Creating American Jobs and Ending Offshoring Act of 2010--Motion to Proceed

Floor Speech

BREAK IN TRANSCRIPT

Ms. COLLINS. Mr. President, I rise to express my concern that the Senate may adjourn this week without extending the 2001 and 2003 tax relief provisions which are slated to expire on January 1.

These tax laws include important reforms such as the 10 percent tax rate, relief from the marriage penalty, and the child tax credit. They provide tax relief to nearly 90 percent of all Mainers. If they are not extended, virtually every Maine family and many--indeed, most--of our small businesses will see their taxes increase. If these tax relief provisions are not extended, the typical American family of four with a household income of approximately $50,000 will see their taxes increase by about $2,900 next year. That is right. Coupled with tax increases that are included in the new health care reform law, which I opposed, the result would be one of the largest tax increases in our history.

Many economists contend this is the worst possible time to increase taxes because our economy is so fragile. I fully agree. I cannot imagine anyone even contemplating increasing taxes in the midst of a recession. The consequences for small businesses would also be dire. Higher taxes would take critical investment dollars away, leaving less for innovation and expansion, not to mention employee wages and benefits. Raising taxes when the economy is still weak would make it difficult and in some cases impossible for small businesses to start, grow, and create jobs.

Peter Orszag, President Obama's former OMB Director, recently penned and op-ed for the New York Times in which he argued that this is no time to raise taxes. As he pointed out, the failure to extend existing tax relief would ``make an already stagnating job market worse.'' He went on to say:

Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt.

I hope President Obama will heed the advice of his former budget director and abandon his plan to raise taxes at this critical time.

It is important to understand that many small businesses are passthrough entities such as sole proprietorships, partnerships, and S corporations. These small businesses must report their earnings on their owner's individual income tax returns. The Joint Committee on Taxation has estimated that there are some 750,000 passthrough small businesses in the top two tax brackets.

I wish to share with my colleagues examples of a couple small businesses in Maine that would be hurt by this tax increase. They are representative of many others, of course.

This August, I toured several remarkable businesses in my home state. Their products are diverse and their histories vary greatly, but they share the traits of ingenuity, energy, and a commitment to excellence. The employees and the owners of these small businesses work so hard. An example is D&G Machine Products of Westbrook. Its name and products may not be familiar to the general public, but it is internationally known and respected throughout the pulp and paper, high technology, power, petrochemical, food processing, aerospace, and defense industries. Its precision design machining and fabrication operations put Maine on the cutting edge of innovation. As is so often the case, success started small with this small business. D&G was founded in 1967 by Dave Gushee and Fred Loring in a one-car garage behind Dave's home. They specialized in producing custom tooling and dyes for equipment manufacturers in the Portland area and soon added fabrication and welding services. D&G's founding principles of quality, attention to detail and delivering unsurpassed customer satisfaction paid off.

Within a few years, this young company outgrew the tiny garage and expanded into sophisticated design and engineering services. Today D&G has more than 100,000 square feet of shop space and more than 130 highly skilled and dedicated employees. I met many of them during my tour last month.

Duane Gushee, who now runs the company, tells me he is very concerned about the impact higher taxes would have on his company's ability to compete. Duane pointed out to me that his company does not compete primarily against other Maine firms or even against other U.S. companies. It has to compete successfully with companies all around the world for markets and customers. Without constant innovation and investment in cutting edge technology, D&G will lose its customers, and its employees will lose their jobs. If we don't act, the tax increase that will hit D&G on January 1 will take money out of its bottom line, money that is needed to upgrade equipment and stay ahead of foreign competition.

Another small business I visited is Pottle's Transportation, a trucking company headquartered in Bangor. This company was founded in 1972, and it has grown to more than 200 employees with 150 trucks. Pottle's now provides service throughout the continental United States and Canada, although it concentrates its efforts in the Northeast. It is known for maintaining an impressive on-time delivery record without sacrificing safety. In fact, it has received award after award in recognition of its safety record. Pottle's is also known for its commitment to the environment. Pottle's is a member of EPA's Smartway Program and received the EPA Environmental Merit Award in 2008.

