Creating American Jobs And Ending Offshoring Act Of 2010--Motion To Proceed

Floor Speech

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Mr. GRASSLEY. Mr. President, in a few minutes, the Senate will be voting on the motion to invoke cloture on the motion to proceed to a bill that has been mislabeled the ``Creating American Jobs and Ending Offshoring Act.''

The part of the bill that is attracting the most attention is the repeal of deferral for the income of foreign subsidiaries for importing into the United States. Deferral is the policy that allows U.S. corporations to defer paying U.S. tax on the earnings of its foreign subsidiaries until those earnings are sent back to the United States when, at that point, they are going to be taxed just like every other corporate income.

In general, deferral is not allowed if the income is earned offshore and the reason for it being offshore is solely to avoid tax. What is bad about the bill is it would deny deferral for income that a foreign subsidiary legitimately earns from the sale of goods into the U.S. market.

The problem is that there has been no finding that such income is earned outside the United States by a motivation to simply avoid U.S. taxes. So this bill is completely contrary to a whole half century of bipartisan thinking as to when it is appropriate to deny deferral and when it is not. That bipartisanship goes back to President John F. Kennedy's administration, when there was a bipartisan agreement within the Congress and between the President and the Congress that this is the tax policy we should have to make American manufacturing competitive with foreign competition.

To the contrary, there are obviously many reasons for a foreign subsidiary of a U.S. corporation selling goods into the United States. There could be a need to be near to a certain overseas market or the good in question may not be found in appreciable quantities within the United States. Yesterday, I referred to chromium not being available in the United States, as one example.

There could be many reasons having nothing to do with tax policy. But the sponsors of this bill don't seem to understand that fact, that American
manufacturing ought to be competitive with overseas competition or, obviously, we are going to lose business and lose jobs in the process or perhaps the bill's sponsors would admit that curbing tax avoidance is not the point. Perhaps they would instead claim it is all about an effort to create American jobs.

That would be a very good goal, but it is unlikely to create jobs. I fear it would have the opposite effect. The bill may lead to fewer headquarters jobs in the United States, if a corporation, for uncompetitive reasons, decided to move totally offshore and take those headquarters jobs with them. The bill could lead to a loss of American jobs assembling finished products from parts assembled outside the United States.

In the words of the late Senator Moynihan, who was, for a long time, chairman of the Senate Finance Committee, in speaking in opposition to this very same proposal 14 years ago:

Investment abroad that is not tax driven is good for the United States.

In other words, what he is saying there is, if there is investment abroad but it is not solely to avoid U.S. taxation but has economic substance behind it, that is good for the United States.

He did not say this. Contrariwise, if there is money offshore simply to avoid U.S. taxation, then obviously that is wrong. As an example, Senator Baucus and I have been involved in the Stanley Corporation doing that 6, 7 years ago, and we plugged those loopholes.

I agree with Senator Baucus when he was recently quoted as to this bill saying:

I think it puts the United States at a competitive disadvantage. That's why I'm concerned.

If there is any doubt about whether I agree with that statement of Senator Baucus, the Democratic leader of our committee, I agree with Senator Baucus.

In addition, there are procedural defects concerning this bill. I wish to start this part of my remarks by relying on a statement Senator Reid said to me privately--he might deny he made this statement, but soon after the 2006 election, when the Senate became a Democratic majority rather than a Republican majority, he said something like this to me: You and Senator Baucus work so well together. I want you to know I am going to let the committees continue to function as they always have, particularly in your case because you have such a close working relationship.

With that as background, things have changed very recently so that every bill seems to be written in Senator Reid's office, not in committee.

This bill before us has not been vetted by the Finance Committee. Does anyone believe that if my friend the chairman were to put this bill before the Finance Committee, it would be approved in the form it is right now? If the idea in this bill had the kinds of merits claimed by their proponents, then they should welcome the Finance Committee reviewing it. Let members ask questions as they review the language. Test the strength of ideas through the committee process.

