
Chambliss
Clinton
Cochran
Coleman
Conrad
Cornyn
Corzine
Craig
Crapo
Daschle
Dayton
DeWine
Dodd
Dole
Durbin
Edwards
Enzi
Feingold
Feinstein
Frist
Graham (FL)
Graham (SC)
Hatch
Hollings
Hutchison
Inouye
Johnson
Kennedy
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lugar
McConnell
Mikulski
Miller
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Pryor
Reid
Roberts
Rockefeller
Santorum
Sarbanes
Schumer
Smith
Specter
Stabenow
Stevens
Talent
Voinovich
Warner
Wyden

NAYS--23

Bayh
Cantwell
Collins
Domenici
Dorgan
Ensign
Fitzgerald
Grassley
Gregg
Hagel
Harkin
Inhofe
Jeffords
Kyl
Lott
McCain
Nickles
Reed
Sessions
Shelby
Snowe
Sununu
Thomas

NOT VOTING--1

Kerry

The amendment (No. 3118) was agreed to.
Mr. GRASSLEY. I move to lay that motion on the table.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. REID. Madam President, I have spoken to the Democratic leader, I
have spoken to our manager. On our side we have six amendments
remaining. I mention them by name: Feingold, 5 minutes on his side;
Lautenberg, 30 minutes; Corzine, 30 minutes; Cantwell, 30 minutes;
Hollings, 40 minutes; Landrieu, 30 minutes. This bill can be completed
in a relatively short time. I understand the Members would rather not
vote on some of these amendments, but I want the record to reflect we
would agree to these very short time limits. There are no surprises in
any of the amendments. Everyone knows what they are. Certainly on
Hollings and Landrieu, we have agreed with the majority these could be
next in order.
The problem we have, everyone should understand, is Senator Cantwell
will not let us do the unanimous consent agreement unless we have some
way of disposing of her amendment. I have also been contacted by
Senator Corzine, Senator Lautenberg, and Senator Feingold. They will
agree to no more unanimous consent agreements unless they are included
in the order in some way.
I repeat: Each of these Senators wants this bill passed. None of them
is trying to stall. They understand the importance of this legislation.
But add up all the time on our side, and it is about 2 hours 45
minutes. That is all that is remaining on debate time on our side. I
hope we recognize and can figure out some way to get through these
amendments and get this bill passed. I see no reason we could not do it
tomorrow easily.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Madam President, first of all, there has been a very
good working relationship between the two sides on this bill. That is
very encouraging. I recognize that upfront.
In regard to the list of amendments, the fact that it is very short,
with time agreements, is very good news. However, in that list of
amendments, there are some that are nongermane, some that are very
controversial, some on our side of the aisle we do not think are
appropriate to be brought up on this legislation; and also a reminder
that we have only dealt with two Republican amendments at this point
and we have dealt with a lot of amendments on the other side. Now,
there is nothing wrong with dealing with more amendments on one side
than on the other, and we have been very fair in how we have approached
this.
I don't have a response to the Senator from Nevada, the distinguished
Democratic assistant leader. We intend to work very closely with him to
see if we can get this bill to finality. In the same way we have gotten
this far this week--we have made a great deal of progress--it is
because we have had a good working relationship with the Senator from
Nevada and the Senator from Montana.
I cannot state an agreement at this point. I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KENNEDY. Madam President, parliamentary inquiry. Is the Cantwell
amendment now the pending amendment?
The PRESIDING OFFICER. The Cantwell amendment is the pending
amendment.

