[Congressional Record Volume 142, Number 117 (Friday, August 2, 1996)]
[Senate]
[Pages S9541-S9548]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    A VICTORY FOR WORKING AMERICANS

  Mr. KERRY. Mr. President, today--finally--we are raising the minimum 
wage and putting families first. We have won a major victory for every 
American who values work and believes in fairness. It is a victory for 
common sense over ideology, for bipartisanship over saber rattling.
  It is a victory for 290,000 hard-working families in Massachusetts 
who are playing by the rules and struggling to make ends meet--who have 
fallen behind in the last 20 years and now have a chance to do better, 
to keep up, and give their children a chance at a decent life. It is a 
victory for the millions of Americans who were trying to make a living 
and raise a family on $4.25 an hour and now will get $1800 more a 
year--enough to buy groceries for 7 months.
  Raising the minimum wage is a work force enhancement program and a 
family protection program for an investment of 90 cents an hour--a move 
which will strengthen the fabric of the American community and narrow 
the widening gap in the workforce.
  For the first time in years, we are giving workers a raise. This is a 
down payment on our commitment to make sure that everyone in this 
economy can participate--that everyone can earn more, learn more, 
provide more for their families, and be part of an economy that works 
for families--that values the dignity of work for those at the bottom 
as well as the top.
  Mr. President, raising the minimum wage is, in fact, the most basic 
welfare reform measure we could enact. It helps make work pay for those 
who will be returning to the workforce. It will allow working mothers 
who come off welfare to have a fighting chance to put food on the table 
for their children and still find enough to pay the rent.
  In the last few months we have heard a lot of talk from many of my 
Republican colleagues that welfare recipients need to learn the dignity 
of work, and we would agree with them and we have passed a welfare 
reform package incorporating that concept. But I also believe that the 
dignity of a liveable minimum wage is that, as a society, we believe 
that if you are willing to work hard, you deserve the dignity of 
earning enough to at least pull yourself out of poverty and put food on 
the table and a roof over your children's heads.
  Mr. President, this is the beginning of a new era of worker fairness, 
of giving a raise to those who need it most, and taking one more step 
toward relieving the insecurities of the American worker. There is no 
greater gift to a young mother who is trying to make ends meet, trying 
to pay the rent, buy food, pay child care, pay for health care, and 
save for the future than to say to her that we know how difficult the 
struggle is and we, as a nation, as a Congress, as a people are willing 
to do what we can to help.
  Today, Mr. President, with this vote to increase the minimum wage and 
give workers a raise, we have sent a message to America that we have 
rejected the extreme, hard line policies of the ideological warriors 
who believe that the bottom line is the only line, and that if those at 
the top earn more then those at the bottom will be better off. We have 
sent a message, instead, that we are, indeed, a common sense, pro-
family community that believes in fairness and in a fair wage for a 
day's work. And we have sent a message that we believe that if you 
increase the intrinsic value of work you decrease the emotional cost of 
welfare, and the emotional toll that hopelessness and fear take on hard 
working mothers and families.
  Mr. President, we have done the right thing. Some have fought it. 
Some have argued vehemently against it. Some have found arguments to 
try to stop it. But in the end, we have struck an important blow for 
fairness, for work, for families; and in so doing we have brought two 
words back into the lexicon of the 104th Congress and they are 
``compassion'' and ``community''. Increasing the minimum wage means 
that we understand that we are all in this together and that we care. 
That, Mr. President, is a victory for the principles for which I have 
fought during my tenure here, and for which I will continue to fight in 
the future.

[[Page S9542]]