The past few years have been very tough on the trucking industry. Barry Pottle, who runs the company, tells me that 1,100 trucking companies around the country have gone under so far this year. His company is in the black right now, but it is a real struggle to generate the capital needed to keep his trucks on the road. Pottle's needs to buy 25 to 30 trucks every year just to maintain its fleet. New trucks used to cost the company about $100,000, but in the past few years, the cost has gone up by another $25,000. Barry tells me this is due to an excise tax on heavy trucks passed in 2006 and new environmental regulations that require $13,000 in emissions equipment on each new truck. Together, these changes have raised Pottle's annual cost of doing business by about three-quarters of $1 million.

On top of this, Barry has to worry about the tax increases his company will face if the 2001 and 2003 tax relief laws expire at the end of this year.

Visiting these businesses and others, reading what economists such as Peter Orszag have said, has confirmed my belief that the administration must reverse its present course, which is stifling job growth, discouraging entrepreneurship and risk taking, and hobbling the economic recovery. Americans should be proud of the spirit, the drive, and the determination that has produced small business success stories such as D&G Machine Products and Pottle's Transportation.

We in Washington must recognize that the policies we adopt or the tax laws we fail to extend have an impact on whether these companies can start up, grow, prosper, and, most of all, create good jobs. So what I have suggested we do as a compromise is to extend these two important tax relief laws for another 2 years. That will get us through this recession. It will send a strong signal to the business community.

I cannot tell you how many businesses have told me they are holding on to capital right now. They do not dare invest to create much needed jobs because of the uncertainty of what is going to happen on tax policy. We know we need to revamp our Tax Code. We need to make it fairer. We need to make it simpler. But for right now the best thing we could do would be to extend those two laws--the 2001 and 2003 tax reform laws--for an additional 2 years to provide certainty to businesses and to send a strong signal that we get it. We know we should not increase taxes in the midst of a recession.

One of the most startling conversations I had during August was with a small businessman who owns a small community grocery store. He told me he had an opportunity to buy a second store in another rural Maine town. He said he had the financing in place to make the purchase, and he would like to create more jobs and keep this small business going serving the needs of the community.

I said to him: Well, why don't you just do it? Interest rates are low, so it seems like a good time. Is the uncertainty about what is coming out of Washington keeping you from acting?

He said: You know, Senator, it is not so much the uncertainty. It is the certainty, the certainty of higher taxes, of more regulation, of having to pay more for health insurance for my employees. It is the certainty of more spending. That is what is discouraging me.

So I hope we could come together right now, and before we go home pass a 2-year extension of the current tax law, to provide some certainty that we are not going to impose higher taxes on the American people and our small businesses.

U.S. POSTAL SERVICE

Mr. President, in my remaining time, I would like to speak today about the future of the U.S. Postal Service.

The Postal Service is in the midst of a dire financial crisis. The data are grim. In the first three quarters of fiscal year 2010, the Postal Service posted a net loss of $5.4 billion. By the end of this week, when the fiscal year ends, I expect that number may hit $7 billion that the Postal Service will be in the red for this fiscal year alone.

Obviously, faced with this much red ink, the Postal Service needs to do everything possible to increase its revenue and reduce costs. Yet the Postal Service's plan for regaining its fiscal footing relies too heavily on service cutbacks, relief from funding its known liabilities, and the hope that enormous rate increases will be approved.

I am a huge supporter of the Postal Service, and I want it not only to survive but to thrive. It is a vital American institution that serves our Nation and whose roots are found in our Constitution.

To help the Postal Service identify additional areas for cost reductions, I asked the Postal Service inspector general to review three areas: the benefits the Postal Service pays on behalf of its employees, the Postal Service's contracting policies--which is an area where Senator Claire McCaskill, who has been a real leader in procurement reform, joined with me--and, third, the Postal Service's area and district field office structure to see if there were efficiencies that could be realized there.

I must say, I was both dismayed and outraged when I received the results of the IG's audits.

The IG found stunning evidence of contract mismanagement, ethical lapses, financial waste, and excessive executive perks which, if remedied, could allow the Postal Service to realize in excess of $800 million in savings next year alone. That is at a minimum.

Let me give you some startling facts the IG found. For a long time, we have known the Postal Service has been more generous in paying the health insurance and the life insurance premiums of its employees, most of whom participate in the same health insurance and life insurance programs as Federal employees.

But what we did not know until this review was conducted is that the Postal Service pays 100 percent of the health insurance premiums for 835 of its top executives, an expensive perk that no governmental agency appears to provide.

