[Congressional Record Volume 142, Number 123 (Tuesday, September 10, 1996)]
[Senate]
[Pages S10155-S10185]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 TREASURY, POSTAL SERVICE, AND GENERAL GOVERNMENT APPROPRIATIONS ACT, 
                                  1997

  The Senate continued with the consideration of the bill.
  Mr. SHELBY. Mr. President, I ask unanimous consent that Paul Irving, 
a legislative fellow with the subcommittee, and Bruce Townsend, a 
fellow with the office of Senator Mikulski, be granted floor privileges 
during deliberations on H.R. 3756, the Treasury, Postal Service, and 
general Government appropriations bill.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SHELBY. Mr. President, today with my distinguished ranking 
member, Senator Kerrey, I bring before the Senate the Appropriations 
Committee recommendations on fiscal year 1997 appropriations for the 
Department of the Treasury, the U.S. Postal Service, the Executive 
Office of the President and certain independent agencies.
  The bill we are presenting today contains total funding of 
$23,487,761,000. This bill is $324,007,000 above the appropriations 
provided in fiscal year 1996. The mandatory accounts make up 
$320,850,000 of this increase. In other words, this bill is $3,157,000 
in discretionary spending above the fiscal year 1996 level.
  Of the totals in this bill we are recommending $11,291,000,000 for 
new discretionary spending.
  The $11,291,000,000 the committee proposes for domestic discretionary 
programs is $1.354 billion below the President's request. Let me repeat 
that, Mr. President. This bill is $1.354 billion below the President's 
fiscal year 1997 request. The fiscal year 1996 bill was $1.8 billion 
below the President's request. That is a reduction of $3.15 billion 
below what the President requested in 2 years.
  Reaching this level has not been an easy task. We have had to make 
some very difficult decisions, while trying to ensure that funds are 
made available to

[[Page S10156]]

carry out essential Government services.
  Mr. President, this bill includes $10,185,009,000 for the Department 
of the Treasury. The Treasury Department has varied responsibilities, 
the bulk of which are directed to the revenues and expenditures of this 
Government and law enforcement functions.
  This bill includes $90,433,000 for payment to the Postal Service Fund 
for free mail for the blind, overseas voting, and a payment to offset 
previous shortfalls in revenue forgone funding.
  The President receives $183,339,000 to exercise the duties and 
responsibilities of the Executive Office of the President.
  This bill includes $657,724,000 for construction of new courthouses 
and Federal facilities. This funding provides the General Services 
Administration with the ability to let construction contracts for 
courthouses for which the construction schedule is slated in fiscal 
year 1997.
  The courthouses funded in this bill are those listed as the top 
priority of the administrative office of the courts for fiscal year 
1997.
  There is $12.08 billion in mandatory payments through the Office of 
Personnel Management for annuitant and employee health, disability and 
retirement, and life insurance benefits. There is $850 million for 
other independent agencies.
  Mr. President, this subcommittee continues to be a strong supporter 
of law enforcement. We have done what we can to ensure that the law 
enforcement agencies funded in this bill have the resources to do the 
job we ask them to do.
  We have utilized the salaries and expenses account, as well as, funds 
from the Violent Crime Trust Fund to enhance law enforcement efforts.
  In addition, the committee has provided funding over the President's 
request for the Nation's drug policy office. While I have been highly 
critical of this administration's previous commitment to combating the 
growing drug problem in this country, I fully support the efforts and 
leadership of the new drug czar, General Barry McCaffrey.
  Under his leadership, it is my hope that the alarming rise in teen 
drug use can be turned back, before this country feels its tragic 
consequences--such as, more crime, more death, more young futures lost. 
Drugs are a plague that claim the hopes and dreams, the aspirations and 
goals, of our young people. We need to do more. This bill does more.
  The fiscal year 1997 Treasury bill funds the Office of National Drug 
Control Policy at the President's request of $34,838,000 and provides 
$103 million for high-intensity drug trafficking areas.
  While the committee has attempted to give the drug czar sufficient 
flexibility to address the high-intensity drug trafficking areas, the 
bill does encourage the drug czar to give high priority to certain 
areas of the country where the methamphetamine problem is overtaking 
many communities.
  The committee has further provided an additional $13 million in 
funding within the Violent Crime Trust Fund to designate new HIDTAs.
  In addition, the committee has provided $65 million for southwest 
border antidrug efforts, $83 million for air and marine interdiction 
and $45 million for procurement of an additional P-3AEW aircraft for 
detection and interdiction purposes.
  There has been considerable discussion since this bill was reported 
from the subcommittee about the level of funding for the Internal 
Revenue Service.
  Some have questioned overall funding in this bill for the IRS, but 
the major focus has been directed toward the committee's action 
regarding the IRS tax systems modernization or TSM program. I would 
like to take a few moments to describe how we arrived at the funding 
level for the IRS.
  This bill includes $6,880,221,000 for the IRS; this total is $1.14 
billion below the President's request and $468 million below the fiscal 
year 1996 appropriation. There are those, including the President, who 
have said--you have to fund the IRS at the requested level to ensure 
that tax systems modernization continues and that funds ``owed'' the 
Government are collected.
  Mr. President, the IRS budget makes up approximately 65 percent of 
the committee's discretionary spending. Think about it--65 percent.
  As the largest consumer of revenues under the committee's 
discretionary budget and competitor with equally important funding 
priorities in the budget, like law enforcement, the IRS is subject to 
reductions, which would otherwise have to come from these other 
important programs.
  A dollar more for law enforcement, means a dollar less somewhere 
else--and this budget, which I believe to be consistent with the 
priorities of the President, reflects an emphasis on law enforcement, 
particularly drug enforcement.
  While the Committee's funding for the IRS is significantly below the 
President's request--$1.14 billion and $468 million below last year's 
appropriated level--the Committee feels strongly that these funding 
levels are adequate, and more than justified given the dismal record of 
the Internal Revenue Service.
  Mr. President, the IRS, until very recently, has refused to respond 
to bipartisan concerns that have been raised by the Congress and the 
General Accounting Office.
  Its overall lack of financial accountability and failure to produce 
quantifiable results in tax systems modernization has done little to 
encourage the committee of the IRS's commitment to ensuring that funds 
appropriated are being spent wisely or effectively. The taxpayer 
deserves accountability, particularly from the IRS. But more than that, 
Mr. President, no taxpayer should be held to a level of accountability 
that even the IRS cannot meet.
  The committee has gone to great lengths to ensure that the IRS is 
adequately funded, and that sufficient resources are provided for 
taxpayer assistance and tax return processing.
  There is nothing in this bill which will inhibit the IRS from doing 
their job. Any forecasts of doom and gloom are not accurate.
  We have spent a long time looking at IRS operations, especially tax 
systems modernization over the past 1\1/2\ years during my tenure as 
chairman. I worked with Senator Kerrey, the ranking Democrat on this. 
Frankly, I am not pleased with what I have seen after the expenditure 
of millions of dollars.
  TSM programs that the committee and the GAO have reviewed, have 
almost always come in late and over budget and have almost 
universally--universally, Mr. President--not lived up to expectations, 
despite hundreds of millions of dollars being spent. The Department of 
the Treasury has indicated the current program is off course.
  They are not the only ones, though, who have reached that conclusion. 
The General Accounting Office and National Research Council have been 
highly critical of the direction TSM is headed.
  I have stated many times that we must modernize the IRS. I will 
support that effort. To follow the current course, or lack of course, 
the IRS has chartered for TSM at this time would be irresponsible.
  TSM is clearly not providing us with what we have been seeking and 
what taxpayers deserve.
  Mr. President, I feel very strongly that the subcommittee would be 
abdicating its responsibilities if it did not take action.
  Funds are provided in this bill to continue current information 
systems, but no money is available for further TSM development. I 
expect the Department's review board to take an active roll in ensuring 
corrections are made, and made soon.
  When the Department of the Treasury and the Internal Revenue Service 
have shown that things are back on track, we can proceed with providing 
funds for programs that work. Let me repeat that--we will support 
programs that work and provide the IRS with the necessary tools to 
achieve efficiency and effectiveness.
  Mr. President, this bill does not spend as much as the President 
would like. If it did, the subcommittee would be over a billion dollars 
above its allocation, and that is not the way to balance the budget.
  Tough choices were made as said--in a way that attempted to reflect 
the priorities of the President and the Congress--law enforcement is 
plussed up across the board. It is, however, the result of long, hard 
hours of work on the

[[Page S10157]]

part of the members and the staff of this subcommittee.
  I want to thank all of them for that effort. I believe it is workable 
and should be enacted.
  I yield to Senator Kerrey, the subcommittee's ranking member.
  Mr. KERREY. Mr. President, as the distinguished Senator from Alabama, 
Chairman Shelby, just indicated, we are bringing to the floor of the 
Senate recommendations on the fiscal year 1997 appropriations for the 
Department of Treasury, Postal Service, and independent agencies.
  First of all, I thank Senator Shelby for his dedicated work on this 
bill. He worked very long and hard on the difficult issues he has just 
outlined for Members, and throughout the process, as well, he has 
forged a very cooperative relationship not just with myself but with 
all the subcommittee members on both sides of aisle.
  The subcommittee has achieved a balanced approach of dealing with the 
many programs and activities under the jurisdiction of the subcommittee 
while staying within the 602(b) allocation. This allocation is $11.081 
billion, $1.6 billion below the administration's request. While 
required to make substantial reductions from the request level, I 
believe the program funding levels included in the bill are both 
fiscally responsible and very reasonable.
  Senator Shelby has discussed the major funding highlights, and rather 
than repeating those highlights, I will limit my comments to a few 
areas I would like to emphasize. As Senator Shelby said, the IRS 
received $6.8 billion, 60 percent of the discretionary allocation, 
which is $1 billion lower than the administration's request, but it is 
$200 million above the House mark.
  The reduction from the request reflects our decision to limit IRS 
spending to cost-effective and operational efforts. As you know, there 
have been continuing questions, as the chairman just indicated, 
concerning the TSM, the tax system modernization efforts, questions I 
am attempting to answer, as well, through my work on the subcommittee, 
as well as through the efforts of the newly formed IRS Restructuring 
Commission.
  A June 1996 GAO report stated the IRS has not made adequate progress 
in correcting its management and technical weaknesses, nor have they 
fully implemented any of the GAO recommendations. In addition, the IRS 
does not have a process for selecting, controlling, and evaluating its 
technology investments. It does not have a clear basis for making 
investment decisions, and it does not have a complete procedure for 
requirements management, quality assurance, configuration management, 
project planning and tracking.
  Finally, it does not have an integrated structural architecture or 
security and data architecture. The recommended funding in this bill is 
adequate to support ongoing operations and maintenance and to support 
those systems that have provided taxpayer assistance, such as Telefile 
and the Electronic File Transfer System.
  Of the funds provided IRS, $200 million of non-TSM and $66 million of 
TSM funds may not be obligated until the Secretary of the Treasury 
consults with the Committee on Appropriations and provides criteria to 
explain the needs and priorities of the proposed programs. It is our 
hope that by fencing these funds, the IRS will develop an integrated 
systems architecture and that we can proceed toward completing a 
modernized tax system.
  As I mentioned, I will continue to work with the IRS both through the 
subcommittee and the IRS restructuring commission to ensure they are 
moving in the right direction and that a modernized tax system will be 
provided to our citizens.
  I believe, second, the administration is moving in the right 
direction. As the chairman indicated, I, too, strongly support the 
appointment of General McCaffrey as the head of the Office of National 
Drug Control Policy. This bill fully funds the administration's 
efforts. However, I continue to have a number of questions on the 
direction we are pursuing in the war against drugs.
  I believe ONDCP must develop long-term measurable strategies for 
decreasing drug use and drug-related crimes. I want ONDCP to set 
standards for measuring success. I want these measures to show that the 
dollars being spent are keeping children from starting to use drugs, 
reducing the number of hard-core drug users, and limiting the amount of 
drugs coming into the country.
  To ensure the law enforcement agencies can work in conjunction with 
the ONDCP to achieve these results, the subcommittee has increased the 
law enforcement funding levels to provide additional training and 
equipment, infrastructure investments in technologies on the Southwest 
border and, as the chairman stated, a P-3AEW aircraft for interdiction 
of illegal narcotics.
  Through the violent crime reduction trust fund, we have continued 
funding for important crime reduction programs, such as gang resistance 
education and training, and FinCen enforcement programs.
  In addition, we have provided funding above the request level to 
increase participation in the High Intensity Drug Trafficking Area, or 
the HIDTA Program.
  A third area I want to mention, Mr. President, is the General 
Services Administration. We have provided, through the GSA, for Federal 
buildings funds, for the site, design, or construction of five 
courthouses. Funding for these court facilities is consistent with the 
courthouse construction criteria we established last year. The 
application of these criterion allowed us to choose specific court 
projects, as opposed to applying the House approach of applying across-
the-board cuts to the entire construction program.
  As Senator Shelby indicated, we have also included funding for the 
five northern border stations, the construction of a Federal office 
building in Portland, OR, the site preparation for the Food and Drug 
Administration consolidation, the completion of a Veterans' Affairs 
office complex, and the environmental cleanup of the southeast Federal 
Center.
  I also point out that this bill fully funds the administration's 
request for the Executive Offices of the President, the Federal Labor 
Relations Authority, the Merit Systems Protection Board, and the Office 
of Personnel Management.
  Finally, funding increases are specified for the National Archives 
repairs and restoration account. These increases will provide much-
needed repairs of two Presidential libraries: The Truman and Roosevelt 
Libraries and the National Archives headquarters facility. The funding 
level also indicates that we continue to support the Archives 
electronic access project. The Archives has recently provided us with a 
work plan for completing this important project to bring their files 
online and to provide a full catalog system. We are looking forward to 
the Archives making significant strides toward accomplishing this 
project in the near future.
  However, Mr. President, I must raise an objection to the provision 
which provides funding of $500,000 to cover the attorneys' fees for 
those fired from the White House Travel Office. It is a genuine 
disagreement between the chairman and I--I believe the only one in the 
entire bill. This action, in my reasoned opinion, would set a bad 
precedent for Congress paying the attorney fees of an indicted 
individual. This is not a precedent I believe we should set.
  Mr. President, that summarizes, as I see it, the bill's funding 
levels. We have tried to accommodate the numerous Member requests, and 
while it is difficult to always accommodate these requests, we have 
tried to include all those that were possible given funding 
restrictions. I also acknowledge the fine work done by the staff on 
this bill. They are Chuck Parkinson, Diane Hill, Hallie Hastert, Paul 
Irving, and others. I thank them for their helping in permitting us to 
bring this bill before the Senate.
  I yield the floor.
  Mr. SHELBY. Mr. President, we are trying to clear, with both sides, a 
number of matters. We have worked out a number of committee amendments, 
and we have several that we are trying to clear with the other side of 
the aisle at the moment. I want to take a minute to thank Senator 
Kerrey for his leadership on the committee. We have had a number of 
hearings throughout the year. Some of them have been tough hearings. He 
has made a real contribution to the tax system changes that we envision 
in the future.

[[Page S10158]]

  We have set up a task force that he is involved in. As a matter of 
fact, he suggested this to me a year or so ago, as he was not 
satisfied--and he worked on this committee before I had --with the 
modernization program of the Internal Revenue Service and thought that, 
of all the agencies in Government, Internal Revenue Service should be 
on the cutting edge of technology and should not be behind in any way. 
Some of us are concerned that maybe the IRS is getting behind. Getting 
behind what? The marketplace.
  There has been a tremendous revolution in the software industry, and 
Senator Kerrey and I both have talked and met with various people that 
are dealing in financial electronic software of various kinds. The 
market, it seems to me, is farther ahead in various areas than the IRS. 
This is not a good sign for the future of the IRS or the future of 
Government, because most people in America always thought--and I came 
to believe it--that the IRS had the best of everything and was on the 
cutting edge. But I will submit to you that they are not. I believe the 
Senator from Nebraska believes that. He is also interested in--and so 
am I--the task force to study the IRS and our tax laws and everything 
that goes with it. I believe we are going to get some good results out 
of that, some great recommendations. He may want to take a minute to 
talk about that.
  Mr. KERREY. Mr. President, the chairman is quite right. Last year, 
during the conference deliberations--we had seen, throughout the last 
couple of years, a considerable accumulation of reports, specifically, 
the General Accounting Office evaluation of tax system modernization. 
While it has not all been a loss, there is no question that there has 
been significant disappointment and the evaluation of GAO is quite 
negative. I must point out that some of that difficulty is caused by 
us.
  Earlier today, we actually had the first meeting of the restructuring 
of the commission. Commissioner Richardson appeared before that 
commission, observing that the mission statement itself very often does 
not connect to many of the things that are identified as great 
successes. Very specifically, the mission statement of the IRS is to 
collect taxes in the most cost-effective way possible. One of the 
things that we often don't look at is what does it cost us to collect 
the taxes, and how can we do it in a more cost-effective way, not just 
measuring the money we spend but the money the taxpayers spend to 
comply with the laws. One of the examples is we have this alternative 
minimum tax. There are about 4 million taxpayers that are identified as 
possibly candidates for paying this AMT. What has happened is, of 4 
million taxpayers, 90 percent--3.6 million of that 4 million--after 
they have gone through all the work and hired the accountants to do the 
calculation of taxes, they discover they owe no taxes at all. The 
question is, what are the man and women hours and time on task?
  That is substantial to collect a relatively small amount of money. 
What we have to do, in my judgment, is not just look at the cost-
effectiveness of the IRS versus what they collect, but what kind of 
friction or cost is imposed out there for that taxpayer, either the 
households or the business, because they have substantial costs that 
are imposed. When I say ``sometimes we cause the problems,'' we passed 
a tax bill with 900 new changes that are required, and the President 
signed it and it goes into law. I asked the Commissioner this morning 
if she ever, in the 3\1/2\, or whatever years she has been in office, 
had a time when she has gone to the President and said, Mr. President, 
I urge you to veto the tax bill because this is going to make it 
difficult to accomplish the mix of keeping the IRS a cost-effective, 
low-cost operation, both in terms of the costs to the taxpayers and the 
costs to the people that are out there in the community. The answer to 
the question was, ``no,'' she never has. The day that starts to 
happen--the day the IRS Commissioner says to the President, you may 
want to do this for whatever the reason, but here is what it will cost 
the American taxpayers to fill out the forms and go through that, it 
seems to me that will be the day you are going to start to see the 
customer out there, the taxpayer, say they are finally understanding 
it.

  We, very often, say here that we have to collect money to accomplish 
some social or economic good. We don't really think about what that 
taxpayer out there is going to have to go through in order to comply 
with the forms, the regulations, and the rules, and all the other sort 
of things to put in place.
  But there is no question that we have a very, very serious problem in 
that we have to go from where we are now, which is we have expended $8 
billion or $9 billion, thus far, on TSM, perhaps a great deal more than 
that, over a bit longer period of time. It depends on when you track 
it. We are really not much closer to where we needed to go when we 
started the whole process.
  All of us understand that one of the most costly things that happen 
in tax collection is when a mistake is made--not by the taxpayer but by 
the IRS. When the IRS makes a mistake, that is an expensive thing to 
try to correct, whether it is giving somebody advice over the phone, or 
any mistake made in the entire system. Those mistakes are the most 
costly things of all to fix. So the more they can reduce the mistakes, 
the better off they are. The least costly environment of all, the least 
number of mistakes are the mistakes made in a paperless environment. 
Those transactions that are currently done, a limited number of 
transactions to be done without paper, have a very, very substantial 
difference in terms of mistakes versus the ones that continue to be 
done by paper, through all the processing centers.
  So I hope, I say to my friend from Alabama, that we are able, in 
restructuring the commission, to come to the Congress, and all the 
stakeholders involved, and we are able to make some recommendations so 
that 10, 15 years from now, at some point in the future, people will 
say that it was worth spending a million dollars on. You did actually 
make some recommendations. I point out, Mr. President, that one of the 
things that I think makes that more likely rather than less, is 
Congressman Portman and I are cochairs. He is from the House and he is 
also a Republican. My experience is that more often, some things you 
can't make bipartisan but we have a difficult subject. If you can make 
it bipartisan, you tend to make it more likely you are going to be 
successful. So I appreciate the Senator's support in the hearings.

  Mr. President, I can tell you that there is no better cross-examiner 
than Chairman Shelby when it comes to watching out for the taxpayer's 
money. There is no better cross-examiner than the Senator from Alabama 
when it comes to trying to make sure that the taxpayers are getting a 
good dollar's return on their investment, and I appreciate the 
Senator's support for this effort.
  Mr. SHELBY. Mr. President, I again acknowledge the hard work and the 
leadership that the Senator from Nebraska, Mr. Kerrey, has brought 
here. He is absolutely right. When we are dealing with something as 
complicated as the Internal Revenue Service modernization and taxes in 
general, it is going to take, I believe, as he does, a bipartisan 
effort to do this. If we can bring something out of this commission 
that we will listen to and do something about here that will modernize 
the IRS, that will help the taxpayers understand the system, will help 
the taxpayers keep more of their money without a lot of cumbersome 
involvement, we will be doing part of our job here today.
  Mr. President, I ask unanimous consent that the committee amendments 
to H.R. 3756 be considered and agreed to en bloc, provided that no 
points of order be waived thereon and that the measure, as amended, be 
considered as original text for the purpose of further amendment, with 
the exception of the following amendments: Page 2, line 18; page 16, 
line 16 through page 17, line 2; page 80, line 20 through page 81, line 
4; that portion of the amendment on page 129, line 20 through page 130, 
line 18.
  The PRESIDING OFFICER. Is there objection?
  Mr. KERREY. No objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The committee amendments were considered and agreed to en bloc with 
the above noted exceptions.
  The PRESIDING OFFICER. The Senator from North Carolina.

[[Page S10159]]

            Excepted Committee Amendment on page 2, line 18

  Mr. HELMS. Mr. President, let me inquire of the Parliamentarian and 
the Chair, all committee amendments have been approved except one, is 
that my understanding? Except four.
  The PRESIDING OFFICER. There are four committee amendments that have 
not been adopted.
  Mr. HELMS. Very well. Will the clerk just reference them.
  The PRESIDING OFFICER. The clerk will report the first excepted 
committee amendment.
  The legislative clerk read as follows:

       On page 2, line 18, strike the numeral and insert 
     $111,348,000.

  Mr. HELMS. That is subject to amendment, is that correct?
  The PRESIDING OFFICER. That is correct.


 Amendment No. 5208 to Excepted Committee Amendment on page 2, line 18

  Mr. HELMS. On behalf of the distinguished occupant of the chair, Mr. 
Thompson, I send an amendment to the desk and ask it be stated.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The bill clerk read as follows:

       The Senator from North Carolina [Mr. Helms], for Mr. 
     Thompson, for himself, Mr. Helms, Mr. Thurmond, and Mrs. 
     Hutchison, proposes an amendment numbered 5208 to the 
     committee amendment on page 2, line 18.

  The amendment is as follows:

       At the end of the committee amendment insert the following:
       No adjustment under section 5303 of title 5, U.S. Code, for 
     Members of Congress and members of the President's Cabinet 
     shall be considered to have taken effect in FY '97.

