[Congressional Record Volume 142, Number 72 (Tuesday, May 21, 1996)]
[Senate]
[Pages S5397-S5410]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       RESERVATION OF LEADER TIME

  The PRESIDING OFFICER. Under the previous order, Senate leadership 
time is reserved.

[[Page S5398]]



                  CONCURRENT RESOLUTION ON THE BUDGET

  The PRESIDING OFFICER. The Senate will resume consideration of Senate 
Concurrent Resolution 57, which the clerk will report.
  The assistant legislative clerk read as follows:

       A concurrent resolution (S. Con. Res. 57) setting forth the 
     congressional budget for the U.S. Government for fiscal years 
     1997, 1998, 1999, 2000, 2001, and 2002.

  The Senate resumed consideration of the bill.

       Pending:
       Boxer amendment No. 3982, to preserve, protect, and 
     strengthen the Medicaid program by controlling costs, 
     providing State flexibility, and restoring critical standards 
     and protections, including coverage for all populations 
     covered under current law, to restore $18 billion in 
     excessive cuts, offset by corporate and business tax reforms, 
     and to express the sense of the Senate regarding certain 
     Medicaid reforms.
       Wyden/Kerry amendment No. 3984, to express the sense of the 
     Senate regarding revenue assumptions.
       Wellstone amendment No. 3985, to express the sense of the 
     Senate on tax deductibility of higher education tuition and 
     student loan interest costs.
       Wellstone/Kerry amendment No. 3986, to express the sense of 
     the Senate that funds will be available to hire new police 
     officers under the Community Oriented Policing Service.
       Wellstone amendment No. 3987, to express the sense of the 
     Senate that Congress will not enact or adopt any legislation 
     that would increase the number of children who are hungry or 
     homeless.
       Wellstone amendment No. 3988, to express the sense of the 
     Senate with respect to maintaining current expenditure levels 
     for the Low Income Home Energy Assistance Program for fiscal 
     year 1997.
       Wellstone amendment No. 3989, to express the sense of the 
     Senate with respect to the interrelationship between domestic 
     violence and welfare.
       Kerry amendment No. 3990, to restore proposed cuts in the 
     environment and natural resources programs, to be offset by 
     the extension of expired tax provisions or corporate and 
     business tax reforms.
       Kerry amendment No. 3991, to increase the Function 500 
     totals to maintain levels of education and training funding 
     that will keep pace with rising school enrollments and the 
     demand for a better-trained workforce, to be offset by the 
     extension of expired tax provisions or corporate and business 
     tax reforms.
       Kyl amendment No. 3995, to express the sense of the Senate 
     regarding a supermajority requirement for raising taxes.
       Kyl amendment No. 3996, to providing funding for the Low 
     Income Home Energy Assistance Program through fiscal year 
     2000.
       Kennedy amendment No. 3997, to express the sense of the 
     Congress that the reconciliation bill should maintain the 
     existing prohibition against additional charges by providers 
     under the medicare program.
       Kennedy amendment No. 3998, to express the sense of the 
     Congress that the reconciliation bill should not include any 
     changes in Federal nursing home quality standards or the 
     Federal enforcement of such standards.
       Kennedy amendment No. 3999, to express the sense of the 
     Congress that provisions of current medicaid law protecting 
     families of nursing home residents from experiencing 
     financial ruin as the price of needed care for their loved 
     ones should be retained.
       Kennedy amendment No. 4000, to express the sense of the 
     Senate relating to the protection of the wages of 
     construction workers.
       Byrd amendment No. 4001, to increase overall discretionary 
     spending to the levels proposed by the President, offset by 
     the extension of expired tax provisions or corporate and 
     business tax reforms.
       Lott/Smith amendment No. 4002, to express the sense of the 
     Congress regarding reimbursement of the United States for the 
     costs associated with Operations Southern Watch and Provide 
     Comfort out of revenues generated by any sale of petroleum 
     originating from Iraq.
       Simpson/Moynihan amendment No. 4003, to express the sense 
     of the Senate that all Federal spending and revenues which 
     are indexed for inflation should be calibrated by the most 
     accurate inflation indices which are available to the Federal 
     government.
       Graham amendment No. 4007, to create a 60 vote point of 
     order against legislation diverting savings achieved through 
     medicare waste, fraud and abuse enforcement activities for 
     purposes other than improving the solvency of the Medicare 
     Federal Hospital Insurance Trust Fund.
       Ashcroft modified amendment No. 4008, to provide for an 
     income tax deduction for the old age, survivors, and 
     disability insurance taxes paid by employees and self-
     employed individuals.
       Gramm amendment No. 4009, to express the sense of the 
     Congress that the 1993 income tax increase on Social Security 
     benefits should be repealed.
       Brown amendment No. 4010, to express the sense of the 
     Senate that there should be a cap on the application of the 
     civilian and military retirement COLA.
       Harkin amendment No. 4011, to provide that the first 
     reconciliation bill not include Medicaid reform, focusing 
     mainly on Welfare reform by shifting Medicaid changes from 
     the first to the second reconciliation bill.
       Harkin (for Specter) amendment No. 4012, to restor e 
     funding for education, training, and health programs to a 
     Congressional Budget Office freeze level for fiscal year 1997 
     through an across the board reduction in Federal 
     administrative costs.
       Bumpers amendment No. 4013, to establish that no amounts 
     realized from sales of assets shall be scored with respect to 
     the level of budget authority, outlays, or revenues.
       Bumpers amendment No. 4014, to eliminate the defense 
     firewalls.
       Thompson amendment No. 3981, to express the sense of the 
     Senate on the funding levels for the Presidential Election 
     Campaign Fund.
       Murkowski amendment No. 4015, to prohibit sense of the 
     Senate amendments from being offered to the budget 
     resolution.
       Simpson (for Kerrey) amendment No. 4016, to express the 
     sense of the Senate on long term entitlement reforms.
       Snowe amendment No. 4017, to express the sense of the 
     Senate that the aggregates and functional levels included in 
     the budget resolution assume that savings in student loans 
     can be achieved without any program change that would 
     increase costs to students and parents or decrease 
     accessibility to student loans.
       Chafee/Breaux amendment No. 4018, in the nature of a 
     substitute.
       Domenici (for Dole/Hatch/Helms) amendment No. 4019, to 
     express the sense of the Senate that the Attorney General 
     should investigate the practice regarding the prosecution of 
     drug smugglers.
       Feingold amendment No. 3969, to eliminate the tax cut.

  Mr. HATFIELD. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. Without objection, the time will be charged 
equally, and the clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. EXON. 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. EXON. Mr. President, I ask unanimous consent that the pending 
amendment before the Senate be temporarily set aside so that we can 
entertain two amendments by previous agreement, the first to be offered 
by the Senator from Michigan, the second to be offered by the Senator 
from North Carolina. Both have been cleared, and we can move ahead on 
them. I would appreciate very much if the Chair would see fit to 
recognize the Senator from Michigan at this time for his statement and 
the introduction of the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Michigan [Mr. Levin] is recognized.
  Mr. LEVIN. I thank the Chair. I thank my good friend from Nebraska.


                           Amendment No. 4020

  Mr. LEVIN. Mr. President, the sense-of-the-Senate amendment which I 
will offer in a moment will put the Senate on record in support of 
sufficient funding in order that the National Institute on Drug Abuse, 
or NIDA, be able to continue to increase the pace of discovery of an 
antiaddiction drug, or drugs, in order to block the craving for illicit 
addictive substances.
  This sense-of-the-Senate amendment expresses our sentiment that 
amounts that are appropriated to the National Institutes of Health 
should be increased by amounts above the fiscal year 1996 
appropriations for this form of NIDA research. This effort is to 
discover antiaddiction drugs so that the craving which exists for them 
can be blocked. The amounts in this sense-of-the-Senate resolution are 
based on meetings and discussions with NIDA officials about what 
resources would be necessary to expedite the development of these 
illicit drug blocking agents, and the increase that would be 
recommended here in the sense-of-the-Senate amendment would be $33 
million in fiscal year 1997, $67 million for fiscal year 1998, and $100 
million for each of the fiscal years 1998 through 2002.

  There have been some significant breakthroughs already by NIDA. NIDA 
researchers have recently shown that activation in the brain of one 
type of dopamine receptor suppresses the drug-seeking behavior, whereas 
activation of another triggers drug-seeking behavior. Another 
significant finding in this past year is the successful immunization of 
animals against the psychostimulant effects of cocaine. In 1993, NIDA 
announced the FDA approval of a medication called LAAM for heroine 
addiction. One of LAAM's

[[Page S5399]]

advantages over methadone is that it does not need to be taken daily.
  These are but a few of the exciting discoveries in drug abuse 
research that have been made over the past several years.
  Stemming the tide of drug addiction by trying to find these 
anticraving substances is in the best interests of all of us, 
particularly the innocent victims of drug-related offenses. We spend at 
the State and local level and at the Federal level billions and 
billions and billions of dollars to incarcerate people who commit drug-
related offenses.
  A 1992 report by the Bureau of Justice revealed that three out of 
four jail inmates reported illicit drug use in their lifetime and more 
than 40 percent had used drugs in the month before their offense, with 
27 percent under the influence of drugs at the time of their offense. A 
significant percentage also said that they were trying to obtain money 
for drugs when they committed their crime.
  More than 60 percent of juveniles and young adults in State-operated 
juvenile institutions reported using illicit drugs once a week or more 
for at least a month during some time in the recent past and almost 40 
percent reported being under the influence of drugs at the time of 
their offense.
  The National Institute on Drug Abuse has presented us with some 
unprecedented opportunities to understand and to treat addiction and to 
block craving. We should support that effort and the progress which has 
been made with a funding level which will enhance the efforts of NIDA 
to achieve these breakthroughs. We will all benefit. We will benefit in 
terms of our safety. We will benefit in terms of the Nation's resources 
if we can finally discover agents which will block the craving for 
cocaine and for other illicit drugs. NIDA does the majority of research 
in this area in the world.
  So I hope that this sense-of-the-Senate amendment will be adopted 
which will put us on record as encouraging these additional funds so as 
to promote the efforts of the National Institute on Drug Abuse. I now 
will send this amendment to the desk.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Michigan [Mr. Levin] proposes an amendment 
     numbered 4020.

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

       At the appropriate place, insert the following new section:

     SEC.   . SENSE OF THE SENATE REGARDING THE NATIONAL INSTITUTE 
                   OF DRUG ABUSE.

       (a) Findings.--Congress finds the following:
       (1) The National Institute on Drug Abuse (hereafter 
     referred to in this section as ``NIDA'') a part of the 
     National Institutes of Health (hereafter referred to in this 
     section as ``NIH'') supports over 85 percent of the world's 
     drug abuse research that has totally revolutionized our 
     understanding of addiction.
       (2) One of NIDA's most significant areas of research has 
     been the identification of the neurobiological bases of all 
     aspects of addiction, including craving.
       (3) In 1993, NIDA announced that approval had been granted 
     by the Food and Drug Administration of a new medication for 
     the treatment of heroin and other opiate addiction which 
     breaks the addict of daily drug-seeking behavior and allows 
     for greater compliance because the patient does not need to 
     report to a clinic each day to have the medication 
     administered.
       (4) Among NIDA's most remarkable accomplishments of the 
     past year is the successful immunization of animals against 
     the psycho-stimulant effects of cocaine.
       (5) NIDA has also recently announced that it is making 
     substantial progress that is critical in directing their 
     efforts to identify potential anti-cocaine medications. For 
     example, NIDA researchers have recently shown that activation 
     in the brain of one type of dopamine receptor suppresses 
     drug-seeking behavior and relapse, whereas activation of 
     another, triggers drug-seeking behavior.
       (6) NIDA's efforts to speed up research to stem the tide of 
     drug addiction is in the best interest of all Americans.
       (7) State and local governments spend billions of dollars 
     to incarcerate persons who commit drug related offenses.
       (8) A 1992 National Report by the Bureau of Justice 
     Statistics revealed that more than 3 out of 4 jail inmates 
     reported drug use in their lifetime, more than 40 percent had 
     used drugs in the month before their offense with 27 percent 
     under the influence of drugs at the time of their offense. A 
     significant number said they were trying to get money for 
     drugs when they committed their crime.
       (9) More than 60 percent of juveniles and young adults in 
     State-operated juvenile institutions reported using drugs 
     once a week or more for at least a month some time in the 
     past, and almost 40 percent reported being under the 
     influence of drugs at the time of their offense.
       (10) This concurrent resolution proposes that budget 
     authority for the NIH (including NIDA) be held constant at 
     the fiscal year 1996 level of $11,950,000,000 through 
     fiscal year 2002.
       (11) At such appropriation level, it would be impossible 
     for NIH and NIDA to maintain research momentum through 
     research project grants.
       (12) Level funding for NIH in fiscal year 1997 would reduce 
     the number of competing research project grants by nearly 
     500, from 6,620 in fiscal year 1996 to approximately 6,120 
     competing research project grants, reducing NIH's ability to 
     maintain research momentum and to explore new ideas in 
     research.
       (13) NIH is the world's preeminent research institution 
     dedicated to the support of science inspired by and focused 
     on the challenges of human illness and health.
       (14) NIH programs are instrumental in improving the quality 
     of life for Americans through improving health and reducing 
     monetary and personal costs of illnesses.
       (15) The discovery of an anti-addiction drug to block the 
     craving of illicit addictive substances will benefit all of 
     American society.
       (b) Sense of the Congress.--It is the sense of the Congress 
     that amounts appropriated for the National Institutes of 
     Health--
       (1) for fiscal year 1997 should be increased by a minimum 
     of $33,000,000;
       (2) for fiscal year 1998 should be increased by a minimum 
     of $67,000,000;
       (3) for fiscal year 1999 should be increased by a minimum 
     of $100,000,000;
       (4) for fiscal year 2000 should be increased by a minimum 
     of $100,000,000;
       (5) for fiscal year 2001 should be increased by a minimum 
     of $100,000,000; and
       (6) for fiscal year 2002 should be increased by a minimum 
     of $100,000,000;

     above its fiscal year 1996 appropriation for additional 
     research into an anti-addiction drug to block the craving of 
     illicit addictive substances.