  Mr. LAUTENBERG. Mr. President, I rise to speak in support of the 
increase in the minimum wage.
  Mr. President, 5 years is a long time to go without a raise. Senators 
and Representatives do not go that long. Nor do corporate executives, 
or even most average working people.
  And neither should those who earn the minimum wage.
  Mr. President, the increase in the minimum wage that we will pass 
today will be the first raise in 5 years for close to 12 million 
American workers. It's about time.
  Mr. President, there's a lot of mythology about just who these 
minimum wage workers are.
  Contrary to those prevailing myths, Mr. President, most minimum wage 
workers are not rich suburban teenagers who take a job for extra 
spending money.
  The fact is--two-thirds of minimum wage workers are adults; 58 
percent are women; 40 percent are the sole breadwinners for their 
families; and of the 25 percent that are teenagers, over half come from 
families with below-average income.
  Mr. President, fundamental fairness dictates that a person who gets 
up every day, goes to work, 40 hours a week, 52 weeks a year, should 
earn a living wage.
  And yet, a minimum wage worker who works 40-hours per week, every 
single week of the year, doesn't even earn enough to reach the poverty 
line. That's wrong. And we have an obligation to do something about it.
  Mr. President, the minimum wage increase in this bill will lift 
300,000 American families out of poverty. And that includes 100,000 
children.
  Mr. President, an increase in the minimum wage to $5.15 per hour 
means an increase in income of $1,800 per year for about 10 million 
workers.
  That's enough to pay for 7 months of groceries, or 4 months of rent, 
or even 1 year of tuition at a 2-year college.
  It's tremendously important for millions of American families.
  In my home State of New Jersey, the minimum wage is currently $5.05 
an hour, above the national minimum, and only 10 cents below this new 
minimum of $5.15.
  In my State, this wage increase will amount to $4 per week for a 
minimum wage worker. You might think that a 10-cent-an-hour raise 
wouldn't be a big deal. Well, you would be wrong.
  In communities and families all over New Jersey, and around this 
country, even such a small increase in income could mean the difference 
between caring for children, and having them go hungry.
  Four dollars buys 2 more gallons of milk, or 2 more loaves of bread, 
or 8 more boxes of spaghetti.
  To millions of American families, even just a few dollars more per 
week is a lot of money.
  Mr. President, people who work hard and play by the rules should be 
able to provide for themselves, and their families.
  The best way to encourage and honor the work ethic so important to 
our economic future is to ensure that even those at the bottom earn a 
living wage.
  So, Mr. President, I urge my colleagues to support working Americans 
and to support this bill. It's the right thing to do. And it's long 
overdue.
  Mr. HARKIN. Mr. President, I supported the health insurance 
conference agreement. I want to speak a few minutes about some of the 
very good and some very problematic provisions in this agreement. I 
want to congratulate Senator Kennedy and Senator Kassebaum and others 
for their hard work and perseverance.
  A number of the provisions of this bill follow the framework of a 
proposal I put forth in the last Congress. In 1994, I offered what I 
called a downpayment plan that would have made health insurance 
affordable for every child in America, provided for increased 
portability and other insurance reforms, full tax deductibility of 
health insurance costs for the self-employed and a clampdown on health 
care fraud, waste, and abuse. I am pleased that provisions similar to 
several of these items are included in this conference report.
  I am very pleased that this legislation prohibits group and 
individual health plans from establishing eligibility, continuation, or 
enrollment requirements based on genetic information. I offered an 
amendment on this issue during committee consideration of S. 1028 and 
am pleased that it is included in the conference bill.
  I believe this is a very important provision that will become even 
more important as the availability and use of genetic tests grows in 
the coming years. Genetic information should be used to help people 
stay healthy and should not be used to put a person at a disadvantage 
when it comes to health insurance.
  While this legislation still leaves serious flaws in our health care 
system, it represents an important step toward reforming health care 
and injecting some fairness and common sense into the system.
  The portability provision in the bill would provide some much-needed 
relief for many Americans. Provisions to gradually raise the percentage 
of health insurance costs that farmers and other self-employed can 
deduct from their taxes from 30 to 80 percent over the next 10 years, 
would provide greater relief, if not equity, with larger businesses.
  Mr. President, the portability provisions in the bill are 
particularly important. Americans should not have to worry about facing 
preexisting condition exclusions if they get sick, change jobs, or lose 
their job.
  This health insurance bill will provide many American families with 
added security and choices.
  The provisions in the legislation related to preexisting conditions 
are important and add some common sense to the current health insurance 
market. The bill limits the ability of insurers to impose exclusions 
for preexisting conditions. Under the legislation, no such exclusion 
can last for more than 12 months. Once someone has been covered for 12 
months, no new exclusions can be imposed as long as there is no gap in 
coverage--even if someone changes jobs, loses their job, or changes 
insurance companies.
  The preexisting condition provisions will help real people who have 
already experienced an illness and want to switch insurers or change 
jobs
  For example, a father from Iowa City called my office about his 
daughter who has a chronic health condition and will graduate from 
college this spring. He was worried that when she graduates and is no 
longer covered under his health insurance policy she will not be able 
to find insurance coverage for her chronic health condition.
  Because the Health Insurance Reform Act would require insurers to 
credit prior insurance coverage, his daughter can move to another 
health insurance plan without being denied coverage for her preexisting 
condition.
  The portability provision in the bill will help with so-called job 
lock. Workers who want to change jobs for higher wages or advance their 
careers often have to pass up opportunities because it might mean 
losing health coverage. These provisions will provide greater security 
for Americans currently covered under group health plans.
  I've heard form Iowans who have had to pass up new job offers or 
forgo starting their own small business because they or someone in 
their family has a preexisting condition. Workers with a sick child are 
forced to pass up career opportunities because their new insurance may 
not cover a preexisting condition for 6 months or more.
  These families have played by the rules and have been continuously 
insured--they deserve to know that if they pay their insurance premiums 
for years, they cannot be denied coverage or be subjected to a new 
exclusion for a preexisting condition because they change jobs.
  But, I do want to express my concern about some of the comments that 
are being made on both sides of the aisle about this bill.
  In today's edition of the Washington Post, House Speaker Newt 
Gingrich is quoted as saying ``it means guaranteed health insurance for 
everyone who's in the system.''
  Mr. President, this bill is an important step forward, but it in no 
way means guaranteed health insurance for people now in the system. We 
should not overpromise or oversell this bill. American workers still 
face the possibility that their employer will reduce their health 
insurance or drop coverage altogether.
  Workers still face the possibility that coverage for their children 
will be dropped. In fact, the number of children covered by employment-
based

[[Page S9543]]

health insurance has been decreasing and over 9 million children have 
no health insurance.
  If you lose your job you still face the high costs of health 
insurance--certainly many people who have just lost their job can't 
afford health insurance premiums. If you get sick, lose your job, and 
can't afford health insurance premiums you are still out of luck under 
this bill.
  And, Mr. President, today if a worker switches jobs their next 
employer may or may not offer health care coverage. The bill before us 
today does not change this situation. Companies can also continue to 
eliminate health care coverage for retirees.
  So, Mr. President, this bill does not guarantee health insurance. It 
is an important step forward and it should be passed.
  We should not let the perfect be the enemy of the good, but we also 
shouldn't lead Americans to believe it does more than it really does.
  While there are many positive things in this bill that merit its 
enactment, Mr. President, there are several provisions that I believe 
would substantially undermine our efforts to combat fraud, waste, and 
abuse in Medicare and other health programs. Our two lead agencies in 
combating health care fraud and abuse, the Department of Justice and 
the office of inspector general of the Department of Health and Human 
services, have also raised serious concerns with different provisions 
in this conference report.
  First, the conference agreement includes language from the House bill 
that significantly raises the burden of proof on the Government to 
prove fraud and impose civil monetary penalties. Let me read from a 
letter that June Gibbs Brown, HHS inspector general wrote to me 
recently about this provision.
  I ask unanimous consent that the relevant portion of the letter be 
included at this point.

            Letter from June Gibbs Brown, Inspector General

                                               September 29, 1995.
     Hon. Tom Harkin,
     U.S. Senate, Washington, DC.
     Re H.R. 2389: ``Safeguarding Medicare Integrity Act of 1995''
       Dear Senator Harkin: You requested our views regarding the 
     newly introduced H.R. 2389, which we understand may be 
     considered in the deliberations concerning the ``Medicare 
     Preservation Act.'' We strongly support the expressed 
     objective of H.R. 2389 of reducing the fraud and abuse which 
     plagues the Medicare program. The proposed legislation 
     contains some meritorious provisions. However, if enacted, 
     certain major provisions of H.R. 2389 would cripple the 
     efforts of law enforcement agencies to control health care 
     fraud and abuse in the Medicare program and to bring 
     wrongdoers to justice.
       The General Accounting Office estimates the loss to 
     Medicare from fraud and abuse at 10 percent of total Medicare 
     expenditures, or about $18 billion. We recommend two steps to 
     decrease this problem: strengthen the relevant legal 
     authorities, and increase the funding for law enforcement 
     efforts. Some worthy concepts have been included in H.R. 
     2389, and we support them. For example, we support:
       ``a voluntary disclosure program, which allows corporations 
     to blow the whistle on themselves if upper management finds 
     wrongdoing has occurred, with carefully defined relief for 
     the corporation from qui tam suits under the False Claims Act 
     (but not waiver by the Secretary of sanctions);
       ``minimum periods of exclusion (mostly parallel with 
     periods of exclusion currently in regulations) with respect 
     to existing exclusion authorities from Medicare and Medicaid; 
     and
       ``increases in the maximum penalty amounts which may be 
     imposed under the civil monetary penalty laws regarding 
     health care fraud.''
       As stated above, however, H.R. 2389 contains several 
     provisions which would seriously erode our ability to control 
     Medicare fraud and abuse, including most notably: making the 
     civil monetary penalty and anti-kickback laws considerably 
     more lenient, the unprecedented creation of an advisory 
     opinion mechanism on intent-based status, and a trust fund 
     concept which would fund only private contractors (not law 
     enforcement). Our specific comments on these matters follow.