  Mr. HELMS. Mr. President, the pending amendment that the 
distinguished Senator from Tennessee [Mr. Thompson] and I have offered 
forbids any Member of Congress, House or Senate, from receiving a pay 
raise or cost of living adjustment in the fiscal year 1997 that begins 
in a few days on October 1. Here we are, both Houses of Congress, 
asking the American people to make the sacrifices necessary to get the 
Nation's fiscal house in order, and it seems to me that all of us 
should be willing to forego even the thought of a pay increase.
  Each day I make a formal report to the Senate specifying the 
staggering federal debt as of the close of business the previous day. 
Most of this enormous burden was run up by Congress in prior years. 
But, the point is that Congress alone is charged with the 
constitutional duty of authorizing and appropriating funds for Federal 
spending, and it's our responsibility to pay the debt down and live 
within our means. The activities of Congress, the timidity of Congress, 
the inclination to play politics with the public purse--all of this has 
brought us to a Federal debt that, as of close of business yesterday, 
stood at $5,214,144,675,542.25, or $19,625.30 for every man, woman and 
child in America on a per capita basis.
  Mr. President, while we are systematically piling on to the arrearage 
which our children and grandchildren must bear, the notion that 
Congress deserves a pay raise is absurd.
  Since I came to the Senate, interest on the money borrowed and spent 
by the Congress of the United States cost the American taxpayers over 
$3.5 trillion. Three trillion and 500 billion dollars, just to pay 
interest on excessive spending authorized and approved by the Congress. 
Just last year Congress spent over $235 billion on interest alone.
  It is true, Mr. President, that the 104th Congress has garnered an 
impressive list of accomplishments. For the first time since Neil 
Armstrong walked on the moon, this Congress has enacted a balanced 
budget--which was vetoed to the glee of the national media. It has 
reformed the dilapidated welfare system; the President signed the bill, 
but immediately gutted part of it by issuing a host of waivers. 
Congress reined in the out-of-control trial lawyers and passed the 
Partial Birth Abortion ban, but both pieces of legislation were 
vetoed.) And Congress eliminated 270 wasteful Federal programs and 
agencies and succeeded in cutting year-to-year discretionary spending 
by $53 billion.
  This Congress has done a lot, Mr. President, but we can't rest on our 
laurels. We're asking the American people to tighten their belts. And 
we should demonstrate our solidarity with them by rejecting the built-
in congressional pay raises which, as Senator Thompson said last year, 
``stick in the craw of the American people.'' It's the least we can do.
  It is crucial that while the American people are making sacrifices 
and taking steps toward independence from the Federal Government, the 
Congress of the United States share in these sacrifices.
  Americans need lower taxes, higher wages and better jobs. Only a 
growing economy can provide the society we want. Only a balanced 
budget--and proper tax policies--can provide an atmosphere in which the 
economy can approach the rate of growth of which it's capable. Until 
this is realized, Mr. President, Congress deserves no pay raise.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Abraham). The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. HELMS. 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. HELMS. Mr. President, I ask the managers of the bill, in order to 
save a little time: Senator Inhofe has an amendment that will take no 
time at all. It will not require a vote or anything like that. I wonder 
if it would be in order, in the judgment of the managers of the bill, 
for me to set aside the pending amendment for the purpose only of 
Senator Inhofe's being recognized for his brief amendment. Would that 
be satisfactory?
  Mr. SHELBY. I have no problem with that.
  Mr. HELMS. I make that as a unanimous consent request.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Oklahoma is recognized.
  Mr. INHOFE. Mr. President, it is not my intention to offer an 
amendment at this time, as I told the Senator from Oregon, but just to 
make a brief statement about the concern that I have with the bill in 
hopes that, when you come up with the management amendments, you will 
include the proposed amendment as a part of those. It should be 
noncontroversial. I cannot imagine anyone would be opposed to it.
  Back in the 100th Congress, which is the year I was first elected to 
the other body, they passed Public Law 100-440, in that they made the 
requirement that the General Services Administration be required to 
hire up to, and maintain an average of, 1,000 full-time Federal 
positions for the full-time Federal Protective Officers. These are the 
people who serve as security in Federal buildings. Both the House and 
Senate versions have language that would take that section out.

  When the Murrah Federal Office Building in Oklahoma was bombed, they, 
the GSA, had only provided security of one individual. It was from a 
company called Rent-A-Cop. That Rent-A-Cop individual, one individual, 
had to cover that building and several other buildings.
  While it can never be known if the tragedy could have been averted, 
it is the opinion of the police officers from whom the American 
Federation of Government Employees solicited comments that any trained 
FPO would have noted the parked rental vehicle which carried the bomb 
and immediately raised questions about its presence.
  It is also the opinion of the law enforcement community that the 
physical presence of FPO's at the Murrah Building would have served as 
a major deterrent to those who might have been contemplating committing 
that crime.
  The current ratio is something in the neighborhood of one officer for 
every 21 buildings. If they complied with this, the GSA, they should 
have reached a ratio of 1 per 8 by 1992. They did not do this. I think, 
if we repeal this section, it is sending the wrong message out, saying 
we want to be more lenient in terms of protection in Federal buildings.
  So I have an amendment that would merely delete that particular 
section that would repeal Public Law 100-440, section 10, and would 
allow the GSA to continue and encourage them to go ahead and comply 
with the law they should be complying with right now. That would be the 
intent. I only ask the two managers of the bill, when the

[[Page S10160]]

managers' amendments come up, that they give serious consideration to 
this.
  Mr. SHELBY. Will the Senator from Oklahoma yield?
  Mr. INHOFE. I will be happy to yield.
  Mr. SHELBY. I, as the manager of the bill, along with Senator 
Kerrey--we are going to try to work with you to make that part of the 
managers' amendment. We believe it will be. But if it is not, we will 
tell you and give you a chance to offer it on the floor.
  Mr. KERREY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. KERREY. It seems to me what the Senator is asking for is quite 
reasonable. We will work with him to try to get it done.
  Mr. INHOFE. I thank the Senator and thank the Senator from North 
Carolina for yielding to me. I yield the floor.
  Mr. HELMS. Mr. President, regular order. What is the pending 
business?
  The PRESIDING OFFICER. The pending business is the amendment by the 
Senator from North Carolina.
  Mr. THOMPSON. Mr. President, this amendment would deny the automatic 
cost-of-living adjustment [COLA] to Members of Congress.
  Last year, I sponsored this very same amendment with the Senator from 
New Mexico, Senator Domenici. I believe now, as I did then, that this 
amendment is an important part of the efforts we have made in this 
Congress to balance the budget by the year 2002.
  Mr. President, some might ask how passing an amendment requiring 
Members of Congress to forego a cost-of-living adjustment will achieve 
savings that will move us towards a balanced budget. The simple answer 
is that a pay freeze for Members of Congress will not produce 
significant budget savings. But, Mr. President, the savings that this 
amendment achieves is not the point. This amendment is important 
because of what it communicates to the American people. Let me take a 
minute to explain what I mean.
  During this 104th Congress, we have debated many fundamental issues 
facing this country. While Republicans and Democrats still disagree on 
many of these issues, there are certain principles around which a 
consensus is developing.
  Probably the most important of these principles is that we need to 
get our fiscal house in order to avoid national bankruptcy and to 
preserve the country that we have known for our children and 
grandchildren.
  It is true that our national debt and interest on that debt are 
strangling us. We cannot sustain deficits endlessly in the future at 
the rate we have. It will cause interest rates to soar and national 
savings, investment and growth to plummet. If we continue on the path 
we have followed in the past, we will be leaving a legacy of 
significantly lower living standards to future generations.
  Mr. President, I think we are in the beginning stages, finally, of 
facing up to these problems. Last year, this Congress sent the 
President the Balanced Budget Act, which will lead us to a balanced 
budget in the year 2002--for the first time in decades in this country. 
I regret that the President chose to veto this legislation. However, I 
do think that the Republicans in Congress have succeeded in convincing 
the President--however belatedly--that a balanced budget is both 
necessary and important.
  As a consequence, I believe that we have a great opportunity to work 
together to solve this problem. Although we may differ on the means by 
which we solve it, I think we can certainly agree on the end that we 
must all work toward.

  During this debate, I think that we in Congress have done a better 
job of communicating to the American people the level of sacrifice that 
is necessary to reach a balanced budget. People are beginning to 
realize that, if we are to solve this problem, we cannot have 
everything exactly as we have had it in years past. Sooner or later we 
are going to all have to make some sacrifices for the sake of our 
country. We will have to look at things like the rate of growth in non-
discretionary spending, the cost of some of the major military 
engagements abroad, and the whole issue of cost-of-living increases, 
among other things.
  Mr. President, the point of all of this is that everybody is going to 
have to pitch in, and the American people now know it. Nobody is going 
to get all of what they want. I feel there are very few Americans who 
are not willing to help, as long as they believe that they are being 
treated fairly, and that everyone is being asked to sacrifice.
  The amendment we offer today is based upon the simple proposition 
that while we are asking the American people to make these adjustments, 
we must ask the same of ourselves. We certainly should not be having 
automatic cost-of-living increases for this body during this particular 
period of time. Automatic pay increases, where we do not even have to 
vote on them, stick in the craw of the American people, and further 
diminish the already low regard they have for Members of Congress.
  Some people will say that freezing the pay of Members of Congress is 
a largely symbolic act. I agree. I have already stated that the turning 
back a COLA does not achieve much in budget savings. But, Mr. 
President, I believe that symbolism is important. We need to lead by 
example by showing the American people that we in Congress are willing 
to make a personal contribution to the effort of balancing the budget.
  Mr. President, I think we have already begun to demonstrate to the 
American people that this body is willing to do its part. We have 
addressed the problems of gifts and free trips for Members of Congress. 
We have applied the laws to ourselves that have, for so many years, 
been applied to the American people. We have tried to face up to the 
pension issues which will bring us more into line with other employees 
and other people in the private sector. So, turning down an automatic 
cost-of-living increase this year--as we did last year--is a part of 
that overall picture.
  In conclusion, Mr. President, I want to note that I did not decide to 
offer this amendment without giving thought to the impact that it would 
have on my colleagues in the Congress who have families with children 
and are faced with expenses for education and maintaining two separate 
residences. These individuals cannot continue to withstand indefinitely 
the erosion of purchasing power that this pay freeze represents. 
However, at this crucial time in our history, I believe that a pay 
increase is not appropriate. Since we have made significant progress on 
budget issues in these past 2 years, it is my hope that we can make 
even more progress and avoid the need for pay freezes in the future.
  I urge my colleagues to support the Thompson-Helms amendment to 
continue the work we have started in this historic Congress.
  Mr. HELMS. I do not know if there is further debate, Mr. President. 
That is up to the managers.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SHELBY. Mr. President, we have no objection to the amendment, the 
Thompson amendment.
  Mr. KERREY. Mr. President, if the Senator from Alabama will just 
withhold and give me a couple of minutes here?
  Mr. SHELBY. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. KERREY. 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. KERREY. Mr. President, I ask unanimous consent Senator Wellstone, 
from Minnesota, be added as a cosponsor to this amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KERREY. I am ready to proceed.
  Mr. SHELBY. We have no objection to the amendment.
  The PRESIDING OFFICER. If there be no further debate, the question is 
on agreeing to the amendment.
  The amendment (No. 5208) was agreed to.
  Mr. SHELBY. Mr. President, I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. WYDEN. Mr. President, I have an amendment involving managed care; 
5206 is the number of the amendment.
  The PRESIDING OFFICER. Does the Senator wish to amend the first 
committee amendment?

[[Page S10161]]

  Mr. KERREY. If the Senator from Oregon would allow me to dispose of 
this, I have to dispose, I believe, of the underlying committee 
amendment that we just attached an amendment to.
  Mr. President, I urge adoption of the underlying committee amendment.
  The PRESIDING OFFICER. If there be no further debate, the question is 
on agreeing to the underlying committee amendment, as amended.
  The excepted committee amendment on page 2, line 18, as amended, was 
agreed to.
  Mr. SHELBY. Mr. President, I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


 Amendment No. 5206 To Excepted Committee Amendment Beginning On Page 
                  16, line 16, Through Page 17, Line 2

   (Purpose: To prohibit the restriction of certain types of medical 
      communications between a health care provider and a patient)

  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, I have an amendment No. 5206, involving 
managed health care.
  The PRESIDING OFFICER. Is the Senator attempting to amend the next 
committee amendment?
  Mr. WYDEN. Yes.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       Excepted committee amendment beginning on page 16, line 16, 
     through page 17, line 2.

  Mr. WYDEN. Mr. President, I rise to offer an amendment which will add 
much-needed new protections for the sacred, confidential relationship 
between physicians and their patients. In doing so, I want to single 
out, on a bipartisan basis, the excellent work done by a number of 
Members of Congress on this issue.
  In particular, I would like to single out Dr. Greg Ganske, a Member 
of the House, a physician, a Republican. He has done excellent work 
with Congressman Markey in the House, and also to thank Senator 
Kennedy, who joins me in this effort.
  This matter of protecting the rights of patients in health 
maintenance organizations has been thoroughly bipartisan through this 
Congress, and I want to make sure that this body understands that there 
is a very strong track record of bipartisan support for this issue.
  The PRESIDING OFFICER. If the Senator will suspend so we might have 
the amendment read. The clerk will report.
  The bill clerk read as follows:

       The Senator from Oregon [Mr. Wyden], for himself and Mr. 
     Kennedy, proposes an amendment numbered 5206 to the committee 
     amendment on page 16, line 16, through page 17, line 2.

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

       At the end of the Committee amendment, insert the following 
     new title:

             TITLE   --PROTECTION OF PATIENT COMMUNICATIONS

     SEC.   01. SHORT TITLE; FINDINGS.

       (a) Short Title.--This title may be cited as the ``Patient 
     Communications Protection Act of 1996''.
       (b) Findings.--Congress finds the following:
       (1) Patients need access to all relevant information to 
     make appropriate decisions, with their physicians, about 
     their health care.
       (2) Restrictions on the ability of physicians to provide 
     full disclosure of all relevant information to patients 
     making health care decisions violate the principles of 
     informed consent and practitioner ethical standards.
       (3) The offering and operation of health plans affect 
     commerce among the States. Health care providers located in 
     one State serve patients who reside in other States as well 
     as that State. In order to provide for uniform treatment of 
     health care providers and patients among the States, it is 
     necessary to cover health plans operating in one State as 
     well as those operating among the several States.

     SEC.   02. PROHIBITION OF INTERFERENCE WITH CERTAIN MEDICAL 
                   COMMUNICATIONS.

       (a) In General.--
       (1) Prohibition of certain provisions.--Subject to 
     paragraph (2), an entity offering a health plan (as defined 
     in subsection (d)(2) may not include any provision that 
     prohibits or restricts any medical communication (as defined 
     in subsection (b)) as part of--
       (A) a written contract or agreement with a health care 
     provider.
       (B) a written statement to such a provider or
       (C) an oral communication to such a provider.
       ``(2) Construction.--Nothing in this section shall be 
     construed as preventing an entity from exercising mutually 
     agreed upon terms and conditions not inconsistent with 
     paragraph (1), including terms or conditions requiring a 
     physician to participate in, and cooperate with, all 
     programs, policies, and procedures developed or operated by 
     the person, corporation, partnership association, or other 
     organization to ensure, review, or improve the quality of 
     health care.
       (3) Nullification.--Any provision described in paragraph 
     (1) is null and void.
       (b) Medical Communication Defined.--In this section, the 
     term ``medical communication'' means a communication made by 
     a health care provider with a patient of the provider (or the 
     guardian or legal representative of such patient) with 
     respect to the patient's physical or mental condition or 
     treatment options.
       (c) Enforcement Through Imposition of Civil Money 
     Penalty.--
       (1) In general.--Any entity that violates paragraph (1) of 
     subsection (a) shall be subject to a civil money penalty of 
     up to $25,000 for each violation. No such penalty shall be 
     imposed solely on the basis of an oral communication unless 
     the communication is part of a pattern or practice of such 
     communications and the violation is demonstrated by a 
     preponderance of the evidence.
       (2) Procedures.--The provisions of subsection (c) through 
     (l) of section 1128A of the Social Security Act (42 U.S.C. 
     1320a-7a) shall apply to civil money penalties under 
     paragraph (1) in the same manner as they apply to a penalty 
     or proceeding under section 1128A(a) of such Act.
       (d) Definitions.--For purposes of this section:
       (1) Health care provider.--The term ``health care 
     provider'' means anyone licensed or certified under State law 
     to provide health care services.
       (2) Health plan.--The term ``health plan'' means any public 
     or private health plan or arrangement (including an employee 
     welfare benefit plan) which provides, or pays the cost of, 
     health benefits, and includes an organization of health care 
     providers that furnishes health services under a contract or 
     agreement with such a plan.
       (3) Coverage of third party administrators.--In the case of 
     a health plan that is an employee welfare benefit plan (as 
     defined in section 3(1) of the Employee Retirement Income 
     Security Act of 1974), any third party administrator or other 
     person with responsibility for contracts with health care 
     providers under the plan shall be considered, for purposes of 
     this section, to be an entity offering such health plan.
       (e) Non-Preemption of State Law.--A State may establish or 
     enforce requirements with respect to the subject matter of 
     this section, but only if such requirements are consistent 
     with this title and are more protective of medical 
     communications than the requirements established under this 
     section.
       (g) Effective Date.--Subsection (a) shall take effect 180 
     days after the date of the enactment of this Act and shall 
     apply to medical communications made on or after such date.

  The PRESIDING OFFICER. The Senator can continue.
  Mr. WYDEN. Mr. President, again, this amendment involves some very 
important rights with respect to consumer protection as it relates to 
health care practitioners, health care plans and the fact that it 
appears that some physicians are actually gagged in terms of what they 
can tell their patients about their illnesses and their treatment.
  These gag provisions often are included in contracts for purely 
financial reasons. They limit the kinds of therapies that physicians or 
other licensed health care practitioners may recommend. It can restrict 
a practitioner from recommending a patient consult a physician outside 
a plan or go to a facility outside the plan's network.
  In addition, these kinds of approaches may even prohibit a 
practitioner from discussing financial incentives or penalties 
physicians may be subject to based on treatments that are recommended 
or ignored, in the case of an individual physician.
  Mr. President, the preamble of the Hippocratic oath tells physicians, 
``First, do no harm.'' The message of these gag restrictions, 
unfortunately, is, ``First, support the bottom line.'' That is not good 
health care, and it is certainly not good managed care.
  Several months ago, the Washington Post cited a startling example 
involving Mid-Atlantic Medical Services health plans, a large 
Washington metro area provider. This plan wrote a letter to network 
practitioners informing them that:

       Effective immediately, all referrals from (the plan) to 
     specialists may be for only one visit.

  And in bold type the letter stated:

       We are terminating the contracts of physicians and 
     affiliates who fail to meet the performance patterns for 
     their specialty.


[[Page S10162]]


  Obviously, this is a bad deal for patients on two counts. First, the 
patients may not be getting the kind of health care that is needed.
  Second, the plan may restrict the physician from informing the 
patient about referral restrictions so the patient doesn't even know 
whether they are being medically shortchanged via the plan's policy.
  In my home State of Oregon, where we do have a great number of 
managed health care services and plans, our State law specifically 
prohibits these kinds of provisions. Many managed care plans in our 
State are offering good quality services. They are able to do it in a 
way that allows them to be both patient-oriented and consumer-friendly 
and still be sensitive to their financial needs.
  Unfortunately, even in our State, a State where there are good 
managed care plans, problems can develop. For example, an orthopedic 
surgeon in Portland recently was in a situation where their managed 
care plan demanded that this particular physician diagnose problems in 
patients apart from the ones for which they were referred. He was, in 
effect, in a situation where he was told to keep his mouth shut and 
instead re-refer those particular patients back to their primary care 
physician.
  This physician wrote to us:

       This is extremely disappointing to patients, as you might 
     imagine. This requires more visits on their part to their 
     primary care physician and then back to me, which is 
     extremely inefficient.

  Another physician, a family practice physician in rural Enterprise, 
OR, wrote that this antigag legislation is needed because ``when a 
physician recommends medical treatment for a patient and a plan denies 
coverage for that treatment, patients and physicians need an effective 
mechanism to challenge the plan.''

  I think it is understood that the free flow of information between 
doctors and patients is the very foundation of good health care. State 
legal protections on this matter vary. Some States have taken steps to 
limit these gag rules, but one of the reasons that I come to the floor 
today and why this legislation has received strong bipartisan support 
is that I think it is time for a national standard to deal with a 
national problem.
  This amendment is rifle-shot legislation prohibiting only oral gag 
provisions in contracts or in a pattern of oral communications between 
plans and practitioners that limit discussion of a patient's physical 
or mental condition or treatment options. Health plans would still be 
able to protect and enforce provisions involving all other aspects of 
their relationship with their practitioners, including the 
confidentiality of proprietary business information.
  In developing this amendment, Mr. President, I and others have talked 
with many who offer managed care health services, as well as 
practitioners and consumer advocates. Our enforcement provision 
specifies penalties for violations by plans of up to $25,000 per event. 
The amendment also specifies that State laws which meet or exceed the 
Federal standard set herein will not be preempted by Federal law.
  I would like to point out to my colleagues that this amendment has 
been endorsed by the Association of American Physicians and Surgeons, 
the American Association of Retired Persons, the Center for Patient 
Advocacy, Citizen Action, Consumers Union, the American College of 
Emergency Physicians and a number of other organizations. I ask 
unanimous consent to have printed in the Record letters from these 
groups.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                                   August 1, 1996.
     Hon. Ron Wyden,
     259 Russell Senate Office Building,
     Washington, DC.
       Dear Senator Wyden: We are writing to express our strong 
     support for ``The Patient Communications Protection Act.''
       As you know, it has become common for insurers to 
     incorporate clauses or policies into providers' contracts 
     that restrict their ability to communicate with their 
     patients. Such ``gag clauses'' seriously threaten the quality 
     of care for American patients. Not only do gag clauses deny 
     patients the fundamental right to make a fully informed 
     decision about the care they receive, but also they prevent 
     health care providers from delivering the highest quality of 
     care.
       Your legislation would prohibit the use of gag clauses. By 
     opening the lines of communication between patients and their 
     physicians, the bill helps to ensure that the practice of 
     medicine occurs in the doctors office not in the corporate 
     boardroom.
       We, at the Center for Patient Advocacy, applaud your 
     efforts in behalf of American patients. We look forward to 
     working with you to secure passage of the Patient 
     Communications Protection Act.
           Sincerely,
     Neil Kahanovitz, M.D.,
       President and Founder.
     Terre McFillen Hall,
       Executive Director.
                                                                    ____



                                   Oregon Medical Association,

                                      Portland, OR, July 22, 1996.
     Hon. Ron Wyden,
     U.S. Senate, Russell Senate Office Building, Washington, D.C.
       Dear Senator Wyden: Thank you for asking for input from the 
     Oregon Medical Association prior to your introduction of the 
     Patient Communication Act of 1996. The ``gag rules'' decreed 
     by some of the managed care organizations would, indeed, make 
     a reasonable person gag. We appreciate your interest in 
     halting such activities and your intent to prohibit by 
     federal law such draconian practices. I know how much you 
     value and how well you understand the necessity of open 
     communication between patients and their physicians. Such 
     rules, and the knowledge that such rules exist, undermine the 
     trust that patients absolutely must have for their physicians 
     if the relationship is to be of value.
       As you know, we here in the O.M.A. introduced and 
     orchestrated the 1995 state legislature's passage of the 
     Oregon Patient Protection Act which prohibited ``gag 
     clauses'' in managed care contracts here in Oregon, as you 
     are now intending to do at the federal level. As usual, your 
     state is out in front showing the way in health care.
       We appreciate your sharing and exchanging ideas and 
     apprising us of pending legislation and we value such 
     dialogue. Please keep us informed of the progress of this 
     bill, on which we certainly are in agreement.
           Sincerely yours,
                                   Frank J. Baumeister, Jr., M.D.,
     President.
                                                                    ____



           National Committee to Preserve Social Security and 
                                                     Medicare,

                                  Washington, DC, August 30, 1996.
     Hon. Ron Wyden,
     Russell Senate Office Building, U.S. House of 
         Representatives, Washington, DC.
       Dear Senator Wyden: The National Committee to Preserve 
     Social Security and Medicare, on behalf of its 5.5 million 
     members and supporters, endorses S. 2005, the ``Patient 
     Communications Protection Act of 1996.'' By addressing a 
     concern health care providers and patients may have with 
     managed care, this bill may encourage Medicare beneficiaries 
     to enroll in managed care plans.
       This bill will encourage full and open communication 
     between physicians and their patients, which are vital to the 
     prevention of and recovery from illness. Frank discussions 
     cannot occur if providers are prohibited by health plans from 
     disclosing all available treatment options. In addition, the 
     use by some managed care companies of financial incentives to 
     limit costly care also limits communication between the 
     provider and the patient.
       Managed care enrollees have a right to expect that they 
     will receive appropriate care for their medical condition, 
     without regard to the cost to the managed care company. The 
     best way to ensure that appropriate care is given to foster 
     full communication between provider and patient.
       We applaud your effort to advance the ``Patient 
     Communications Protection Act'' and look forward to working 
     with you toward final enactment of this important bill.
           Sincerely,
                                                Martha A. McSteen,
     President.
                                                                    ____