This costs the Postal Service an estimated $10 million annually. If the Postal Service brought the contribution for these executives into line with federal agencies, it could save $2.8 million per year on this change alone.

It is unbelievable to me the Postal Service--awash in debt and asking for huge postal rate increases--is paying the full health care premiums for 835 of its executives.

The Postal Service is now paying 79 percent of health insurance contributions for its rank-and-file employees, in comparison to 72 percent for the average Federal employee. It is a little hard for the Postal Service to make the case to its employees that it needs to reduce health insurance if it is paying 100 percent of the premiums for 835 of its top executives. If the Postal Service brought its benefit contributions in line with other Federal agencies, it could save more than $700 million next year alone.

But that is not all. When Senator McCaskill and I requested that the IG review the Postal Service's contracting practices, the IG discovered unfair and unethical practices replete with no-bid contracts and examples of apparent cronyism.

The Postal Service's contract management did not protect it from waste, fraud, and abuse. Indeed, it left the door wide open. The Postal Service could not even identify how many contracts were awarded without competition. The inspector general found that 35 percent of the no-bid contracts it did review lacked justification. As part of its review, the IG discovered that more than 2,700 contracts had been awarded to former postal employees since 1991. Of these contracts, 359 were awarded as no-bid contracts to former postal employees in the last 3 years. Seventeen of them were noncompetitive contracts to career executives within 1 year of their leaving the Postal Service.

Some former executives were brought back at nearly twice their former pay--an outrageous practice the IG says raises serious ethical questions, hurts employee morale, and has tarnished the Postal Service's public image.

In one particularly egregious example, an executive received a $260,000 no-bid contract just 2 months after retiring. The purpose? To train his successor.

The findings of these three investigations show that the Postal Service must get more serious about cost cutting. Clearly, there are savings to be had.

Faced with shrinking mail volume and a declining workforce, the Postal Service understands the need to reduce unnecessary costs but its efforts have fallen short.

For example, the Postal Service can realize structural efficiencies. Even after the Postal Service consolidated 1 area office and 6 district offices last year, the structure still includes 8 area offices and 74 district offices, costing approximately $1.5 billion during fiscal year 2009.

To determine if additional efficiencies exist, the inspector general reviewed area and district offices, which handle administrative functions but do not actually handle any mail. In doing so, the IG identified several options for consolidating the area and district field office structure.

One option, which would entail closing area and district offices that have less than the mean mail volume and work hours, could save the Postal Service more than $100 million annually.

Another, more conservative, option could save the Postal Service some $33.6 million annually by closing district offices that are within 50 miles of one another.

Management at headquarters reported that last year's consolidations went smoothly, with no negative impact on operations. That result clearly shows that the Postal Service should continue its strategic efforts to consolidate.

After receiving the results of these three IG investigations last week, I wrote a letter to the Postmaster General, urging him to implement the inspector general's recommendations immediately.

In my letter, I emphasized that the IG reports had found concrete ways for the Postal Service to cut sizeable expenses. Reducing costs is a far better solution than reducing service and increasing rates remedies that run the risk of driving away even more customers.

Additionally, the Postal Service should increase cross-craft training and collaborate with high-volume customers to increase mail volume through initiatives like the ``Summer Sale.''

It also should work with OMB and OPM to access the more than $50 billion which the Postal Regulatory Commission believes USPS has overpaid into the Civil Service Retirement System fund.

I have been pressing the Office of Personnel Management to change its method for calculating the Postal Service payments into the CSRS pension fund consistent with the 2006 Postal reform law. The OPM, however, stubbornly refuses to change its methodology or to even admit that the 2006 Postal law permits them to do so.

I have continued to stress the importance of this change to both OPM and the administration. Clearly, the Postal Service's refund of a more than $50 billion overpayment would greatly aid its current financial condition.

In sum, the Postal Service must devote more energy and adapt a laser focus to reducing costs, such as those identified in the recent IG reports. It also must develop customer-first programs that can enhance revenue, increase volume, and earn loyalty.

The Postal Service is at a crossroads. It must choose the correct path. It must take steps toward a bright future that allows it to grow and thrive. It must reject the path of service reductions and ongoing postal rate hikes, which will only alienate customers.

The Postal Service must reinvent itself by embracing change that will revitalize its business model and enable it to attract and keep customers. These actions are within its reach and will help protect and preserve this vital American institution.

Thank you, Mr. President.

BREAK IN TRANSCRIPT

Source