The Democratic leadership has short-circuited the opportunity to methodically test the bill as good tax policy. Unfortunately, this process defect has been more the rule than the exception. Since the stimulus bill in January of 2009, the Finance Committee has only marked up one tax policy bill, and that was the health care reform bill.

My sense is the Democratic leadership simply does not want this bill to undergo scrutiny of a regular-order process--in other words, the way the Senate normally does business. This bill is presented as a ``take it or leave it'' proposition. Republicans are not supporting cloture because they are not being offered the opportunity to amend this bill with amendments that go to the supposed purposes of the bill. No amendments are allowed on any tax incentives for job creation. No amendments are allowed on measures to prevent offshoring of jobs. In other words, the Senate being a deliberative body of a bicameral Congress--and, obviously, the House is not a deliberative body--the purpose of this body is being neutered by the procedure this bill is going through. For instance, I have amendments dealing directly with the offshoring of jobs. They are bipartisan amendments. But if I vote for cloture, I have no assurance from the Democratic leadership that these amendments will be in order. I will describe these amendments.

The first amendment mirrors a bill the junior Senator from Vermont and I have coauthored. It is the Employ America Act. It would prevent any companies engaged in the mass layoff of American labor from importing cheaper labor from abroad through temporary guest worker programs if they lay somebody off.

The second amendment I filed today mirrors a bill the senior Senator from Illinois, a Democrat, and I have worked on for several years. It is the H-1B and L-1 Visa Reform Act of 2009. It would improve two key visa provisions while rooting out abuse while making sure Americans have the first chance of obtaining high-skilled jobs in this country.

Many Americans are unemployed. Yet we still allow companies to import thousands of foreign workers. These businesses should be asked to look first at Americans to fill those jobs, and they should be held accountable for displacing Americans to hire cheaper foreign labor.

These two amendments go directly to the concerns about job creation and the prevention of offshoring of U.S. jobs. Both amendments are bipartisan. Yet if cloture is invoked, these amendments would fall on the Senate cutting room floor.

Furthermore, I have no confidence, even if the Democratic leadership were to follow regular order for floor purposes, that we could expect anything like a conference committee to work out the issues between the House and the Senate.

In sum, the bill's substance would more likely lead to an increase in offshoring of American jobs and would make American companies less globally competitive. The bill's procedure is very irregular and not in the thoughtful traditions that so dignify the Senate.

For purposes of the contents of the amendments, as well as this procedure, I ask that we vote against this bill.

I yield the floor.

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Mr. GRASSLEY. Mr. President, very soon, the Senate will be asked to vote on the motion to invoke cloture on the majority leader's motion to proceed to a bill that is mislabeled the ``Creating American Jobs and Ending Offshoring Act.''

The process for this bill illustrates how the Democratic leadership has dumbed down any efforts to seriously legislate any tax policy issues. To show how far, as a body, we have run off the rails in legislating, let's compare the legislative track record of this bill with the last major piece of tax legislation designed to deal with domestic job creation.

I am referring to the bill that responded to a World Trade Organization ruling against a domestic manufacturing benefit known, at that time, as the foreign sales corporation or FSC program. Dangerous tariffs were pending with respect to many American products. How was that legislation handled?

First of all, the Finance Committee members and staff engaged in a lot of due diligence in crafting the replacement regime, the domestic manufacturing deduction. On a bipartisan basis, Finance Committee staff, principally the tax and trade staffs, met with the interested parties, including officials from the litigating group, the European Union.

Finance Committee staff, Republican and Democrat, negotiated a bill that took the revenue generated from repealing the FSC benefit, added revenue from shutting down tax shelters like the so-called SILO/LILO schemes, and channeled that revenue back into a new broader based domestic manufacturing incentive. That incentive is a 9 percent deduction for domestic manufacturing activity. It is a substantial tax incentive. The Joint Committee on Taxation estimates it is worth $10 billion annually in terms of reduced taxes to domestic manufacturers, large and small. The chairman's mark was a joint mark between my friend, then-ranking Democratic member, Max Baucus, and me.