  Mr. LEVIN. I yield the floor.
  Mr. EXON addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska [Mr. Exon] is 
recognized.
  Mr. EXON. I thank my good friend and colleague from the State of 
Michigan, Senator Levin, for the amendment that I had indicated earlier 
has been cleared on both sides. This is an important sense-of-the-
Senate resolution, and I appreciate the cooperation we have had from 
Senator Levin and his staff on this matter.
  We are about ready to have proposed in behalf of Senator Helms from 
North Carolina an amendment that likewise has been cleared on both 
sides. Then we can move the adoption of those by voice vote. Awaiting 
the arrival of one Member on the Senate floor, I suggest the absence of 
a quorum.
  Mr. LEVIN addressed the Chair.
  Mr. EXON. I withhold.
  Mr. LEVIN. If the Senator will withhold, let me simply thank my good 
friend from Nebraska and his staff and the staff on the Republican side 
who have worked with us to clear this amendment. As always, I have had 
great response from my friend from Nebraska and the Republicans on this 
issue. It is an important issue for all America. I am grateful for 
their help.
  Mr. EXON. I thank the Senator.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. BROWN. 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. 4018

  Mr. BROWN. Mr. President, I wanted to add a word of support for the 
very diligent effort of the Senator from Rhode Island and the 
bipartisan group he has gathered together to offer a budget 
alternative. I am very mindful of the remarks made by the distinguished 
Senator from New Mexico when he observed yesterday that such a change 
in budget, to be enacted, would literally require the President's help 
and support. Certainly we have learned this last year; that, indeed, 
progress for reconciliation has to include the President. But I intend 
to vote for the Chafee amendment. I think it brings two factors to it 
that are worth considering.

[[Page S5400]]

  First of all, it is bipartisan. It is the only major bipartisan 
proposal that is here and, I think, as such, has a chance of making it 
all the way through reconciliation.
  Second, I am going to support it because, of the alternatives, it has 
the strongest impact long term, that is beyond the 6-year window or the 
7-year window. Long term, it is significantly better in deficit 
reduction.
  For those two reasons I salute the efforts of Senator Chafee, and I 
will probably vote for it.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. EXON addressed the Chair.


                           Amendment No. 4020

  The PRESIDING OFFICER. The Chair will inform the Senator that the 
pending amendment is the amendment offered by Mr. Levin.
  Mr. EXON. Mr. President, I am back to see if possibly we could at 
this time clear the two amendments agreed to earlier. Has the amendment 
by the Senator from North Carolina been offered?
  I am prepared to yield back time on the Levin amendment, which we 
will agree to by a voice vote. I likewise assume we will move forward 
with the amendment of the Senator from North Carolina, which I assume 
has been cleared on both sides.
  I yield back the remainder of the time on the Levin amendment.
  Mr. DOMENICI. Do I have the time in opposition? I yield back the time 
in opposition to the Levin amendment.
  THE PRESIDING OFFICER. If there be no further debate, the question is 
on agreeing to the amendment.
  The amendment (No. 4020) was agreed to.


                           Amendment No. 4021

(Purpose: To express the sense of the Senate regarding the extension of 
 the employer education assistance exclusion under section 127 of the 
                     Internal Revenue Code of 1986)

  Mr. DOMENICI. Mr. President, I send an amendment to the desk on 
behalf of Senator Helms. I ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from New Mexico [Mr. Domenici], for Mr. Helms, 
     proposes an amendment numbered 4021.

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

       At the appropriate place insert the following:

     SEC.   . SENSE OF THE SENATE REGARDING THE EXTENSION OF THE 
                   EMPLOYER EDUCATION ASSISTANCE EXCLUSION UNDER 
                   SECTION 127 OF THE INTERNAL REVENUE CODE OF 
                   1986.

       (a) Findings.--The Senate finds that--
       (1) since 1978, over 7,000,000 American workers have 
     benefited from the employer education assistance exclusion 
     under section 127 of the Internal Revenue Code of 1986 by 
     being able to improve their education and acquire new skills 
     without having to pay taxes on the benefit;
       (2) American companies have benefited by improving the 
     education and skills of their employees who in turn can 
     contribute more to their company;
       (3) the American economy becomes more globally competitive 
     because an educated workforce is able to produce more and to 
     adapt more rapidly to changing technologies;
       (4) American companies are experiencing unprecedented 
     global competition and the value and necessity of life-long 
     education for their employees has increased;
       (5) the employer education assistance exclusion was first 
     enacted in 1978;
       (6) the exclusion has been extended 7 previous times;
       (7) the last extension expired December 31, 1994; and
       (8) the exclusion has received broad bipartisan support.
       (b) Sense of the Senate.--It is the sense of the Senate 
     that the revenue level assumed in the Budget Resolution 
     accommodate an extension of the employer education assistance 
     exclusion under section 127 of the Internal Revenue Code of 
     1986 from January 1, 1995, through December 31, 1996.

  Mr. HELMS. Mr. President, this sense-of-the-Senate resolution calls 
for the extension of a critical education tax provision that enables 
American workers to further their education and better provide for 
their families. I have vigorously supported this education tax credit 
since its initial authorization in 1978. This provision has allowed 
millions of American men and women to acquire new skills and pursue 
their educational goals.
  Our Government, being a republic, relies on the promotion of a moral 
and principled citizenry, education is central to the continued 
vitality of America. President Thomas Jefferson put it this way: ``If a 
nation expects to be ignorant and free, in a state of civilization, it 
expects what never was and never will be.''
  The Federal Government has promoted education and individual choice 
through the educational assistance exclusion, codified at section 127 
of the Internal Revenue Code, a provision that allows employees to 
receive up to $5,250 a year, tax-free, in educational benefits from 
their respective employers.
  When this provision expired on December 31, 1994, it left many 
workers and companies uncertain about the Federal Government's 
commitment to the promotion of worker education and retraining. That 
uncertainty increased last year, when President Clinton vetoed the 
Balanced Budget Act that would have extended the credit through 
December 31, 1996.
  Mr. President, over the years, this provision has enjoyed wide 
bipartisan support, resulting in its reauthorization seven times. I 
hope Senators will once again support extension of this education tax 
credit which has done so much to help our Nation's workers and 
employers alike. Accordingly, I offer today a sense-of-the-Senate 
resolution that provides that Congress should include, in any 
appropriate tax legislation, an extension of this critically needed tax 
credit.
  Neither the need for education nor the need for acquiring new skills 
stops when a young person receives a high school diploma. Increasingly, 
education and worker training have become lifelong pursuits.
  My home State of North Carolina has been hit hard by plant closings 
during the last few years. The textile industry in my State has been 
particularly hard hit as thousands of workers have lost their jobs. I 
could cite eye-popping statistics as to the number of lost jobs but 
what is important to realize is that each one of these lost jobs 
represents an individual man or woman, often the lone breadwinner in a 
family.
  Many workers are understandably concerned about job security. They 
worry about the possibility of losing their job and wonder how they 
would provide for their loved ones if they did suddenly become 
unemployed. If this education provision is not reauthorized then 
many more workers and their families, across the country, will suffer 
needless anxiety and uncertainty.

  Mr. President, while the Federal Government cannot set up programs to 
guarantee that every American has a job, we can act to ensure our Tax 
Code encourages workers and companies to act in their own interest by 
promoting education and training.
  Without this exclusion, many employers may choose to end these 
benefits for their employees. Those employers who do offer these 
benefits will subject their employees to additional Federal and State 
taxes. A fortunate few may be able to meet a complex IRS test to 
demonstrate that the benefits are sufficiently job-related so as to be 
deductible. These additional taxes can easily exceed 40 percent of the 
amount paid by the employer. This enormous tax burden can be decisive 
in preventing an employee from pursuing an education to improve his or 
her career prospects and earning ability.
  I support reauthorization of this provision because it empowers 
individual employees and businesses by encouraging and promoting 
education not through a monolithic Government bureaucracy but through 
the removal of a harmful and destructive hurdle to the pursuit of an 
education.
  Over the years, this provision has helped more than 7 million working 
Americans to further their education and to acquire additional skills. 
While the importance of this achievement to those individuals, their 
families and their companies cannot be overstated, it is also true that 
this accomplishment has served our Nation well.
  Last week, the House Ways and Means Committee included an extension 
of the tax credit for employer provided education assistance in its 
markup of the Small Business Job Protection Act.
  Mr. President, I do hope Senators will demonstrate their support for 
the

[[Page S5401]]

continuation of this important provision and vote for this sense-of-
the-Senate resolution to reaffirm the Congress' commitment to improving 
the education of American workers.
  Mr. DOMENICI. Mr. President, I understand this amendment is 
acceptable to Senator Exon, as the Levin amendment was to us; is that 
correct?
  Mr. EXON. It is, and I yield back any time in opposition that we may 
have on this side.
  Mr. DOMENICI. And I yield back time Senator Helms has on the 
amendment and ask for its adoption.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered. The amendment is agreed to.
  The amendment (No. 4021) was agreed to.
  Mr. EXON. Mr. President, I move to reconsider the vote by which the 
amendment was agreed to.
  Mr. DOMENICI. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. EXON. Mr. President, I ask for a vote on the Levin amendment that 
is now the pending amendment.
  Mr. DOMENICI. We have adopted it.
  Mr. EXON. Did we adopt that?
  The PRESIDING OFFICER. The Levin amendment was adopted.
  Mr. DOMENICI. I move to reconsider the vote by which the Levin 
amendment was agreed to.
  Mr. EXON. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. DOMENICI. Mr. President, how much time do we have on the Chafee-
Breaux amendment?
  The PRESIDING OFFICER. There is 1 hour of debate equally divided.
  Mr. DOMENICI. I yield the floor.
  Mr. CHAFEE addressed the Chair.
  The PRESIDING OFFICER. The Senator from Rhode Island, [Mr. Chafee], 
is recognized.
  Mr. CHAFEE. Mr. President, I ask that the half-hour this side has be 
divided in half, with half to me and the other half to the Senator from 
Louisiana.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 4018

  Mr. CHAFEE. I will take such time as I need.
  Mr. President, in the years 1931 to 1938, the people of England 
failed to heed the warnings that their nation and, indeed, their lives 
were in peril. They dismissed voices, such as that of Winston 
Churchill, crying the alarm. They dismissed him as a warmonger and a 
scaremonger. Despite clear proof that Hitler was building a fierce war 
machine, the people of Great Britain preferred to ignore such evidence. 
John F. Kennedy described that in his book, ``Why England Slept.'' And 
in his history of World War II entitled ``The Gathering Storm''--that 
was the first volume--Churchill gave the theme of that volume as 
follows:

       How the English-speaking people through their unwisdom, 
     carelessness and good nature allowed the wicked to rearm.