                                           Association of American


                                Physicians and Surgeons, Inc.,

                                        Tucson, AZ, July 29, 1996.
     Hon. Ron Wyden,
     Russell Senate Building,
     Washington, DC.
       Dear Senator Wyden: The Association of American Physicians 
     and Surgeons supports your efforts to protect the sanctity of 
     the patient-physician relationship with the ``Patients Right 
     to Know Act of 1996.''
       Our association strongly supports the liberty of contract 
     and freedom of association. However, such liberty has bounds. 
     Contracts of adhesion are immoral, unjust and should be 
     unlawful. Patients are being exploited by powerful 
     organizations.
       Patients should be able to rely upon their physicians' 
     ethics. However, today certain organizations are gaining the 
     economic power to exclude and financially destroy 
     conscientious physicians who place their obligations to the 
     patient ahead of the interests of the ``plan.'' Restrictions 
     on communication with our patients not only undermine quality 
     of care, but are a blatant violation of the Hippocratic Oath. 
     Prohibition of ``gag rules'' is a crucial step toward 
     protecting patients.
       Contracts which restrict physicians' freedom to communicate 
     their best judgment are only one of the most egregious 
     violations of patients' rights.
       AAPS believes Congress should consider legislation which 
     would protect patients'

[[Page S10163]]

     right to choice, confidentiality, the ability to privately 
     contract, and to receive full advance disclosure of the terms 
     of their insurance/health care plan in plain language. The 
     AAPS ``Patient's Bill of Rights'' which will be introduced as 
     a Congressional resolution by Rep. Linda Smith, addresses 
     those issues. We hope it will serve as a model and catalyst 
     for future legislation.
       Information is the best prescription. Prohibition of ``gag 
     clauses'' is the first step in that direction, and we hope it 
     sets the stage for additional patient protections to come 
     from the 104th Congress.
           Sincerely,
                                             Jane M. Orient, M.D.,
     Executive Director.
                                                                    ____



                              American Counseling Association,

                                  Alexandria, VA, August 20, 1996.
     Hon. Ron Wyden,
     U.S. Senate, Russell Senate Building, Washington, DC.
       Dear Senator Wyden: I am writing on behalf of the American 
     Counseling Association (ACA), the nation's largest nonprofit 
     organization representing licensed and certified professional 
     counselors, to express our support for your legislation S. 
     2005, the Patient Communications Protection Act of 1996. As 
     behavioral healthcare providers, professional counselors 
     would be greatly helped by your legislation. However, we 
     could appreciate your consideration of a minor change in the 
     bill's definition of a ``health care provider'' from ``anyone 
     licensed under State law to provide health care services . . 
     .'' to ``anyone licensed or certified under State law to 
     provide health care services . . .''
       Currently, 33 states--including the State of Oregon--and 
     the District of Columbia license professional counselors to 
     provide behavioral healthcare services to their residents. In 
     eight other states--including Arizona, Kentucky, Maryland, 
     New Hampshire, New Mexico, Rhode Island, Washington, and 
     Wisconsin--professional counselors are certified, and thus 
     would not be considered ``health care providers'' under S. 
     2005. Attached for your information is a survey comparing 
     state policies regarding licensure and certification.
       We have discussed this issue with Steve Jenning of your 
     staff, who states he saw no reason this change couldn't be 
     included in the legislation as it moves forward. Should you 
     be agreeable to this proposed change, we would be happy to 
     provide you with any assistance or further information you 
     may need. Please use Scott Barstow of our Office of 
     Government Relations as our contact on this issue, at (703) 
     823-9800 x234.
       Thank you for your time and consideration. We look forward 
     to working with you on behavioral healthcare issues and other 
     areas of mutual concern.
           Sincerely,
                                                    Gail Robinson,
     President.
                                                                    ____



                            American Chiropractic Association,

                                     Arlington, VA, July 30, 1996.
     Hon. Ron Wyden,
     Russell Senate Office Building, U.S. Senate, Washington, DC.
       Dear Senator Wyden: Yesterday your office contacted the ACA 
     seeking endorsement for a bill you are drafting to prohibit 
     health insurance plans from restricting or limiting 
     communication between health providers and patients about 
     treatment options and procedures. This practice is most often 
     employed by managed care plans through what are called ``gag 
     rules.'' The ACA has endorsed legislation in the House, H.R. 
     2976, that would prohibit these gag rules, and we commend you 
     for your efforts to eliminate this unfair practice.
       However, in the materials your staff provided us 
     (attached), it appeared that your proposal would limit the 
     effect of the bill to only those communications between 
     medical doctors and health plan participants. Thus, health 
     plans technically would be permitted to continue to employ 
     ``gag rules'' on communications between non-M.D. health 
     providers and their patients enrolled in managed care plans.
       Such language concerns the ACA, since as you are aware, 
     doctors of chiropractic are not M.D.s, but rather are fully 
     licensed health care providers so recognized in every state. 
     It is our belief that any legislative proposal to prohibit 
     the establishment of ``gag rules'' in managed care plans 
     should apply to all providers licensed or otherwise 
     recognized by a state authority. Since hundreds of millions 
     of consumers utilize non-M.D. health professionals every 
     year, we believe your proposal needs to be broadened.
       Therefore, before endorsing your bill, ACA would strongly 
     urge you to expand its definition of health provider to mean 
     any health professional licensed, certified or registered in 
     a state to provide health care services. This would extend 
     the sensible protections your legislation offers to those 
     patients who utilize the services of health professionals who 
     are not M.D.s.
       ACA appreciates and acknowledges your past efforts on 
     behalf of the chiropractic profession and the tens of 
     millions of patients who visit doctors of chiropractic every 
     year. We hope that you will see fit to make the modifications 
     that we have respectfully submitted in this letter.
           Sincerely,
                                                 Garrett F. Cuneo,
                                         Executive Vice President.

  Mr. WYDEN. Mr. President, let me also, in closing, quote briefly from 
a few of these endorsements.
  The Association of American Physicians writes:

       Restrictions on communication with our patients not only 
     undermine quality of care, but [constitutes] a blatant 
     violation of the Hippocratic oath. Prohibition of ``gag 
     rules'' is a crucial step toward protecting patients.

  The Center for Patient Advocacy writes:

       It has become common for insurers to incorporate clauses or 
     policies into providers' contracts that restrict their 
     ability to communicate with their patients. Such gag clauses 
     seriously threaten the quality of care for American patients.

  Mr. President, let me conclude by saying that my part of the country 
was involved in the pioneering work in the managed care area. I have 
seen in my community--we have perhaps the highest concentration of 
managed Medicare in the country, with almost 50 percent of the older 
people in managed care--that it is possible to offer good quality 
managed care services.
  What has concerned me is that there has been a pattern documented of 
managed care plans cutting corners and, unfortunately, imposing these 
gag clauses which get in the way of the doctor-patient relationship and 
the patient having the kind of information that a patient needs in 
order to make their own decisions about their health care.
  I don't think that is what the health care future of our country is 
all about. As I talk to patients, and I have sought to work in this 
area since my days with the elderly before being elected to Congress, I 
find that patients today hunger for information. I suspect in the years 
ahead, you are going to have medical patients in our country at their 
computer looking at the Internet to get information about medical 
services, and it seems to contradict the future of American health care 
to have these gag rules which would cut off essential information in 
managed care plans between providers and plans and their patients.
  Mr. President, I hope that my colleagues will support this 
legislation. It has received bipartisan support on both sides of the 
Hill. I hope this will receive a unanimous vote here in the Senate 
today.
  Mr. KENNEDY. Mr. President, one of the most dramatic changes in the 
American health care system in recent years has been the growth of 
managed care plans such as health maintenance organizations, preferred 
provider organizations, point of service plans, and other types of 
network plans. Today, more than half of all Americans with private 
insurance are enrolled in such plans, and 70 percent of covered 
employees in businesses with more than 10 employees are enrolled in 
managed care. Between 1990 and 1995 alone, the proportion of Blue Cross 
and Blue Shield enrollees participating in managed care plans 
skyrocketed from just one in five to almost half. Even conventional 
fee-for-service plans have increasingly adopted features of managed 
care, such as ongoing medical review and case management.
  In many ways, this is a positive development. Managed care offers the 
opportunity to extend the best medical practice to all medical 
practice. It emphasizes helping people to stay healthy, rather than 
simply caring for them when they become sick. It helps provide more 
coordinated and more effective care for people with multiple medical 
needs. It offers a needed antidote to the incentives in fee-for-service 
medicine to provide unnecessary care--incentives that have contributed 
a great deal to the high cost of care in recent years.
  In fact, in 1973, Congress enacted the first Federal legislation to 
encourage HMO's, in recognition of these potential benefits for 
improving the quality of care.
  At its best, managed care fulfills these goals. Numerous studies have 
found that managed care compares favorably to fee-for-service medicine 
on a variety of quality measures, including use of preventive care, 
early diagnosis of some conditions, and patient satisfaction. Many 
HMO's--including a number based in Massachusetts--have made vigorous 
efforts to improve the quality of care, gather and use systematic data 
to improve clinical decision-making, and assure an appropriate mix of 
primary and specialty care.
  But the same financial incentives that can lead HMO's and other 
managed care providers to practice more

[[Page S10164]]

cost-effective medicine also can lead to under-treatment or 
inappropriate restrictions on specialty care, expensive treatments, and 
new treatments. As Dr. Raymond Scalettar, speaking on behalf of the 
Joint Commission on Accreditation of Health Care Organizations, 
recently testified,

       The relative comfort with which the fee-for-service sector 
     has ordered and provided health care services has been 
     replaced with strict priorities for limiting the volume of 
     services, especially expensive specialty services, whenever 
     possible . . . [T]hese realities are legitimate causes for 
     concern, because no one can predict the precise point at 
     which overall cost-cutting and quality care intersect. The 
     American public wants to be assured that managed care is a 
     good value, and that they will receive the quality of care 
     they expect regardless of age, type of disorder, existence of 
     a chronic condition or other potential basis for 
     discrimination.

  In recent months a spate of critical articles in the press has 
suggested that too many managed care plans place their bottom line 
ahead of their patients' well-being--and are pressuring physicians in 
their networks to do the same. These abuses include failure to inform 
patients of particular treatment options; excessive barriers to reduce 
referrals to specialists for evaluation and treatment; unwillingness to 
order appropriate diagnostic tests; and reluctance to pay for 
potentially life-saving treatment. In some cases, these failures have 
had tragic consequences.
  For example, David and Joyce Ching spent 12 weeks trying 
unsuccessfully to obtain a referral to a specialist from their primary 
care physician or gatekeeper in the MetLife HMO Plan. Not until David 
refused to leave the office of the gatekeeper physician was his wife 
referred to a specialist. Within 24 hours of her visit to a specialist, 
Joyce was diagnosed with cancer. She died 15 months later.
  Alan and Christy DeMeurers had a similarly frustrating experience 
with their HMO. An HMO-provided oncologist recommended--in violation of 
the HMO rules--that Christy obtain a bone marrow transplant and made 
the necessary referral. The DeMeurers spent months trying to get this 
treatment. Not only did the HMO seek to deny the treatment, it 
attempted to deny the DeMeurers information about the treatment itself. 
By going outside the HMO plan, the DeMeurers were finally able to get 
answers to their questions about the treatment, and Christy was finally 
able to get the treatment recommended by her original oncologist.
  In the long run, the most effective means of assuring quality in 
managed care is for the industry itself to make sure that quality is 
always a top priority. I am encouraged by the industry's recent 
development of a ``philosophy of care'' that sets out ethical 
principles for its members, by the growing trend toward accreditation, 
and by the increasingly widespread use of standardized quality 
assessment measures. But I also believe that basic Federal regulations 
to assure that every plan meets at least minimum standards is 
necessary.
  With this amendment, the Senate has a chance to go firmly on record 
against a truly flagrant practice--the use of ``gag rules'' to keep 
physicians from informing patients of all their treatment options and 
making their best professional recommendations. Gag rules take a number 
of forms. They include:
  Forbidding a physician to discuss treatment options not covered by 
the insurance plan or prior to consultation with officers of the plan;
  Forbidding the referral of patients to specialists or facilities not 
participating in the plan.
  So-called ``non-disparagement clauses'' in contracts, which are 
designed to keep network physicians from urging patients to switch to 
another plan, but which are also used to threaten physicians who 
recommend therapies the plan refuses to cover; rules forbidding 
physicians to inform patients of financial incentives or utilization 
management rules that could lead to denial of appropriate treatment; 
denying information to patients that a physician has been de-selected 
from a plan.
  The amendment we are offering today targets the most abusive type of 
gag rule: those that forbid physicians to discuss all treatment options 
with the patient and make the best possible professional 
recommendation, even if that recommendation is for a noncovered service 
or could be construed to disparage the plan for not covering it. Our 
amendment forbids plans from ``prohibiting or restricting any medical 
communication'' with a patient ``with respect to the patient's physical 
or mental condition or treatment options.''
  This is a basic rule which everyone endorses in theory, but which has 
been violated in practice. The standards of the Joint Commission on 
Accreditation of Health Care Organizations require that ``Physicians 
cannot be restricted from sharing treatment options with their 
patients, whether or not the options are covered by the plan.''
  As Dr. John Ludden of the Harvard Community Health Plan, testifying 
for the American Association of Health Plans has said, The AAHP firmly 
believes that there should be open communications between health 
professionals and their patients about health status, medical 
conditions, and treatment options.''
  Legislation similar to this amendment recently passed the House 
Commerce Committee on a unanimous bi-partisan vote. President Clinton 
has strongly endorsed the proposal. The congressional session is 
drawing to close. Today, the Senate has the opportunity to act to 
protect patients across the country from these abusive gag rules. I 
urge the Senate to approve this amendment.
  Mr. KERREY. Mr. President, I looked at this amendment, as has the 
chairman. It is similar to an amendment offered by the Senator from 
North Carolina. We are having some review done on it. It is likely that 
we might be willing to accept the amendment. If the Senator would be 
willing to wait for a bit until we can get that language reviewed to 
make sure there are no problems with it, it is likely we will be able 
to accept it, as we did the Senator from North Carolina's amendment.
  Mr. SHELBY. Mr. President, we have not had a chance to really study 
the Wyden amendment yet. We have just had a quick opportunity to review 
the Senator's amendment. We need to look at it more closely, and we 
have some other people doing it. There are some other committees this 
could have tremendous impact on. We do not know what CBO will say about 
this, if anything. It might need to be scored, what the cost is, if 
any. We just started into the bill. We have a little time, I believe. I 
was wondering if the Senator from Oregon would set it aside and let us 
look at it.
  Mr. WYDEN. Let me first say to my friend, this is not an issue 
involving the Congressional Budget Office.
  Mr. SHELBY. Sure. That is good.
  Mr. WYDEN. This is simply a matter of patients and managed care 
organizations not being subjected to these gag rules which keep them 
from having information. But I think that the request that the Senator 
from Alabama and the Senator from Nebraska makes is a reasonable one. I 
saw the thrashing we were going through at the beginning in the effort 
to work out a number of these amendments on a bipartisan basis. So I am 
happy to hold off a bit in terms of a vote to work further with the 
Senator from Nebraska and the Senator from Alabama.
  Let me say, also, that I have noted that what the Senator from North 
Carolina has indicated he was interested in as well is quite similar to 
what I have sought to do. If anything, it just corroborates the 
proposition that we are discussing here today that there is bipartisan 
interest on both sides of Capitol Hill in this matter with the growth 
of managed care in our country.
  This is an issue that millions of consumers care about that I think, 
for those of us who believe in managed care, has great potential. It is 
absolutely critical at this time to lock in these consumer protections 
and restrict these gag rules. From my previous experience in working 
with the Senator from Alabama, I know that he will pursue this in good 
faith. I ask that we have the vote a bit later and have an opportunity 
to consult further with the Senators from Nebraska and Alabama. I will 
be happy to yield.
  Mr. SHELBY. If the Senator from Oregon will just yield briefly, this 
would give us a chance for both my staff and the staff of the Senator 
from Nebraska to look at this amendment and see what the significance 
of it is. We will be glad to get back with the Senator. Is that OK?

[[Page S10165]]

  Mr. WYDEN. Yes.
  Mr. KERREY. If I could comment on the substance as well. I think both 
the Senator from Oregon and the Senator from North Carolina identified 
a very important problem in the current health care system. He is quite 
right. It is one thing to say to a patient, I am not going to pay for a 
procedure; it is quite another to say you cannot talk amongst one 
another, or I am going to be prohibited from telling you about a 
procedure that you may say you want.
  We are moving into an environment, not just on the private-sector 
side, but, also, in many of the Government programs in Medicare. Many 
of the States are using managed care with Medicaid as well. I think the 
Senator from Oregon has identified a very, very important consumer 
problem.
  It is far better for us to give the consumer more information than 
they need, far better for us to make certain that the consumer, the 
patient, is well-informed of what the choices are, as opposed to on the 
basis of being concerned they might ask for something that I am going 
to say no to if I am running the managed care program. It is far better 
to give them the information, it seems to me, than to deny it to them.
  So my hope is we will be able to clear both this and the amendment of 
the Senator from North Carolina, subject to no serious problems being 
raised.
  Mr. WYDEN. If the Senator from Nebraska will allow me to reclaim my 
time, let me just say I think that both of you have indicated your 
desire to work on this. I very much appreciate your comments.
  I say to Senator Kerrey, I know of your interest in this health care 
issue and the fact that it has been longstanding. Let us say that for 
purposes of working on this in a bipartisan way, I will not request 
that the vote be taken right now and look forward to voting a little 
bit later today on this when the staffs have had a chance to work with 
it further.
  Mr. KERREY. Right.
  Mr. SHELBY. Mr. President, I ask unanimous consent that the pending 
committee amendments be temporarily laid aside.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. SHELBY. Mr. President, I have a number of amendments I will offer 
that are either technical in nature or necessary to change the bill 
because of events which have occurred since the bill was reported or 
are of a noncontroversial nature. All of these amendments, I 
understand, have been cleared with Senator Kerrey's staff.
  Mr. KERREY. They have been cleared. We have no problem with the 
amendments.


                           Amendment No. 5209

              (Purpose: Technical correction to H.R. 3756)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5209.

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

       On page 131, line 13, strike ``and''.
       On page 131, line 18, strike ``.'', and insert ``; and''.

  Mr. SHELBY. Mr. President, this is a technical amendment which 
corrects an initial printing error. It has been cleared on both sides. 
Mr. President, I urge the adoption of the amendment.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5209) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5210

    (Purpose: To strike language to conform to other bill language)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5210.

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

       On page 42, strike all from line 9 through line 15.

  Mr. SHELBY. Mr. President, this, again, is a technical and conforming 
amendment which is necessary to conform with the committee action, 
striking section 116. It has been cleared on both sides of the aisle.
  Mr. KERREY. Mr. President, I have no objection to this amendment.
  Mr. SHELBY. I urge its adoption.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5210) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5211

              (Purpose: Technical correction to H.R. 3756)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5211.

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

       On page 4, line 4, line type ``$29,319,000''.

  Mr. SHELBY. Mr. President, this, again, is a technical amendment. In 
printing the bill, the GPO failed to line type the figure in the House-
passed bill. This amendment does this. It has been cleared on both 
sides of the aisle.
  Mr. KERREY. We have no objection.
  Mr. SHELBY. Mr. President, I urge its adoption.
  The PRESIDING OFFICER. Without objection, the amendment is agreed to.
  The amendment (No. 5211) was agreed to.
  Mr. SHELBY. Mr. President, I move to reconsider the vote.
  Mr. KERREY. Mr. President, I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5212

                    (Purpose: To strike section 632)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5212.

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

       On page 118, line 16 strike all through page 120, line 15.

  Mr. SHELBY. Mr. President, this amendment strikes section 632 of the 
bill. The President signed a freestanding bill, H.R. 782, which 
includes the provisions of section 632, on August 1 of this year. This 
amendment has been cleared on both sides of the aisle.
  Mr. KERREY. We have no objection to this amendment.
  Mr. SHELBY. I urge adoption of the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 5212) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5213

                     (Purpose: To strike Title VII)

  Mr. SHELBY. Mr. President, I send another amendment to the desk and 
ask for its immediate consideration.

[[Page S10166]]

  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5213.

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

       On page 135, strike line 5 through line 20.

  Mr. SHELBY. Mr. President, this amendment strikes title VII of the 
bill. Because of the urgency of investigations of the church fires, 
this language was included in the agriculture appropriations bill. The 
President signed that bill on August 6. I understand that this 
amendment has been cleared on both sides.
  Mr. KERREY. It has been cleared. We have no objection.
  Mr. SHELBY. I urge its adoption.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 5213) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5214

   (Purpose: To provide funding to the Postal Service for payment of 
                         nonfunded liabilities)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5214.

  Mr. SHELBY. 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:

       On page 34, after line 23 insert the following:


      payment to the postal service fund for nonfunded liabilities

       For payment to the Postal Service Fund for meeting the 
     liabilities of the former Post Office Department of the 
     Employees' Compensation Fund pursuant to 39 U.S.C. 2004, 
     $35,536,000.

  Mr. SHELBY. Mr. President, this amendment before the Senate provides 
funding to the Postal Service for liabilities incurred by the former 
Post Office Department. The funds are paid to the Department of Labor 
for workmen's compensation claims.
  Mr. President, this provision was inadvertently left out of the bill. 
It is a mandatory payment and does not have an impact on the 
discretionary funding in the bill.
  This amendment, I understand, has been cleared on both sides of the 
aisle.
  Mr. KERREY. We have no objection.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5214) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to table the motion.
  The motion to lay on the table was agreed to.


                           Amendment No. 5215

 (Purpose: To define and conform language for expenditure of funds for 
          information systems of the Internal Revenue Service)

  Mr. SHELBY. Mr. President, I have another amendment that I send to 
the desk and ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5215.

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

       On page 22, line 21 strike all from ``(modernized'' through 
     ``systems'' on line 23, and insert: ``(development and 
     deployment) and operational information systems''.
       On page 23, line 14 strike all from ``to manage,'' through 
     ``Management Office'' on line 17.
       On page 23, line 18 strike ``and other necessary Program 
     Management activities'' and insert: ``the Internal Revenue 
     Service shall seek contractual support in managing, 
     integrating, testing and implementing''.
       On page 23, line 22 strike all from ``none of'' through 
     ``program without'' on page 24, line 3.
       On page 24, line 5 strike ``which''.
       On page 24, line 8 strike all from ``except that'' through 
     ``Board'' on line 11.
       On page 24, line 18 strike all from `` Provided further,'' 
     through ``modernization'' on line 20.

  Mr. SHELBY. Mr. President, this amendment makes a number of 
corrections to further define the actions that the Internal Revenue 
Service is to take with regard to the information systems account we 
have been talking about.
  It has been cleared on both sides of the aisle.
  Mr. KERREY. We have no objection.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5215) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to table the motion.
  The motion to lay on the table was agreed to.


                           Amendment No. 5216

(Purpose: To provide for assistance to Special Agents of the Department 
                of State's Diplomatic Security Service)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5216.

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

       On page 128, line 9 before the semicolon insert the 
     following: ``, or under section 4823 of title 22, United 
     States Code''.

  Mr. SHELBY. Mr. President, this amendment amends section 636 of the 
bill which provides authority for agencies to provide assistance to 
agents who secure liability insurance. This amendment will provide this 
authority to the State Department if it chooses to provide the same 
assistance to special agents of the Department of State's Diplomatic 
Security Service.
  It is my understanding that it has been cleared on both sides of 
aisle.
  Mr. KERREY. It has been cleared. We have no objection.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5216) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5217

 (Purpose: To provide Federal Executive Boards ability to expand funds)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5217.

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

       On page 101, on line 3, insert after ``boards'' the 
     following: ``(except Federal Executive Boards)''.