Mr. KENNEDY. I see the Senator from Washington on her feet and ready
to address the Senate. As I understand, she would be willing to set a
time for a vote on her amendment sometime in the morning. So we can
give the Senate some idea what the program will be, I am just wondering
now whether the floor managers would be willing to agree to a time
limit on the amendment of the Senator from Washington, for a vote on it
in the late morning tomorrow, with the time to be divided.
Mr. GRASSLEY. Madam President, to respond to the Senator from
Massachusetts, first of all, not involving me but other people that are
interested--I am interested--I have asked other members to see what
could be negotiated. There are talks ongoing now that range from,
hopefully, we can establish a couple other amendments for votes before
that. Part of that discussion is seeing if we can reach an agreement on
bringing up the amendment. However, I don't have anything to report to
Senator Kennedy at this point.
Mr. KENNEDY. Again, I don't want to interfere with the Senator from
Washington, but I know the Senator has attempted to get this amendment
up, at my last count, some 14 times over the period of the last 7 or 8
months. Now it is before the Senate. She is entitled to have it
considered.
It is an amendment of enormous importance to working families in this
country. We have 85,000 workers who, each week, lose their unemployment
insurance. This represents an extremely important issue to hard-pressed
middle-income families that are trying to make ends meet and facing
serious issues in terms of the increase in health care costs, increases
in tuition, increases in terms of their utilities, their mortgage
payments. This is a lifeline to hundreds of thousands of American
families. This is a matter of enormous importance. It is not just a
minor amendment. For many of us, it is the most important or perhaps
the second most important outside of the overtime amendment on this
bill.
I thank the Senator for Washington for her perseverance on behalf of
the working families of this country, commend her for her diligence in
protecting their interests, and look forward to following her
leadership, hopefully getting the opportunity to have a reasonable
period of time and then have the Senate express its will. I certainly
hope we would not have the blind opposition to this amendment we have
faced in the past when Members have tried to basically handcuff the
Senate from being able to give consideration to this amendment.
I commend the Senator from Washington for her diligence and
perseverance. This is a matter of enormous importance and enormous
consequence to the people of my State, I know to the people in her
State, and for people all over this country. I commend her for
developing the bipartisanship she has with the Senator from Ohio and
other Senators. This has been a bipartisan effort she has led. That is
the way it should be because, obviously, the workers who need this help
are from all parts of the country and represent all kinds of different
viewpoints.
I thank her for her leadership and look forward to following this
issue.

[[Page S4896]]

Ms. SNOWE. Mr. President, I would like to speak to one provision in
the FSC/ETI tax legislation we are considering on the Senate floor
which is very imporant--the broadband expensing provision. This
provision would allow investments in broadband infrastructure, or high-
speed Internet access, to be deducted for tax purposes in the year the
investment was made rather than over several years. The simple point of
this provision is to stimulate new technology investment.
We have worked on the bill since mid-2000, and it is time to see it
enacted. I am particularly pleased to have worked with Senator
Rockefeller on this issue and to join him in sponsoring legislation to
provide a broadband tax incentive. He and I go back quite a few years
on technology matters. We worked side by side to ensure that all of our
Nation's schools are wired for basic Internet service, and that has
been a tremendous success. I also appreciate the effective work Senator
Burns has done to fight for broadband investment.
It is time to move beyond basic dial-up service. Dial-up is adequate
for sending e-mail, and sharing short documents, and browsing the web
slowly. But if you need to receive information quickly, or if you need
something that is data-intensive like photographs or graphics or
lengthy documents, then you need broadband.
Unfortunately, in rural States like mine, broadband deployment is not
proceeding quickly enough. And that is what this provision is
designated to address--the rural and low-income areas where broadband
generally is not already or readily available. It is designed to help
us move to the next generation of broadband that some countries are
already rolling out. There are times when it makes sense to help the
market deploy technology more quickly, and this is one of those times.
Why? Because here we are taking about infrasturcture, and the
Government can help ensure that all our citizens have access to basic
infrastructure so all Americans regardless of their zip code will have
the chance to participate in--and succeed under--the tremendous
benefits of new technologies.
It is critical we act quickly in this area. A report by the
Organization for Economic Cooperation and Development finds that the
United States has dropped to sixth in the world in percentage of
broadband penetration. We must not sit idly by and allow the United
States to fall further behind in this crucial area.
In addition to accelerating the deployment of broadband, the
provision will also infuse immediate stimulus for the economy by
encouraging firms to invest in high-speed telecom equipment.
Furthermore, these new capital expenditures will create jobs--equipment
manufcturers will expand their production capabilities to meet
increased demand, and broadband providers with hire additional
employees to install this new infrastructure.
We must engage on this issue and we must do it now. I thank Senator
Rockefeller for his leadership and partnership on this issue, and the
Chairman and Ranking Member of the Finance Committee for their support,
and I look forward to passing this provision and seeing it enacted this
year.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Madam President, I ask unanimous consent that the
Senate now proceed to a period of morning business with Senators
permitted to speak for up to 10 minutes each.
Mr. BAUCUS. Madam President, will the Senator hold back for a second
before making that request?
Mr. GRASSLEY. Yes, I will. Madam President, I withdraw my unanimous
consent request.
Mr. BAUCUS. I thank the Senator.
The PRESIDING OFFICER. Does the Senator from Iowa yield the floor?
Mr. GRASSLEY. Madam President, I withdraw my unanimous consent
request and yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Madam President, this is a good bill on which we have
made a lot of progress. There are a lot of good amendments yet
outstanding. It is amazing how much is in this bill that is so
positive.
I say to my colleagues on both sides of the aisle, it is important
for us to go the extra mile, to see if there is a way to compromise. I
will say that again: both sides of the aisle.
Here we have the amendment offered by the Senator from Washington,
and we are kind of at a little bump in the road. But this can be
resolved. This is resolvable. I hope very much we are not in a
situation where backs stiffen up and people dig their heels in the
ground and pride becomes the overriding emotion. Rather, we are very
close to resolving a very important issue. So I ask that cooler heads
prevail over the evening, to sleep on it, and tomorrow morning--and/or
tonight--find a way to resolve this issue; otherwise, people could see
the Senate not at its best. There is an opportunity, a real
opportunity, for Senators to show they can work together on both sides
of the aisle on very important matters.
We know none of us can have everything. We also know for things that
are important and worthwhile, generally it takes some give-and-take and
compromise. We are almost there.
I thank the Senators for how far we have come thus far, and I urge us
to work together to find a solution to these remaining amendments so we
can get the bill passed very quickly.
I yield the floor.
The PRESIDING OFFICER (Mr. Ensign). The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Senate
now proceed to a period of morning business, with Senators permitted to
speak for up to 10 minutes each.
The PRESIDING OFFICER. Is there objection?
Mr. REID. Mr. President, reserving the right to object, will the
distinguished chairman of the committee allow a modification to his
request, that the Senator from Washington be allowed to speak for 10
minutes prior to us going into morning business?
Mr. GRASSLEY. Limited to speaking, and no requests or anything like
that?
The PRESIDING OFFICER. Does the Senator so modify his request?
Mr. GRASSLEY. My request would be so modified.
The PRESIDING OFFICER. Is there objection?
Mr. NICKLES. Reserving the right to object, I want to make sure the
Senator from Washington be allowed to speak and there be no unanimous
consent requests made pertaining to her amendment.
Mr. REID. Mr. President, if I could respond, the Senator from
Washington is protected. Her amendment is the next amendment. I mean,
it is an amendment that is now before the Senate, and she understands
nothing is going to happen on this bill until there is an agreement in
some regard to her vote. She is not going to ask at this period of time
for a unanimous consent. She does not need to be protected.
Mr. NICKLES. If the Senator will yield further, the unanimous consent
request only limits time; is that correct?
I have no objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Washington is recognized for 10 minutes.
Ms. CANTWELL. Mr. President, I remind my colleagues we are here
talking about a JOBS bill. That is what we are talking about, how we
keep jobs in America. So I think it is more than appropriate to be
talking about one of the biggest problems in our country right now, the
fact we have not created jobs. We have lost 2 million jobs since this
administration began. It is more than appropriate to be discussing the
unemployment benefits American workers need because they have lost
jobs, through no fault of their own, since 9/11 and have been
struggling to get recognition by this body and the other body on
unemployment benefits.
We still have 1.5 million Americans who have exhausted State benefits
and have not gotten assistance from this body, the Senate, which now
wants to talk about a JOBS bill. Well, the most important jobs issue we
are facing in America right now is that people who are trying to go
back to work would love to be getting a paycheck instead of an
unemployment check, and yet we are not giving them the option to have
support in a program they have already paid into through their employer
for unemployment benefits.
So what are people across the country saying? As the Senator from
Massachusetts pointed out, we have had