  Mr. President, a clear analogy can be drawn between the financial 
peril of the United States in the immediate years ahead and the 
military peril of Great Britain in the years referred to, with one 
major difference.
  No one disputes--no one disputes--the fiscal danger our Nation faces 
if we do not control these entitlements.
  We hear a whole series of siren-like voices, gentle voices saying, 
``Don't do anything now. Let's have more study. Isn't there an easier 
way of correcting the situation? It's an election year, let's wait. We 
can't do anything because we don't have the President's support.''
  Mr. President, we can follow all that kind of advice, but it will not 
cure the situation one iota, and the only way to solve the financial 
problem that this Nation faces is to do something about it now. Oh, 
sure, we can postpone it. Every year we postpone makes the solution 
that much more difficult.

  The solution of the centrist group has been, first, a realistic 
budget that we do not have any savings that really cannot be achieved. 
We do not say we are going to make these $300 billion savings out of 
discretionary accounts. We know that will not occur. Every Senator 
knows that will not happen.
  So what we have done is said the solution to this is to state the 
CPI, the Consumer Price Index, in a realistic fashion, and we have not 
taken the high side of the recommendations. Many of the witnesses that 
came before the Finance Committee said the CPI is overstated by 1 
percent at least and as high as 2 percent. But, no, we have gone to 
one-half of 1 percent because that can be thoroughly justified.
  Has there been criticism of that? Oh, yes, there has been criticism: 
``Savings from the CPI adjustment should not be used except to shore up 
the Social Security fund.'' That is what we do, Mr. President. We have 
a statement from the Social Security's chief actuary that the solvency 
of the Social Security trust fund, as a result of the CPI changes 
recommended by the centrist group, will extend the solvency of the 
Social Security fund.
  Some say that if you change the CPI or go to a realistic correct 
tabulation of the CPI that you are going back on promises made to 
Social Security recipients. That is absolutely inaccurate. Nothing in 
the centrist plan affects commitments we have made to Social Security 
recipients. Congress promised to provide cost-of-living adjustments to 
beneficiaries, and we continue to do that under our plan. All our plan 
does is make the CPI correct.
  Mr. President, I notice there are others waiting to speak, so I will 
reserve the remainder of my time.
  Mr. BREAUX addressed the chair.
  The PRESIDING OFFICER. The Senator from Louisiana, [Mr. Breaux] is 
recognized.
  Mr. BREAUX. Mr. President, it is my understanding we have 30 minutes 
for the proponents and 30 minutes for the opponents.
  The PRESIDING OFFICER. That is correct.
  Mr. BREAUX. And we have agreed to divide 15 and 15 to each side?
  The PRESIDING OFFICER. That is correct.
  Mr. BREAUX. I yield 5 minutes to the Senator from Florida.
  The PRESIDING OFFICER. The Senator from Florida, [Mr. Graham] is 
recognized for 5 minutes.
  Mr. GRAHAM. Mr. President, I thank my friend from Louisiana. It is a 
pleasure to have worked with the centrist coalition in the last several 
months in an attempt to develop a balanced budget based on a realistic 
set of principles.
  In my limited time, I would like to make two points. First, if this 
Congress is serious about achieving what is stated to be its No. 1 
priority, which is to develop a multiyear balanced budget plan that 
would reduce the Federal deficit to zero at the earliest practical date 
and then to keep that deficit at zero for the foreseeable future, I 
suggest that the vote that we are about to take on this centrist 
coalition will be the ultimate test of our fidelity to that principle.
  There is no other opportunity to pass a balanced budget in 1996 other 
than that which is presently before the Senate. The reality is a 
balanced budget will not be passed which is totally written by 
Democrats. We established that fact in the early 1990's. A balanced 
budget proposition will not be passed which is written and supported 
totally by Republicans. We validated that truth in 1995.

  We now have an opportunity to vote on a plan which represents a 
moderate centrist perspective with support from significant numbers of 
Senators from a variety of philosophical and regional and economic 
backgrounds which does have a meaningful chance to be adopted. That is 
the fundamental question: Are we going to reject the good because it 
falls somewhat short of our own personal view of the perfect, or are we 
to say that this good is so much better than the alternative, which is 
to continue to have these enormous Federal deficits and all of the 
damage that they do to our Nation and to our individual lives? Are we 
going to miss the opportunity to get the benefits of a balanced budget, 
including the very substantial benefits of a lower interest rate over 
the next decade than that which we will have if we do not exercise this 
act of discipline?
  I believe, Mr. President, that the course of action which commends 
itself to this Senate is to adopt the centrist budget.
  I would like to speak to one element of the budget which has received 
some comment which I think is illustrative of the principles that 
underlie the centrist approach. And that is that it is pragmatic, it is 
compassionate and it

[[Page S5402]]

builds in structural changes that will help keep a budget once brought 
to balance in balance for the foreseeable future.
  Our Medicare Program is in two parts. One part relates to hospitals 
and is financed through a trust fund supported by payroll taxes. The 
other part relates to physician's payments, and it is supported by a 
premium paid by the beneficiaries voluntarily.
  If they do not wish to receive those physicians' services, they can 
elect not to do so and not to pay the premium. The balance is paid by 
the general tax revenue of the Federal Government.
  That premium has been set for most of the 1990's to be 31.5 percent 
of the cost of providing the physicians' services. Today it has dropped 
back to its pre-1990's level of 25 percent of the cost. That 31 
percent, or today's 25 percent, is applied to all of the some 35 
million-plus Medicare beneficiaries, the most affluent to the most 
indigent.
  Our plan is based on, first, that we should raise from the part B 
premium, the premium for physicians' payments, the equivalent of 31.5 
percent if that amount were applied to all of the 35 million 
beneficiaries. But we should not distribute the premium across all 
beneficiaries equally. Rather, it should be affluence tested.
  We propose to have those Social Security beneficiaries who are under 
200 percent of poverty, which represents approximately 70 percent of 
the beneficiaries, pay the current----
  The PRESIDING OFFICER. The Senator has used his 5 minutes.
  Mr. BREAUX. I give 1 additional minute.
  The PRESIDING OFFICER. The Senator has 1 additional minute.
  Mr. GRAHAM. Pay the current 25 percent. Those who are between 200 
percent of poverty and $50,000 for an individual or $75,000 for a 
couple will pay the 31.5 percent, which had been the premium level for 
the first half of this decade. Those above the $50,000 or $75,000 per 
couple, will pay a higher premium based on their income.
  Mr. President, I believe that is fair, equitable, and compassionate 
and makes an important structural change in the Medicare system which 
will help to preserve the long-term solvency of our Medicare system.
  I cite this one example as illustrative of the approach that has been 
taken throughout the centrist coalition budget. But the fundamental 
thing that recommends it is its bipartisan nature, the fact that it is 
reality, both economically and politically. This has a chance to 
actually pass, become law and make a difference in the lives of 
Americans. I urge its adoption.
  The PRESIDING OFFICER. Who yields time?
  Mr. BREAUX. Mr. President, I yield 4 minutes to the Senator from 
Wisconsin.
  The PRESIDING OFFICER. The Senator from Wisconsin has 4 minutes.
  Mr. KOHL. Mr. President, with this week's debate on the budget 
resolution, I believe the Senate has moved a giant step closer to 
implementing a balanced budget. We are no longer debating whether we 
should balance the budget. We are actually choosing between three 
separate, complete balanced budget proposals: the Republicans' budget 
resolution, the President's balanced budget submission, and the 
centrist coalition's bipartisan budget plan now pending as an 
amendment.
  The President's plan has already been defeated in a party line vote--
not a surprising result in an election year. We now have to decide 
whether to adopt the Republicans' budget or the only bipartisan 
balanced budget plan presented in the Senate.
  If we are serious about setting the course for a balanced budget this 
year, I think we must choose the centrist plan. The Republicans' 
budget, as Yogi Berra said, is ``deja vu all over again.'' It is 
virtually identical to last year's vetoed budget bill.
  The Republican budget puts forth the same plan that was rejected last 
year by the public and the President. This is the plan that guided us 
through a year of vetoes, gridlock, Government shutdowns, and stopgap 
spending measures.
  Mr. President, we have a chance to redeem ourselves in the eyes of 
the American public. They have seen 2 years of partisanship, bickering, 
and gridlock. In one vote we can send a message that we can work 
together in the spirit of bipartisanship, that we can bridge our 
differences and pass a budget that is honest, balanced, and fair.
  That plan is the centrist budget now before us as an amendment. 
First, and most important, this is the only plan on the table that is 
bipartisan. It has been developed over the last half year by 11 
Democratic Senators and 11 Republican Senators. We have worked in a way 
that I believe the American people want us to work. We have put aside 
our own political needs and party positions. We have compromised. Our 
primary goal was a balanced budget--not a partisan victory. And the 
result is an equitable budget plan that can win the support of a 
majority of the American people.
  The budget the centrists present today contains $679 billion in 
proposed savings over 7 years. Those savings are spread across almost 
every group in society and almost every Government program. Our plan 
has lower Medicare cuts than either the Republican or Democratic plans 
but enough cuts to guarantee the longrun solvency of the program. Our 
plan contains a modest tax cut--$130 billion--that will allow us to do 
some targeted tax credits for children and give businesses some capital 
gains relief. Our plan caps the out-of-control growth of entitlements 
through an adjustment in the CPI. And, most importantly, our plan 
achieves real and sustainable deficit elimination.
  Mr. President, the centrists have put together a solid, bipartisan 
balanced budget plan. I believe it is the best--and perhaps the only--
choice for those Members who want to see a balanced budget enacted this 
year.
  Mr. President, we know partisanship does not work. If we go down that 
road again with a budget that only gets Republican votes, then we may 
see some interesting campaign ads, but we will not see a balanced 
budget.
  We have a clear choice before us today. Vote for the centrist 
amendment, and vote for bipartisanship, honest budgeting, shared and 
fair sacrifice, and the last, best hope for a balanced budget in this 
Congress. I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. CHAFEE. Mr. President, I yield 3 minutes to the Senator from 
Washington.
  The PRESIDING OFFICER. The Senator from Washington [Mr. Gorton], is 
recognized for 3 minutes.
  Mr. GORTON. Mr. President, the remarks beginning the debate this 
morning on the part of the Senator from Rhode Island were directly on 
point. Now is the time and this is the place for the oratory to end and 
the true work in balancing our budget and building a brighter future 
for our own generation, for our children and our grandchildren, is to 
begin. There are no longer any real excuses.
  A year ago, for the very first time for 20 or 30 years, this Congress 
actually passed a balanced budget that was then vetoed by the 
President. But that balanced budget changed the entire nature of the 
debate. The President himself proposed a budget that was balanced, as 
inadequate as it was unfair, but nonetheless lip service to this 
proposition.
  Again, this year we have before us from the Budget Committee, with my 
support, a budget that is truly balanced, but the execution of which 
will almost certainly receive another veto from a President in an 
election year.
  This group, for the first time in a decade, two decades, three 
decades, has gotten together, on a bipartisan basis, to solve the 
greatest problem facing the United States of America, Democrats and 
Republicans working together. It has a proposal that in the long run 
creates a greater degree of financial stability and security for the 
people of the United States than do any of the other proposals. Most 
Members in this body would like to vote for it if they only believed 
that it would become law.
  But, Mr. President, we cannot tell whether or not it will pass the 
House of Representatives unless we pass it here in the Senate. We do 
not know whether a President would respond to the dynamic of it passing 
both Houses until it has passed both Houses. So the ball is in our 
court. If this is simply a good try that fails, we will be debating the 
same issues over and over and over again, but we will not have done 
what we were supposed to do for the people of our country.