 making civil monetary penalties for fraudulent claims more lenient by 
 relieving providers of the duty to use reasonable diligence to ensure 
                   their claims are true and accurate

       Background: The existing civil monetary penalty (CMP) 
     provisions regarding false claims were enacted by Congress in 
     the 1980's as an administrative remedy, with cases tried by 
     administrative law judges with appeals to Federal court. In 
     choosing the ``knows or should know'' standard for the mental 
     element of the offense, Congress chose a standard which is 
     well defined in the Restatement of Torts, Second, Section 
     12. The term ``should know'' places a duty on health care 
     providers to use ``reasonable diligence'' to ensure that 
     claims submitted to Medicare are true and accurate. The 
     reason this standard was chosen was that the Medicare 
     system is heavily reliant on the honesty and good faith of 
     providers in submitting their claims. The overwhelming 
     majority of claims are never audited or investigated.
       Note that the ``should know'' standard does not impose 
     liability for honest mistakes. If the provider exercises 
     reasonable diligence and still makes a mistake, the provider 
     is not liable. No administrative complaint or decision issued 
     by the Department of Health and Human Services (HHS) has 
     found an honest mistake to be the basis for CMP sanction.
       H.R. 2389 Proposal: Section 201 would redefine the term 
     ``should know'' in a manner which does away with the duty on 
     providers to exercise reasonable diligence to submit true and 
     accurate claims. Under this definition, providers would only 
     be liable if they act with ``deliberate ignorance'' of false 
     claims or if they act with ``reckless disregard'' of false 
     claims. In an era when there is great concern about fraud and 
     abuse of the Medicare program, it would not be appropriate to 
     relieve providers of the duty to use ``reasonable diligence'' 
     to ensure that their claims are true and accurate.
       In addition, the bill treats the CMP authority currently 
     provided to the Secretary in an inconsistent manner. On one 
     hand, it proposes an increase in the amounts of most CMPs 
     which may be imposed under the Social Security Act. Yet, it 
     would significantly curtail enforcement of these sanction 
     authorities by raising the level of culpability which must be 
     proven by the Government in order to impose CMPs. It would be 
     far preferable not to make any changes to the CMP statutes at 
     this time.


    MAKING THE ANTI-KICKBACK STATUTE MORE LENIENT BY REQUIRING THE 
 GOVERNMENT TO PROVE THAT ``THE SIGNIFICANT'' INTENT OF THE DEFENDANT 
                              WAS UNLAWFUL

       Background: The anti-kickback statute makes it a criminal 
     offense knowingly and willfully (intentionally) to offer or 
     receive anything of value in exchange for the referral of 
     Medicare or Medicaid business. The statute is designed to 
     ensure that medical decisions are not influenced by financial 
     rewards from third parties. Kickbacks result in more Medicare 
     services being ordered than otherwise, and law enforcement 
     experts agree that unlawful kickbacks are very common and 
     constitute a serious problem in the Medicare and Medicaid 
     programs.
       The two biggest health care fraud cases in history were 
     largely based on unlawful kickbacks. In 1994, National 
     Medical Enterprises, a chain of psychiatric hospitals, paid 
     $379 million for giving kickbacks for patient referrals, and 
     other improprieties. In 1995, Caremark, Inc. paid $161 
     million for giving kickbacks to physicians who ordered very 
     expensive Caremark home infusion products.
       Most kickbacks have sophisticated disguises, like 
     consultation arrangements, returns on investments, etc. These 
     disguises are hard for the Government to penetrate. Proving a 
     kickback case is difficult. There is no record of trivial 
     cases being prosecuted under this statute.

  Let me repeat, the IG says this provision will ``significantly 
curtail enforcement of these sanctions.'' Mr. President, this provision 
has no business in this conference report and flies in the face of the 
bill's section title ``Preventing Health Care Fraud and Abuse.''
  Along with other exemptions provided in the bill, this change will 
cost taxpayers $200 million, according to the Congressional Budget 
Office [CBO].
  The conference agreement also includes a provision from the House 
bill requiring the IG to provide advisory opinions to the public on the 
Medicare anti-kickback statute. The Attorney General and the HHS 
strongly oppose this provision. In fact, the Attorney General in a June 
6, 1996 to then Majority Leader Dole and Speaker Gingrich said:

       This is an unprecedented and unwise requirement that would 
     severely undermine our law enforcement efforts relating to 
     health care fraud. The HHS IG said in her letter to me that 
     similar provisions would ``severely hamper the Government's 
     ability to prosecute health care fraud.''

  She goes on to say:

       Even with appropriate written caveats, defense counsel will 
     hold up a stack of advisory opinions before the jury and 
     claim that the defendant read them and honestly believed 
     (however irrationally) that he or she was not violating the 
     law. The prosecution would have to disprove this defense 
     beyond a reasonable doubt. This will seriously affect the 
     likelihood of conviction of those offering kickbacks.