[[Page S4897]]

something like 15 different attempts to get unemployment benefits for
workers who are trying to find jobs but are not finding jobs available.
They are certainly people who would rather work.
The Dayton Daily News recently said:

What's troubling . . . is how some Republican leaders are
hoisting another ``Mission Accomplished'' banner, this one to
hide the struggle for more than a million unemployed workers
who have exhausted state benefits without finding another
job.

That is not what this Senator is saying. That is what a newspaper in
one of the hardest hit States is saying about this particular problem,
the fact we cannot simply say on a certain day the economy is better
and Americans are back to work, when, for the first part of this year,
with last month's numbers, we only created somewhere between 300,000
and 400,000 new jobs. We have lost 2 million jobs since this
administration has been in power.
We had an economic report by the administration that they were going
to create all sorts of jobs in 2002. That did not come about. In 2003
there was another projection. That did not happen. Now we are in 2004.
And even though the administration said they thought they were going to
create, I think the number was 2.6 million jobs this year, the
President's own economic advisers backed off of those numbers and said:
We don't know how many jobs are going to be created.

Well, I can tell them, having been in the private sector, trying to
determine whether a company is growing at a rate in which you can
resume hiring is a tough question. So I get that this is a complicated
issue, and we do not know how fast our economy is going to grow. But we
know this: We are not going to find 2 million jobs in the next 6
months. We are not going to hire 2 million Americans who basically have
lost their jobs, and in many cases through no fault of their own, and
put them back to work in that short a period of time.
The question is whether we want to give the American worker who is
unemployed an opportunity to receive the Federal benefit this program
was created for, what they paid into through their employer so there
could be assistance in tough economic times.
Well, if the last year and a half does not qualify for tough economic
times, I don't know what would. Newspapers across the country are
saying it is time we deal with this.
The Dayton Daily News again said early last month:

Maybe there are brighter days ahead. But that's no comfort
now to the unprecedented number of laid-off workers, who have
scrambled without success to find a job and . . . lost the
little bit of help given under state unemployment benefits
programs.