[[Page S5403]]

  If we pass it, maybe it will be defeated in some future place in this 
political debate in this election year. But maybe it will not. Perhaps 
it will build its own dynamic. Let us give it that opportunity, Mr. 
President. That is what we were elected to do.
  The PRESIDING OFFICER. The time has expired.
  Mr. BREAUX. Mr. President, I inquire of the Chair how much time our 
side has.
  The PRESIDING OFFICER. The Senator from Louisiana has 6 minutes left.
  Mr. BREAUX. I yield myself 2 minutes.
  Mr. President, yesterday a great deal of discussion was held about 
the CPI adjustment. I just want to make a couple comments because many 
Members said, ``We like your budget, but the CPI is something that we 
can't handle. We don't think it's the right thing to do.''
  We have had three hearings in the Senate Finance Committee--March 13 
of last year, April 6 of last year, and June 5 of last year--we had a 
parade of economists before the Finance Committee. Every one of them to 
a person said that we are making a mistake as a country. The 
distinguished Senator from North Dakota said that yesterday.
  Every year we make a mistake. Every year we give every person who is 
on an entitlement program more than they should get, by every 
economists' professional judgment. They say we overestimate what their 
increase should be from anywhere between 0.7 and 2 percent.
  So we have had the courage to make a decision that we will fix the 
problem. We will correct the mistake. We will say that every person in 
America who is entitled to an entitlement increase--Social Security, 
railroad retirees, Federal retirees--we will give you a more accurate 
increase in your benefits. For instance, in Social Security it says 
instead of getting a $20-a-month increase, you will get a $16-a-month 
increase. They still get an increase, a substantial increase. It is $4 
less than they would have gotten under the incorrect formula, but 
everybody knows the formula is wrong. The formula has made a mistake.
  Are there not enough people in this Congress to say that when we make 
a mistake, we should correct it and recognize it? That is what we do in 
CPI.
  I think everybody should enthusiastically stand up and say we want to 
guarantee everybody in this country gets an accurate increase based on 
inflation. When the formula is wrong, Congress should have the courage 
to at least correct the mistake. That is the only thing we do. It is 
supported by a Republican economist, by a Democratic economist, and by 
everybody who has testified before the Senate Finance Committee. I 
think it should be adopted.
  I reserve the balance of my time.
  The PRESIDING OFFICER. Who yields time to the Senator from North 
Dakota?
  Mr. BREAUX. I inquire, Mr. President, how much time do we have 
remaining?
  The PRESIDING OFFICER. The Senator has 4 minutes.
  Mr. BREAUX. Senator Lieberman requested some time.
  Mr. CHAFEE. Mr. President, I am happy to give the Senator some of my 
time.
  Mr. BREAUX. We will give 3 minutes to Senator Conrad.
  Mr. CONRAD. I thank Senator Chafee and Senator Breaux for this time.
  Mr. President, what can be more clear? We are headed for a cliff. 
Everyone who has examined this question tells us we are headed for a 
circumstance in which if we do not change course, we will either face 
an 82-percent tax rate in this country or a one-third cut in all 
benefits. That is where we are headed. Make no mistake.
  There are many things that must be done in order to prevent that 
calamity from occurring. We must generate savings out of the various 
entitlement programs. We must cut other spending. All of those things 
must be done.
  Mr. President, with respect to the CPI that was criticized on the 
floor last night, the technical correction in the Consumer Price Index 
that our group has advocated on a bipartisan basis, this is a question 
of a mistake--a mistake. The Consumer Price Index is being used to 
adjust for cost-of-living increases, not just with respect to 
entitlement programs but also with respect to the revenue base of this 
country.
  The economists have come to us and said, overwhelmingly, ``You are 
overcorrecting by using the Consumer Price Index. It is not a cost-of-
living index.'' Even the people who draw it up at the Bureau of Labor 
Statistics will tell you it is not a cost-of-living index. Yet, that is 
what we are using it for. The economists tell us, because we are doing 
that, we are making a mistake. They say the mistake is between 0.7 and 
2 percent a year, with the most likely overstatement being 1 percent.

  What does that mean? Over 10 years, that means we are spending $600 
billion by mistake--by mistake. If we cannot correct a mistake around 
here to address preventing the calamity that is going to occur, what 
can we do? If this body and the other body and the President of the 
United States cannot correct mistakes to prevent a fiscal calamity, 
what can we do?
  Mr. President, I think the question has to be, if not now, when? If 
not us, who? If we cannot correct a mistake to prevent a financial 
calamity, then we fail in our responsibility.
  Mr. BREAUX. Mr. President, I yield the remaining time we have, 4 
minutes, to the Senator from Connecticut, Senator Lieberman.
  Mr. LIEBERMAN. I thank my friend and colleague from Louisiana. I 
thank my friend from North Dakota, who I am pleased to see this morning 
paraphrasing the words of the Talmud, which come strongly from his 
lips. I appreciate that sentiment.
  Mr. President, I want to thank Senators Chafee and Senator Breaux for 
convening this so-called centrist coalition. Frankly, it has been one 
of the most satisfying experiences I have had in the 8 years I have 
been in the Senate, because we did what I thought we came here to do, 
which was to forget that we are Democrats or Republicans, focus on the 
responsibility that we have as Americans, elected by people from all 
parties in our State, and deal with central and obvious problems--and, 
in this case, most especially, the imbalance in our budget.
  Sometimes when I look at the course that both parties are taking 
here, frankly, on matters such as the budget, it seems to me it has 
become so highly politicized that we might as well have our press 
secretaries staffing us on budget questions.
  This centrist coalition attempted to find a third way. The group was 
driven by the knowledge that if we truly want to balance the budget, it 
is going to take Members of both parties, working cooperatively, to do 
so.
  Our group understands, I think, the first rule of compromise. It 
means you cannot always have your way, or, put more eloquently, as the 
junior Senator from Utah, Senator Bennett, did in quoting his father, 
``It means that you attempt''--and I love this expression--``to 
legislate at the highest level at which you can obtain a majority.'' 
That is perfect. That is just what we attempted to do in this group.
  What does this proposal have? It faces the big problem in the budget 
which is that the so-called entitlements are skyrocketing. If we let 
them go, they will eat up our Government and make it impossible for us 
to continue to do what people want us to do without grossly overtaxing 
them. It approaches entitlement reform not in a weak and defensive way, 
but by understanding that there is another side to this question.
  Yes, as Medicaid and Medicare go up, people are benefiting, but 
people are paying for them. Just to state it briefly in the time I 
have, how can we explain to a worker, how can I explain to a factory 
worker in Connecticut making $30,000 a year that through his paycheck 
he is paying for part A and through his tax bills, 75 percent of part B 
Medicare for a senior citizen retired, making $30,000 a year, with no 
kids to send through college or feed and clothe; or forget the 
$30,000--a senior citizen making $50,000 or $100,000 or $1 million. It 
is unfair to the people.

  We have a reasonable number on discretionary spending, the most 
reasonable of any of the budget packages. Mr. President, we have a 
sensible tax cut program that will create growth, that stimulates 
savings and investment through capital gains cuts and through some very 
creative programs to encourage people to save more. Also, to

[[Page S5404]]

help the middle class in targeted areas, such as offering a deduction 
and help in sending their kids to college, which, at least in 
Connecticut, is the greatest burden I find the middle class is 
shouldering as I talk to them when I go around the State.
  This is a solid, balanced, thoughtful program. Mr. President, 22 of 
us--11 Democrats, 11 Republicans--have put it together. I hope a lot of 
our colleagues surprise us and join us in getting this moving in the 
right direction toward balanced growth for our country.
  I yield the floor.
  Mr. CHAFEE. Mr. President, I yield myself 2 minutes.
  I have listened to the presentation of our amendment, and I must say 
I want to congratulate every Senator who has spoken on behalf of this 
amendment. I think the arguments, really, are overpowering.
  Here is the problem: If we continue on the path we are on now in this 
country, every one of the entitlement programs is going to be in a 
very, very severe situation.
  What did the entitlement commission say when they reported 2 years 
ago? This is what they found: By the year 2010--how far away is that? 
Mr. President, 2010 is 14 years away. Spending on entitlement 
programs--Social Security, Medicare, Medicaid, welfare, all of the 
entitlement programs--where they are locked in, unless we do something, 
the payments on those programs, plus the interest on the national debt, 
will exceed all the Federal tax revenues. All the money that comes into 
the Federal Government will be inadequate to cover those entitlement 
programs; not a nickel left for the Park System or for maintaining our 
highways or for building them or the FBI, the State Department, the 
Justice Department, whatever it is.

  Mr. President, obviously, something has to be done. I find the 
arguments of the opponents difficult to understand. One of the 
arguments is, ``Well, the President has not said he is for this thing, 
so we should not vote for it.'' What are we hired for? We are hired, it 
seems to me, to do what is best for the country, and whether the 
President is for it or is against it does not make any difference. He 
cannot vote here on the floor of the Senate. We can. It seems to me to 
make our vote depending on whether this is going to pass or not and 
whether the President is for it or not is hardly the route to go.
  So I plead with my colleagues to come forward and support this 
amendment.
  Mr. President, I ask for the yeas and nays on the amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. CHAFEE. Mr. President, I will take 1 more minute.
  The PRESIDING OFFICER. The Senator has 1 more minute.
  Mr. CHAFEE. Mr. President, here we have a chance to do something. In 
my opening remarks, I mentioned the situation in England in the 1930's 
which John F. Kennedy described in his book ``Why England Slept.'' As 
Winston Churchill said in his four-volume history of the war, ``The 
Gathering Storm,'' he said the English people through their nonwisdom 
and carelessness allowed the wicked to rearm.
  We have a similar situation, not a peril from abroad militarily but a 
peril from within financially. The good news is we can do something 
about it. What we can do now is the smartest; but, if we wait, it 
becomes that much more difficult.
  All we are saying is one-half of 1 percent correction, as it should 
be and as every economist that has come before the Finance Committee 
has told us the correction should be made. Let us seize the 
opportunity, Mr. President.
  Mr. SIMPSON. Mr. President, I am so very proud to join my colleagues 
in the centrist coalition in declaring my support for this bipartisan 
budget resolution. Everyone in this Chamber should take a close look at 
our amendment. Reading this plan will be a frustrating and vexing 
experience for the critics who are always anxious to label legislation 
as ``extreme'' or ``timid'' or ``too conservative'' or ``too liberal.'' 
None of those tired old labels apply to this budget resolution.
  This is truly a blueprint for a mainstream budget. It is the product 
of many weeks and months of compromise and negotiation and good old-
fashioned ``give and take.'' On issue after issue, Republicans and 
Democrats in the centrist coalition have resolved areas of disagreement 
by ``splitting the difference'' or ``meeting each other halfway.'' That 
is what legislating is all about.
  For every element of this plan that Republicans don't like, there is 
another provision that is equally troubling to Democrats. Under this 
budget resolution, neither party would score a clear ``political 
win''--but the Congress as a whole and, more importantly, the American 
people would benefit tremendously if we adopt this mainstream approach 
to balancing the budget.
  The most striking feature of our plan is that we do not shy away from 
correcting the inaccuracies in the Consumer Price Index [CPI]. We now 
have almost universal agreement that the procedures currently used for 
calculating the CPI are flawed, thereby resulting in a CPI that 
overstates inflation, according to the ``experts,'' by at least seven-
tenths of a percentage point and perhaps as much as 2 percentage 
points. Yet neither Republicans nor Democrats want to be the first to 
include a CPI correction in its budget.
  By advancing such a correction in a bipartisan budget, neither party 
will receive the full blame or the full credit, depending on how the 
public responds, for addressing this issue. It is no secret that the 
American Association of Retired Persons [AARP] and other seniors groups 
are almost violently opposed to a correction of the CPI. But we haven't 
heard yet from the masses of working people who will continue to ``pick 
up the tab'' for as long as we continue to use an overstated CPI.
  We may well be pleasantly surprised by the public's reaction when 
they find out that we can save $126 billion--as this centrist coalition 
plan proposes--by adopting a modest five-tenths of a percent reduction 
in the CPI over the next 7 years. This reduction is well below the 
official range, which extends from 0.7 to 2.0, by which the experts 
tell us the CPI is overstated. We adopt this modest figure precisely 
because we want to make clear that our motivation is to have an 
accurate CPI--and that our actions are not driven solely by budgetary 
pressures.
  Nonetheless, it is impossible to ignore the fact that this step would 
save $126 billion over 7 years and, furthermore, that this represents 
$126 billion we would not have to cut from education, child care, 
health care, transportation, infrastructure, and other important 
priorities as we work to balance the budget.
  It seems to me that all 100 Members of the Senate would leap in 
unison at the chance to embrace this provision, as well as the broader 
package we are proposing. Being a realistic creature, however, I would 
be satisfied if only 51 of us do so on this particular vote. I urge my 
colleagues to join us in this bipartisan effort.
  The PRESIDING OFFICER. The Senator's time has expired.
  Who yields time?
  Mr. DOMENICI addressed the Chair.
  The PRESIDING OFFICER. Senator Domenici is recognized.
  Mr. DOMENICI. I yield myself 5 minutes off the resolution.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. DOMENICI. I want to give a report to the Senate about where we 
are and what things look like.
  When we started this morning, we had 8\1/2\ hours on the resolution.
  How much of that have we used this morning?
  The PRESIDING OFFICER. Fifty-seven minutes.
  Mr. DOMENICI. So essentially we are now down to about 7\1/2\ hours. 
Assuming that time runs uninterrupted throughout the day, all time will 
have expired pursuant to the unanimous consent request at 5:30 p.m. 
today. Pending at the start of today were 33 amendments that have been 
laid aside. We have disposed of 15 amendments either by rollcall vote 
or voice. Therefore, as of this morning, we have considered 48 
amendments.
  The consent agreement for first-degree amendments of last Thursday 
night listed about 75 amendments. Therefore, there could be as many as 
27 first-degree amendments still to be considered. I am not at all 
sure, nor do

[[Page S5405]]

I in any way hold Senators to the amendments that they listed, but I 
think we still have to find out a little more about them.
  So I encourage Senators who have first-degree amendments left on this 
list as of last Thursday night which we have not acted on yet to let 
the managers know this morning if you still intend to offer the 
amendments. I assume Senator Exon would join me in urging that they try 
to let us know this morning if they are going to call up amendments.
  Mr. EXON. If we are going to have any order at all, we will have to 
have that.
  Mr. DOMENICI. So as I look down this list of amendments that have not 
yet been brought up, I conclude that after removing the duplicative 
amendment--this is my own assessment--there are only 10 or 12 first-
degree amendments left. But I cannot reach that conclusion without the 
help of some Senators who are on that list.
  Not counting any second degrees that may be considered, this should 
give us hope that we can finish discussing all the amendments in the 
50-hour time period and maybe even start voting late this afternoon. 
That depends upon whether it will be more accommodating to the Senate 
to vote all day tomorrow rather than to start tonight.
  We need some guidance from Senators whose names and amendments are 
still on this list. I think I can say as of now that there are very few 
Republican amendments that are going to be called up off the list.