  Mr. President, I strongly support the concept of providing the public 
and health care providers guidance on complying with Medicare law. The 
government does issue advisory opinions and other guidance and it 
should be provided the resources to do more. But law enforcement should 
not be forced to

[[Page S9544]]

issue information that it feels will undermine compliance with anti-
kickback laws.
  The Attorney General and IG have said that these requirements are so 
damaging to their ability to prosecute fraud because they would require 
law enforcement to issue opinions on intent based statutes. Because of 
the inherently subjective nature of intent, they believe it would be 
impossible for them to determine intent based solely upon a written 
submission from the requestor. They point out that it does not make 
sense for a requestor to ask the Government to determine the 
requestor's own intent.
  The Congressional Budget Office has scored this advisory opinion 
provision as costing taxpayers $280 million over the next 7 years. They 
recognize the obvious, that this provision will result in fewer 
successful prosecutions of health care fraud.
  Mr. President, there are a number of provisions in the conference 
agreement that would, taken alone, improve our fight against Medicare 
fraud, waste, and abuse--provisions I have long advocated. The bill 
creates a mandatory source of funding for the IG, the FBI, and other 
law enforcement agencies.
  Their efforts return many times their costs in savings. In order to 
make this change significant, though, we can't simply eliminate 
existing discretionary funding for these activities in the 
appropriations bill.
  The bill also requires some steps to be taken to encourage and assist 
Medicare beneficiaries in identifying and reporting fraud and abuse. 
Significant additional steps are needed to assure that seniors really 
have the tools they need to fully participate in this important effort.
  So, Mr. President, this bill is a mixed bag. I will support it 
because it provides important new protections to working Americans and 
tax relief for farmers and the self-employed. However, I will actively 
work to have the provisions which hamper our efforts to combat health 
care fraud and abuse removed from the books.


                        AID TO SMALL BUSINESSES

  Mr. KERRY. Mr. President, this is a good day for hard-working 
Americans and small business owners across the Commonwealth of 
Massachusetts. The final passage of the Small Business Job Protection 
Act will stoke the engine of job growth in this country and will help 
further the current economic expansion.
  Just 2 days ago, we learned that, in the second quarter of 1996, our 
national economy posted a robust 4.2 percent growth rate. This buoyant 
growth figure is just the latest indication that the Clinton economic 
plan which the Congress passed in 1993 without one single Republican 
vote is benefiting hard-working Americans. We have unprecedented low 
interest rates and subdued inflation and unemployment levels. In fact, 
the Clinton plan has created more than 10 million jobs since its 
enactment.
  Mr. President, the Clinton plan reduced the deficit from a record-
high $290 billion in 1992 to a projected $117 billion this year. That 
is a 60-percent reduction of the deficit in 4 years, Mr. President. But 
some Members on the other side of the aisle seem to forget that deficit 
reduction is, in and of itself, not an economic policy. Cutting 
wasteful spending in order to keep interest rates low whole protecting 
programs and services which stimulate growth and create jobs is an 
economic policy. It is an economic plan. It is, in fact, the core of 
the Clinton plan, and I am pleased to have helped shape this plan.
  Just 2 weeks ago, the Chairman of the Federal Reserve, Alan Greenspan 
told me that our economy has not looked this sanguine in 3 years. But I 
reminded him during our Banking Committee hearing that all Americans 
have not yet felt the benefits of the Clinton plan. Accordingly, I 
introduced the American Family Income and Economic Security Act this 
year. Several provisions of my 20-point plan will become law when the 
President signs the conference report before us.
  One of these provisions is raising the minimum wage to $5.15 per 
hour, which I will address in a separate statement later this 
afternoon.
  Two other provisions of my bill which are echoed in the Small 
Business Job Protection Act are the extension of the credit for 
research and experimentation and the deduction for employer-provided 
educational assistance.
  This bill will extend the R&E Tax Credit, sometimes called the 
Research and Development Tax Credit, until May 1997. Mr. President, for 
years, I have fought to make this credit permanent; it is one of the 
most important tax provisions for our high-technology, high-wage, job-
crating industries, many of which are found in my home State. I am 
disappointed this bill does not make the credit permanent or 
retroactive; however, I am pleased the Congress is once again 
acknowledging the significance of the credit.
  The bill will also extend the exclusion, up to $5,250, for employer-
provided educational assistance through May 1997. This provision gives 
many Americans an opportunity to further their education while working. 
It allows them to upgrade their skills in order to survive and compete 
in the changing global economy.
  These provisions are the logical complements to the Clinton economic 
plan. They will help more working Americans to enjoy the benefits of 
the current robust economic growth. I will continue to fight for other 
provisions of my American Family Income and Economic Security, like 
allowing more Americans to save for their retirement through IRA's, 
safeguarding pension plans from corporate raiders, reducing capital 
gains tax rates for investors in targeted, high-technology industries, 
furthering training programs and expanding stock option programs.
  Mr. President, there is one last provision of the small business job 
protection bill of which I am extremely proud. For almost 8 years, 
hard-working owners of fishing vessels in New Bedford, MA, have been 
subject to an Internal Revenue Service ruling that would have resulted 
in approximately $11 million in penalties. This situation arose from an 
IRS misinterpretation of the Tax Code as applied to crewmembers on 
small fishing vessels. The IRS' interpretation and assessment nearly 
devastated the fishing families in southeastern Massachusetts--a region 
struggling with the departure of the textile industry and the demise of 
the fishery. I am pleased that this bill includes a correction to this 
wrong-headed interpretation. This action is providing relief for four 
fishing vessels in New Bedford--F/V Edgartown, F/V Nordic Pride, F/V 
Lady J, F/V Steel--by rendering moot a court action against them.
  Life on the seas requires fishermen to be ruggedly independent 
individuals. Fishing boat operations reflect this independence in that 
they are fundamentally small business operations with crews that 
typically vary from trip to trip, with each crewmember acting as a free 
agent. Recognizing that there was a unique worker arrangement on 
fishing vessels, Congress amended the Tax Code in 1976 to clarify the 
employment status of crewmembers as self-employed and required the 
self-employed crewmembers to be compensated solely with a share of the 
catch.
  It is common practice on fishing boats around the country to provide 
a small cash payment called a pers to the cook, first mate and engineer 
in recognition of additional duties they perform at sea. These pers 
represent only 1 to 5 percent of the total compensation which amounts 
to approximately $500 annually on a $30,000 income.
  This bill will allow the pers payments--which are essentially 
calculated as a share of the catch--without jeopardizing the self-
employment status of crewmembers. Let me emphasize, Mr. President, that 
the boat owners believed they complied with the new tax laws and 
regulations, and in fact they did comply with the law as Congress 
intended it to be applied to small fishing vessels.
  With my colleagues from Massachusetts, Senator Kennedy and 
Congressman Frank, I tried to remedy this situation for 7 years. We 
appealed to the Treasury Department and the Internal Revenue Service, 
and introduced legislation that was vetoed twice by President Bush. 
Today, I am pleased that this issue will be resolved as soon as 
President Clinton signs this bill.
  Mr. President, this has been a long and difficult struggle to provide 
relief for the fishing families of New Bedford. Like the hard-working 
people of southeastern Massachusetts, small business owners and 
American workers will enjoy the benefits of this bill. I am