  Mr. SHELBY. Mr. President, section 613 prohibits the executive 
department from pooling or passing the hat for funds. This amendment 
allows for agencies to contribute funds to Federal executive boards 
when they are created. It is very tightly written, and it is intended 
to meet specific problems faced by these boards.
  It is my understanding it has been cleared on both sides.
  Mr. KERREY. It has been cleared.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5217) was agreed to.

[[Page S10167]]

  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5218

 (Purpose: To expand flexibility to OPM in providing services to CSRS 
                          and FERS annuitants)

  Mr. SHELBY. I send an amendment to the desk and ask for its immediate 
consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5218.

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

       On page 69, after line 20, add the following new section:
       Sec. 422. Subparagraph (B) of section 8348(a)(1) of title 
     5, United States Code, is amended by striking ``title;'' and 
     inserting ``title and providing other post-adjudicative 
     services to annuitants;''.

  Mr. SHELBY. Mr. President, this amendment would expand the 
flexibility available to OPM in providing services to CSRS and FERS 
annuitants in such functions as processing health benefits enrollment 
changes, changes of address and responding to annuitant inquiries. All 
of these postadjudication matters would be funded in the same way, and 
therefore fully integrated with the postretirement COLA adjustments, 
Federal and State tax withholding and allotments from annuity payments.
  It is my understanding it has been cleared on both sides of the 
aisle.
  Mr. KERREY. It has been cleared.
  The PRESIDING OFFICER. The question on agreeing to the amendment.
  The amendment (No. 5218) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5219

  (Purpose: To provide that the Administrator of General Service have 
    funds available to make payments for the Federal Communications 
                              Commission)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5219.

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

       On page 57, line 21 before the colon insert the following 
     new provision: ``: Provided further, That to the extent that 
     the Federal Communications Commission does not receive 
     sufficient appropriations for necessary expenses associated 
     with its relocation to the Portals in Washington, DC, funds 
     available to the Administrator of General Services shall 
     hereafter be available for payments to the lessor of the 
     amortized amount, to be financed at the lowest cost to the 
     Government, of such expenses. Such payments shall be in 
     addition to amounts authorized pursuant to section 7(a) of 
     the Public Buildings Act of 1959 (40 U.S.C. 606) and shall be 
     made for a term not to exceed the useful life of the 
     improvements, furniture, equipment, and services provided, up 
     to a maximum of ten years.''

  Mr. SHELBY. Mr. President, this amendment before the Senate provides 
authority to the General Services Administration to negotiate payment 
for housing the Federal Communications Commission in Washington, DC.
  It is my understanding this amendment, too, has been cleared on both 
sides.
  Mr. KERREY. It has been cleared. We have no objection.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5219) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5220

              (Purpose: Technical amendment to H.R. 3756)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5220.

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

  The amendment is as follows:

       On page 51, line 10 strike all from ``Provided further,'' 
     through ``House and Senate:'' on line 16.

  Mr. SHELBY. Mr. President, this is a technical amendment that strikes 
a provision which is identical to a provision which appears at another 
place in the bill.
  It has been cleared, I understand, on both sides of the aisle.
  Mr. KERREY. It has been cleared. We have no objection.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5220) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5221

     (Purpose: To strike provision requiring a study of courtroom 
                              utilization)

  Mr. SHELBY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5221.

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

       On page 61, line 5 strike all from ``: Provided,'' through 
     ``or expanded'' on line 8.

  Mr. SHELBY. Mr. President, the committee included language in the 
bill when it was reported to require the Administrative Office of the 
Courts to do a space utilization study of courtroom space and 
utilization. Since the bill was reported from the committee, the AOC 
has been working with the appropriate authorizing committees to review 
courtroom space and utilization. These issues should appropriately be 
reviewed in this manner. It is for that reason I am moving to strike 
this provision.
  It has been cleared on both sides.
  Mr. KERREY. It has been cleared. We have no objection.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 5221) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 5222

   (Purpose: To allow agencies to advance employee FEHB premiums for 
                    employees on leave without pay)

  Mr. SHELBY. Mr. President, I have another amendment, and I ask for 
its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes an amendment 
     numbered 5222.

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

       On page 69, after line 20 add the following new section
       Sec.  . Paragraph (1) of section 8906(e) of title 5, United 
     States Code, is amended--
       (1) by striking the last sentence of that paragraph and 
     redesignating the remainder of that paragraph as (1)(A);
       (2) by adding at the end of paragraph (1)(A) (as so 
     designated) the following:

[[Page S10168]]

       ``(B) During each pay period in which an enrollment 
     continues under subparagraph (A)--
       ``(i) employee and Government contributions required by 
     this section shall be paid on a current basis; and
       ``(ii) if necessary, the head of the employing Agency shall 
     approve advance payment, recoverable in the same manner as 
     under section 5524a(c), of a portion of basic pay sufficient 
     to pay current employee contributions.
       ``(C) Each agency shall establish procedures for accepting 
     direct payments of employee contributions for the purposes of 
     this paragraph.''.

  Mr. SHELBY. Mr. President, this amendment will solve problems that 
agencies, the Office of Personal Management, and the Federal employee 
health benefit carriers have experienced with regard to payment of 
health care premiums by allowing agencies to advance the employee 
premium for employees on leave without pay, rather than waiting for the 
employees to return to work.
  I understand this has been cleared on both sides.
  Mr. KERREY. It has been cleared. We have no objection.
  The PRESIDING OFFICER. The question is on agreeing to the amendment. 
The amendment (No. 5222) was agreed to.
  Mr. SHELBY. I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. SHELBY. 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. DORGAN. 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. DORGAN. What is the pending business, Mr. President?
  The PRESIDING OFFICER. The amendment of the Senator from Oregon, the 
second-degree amendment.
  Mr. DORGAN. I ask unanimous consent we set that aside. As I 
understand, the managers talked about setting aside the amendment by 
the Senator from Oregon.
  The PRESIDING OFFICER. Without objection, it is so ordered.


Amendment No. 5223 to Excepted Committee Amendment on Page 16, Line 16 
                       Through Line 2 on Page 17

 (Purpose: To amend the Internal Revenue Code of 1986 to end deferral 
    for United States shareholders on income of controlled foreign 
 corporations attributable to property imported into the United States)

  Mr. DORGAN. Mr. President, I offer a second-degree amendment to the 
second committee amendment.
  I believe the second committee amendment is now the pending business.
  The PRESIDING OFFICER. That is correct.
  Mr. DORGAN. On behalf of myself, Senator Hollings, Senator Bumpers, 
Senator Kerry of Massachusetts, Senator Simon, Senator Kohl, and 
Senators Reid, Wellstone, Leahy, Harkin, Feingold, and Kennedy, I send 
an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from North Dakota [Mr. DORGAN], for himself, 
     Mr. Hollings, Mr. Bumpers, Mr. Kerry, Mr. Simon, Mr. Kohl, 
     Mr. Reid, Mr. Wellstone, Mr. Leahy, Mr. Harkin, Mr. Feingold, 
     and Mr. Kennedy, proposes an amendment numbered 5223 to 
     excepted committee amendment on page 16 line 16 through line 
     2 on page 17.

  Mr. DORGAN. I ask unanimous consent 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.   . TAXATION OF INCOME OF CONTROLLED FOREIGN 
                   CORPORATIONS ATTRIBUTABLE TO IMPORTED PROPERTY.

       (a) General Rule.--Subsection (a) of section 954 of the 
     Internal Revenue Code of 1986 (defining foreign base company 
     income) is amended by striking ``and'' at the end of 
     paragraph (4), by striking the period at the end of paragraph 
     (5) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(6) imported property income for the taxable year 
     (determined under subsection (h) and reduced as provided in 
     subsection (b)(5)).''
       (b) Definition of Imported Property Income.--Section 954 of 
     such Code is amended by adding at the end the following new 
     subsection:
       ``(h) Imported Property Income.--
       ``(1) In general.--For purposes of subsection (a)(6), the 
     term `imported property income' means income (whether in the 
     form of profits, commissions, fees, or otherwise) derived in 
     connection with--
       ``(A) manufacturing, producing, growing, or extracting 
     imported property,
       ``(B) the sale, exchange, or other disposition of imported 
     property, or
       ``(C) the lease, rental, or licensing of imported property.
     Such term shall not include any foreign oil and gas 
     extraction income (within the meaning of section 907(c)) or 
     any foreign oil related income (within the meaning of section 
     907(c)).
       ``(2) Imported property.--For purposes of this subsection--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the term `imported property' means property which 
     is imported into the United States by the controlled foreign 
     corporation or a related person.
       ``(B) Imported property includes certain property imported 
     by unrelated persons.--The term `imported property' includes 
     any property imported into the United States by an unrelated 
     person if, when such property was sold to the unrelated 
     person by the controlled foreign corporation (or a related 
     person), it was reasonable to expect that--
       ``(i) such property would be imported into the United 
     States, or
       ``(ii) such property would be used as a component in other 
     property which would be imported into the United States.
       ``(C) Exception for property subsequently exported.--The 
     term `imported property' does not include any property which 
     is imported into the United States and which--
       ``(i) before substantial use in the United States, is sold, 
     leased, or rented by the controlled foreign corporation or a 
     related person for direct use, consumption, or disposition 
     outside the United States, or
       ``(ii) is used by the controlled foreign corporation or a 
     related person as a component in other property which is so 
     sold, leased, or rented.
       ``(3) Definitions and special rules.--
       ``(A) Import.--For purposes of this subsection, the term 
     `import' means entering, or withdrawal from warehouse, for 
     consumption or use. Such term includes any grant of the right 
     to use an intangible (as defined in section 936(b)(3)(B)) in 
     the United States.
       ``(B) Unrelated person.--For purposes of this subsection, 
     the term `unrelated person' means any person who is not a 
     related person with respect to the controlled foreign 
     corporation.
       ``(C) Coordination with foreign base company sales 
     income.--For purposes of this section, the term `foreign base 
     company sales income' shall not include any imported property 
     income.''
       (c) Separate Application of Limitations on Foreign Tax 
     Credit for Imported Property Income.--
       (1) In general.--Paragraph (1) of section 904(d) of such 
     Code (relating to separate application of section with 
     respect to certain categories of income) is amended by 
     striking ``and'' at the end of subparagraph (H), by 
     redesignating subparagraph (I) as subparagraph (J), and by 
     inserting after subparagraph (H) the following new 
     subparagraph:
       ``(I) imported property income, and''.
       (2) Imported property income defined.--Paragraph (2) of 
     section 904(d) of such Code is amended by redesignating 
     subparagraphs (H) and (I) as subparagraphs (I) and (J), 
     respectively, and by inserting after subparagraph (G) the 
     following new subparagraph:
       ``(H) Imported property income.--The term `imported 
     property income' means any income received or accrued by any 
     person which is of a kind which would be imported property 
     income (as defined in section 954(h)).''
       (3) Look-thru rules to apply.--Subparagraph (F) of section 
     904(d)(3) of such Code is amended by striking ``or (E)'' and 
     inserting ``(E), or (I)''.
       (d) Technical Amendments.--
       (1) Clause (iii) of section 952(c)(1)(B) of such Code 
     (relating to certain prior year deficits may be taken into 
     account) is amended by inserting the following subclause 
     after subclause (II) (and by redesignating the following 
     subclauses accordingly):
       ``(III) imported property income,''.
       (2) Paragraph (5) of section 954(b) of such Code (relating 
     to deductions to be taken into account) is amended by 
     striking ``and the foreign base company oil related income'' 
     and inserting ``the foreign base company oil related income, 
     and the imported property income''.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     of foreign corporations beginning after December 31, 1996, 
     and to taxable years of United States shareholders within 
     which or with which such taxable years of such foreign 
     corporations end.
       (2) Subsection (c).--The amendments made by subsection (c) 
     shall apply to taxable years beginning after December 31, 
     1996.

  Mr. DORGAN. Mr. President, this amendment is not a germane amendment 
to this appropriations bill. I assume notice will be made of that, so I

[[Page S10169]]

immediately agree this is not germane to this legislation.
  However, this is, perhaps, the only remaining opportunity to offer 
such an amendment. I offered it about a year ago, and the Senate had a 
vote on it. It was a 52 to 47 vote. It deals with a provision in our 
tax law which encourages and provides incentives to U.S. companies that 
move jobs overseas from this country to their foreign factories 
operating in tax havens.
  I have believed for some long while that we have an obligation in 
Congress to decide that we will change our Tax Code sufficiently so we 
will not be providing incentives to ship U.S. manufacturing jobs 
overseas.
  I offered this amendment last year, almost a year ago now, and, as I 
indicated, the vote on it was on a vote to table, and it was 52 to 47. 
I recognize this is controversial, but I also maintain it is critically 
important. I also do not prefer to offer a nongermane amendment to this 
particular appropriations bill. I have great respect for the Senator 
from Alabama and the Senator from Nebraska. They want to get this bill 
done, and I understand that. I don't intend to hold them up forever on 
this, but I would like to have a discussion about this and have a vote 
on it. I know there are a couple of others who want to speak about this 
amendment as well.

  Let me try to briefly describe what this amendment would do. Before I 
do that, let me say again to those who will point out that this is 
nongermane, I admit that, and I assert that we have faced nongermane 
amendments from both sides of the aisle in the past year or two here in 
Congress. We have recently seen an amendment dealing with a gas tax 
repeal on a White House travel bill. So we have seen a whole range of 
nongermane amendments. While I agree with others that that is not the 
preferable way to do business, this is the last opportunity to offer 
such an amendment.
  Let me talk for a moment about the specifics. On July 8, this year, 
the Boston Globe had an article that was entitled ``Tax Code Gives 
Companies a Lift,'' and I would like to read a few paragraphs of it 
because it was a fascinating, lengthy article written by Aaron Zitner 
of the Boston Globe. The first paragraph describes what has long 
concerned me and persuaded me previously, and now again, to offer an 
amendment of the type I am offering today. It reads in the Globe:

       When Robert M. Silva's job moved to Singapore two years 
     ago, his company flew him overseas so he could train his 
     replacement. Then the company closed its North Reading 
     factory [in Massachusetts], laid off Silva and 119 co-workers 
     and began importing from its Asian plant the medical products 
     once made in Massachusetts.
       Moving jobs to Singapore had obvious advantages for Baxter 
     International Inc. Taxes are low, and Silva's $26,000 salary 
     was far higher than what the company pays his replacement.
       But Baxter reaped another reward for moving overseas: a tax 
     break, courtesy of the United States Government. In the name 
     of boosting U.S. business, the Tax Code offers a special 
     benefit to companies that move jobs offshore. . . .
       It is one of many tax breaks that ripple perversely through 
     the economy--favoring multinationals over small firms, 
     favoring investors over average taxpayers and favoring 
     foreign workers over those at home.

  Those are the first paragraphs of a lengthy and very interesting 
article in the Boston Globe. This paragraph talks about a man named 
Robert Silva. I have never met him, and I don't ever expect to meet 
him. He is one of many Americans who discovered that his job no longer 
exists in this country; it exists in Singapore. He discovered he was 
sent to Singapore to train his replacement. He is a taxpayer, like 
others, who pays taxes to our Government for a lot of things that he no 
doubt supports. But I will bet you that Mr. Silva, like many others, 
does not support a provision in our Tax Code that actually rewards 
those who would move U.S. jobs overseas.
  Now, what is this reward, and what is the amendment I am proposing? 
The amendment I am proposing is not to repeal all of something called 
deferral. That is not my proposal. The Senate actually voted once to 
repeal deferral many years ago. It just did not go beyond the Senate. 
But the Senate has already acted to repeal something called deferral. 
What is deferral? That means that if you are an American manufacturing 
company producing overseas, you make an income there, and you generally 
don't have to report it and pay taxes on it in this country. You may 
defer that tax obligation until and unless you repatriate the income to 
our country. That is a special tax break called deferral. You can defer 
any taxes you would have owed to this country on income you made in a 
plant outside of this country.
  As I indicated, the Senate in 1975 voted to repeal all of the 
deferral tax break. Of course, it was a different day, a different 
debate. It was very controversial then. In 1987, the House of 
Representatives voted to repeal a small part of deferral. In fact, it 
is exactly the part that I am proposing that we now repeal. The House 
of Representatives passed this provision, which I now offer the Senate, 
in 1987. The provision says that those U.S. companies who establish a 
manufacturing plant overseas, move their U.S. jobs overseas to tax 
havens, and then ship their products back into this country will lose 
the deferral on their tax break--the tax break called deferral--that 
amount of income attributable to the goods they move back into our 
country. It is a very small slice of this issue called deferral, but it 
would close that, because that which now exists is to say to a U.S. 
company, close your manufacturing plant in Boston or Bismarck or Los 
Angeles and then move it overseas to a tax haven and the American 
taxpayer will make a deal with you. If you do that, we will give you a 
tax break. What is that tax break worth? It is worth $2.2 billion in 7 
years. That is how much is paid to companies who locate their 
manufacturing jobs in other countries as opposed to this country.

  Now, I don't know of anyone who really can stand up and say, boy, 
this makes a lot of sense. It is an affirmative policy on our part to 
reward the export of American jobs. I don't know of anyone who is 
proposing that. If there are people who propose that, I would very much 
like them to come to the floor of the Senate and see if we can begin 
debating it, because I hope we will have some discussion. A year ago, 
when I offered this amendment, we were told that some hearings might be 
held and that this is not the time, the place, nor the way, and I 
understood all that. I did not agree with it. But as is usually the 
case, a year passes and not much happens. I wanted to offer this a 
month or two ago and wasn't able to do that, given the parliamentary 
circumstances. So now I am required, if I am to offer it at all in this 
session of Congress, to offer it today on this piece of legislation.
  I would like to go over a couple of charts. Lest anyone thinks this 
is something that is irrelevant and not important, I would like to go 
over a few charts to describe why I think this is important. First of 
all, I would like to talk about manufacturing jobs in this country. The 
trend line on manufacturing jobs is dismal. The trend line is that we 
are a country with fewer and fewer manufacturing jobs, and 
manufacturing jobs, traditionally, have been the good jobs that pay 
good income with good benefits. But you see what is happening.
  Since 1979, we have lost about 3 million good-paying manufacturing 
jobs in this country. We continue to see manufacturing jobs move 
elsewhere, and I know people say, ``Well, yes, but we have more service 
jobs,'' and this and that and the other. The fact is that getting a job 
at minimum wage, working for some discount store on the edge of a city, 
is not a replacement for good manufacturing jobs that traditionally 
have paid good income in this country. This is what is happening to 
manufacturing jobs in our country. That is a ominous trend. Part of 
that is because those manufacturing jobs are being exported. Exported 
how? Well, for a lot of reasons, one of which is that we actually 
encourage it in our Tax Code.
  Next is ``Employment by Foreign Manufacturing Affiliates of United 
States Companies''--U.S. firms and their employment. Here is what is 
happening to manufacturing employment in the United States. That is the 
red line. You see what is happening to that. That is going down.
  U.S. companies manufacturing abroad, what is happening to their 
employment? That is going up. Those lines show clearly what is 
happening on manufacturing employment by U.S. corporations in Asia and 
Latin America, the location of most low wage and tax haven countries.

[[Page S10170]]

  ``Employment in Foreign Manufacturing Affiliates.'' You can see what 
is happening over the years. That employment continues to increase. 
Again, this is manufacturing and manufacturing jobs are traditionally 
the best source of jobs or the best income and the most secure.
  ``Employment by U.S. Firms in Foreign Tax Havens.'' You will see 
Ireland, the Netherlands, Hong Kong, Singapore. Singapore, 74,700 
firms. I am not suggesting that a United States company should not be 
able to have a foreign affiliate and manufacture in Singapore. A United 
States company might well want to establish an affiliate in Singapore 
in order to manufacture there to compete in Korea. I am not suggesting 
that is inappropriate. I am not suggesting we change that. I am saying 
that if a United States company decides it wants to manufacture in 
Singapore for the purpose of serving the United States market, the 
company that manufactures in the United States to serve the United 
States market is put at a substantial disadvantage. Why? Because at 
least in part we have provided in our Tax Code a reward for those who 
left which translates into a penalty for those who stayed.
  ``Growth of Manufacturing Employment.'' You can see what is happening 
again, in the number of countries where manufacturing jobs have been 
moving with robust growth and what is happening in the United States. 
That is not, it seems to me, what we should aspire to have happen in 
our country.
  ``Growth of Imports of Manufactured Products.'' Once again, the line 
shows that we have a steady upward trend of growth of imports from 
manufactured products. The moment I say this some will say, ``Well, he 
wants to stop the imports.'' This is not the case. This is not, on the 
one hand, a debate between those who want free and open and 
unrestricted trade and those, on the other hand, who are protectionist, 
xeno- phobic stooges who do not understand what is happening in the 
world. That is the way it is characterized. That is a lot of baloney. 
What this is is a narrow question of whether or not we ought to have in 
our Tax Code that provision which provides a significant incentive to 
say to a U.S. manufacturer, ``We will make you a deal: Move your jobs 
overseas and we will give you tax relief. Compete after you move 
overseas against a domestic company that stayed in the United States 
and will be at a disadvantage because we gave you a tax advantage and 
did not give the company that stayed here a tax advantage.''
  That, it seems to me, is exactly the wrong message we want to be 
sending to American manufacturers.
  Well, I do not know that I need to provide more evidence that 
manufacturing jobs are leaving this country. It is, I suppose, 
difficult to discuss this with a great deal of success at a time when 
those who receive these benefits are the largest enterprises in our 
country, literally in many cases the largest enterprises in the world, 
spending an enormous amount of time lobbying to keep what they now 
have, preventing someone from taking away the benefits they now have. 
There are not people walking around the streets carrying placards 
telling us that we have to shut this tax loophole because almost no one 
knows it exists.
  Mr. Silva, who has lost his job in Massachusetts, may not know it 
exists, but it contributed to his losing his job. A woman named Carolyn 
Richard probably does not know it exists. She is a woman married with 
one child, a 10th grade education, one of 500 people who worked in a 
Fruit of the Loom factory, 8-hour days, stitching shoulder joints and 
hemming T-shirts. She, with a lot of others, worked hard. They liked 
their jobs, did well. But they cannot compete against others who will 
work for a dollar a day, a dollar an hour, and so companies that would 
employ Carolyn Richard decide they will close their American plant 
because they can make that product elsewhere less expensively.
  I admit there are several things that persuade companies to do this, 
one of which is a tax break. Several others include being able to pole 
vault over an entire range of knotty little problems in this country 
that we served 75 years debating--should there be child labor 
protection laws? Should there be safety in the workplace? If so, what 
should those standards be? Should we prevent the dumping of chemicals 
and effluents into the air and water by manufacturing plants? We spent 
75 years debating that and came to some conclusions about it, and we 
have child labor laws; we have worker safety protection issues; we have 
minimum wages; we have provisions that you cannot dump chemicals into 
our water; you cannot dump effluents into the airshed that pollute this 
country.
  So that is what costs money, and some are able to pole vault over all 
of those issues by saying: I do not have to pay the minimum wage; I can 
hire a 14-year old and pay them 14 cents an hour and work them 14 hours 
a day; I can dump chemicals into the stream; I can dump pollution into 
the airshed; I do not have to care about OSHA inspectors, safe work 
place; I do not have to care about any of those things and save money 
because I can move this plant overseas. Besides, when I am done doing 
that, I can claim a tax break because the American taxpayers will pay 
me and others who do it $2.2 billion in 7 years if I will just consider 
moving my American jobs elsewhere.
  There is at the moment a wonderful series that I would commend to my 
colleagues being done in the Philadelphia Inquirer by fellows named 
Donald Barlett and James Steele. They have done a substantial amount of 
economic work. They have won the Pulitzer Prize, a couple Pulitzer 
Prizes for their reporting, and they have now published 3 of an 
expected 10 pieces dealing with these issues--trade, tax preferences. 
What is happening to an endangered label, they say. ``Made in the 
U.S.A.'' ``An Endangered Label: `Made in the U.S.A.' ''
  Product after product once made or grown in the United States now 
comes from abroad and one of the biggest losers in this influx is small 
business.
  From one of their articles I wanted to read a couple of paragraphs 
that I think summarize part of this issue for me.