  So I urge that the Democrat Senators that have amendments listed to 
let us know. We are going to stay here during the funeral of Admiral 
Boorda right up until 12 o'clock when we recess for the policy, and we 
will be in recess until 2:15. During that time, we will obviously do 
nothing here on the Senate floor. We are back in at 2:15.
  If I have not used my 5 minutes off the resolution, I yield back 
whatever time remains and yield the floor.
  Mr. EXON addressed the Chair.
  The PRESIDING OFFICER. Does the Senator from Nebraska yield time on 
the pending amendment?
  Mr. EXON. The Senator from Nebraska seeks time off the amendment.
  Mr. DOMENICI. I yield the Senator as much time off that as he needs. 
I am in charge of the opposition time. I will give him as much time as 
he wants.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. EXON. I am about ready to yield 15 minutes to the Senator from 
Massachusetts, half of the time.
  I will be allotted the half hour remaining on the pending matter. Is 
that correct?
  Mr. DOMENICI. If you want Senator Kennedy to have 15 minutes in 
opposition, I yield him 15 minutes.
  Mr. EXON. Maybe we could settle something right now. I am not sure 
that we should be in session during the important matter that is going 
to be taking place at the Washington Cathedral. I was just wondering if 
I might have the attention of my colleague. I am wondering if it might 
be better for us to recess during the time of the memorial service with 
the time being charged along the lines just outlined by the chairman of 
the committee. I just say let us take that under advisement for now.
  With that, if the Senator from Massachusetts could be recognized at 
this time as previously arranged.
  Mr. DOMENICI. Let me take a minute off the resolution to respond.
  I will be glad, in the next 10 minutes or so, to discuss this issue 
with you. I think it is probably more important to your side than ours 
because we do not have very many amendments left. But if you want to 
use time while the Boorda funeral is going on and charge it equally 
rather than a few of us remaining in the Senate, if you think that 
through and want to offer it to us, I am thinking I will probably agree 
to that.
  Mr. EXON. We will visit about it. I hope the Senator from 
Massachusetts could be recognized at this time for 15 minutes.
  The PRESIDING OFFICER (Mr. Santorum). The Senator from Massachusetts 
is recognized.
  Mr. KENNEDY. Mr. President, I thank my friend, Senator Exon, for 
yielding 15 minutes. I yield myself 12 minutes.
  Mr. President, during the course of this budget debate, there have 
been several proposed amendments expressing a fundamentally bad idea, 
and that is legislating a change in the Consumer Price Index. These 
amendments have been offered as stand-alone, sense-of-the-Senate 
amendments and as part of the centrist coalition budget. In fact, 20 
percent of the total cuts in this budget come from a legislative 
reduction in the CPI.
  That kind of arbitrary action by Congress would break faith with the 
elderly and make a mockery of the commitment of both parties not to cut 
Social Security. It would raise taxes on low-income, working families 
qualifying for the earned-income tax credit and other working families 
as well. It would lead to lower wage increases for millions of workers 
throughout the country at a time when one of the most serious 
challenges our society faces is the decline in the living standards for 
all but the wealthiest families. Such a change would be harshly 
regressive in its impact. It would be unprecedented political meddling 
of what has been an impartial factual determination of the CPI.
  Reducing the CPI would reduce cost-of-living adjustments for millions 
of Americans receiving Social Security benefits, military pensions, 
veterans pensions and civil service retirement. It would reduce the 
amount of supplemental security income payments to the needy, and 
because of indexing of tax brackets, it would raise income taxes for 
most taxpayers and reduce the earned-income tax credit.
  Some may see a cut in the CPI as a magic bullet to balance the budget 
and avoid other painful choices, but it is a bullet aimed at millions 
of Americans who need help the most and who do not deserve this added 
pain. It makes no sense to fight hard to save Medicare and then attack 
Social Security. Legislating an arbitrary reduction in the CPI would 
clearly break the compact of Social Security. That compact says work 
hard, play by the rules, contribute to the system, and in turn you will 
be guaranteed retirement security when you are old.
  An essential part of that compact is a fair Social Security COLA so 
that senior citizens can be sure that their hard-earned Social Security 
benefits will not be eaten away by inflation. Overall, more than three-
quarters of the lower spending under the change would come from cuts in 
Social Security alone. Nearly all the rest would come from other 
Federal retirement programs. It is the elderly who pay heavily if 
Congress adopts this change.
  Over the next 10 years, a half-percent cut in the COLA would reduce 
the real value of the median income beneficiary Social Security checks 
by $2,650. By the 10th year, the real purchasing value of that check 
would be 4.5 percent lower, making it even harder than it is today for 
senior citizens to stretch their limited incomes to pay the bills for 
housing, food and medical care, and other necessities.
  Under the centrist budget, the median Social Security beneficiary 
will see the value of the benefits they have earned cut by $1,200 over 
the next 7 years. Let me repeat that. Under the centrist budget, the 
median Social Security beneficiary will see the value of the benefits 
they have earned cut by $1,200 over the next 7 years.
  Reducing the Social Security COLA is a direct attack on the 
retirement benefits that senior citizens have earned. If Congress is to 
respect family values, it has to value families, especially the 
millions of elderly families all across America.
  Changing the CPI also affects the deficit by increasing taxes because 
income tax brackets and the earned income tax credit are indexed to 
inflation. If the tax brackets are not adjusted for inflation, taxes go 
up and the earned income tax credit goes down.
  Failing to adjust the tax bracket hits middle-income families the 
hardest. A family earning $36,000 would face a tax increase that as a 
percent of income would be more than four times as large as the tax 
increase faced by a family earning $100,000. Hardest hit are the low-
income, hard-working families; 13 percent of the total tax increase, $6 
billion, would be paid by these low-income, hard-working families under 
the centrist budget. Has not income inequality grown enough without 
legislating another tax increase that disproportionately harms working 
families?

[[Page S5406]]

  The impact of cutting the CPI reaches well beyond the Federal budget. 
It is also a direct attack on the wages of working families. Many 
workers have CPI adjustments in their collective bargaining contracts, 
but every pay increase is affected by CPI. If the CPI is reduced by 
Congress, wages will be lower, too, for virtually all workers across 
the country.
  There is no greater source of dissatisfaction in American families 
than the continuing erosion of their living standards. Except for the 
wealthy, the story of the past two decades has been, work harder and 
earn less. Cutting the CPI will make a bad situation even worse by 
putting even greater downward pressure on the wages of every American.
  One argument made by the proponents of this idea of lowering the CPI 
is that it is merely an overdue technical correction that should be 
supported as a matter of good government. This claim cannot pass the 
truth-in-advertising test. The technical argument for lowering the CPI 
has been made by the Boskin Commission, which was appointed by the 
Senate Finance Committee to examine the issue. The commission issued a 
report in September of 1994 which identified several biases in the 
calculation. The commission asserted that the CPI had overstated 
inflation by 1.5 percent a year. For the future, the commission 
predicted the CPI would be 1 percent a year too high.
  The major problem with the commission's analysis is that the sources 
of bias it identifies are also identified by the nonpolitical, 
professional economists at the Bureau of Labor Statistics in the 
Department of Labor. They have the responsibility for setting the CPI 
each year. They do so fairly and impartially. They make periodic 
corrections to take account of any biases up or down that affect the 
index. The Bureau already plans to reduce the CPI by about two-tenths 
of 1 percent in 1997. This reduction is already assumed in the budget 
projections for the next 7 years.
  The issue is not whether there should be changes in the CPI but who 
should make them and how large they should be. The Boskin Commission's 
work is a poor basis for changing the CPI. As the Commission itself 
acknowledged, it did little original research. The Commission's 
membership was stacked with economists who believed that the CPI was 
overstated. According to Dean Baker, an economist at the Economic 
Policy Institute, all five members had previously testified they 
believed the CPI was overstated. Economists who gave contrary testimony 
were excluded.
  According to Joel Popkin, another expert on the CPI, the Commission 
comprised five of the six witnesses before the full Finance Committee 
who gave the highest estimates of bias. As Mr. Popkin also pointed out, 
the interim report of the commission falls far short of presenting 
adequate justification for its conclusions, and therefore provides no 
basis for Congress to change tax policies or entitlement policies such 
as Social Security.
  In fact, for the elderly, the group most affected by any change, the 
most authoritative study by the Bureau of Labor Statistics suggests 
that the CPI may understate rather than overstate the true increase in 
the cost of living because of the rapid increase in the medical costs 
for the elderly.
  To legislate an arbitrary change in the CPI would be unprecedented. 
In the entire history of the CPI, the Congress has never tried to 
impose a politically driven adjustment, and there is no excuse for 
imposing one now. Senior citizens and working families across the 
country depend on a fair CPI, and Congress should keep it that way.
  Mr. President, I believe that that provision is unwise and 
unjustified. It provides, according to their own proposal, total cuts 
of $126 billion over 7 years. That will be a Social Security cut of 
some $47 billion. It is going to amount to $1,205 for the median Social 
Security recipient, and it is going to reduce the value of the earned-
income tax credit by $6 billion.

  Who are these people? They are men and women who are working, making 
$25,000 to $28,000 a year. That is where it is gradually being phased 
out. It is going to take $6 billion out of their resources.
  The Democrats are over here talking about increasing the minimum 
wage. That is $3.2 billion a year. They are talking about taking $6 
billion out of families with children that are on the lower economic 
ladder. To believe that these families are part of the problem in terms 
of what we are facing in this country, I think is unjustified and 
unwise.
  Mr. President, I think the basic concept of legislating an adjustment 
in the CPI, that some are willing to accept and interject based upon 
the Boskin Commission, which was basically flawed, is sending a very 
powerful message to our seniors. The elderly in this country are going 
to have a very real reduction in terms of their income over a period of 
years.
  It is sending a message to workers who are below the average median 
income in this country that it is OK if they are going to lose some of 
the protections they have now primarily focused on their children. It 
is going to send a general message to all workers across this country 
that it is OK that they will see a reduction in their wages because 
most of the contracts that are signed are tied to the CPI. Here we are 
in the Chamber of the Senate with just some votes effectively saying to 
workers all across this country that their incomes are going to go 
down.
  So this is a very, very important aspect of what is allegedly the 
compromise proposal. It is unwise. It is unjustified. I hope for that 
reason as well as others that the Senate will not accept that proposal.
  I yield the remainder of my time.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. CHAFEE. Mr. President, we have had a wonderful presentation just 
completed about why this Nation does nothing about facing up to the 
problems that confront us. Sure it is easy to trash any proposal that 
comes before us. That is what we see. Not one word--not one word about 
what to do about the crisis our country faces in these entitlement 
programs in the future years. I find it terribly disappointing that the 
Senator from Massachusetts chose this opportunity to go out of his way 
to trash all the proposals that we presented but not a word about doing 
something about it. Right here we had presented why the Congress of the 
United States refuses to face up to the problems we have before us.
  Mr. KENNEDY. Mr. President, may I reclaim time to be able to respond 
for 3 minutes? May I have 3 minutes to respond to the assault that the 
Senator from Rhode Island made upon me?
  Mr. EXON. Reserving the right to object, we are trying to get 
something done here before 10:30. I thought we had an orderly process 
going on. But the Senator from Massachusetts, I think, is entitled to 
reclaim the time he yielded back, given the insertion of the remarks by 
the Senator from Rhode Island.
  The PRESIDING OFFICER. Who yields time?
  Mr. KENNEDY. How much time did I yield back?
  The PRESIDING OFFICER. The Senator yielded back 3 minutes.
  Mr. KENNEDY. Mr. President, I reclaim that time.
  Mr. President, with all respect to my good friend from Rhode Island, 
in the various Republican proposals they had $4.4 trillion in, 
effectively, tax breaks for the wealthiest corporations and companies 
in this country. And, instead of finding that $100 billion over the 
period of the next 7 years from corporate welfare, from tax breaks that 
go to the wealthiest individuals and corporations and drive American 
jobs overseas, he is taking it out on the elderly and workers in this 
country. So I do not yield to those words of the Senator from Rhode 
Island. When you start to get after corporate welfare, Senator, when 
you start to support even what the administration talked about, $60 
billion, when we start having, in your proposal, something that is 
reducing that corporate welfare, then you will have some credibility in 
speaking about that. Your proposal eliminates a minuscule $25 billion 
in corporate tax loopholes--$25 billion versus a tax cut of $100 
billion. In total, your proposal cuts over $270 billion in spending for 
the elderly and the less well off through the Medicare, Medicaid, 
welfare, and EITC programs. I have not heard you speak about these 
particular issues and I reject the criticisms of the Senator from Rhode 
Island.

