CNBC Business Center - Transcript

CNBC News Transcripts

SHOW: Business Center (5:00 PM ET) - CNBC

HEADLINE: Senators Chuck Grassley and John Breaux discuss a proposal in Congress regarding US multinational companies deferring taxes on income they've earned overseas

ANCHORS: RON INSANA

BODY:
RON INSANA, co-anchor:

Well, the issue seems to come up on almost a yearly basis. For some time, large US multinational companies have deferred taxes on income they've earned overseas. Now Congress is looking into how to deal with the issue. One proposal now being considered by the Senate is to give these multinationals a six-month tax holiday to--in the hopes they'll use the money here at home.

Tonight we look at both sides of the issue with the sponsor of the bill, Republican Senator Chuck Grassley of Iowa, and an opponent, Democratic Senator John Breaux of Louisiana. Senators, thank you both for being with us. Senator Grassley, if I may start with you, what's the aim of the proposal that is currently being considered?

Senator CHUCK GRASSLEY (Republican, Iowa): Well, the Ensign provision is a small part of a much larger bill that is meant to make American manufacturing competitive, and we take $50 million and reduce--$50 billion and reduce the corporate tax rate for all manufacturing companies in the United States in order to make our manufacturing more competitive with Europe. And we also do that in a way that meets the World Trade Organization decision that was against the United States for another way we had of leveling that playing field.

INSANA: Yeah.

Sen. GRASSLEY: And in regard to the issue you brought up, the idea is to have this money that's parked overseas come home so that you can create jobs in the United States instead of creating jobs overseas.

INSANA: All right. Senator Breaux, is there any guarantee that corporations, while they are enjoying some better profits right now, will put that money to work in a profit-starved environment or just keep it at home?

Senator JOHN BREAUX (Democrat, Louisiana): Well, Ron, Senator Grassley is to be congratulated for the overall bill. I think it's the right thing to do. But this repatriation of bringing money that they have kept overseas back to the United States and only have to pay 5 percent tax, and they can use it for pretty much whatever they want, is a bad idea. Companies would be encouraged to stash money overseas if they knew they could bring it back and avoid about 30 percent of the tax that everybody else pays as a corporation in this country. I think it's a bad idea without some restrictions.

INSANA: All right. What are the restrictions you would propose?

Sen. BREAUX: Well, the restrictions, I would say, look, we'll give you the tax break if you bing it--bring it back to create jobs or to invest in equipment or to do research and development or to pay pension plans, but not if you just want to use it to create financial stability in the company by increasing the CEO's salary or by propping up the stock. That's an unfair advantage that they would have over other companies.

INSANA: Senator Grassley, what do you make that criticism? I mean, should the tax break be tied to something so that, indeed, in a jobless recovery, in an environment where labor has become extraordinarily competitive, something gets done here at home?

Sen. GRASSLEY: Yeah. I think we'll have that opportunity and debate on the Senate floor to consider those things, and maybe some of them should be considered, but I think the thing to remember is that we've got this money overseas and it's going to be used to create jobs overseas. If we bring it home, it'll be--be used to create jobs at home. And that's the whole purpose of it. And remember that it's just a one-time shot, and it's all retroactive.

INSANA: Retroactive to when?

Sen. GRASSLEY: Well, retroactive meaning that it's f--it's money that's already accumulated, that would have to be brought home in this year, and it would not be into the future.

INSANA: Now, Senator Breaux, how do you see this debate going forward? I mean, I--I--as I recall, one amendment that you put forth has already been--been shot down with respect to earmarking the money for specific uses. How will you move forward on the Senate floor when the bill is debated by the entire body?

Sen. BREAUX: Well, Ron, there's about $300 billion or so that's been stashed overseas and corporations doing business overseas. And if they bring it back, I'm willing to say, all right, bring it back and only pay 5 percent tax. But at least use it for job creation in the United States. We're going to offer an amendment to do that on the Senate floor, and I hope people will understand when they see what we're talking about that this is the right a--balance and proper thing to do.

INSANA: Now, Senator Breaux, you know, joblessness in the--in the manufacturing sector is not only about multinational profits that are kept overseas, but also what some would criticize as unfair trade advantages in countries like China, where labor is far cheaper, where currencies are kept artificially low. Is Congress contemplating doing something about that or just letting the Bush administration and the Treasury Department deal with it as it has been over the last several months?

Sen. BREAUX: Congress has to be involved, Ron. I've been traditionally a free trader, but I see more and more companies in my state that are good companies, making good products that simply cannot compete when you have companies in countries that are paying wages that are 1/100th of what we pay here in this country. I think it has to be balanced. It should be free trade but it has to be balanced. And I'm afraid right now we're simply getting clobbered by some of the government subsidies that other countries pay to their manufacturers.

INSANA: Now we--we pay a lot to farmers, but Senator Grassley, how would you address the issue with respect to this competitive or comparative advantage that other countries have on the labor front?

Sen. GRASSLEY: Well, number one, the negotiations that are going on or at least the jawboning that's going on between our government and China in regard to the floating of the yuan, their currency, is one thing. But I think we have historically and--and GATT legal instruments on our books already called anti-dumping laws, various petitions that can be filed with the International Trade Commission, and we don't use those vigorously enough i--in--in order to con--counteract le--le--legitimate and knowing violation and subsidy by foreign countries of products coming to our country.

INSANA: You know, we have a big unemployment report coming out tomorrow. Senator Grassley, in your mind--I'll ask you first--what do you think should be done in addition to all that has been done thus far, either on the tax front o--or in some other way, to stimulate the economy and create more jobs here at home...

Sen. GRASSLEY: Well...

INSANA: ...aside from what we've just talked about?

Sen. GRASSLEY: OK. Well, I think what you're talking about is now that we're over 3 percent growth, that's usually a threshold by which economists suggest that the e--that the employment does grow, and I think that you're seeing the benefits, like investment in manufacturing right now for--an upturn for the first time, of three months in a row, you've seen some increase in the manufacturing index. That's very good in--good news. And that's a complete turnaround from 38 months of downturn in employment in manufacturing.

INSANA: Yeah. Senator Breaux, what would you do right now? Are there any legislative fixes to get the economy going again?

Sen. BREAUX: Ron, the last three years and the next year may well be the lowest in terms of job creation of new jobs since the Herbert Hoover administration, and that's really bad news. One thing I would want to do is to have a six-year highway bill instead of just a short-term extension. That would really put people to work and--and doing things and building highways and transportation so someth--that are incredibly important to this country and it really employs a lot of people quickly.

INSANA: All right. Senators, I thank you both for being with us.

Sen. GRASSLEY: Thank you.

INSANA: John Breaux of Louisiana...

Sen. BREAUX: Thank you.

INSANA: ...and Chuck Grassley of Iowa, thanks for joining us tonight.

Sen. GRASSLEY: Thank you.