       Unlike multinational corporations that have closed 
     factories in the United States and shifted the production 
     abroad to take advantage of cheap labor, small companies 
     seldom have that option. It is these businesses, employing a 
     few to a dozen workers, that are being squeezed out. 
     Individually, they barely register a blip on the economic 
     indicators. Taken together, they provide a livelihood for 
     millions.
       Small businesses have scant access to people in Congress 
     who write the laws and little influence in the White House. 
     They rarely receive favorable hearings from regulatory 
     authorities. With few exceptions, their appeals for help go 
     unheard when imports of competing products from low wage 
     countries begin flooding in.

  Mr. President, Mr. Glover, chief counsel from the Small Business 
Administration's Office of Advocacy, said it pretty well. He was 
speaking of part of this amendment. He talked about the legislative 
offering that I have proposed, ``encouraging small and mid-sized 
domestic businesses by reducing the competitive advantage a business 
might receive by moving its operations overseas.''
  ``We recognize,'' he said, ``the fact of life that some businesses 
may move their production operations to a foreign nation for reasons of 
market access, materials availability or a variety of other concerns.''
  And I recognize that as well.
  He also said, ``We also know that domestic small businesses, having 
neither the resources nor the expertise for such a move, should be 
assured that their globe-trotting, multinational competitors will not 
be provided tax advantages as well. Eliminating the deferrals for a 
U.S. business which has closed its domestic production and moved abroad 
and which now seeks to sell those same products domestically will help 
small businesses to be competitive and at least give them a sense of 
fair treatment.''
  Mr. President, I could go on at some length because this is a very 
controversial issue. Not long ago, a couple of people who worked for an 
organization that has been put together and funded by the largest 
companies in this country, which benefit from this tax break, put 
together a piece in one of the tax publications here in town. It was 
just a scathing attack of this proposal of mine. It described all that 
is wrong with it and why the current system is wonderful and why what I 
am proposing is so awful.
  A response to that was recently done by the Congressional Research 
Service, prepared by its senior specialist in economic policy, Jane 
Gravelle. It was

[[Page S10171]]

published recently, and it debunks all of the hollow issues that were 
raised about this legislation.
  This is not rocket science, no matter what those who come to the 
floor may say. This is not complicated. It is not even highly technical 
in its application. The question that we ought to address as Members of 
the Senate, at the time when this country is losing more and more 
manufacturing jobs, is this: Do we want to continue in our Tax Code to 
subsidize the exodus of American jobs overseas, by saying to U.S. 
companies, ``If you put U.S. jobs overseas rather than here at home we 
will give you a tax break"? ``If you have a plant here at home, shut 
the door, get rid of the workers, move it overseas, and the American 
taxpayer will say thank you by giving you a check.''
  If you believe that makes sense and if you believe there is any room 
in this country where you can stand up and describe that as a sensible 
public policy, then you ought to vote against what I am proposing. But 
if you, like most people, think that our Tax Code at least ought to be 
neutral on the question of where you locate jobs--and it probably ought 
to be more than neutral--we ought to tip it on the side of saying, if 
you create jobs here, we will provide incentives for you. We ought to 
turn it around. Instead of providing incentives for those who ship jobs 
out of our country, we ought to create incentives for those who create 
jobs in this country.
  We are told this is a global economy and some Members of the Senate 
and the House simply lack the capability of understanding the new 
realities of the global economy. I do not know whether they refer to me 
when they say that, or the Senator from South Carolina. I do not know 
who it is who does not understand all this global economy. I confess to 
growing up in a town of 300 people, attending a high school with a 
class of 9. I graduated in a senior class of 9. They did not teach us, 
necessarily, higher math in our high school, but we got reasonably good 
training. They taught us to think a little bit, use a little judgment, 
have a little common sense.
  I could go back to Regent, ND, tonight, perhaps hold a meeting in the 
Regent town hall, and most of the folks in Regent would come, because 
it is a small town. There is probably not a lot going on there this 
evening. Regent was a town where there probably was not much going on 
when I was a student there. It is a wonderful community, small but 
wonderful. If we could get all the folks there in the Regent Center 
tonight, we could talk to them about what do they think we ought to do 
on tax policy. Do you think we ought to encourage some jobs that exist 
in North Dakota or in Colorado, New Hampshire, Rhode Island--do you 
think we ought to encourage those jobs to move elsewhere, just leave 
our country? Take a manufacturing job and send it elsewhere? Make 
shoes, shirts, belts and television sets and cars elsewhere? Or would 
it be better if you could find a way to try to keep most of those jobs 
here?
  If we could get all the folks there in Regent and talk to them, they 
might raise the question of the global economy. They might say, ``Isn't 
the global economy kind of an inevitable circumstance nowadays, where 
we are competing against those workers who live in Sri Lanka, in 
Bangladesh, in Malaysia, in Singapore?'' Yes, it is, absolutely. That 
is the reality. We are competing against those people and that is 
precisely why we are losing manufacturing jobs. We should have to 
compete with virtually everyone in the world, providing the competition 
is fair.

  I would ask this. Is it fair to ask a worker in Alabama, Colorado, 
South Carolina, or North Dakota to compete against someone who makes 14 
cents an hour? Can we compete against someone who makes 14 cents an 
hour? Should we compete? Is it necessary to be required to compete 
against someone who makes 14 cents an hour? I can tell you about some 
people who do make 14 cents an hour working 11 hours a day, 6 days a 
week. I can tell you about them. How about making 14 cents an hour at 
age 14? Working 14 hours a day? I can tell you about some of them.
  So, if the answer to the question is no, we should not have to 
compete against that, then the question is, what do we do? We not only 
create a circumstance in our country where we say you are going to 
compete against it, but we say if you will simply take the opportunity 
to access low wages elsewhere, we will give you a tax break.
  Folks in my hometown would, I think, find that fairly dumb. I do not 
know how else you describe that. I think they would say that is a 
pretty dumb policy. What kind of minds conspired together to figure out 
that we ought to have a tax break if we boot jobs out of our country? 
What kind of high-minded people? Tell me where they got their 
education. What kind of high-minded people is it who believe it makes 
sense for us to create tax policy that has the consequence of weakening 
our country and weakening the job base that has been the very 
foundation for economic growth in America?
  Economic growth in this country is not economic growth based on 
target discount stores on the edge of our cities, paying minimum wage. 
In fact, I went through one recently with my little daughter, trying to 
find a bathing suit. Do you know, I could not find an employee. I 
walked around forever trying to find somebody who worked there. They 
have a store and, at least to my knowledge, no discernible employees.
  I finally found somebody to take my money. But is that a substitute? 
Are those jobs the substitute for good manufacturing jobs? Of course 
not. So the question is, should we decide to focus a bit on this 
question? We will have people come and say, ``No, no, you should not 
focus on it. This is irrelevant, it is extraneous, and besides you have 
it all wrong. This tax break is not really a tax break; those who you 
say get it do not get it, and if they do get it, it really doesn't 
matter.'' There are always three or four stages of denial here in this 
Chamber.
  But some of us think this is important. The global economy is a 
reality. I am not suggesting we put up walls and keep products out. I 
am not suggesting that we tie the hands of American corporations. I am 
suggesting that we decide, on behalf of our country, that rather than 
provide incentives to those who would move jobs outside of our country, 
we consider providing incentives to those who would create jobs inside 
of our country, and that is the central question before us.
  So, I have a couple of other things I want to say, but I know the 
Senator from South Carolina wishes to speak on this. I, at this point, 
yield the floor.
  The PRESIDING OFFICER (Mr. Smith). The Senator from South Carolina.
  Mr. HOLLINGS. Mr. President, I will be as brief as I possibly can. I 
will not take long. This is a subject that really deserves several days 
of debate.
  But, in a capsule, we are going to bring it right to a head, I think, 
in the next couple of hours, in that Pat Choate, the author of ``Agents 
Of Influence,'' has been selected as the Vice Presidential candidate by 
Ross Perot, in this so-called Reform Party.
  Mr. Choate was the vice president in charge of policy at TRW. When he 
published this book, which factually has never been challenged, he, of 
course, was relieved of his post as vice president of TRW and has been 
out as a consultant to industry.
  There is no question that finally, finally, in this election, trade 
and jobs will really come into focus, as the distinguished Senator from 
North Dakota is bringing right here.
  Let me hasten to add, I support, of course, our Democratic ticket of 
Clinton-Gore and will continue to support them. I have tried to work--
with respect, unsuccessfully, of course--on NAFTA and GATT to change 
our trade policy and save us from these two flawed agreements. But we 
are going to have to try to do our dead level best to bring them into 
the real world of trade and jobs, and I am confident that the selection 
of Mr. Choate will really bring it front and center.
  There is no question, don't put this gentleman in a debate with any 
of the persons mentioned here, and he is far, far more informed. They 
do not have to bring up the case of Smoot-Hawley and think you are 
going to show a picture and rattle this gentleman.
  Let me first commend my distinguished colleague from North Dakota. He 
has been very erudite in this particular matter, because he feels 
keenly about the two really great issues facing our Nation.

[[Page S10172]]

  One, of course, is trying to get this Congress to pay the bills. And 
you heard earlier today the distinguished Senator from North Carolina 
holler, ``Up, up and away, the debt.'' The national debt has gone to 
some $5.2 trillion. I remember well when President Reagan came to 
office, it wasn't even $1 trillion.
  We had 38 Presidents of the United States, Republican and Democrat, 
200 years of history, and never a trillion-dollar debt, with the cost 
of all the wars--Revolutionary, 1812--right on up--Civil War, Spanish 
American, World War I, II, Korea, Vietnam, with the cost of all the 
wars, we had not gotten to a trillion-dollar debt.
  Now, without the cost of a war, in 15 years we have gone to $5.2 
trillion. And, as a result, we are raising taxes a billion dollars a 
day. I use that expression, ``raising taxes a billion dollars a day,'' 
advisedly for the simple reason is, Mr. President, you have to pay the 
interest costs. They say there are two things in life unavoidable: 
death and taxes. Make it a third: interest costs on the national debt. 
We have to pay that. Republicans and Democrats vote every time to pay 
the interest costs on the national debt.
  So that is a billion a day for nothing. That is not for schools. That 
is not for defense. That is not for education or housing or the 
environment. You don't get anything for that. You are just paying for 
the past profligacies of these Congresses. That is problem No. 1.
  Problem No. 2 is barely mentioned, and I speak advisedly about jobs, 
because I have been in the game. I didn't come here as a neophyte. We 
can start off 37 years ago. When I took office, we had an agriculture 
State. When I left, we had an industrial State.
  Anybody connected with the history of our great State of South 
Carolina will tell you the technical training program that we 
instituted is a big attraction for industrial investment and expansion, 
period, for South Carolina, New Hampshire, or anywhere else. I offered 
Governor Sununu in the Presidential race in the early eighties to come 
up there and institute my technical training, but New Hampshire wanted 
to leave it to the industries.
  I talked to my friends at Wang, in, Nashua. I said, I don't see how 
you expect any expansion except to run away from the taxes in Boston, 
coming up Highway 128, or whatever it is, to get out of the taxes in 
that beautiful State of New Hampshire, which everyone will agree is one 
of the most beautiful in the entire Nation.
  But be that as it may, we are not just talking philosophically as an 
economist or anything else, we are talking business sense. I have 
worked firsthand with the chairmen of the boards, the vice chairmen, 
come on down to No. 6 man who really has to get the operation in the 
black. That is the gentleman or lady that counts. And when you give 
them a spread sheet and you tell them the hourly wages and how it is 
going to come out, when they break ground, when the plant will be 
complete, you can get in operation in 7 months or a year or less, 
whatever it is, you are beginning to talk sense, and that is the way we 
work at it.
  Right to the point, our poor friends in Alabama went totally 
overboard. In Alabama, they paid over $300 million to get Mercedes 
Benz. I was in that competition. I will never forget meeting with the 
Mercedes executives. I carried them down to South Carolina to Bosch, 
and at Bosch, I showed them where they not only were making the fuel 
injectors, but they were making the antilock brakes for the Mercedes 
Benz. They were making the antilock brakes for the Toyota, for all Ford 
cars and all General Motors cars.

  I showed them a good little country boy from Dorchester County who 
had been trained in our technical training system, sent to Stuttgart 
and learned the German apprenticeship system and was instructing in 
Charleston, SC, the German apprentice system.
  The man from Mercedes said, ``This is what we want. We are looking 
for a port. We are looking for the skills.'' But the great executives 
back in Germany were looking for money, so we lost out on that one.
  I only introduce that because these rat-a-tat talks about ``I'm for 
jobs, I'm for jobs,'' they don't know anything about the retaining, 
anything about the work in trying to get the job there, keep the job 
there and get the expansion, which we are doing in South Carolina.
  Having said that, Mr. President, I notice my distinguished friend had 
to talk almost defensively. He said, ``Wait a minute, I'm not trying to 
put up a wall or anything else.'' It is very unfortunate I have to do 
the same thing. I am speaking defensively trying to qualify as you 
might a witness in a case, because this is the real case of the United 
States of America and nobody wants to try it, Republican or Democrat. 
Oh, no, they want to ignore it.
  Let me go right to the heart of the matter. Yes, in the cold war, we 
had to sacrifice our industrial backbone in order to spread capitalism 
and bring about freedom in the Pacific rim and we used the Marshall 
plan to rebuild Europe, and it worked. Nobody is complaining about that 
sacrifice.
  I used to testify back in the fifties before the old International 
Trade Commission--International Tariff it was called at that particular 
time. They said, ``Governor, what do you expect these emerging 
countries to make, the airplanes and the computers?'' Let them make the 
clothing and the shoes. That is why 86 percent of the shoes on this 
floor are imported; 66 percent, two-thirds of the clothing you are 
looking at is imported.
  So I said, ``Yes, you have to give the lesser skilled jobs to the 
emerging countries,'' but we have done that. As my friend, Senator 
Dole, says, ``Been there, done that.'' So all right, it worked.
  Now we are into a global competition, and who is making the computers 
and who is making the airplanes? Our competitors. So don't come now 
with this argument about we are rebuilding the world. We have to 
rebuild the United States. Our standard of living has gone out of the 
window.
  You cannot be a world power--let's talk security and national 
defense--you cannot be a world power unless you are a manufacturing 
power. Ten years ago, we had 26 percent of our work force in 
manufacturing. We almost had half at the end of the war. That is what 
won the war.
  I spent 3 years overseas in World War II. Yes, we had brave soldiers. 
These people are talking about the veterans' record. But Rosie the 
Riveter won World War II. We inundated them. I can see me now saying, 
``Send those planes. Keep sending them.'' They kept shooting them down, 
but we had more. Building No. 1 down in Marietta, GA, was spitting out 
five B-29's a day.
  Rosie the Riveter, our industrial backbone, won World War II, and we 
are losing world war III, the economic war, because instead of now 
going from half to 26 percent 10 years ago, today we are down to 13 
percent.
  That up east Harvard group would give that lecture, ``small is 
beautiful, service economy,'' all these here nonsensical arguments. And 
we are going to the poorhouse. That is why real wages have dropped 20 
percent in the last 20 years, for the simple reason that the big 
multinationals have increased their profits by moving offshore.
  Mr. President, we are competing with ourselves. Mark it down. I am 
not worried about Japan. I am not here to bash Japan. I am here to bash 
me, us, you, the Congress, the silly policy. What we have in 
manufacturing is the cost of labor is 30 percent of volume. And we know 
it is a given. We had many witnesses testify to that in our particular 
hearings, that you can save as much as 20 percent of volume of sales by 
moving offshore to a low-wage country.
  Take a company, a manufacturer with $500 million in sales, they can 
keep the head office, the sales force here in America; but they can 
move their manufacturing offshore and make $100 million at 20 percent 
or they can continue to work their own people and go bankrupt, because 
that is the competition. Do not talk about the global competition. I am 
talking about the fellow next door that has already moved.
  When you come up here, they dance around hollering, ``retrain, 
retrain, retrain.'' I want to say a word about that to get it on the 
record, because we know about training. We do not have to wait on 
Washington to get us industrial expansion in South Carolina.
  But Oneita Mills closed recently in South Carolina. We had 487 jobs 
making these T-shirts. We got that 35 years ago, a beautiful little 
plant, wonderful

[[Page S10173]]

workers. The average age there was 47 years of age, Mr. President. 
Retrain them. Do it Secretary Reich's way, the Secretary of Labor. Go 
ahead and retrain them; and tomorrow morning give me 487 expert 
computer operators. Are you going to hire the 47-year-old computer 
operator or the 20- or 21-year-old computer operator? To ask the 
question is to answer it. You are not going to take on the health 
costs, the retirement costs of the 47-year-old.
  You can keep on retraining them. They are out in this little rural 
town, scavenging, trying to make enough money, where their husbands 
probably were in the tobacco allotment. They want to cut that out. 
Together they work and save enough money to send the boy to Clemson. I 
am seeing it happening, and I am coming around here hearing ``skills, 
skills.'' We have skills. Do not give me that. I have skills coming out 
of my ear.
  And do not give me any of these other arguments they are talking 
about, product liability, and all of these other silly--why do you 
think we have Hoffmann La Roche and BMW. And go right on down. And we 
have now 50 Japanese plants. I have almost 100 German plants, a bunch 
of British plants. Michelin--the French--they just announced another 
expansion. I remember calling on them in Paris in 1961. Now they are 
going up to 11,600 employees, Senator, with their North American 
headquarters in Greenville, SC. I got Bowater; I have got their North 
American plant in Greenville, S.C. So let us get on with what the 
Senator from North Dakota wants to talk about, and that is, these 
freebies that are being given out to continue a policy that was well-
conceived in order to spread capitalism and defeat communism in the 
cold war. We have won that war.
  Now we look around, and we have sacrificed the working people of 
America, and our standard of living. And the job is for you and I to be 
realistic and start building it back up. And do not come--I can hear it 
now, because I can tell you, Senator, once they chose Pat Choate, you 
are going to find the multinationals, they are going to come down here 
on your necks and heads around here, ``free trade, free trade, 
protectionism, protectionism, protectionism.''
  Let me plead guilty. I am a protectionist. We have the Army to 
protect us against the enemies from without. We have the FBI to protect 
us from the enemies within. We have Social Security to protect us from 
the ravages of old age, Medicare to protect us in ill health. The 
fundamentals of government, that is what we are up here for.

  I remember when Ronald Reagan was sworn in in the rotunda. He raised 
his hand to preserve, protect, and defend. And when we came back down 
here on the Senate floor and started talking about it, he said, ``Oh, 
no, we don't want to be protectionist.'' You darn right I want to 
protect our industrial backbone, our standard of living, and the jobs 
of America. And I want a competitive trade policy. We are not 
competing. We have been taken over by a fifth column within the ranks 
in this land of ours.
  Remember, we heard this same argument about comparative advantage and 
free trade from David Ricardo in the earliest, earliest of days. Or the 
Brits, once we got our freedom, they said, ``Now, just you little 
fledgling nation, the United States of America, you trade back with the 
mother country with what you produce best, and we will trade back with 
what we produce best,'' the doctrine of comparative advantage, free 
trade, free trade, free trade. And you know what Alexander Hamilton 
said? He wrote it in a little booklet, ``Reports on Manufacturers.'' 
Get a copy of it. There is one left. It is on guard over there at the 
Library of Congress where I hope to be tonight because they have a 
wonderful reading going on over there. But this is even again more 
important.
  And in the ``Reports on Manufacturers,'' Alexander Hamilton told the 
Brits in one line, ``Bug off. We are not going to remain your colony. 
We are not going to continue to ship our agricultural products, our 
timber, our iron, our coal, and bring in your manufactured products. 
You have to be a nation State. You have to have a preeminence in 
manufacturing.''
  The second bill, Mr. President, on July 4, 1789, that actually passed 
this Congress was a protectionist bill, setting a 50-percent tariff on 
60 some articles going on down the list. And we built this United 
States of America, this economic giant with protectionism.
  Abraham Lincoln, when he was going to get the transcontinental 
railroad--that same type of crowd is buzzing around us here tonight; 
and they will be around tomorrow; and they will say, go ahead and let 
us have free trade, free trade--they told President Lincoln that we 
should get the steel from England. He said no. He would build our own 
steel mills. When they got through, they had not only the 
transcontinental railroad, but they had their own steal capacity.
  And so it was in the Depression, in the darkest days. Franklin 
Roosevelt came in with his competitive free trade under Cordell Hull. 
And Dwight David Eisenhower, in 1955, put quotas on imported oil 
because we had to sort of build up our capacity. And we have done that 
from time to time. And now is a time again when we survey the horizon, 
and start talking as realists. And quit giving us these symbolic 
baloneys, malarkeys such as Smoot-Hawley.
  Mr. President, right to the point, I ask unanimous consent--I am 
trying to save time here--I ask unanimous consent to have printed in 
the Record the record made by our distinguished former colleague, 
Senator John Heinz of Pennsylvania entitled ``The Myth of Smoot-
Hawley'' back in 1983.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                        The Myth of Smoot-Hawley

       Mr. Heinz. Mr. President, every time someone in the 
     administration or the Congress gives a speech about a more 
     aggressive trade policy or the need to confront our trading 
     partners with their subsidies, barriers to import and other 
     unfair practices, others, often in the academic community or 
     in the Congress immediately react with speeches on the return 
     of Smoot-Hawley and the dark days of blatant protectionism. 
     ``Smoot-Hawley,'' for those uninitiated in this arcane field, 
     is the Tariff Act of 1930 (Public Law 71-361) which among 
     other things imposed significant increases on a large number 
     of items in the Tariff Schedules. The act has also been, for 
     a number of years, the basis of our countervailling duty law 
     and a number of other provisions relating to unfair trade 
     practices, a fact that tends to be ignored when people talk 
     about the evils of Smoot-Hawley.
       A return to Smoot-Hawley, of course, is intended to mean a 
     return to depression, unemployment, poverty, misery, and even 
     war, all of which apparently were directly caused by this 
     awful piece of legislation. Smoot-Hawley has thus become a 
     code word for protectionism, and in turn a code word for 
     depression and major economic disaster. Those who sometimes 
     wonder at the ability of Congress to change the country's 
     direction through legislation must marvel at the sea change 
     in our economy apparently wrought by this single bill in 
     1930.
       Historians and economists, who usually view these things 
     objectively, realize that the truth is a good deal more 
     complicated, that the causes of the Depression were far 
     deeper, and that the link between high tariffs and economic 
     disaster is much more tenuous than is implied by this 
     simplistic linkage. Now, however, someone has dared to 
     explode this myth publicly through an economic analysis of 
     the actual tariff increases in the act and their effects in 
     the early years of the Depression. The study points out that 
     the increases in question affected only 231 million dollars' 
     worth of products in the second half of 1930, significantly 
     less than 1 percent of world trade; that in 1930-32 duty-free 
     imports into the United States dropped at virtually the same 
     percentage rate as dutiable imports; and that a 13.5 percent 
     drop in GNP in 1930 can hardly be blamed on a single piece of 
     legislation that was not even enacted until midyear.
       This, of course, in not to suggest that high tariffs are 
     good or that Smoot-Hawley was a wise piece of legislation. It 
     was not. But it was also clearly not responsible for all the 
     ills of the 1930's that are habitually blamed on it by those 
     who fancy themselves defenders of free trade. While I believe 
     this study does have some policy implications, which I may 
     want to discuss at some future time, one of the most useful 
     things it may do is help us all clean up our rhetoric and 
     reflect a more sophisticated--and accurate--view of economic 
     history.
       Mr. President, I ask that the study, by Don Bedell of 
     Bedell Associates, be printed in the Record.
       The study follows:


                                            Bedell Associates,

                                   Palm Desert, Calif., April 1983

   Tariffs Miscast as Villain in Bearing Blame for Great Depression--
                        Smoot/Hawley Exonerated

                         (By Donald W. Bedell)


             smoot/hawley, depression and world revolution

       It has recently become fashionable for media reporters, 
     editorial writers here and

[[Page S10174]]

     abroad, economists, Members of Congress, members of foreign 
     governments, UN organizations and a wide variety of scholars 
     to express the conviction that the United States, by the 
     single act of causing the Tariff Act of 1930 to become law 
     (Public Law 361 of the 71st Congress) plunged the world into 
     an economic depression, may well have prolonged it, led to 
     Hitler and World War II.
       Smoot/Hawley lifted import tariffs into the U.S. for a 
     cross section of products beginning mid-year 1930, or more 
     than 8 months following the 1929 financial collapse. Many 
     observers are tempted simply repeat ``free trade'' economic 
     doctrine by claiming that this relatively insignificant 
     statute contained an inherent trigger mechanism which upset a 
     neatly functioning world trading system based squarely on the 
     theory of comparative economics, and which propelled the 
     world into a cataclysm of unmeasurable proportions.
       We believe that sound policy development in international 
     trade must be based solidly on facts as opposed to 
     suspicious, political or national bias, or ``off-the-cuff'' 
     impressions 50 to 60 years later of how certain events may 
     have occurred.
       When pertinent economic, statistical and trade data are 
     carefully examined will they show, on the basis of 
     preponderance of fact, that passage of the Act did in fact 
     trigger or prolong the Great Depression of the Thirties, that 
     it had nothing to do with the Great Depression, or that it 
     represented a minor response of a desperate nation to a giant 
     world-wide economic collapse already underway?
       It should be recalled that by the time Smoot/Hawley was 
     passed 6 months had elapsed of 1930 and 8 months had gone by 
     since the economic collapse in October, 1929. Manufacturing 
     plants were already absorbing losses, agriculture surpluses 
     began to accumulate, the spectre of homes being foreclosed 
     appeared, and unemployment showed ominous signs of a 
     precipitous rise.
       The country was stunned, as was the rest of the world. All 
     nations sought very elusive solutions. Even by 1932, and the 
     Roosevelt election, improvisation and experiment described 
     government response and the technique of the New Deal, in the 
     words of Arthur Schlesinger, Jr. in a New York Times article 
     on April 10, 1983. President Roosevelt himself is quoted in 
     the article as saying in the 1932 campaign, ``It is common 
     sense to take a method and try it. If it fails, admit it 
     frankly and try another. But above all, try something.''
       The facts are that, rightly or wrongly, there were no major 
     Roosevelt Administration initiatives regarding foreign trade 
     until well into his Administration; thus clearly suggesting 
     that initiatives in that sector were not thought to be any 
     more important than the Hoover Administration thought them. 
     However, when all the numbers are examined we believe 
     neither. President Hoover nor President Roosevelt can be 
     faulted for placing international trade's role in world 
     economy near the end of a long list of sectors of the economy 
     that had caused chaos and suffering and therefore needed 
     major corrective legislation.
       How important was international trade to the U.S.? How 
     important was U.S. trade to its partners in the Twenties and 
     Thirties?
       In 1919, 66% of U.S. imports were duty free, or $2.9 
     Billion of a total of $4.3 Billion. Exports amounted to $5.2 
     Billion in that year making a total trade number of $9.6 
     Billion or about 14% of the world's total. See Chart I below.