[[Page S5407]]

  Several Senators addressed the Chair.
  Mr. CHAFEE. May I have 30 seconds?
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. EXON. Mr. President, much has been said about CPI. I ask 
unanimous consent that at this point an article by Mr. Jim Klumpner on 
CPI bias be printed in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

           Fact and Fancy: CPI Biases and the Federal Budget

                         (By Jim Klumpner \1\)

       Does the consumer price index have an upward bias? The 
     author believes that, while substitution and formula biases 
     exist, together they might amount to 0.3 to 0.5 percentage 
     points. Other alleged causes of bias are not considered 
     significant. The budget negotiators already have incorporated 
     substitution and formula adjustments in their baseline 
     assumptions. To go beyond this is an attempt to camouflage an 
     increase in taxes and a cut in Social Security, which could 
     be regressive and call for excessive sacrifice by the 
     elderly.
---------------------------------------------------------------------------
     Footnotes at end of article.
---------------------------------------------------------------------------
       On January 10, 1995, Federal Reserve Chairman Alan 
     Greenspan suggested that adjusting the Consumer Price Index 
     (CPI) for alleged upward biases might produce federal budget 
     savings measures in hundreds of billions of dollars. 
     Understandably, politicians and political commentators found 
     this very exciting, being largely unencumbered by technical 
     knowledge about it. Gobs of free money? Why didn't we notice 
     this before.
       Within days, Speaker of the House Newt Gingrich let loose 
     with a typically vesuvial outburst: ``We have a handful of 
     bureaucrats who, all professional economists agree, have an 
     error in their calculations. But we can't tell these people 
     to get it right? If they can't get it right in the next 
     thirty days or so, we zero them out, we transfer the 
     responsibility to either the Federal Reserve or the Treasury 
     and tell them to get it right.'' \2\ Like his colleagues, the 
     Speaker was untroubled by subtleties, such as the conflict of 
     interest posed by having the nation's primary inflation 
     fighter control the data by which its performance is judged. 
     No matter; the quality of federal statistics had hit the 
     bigtime.
       The situation to which this has now led holds rich ironies 
     for me. Both at the Senate Budget Committee and at the Joint 
     Economic Committee where I served previously, I have worked 
     with a few far-sighted Democratic members of Congress to 
     promote the integrity of the federal statistical system. By 
     and large, this effort consisted of defending agencies like 
     the Bureau of Labor Statistics (BLS) from penny-wise but 
     pound-foolish budget cuts. We were privileged to have the 
     National Association of Business Economists as allies in this 
     effort, even though most NABE members probably wouldn't count 
     themselves as Democrats. Now all of a sudden, the cause of 
     quality statistics seems to have acquired a horde of new 
     allies, many of them Republican politicians. It reminds me of 
     a response that Robert Redford once gave when asked what it 
     was like to have gorgeous women flock to him: ``Where were 
     they before I became rich and famous?''
       Unfortunately, the new allies of statistical integrity are 
     pursuing their cause with zeal and urgency typical of recent 
     converts. Politicians and journalists have been hazarding 
     wild, research-free guesses about the size of CPI bias and 
     proposing nonsensical ways to apply their new enthusiasm to 
     the budget. In this murky atmosphere, it is important that 
     economists at least see the issues clearly. As someone who 
     worked to address the problem of CPI bias before it became so 
     fashionable, I offer in this paper one view of the technical 
     issues, as well as some thoughts about how COLA adjustments 
     might figure in a deal to balance the budget.


                          how big is the bias?

       Various reputable analysts have made guesses about the size 
     of possible CPI biases, and their guesses span a rather broad 
     range. The BLS, which not only produces the CPI but also has 
     pioneered much of the research on potential biases, tends to 
     be at the low end of the range. They estimate very small 
     effects for the individual components of the overall bias, 
     which in their view totals about a half percentage point of 
     the annual inflation rate. This is similar to the conclusions 
     of the Congressional Budget Office (CBO), which argued for a 
     range of 0.2 to 0.7 percentage points in early 1995. Other 
     economists have advanced much higher estimates. Most 
     noteworthy is the 0.7 to 2.0-percentage-point range proposed 
     last September by a commission headed by Michael Boskin who, 
     I hasten to note, has long been an ardent advocate for 
     quality statistics.\3\
       It should not be too surprising that respected economists 
     cite such a large plausible range for CPI biases, going from 
     almost nothing to 2.0 percent per year. After all, we are 
     trying to estimate the extent of our ignorance. This is the 
     classic boot-strap problem in philosophy. How can you measure 
     what you don't know, when you don't know what you don't know? 
     Of course, this uncertainty among the experts does little to 
     temper the certitude of others.
       I tend to line up with the smaller bias estimates endorsed 
     by the BLS and CBO, and I find the very high estimates of the 
     Boskin commission implausible. Fortunately, there is fairly 
     wide agreement on what kinds of biases might exist. By going 
     through these components one by one, we at least can isolate 
     where differences in opinion lie.


                           substitution bias

       The substitution bias is one component of this problem on 
     which most analysts can agree. When the CPI is used as a 
     measure of the cost of living, it fails to capture consumers' 
     ability to change the ``market basket'' of things that they 
     buy. If the price of entertainment rises, for example, 
     consumers can offset the impact of this on their well-being 
     by purchasing more of something else, like food. A price 
     index with fixed expenditure weights like the CPI will 
     overstate the impact of rising prices for some items because 
     it fails to account for consumers' substitution of other 
     items whose prices have risen slowly or fallen.
       When prices change by relatively small amounts over short 
     periods of time, substitution bias isn't much of a problem. 
     Over long periods of time, however, prices can drift 
     substantially up or down, leading to correspondingly large 
     changes in consumers' purchasing patterns. Thus, the 
     substitution bias grows over time. A widespread consensus 
     exists that the substitution bias averages about 0.2 
     percentage points over the course of a decade.
       BLS argues that they never intended the CPI to be a cost-
     of-living index and that they are well aware that a fixed-
     weight index suffers from substitution bias when used as a 
     cost-of-living proxy.\4\ Nonetheless, they have accommodated 
     the problem in the only way possible, i.e., with periodic 
     revisions of the expenditure weights to reflect more current 
     purchasing patterns. In the past, this was part of the BLS' 
     regular decennial rebenchmarking of the CPI.
       Unfortunately, funds were not appropriated in a timely 
     fashion for the most recent rebenchmarking. As a consequence, 
     the new index will not be ready until 1998 rather than this 
     year, when it normally should have been introduced. Perhaps, 
     the newly found urgency concerning quality price statistics 
     will lead to more frequent and more regular rebenchmarking in 
     the future. For now, all of the participants in the budget 
     debate are assuming that the reported CPI will rise at least 
     0.2 percentage point less than it otherwise would have after 
     1998.


                      formula bias and outlet bias

       Formula bias results from the sample rotation procedures 
     used by BLS. The Bureau updates 20 percent of its surveyed 
     outlets each year in an effort to keep their mix of both 
     outlets and items more current. Past BLS procedures, in 
     combination with fixed expenditure weights, gave improper 
     weights to items whose prices are especially volatile. For 
     instance, if an item happened to be on sale when the update 
     was made, its fixed expenditure share corresponded to a 
     temporarily overstated number of units, because of its 
     temporarily depressed price. When the item's price returned 
     to a more ``normal'' level, the impact of that price increase 
     was overstated because it was multiplied by an inflated 
     number of units. Similarly, items whose prices were 
     temporarily high were undervalued, as was the subsequent fall 
     of that price to a ``normal'' level.
       The BLS became aware of the formula bias some time ago and 
     has been working to correct if for the past couple of 
     years.\5\ They are replacing their previous procedures with a 
     ``seasoned'' sample, which should more accurately distinguish 
     short-term price volatility from enduring price change. BLS 
     expects that this work will be complete by January 1997. When 
     the budget negotiators became aware of this, Senators Dole 
     and Domenici and Congressmen Gingrich and Kasich officially 
     requested that BLS predict what the future results of their 
     current research would show. Though somewhat uncomfortable 
     with the request, BLS responded that they guessed the formula 
     bias was between 0.1 and 0.3 percentage points, and the 
     budget negotiators have now built this assumption into 
     their baselines as well.
       The Boskin commission's September report also argued that 
     there is an outlet bias, distinct from formula bias, that 
     they believe adds another 0.2 percentage points to reported 
     inflation. As noted above, the sample rotation procedure is 
     intended partly to ensure that the outlets surveyed are those 
     at which consumers actually shop. BLS is confident that there 
     is no outlet bias independent of the formulas bias. Indeed, 
     it seems unbelievable that the price division at BLS could 
     remain ignorant of K-Mart, Price Club and CompUSA when these 
     firms spend millions of advertising dollars to make certain 
     that the rest of us are aware they exist.
       The commission's incorrect ideas about outlet bias and 
     somewhat higher estimate for formula bias probably are the 
     inadvertent results of the haste with which the September 
     report was put together. It is unfortunate that the 
     commission had time for only the briefest of briefings from 
     the BLS analysts who work full-time on the CPI. Greater 
     familiarity with what the Bureau actually is doing might have 
     avoided these misunderstandings, as well as some of the 
     unrealistic notions about quality adjustment discussed below.


               quality change bias and new products bias

       Most of the differences between economists' estimates of 
     CPI bias stems from different views about quality change bias 
     and new products bias. For instance, the Boskin commission's 
     September report claimed that

[[Page S5408]]

     these two effects probably accounted for about 0.5 percentage 
     point of bias and might account for as much as 1.3 percentage 
     points. I would argue that the effect of these two factors is 
     close to zero.
       The basic concept underlying these two effects is quite 
     straightforward. Quality change bias occurs when the 
     characteristics of an item change at the same time that its 
     price changes. Some of the price change should be attributed 
     to the new characteristics, but some should be interpreted as 
     a change in the price of the old characteristics. If the new 
     item is in some sense twice as good as the old item and its 
     price is also twice as high, the item's quality-adjusted 
     price should not change.
       The issue of new products bias is conceptually similar 
     because consumers face a new range of offerings in the 
     marketplace, just as they do when product quality changes. 
     For instance, the proper way to analyze the introduction of a 
     new drug that replaces a surgical procedure might be to 
     compare the characteristics of these two treatments, both of 
     which are expected to have the same therapeutic result. With 
     both quality adjustment and new products, we need to 
     distinguish ``pure'' price change from the part that reflects 
     consumers' enhanced welfare due to new market options.
       One notable paper argues that the flux of new offerings 
     available in the marketplace is itself a significant 
     contributor to consumer welfare, even if the items are not 
     all that new.\6\ The paper arrives at this conclusion by 
     examining the case of Apple-Cinnamon Cheerios. The conclusion 
     seems to derive from estimating the considerable surplus 
     generated by marching down the demand curve from its 
     intersection with the price axis to the place where it 
     intersects the supply curve.
       What appears to drive the analysis, however, is the 
     assumption of imperfect competition, which implies that 
     increased purchases of Apple-Cinnamon Cheerios don't merely 
     displace other cereal purchases and the consumer surplus 
     associated with them. It seems unreasonable to believe that 
     households stock an ever-increasing quantity of breakfast 
     cereal to accommodate the dizzying variety of new offerings. 
     Most people can only eat just so much cereal.
       Discussion of quality adjustment and new products bias 
     raises a similar metaphysical puzzle to the one mentioned 
     earlier in this article. After all, ``quality'' is usually 
     distinguished from ``quantity'' because it is essentially 
     nonquantifiable. How then should we measure something that we 
     already have defined as essentially unmeasurable? For 
     example, one of the most striking aspects of Windows software 
     is the fact that its prettier than DOS. There is no obvious 
     way to attribute a specific portion of the program's price to 
     this improvement in quality.
       In addition, economists like to believe that everything can 
     be reduced to market prices, even though this clearly is 
     untrue for a wide range of public goods for which markets 
     fail. For instance, the required installation of smog 
     controls on autos raises their price. It is doubtful that 
     individual consumers perceive this as an improvement in the 
     quality of their cars, though all of us may benefit from the 
     cleaner air that results. How does one put a value on the 
     improvement in air quality when there is no private market 
     for clean air? How should we evaluate new antitheft devices 
     on cars that compensate for rising fear of crime?
       As a practical matter, BLS already makes a serious attempt 
     to adjust for quality changes where they believe them to be a 
     problem.\7\ If both the old and new models of some item exist 
     in the market at the same time, the difference between the 
     prices can be used to estimate the proper quality adjustment. 
     For some other items, the BLS attempts to measure directly 
     the additional cost of added attributes, as they did with 
     smog equipment on autos. Neither of these procedures is 
     perfect, but the imperfections necessarily result from the 
     inherent unmeasurability of quality itself.
       One procedure for handling quality adjustment that BLS 
     sometimes employs and that appeals to most economists is 
     called the ``hedonic'' technique. This involves regressing 
     past prices of an item on past changes in its 
     characteristics. The coefficients from such a regression are 
     then used to attribute some of the item's current price 
     change to current changes in characteristics, with the 
     residual being ``pure'' price change. It is fairly tricky to 
     decide on a comprehensive set of independent variables so 
     that the results do not suffer from omitted variables bias. 
     This is a particular danger because any important 
     unmeasurable factors necessarily will be omitted by their 
     very nature.
       Another serious practical difficulty in making quality or 
     new product adjustments, whether hedonic or not, is cost. 
     Large quantities of auxiliary data must be collected for each 
     adjusted item, and highly trained econometricians must be 
     hired to do the analysis. Furthermore, it is hard to know 
     where to stop, short of comprehensive quality adjustment for 
     every item in the CPI. It is safe to say that BLS does as 
     much quality adjustment as their appropriations allow. The 
     political process should provide the necessary funds if there 
     now is a burning desire for more.