Ranking Member Baucus and I came up with a bill title. It was the Jump Start Our Business Strength or JOBS bill. The bill went through the usual transparent Finance Committee markup process. Over several days, Finance Committee members reviewed the language, asked questions, and prepared and filed amendments. When I gaveled the committee to order, several amendments were debated. Some were defeated. Some were modified and accepted. Others were discussed and withdrawn. Every Finance Committee member played a role in shaping the bill the committee approved. And it should be noted the only dissents were two members on the then majority side.

When the bipartisan JOBS bill was scheduled for floor debate, then majority leader Bill Frist brought up the Finance Committee bill. Both my friend, Senator Baucus, and I were consulted on the floor bill's contents. At that time the Democratic leadership filibustered efforts to effectively process the bill. Keep in mind there was no dissent in the Finance Committee on the substance of the bill on the Democratic side. As I said before, two members of my leadership, on very principled grounds, voted against this popular bill. Despite opposing the bill in committee, those two members supported the majority leader's efforts to bring the time-sensitive legislation to the floor and process it in a timely fashion.

It took three cloture votes to process the JOBS bill. That is right. Three cloture votes. The basis for the multiple filibusters of the JOBS bill was not opposition to material in the bill. The Democratic leadership filibustered over items not in the bill that they wanted to offer as amendments. The Republican leadership did something we seldom, if ever, see from the Democratic leadership. Majority Leader Frist yielded by allowing votes on those issues, which were not in the bill, but controversial with many in the Republican Conference. Many votes were held on the JOBS bill. Some were designed by those close to the Democratic campaign operation solely to score political points. The Republican Conference, as the majority party at the time, recognized multiple votes were the price to pay to push part of the majority's agenda.

Even if that agenda consisted of doing the people's business by processing a bill with more support on the other side.

The conference committee that considered the JOBS bill was fully open. There was a chairman's mark and several days of amendments between the House and Senate. In the end, a conference report was produced that
garnered a majority of Senate conferee signatures from each side. The conference report passed with overwhelming bipartisan support.

Compare that JOBS bill process with the one for this bill which, as I said at the start of my remarks, is a jobs bill in name only. In the Senate, I have found over the years, that legislative substance and legislative process are symbiotic.

That is, the quality of the process often affects the quality of the substance and vice versa.

Here we are debating a bill whose proponents claim will make a material difference with job creation incentives. We are also told that this bill will materially curtail the offshoring of U.S. jobs. If it were only that simple, I am sure the bill would pass with the overwhelming bipartisan margin the JOBS bill did some 6 years ago.

I have previously discussed the defects in the bill before the Senate. I will not do it again here. But I will say this: Does anybody on the other side really believe if my friend, the chairman, were to put this bill before the Finance Committee that it would be approved in the form that is before the body today? I can tell you this Senator has several amendments that he thinks would improve this bill dramatically.

I would expect those amendments might pass with bipartisan support. This bill, like so many others, was crafted in the majority leader's office and is largely the singular work of two senior members of his leadership. That is not to say anything negative about those members or their interest or work in the area of tax legislation. My point is that, if the ideas in this bill had the kind of merit claimed by their proponents, why avoid the Finance Committee? Why not let the public see it in committee. Let members ask questions as they review the language. Test the strength of the ideas through the amendment process. If the proponents answer by blaming Republican Leader McConnell, I would point out that Senator McConnell isn't on the Finance Committee. If the proponents answer by blaming partisanship, I would ask them to take a look at the Finance Committee ratio.