                                 CHART I.--U.S. GROSS NATIONAL PRODUCT, 1929-33                                 
                                          [Dollar amounts in billions]                                          
----------------------------------------------------------------------------------------------------------------
                                                                       1929     1930     1931     1932     1933 
----------------------------------------------------------------------------------------------------------------
GNP................................................................   $103.4    $89.5    $76.3    $56.8    $55.4
U.S. international trade...........................................     $9.6     $6.8     $4.5     $2.9     $3.2
U.S. international trade percent of GNP............................      $.3      7.6      5.9      5.1  $5.6 \1
                                                                                                               \
----------------------------------------------------------------------------------------------------------------
\1\ Series U, Department of Commerce of the United States, Bureau of Economic Analysis.                         

       Using the numbers in that same Chart I it can be seen that 
     U.S. imports amounted to $4.3 Billion or just slightly above 
     12% of total world trade. When account is taken of the fact 
     that only 33%, or $1.5 Billion, of U.S. imports was in the 
     Dutiable category, the entire impact of Smoot/Hawley has to 
     be focused on the $1.5 Billion number which is barely 1.5% of 
     U.S. GNP and 4% of world imports.
       What was the impact? In dollars Dutiable imports fell by 
     $462 Million, or from $1.5 Billion to $1.0 Billion, during 
     1930. It's difficult to determine how much of that small 
     number occurred in the second half of 1930 but the 
     probability is that it was less than 50%. In any case, the 
     total impact of Smoot/Hawley in 1930 was limited to a 
     ``damage'' number of $231 Million; spread over several 
     hundred products and several hundred countries.
       A further analysis of imports into the U.S. discloses that 
     all European countries accounted for 30% or $1.3 Billion in 
     1929 divided as follows: U.K. at $330 Million or 7\1/2\%, 
     France at $171 Million or 3.9%, Germany at $255 Million or 
     5.9%, and some 15 other nations accounting for $578 Million 
     or 13.1% for an average of 1%.
       These numbers suggest that U.S. imports were spread broadly 
     over a great array of products and countries, so that any 
     tariff action would by definition have only a quite modest 
     impact in any given year or could be projected to have any 
     important cumulative effect.
       This same phenomenon is apparent for Asian countries which 
     accounted for 29% of U.S. imports divided as follows: China 
     at 3.8%, Japan at $432 Million and 9.8% and with some 20 
     other countries sharing in 15% or less than 1% on average.
       Australia's share was 1.3% and all African countries sold 
     2.5% of U.S. imports.
       Western Hemisphere countries provided some 37% of U.S. 
     imports with Canada at 11.4%, Cuba at 4.7%, Mexico at 2.7%, 
     Brazil at 4.7% and all others accounting for 13.3% or about 
     1% each.
       The conclusion appears inescapable on the basis of these 
     numbers; a potential adverse impact of $231 Million spread 
     over the great array of imported products which were 
     available in 1929 could not realistically have had any 
     measurable impact on America's trading partners.
       Meanwhile, the Gross National Product (GNP) in the United 
     States had dropped an unprecedented 13.5% in 1930 alone, from 
     $103.4 Billion in 1929 to $89 Billion by the end of 1930. It 
     is unrealistic to expect that a shift in U.S. international 
     imports of just 1.6% of U.S. GNP in 1930, for example ($231 
     Million or $14.4 Billion) could be viewed as establishing a 
     ``precedent'' for America's trading partners to follow, or 
     represented a ``model'' to follow.
       Even more to the point an impact of just 1.6% could not 
     reasonably be expected to have any measurable effect on the 
     economic health of America's trading partners.
       Note should be taken of the claim by those who repeat the 
     Smoot/Hawley ``villain'' theory that it set off a ``chain'' 
     reaction around the world. While there is some evidence that 
     certain of America's trading partners retaliated against the 
     U.S. there can be no reliance placed on the assertion that 
     those same trading partners retaliated against each other by 
     way of showing anger and frustration with the U.S. Self-
     interest alone would dictate otherwise, common sense would 
     intercede on the side of avoidance of ``shooting oneself in 
     the foot,'' and the facts disclose that world trade declined 
     by 18% by the end of 1930 while U.S. trade declined by some 
     10% more or 28%. U.S. foreign trade continued to decline by 
     10% more through 1931, or 53% versus 43% for worldwide trade, 
     but U.S. share of world trade declined by only 18% from 14% 
     to 11.3% by the end of 1931.
       Reference was made earlier to the Duty Free category of 
     U.S. imports. What is especially significant about those 
     import numbers is the fact that they dropped in dollars by an 
     almost identical percentage as did Dutiable goods through 
     1931 and beyond: Duty Free imports declined by 29% in 1930 
     versus 27% for Dutiable goods, and by the end of 1931 the 
     numbers were 52% versus 51% respectively.
       The only rational explanation for this phenomenon is that 
     Americans were buying less and prices were falling. No basis 
     exists for any claim that Smoot/Hawley had a distinctively 
     devastating effect on imports beyond and separate from the 
     economic impact of the economic collapse in 1929.
       Based on the numbers examined so far, Smoot/Hawley is 
     clearly a mis-cast villain. Further, the numbers suggest the 
     clear possibility that when compared to the enormity of the 
     developing international economic crisis Smoot/Hawley had 
     only a minimal impact and international trade was a victim of 
     the Great Depression.
       This possibility will become clear when the course of the 
     Gross National Product (GNP) during 1929-1933 is examined and 
     when price behaviour world-wide is reviewed, and when 
     particular Tariff Schedules of Manufacturers outlined in the 
     legislation are analyzed.
       Before getting to that point another curious aspect of the 
     ``villain'' theory is worthy of note. Without careful 
     recollection it is tempting to view a period of our history 
     some 50-60 years ago in terms of our present world. Such a 
     superficial view not only makes no contribution to 
     constructive policy-making. It overlooks several vital 
     considerations which characterized the Twenties and Thirties:
       1. The international trading system of the Twenties bears 
     no relation to the interdependent world of the Eighties 
     commercially, industrially and financially in size or 
     complexity.
       2. No effective international organization existed, similar 
     to the General Agreement for Tariffs and Trade (GATT) for 
     example for resolution of disputes. There were no trade 
     ``leaders'' among the world's nations in part because most 
     mercantile nations felt more comfortable without dispute 
     settlement bodies.
       3. Except for a few critical products foreign trade was not 
     generally viewed in the ``economy-critical'' context as 
     currently in the U.S. As indicated earlier neither President 
     Hoover nor President Roosevelt viewed foreign trade as 
     crucial to the economy in general or recovery in particular.
       4. U.S. foreign trade was relatively an amorphous 
     phenomenon quite unlike the highly structured system of the 
     Eighties; characterized largely then by ``caveat emptor'' and 
     a broadly laissez-faire philosophy generally unacceptable 
     presently.
       These characteristics, together with the fact that 66 
     percent of U.S. imports were Duty Free in 1929 and beyond, 
     placed overall international trade for Americans in the 
     Twenties and Thirties on a very low level of priority 
     especially against the backdrop of world-wide depression. 
     Americans in the

[[Page S10175]]

     Twenties and Thirties could no more visualize the world of 
     the Eighties than we in the Eighties can legitimately hold 
     them responsible for failure by viewing their world in other 
     than the most pragmatic and realistic way given those 
     circumstances.
       For those Americans then, and for us now, the numbers 
     remain the same. On the basis of sheer order of magnitude of 
     the numbers illustrated so far, the ``villain'' theory often 
     attributed to Smoot/Hawley is an incorrect reading of history 
     and a misunderstanding of the basic and incontrovertible law 
     of cause and effect.
       It should also now be recalled that, despite heroic efforts 
     by U.S. policy-makers its GNP continued to slump year-by-year 
     and reached a total of just $55.4 billion in 1933 for a total 
     decline from 1929 levels of 46 percent. The financial 
     collapse of October, 1920 had indeed left its mark.
       By 1933 the 1929 collapse had prompted formation in the 
     U.S. of the Reconstruction Finance Corporation, Federal Home 
     Loan Bank Board, brought in a Democrat President with a 
     program to take control of banking, provide credit to 
     property owners and corporations in financial difficulties, 
     relief to farmers, regulation and stimulation of business, 
     new labor laws and social security legislation.\1\
---------------------------------------------------------------------------
     \1\ Beard, Charles and Mary, New Basic History of the United 
     States.
---------------------------------------------------------------------------
       So concerned were American citizens about domestic economic 
     affairs, including the Roosevelt Administration and the 
     Congress, that scant attention was paid to the solitary 
     figure of Secretary of State Cordell Hull. He, alone among 
     the Cabinet, was convinced that international trade had 
     material relevance to lifting the country back from 
     depression. His efforts to liberalize trade in general and to 
     find markets abroad for U.S. products in particular from 
     among representatives of economically stricken Europe, Asia 
     and Latin America were abruptly ended by the President and 
     the 1933 London Economic Conference collapsed without result.
       The Secretary did manage to make modest contributions to 
     eventual trade recovery through the Most Favored Nation (MFN) 
     concept. But it would be left for the United States at the 
     end of World War II to undertake an economic and political 
     role of leadership in the world; a role which in the Twenties 
     and Thirties Americans in and out of government felt no need 
     to assume, and did not assume. Evidence that conditions in 
     the trade world would have been better, or even different, 
     had the U.S. attempted some leadership role cannot 
     responsibly be assembled. Changing the course of past history 
     has always been less fruitful than applying perceptively 
     history's lessons.
       The most frequently used members thrown out about Smoot/
     Hawley's impact by those who believe in the ``villain'' 
     theory are those which clearly establish that U.S. dollar 
     decline in foreign trade plummeted by 66 percent by the end 
     of 1933 from 1929 levels, $9.6 billion to $3.2 billion 
     annually.
       Much is made of the co-incidence that world-wide trade also 
     sank about 66 percent for the period. Chart II summarizes the 
     numbers.

                                CHART II.--UNITED STATES AND WORLD TRADE, 1929-33                               
                                          [In billions of U.S. dollars]                                         
----------------------------------------------------------------------------------------------------------------
                                                                       1929     1930     1931     1932     1933 
----------------------------------------------------------------------------------------------------------------
United States:                                                                                                  
    Exports........................................................      5.2      3.8      2.4      1.6      1.7
    Imports........................................................      4.4      3.0      2.1      1.3      1.5
Worldwide:                                                                                                      
    Exports........................................................     33.0     26.5     18.9     12.9     11.7
    Imports........................................................     35.6     29.1     20.8     14.0   a 12.5
----------------------------------------------------------------------------------------------------------------
a Series U Department of Commerce of the United States, League of Nations, and International Monetary Fund.     

       The inference is that since Smoot/Hawley was the first 
     ``protectionist'' legislation of the Twenties, and the end of 
     1933 saw an equal drop in trade that Smoot/Hawley must have 
     caused it. Even the data already presented suggest the 
     relative irrelevance of the tariff-raising Act on a strictly 
     trade numbers basis. When we examine the role of a world-wide 
     price decline in the trade figures for almost every product 
     made or commodity grown the ``villain'' Smoot/Hawley's impact 
     will not be measurable.
       It may be relevant to note here that the world's trading 
     ``system'' paid as little attention to America's revival of 
     foreign trade beginning in 1934 as it did to American trade 
     policy in the early Thirties. From 1934 through 1939 U.S. 
     foreign trade rose in dollars by 80% compared to world-wide 
     growth of 15%. Imports grew by 68% and exports climbed by a 
     stunning 93%. U.S. GNP by 1939 had developed to $91 billion, 
     to within 88% of its 1929 level.
       Perhaps this suggests that America's trading partners were 
     more vulnerable to an economic collapse and thus much less 
     resilient than was the U.S. In any case the international 
     trade decline beginning as a result of the 1929 economic 
     collapse, and the subsequent return by the U.S. beginning in 
     1934 appear clearly to have been wholly unrelated to Smoot/
     Hawley.
       As we begin to analyze certain specific Schedules appearing 
     in the Tariff Act of 1930 it should be noted that sharp 
     erosion of prices world-wide caused dollar volumes in trade 
     statistics to drop rather more than unit-volume thus 
     emphasizing the decline value. In addition, it must be 
     remembered that as the Great Depression wore on, people 
     simply bought less of everything increasing further price 
     pressure downward. All this wholly apart from Smoot/Hawley.
       When considering specific Schedules, No. 5 which includes 
     Sugar, Molasses, and Manufactures Of, maple sugar cane, 
     sirups, adonite, dulcite, galactose, inulin, lactose and 
     sugar candy. Between 1929 and 1933 import volume into the 
     U.S. declined by about 40% in dollars. In price on a world 
     basis producers suffered a stunning 60% drop. Volume of sugar 
     imports declined by only 42% into the U.S. in tons. All these 
     changes lend no credibility to the ``villain'' theory unless 
     one assumes, erroneously, that the world price of sugar was 
     so delicately balanced that a 28% drop in sugar imports by 
     tons into the U.S. in 1930 destroyed the price structure and 
     that the decline was caused by tariffs and not at least 
     shared by decreased purchases by consumers in the U.S. and 
     around the world.
       Schedule 4 describes Wood and Manufactures Of, timber hewn, 
     maple, brier root, cedar from Spain, wood veneer, hubs for 
     wheels, casks, boxes, reed and rattan, tooth-picks, porch 
     furniture, blinds and clothes pins among a great variety of 
     product categories. Dollar imports into the U.S. slipped by 
     52% from 1929 to 1933. By applying our own GNP as a 
     reasonable index of prices both at home and overseas, unit 
     volume decreased only 6% since GNP had dropped by 46% in 
     1933. The world-wide price decline did not help profitability 
     of wood product makers, but to tie that modest decline in 
     volume to a law affecting only 6\1/2\% of U.S. imports in 
     1929 puts great stress on credibility, in terms of harm done 
     to any one country or group of countries.
       Schedule 9, Cotton Manufactures, a decline of 54% in 
     dollars is registered for the period, against a drop of 46% 
     in price as reflected in the GNP number. On the assumption 
     that U.S. GNP constituted a rough comparison to world prices, 
     and the fact that U.S. imports of these products was 
     infinitesimal, Smoot/Hawley was irrelevant. Further, the 
     price of raw cotton in the world plunged 50% from 1929 to 
     1933. U.S. growers had to suffer the consequences of that low 
     price but the price itself was set by world market prices, 
     and was totally unaffected by any tariff action by the U.S.
       Schedule 12 deals with Silk Manufactures, a category which 
     decreased by some 60% in dollars. While the decrease amounted 
     to 14% more than the GNP drop, volume of product remained 
     nearly the same during the period. Assigning responsibility 
     to Smoot/Hawley for this very large decrease in price 
     beginning in 1930 stretches credibility beyond the breaking 
     point.
       Several additional examples of price behaviour are 
     relevant.
       One is Schedule 2 products which include brick and tile. 
     Another is Schedule 3 iron and steel products. One 
     outstanding casualty of the financial collapse in October, 
     1929 was the Gross Private Investment number. From $16.2 
     Billion annually in 1939 by 1933 it has fallen by 91% to just 
     $1.4 Billion. No tariff policy, in all candor, could have so 
     devastated an industry as did the economic collapse of 1929. 
     For all intents and purposes construction came to a halt and 
     markets for glass, brick and steel products with it.
       Another example of price degradation world-wide completely 
     unrelated to tariff policy is Petroleum products. By 1933 
     these products had decreased in world price by 82% but Smott/
     Hawley had no Petroleum Schedule. The world market place set 
     the price.
       Another example of price erosion in world market is 
     contained in the history of exported cotton goods from the 
     United States. Between 1929 and 1933 the volume of exported 
     goods actually increased by 13.5% while the dollar value 
     dropped 48%. This result was wholly unrelated to the tariff 
     policy of any country.
       While these examples do not include all Schedules of Smoot/
     Hawley they clearly suggest that overwhelming economic and 
     financial forces were at work affecting supply and demand and 
     hence on prices of all products and commodities and that 
     these forces simply obscured any measurable impact the Tariff 
     Act of 1930 might possibly have had under conditions of 
     several years earlier.
       To assert otherwise puts on those proponents of the Smoot/
     Hawley ``villian'' theory a formidable challenge to explain 
     the following questions:
       1. What was the nature of the ``trigger'' mechanism in the 
     Act that set off the alleged domino phenomenon in 1930 that 
     began or prolonged the Great Depression when implementation 
     of the Act did not begin until mid-year?
       2. In what ways was the size and nature of U.S. foreign 
     trade in 1929 so significant and critical to the world 
     economy's health that a less than 4% swing in U.S. imports 
     could be termed a crushing and devastating blow?
       3. On the basis of what economic theory can the Act be said 
     to have caused a GNP drop of an astounding drop of 13.5% in 
     1930 when the Act was only passed in mid-1930? DId the entire 
     decline take place in the second half of 1930? Did world-wide 
     trade begin its decline of some $13 Billion only in the 
     second half of 1930?
       4. Does the fact that duty free imports into the U.S. 
     dropped in 1930 and 1931 and in 1932 at the same percentage 
     rate as dutiable imports support the view that Smoot/Hawley 
     was the cause of the decline in U.S. imports?
       4. Is the fact that world wide trade declined less rapidly 
     than did U.S. foreign trade prove the assertion that American 
     trading partners retaliated against each other as well as 
     against the U.S. because and subsequently held the U.S. 
     accountable for starting an international trade war?
       5. Was the international trading system of the Twenties so 
     delicately balanced that a

[[Page S10176]]

     single hastily drawn tariff increase bill affecting just $231 
     Million of dutiable products in the second half of 1930 began 
     a chain reaction that scuttled the entire system? Percentage-
     wise $231 Million is but 0.65% of all of 1929 world-wide 
     trade and just half that of world-wide imports.
       The preponderance of history and facts of economic life in 
     the international area make an affirmative response by the 
     ``villain'' proponents an intolerable burden.
       It must be said that the U.S. does offer a tempting target 
     for Americans who incessantly cry ``mea culpa'' over all the 
     world's problems, and for many among our trading partners to 
     explain their problems in terms of perceived American 
     inability to solve those problems.
       In the world of the Eighties U.S. has indeed very serious 
     and perhaps grave responsibility to assume leadership in 
     international trade and finance, and in politics as well.
       On the record, the United States has met that challenge 
     beginning shortly after World War II.
       The U.S. role in structuring the United Nations, the 
     General Agreement on Tariffs and Trade (GATT), the 
     International Monetary Fund, the Bretton Woods and Dumbarton 
     Oaks Conference on monetary policy, the World Bank and 
     various Regional Development Banks, for example, is a record 
     unparalleled in the history of mankind.
       But in the Twenties and Thirties there was no acknowledged 
     leader in International affairs. On the contrary, evidence 
     abounds that most nations preferred the centuries-old 
     patterns of international trade which emphasized pure 
     competition free from interference by any effective 
     international supervisory body such as GATT.
       Even in the Eighties examples abound of trading nations 
     succumbing to nationalistic tendencies and ignoring signed 
     trade agreements. Yet the United States continues as the 
     bulwark in trade liberalization proposals within the GATT. It 
     does so not because it could not defend itself against any 
     kind of retaliation in a worst case scenario but because no 
     other nation is strong enough to support them successfully 
     without the United States.
       The basic rules of GATT are primarily for all those 
     countries who can't protect themselves in the world of the 
     Eighties and beyond without rule of conduct and discipline.
       The attempt to assign responsibility to the U.S. in the 
     Thirties for passing the Smoot/Hawley tariff act and thus set 
     off a chain reaction of international depression and war is, 
     on the basis of a prepondance of fact, a serious mis-reading 
     of history, a repeal of the basic concept of cause and effect 
     and a disregard for the principle of proportion of numbers.
       It may constitute a fascinating theory for political 
     mischief-making but it is a cruel hoax on all those 
     responsible for developing new and imaginative measures 
     designed to liberalize international trade.
       Such constructive development and growth is severely 
     impeded by perpetuating what is no more than a symbolic 
     economic myth.
       Nothing is less worthwhile than attempting to re-write 
     history, not learning from it. Nothing is more worthwhile 
     than making careful and perceptive and objective analysis in 
     the hope that it may lead to an improved and liberalized 
     international trading system.

  Mr. HOLLINGS. One, Smoot-Hawley, Mr. President, was passed 8 months 
after the crash. It could not have caused the crash we had that 
occurred in 1929. Smoot-Hawley was June 1930.
  It only affected one-third of the trade. As is stated here, Alan 
William Wolff, in ``Improving United States Trade Policy,'' ``Smoot-
Hawley was only half of that which had been put into effect by the 
Fordney-McCumber Tariff Act of 1922. Even after enactment of Smoot-
Hawley, two-thirds of all U.S. imports, in value, entered the United 
States duty-free.''
  A statement, also, by the distinguished professor of economics at 
MIT, Paul Krugman, who just recently had an article, and we will get to 
that--I did not realize this was coming up --in the London Economist 
relative to monetary policy. He stated, in ``The Age of Diminished 
Expectations,'' ``In popular arguments against protectionism, the usual 
warning is that protectionism threatens our jobs--the Smoot-Hawley 
tariff of 1931, we are told, caused the Depression, and history can 
repeat itself.''

       The claim that protectionism caused the Depression is 
     nonsense; the claim that future protectionism will lead to a 
     repeat performance is equally nonsensical.