It cannot be any more plain than that. The President is on a bus
driving through a State that is basically saying, as crisply and
clearly as they possibly can: We need additional help and support. The
State program has expired. People are still unemployed, and they cannot
find a job. These people would gladly go back to work, gladly go back
to getting health benefits, gladly go back to getting the other
benefits of being employed, but the jobs are not there. So the question
is whether we are going to do the job we have said we were going to do.
In fact, you can take the economists who are also looking at this,
because I think part of the other side of the aisle would like to say:
Don't worry, it is all going to get better. But even if we double last
month's numbers, even if in the next 2 months we created 500,000 or
600,000 jobs, it still isn't going to be enough jobs for the 2 million
Americans who have lost their way. So why not put some stimulus into
the economy.
That is why the Miami Herald said last month: Mixed messages, the
White House gets a boost from strong job growth, but economists say
unemployment will remain a problem.
That is because economists are looking at the numbers and they are
saying: You are still going to have unemployment.
It is no surprise that Alan Greenspan came before a House committee
and, when asked about whether we should expand Federal unemployment
benefits, basically said: I think it is a good idea, largely due to the
number of exhaustees that are out there in America. By that he means
the number of people who have fallen off the State program and could
qualify for Federal assistance.
I know some of my colleagues have said they want to cut this program
off at some point in time: Why should we keep doing it; the economy is
starting to pick up.
You do it because these exhaustees don't have a job. They can't pay
mortgage payments, take care of health care. Their employer paid into
this program for this very benefit. This is the best economic stimulus
this country could get right now. Giving employees access to the
assistance of the Federal program for the next 6 months would generate
$11 billion in economic stimulus. That is for every dollar spent on
unemployment benefits, it generates $2 of economic stimulus.
I think about the States that have been hard hit, such as Ohio,
Pennsylvania, Missouri, Washington, Oregon, Alaska. Those are States
that certainly could use the economic stimulus in their States to keep
companies from not defaulting on mortgage payments, keep families in
their home, and provide additional stimulus to those sagging economies.
People on the other side of the aisle say: At some point in time, the
President's economic plan is going to kick in and work. But I don't
think anybody can say it is going to kick in and work in the next 2
months to the degree necessary to take care of the number of
unemployed. It is not going to take care of 1.5 million. It is not
going to take care of 2 million people who have lost their jobs and 1.5
million who have already exhausted State benefits.
The question is whether this body is going to stand up and do the
right thing and come up with a program to expand unemployment benefits
for the next several months so unemployed workers in America can have
some certainty they are going to have a future where they can stay in
their home.
I am having a tough time convincing the other side of the aisle.
Maybe they haven't heard from their constituents on this issue. I think
there are one or two States that may not have lost any manufacturing
jobs. Maybe their constituents don't feel the same pain that we do in
the Northwest. In 2002 alone, we lost 72,000 jobs in our State, mostly
as a result of the downturn after 9/11 and its impact on the aviation
industry, but certainly other industries as well. So we have had a lot
of people who have continued to look for jobs. We have heard from a lot
of these individuals. We have a Web site anybody can access at
cantwell.senate.gov that tells you the stories of these individuals in
their own words.

What each person tells over and over is how much they would like to
have a job, how many job interviews they have gone on, only to find
people five and six times more qualified than they taking the minimal
number of jobs that are actually being created. That is why one of the
chief economists in the country, Alan Greenspan, has said the size of
the exhaustees alone should drive us to expand unemployment benefits.
It would, in and of itself, give us the stimulus that would help us
return the economy.
We had a vote not that long ago. Fifty-eight Members in this body
voted in support of unemployment benefits. There was a similar vote,
not the exact same language, in the House of Representatives. They
voted to basically give an extension of unemployment benefits through
the Federal program. So basically majorities in both the House and the
Senate have voted for unemployment benefits. Yet still we do not have a
benefit package.
The administration was asked whether they thought we should do this.
Secretary of the Treasury Snow basically said it was something the
White House wasn't objecting to. We asked the White House in their
communications shop. They said they thought it should get done.
Now the question remains, who wants to hold up this benefit package?
The American workers have paid into this. They want the money they paid
into the Federal program to give them economic support so we can give
people an opportunity to go back to work when jobs are created and not
penalize them for the economic situation they are in today.

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