                         arguing from anecdote

       Because there hasn't been a comprehensive research effort 
     to adjust a broad range of items in the CPI or to account for 
     newly introduced goods, arguments in these areas usually rely 
     on anecdote. The danger in arguing from anecdote, of course, 
     is that an anecdote may seriously misrepresent the more 
     general case. I believe that this is the source of error in 
     the very high estimates for quality adjustment and new 
     product biases of the Boskin commission and others.
       The commission's September report explicitly notes that 
     most of the evidence for upward price bias due to these two 
     factors comes from nonauto consumer durables. The report 
     cites VCRs, televisions, microwave ovens and PCs as hallmark 
     examples. However, Table 1 shows that nonauto consumer 
     durables account for only 4.2 percent of the expenditure 
     weights in the CPI. House furnishings, which can hardly be 
     said to show rapid increases in quality, account for 3.5 
     percent of spending, leaving only 0.7 percent of monthly 
     expenditures for the whiz-bang stuff. This very low weight 
     stems not from low prices for these items but from the fact 
     that they are infrequently purchased.
       Such tiny expenditure weights for the goods with which we 
     typically associate quality improvement must imply 
     astronomical rates of improvement in order to justify the 
     quality bias assumed by the Boskin commission and others. For 
     example, if goods imparting quality bias to the CPI represent 
     only 1 percent of the index, then their quality would have to 
     improve at 100 percent per year in order to arrive at a 1.0-
     percentage-point bias. The new PC that I bought this year 
     certainly is better than the one I bought six years ago, but 
     it's not sixty-four times as good. Advertisers' gaseous 
     claims notwithstanding, the new PC has not revolutionized my 
     life nor had an important impact on my well-being.
       The problem of small expenditure weights is especially 
     important for new products bias. Newly introduced items 
     necessarily have tiny expenditure weights because they are 
     novelties. The Boskin commission's report complains that 
     ``the microwave oven was introduced into the CPI in 1978 and 
     the VCR and personal computer in 1987, years after they were 
     first sold in the marketplace.'' \8\ Even now, however, these 
     items have weights measured in hundredths of a percentage 
     point and properly so. Many households do not even own PCs, 
     microwaves and VCRs, let alone Salad-Shooters. Those who do 
     own such items purchase them only infrequently. It is this 
     that gives them a tiny weight compared to things like rent 
     and food, which loom large in the average consumer's budget. 
     BLS must make a judgment about when new items comprise a 
     sufficiently large proportion of expenditures to justify 
     inclusion in the CPI. The evidence for these high-profile 
     examples suggests that the Bureau's judgment has been 
     correct.


                Table 1.--CPI expenditure weights, 1995


Durable Goods......................................................10.6
                                                               ________

  New Vehicles......................................................5.1
  Used Vehicles.....................................................1.3
  House Furnishing..................................................3.5
  Other Durables....................................................0.7
                                                               ========

Nondurable Goods...................................................32.8
                                                               ________

  Food and Beverages...............................................17.4
  Apparel...........................................................5.1
  Other nondurables................................................10.3
                                                               ========

Services...........................................................56.6
                                                               ________

  Shelter..........................................................28.0
  Utilities.........................................................7.0
  Medical Care Services.............................................6.0
  Other Services...................................................15.6

Source: Bureau of Labor Statistics.

       I have focused my arguments about quality adjustment and 
     new products bias on the 0.7 percent of the CPI that the 
     proponents of large bias adjustments usually cite. Perhaps 
     there are other components of the CPI with larger expenditure 
     weights that have had significant quality improvements but 
     have been ignored. Let's see.
       new motor vehicles account for 5.1 percent of the CPI. The 
     Boskin report itself notes that the case for quality 
     adjustment bias here is murky. They cite the ambiguity of 
     balancing the negative quality adjustment for decreasing auto 
     size with the positive adjustment for improved fuel 
     efficiency, itself a function of the (declining) price of 
     gasoline. Used vehicles, which make up 1.3 percent of the 
     index, probably did show some upward drift in quality in 
     the past, but BLS has taken steps to account for this 
     since 1987. As mentioned above, household furnishings (3.5 
     percent of expenditures) probably haven't shown 
     appreciable quality improvements, and new furniture in 
     particular seems to have become cheesier in my opinion.
       What about nondurables? Food and beverages account for 17.4 
     percent of the index. Staples like meat, poultry, fish, eggs, 
     milk, cheese, fruits, vegetables, sugar, flour, etc. may have 
     seen some improvements in freshness and selection, although 
     rising salmonella contamination should give pause. Prepared 
     foods may have shown some quality improvements but not much. 
     Other nondurables are mainly apparel (5.1 percent) and 
     various other goods like fuels, tobacco and school supplies 
     (10.3 percent), for which quality improvements would seem 
     trivial.

[[Page S5409]]

       What about services, which account for 56.6 percent of 
     expenditures? A whopping 28.0 percent of the typical 
     consumer's budget is taken up with shelter. Here, the Boskin 
     report acknowledges that there was a serious downward price 
     bias in the past that resulted from BLS' inadequate 
     adjustment for aging and depreciation. This downward bias in 
     the CPI's largest single item has been corrected by the 
     Bureau. Utilities account for 7.0 percent of spending, and 
     there certainly has been little improvement here except for 
     phone service.
       Medical care services are another 6.0 percent, and the 
     situation here is a bit ambiguous. Services for medical 
     crises clearly have improved, although these expenditures are 
     infrequent by their very nature, and the out-of-pocket costs 
     for the average consumer are rather small on a monthly basis. 
     On the other hand, routine visits to the doctor have become 
     pretty annoying. Certainly, if there has been progress in the 
     quality of medical care, it has had only marginal effects on 
     morality, morbidity and lost work time.
       The anecdotal evidence for the remaining 15.6 percent of 
     spending that goes to other services suggests deterioration 
     as often as improvement. Declining test scores certainly 
     aren't reassuring to consumers wondering if they're getting 
     their money's worth for out-of-pocket education expenses. 
     Smaller airplane seats and deteriorating public 
     transportation also suggest declining quality. Shoe-box movie 
     theaters with dinky screens and stale popcorn have not 
     brightened the movie-going experience. The shopping 
     experience itself is less pleasant, and haircuts are about 
     the same. Of course, there are improvements in the quality of 
     some consumer service, notably ATM banking.
       The point here is not whine nostalgically that nothing is 
     as good as it used to be. Rather, I am arguing that once we 
     get away from a few high-profile examples related to 
     infrequently purchased household appliances, even the 
     direction of quality adjustment is ambiguous at best. There 
     is no question that modern market economies produce a great 
     deal of flux in the range of products offered, but many of 
     the offerings are meretricious rather than meritorious. To 
     say that all of this change represents an inexorable 
     improvement in the average consumer's quality of life is 
     panglossian.
       Once one looks at the relative importance of different 
     items in the CPI and the actions that BLS already has taken 
     to address quality adjustment and new products problems, the 
     very high estimates of these biases become unbelievable. I 
     would argue that, if these factors do impart an upward bias, 
     it is a couple tenths of a percentage point at most. The most 
     important spending for the average household still has to do 
     with basic human needs: shelter, food, clothing, 
     transportation and basic health care. The great quality 
     improvements in these areas were achieved long ago. Current 
     quality advances largely are limited to items that clearly 
     are accessories to our lives or to situations that occur only 
     rarely.
       In sum, then, I believe that the very large overall bias 
     that some analysts allege distorts the official CPI is about 
     one-third science and about two-thirds virtual reality. A 
     firm consensus exists regarding the substitution and formula 
     biases, both of which BLS already is working to eliminate. 
     With regard to the alleged outlet bias, some analysts appear 
     to be misinformed about what BLS actually does. And with 
     regard to quality adjustment and new products bias, large 
     effects appear to result from overly enthusiastic 
     extrapolation, if not wishful thinking.


                 the cpi's effect on the federal budget

       As noted at the beginning, the whole reason that these 
     issues have come to popular attention is that small changes 
     in the rate at which government spending programs and taxes 
     are indexed can have huge effects on the federal deficit. The 
     great attraction of fiddling with the CPI is that it can be 
     used to extract money from literally millions of taxpayers 
     and benefit recipients. Table 2 shows CBO's official 
     estimates of the budget savings that would result from 
     reducing CPI indexing by a full percentage point. Seven-year 
     cumulative savings amount to $281 billion, with an impact of 
     almost $82 billion in FY 2002. About a third of the money 
     comes from higher income taxes, another third comes from 
     Social Security, almost a fifth comes from reduced debt 
     service and the rest comes from other federal retirement 
     programs, EITC and SSI.
       It is easy to see how attractive it is for 
     budget negotiations to scale back indexing under the guise 
     of statistical integrity. The budget negotiators already 
     have incorporated baseline changes corresponding to a 0.4-
     percentage-point adjustment to account for BLS's existing 
     efforts to eliminate substitution and formula biases. The 
     arguments above suggest that going beyond this is 
     scientifically questionable. However, this is exactly what 
     is being debated as this is being written in December 
     1995: an additional ad hoc adjustment to account for 
     purported (though unmeasured) quality and new product 
     bias. This seems to be an attempt to use statistical 
     subtleties as a figleaf for increasing income taxes and 
     cutting retirement benefits.