[[Page S9545]]

pleased that the Senate will speak with a strong bipartisan voice to 
raise the minimum wage, to provide tax incentives for small businesses 
and, especially, to assist the families of New Bedford, MA.
  I yield the floor.


                   employer securities in erisa plans

  Mr. BREAUX. Mr. President, I rise today to address the full Senate 
and the distinguished chairman of our Finance Committee, Senator Roth. 
On June 5, I suggested to the Finance Committee that it adopt a 
provision that would permit subchapter S corporations to sponsor 
ESOP's, or employee stock ownership plans.
  When the precise language of my proposal was published as section 
1316 of H.R. 3448, I was disappointed to read that some of the special 
tax benefits that currently are available with respect to ESOP's would 
not be available in the case of an ESOP that acquires and holds 
subchapter S corporation stock.
  I would like to note that the provision in the bill before us related 
to employer securities and sub S ERISA plans is not to take effect 
until January 1, 1998. Between now and then, I will review how we can 
make it possible for subchapter S corporations to avail themselves of 
the special ESOP tax benefits, which will encourage greater use of this 
provision.
  After this review, I hope to be able to offer reasonable alterations 
to H.R. 3448 that will expand our policy of promoting employee 
ownership through ESOPs.
  Mr. ROTH. Mr. President, I appreciate the comments of the Senator 
from Louisiana and look forward to reviewing any thinking he may have 
for future legislation on this matter.


                discrimination under new irs section 936

  Mr. GRAMS. Mr. President, I am very concerned about regulations that 
were just issued by the IRS in May regarding the section 936 possession 
tax credit. These new regulations cast aside regulatory rules upon 
which companies have relied for many years permitting arm's length 
pricing in the purchase of components. The new regulations produce the 
discriminatory result that an arm's length third-party price can be 
used to value outbound sales of components but not inbound purchases of 
components by the possession company for purposes of the section 936 
calculation. I believe that a fair and workable solution can be 
developed to address these concerns and would ask the Senator to join 
me in encouraging the Treasury Department to seek such a solution.
  Mr. ROTH. I believe this is an area that Treasury and the IRS need to 
revisit. I join the Senator from Minnesota in encouraging them to do 
so.
  Mr. HATCH. Mr. President, I rise today to describe why the repeal of 
Internal Revenue Code section 956A, which is included in the Small 
Business Tax Relief bill, is important to both U.S. businesses and 
American workers.
  In his remarks 2 days ago, the distinguished senator from North 
Dakota insisted on referring to the repeal of 956A as opening a tax 
loophole. This is simply not true. Rather, what the repeal does is 
loosen a noose that has been strangling the competitiveness of many of 
our U.S. businesses.
  How many of my colleagues would stand up and say, ``Yes, I would like 
to hamper the competitiveness of U.S. businesses abroad by imposing tax 
restrictions on them unequal to any restriction imposed on their 
competitors.'' Or, how many of my colleagues would say that they are in 
favor of discouraging U.S. firms from increasing employment at home by 
taking advantage of business opportunities abroad. Yet, in essence, 
this is the effect of not repealing section 956A.
  I don't believe there is even one Senator in this Chamber who wants 
to go home in August and brag about putting U.S. companies at a 
competitive disadvantage. I don't believe there is even one Senator who 
wants to go home and brag about eliminating jobs for U.S. workers. Yet, 
this is exactly what section 956A does.
  Mr. President, let me briefly discuss the history of section 956A. 
Until 1993, when President Clinton signed the largest tax increase in 
the history of this Nation, the U.S. generally did not tax the active 
income earned by a U.S. corporation's foreign subsidiaries until that 
income was actually repatriated to the U.S. parent. This tax deferral 
enabled U.S. companies with foreign affiliates to compete on a 
reasonably level playing field with foreign competitors. This is 
because no other industrial nation's tax law forces a parent 
corporation to pay taxes on income earned by a subsidiary until that 
money is sent home to the parent.
  However, in 1993, the Clinton administration proposed and Congress 
enacted a limitation on this tax deferral. The provision, now known as 
section 956A, forces the parent corporation to pay tax on a portion of 
its foreign subsidiary corporation's active income to the extent it has 
an excessive accumulation of passive assets.
  Mr. President, this new restriction did not close a tax loophole. 
Instead, 956A closed doors of opportunity for U.S. business and 
hindered employment and investment growth. As I mentioned, section 956A 
has no counterpart in the tax laws of our foreign competitors. Hence, 
it effectively places an undue burden on U.S.-owned companies abroad--a 
burden that our competitors do not have.
  There are some who want us to believe that the enactment of section 
956A would discourage U.S. companies from moving jobs overseas. Mr. 
President, this is just not true. In fact, the provision has resulted 
in just the opposite effect--it encourages U.S. companies to employ 
more overseas workers.
  Let me explain. As I stated before, section 956A subjects excessive 
passive assets to U.S. tax before profits are repatriated to the United 
States. This provision has actually created an unintended incentive for 
companies to invest in hard assets, such as manufacturing facilities, 
outside the United States. Doing so enables the subsidiary to increase 
its hard assets and thus lower the ratio of it passive assets to total 
assets, which effectively lowers the tax. Manufacturing facilities, 
unlike passive assets, require workers, almost always hired from the 
host nation. Thus, the perverse effect of section 956A is to provide an 
incentive for U.S. multinational companies to invest in jobs overseas 
for non-U.S. workers.
  Contrary to what some contend, U.S. companies generally do not invest 
abroad simply to take advantage of lower labor costs. In fact, most 
foreign investments by U.S. companies are in countries where labor 
costs are often higher than in the United States. In 1993, two-thirds 
of the assets and sales of U.S.-controlled foreign corporations were in 
seven primary locations: Germany, France, Japan, United Kingdom, 
Netherlands, Canada, and Switzerland. The average annual compensation 
paid to foreign workers in these countries was 15 percent higher than 
the average paid to workers in the United States by the parent 
corporations.
  U.S. foreign businesses are almost always established in order to 
better service foreign customers, to have a local presence, to avoid 
excessive transportation costs, or to develop natural resources in the 
geographic locations where they are found. In other words, decisions of 
where to invest are made for solid business reasons--not for tax 
avoidance. Many foreign countries insist that contracts be made only 
with local entities.
  It is also important to note that these U.S. subsidiary corporations 
seldom take jobs away from the United States, but actually supplement 
domestic production and increase U.S. jobs. U.S.-owned foreign 
corporations are large purchasers of exports from their affiliated 
companies in the United States. According to the U.S. Department of 
Commerce, 40 percent of U.S. multinational corporations' exports are 
sold to U.S. affiliates overseas.
  For every one billion U.S. dollars in manufactured exports, over 
14,000 manufacturing jobs are created in the United States. Employment 
growth between 1987 and 1992 at U.S. plants that started or continued 
exporting during that time was 17 to 18 percent greater than at 
comparable plants that did not export.
  These statistics clearly indicate that expanding U.S. business 
overseas increases growth back home, including employment growth. We 
cannot ignore the global economy we are living in by discouraging U.S. 
companies from expanding to other countries.
  Repeal of section 956A doesn't benefit just a handful of large 
corporations, as has been suggested. Small businesses must invest 
overseas also. In today's