  Now, Mr. President, within 3 years in 1933 we had a plus balance of 
trade. Trade at that time was only about 1 percent of our GNP. It is up 
to about 17 percent to 18 percent. It was not a factor, really, but 
that is the false history that these politicians run around and they 
will call the Senator from North Dakota ``Smoot,'' and they will call 
the Senator from South Carolina ``Hawley.'' There they are on the floor 
again. They are trying to get in protectionism and start a depression.
  Mr. President, when they get to trade deficits, I have another 
article that we want to have printed in the Record, because they all 
talk, ``exports, exports, exports.'' They never want to talk about 
imports.
  I want to have printed in the Record the merchandise trade deficits 
since 1979, and I ask unanimous consent to have it printed in the 
Record at this point.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


                  Merchandise trade deficit since 1979


                                                                Billion
1979..............................................................$27.6
1980...............................................................25.5
1981...............................................................28.0
1982...............................................................36.0
1983...............................................................67.1
1984..............................................................112.5
1985..............................................................122.2
1986..............................................................145.1
1987..............................................................159.6
1988..............................................................127.0
1989..............................................................115.0
1990..............................................................109.0
1991...............................................................73.8
1992...............................................................96.1
1993..............................................................132.6
1994..............................................................166.1
1995................................................................174

  Mr. HOLLINGS. Mr. President, it shows we lost 1.5 trillion bucks in 
deficits. That means more imports than exports. I could get into the 
argument about exports creating 20,000 jobs. The Department of Commerce 
finally revised that just 6 weeks ago. It is only 14,000 jobs. The 
exports are not the reason.
  I am quoting from Business Week, September 2, just 8 days ago:

       Indeed, exports are not the reason for the second quarter 
     deterioration in the trade deficit. That blame goes to 
     imports. Exports dipped 0.3 percent in June to $69.7 billion, 
     but much of the decline reflected a drop in the volatile 
     aircraft shipments. For the quarter, total exports rose at a 
     7.3 percent annual rate, up from 2.6 percent in the first 
     quarter.
       So far, the dollar's recent strength has not forced 
     exporters to raise prices. Export prices fell 0.5 percent in 
     July and, excluding farm products and the soaring cost of 
     grain prices, are down 1.6 percent from a year ago. That plus 
     improving economies in Mexico and Canada should continue to 
     lift exports in coming months.
       The story for imports is much less encouraging for growth. 
     Despite a 3.3 percent drop in imports in June, goods and 
     services from abroad in the second quarter still soared at a 
     13.9 percent annual rate, up from an already rapid 11.7 
     percent gain in the first.

  Rather than get into the whole article, every time I get to this 
particular part of the debate they all want to talk exports, exports, 
and that is more or less like the octopus squirting oil on the troubled 
waters and escaping in its own dark mist. Exports are not our problem; 
they are our opportunity, and we have every office in the Lord's world 
working with exports. I work with the Export Council and gave out the 
awards in my own backyard just this past month. But the truth is that 
it is imports and it is the deficit of $1.5 trillion in the last 12 to 
13 years.
  Now, Mr. President, the competition, that is what we really want to 
talk about. The competition is our sales. I remember these folks coming 
to me in the early days now that we have been in this game for at least 
35 years, and the export job creation myth--I use a figure in the 
debate I got from the Department of Commerce of 41 percent back in 
1978, 41 percent of the imports in the United States were U.S. 
companies that moved their manufacturing offshore, and bringing it back 
in, the finished product. It was 41 percent then, and since that there 
has been a deluge. But if you go over there, they give you the 41 
percent.
  I have been like a detective trying to get the truth out of that 
crowd, but they are controlled. They are controlled on this particular 
score, particularly when you make these joint ventures. You cannot go 
into China. You cannot go into Japan. You cannot go into Indonesia 
unless you make a joint venture, and that part you have 49 and they 
have 50 percent, and that part of your manufacturing, the 49 percent, 
is not counted in the figures. That is why we do not realize how we 
have gone from some 26 percent in manufacturing 10 years ago down to 13 
percent.
  However, 50 percent of the U.S. exports come from 100 companies, 80 
percent from 250 companies, a very small part. Our distinguished 
colleague from North Dakota is talking about small

[[Page S10177]]

business. These are the same companies, now, that have been the largest 
downsizers.
  Did you hear that right? Those are the ones who were talking about 
downsizing. General Electric in 1985 had 243,000 jobs; in 1995, they 
are down to 150,000. IBM shaved 132,000 jobs in the last 10 years; it 
now employs more people abroad than at home. Abroad is 116,000. We have 
a foreign company--Mr. President, IBM is not a United States company 
any longer. They have more workers overseas, 116,000 and 111,000 here. 
Intel reduced U.S. employment last year 22,000, down to 17,000. General 
Motors in 1985 had 559,000 and are down to 314,000 last year.
  I ask unanimous consent to have printed in the Record at this point 
another emphasis on this measure, and that is by William Greider on 
August 8, 1996, in the Rolling Stone, ``How the taxpayer-funded Export-
Import Bank helps ship the jobs overseas.''
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                            The Ex-Im Files


  how the taxpayer-funded export-import bank helps ship jobs overseas

                          (By William Greider)

       Washington, D.C.--As the Nation's salesman in chief, Bill 
     Clinton looks like a smashing success. When Clinton came to 
     office, his long-term strategy for restoring American 
     prosperity had many facets, but the core of the plan could be 
     summarized in one word: exports. The U.S. economy would boom 
     or stagnate, it was assumed, depending on how American goods 
     fared in global markets. So the president mobilized the 
     government in pursuit of sales.
       Flying squads of Cabinet officers, sometimes accompanied by 
     corporate CEOs, were dispatched to forage for buyers in 
     foreign capitals from Beijing to Jakarta. The Commerce 
     Department targeted 10 nations--India, Mexico and Brazil 
     among them--as the ``big emerging markets.'' Trade 
     negotiators hammered on Japan and China to buy more American 
     stuff. And two new agreements were completed--GATT and 
     NAFTA--to reduce foreign tariffs.
       U.S. industrial exports have soared in the Clinton years, 
     from $396 billion during the recessionary trough of 1992 to 
     around $520 billion last year. And as this administration has 
     said time and again, more exports means more jobs--usually 
     good jobs with higher wages. In his fierce commitment to 
     trade, Clinton is not much different from Ronald Reagan, who 
     (notwithstanding his laissezfaire pretensions) also played 
     hardball on trade deals and, in some cases, intervened with 
     more effective results. George Bush, too, bargained on behalf 
     of corporate interests and played globe-trotting salesman. 
     Promoting exports and foreign investment is not a new idea; 
     it has enjoyed a bipartisan political consensus for decades.
       What does seem to be new in American politics are the 
     thickening doubts among citizens and a rising chorus of 
     critics, informed and uninformed, who question Washington's 
     assumptions about exports. The conventional strategy, the 
     critics argue, may help the multinational companies turn 
     profits, but does it really serve American workers and the 
     broad public interest? The new realities of globalized 
     production play havoc with the old logic of exports-equal-
     jobs. Sometimes it is the jobs that are exported, too.
       This contradiction, usually covered up with platitudes and 
     doublespeak in political debate, becomes powerfully clear 
     when you look closely at the dealings of an obscure federal 
     agency located just across Lafayette Park from the White 
     House: the U.S. Export-Import Bank with only 440 civil 
     servants and a budget of less than $1 billion--small change 
     as Washington bureaucracies go.
       Yet America's most important multinational corporations 
     devote solicitous attention to the Ex-Im Bank. Their 
     lobbyists shepherd its appropriation through Congress every 
     year and defend the agency against occasional attacks. 
     Why? The Ex-Im Bank provides U.S. corporations with 
     hundreds of millions of dollars each year in financial 
     grease that smooths their trade deals in the new global 
     economy.
       This year, Ex-Im will pump our $744 million in taxpayer 
     subsidies to America's export producers, financing the below-
     market loans and loan guarantees that help U.S. companies 
     sell aircraft, telecommunications equipment, electric power 
     turbines and other products--sometimes even entire 
     factories--to foreign markets. Since the biggest subsidies 
     always go to the largest corporations, skeptics in Congress 
     sometimes refer to Ex-Im as the Bank of Boeing. It might as 
     well be called the Bank of General Electric--or AT&T, IBM, 
     Caterpillar or other leading producers. Ex-Im's senior 
     officers call these firms ``the customers.''
       But the banker-bureaucrats at Ex-Im see their main mission 
     as fostering American employment. ``Our motto is, Jobs 
     through exports,'' says James C. Cruse, vice president for 
     policy planning, ``Exports are not the end in itself, so we 
     don't care about the company and the company profits.'' That 
     was indeed the purpose when the bank was chartered as a 
     federal agency back in 1945 and the reason it has always 
     enjoyed broad support, including that of organized labor.
       At this moment, the tiny agency is under intense pressure 
     from influential U.S. multinationals to change the rules of 
     the game. Specifically, the companies want taxpayer money to 
     subsidize the sale of products that aren't actually 
     manufactured in America. They want subsidies for products 
     that are not really U.S. exports, since companies ship them 
     from their factories abroad to buyers in other foreign 
     countries. If the rules aren't changed, the exporters warn, 
     they will lose major deals in the fierce global competition 
     and may be compelled to move still more of their production 
     offshore.
       ``Global competitiveness, multinational sourcing and the 
     deindustrialization of the U.S.'' wrote Cruse in a policy 
     memo for the bank,'' were the three most common factors that 
     exporters cited as reasons to revise Ex-Im Bank's foreign 
     content policy. . . . U.S. companies need multisourcing to be 
     able to compete with foreign companies. Foreign buyers are 
     becoming more sophisticated and they are expressing certain 
     preferences for a particular item to be sourced foreign . . . 
     [and] U.S. suppliers may not always exist for a particular 
     good.''
       In plainer language, foreign is usually cheaper--often 
     because the wages are much lower--and sometimes better. As 
     U.S. producers have begun to buy more hardware and machinery 
     overseas, the capacity to make the same components in the 
     United States has diminished or even disappeared. What the 
     companies want in Cruse's bureaucratic parlance, is ``broadly 
     based support for foreign-sourced components.''
       As the complaints from American firms swelled in the last 
     few years, Ex-Im officials agreed to convene the Foreign 
     Content Policy Review Group to explore how the U.S. financing 
     rules might be relaxed. The review group's members include 11 
     major exporters (General Electric, AT&T, Boeing, Caterpillar, 
     Raytheon, McDonnell Douglas and others) plus several labor 
     representatives from the AFL-CIO and the machinists' and 
     textile-workers' unions.
       The Ex-Im Bank must decide who wins and who loses--a 
     fundamental argument over what is in the national 
     interest, give globalized business. The review group 
     discussions are couched in polite police talk, but they 
     speak directly to the economic anxieties of Americans. If 
     young workers worried about their livelihood could hear 
     what these powerful American companies are saying in 
     private, there would be many more sleepless nights in 
     manufacturing towns across this Nation. The information 
     below is taken from confidential Ex-Im Bank members that 
     were recently leaked to me. What these executives have to 
     say is not reassuring, but it's at least a more accurate 
     vision of the future than anything you are likely to hear 
     from this year's political candidates.
       A decade ago the rule was simple: Ex-Im would not 
     underwrite any trade package that was not 100 percent U.S.-
     made. Then and now Ex-Im scrutinizes the content of very 
     large export projects, item by item. to establish the 
     national origin of subcomponents. Any subcomponents produced 
     offshore must be shipped back to American factories to be 
     incorporated into the final assembly. If Caterpillar sells 10 
     earthmoving machines to Indonesia all 10 of them have to come 
     out of a U.S. factory to get a U.S. subsidy, even if the 
     axles or engines were made abroad.
       By the late 1980s, however, as major manufacturers pursued 
     globalization strategies that moved more of their production 
     offshore. Ex-Im, with labor approval opened the door. In 1987 
     it agreed to finance deals with 15 percent foreign inside 
     content. Partial financing would also be provided for export 
     deals that involved at least 50 percent U.S. content.
       Now the multinationals are back at the table again, 
     demanding still more latitude. The bank's rules, they 
     complain, have created a bureaucratic snarl that threatens 
     U.S. sales. These regulations are oblivious to the 
     complexities of modern trade which multinationals routinely 
     ``export'' and ``import'' huge volumes of goods internally--
     that is among their own fur-flung subsidiaries or foreign 
     joint ventures.
       The flavor of the company complaints is revealed in Ex-Im 
     Bank minutes of the review group's first meeting last 
     year, where various company managers sounded off about the 
     new global realities. David Wallbaum, from Caterpillar, 
     urged the bank to be ``more flexible in supporting foreign 
     content,'' according to the minutes, General Electric's 
     Selig S. Merber said GE needs ``access [to] worldwide 
     pricing.'' Merber proposed that instead of insisting on 
     American content item by item, Ex-Im look only at the U.S. 
     aggregate.
       Lisa DeSoto of Fluor Daniel, one of America's largest 
     construction engineering firms, suggested in a follow-up memo 
     that Ex-Im subsidize ``procurement from the NAFTA 
     countries,'' Mexico and Canada as if the goods were from the 
     U.S.
       But it was Angel Torres, a representative for AT&T, who 
     spoke more bluntly than the others, AT&T's foreign content 
     has grown in the last 10 years because the U.S. is becoming a 
     ``service-oriented society,'' Torres said, according to the 
     minutes. ``AT&T's priority,'' he declared, ``is to increase 
     the allowable percentage of foreign content.''
       When I rang up these corporate managers and some others to 
     ask them to elaborate on their views, all of them ducked my 
     questions. The one exception was David L. Thornton, a manager 
     from Boeing, whose newest jetliner, the 777, actually 
     involves 30

[[Page S10178]]

     percent foreign content in the manufacturing process (mostly 
     from Japan). It still qualifies for full Ex-Im financing. 
     Thornton explained, because Boeing's original investment in 
     research and development also counts in the sales price. 
     ``Our general view of 75 percent is we can live with it for 
     the time being,'' Thornton said, ``but over time it probably 
     won't be adequate.''
       The labor-union representatives, not surprisingly, choked 
     at the ominous implications of such comments--especially the 
     matter-of-fact references to America's de-industrialization. 
     Corporate leaders and politicians, after all, have been 
     celebrating the ``comeback'' of American manufacturing in the 
     1990s. Exports are booming, and U.S. competitiveness has 
     supposedly been restored, thanks to the corporate 
     restructurings and downsizings. Stock prices are rising, and 
     shareholders are happy again.
       The private corporate view is not so cheery for the 
     employees. A memo from one multinational corporation (its 
     identity whited-out by Ex-Im bureaucrats) made it sound like 
     the demise of American manufacturing is already inevitable. 
     ``We believe the current policy does not reflect the de-
     industrialization of the U.S. economy and the rise of the 
     Western European and Asian capabilities to produce high-tech 
     quality equipment . . .'' the memo states. ``Location is no 
     longer important in the competitive equation, and where the 
     suppliers of components will be [is] wherever the competitive 
     advantage lies.''
       The more that labor heard from the companies, the more 
     hostile it became to any revision. ``We have been 
     presented with no credible evidence that current bank 
     policies have cost companies sales, thereby reducing U.S. 
     employment,'' the labor representatives fired back in a 
     jointly signed letter in April. ``While we understand that 
     global corporations might prefer fewer restrictions--even 
     the provision of financing regardless of the effect on 
     jobs in the United States--that desire simply ignores the 
     very purpose of extending taxpayer-based credit.''
       If Ex-Im agrees to finance more foreign content, the labor 
     reps asked, won't that simply encourage the multinationals to 
     move still more U.S. jobs overseas, thus accelerating 
     deindustrialization? When I put this question to Ex-Im 
     officials and corporate spokesmen, their answer was a limp 
     assurance that this isn't what the bank or the companies have 
     in mind.
       But can anyone trust these assurances? The massive 
     corporate layoffs have sown general suspicions of the 
     companies' national loyalties, and the ``outsourcing'' of 
     high-wage jobs has already boiled up as a strike issue in 
     major labor-management confrontations. The United Auto 
     Workers shut down General Motors earlier this year over that 
     question. The UAW lost a long, bitter strike at Caterpillar 
     when it demanded wage cutbacks, threatening to relocate 
     production if the union didn't yield. The International 
     Association of Machinists and Aerospace Workers closed down 
     Boeing's assembly lines for two months last fall, demanding a 
     stronger guarantee of job security as Boeing globalizes more 
     of its supplier base.
       ``Ex-Im financing is corporate welfare with a fig leaf of 
     U.S. jobs, and now they want to take away the fig leaf,'' 
     says Mark A. Anderson, director of the AFL' task force on 
     trade. ``They want to be able to ship stuff from Indonesia to 
     China and use U.S. financing, I said to them, `You're nuts. 
     If you go ahead with this, you're going to be eaten alive in 
     Congress.'''
       George J. Kourpiss, president of the machinists' union 
     whose members make aircraft at Boeing and McDonnell Douglas, 
     and jet engines at GE and Pratt & Whitney, put it more 
     starkly: ``The American people aren't financing that bank to 
     take work away from us. If the foreign content gets bigger, 
     then we're using the bank to destroy ourselves.''


                             exports--Jobs

       According to the government's dubious rule of thumb, each 
     $1 billion in new exports generates 16,000 jobs. By that 
     measure, Bill Clinton's traveling salesmen brought home 2 
     million good jobs. So why is there not greater celebration? 
     The first, most-obvious explanation is imports. Foreign 
     imports soared, too, albeit at a slower rate of growth, and 
     so America's trade deficit with other nationals actually 
     doubled in size under Clinton, despite his aggressive 
     corporate strategy. Thus a critic might apply the 
     government's own equation to Clinton's trade deficit and 
     argue that there was actually a net loss of 11 million 
     good jobs.
       Bickering over the trade arithmetic, however, does not get 
     to the heart of what's happening and what really bothers 
     people: the specter of continued downsizing among the 
     nation's leading industrial firms. In fact, globalization has 
     created a disturbing anomaly. U.S. exports multiply robustly, 
     yet meanwhile the largest multinationals that do most of the 
     exporting are shrinking dramatically as employers. It's 
     important to note that about half of U.S. manufacturing 
     exports comes from only 100 companies, and 80 percent from 
     some 250 firms, according to Ex-Im's executive vice 
     president, Allan I. Mendelowitz. The top 15 exporters--names 
     like GM, GE, Boeing, IBM--account for nearly one quarter of 
     all U.S. manufactured exports. Yet these same firms are 
     shedding American employers in alarming dimensions. The 15 
     largest export producers with few exceptions have steadily 
     reduced their U.S. work forces during the past 10 years--some 
     of them quite drastically--even though their export sales 
     nearly doubled.
       GE is a prime example because the company is widely 
     emulated in business circles for its tough-minded corporate 
     strategies. In 1985, GE employed 243,000 Americans and 10 
     years later, only 150,000. GE became stronger, then Executive 
     Vice President Frank P. Doyle said. But, he conceded. We did 
     a lot of violence to the expectations of the American work 
     force.
       So, too, did GM, the top U.S. exporter in dollar volume 
     (though the auto companies are not big users of Ex-IM 
     financing). GM has shrunk in U.S. work force from 559,000 to 
     314,000. IBM shed more than half of its U.S. workers during 
     the past decade (about 132,000 people). By 1995, Big Blue had 
     become a truly global firm--with more employees abroad than 
     at home (116,000 to 111,000). Even Intel, a thriving 
     semiconductor maker, shrank U.S. employment last year from 
     22,000 to 17,000. Motorola has grown, but its work force is 
     now only 56 percent American.
       The top exporters that increased their U.S. employment 
     didn't begin to offset the losses. The bottom line tells the 
     story. The government's great substitute for America's major 
     multinational corporations has not been reciprocated, at 
     least not for American workers. The contradiction is not 
     quite as stark as the statistics make it appear, because 
     the job shrinkage is more complicated than simply shipping 
     jobs offshore. Some companies eliminated masses of 
     employees both at home and abroad. Others, like Boeing, 
     reduced payrolls primarily because global demand weakened 
     in their sectors. Some jobs were wiped out by labor-saving 
     technologies and reorganizations. But virtually all of 
     these companies offloaded major elements of production to 
     lower-cost independent suppliers, both in the U.S. and 
     overseas. If the jobs did not disappear, the wages were 
     downsized.
       This dislocation poses an important question, which 
     American politicians have not addressed. Does the success of 
     America's multinationals translate into general prosperity 
     for the country or merely for the companies and their 
     shareholders? The question is a killer for politicians--
     liberals and conservatives alike--because it challenges three 
     generations of conventional wisdom. That's why most Democrats 
     or Republicans never ask it.
       When these facts are mentioned, the exporters retreat to a 
     few trusty justifications. First there is the ``half a loaf'' 
     argument. Yes, it is unfortunately true that companies must 
     disperse an increasing share of the production jobs abroad, 
     either to reduce costs or to appease the foreign customers. 
     But if this were not done, there might be no export sales at 
     all and, thus, no jobs for Americans. Next, there is the 
     ``me, too'' argument. All of the other advanced industrial 
     nations have export banks that provide financing subsidies to 
     their multinationals. The export banks in Europe do allow 
     greater foreign content than the U.S.--but only if the goods 
     originate from an allied nation in the European community. 
     France supports German goods and vice versa, just as Michigan 
     supports California. The U.S. Ex-Im Bank, as Mendelowitz has 
     pointed out, actually provides greater risk protection and 
     generally charges lower premiums.
       Japan's Ex-Im bank is indeed more flexible than America's, 
     but Japan's industrial system also operates on a very 
     different principle; major Japanese corporations take 
     responsibility for their employees. That understanding 
     creates a mutual trust that allows both the government and 
     the firms to pursue more sophisticated globalization 
     strategies. Japanese jobs are regularly eliminated when 
     Japan's manufacturing is relocated offshore in Asia or in 
     Europe (and sometimes in the U.S.), but the companies find 
     new jobs for displaced employees and only rarely, 
     reluctantly, lay off anyone.
       ``The situation that our companies see,'' Ex-Im's Cruse 
     explains, ``is that Japan is willing to finance as much as 50 
     percent foreign content, and [the companies] say to us, 
     ``You're not competitive.'' But an important difference is 
     that the Japanese government doesn't have to worry about the 
     workers because the Japanese companies worry about them. . . 
     . If GE subcontracts work to Indonesia, it tends to lay off a 
     line of workers back in the U.S.''