                     TABLE 2.--REDUCTION OF DEFICIT FROM 1.0 PERCENTAGE POINT CPI ADJUSTMENT                    
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
Revenues..................................       1.8       5.5       9.8      13.1      17.7      23.0      27.1
Outlays...................................       3.1       8.4      14.1      20.2      26.5      32.7      39.8
  SS, RR retirement.......................       2.6       6.2      10.1      14.1      18.4      22.8      27.4
  Other retirement........................       0.3       1.2       2.1       3.1       3.8       4.7       5.6
  SSI, EITC...............................       0.2       1.0       1.9       3.0       4.3       5.2       6.8
  Offsets.................................       0.0      -0.1      -0.2      -0.4      -0.7      -1.0      -1.4
Debt service..............................       0.2       0.8       2.0       4.0       6.7      10.2      14.7
Total deficit reductions..................       5.0      14.7      25.9      37.3      50.9      65.9      81.6
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.                                                                            

       That's not to say that reducing indexing should be 
     considered a totally unacceptable tool for deficit reduction. 
     It does mean that we should be honest about what we are 
     doing. What is being proposed this year used to be called a 
     ``diet COLA,'' a catchy term that distinguishes nicely 
     between ad hoc changes and those based on scientific 
     research. Scaling back indexing is not a ``correction'' of 
     the CPI and does not ``reduce'' the CPI. One Republican 
     senator offered and then withdrew an amendment to this year's 
     Budget Resolution that BLS ``shall reduce the annual percent 
     change in the consumer price indexes by 0.7 percentage 
     points.'' (emphasis added) No mention here about just how 
     that might be done, but plenty of confidence that science was 
     on his side.


         the effects of a diet cola on the income distribution

       Whether or not a diet COLA ought to be included in a 
     comprehensive budget deal depends upon the same criteria as 
     any other deficit reduction tool: How is the burden of 
     deficit reduction apportioned across society, and will there 
     be collateral effects that are unpalatable? Thus, we don't 
     ask that the budget be balanced by eliminating the Defense 
     Department, because it would be unfair to ask the defense 
     sector to bear the entire burden of deficit reduction and 
     because it would leave the nation without defenses.
       In this regard, it is important to note that the diet COLA 
     is regressive on balance, extracting relatively large budget 
     savings from low-income households and relatively small 
     amounts from the well-to-do. Table 3 shows CBO's estimates of 
     a diet COLA's impact. It is important to note that the 
     adjusted family income concept used in the table includes the 
     employer's share of payroll taxes for Social Security and 
     unemployment insurance as well as CBO's attribution of the 
     corporate income tax by income class. As a consequence, the 
     income concept also is adjusted for family size, but that has 
     a much smaller impact on the distributional conclusions.

                            TABLE 3.--DISTRIBUTIONAL EFFECTS OF REDUCED CPI INDEXING                            
----------------------------------------------------------------------------------------------------------------
                                                                      Share of   Share of   Share of            
                                                                      revenue    spending    total     Number of
                 Adjusted, pretax family income \1\                    change     change     change    families 
                                                                     (percent)  (percent)  (percent)  (millions)
----------------------------------------------------------------------------------------------------------------
Less than $10,000..................................................        0.9       10.5        6.0        14.6
$10,000 to $20,000.................................................        7.7       20.1       14.2        18.5
$20,000 to $30,000.................................................       11.6       17.5       14.7        16.6
$30,000 to $40,000.................................................        9.5       14.4       12.1        13.5
$40,000 to $50,000.................................................        7.7       10.3        9.1        10.8
$50,000 to $75,000.................................................       18.3       14.3       16.2        17.7
$75,000 to $100,000................................................       16.1        6.0       10.8         8.6
$100,000 to $200,000...............................................       17.0        5.4       10.9         7.0
Over $200,000......................................................       11.3        1.2        6.0         1.0
----------------------------------------------------------------------------------------------------------------
\1\ Adjusted income is the sum of wages, salaries, self-employment income, rents, taxable and nontaxable        
  interest, dividends, realized capital gains, and all cash transfer payments. Income also includes the employer
  share of Social Security and federal unemployment insurance payroll taxes, and the corporate income tax.      
                                                                                                                
Source: Congressional Budget Office.                                                                            

       The table shows that, even with this inflated income 
     measure, more than a third of the diet COLA's total burden is 
     borne by families below $30,000 per year, or about 45 percent 
     of all families. Fully 56 percent of the burden falls on 
     families below $50,000 per year, who constitute 57 percent of 
     all families. The table also shows that the effect on the tax 
     side is mildly progressive, but this is offset by both the 
     regressivity and larger impact of the spending side.
       Clearly, this creates problems for those politicians who 
     care about the income distribution. It is one thing for the 
     diet COLA to be included as one part of a deficit reduction 
     plan that is progressive in its overall profile. However, it 
     is quite another thing to

[[Page S5410]]

     add a diet COLA to a budget plan that already is regressive 
     in its overall effect.
       As this is being written, a group of fiscally conservative 
     Democrats, known as the Coalition or Blue Dogs, has proposed 
     a clever device that mitigates the regressive effect of the 
     diet COLA on the spending side. As with other diet COLAs, 
     they suggest that the cost-of-living adjustment for 
     various spending programs be keyed to the official CPI 
     minus some specified factor, like 0.5 percent. However, 
     they would also stipulate that the reduced COLA received 
     by all individual beneficiaries of a program be equal to 
     the dollar amount for the average beneficiary. This means 
     that those beneficiaries who are better off would receive 
     a diet COLA that also was a smaller percentage adjustment 
     than otherwise. Some beneficiaries well below the average 
     would actually come out ahead.


          the effects of the diet cola on the age distribution

       Part of the reason that the diet COLA has such a severe 
     effect on very low income families is that the indexed 
     spending programs are almost entirely retirement programs and 
     elderly households tend to have low incomes. This highlights 
     another distributional issue for those who care about such 
     things: the impact of the diet COLA on the age distribution. 
     Here again, the question is not just its effect on the 
     elderly but whether that effect compounds sacrifices called 
     for elsewhere in the deficit reduction plan.
       The proposals being offered in the budget negotiations 
     already get the bulk of their savings from Medicare and 
     Medicaid. All Medicare spending and about a third of Medicaid 
     spending goes to support health care for the elderly. In 
     fact, about half of all nursing home expenditures are paid 
     for by Medicaid. The most severe budget plans propose sharp 
     cuts in service at the individual level because projected 
     program growth would be insufficient to cover increases in 
     the medical costs and the number of beneficiaries.
       Adding a diet COLA, with its heavy impact on retirement 
     programs, to any budget plan with large Medicare and Medicaid 
     cuts would be doubly severe for the elderly. These are 
     citizens who have few options with regard to working longer 
     or harder to offset the effect of cuts. They also tend to 
     have fewer health care options, because the medical attention 
     that they usually need is acute care and it often is too late 
     for preventive care. Expecting the elderly to take a leading 
     role in medical cost containment through individual choice 
     also seems unrealistic, because they may see choice as 
     threatening and confusing rather than liberating. Using a 
     diet COLA to get additional budget savings on top of the 
     sacrifices from the elderly already being contemplated 
     strikes me as unjust.
       There is another important reason to think that price 
     indexing should not be scaled back for retirement programs. 
     Research suggests that these programs actually have been 
     underindexed in the past because spending patterns for the 
     elderly differ from those of consumers in general. Two years 
     ago, the BLS reformulated the raw data underlying the CPI to 
     take account of the different expenditure weights in the 
     ``market basket'' of the typical older consumer.\9\ The 
     results shown in Table 4 indicate that this reconfigured 
     index for the elderly increased by 4.1 percentage points, or 
     8.2 percent, more than the official CPI between December 1982 
     and December 1993. This resulted from the greater weight of 
     out-of-pocket medical expenses for the elderly and the 
     smaller weight for transportation, apparel, and restaurant 
     meals. Of course, out-of-pocket medical expenses for the 
     elderly would become an even larger item in the household 
     budgets of the elderly under most of the deficit reduction 
     plans being discussed.

 TABLE 4.--DECEMBER TO DECEMBER CHANGE IN OFFICIAL CPI AND EXPERIMENTAL 
                       PRICE INDEX FOR THE ELDERLY                      
------------------------------------------------------------------------
                                                            Experimental
                                                             price index
                                                   CPI-U       for the  
                                                 (percent)     elderly  
                                                              (percent) 
------------------------------------------------------------------------
1983..........................................         3.8          3.7 
1984..........................................         4.0          4.1 
1985..........................................         3.8          4.1 
1986..........................................         1.2          1.8 
1987..........................................         4.4          4.5 
1988..........................................         4.4          4.5 
1989..........................................         4.6          5.2 
1990..........................................         6.3          6.6 
1991..........................................         3.0          3.4 
1992..........................................         3.0          3.0 
1993..........................................         2.7          3.1 
1982-93.......................................        49.7         53.8 
------------------------------------------------------------------------
Source: Nathan Amble and Ken Steward, ``Experimental price index for    
  elderly consumers,'' Monthly Labor Review, May 1994.                  

       The BLS researchers stressed that one would need a much 
     more comprehensive effort to create a reliable CPI for the 
     elderly. In particular, one would have to discern whether 
     they shop at the same kinds of outlets as younger consumers 
     and whether they purchase the same kinds of items. Anecdotal 
     evidence suggests that they don't and the divergence between 
     the CPI and the cost of living for the elderly might be even 
     greater if these factors were taken into account. It appears 
     that the elderly tend to shop more at neighborhood stores 
     rather than discount outlets and that they have limited 
     options to save by buying in bulk.


                               conclusion

       As a longtime proponent of better statistics, the sudden 
     awakening of interest in price measurement issues is 
     gratifying. However, I am dismayed that this has not been 
     accompanied by an equal commitment to fund or even to 
     acknowledge the analytical effort needed to address these 
     issues sensibly. The public discussion of the CPI's biases 
     has been carried away on a tide of outrageous claims that 
     have little scientific basis. Most disturbing is the 
     apparent willingness to make arbitrary adjustments to one 
     of our most important economic indicators rather than 
     improve it with more frequent updates and careful 
     research.
       Very large estimates of CPI bias that range as high as two 
     percentage points appear to result from ignorance about what 
     the CPI actually contains and what the BLS actually does. 
     Full-time professionals responsible for properly surveying 
     the mix of outlets certainly are aware of the giant discount 
     chains familiar to the rest of us. Claims that BLS has not 
     addressed the most important quality adjustment issue are 
     patently false. Speculations about huge quality bias seem to 
     result from extrapolating the characteristics of household 
     appliances that average consumers buy once every few years to 
     the much larger and more prosaic spending that they do every 
     month. Arguing that the CPI ignores the great benefits of new 
     product introductions probably fails to note that most such 
     ``new'' products are merely new styles.
       A solid scientific consensus does exist regarding 
     substitution bias and formula bias. Not surprisingly, BLS 
     already is moving to correct these biases. The Bureau also 
     attempts to correct for quality adjustment and new product 
     biases within the constraints of their budget. Although there 
     is no convincing evidence that quality biases are large for 
     items that they do not adjust, BLS undoubtedly would welcome 
     additional resources for more extensive and sophisticated 
     research. Presumably, they also would be happy to have funds 
     for more frequent rebench- marking and more frequent sample 
     rotation.
       The budget negotiators already have incorporated 
     adjustments in their baseline assumptions to account for the 
     two most firmly established components of the CPI bias; 
     substitution and formula bias. Going beyond this is not 
     justified by firm evidence. To do so while claiming a 
     scientific justification amounts to an attempt to camouflage 
     an increase in taxes and a cut in Social Security. A diet 
     COLA should not be adopted as part of a deficit reduction 
     plan that already is likely to be fairly regressive unless 
     some effort is made to counter the regressive effects. In 
     addition to remediating the income regressivity of the diet 
     COLA, one also would need to ensure that it was not part of a 
     deficit reduction plan that called for excessive sacrifice by 
     the elderly, whose retirement benefits may well have been 
     underindexed in the past.


                               footnotes

     \1\ Jim Klumpner is chief Minority Economist, U.S. Senate 
     Budget Committee, Washington, DC. The opinions expressed in 
     this paper are those of the author and do not necessarily 
     represent official positions of the Democratic members of the 
     Senate Budget Committee.
     \2\ Quoted in Washington Post, January 18, 1995.
     \3\ Michael J. Boskin, Ellen R. Dulberger, Robert J. Gordon, 
     Zvi Grilliches, and Dale Jorgenson, ``Toward a more accurate 
     measure of the cost of living,'' September 15, 1995, Senate 
     Finance Committee.
     \4\ Bureau of Labor Statistics (BLS), ``Report from the 
     Bureau of Labor Statistics for the House Budget Committee,'' 
     House Budget Committee, p. 13.
     \5\ BLS, op, cit., p. 14.
     \6\ Jerry A. Hausman, ``Valuation of new goods under perfect 
     and imperfect competition,'' NBER Working Paper No. 4970, 
     December 1994.
     \7\ BLS, op, cit., pp. 21-23.
     \8\ Boskin et al., op. cit., p. 21.
     \9\ Nathan Amble and Ken Stewart, ``Experimental price index 
     for elderly consumers,'' Monthly Labor Review, May 1994.

  Mr. EXON. Mr. President, I hope we could move ahead now, if we might, 
with the agreement.
  Mr. CHAFEE. I wonder if I might have that 30 seconds?
  Mr. KENNEDY. Then I would ask for 30 seconds, too.
  The PRESIDING OFFICER. Who yields time?
  Mr. CHAFEE. Mr. President, I ask the Senator look at our proposal. He 
will see there is $25 billion of corporate welfare cuts that he is 
discussing. Perhaps if he became more familiar with it we would all be 
better off.
  Mr. LOTT addressed the Chair.
  The PRESIDING OFFICER. The Senator from Mississippi.

                          ____________________