[[Page S9546]]

world, any business that doesn't recognize the necessity to go global 
is in jeopardy of losing out to foreign competition. In fact, many 
small Utah businesses are having great success in exporting and are 
finding a need to invest outside the U.S. to establish a global 
presence. Does this mean we are losing jobs in Utah? Hardly. Rather, 
such international growth has further fueled my State's employment 
boom.
  Finally, Mr. President, let me emphasize that repealing 956A will 
give no special treatment to U.S. businesses with foreign affiliates. 
In fact, the tax treatment of U.S. businesses after the repeal of 956A 
will be the same as the tax treatment received by a U.S. individual who 
holds shares in a company and defers U.S. tax on the earnings of the 
company until the company actually pays the dividend to the 
shareholder.
  Until 1993, our tax law has always taxed the active profits of 
American-owned companies abroad when those earnings were sent to the 
U.S. company through dividend, transfer payment, or other means. Let me 
reiterate that repeal of section 956A does not change this basic 
concept of the Internal Revenue Code. Rather, it restores the 
traditional treatment that was changed by the misguided 1993 provision.
  I am proud to say that I stand for creating employment for American 
workers. I stand for increasing our exports and developing foreign 
markets, and I stand for repealing section 956A to remove the 
strangling provisions it places on U.S. businesses trying to compete on 
a level playing ground with foreign competitors.
  Ms. MOSELEY-BRAUN. Mr. President, I rise in support of the Small 
Business Job Protection Act, particularly its minimum wage provisions. 
I would like to commend Chairman Roth and members of the Finance 
Committee who worked in a bipartisan fashion to put together a very 
comprehensive bill that helps small businesses invest, grow and create 
new jobs.
  I am particularly proud to have succeeded in including a large number 
of provisions in the Small Business Job Protection Act that I, along 
with my colleagues, worked very hard to place in the bill and retain in 
conference. These provisions will help to change peoples lives by 
creating pension equity, providing educational assistance, preventing 
job loss, moving people from welfare to work, encouraging research and 
development and giving assistance to first-time farmers.
  One of my primary focuses during this Congress has been to identify 
and resolve the current pension laws that are and have been inequitable 
toward women throughout history. As a result of this effort, earlier 
this year, I introduced the ``Women's Pension Equity Act of 1996.'' 
This bill begins to assist millions of women retain pension benefits 
earned during many years of marriage. Today, I want to thank Chairman 
Roth for including in this small business tax legislation two of the 
most important provisions from my women's pension bill, provisions 
which received broad bipartisan support. One requires the Department of 
Treasury to create model language for spousal consent with respect to 
survivor annuities for widows. The second requires the Department of 
Treasury to create model language for Qualified Domestic Relations 
Order forms used to divide pensions during divorce.
  Pension retention--issues associated with holding onto earned pension 
rights--are important safeguards against ``retirement surprise.'' 
Pensions are often the most valuable financial asset a couple owns--
earned together during their many years of marriage. Unfortunately, it 
is now all too easy for a woman to unknowingly compromise her right to 
a share of her spouse's pension benefits in case of widowhood or 
divorce. If she reads ``lifetime annuity'' to mean her lifetime and 
signs the forms waiving survivor benefits, she loses her pension if her 
spouse dies. In case of divorce, if both spouses do not sign a complete 
QDRO form, she loses her right to any pension benefits, even if the 
marriage lasted fifty years. The provisions adopted in this bill will 
make it more likely that women will be able to protect their rights and 
retain their pensions.
  Additionally, I am an original cosponsor of the Spousal IRA Equity 
legislation. This provision will allow a deductible IRA contribution of 
up to $2,000 per year to be made by each spouse including homemakers. 
Currently, a spouse who works outside the home is allowed to make tax-
free contributions to an Individual Retirement Account up to $2,000 
annually. However, the spouse that works in the home is only allowed to 
contribute $250 annually. This Congress has agreed for the first time 
to right this wrong and provide fairness for women who work both 
outside of and in the home.
  I regret the deletion by the conference committee of safeguards 
against the taxation of non-physical compensatory damages. That 
provision is inequitable because it makes a distinction between 
physical and non-physical compensatory damages. Under this bill, 
victims of sex discrimination, race discrimination, and emotional 
distress would be required to pay taxes on any damages they receive 
while, on the other hand, victims of battery will not be taxed. Not 
only is this provision bad tax policy but it is discriminatory, and 
will make it more difficult for victims of these crimes to achieve 
justice. I hope the Congress will revisit this issue and correct this 
injustice.
  Despite my displeasure with this particular provision, this is a good 
bill. The bill increases investment by small businesses and creates 
incentives for businesses to move people from welfare to work. It 
creates a new tax credit, called the Work Opportunity Tax Credit, which 
replaces the old targeted jobs tax credit program. The Work Opportunity 
Tax Credit encourages employers to hire people from populations 
suffering from high unemployment, who are on government assistance or 
who have limited education. I am just delighted that the conference 
bill includes a provision I authored, along with my Colleagues Senators 
Baucus and Hatch, that will help expand the pool of eligible employees 
by adding a category for indigent 18- 24-year-olds. Adding this 
category encourages employers to hire young people who are all too 
often overlooked, promotes self-sufficiency and prevents our young 
people from returning to the welfare system. The Work Opportunity Tax 
Credit will enable employers to access the credit after an employee has 
worked 400 hours, thereby providing additional incentives for job 
training.
  Job training and educational assistance by employers is essential to 
create a strong work force. That is why I am so pleased that I was able 
to work with Senators Roth and Moynihan to enable employers to provide 
educational assistance to their employees without including the costs 
associated with such assistance in their gross income. This exclusion 
ended December 31, 1994 and is retroactively reinstated in this bill. 
However, the program only applies to undergraduate study until January 
1, 1998 and it troubles me that the House would not agree to extend the 
benefit to employees who are in graduate school past June 1996. 
Employer-provided educational assistance on a graduate level helps our 
national competitiveness, and I hope that we will revisit the 
limitations of this bill.
  The investments we make today in education and research will 
determine our global competitiveness in the future. That is why I am 
happy that this bill extends the Research and Experiment Tax Credit 
through May 31, 1997 however, I believe it should have been 
retroactively reinstated in this bill and hope that it will be made 
permanent in the future. If government does not encourage research and 
development, it will have a negative impact on our international 
competitiveness and our national security. The R & E tax credit has 
demonstrated its efficacy, and it should be continued with sufficient 
certainty to encourage long term planning and investment in this area.
  A tax credit for nonconventional fuels is yet another investment that 
will help develop new sources of coal and methods to recycle biomass 
that will increase our technological advancement. The section 29 tax 
credit is important for recovering and managing landfill gas such as 
methane. In so doing, it helps to improve the quality of life around 
landfills, reduce smog, and alleviate global warming. With this tax 
credit, landfill gas has become a practical fuel for use in 
conventional electrical generating equipment. However, the extension of 
the credit will be less effective as it relates to coal because an 
additional year is needed to