It has been the most favorable to the majority since the early part of the 1990s. By intentionally skipping the committee of jurisdiction, the Democratic leadership has deliberately short-circuited the opportunity to methodically test the bill as tax policy. Unfortunately, this process defect has been more the rule than the exception. Since the stimulus bill in January of 2009, the Finance Committee has only marked up one tax policy bill, the health care reform bill. As a former chairman, I know the current chairman would not want to proceed this way. Nope. My sense is the Democratic leadership simply doesn't want this bill to undergo the extra scrutiny of a regular order process.

Unlike the 2004 JOBS bill, this bill is being presented as a take-it-or-leave-it proposition. Republicans are not supporting cloture because they are not being offered the opportunity to amend this bill with amendments that go to the supposed purposes of the bill. No amendments allowed on other tax incentives for job creation. No amendments allowed on measures to prevent offshoring of jobs. I have amendments dealing directly with the offshoring of jobs question. They are bipartisan amendments. If I vote for cloture, I have no assurances from the Democratic leadership that these amendments will be in order. Any look back on the way in which tax bills have been processed this year tells me I have good reasons for doubting that a full debate would occur. I would like to briefly describe the two amendments I filed earlier.

The first amendment mirrors a bill that the junior Senator from Vermont and I have coauthored. Known as the Employ America Act, this amendment would prevent any company engaged in a mass layoff of American workers from importing cheaper labor from abroad through temporary guest worker programs. Companies that are truly facing labor shortages would not be impacted by this legislation and could continue to obtain employer-sponsored visas. Only companies that are laying off a large number of Americans would be barred from importing foreign workers through guest worker programs.

Since the recession started in December of 2007, nearly 8 million Americans have lost their jobs and the unemployment rate has nearly doubled. In total, 15 million Americans are officially unemployed, another 8.8 million Americans are working part-time only because they cannot find a full-time job, and more than 1 million workers have given up looking for work altogether.

At the same time, some of the very companies that have hired tens of thousands of guest workers from overseas have announced large scale layoffs of American workers. The high-tech industry, a major employer of H-1B guest workers, has announced over 330,000 job cuts since 2008. The construction industry, a major employer of H-2B guest workers, has laid off 1.9 million workers since December of 2007.

The second amendment I filed yesterday mirrors a bill that the senior Senator from Illinois and I have worked on for several years. Known as the H-1B and L-1 Visa Reform Act of 2009, this amendment would improve two key visa programs by rooting out fraud and abuse while making sure Americans have the first chance of obtaining high-skilled jobs in this country.

The amendment does several things, including: one, requiring employers to try and recruit U.S. workers before hiring H-1B visa holders; two, requiring employers to pay a better wage to visa holders who take these jobs; three, expanding the powers of the federal government to go after abusers; four, creating new rules regarding the outsourcing and outplacement of H-1B and L-1 workers by their employers to secondary employers in the United States; and five, establishing a new database that employers can use to advertise positions for which they intend to hire an H-1B worker.

Too many American workers are unemployed today. Yet we still allow companies to import hundreds, even thousands, of foreign workers with very little strings attached. These businesses should be first asked to look at Americans to fill vacant positions, and they should be held accountable for displacing Americans to hire cheaper foreign labor.

These two amendments go directly to the concerns about job creation and prevention of offshoring of U.S. jobs. Both amendments are bipartisan. Yet if cloture is invoked, these amendments would fall on the Senate cutting room floor.

Unlike the 2004 JOBS bill, I have no confidence that, even if the Democratic leadership were to follow regular order for floor purposes, that we could expect anything like a conference committee to work out the issues between the House and the Senate.

We find ourselves in a very disappointing situation today. Two serious issues are supposed to be addressed in the legislation before the Senate: The first is tax incentives for job creation; the second is measures to prevent offshoring of jobs. No doubt the people who send us here expect us to take these weighty matters seriously. With all the economic pain Americans are enduring, we shouldn't be playing political games. But here we are. We have a bill whose proponents claim is a serious effort.

The Democratic leadership skipped the Finance Committee, and we are presented with a take-it-or-leave-it bill that is really nothing more than a political label. We can do better.

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