[[Page S9547]]

get plants up and running given the complexity in converting coal into 
synthetic fuels. I hope we will revisit the effective date of the 
``placed in service'' deadline.

  The effective date was changed in the conference agreement for the 
repeal of the fifty percent interest income exclusion for financial 
institution loans to Employee Stock Ownership Plans [ESOPs]. In the 
original legislation, the House wanted to retroactively repeal the 
fifty percent interest income exclusion for ESOPs using October 13, 
1995 as the effective date. As you may assume, that early effective 
date would have a devastating impact on companies that had reasonably 
relied upon the current laws and acted to establish an employee stock 
ownership plan. I am quite pleased that the conference agreement 
included today as an effective date. Although I am pleased that today 
will be the effective date for repealing this provision, I wish that we 
did not have to repeal the fifty percent interest income exclusion for 
Employee Stock Ownership Plans at all because they are good for 
business and good for employees. When an employee owns part of the 
company, their investment is greater, their work product is better and 
their loyalty will last longer, this bill only makes it harder for this 
to occur.
  Not only does this bill help small businesses but it also helps 
first- time farm buyers. As a cosponsor of the Aggie Bond bill, I am 
thrilled that it is included in this conference agreement. Provisions 
of the aggie bond legislation helps to insure Illinois farmers and 
farmers all over the nation are given assistance in maximizing their 
participation in the first-time farm buyer program. This provision 
allows the purchase of farms from related parties and increases the 
maximum-size requirements for first-time farmer industrial development 
bonds.
  Not only does this bill help farmers and small businesses but it also 
helps low wage workers with an increase in the minimum wage. Raising 
the minimum wage is about allowing people to realize the American 
Dream. It is about valuing hard work and providing people with the 
opportunity to provide for their families.
  For the millions of American's who support themselves and their 
families on $4.25 an hour, the current minimum wage is not enough to 
raise them out of poverty. The ninety cent increase we are voting for 
today will make a difference to the ten million Americans that earn the 
minimum wage.
  In Illinois, over 10 percent of the workforce, or 545,647 people, 
earns the minimum wage. The majority of the people earning the minimum 
wage--two-thirds--are adults, many are parents. Working 40 hours a 
week, 52 weeks a year, a person earning the minimum wage currently 
earns only $8,840. The poverty rate for a family of four is $15,600.
  In light of our recent vote on ending the welfare safety net for 
children, I would like to point out that close to 60 percent of those 
earning minimum wage are women. These are women who are taking 
responsibility for themselves and their children. They go to work every 
single day, and still the minimum wage does not provide them with a 
living wage on which to raise their families. This increase in the 
minimum wage will make a difference to these women.
  Increasing the minimum wage by 90 cents over the next year is the 
right thing to do. It has been almost five years since the minimum wage 
was last increased. As I'm sure anybody who has gone to the grocery 
store or the doctor's office lately can tell you, in the last five 
years prices have increased, but wages have stayed the same. The report 
on our economy issued yesterday confirms this fact: wage growth was at 
0.08 percent, while our economy grew at an annual rate of 4.2 percent.
  Increasing the minimum wage will raise wages, not lose jobs. Last 
year a group of respected economists, including three Nobel prize 
winners, concluded that an increase in the minimum wage to $5.15 an 
hour will have positive effects on the labor market, workers, and the 
economy. Paying a living wage does not mean that jobs will be lost.
  Workers are our greatest resource. We should recognize the 
contributions of our workers. Our country is founded on the belief that 
hard work is the foundation of success--this is the American Dream. 
Congress should encourage, not discourage, effort and perseverance. A 
minimum wage should provide a living wage for those who are working day 
in and day out to provide for themselves and their families. Family 
values and the American Dream are ideas we like to talk about, but 
today we can actually make them more real for millions of Americans.
  Although it is not perfect, this is a good bill. Women, children, and 
working people will all benefit, and it will help promote job-creation, 
and economic growth. I want to commend my colleagues on the Finance 
Committee, particularly Chairman Roth and the ranking Democratic 
member, Senator Moynihan, who have worked hard to produce a bipartisan 
bill that promotes growth and stability among small businesses.
  I urge my colleagues to join with me in supporting the final passage 
of what is generally a common sense, people oriented, bipartisan bill.
  Mr. CRAIG. Mr. President, I rise in opposition to the conference 
report on H.R. 3448.
  This title of this bill is supposed to be the ``Small Business Job 
Protection Act of 1996''.
  Title I, the tax title, is consistent with that spirit. It would make 
the Tax Code a little fairer, improve economic and employment 
opportunities, and provide some necessary tax relief.
  But the problem remains that, in passing this bill as a whole, we 
would be driving the economy with one foot on the gas and the other on 
the brake.
  The Senate had the chance to tip this bill in favor of creating more 
and better jobs and providing necessary relief for small businesses. 
Unfortunately, on a close vote, this body defeated the amendment 
offered by the Chairman of the Small Business Committee, the Senator 
from Missouri [Mr. Bond]. That amendment would have protected small, 
vulnerable employers from a one-size-fits-all mandate increasing the 
federal minimum wage.
  The Democrat Party had two years, during which it controlled the 
White House and the Congress, to increase the minimum wage. They never 
moved a bill out of committee. They never offered an amendment on the 
floor. They waited until this year to strike. I just have to suspect 
there were some political motivations involved, and some crocodile 
tears shed over the workers they say they want to help.
  I commend those who have labored long and hard to take a legislative 
lemon and turn it into lemonade. I am sorry I cannot, in good 
conscience, vote for the resulting bill.
  All too often, Congresses and Presidents have taken a perceived 
problem, put it under a microscope, and tried to address it with a one-
size-fits-all federal mandate. The result often has been government by 
anecdote. Unintended consequences and innocent bystanders have not 
always been taken into account in the rush to adopt a ``feel-good'' 
solution.
  That risk of unintended consequences is definitely present in the 
bill before us today.
  We feel for those Americans who are working hard at making ends meet. 
It is easy and it is tempting to look at a $4.25 an hour minimum wage 
and say, let's just mandate an increase in that wage. But that is the 
wrong answer. That approach will hurt the very persons it is meant to 
help--the working poor and entry-level employees.
  Common sense, the laws of economics, and experience all tell us this. 
We've all heard the numbers. The commonly accepted figure is that a 
stand-alone increase in the minimum wage from $4.25 an hour to $5.15--a 
21 percent increase--would result in the loss of at least 621,000 jobs. 
In Idaho, it would destroy 3,200 jobs.
  I don't know how many of those jobs might be saved with the tax 
provisions in this bill, but it's obvious that many small employers 
will fall through the cracks. These are the businesses who will have 
little or no opportunity to use the tax relief provisions elsewhere in 
this bill.
  These are employers who have taken pride in creating jobs and 
opportunities for those who need them, and who take pride in serving 
their customers at affordable prices.
  I've heard from many small businesses in Idaho who are concerned 
about this bill. They are already calculating whether they will have to 
lay

[[Page S9548]]

off employees because of this bill. Restaurants are already having new 
menus printed up with higher prices. Jobs will not be available for 
young and entry-level workers, because some employers simply will no 
longer be able to afford them when the government arbitrarily raises 
the price of their labor.
  Some have suggested that the economic impact of such an increase is 
``negligible.'' But it's not negligible for each American who loses his 
or her job as a result. In many cases, the job lost would be the most 
important one that person will ever have--his or her first job.
  In recent years, small businesses have created every net new job in 
this country. They take the risks of hiring and training new workers. 
They do not have the economies of scale of large businesses and suffer 
a disproportionate impact from government regulation. They tend to be 
labor-intensive. If you drive up the costs of their labor, they will be 
forced to create fewer jobs.
  In fact, 77 percent of the economists who responded to a survey of 
the American Economics Association agreed that, by itself, a higher 
mandated minimum wage would have a negative impact on employment.
  Obviously, that negative impact is going to fall on workers at or 
near the minimum wage, and especially those who are the least-skilled 
and need an entry-level job the most.
  Realistically, the federal minimum wage today already is a training 
wage. The average minimum wage worker is earning $6.06 an hour after 
one year.
  In most work places, at every level of compensation, it is common for 
a new employee to be paid more after a few months. That is because 
there is almost always a learning curve, during which the employer is 
investing time, energy, and money in training and acclimating the new 
employee. The opportunity wage in this amendment simply reflects that 
reality of labor economics.
  Mr. President, I do want to emphasize that I support the tax title of 
this bill. I particularly want to express my support and appreciation 
for several of these provisions, including:
  The Shelby-Craig adoption tax credit; enactment of this credit is 
compassionate, pro-family, pro-children, and long overdue; increasing 
the availability of Individual Retirement Accounts for spouses working 
in the home as homemakers; revising and extending the Work Opportunity 
Tax Credit, which will help employers hire and retain disadvantaged 
employees; restoring and extending the tax exclusion for employer-
provided educational assistance; making S corporation rules more 
flexible; providing fairer treatment for dues paid to agricultural or 
horticultural organizations; improving depreciation and expensing rules 
for small businesses.
  I also commend the conferees for accepting the House's provision 
restoring and making permanent the exclusion from FUTA--the Federal 
Unemployment Tax--for labor performed by a temporary, legal, immigrant 
agricultural worker. Such employees are ineligible for FUTA benefits 
that are financed by this tax. Therefore, this tax is imposed on 
employers for no reason, except that the previous exclusion simply 
expired.
  I have supported these provisions consistently in the past and 
commend the Finance Committee for including them in this bill.
  I do want to express one note of concern. This bill would extend the 
Research and Experimentation Tax Credit, but with an early sunset--May 
31, 1997--and without making it available for investments made after it 
last expired and before July 1, 1996.
  The R and E Credit is one of those ``extenders'' that keep expiring 
and keep getting renewed. As a matter of fairness, most, if not all, of 
these extenders simply should be made permanent, or at least extended 
for a longer period of time. Several times in the past, these 
provisions have been renewed retroactively, but that is not the case of 
the R and E Credit this year.
  This stop-and-start approach to tax law undoes much of the good 
intended by these tax incentive provisions. We need to provide 
taxpayers with greater predictability in the Tax Code if we want to be 
effective in helping them invest and create jobs.
  Overall, the tax title provisions in this bill are valuable and 
beneficial. I commend the Chairman and Members of the Finance Committee 
for their work.
  We should be passing laws that boost the economy, increase 
opportunity and create jobs. We can and should do better than passing a 
bill that gives with one hand and takes away with the other. Therefore, 
although there are good provisions in this bill, I must cast a nay vote 
today.

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