                            bait and switch

       In April 1994, AT&T announced a $150 trillion joint venture 
     with China's Qingdao Telecommunications to build two new 
     factories, in the Shandong province and in the city of 
     Chengdu, in the Sichuan province, that will manufacture the 
     high-capacity 5ESS switch, the heart of AT&T's advanced 
     telephone systems. AT&T's chairman, Robert Allen, said that 
     it will more than double its Chinese work force over the next 
     two or three years.
       Five months later, in September, the Ex-Im Bank in 
     Washington approved the first of $87.6 million in loan 
     guarantees to underwrite AT&T's export sales to China--
     switching equipment that will modernize the phone systems in 
     Qingdao and several other cities. AT&T won the contract in 
     head-to-head competition with Canada's Northern Telecom, 
     Germany's Siemens and France's Alcatel Alsthom. The Clinton 
     administration celebrated another big win for the home team.
       But who actually won in this deal? A Telecom Publishing 
     Group article provided a different version of what AT&T's 
     victory meant for the United States. ``While some equipment 
     for AT&T's network projects in China will be built in this 
     country,'' the article reported, ``the Chinese are demanding

[[Page S10179]]

     that eventually the bulk of the equipment in their system be 
     built in their country, the carrier [AT&T] said.''
       An AT&T public-affairs vice president, Christopher Padilla, 
     denies this, but then Padilla also denies that AT&T is 
     prodding the Ex-Im Bank to relax its foreign-content rules. 
     Further, he assures me that despite their proximity, there 
     was no explicit quid pro quo and no connection between the 
     two transactions, the taxpayer-financed export sales and 
     AT&T's agreement to build new factories in China.
       ``It's a reality of the marketplace,'' Padilla says. ``If 
     we tried to pursue a strategy of just making everything in 
     Oklahoma City''--where the 5ESS switch is now manufactured--
     ``we wouldn't have any market share at all.''
       The White House also led cheers for Boeing because Boeing 
     was also stomping its competitors in the Chinese market. In 
     1994 alone, Boeing sold 21 737s and seven 757s to various 
     Chinese airlines and obtained nearly $1 billion in Ex-Im 
     loans to finance the deals. When President Clinton hailed the 
     news, he did not mention that Boeing had agreed to consign 
     selected elements of its production work to Chinese 
     factories. The state-owned aircraft company at Xian, for 
     instance began making tail sections for the 737, work that is 
     normally done at Boeing's plant in Wichita, Kan. The first 
     order for Xian was for 100 sets, but that was just the 
     beginning. In March 1996, a China news agency boasted that 
     Boeing had agreed to buy 1,500 tail sections from Chinese 
     factories, both for the 737 and the 757. The deal was 
     described as ``the biggest contract in the history of China's 
     aviation industry.''
       Unlike AT&T and some others, Boeing is relatively 
     straightforward about acknowledging that it's trading away 
     jobs and technology for foreign sales. China intends to build 
     its own world-class aircraft industry, and Boeing helps by 
     giving China a piece of the action, relocating high-wage 
     production jobs from America to low-wage China, as well as 
     relocating some elements of the advanced technology that made 
     Boeing the world leader in commercial aircraft. Boeing has 
     told its suppliers to do the same. Northrop Grumman, in 
     Texas, is sharing production of 757 tail sections with 
     Chengdu Aircraft, in China.
       ``What we've done with China,'' says Lawrence W. Clarkson, 
     Boeing's vice president for international development, 
     ``we've done for the same reason we did it with Japan--to 
     gain market access.'' The two transactions--the export sales 
     and job transfers--are legally separate but typically 
     negotiated in tandem, Clarkson explains. China always insists 
     upon a written acknowledgement of the job commitment in the 
     export sales contract--the same sale to China submitted to 
     the Ex-Im Bank for its financial assistance.
       Until recently, the Ex-Im Bank's operative policy on this 
     issue could be described as ``don't ask, don't tell'': The 
     bank officials didn't ask the companies if they were off-
     loading jobs, and the companies didn't tell them. When I 
     asked various Ex-Im managers if they knew about AT&T's new 
     switch factories in China before they approved AT&T's export 
     financing their answer was no. What about companies like 
     Boeing doing similar deals?
       ``Yes, we're aware of that,'' Cruse says. It's not that the 
     companies tell us, but it's not hard to read the 
     newspapers.''
       After prodding from labor officials, the bank last year 
     began requiring exports to reveal whether they dispersed U.S. 
     jobs or technology in connection with the Ex-Im-financed 
     sales. But the federal agency still approves these deals 
     without weighing the potential impact on future 
     employment. In fact, Ex-Im still pretends that the export 
     sales and corporate decisions to relocate jobs are 
     unrelated transactions, though every company knows 
     otherwise.
       The practice of swapping jobs for sales is widespread in 
     global trade--deals are negotiated in secrecy because such 
     practices ostensibly violate trade rules. But everyone knows 
     the game, and most everyone plays it. If Boeing doesn't swap 
     jobs for Chinese sales, then its European competitor Airbus 
     will. If AT&T doesn't move its switch manufacturing to China, 
     then Siemens or Alcatel will (in fact, Alcatel already has). 
     The cliche at Boeing is ``60 percent of something is better 
     than 100 percent of nothing.''
       The trouble is that nothing may be what many American 
     workers wind up with anyway--especially if China eventually 
     becomes a world-class aircraft producers itself. Officials at 
     the Communications Workers of America, which represents AT&T 
     workers, recall that Ma Bell once made all its home 
     telephones in the U.S. and now makes none here.
       Is the same migration under way now for the high-tech 
     switches? The AT&T spokesman insists not. Anyway, he adds the 
     assurance that the most valuable input in these switches is 
     the software, not the hardware from the factories, and the 
     design work is still American. This may reassure the techies, 
     but it's not much comfort to those who work on the assembly 
     lines. Besides, AT&T plans to open a branch of Bell 
     Laboratories in China.
       The dilemma facing American multinationals is quite real, 
     but the question remains: Why should American taxpayers 
     subsidize export deals contingent on increased foreign 
     production, or even offloading portions of the American 
     industrial base? Americans are told repeatedly that they 
     cannot exercise any influence over these global firms, but 
     that claim is mistaken. The Ex-Im Bank is an important choke 
     point in the bottom line of these multinationals. Americans 
     should demand that the subsidies be turned off, at least for 
     the largest companies, until the multinationals are willing 
     to provide concrete commitments to their work forces.
       The gut issue is not about economics but about national 
     loyalty and mutual trust. ``Every meeting we have in the 
     union, we open it with the pledge of allegiance,'' machinists 
     union president George Kouepias muses, ``Maybe the companies 
     should start doing that at their board meetings.''

  Mr. HOLLINGS. Now, Mr. President, that gives a general feel for the 
amendment that I cosponsored with the Senator from North Dakota, just a 
minuscule part, but it will start maybe in the other direction the 
conscience and the awareness and the understanding of us as Senators 
about this important particular problem.
  We are giving deferrals of $2.2 billion over 7 years to companies 
using your taxpayer money and my taxpayer money. Talking about the 
deficit, using our taxpayer money to get them out of the country, to 
lose the jobs. We have a financial gimmick, the Eximbank; they call it 
the ``bank of Boeing'', to, by gosh, move the jobs over there.
  Now they have taken over in Europe, and you watch, in China, they are 
demanding now and they have in the Record the particular article that 
we had about the number of tail assemblies being manufactured for the 
27 747 planes ordered by the People's Republic of China. We have now 
orders over there to manufacture in China over 1,000 planes. So, 
gradually the value to the economy of these exports is being 
diminished. We are losing, losing, losing, and we act like we are happy 
about it, running around here competing with ourselves over 60 percent 
of exports and imports being U.S.-generated.
  I don't blame the Chinese, the Japanese, and all for the ignorance or 
the lack of awareness on the part of the Government of the United 
States and its policy. I would ride a free train. I do blame--the 
agents of influence, Senator. They got 100 Washington law firms, paid 
$113 million to represent one country--Japan. Do you know what it is 
for the 100 Senators and the 435 House Members? Mr. President, $71.3 
million. The people of Japan, by way of pay, are represented better in 
Washington than the people of the United States. When are we going to 
wake up? When are we going to sober up? When are we going to compete? 
You will get a little flavor of it in an hour when they announce that 
Vice President fellow, because he will run all over the country and run 
a touchdown. I am telling you right now you are going to see an 
``O.J.'' going around running touchdowns economically when this fellow 
gets started because he knows the subject.
  This is a serious amendment to bring the attention of the U.S. Senate 
to this all-important problem of losing our standard of living and 
jobs. Let's quit financing it, let's stop subsidizing it, let's stop 
bankrolling it, and let's stop using that symbolic nonsense of free 
trade and protectionism. We have to come here and start protecting our 
industrial backbone. Your security as a nation is like a three-legged 
stool. One leg is the values of a nation. We sacrificed to feed the 
hungry in Somalia. We sacrificed to build democracy in Haiti. We 
sacrificed to try to build peace in Bosnia. Unquestioned. The second 
leg, Mr. President, is that of military strength. Unquestioned. The 
third leg, economic strength, is fractured. Our stool of the United 
States is about to topple because what we are talking about is family 
values and homosexual marriages and all kind of them silly things 
coming around here like we in Congress can control these things, and 
our duty and responsibility to pay the bill goes wanting. Our duty and 
responsibility is to develop, in a bipartisan fashion, a competitive 
trade policy because that is what we are into. Europe is protectionist. 
They enforce their laws. In 1980, we had a $4 billion deficit in the 
balance of textile trade, and Europe had it. They enforced their 
particular trade laws and they are down to less than $1 billion, and we 
are up to a $36 billion deficit in the balance on textile trade. So the 
Senator from New Hampshire has to know where his textile industry has 
gone. I thank the distinguished colleagues. I thank, particularly, the 
Senator from North Dakota.

[[Page S10180]]

  I yield the floor.
  Mr. KERRY. Mr. President, I am pleased to support the amendment by my 
colleague, the Senator from North Dakota.
  Mr. President, we must balance the budget. We cannot set our sights 
lower than that goal. Earlier in this session of Congress, I introduced 
a bill which would cut wasteful and unnecessary spending by $90 billion 
over 7 years. This spring, I worked with my distinguished colleague 
from Arizona [Senator McCain], to reduce spending programs, subsidies, 
and corporate welfare by $60 billion over 6 years. And most recently, I 
introduced the Family Income and Economic Security Act--a 20-point 
program to provide education, job, income and retirement security for 
Americans while eliminating wasteful spending and costly, 
counterproductive subsidies and giveaways. This provision is an 
integral part of that 20-point plan.
  Mr. President, it is clear that all sectors of our society must 
contribute to the effort of deficit reduction. That includes the 
private business sector.
  The Dorgan-Kerry amendment would close a noxious loophole in our Tax 
Code which is costing the American taxpayers $2.2 billion over 7 years. 
And, Mr. President, what adds insult to injury is the fact the current 
tax law also encourages domestic manufacturers to move their plants 
overseas. The Senator from North Dakota is quite correct in calling 
this loophole the job export subsidy. This is clearly something the 
American taxpayers and our national economy cannot afford.
  This is not just a hypothetical situation. I ask unanimous consent to 
have printed in the Record a compelling article from the Boston Globe 
which describes the effect of this loophole on Massachusetts companies 
and their workers.
  Mr. President, if we are to remain a competitive Nation, we must do 
all we can to eliminate our budget deficit, reduce our national debt, 
maintain robust economic growth, and encourage manufacturers to retain 
high-wage jobs on our shores. This amendment moves us in that direction 
and I encourage our colleagues to support it.
  I yield the floor.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                 [From the Boston Globe, July 8, 1996]

                    Tax Code Gives Companies A Lift

                           (By Aaron Zitner)

       Washington.--When Robert M. Silva's job moved to Singapore 
     two years ago, his company flew him overseas so he could 
     train his replacement. Then the company closed its North 
     Reading factory, laid off Silva and 119 co-workers and began 
     importing from its Asian plant medical products once made in 
     Massachusetts.
       Moving jobs to Singapore had obvious advantages for Baxter 
     International Inc. Taxes are low, and Silva's $26,000 salary 
     was far higher than what the company pays his replacement.
       But Baxter reaped another reward for moving overseas: a tax 
     break, courtesy of the United States government. In the name 
     of boosting US business, the tax code offers a special 
     benefit to companies that move jobs offshore, a gift also 
     accepted by Massachusetts employers such as Stratus Computer 
     Inc. of Marlborough (500 layoffs last year), Augat Inc. of 
     Mansfield (260 layoffs) and the Shrewsbury division of 
     Quantum Corp. (85 layoffs), among others.
       It is one of many tax breaks that ripple perversely through 
     the economy--favoring multinationals over small firms, 
     investors over average taxpayers and foreign workers over 
     those at home.
       The federal government gives up about $70 billion each year 
     through corporate tax breaks, enough to cover the IRS bill 
     for every Massachusetts resident two times over. Corporate 
     tax breaks carry a lower political profile than direct 
     subsidies to businesses for programs such as the one that 
     helps McDonald's Corp. sell Chicken McNuggets overseas. But 
     they cost about as much. For a nation trying to balance its 
     budget and pay for social services tax benefits to businesses 
     are a gold mine.
       ``The tax code is a major source of corporate welfare,'' 
     says US Rep. Lane Evans, an Illinois Democrat. ``Not only 
     that, but we are using our tax dollars in a way that hurts 
     our own economy. It drains our treasury. It forces average 
     Americans to bear a larger share of the tax burden.''
       The Clinton administration says that closing some tax 
     breaks may force companies to raise prices and lose 
     customers, and therefore pay less taxes. ``There are two 
     sides to every part of this,'' says Leslie Samuels, until 
     recently the Treasury Department's tax policy chief. ``If 
     you're thinking that there's hundreds of billions of dollars, 
     it's not there.''
       Republican lawmakers have actually moved to widen some tax 
     breaks. A 1993 law, for example, narrowed the provision that 
     benefited Baxter International, Stratus and Augut, but a GOP 
     bill scheduled for debate on the Senate floor today would 
     fully restore the loophole.
       Other lawmakers and analysts disagree with that approach. 
     At a time when Medicare, Medicaid and other social welfare 
     programs are being curtailed, they say, many tax policies 
     which explicitly benefit corporations cannot be justified. 
     These critics argue:
       The US should not give tax breaks for breaking the law. For 
     example, after testing faulty medical products on unwitting 
     hospital patients, C.R. Bard Inc. paid $61 million in 
     penalties in 1993. But the pain was tempered by the tax code, 
     which allowed Bard to take half the fine as a tax deduction.
       Tax breaks to boost exports are not worth the cost. 
     Companies naturally will try to sell their products overseas, 
     so export incentives worth at least $7 billion a year are a 
     waste of money.
       Too many companies pay no taxes at all. Nearly 60 percent 
     of US-controlled corporations and 74 percent of foreign 
     companies doing business here paid no federal tax in 1991, 
     the last year figures were available. Critics say the US is 
     not tough enough on companies that use illegal accounting 
     maneuvers to shift profits to low-tax nations. The amount 
     lost to the Treasury each year: as much as $40 billion over 
     and above the $70 billion in legal tax breaks.
       Congress must stop the bidding war among the states for 
     jobs, in which companies win ever-greater tax breaks to 
     relocate. It should not let states use federal tax dollars 
     when ``poaching'' jobs from other states. Labor Secretary 
     Robert Reich calls it ``one of the most egregious forms of 
     corporate welfare.''
       Congress and the Clinton administration have cut some tax 
     concessions to businesses. They curtailed deductions for 
     meals, sports tickets and country club dues, raising $3 
     billion a year in tax revenue. They also banned write-offs 
     for ``excessive'' executive salaries, those over $1 million, 
     raising $70 million annually. And they have worked out a 
     deal--not yet final--to phase out a tax break for companies 
     that build plants in Puerto Rico, which costs $2.6 billion a 
     year in tax revenue.
       But as a presidential candidate, Clinton promised more. He 
     vowed to make foreign companies, widely accused of 
     underpaying US taxes, pay $45 billion more over four years. 
     Clinton has taken steps in this direction, but Treasury 
     officials cannot show how much money has been gained. 
     Moreover, the president has done little to fulfill another 
     promise in his 232-page campaign platform, called ``Putting 
     People First,'' to ``end tax breaks for American companies 
     that shut down their plants here and ship American jobs 
     overseas.''


                           incentive to leave

       Just ask Robert Silva.
       A 33-year-old father of two, Silva spent six years at the 
     C.R. Bard plant in North Reading. He assembled and tested 
     infusion pumps, devices that allow patients to receive 
     regular injections without a nurse or traditional needle.
       In 1993, the Bard unit was bought by Illinois-based Baxter. 
     ``They promised us the world. Then they moved the plant to 
     Singapore after telling us they wouldn't,'' says Silva of 
     Nashua. About 130 people lost their jobs. ``It was quite the 
     shock. People were in tears that day.''
       One incentive for Baxter's move, critics say, was a tax 
     break known as the ``runaway plant loophole,'' which accounts 
     for $1.7 billion each year in lost tax revenue. Here's how it 
     works:
       The US taxes the worldwide profits of American companies. A 
     million dollars earned in Ireland, for example, will be taxed 
     at the US rate of 35 percent, minus the 10 percent tax the 
     company must pay to the Irish government.
       But Baxter, or any other company, is not required to pay 
     the US tax bill unless it moves the money home to give to 
     shareholders or to reinvest in the business here. As long as 
     the money remains overseas--invested in foreign plants or 
     banks--Baxter will pay only a small tax to Singapore. That is 
     a total $191 million tax on its overseas profits over the 
     years that the company has no intention of paying.
       ``The tax code literally says, `Move your plant overseas 
     and we'll give you a tax break,' '' says Sen. Byron Dorgan, a 
     North Dakota Democrat.
       The ``runaway plant loophole'' also has saved millions of 
     dollars for Stratus, Quantum, Digital Equipment Corp. of 
     Maynard and many others that have moved New England jobs 
     overseas while deferring US taxes on overseas profits.
       ``Closing it would discourage further investment in growing 
     our business,'' said Mark Fredrickson, a spokesman for EMC 
     Corp. of Hopkinton, a computer equipment maker that has 
     accumulated $388 million in untaxed overseas profits over the 
     years. ``It helps our profitability and helps secure the 
     local jobs we have. The bigger we become, the more people 
     have to be employed her eat corporate headquarters.''
       Many companies take advantage of two other tax breaks 
     designed to encourage exports. By creating a ``foreign sales 
     corporation,'' which often exists only on paper, a firm can 
     claim a tax exemption on some of its export sales. For 
     example, Zoom Telephonics Inc. of Mansfield said recently it 
     lowered its tax rate by selling more products through its 
     foreign sales corporation. These tax rules, created in 1971 
     and refined in 1984, cost the government $1.5 billion a year.

[[Page S10181]]

       The US Treasury also forfeits $3.6 billion annually through 
     the ``title passage loophole,'' as Sen. Edward M. Kennedy has 
     dubbed it, which allows companies to claim that some US sales 
     were actually made on foreign soil. Companies do this because 
     they sometimes have foreign tax credits they cannot use 
     unless they show more foreign income.


                        a break for lawbreakers

       While the tax code causes pain for some US workers, it 
     provides comfort to some companies that break the law.
       Last year, for example, three former executives of C. R. 
     Bard Inc. were convicted of conspiring to conceal flaws in 
     medical catheters manufactured in Billerica and Haverhill. 
     Two deaths allegedly were linked to the catheters, and 
     prosecutors said the faulty devices caused 21 emergency 
     surgeries. Bard's $61 million legal settlement with the 
     government was the largest ever for violations of Food and 
     Drug Administration rules.
       But the tax code cushioned the New Jersey-based company. 
     Half of the settlement--$30.5 million--could be used as a tax 
     write-off against earnings. That was the amount Bard paid to 
     settle civil charges. The money was meant to reimburse the 
     Medicare program for buying catheters that should not have 
     been on the market. ``When they earned the money they should 
     not have earned from the catheters, they paid taxes on it. So 
     when they give up those earnings, they should get the taxes 
     back,'' said Michael Loucks, the assistant US attorney who 
     prosecuted Bard.
       After agreeing last year to pay the second-largest amount 
     ever in a health-care fraud case--$161 million--Caremark 
     International Inc. plans to take a $110 million charge 
     against earnings, on top of a write-off to cover its legal 
     costs.
       Tax law prevents companies from deducting criminal 
     penalties, avoiding an incentive to commit criminal acts. 
     Loucks said Bard did not negotiate with the Justice 
     Department over what portion of the settlement would be a 
     civil penalty, and therefore tax-deductible. But some 
     companies try to. ``Part of the reason companies would rather 
     do civil settlements is because they are deductible,'' he 
     said.


                          zero-tax accounting

       Some companies have gone beyond shielding profits from 
     taxes. By stretching or even breaking U.S. accounting rules, 
     they pay no tax at all. Their goal is to shift profits out of 
     the country into low-tax nations like Bermuda, Ireland or 
     Hong Kong. Their tool is the accounting ledger, and critics 
     of the tax code say it is effective.
       International Business Machines Corp., for example, paid 
     virtually no tax in 1987, despite $25 billion in U.S. sales. 
     Sen. Kennedy says IBM shifted an undue amount of its 
     worldwide research costs onto its U.S. operation. That raised 
     its American expenses, he says, and lowered its profits. IBM 
     says its accounting practices are legal, but will not comment 
     further.
       Similarly, Nissan Motor Corp. of Japan overcharged its U.S. 
     subsidiary for cars, the IRS charged several years ago, 
     lowering its U.S. profits and tax bill. Nissan agreed to pay 
     the IRS $160 million, one of several settlements with the 
     agency the automaker signed between 1987 and 1993.
       Both U.S. and foreign companies cut their taxes by profit 
     shifting, but many lawmakers and tax analysts believe the 
     practice is particularly widespread among foreign companies. 
     More than 70 percent of foreign firms paid no tax each year 
     between 1987 and 1991, the IRS reports, compared to about 60 
     percent of U.S. companies. Clearly, some paid no tax because 
     they did not make a profit, but many lawmakers believe others 
     are illegally shifting profits overseas.
       Estimates on the tax revenue loss range from $10 billion to 
     $40 billion a year. Treasury officials say the figure will 
     decrease over time because of tighter regulations created 
     under the Clinton administration.
       Will the new rules raise the $45 billion that Clinton said 
     he would draw from foreign companies over four years? ``It 
     would be nice to say, `Here's what's going to happen,' but I 
     don't think anyone in the trenches can reliably say that,'' 
     said Samuels, the former Treasury tax policy chief.
       One group of lawmakers says the transfer-pricing system 
     must be scrapped. In its place, they propose a formula 
     similar to what the states use now to determine what portion 
     of a company's profits can be taxed. The formula bases the 
     tax on what portion of a company's sales, property and 
     personnel are in each state.
       The Treasury Department, under pressure from Sen. Dorgan, 
     is holding a conference this year to consider how such a 
     formula might be created.


                          a $143 million jolt

       Every year, the US government spends $143 million to help 
     generate electricity and run recreation programs for 
     Tennessee and six neighboring states. Now 63 years old, the 
     Tennessee Valley Authority keeps the region's electricity 
     rates low.
       By contrast, electric rates in Massachusetts are high. And 
     that is a key reason Lexington-based Raytheon Co. last year 
     threatened to take 15,000 jobs out of state unless it won $40 
     million in tax and electric rate relief. Had it left, 
     Raytheon's likely new home would have been in Tennessee. In 
     other words, says US Rep. Martin T. Meehan, a Lowell 
     Democrat, Washington collected tax dollars from 
     Massachusetts, then sent them to Tennessee, effectively 
     helping to lure Massachusetts jobs.
       Now, Fidelity Investments of Boston and the mutual fund 
     industry, as well as life insurance companies, are demanding 
     similar tax relief. Increasingly, other states find 
     themselves being forced to offer tax breaks to businesses 
     that threaten to leave town.
       ``This is one of the most egregious forms of corporate 
     welfare, because the company essentially holds the state up 
     to ransom,'' Labor Secretary Reich says. ``It's bad, because 
     it's a zero-sum game. No new jobs are created. . . . From the 
     national standpoint, this is money that is subsidizing 
     companies with no net benefit whatsoever.''
       Furthermore, tax breaks don't always save jobs. Raytheon 
     this year is trying to buy out 4,400 workers whose jobs the 
     tax relief intended to save. In 1993, Digital Equipment Corp. 
     angered Boston officials when it closed its Roxbury factory 
     and laid off 190 workers after taking $7 million from the 
     city in financing, tax cuts and other subsidies.
       Now, some are calling for the federal government to step 
     in. Last year, Massachusetts delegates to an annual small 
     business conference at the White House urged the president to 
     ban the use of federal money in interstate bidding wars.
       Congress could tax businesses on the value of the 
     incentives they receive from states, or it could deny federal 
     funding to states that get into bidding wars. It also could 
     bar states from using federal grant money or government-
     backed loans in incentive packages.
       Massachusetts at times has used federal dollars to lure 
     businesses. Springfield, for example, this year beat out 
     sites in six other states to be the home of a new customer 
     service center for First Notice Systems of Medford, which 
     could employ as many as 900 people. As an incentive, the city 
     offered federal funds to train company workers. It also 
     borrowed money from the federal government and used the cash, 
     in essence, to give First Notice a low-interest loan for 
     building renovations.


                           corporate darlings

       Businesses like the tax breaks because, unlike spending 
     programs and direct subsidies, they are outside the federal 
     budget and therefore not subject to Revenue Service for tax 
     rebates on weapons programs that date to the early 1980s. The 
     IRS says the tax credits are not deserved, since the Pentagon 
     paid for the weapons research and usually covers the costs 
     even of failed weapons programs. But the companies have won 
     an early round in the courts, arguing that the Pentagon paid 
     for the weapons, not the research that produced them. The tax 
     refunds could total billions of dollars.
       Each tax break is a choice, favoring one group of taxpayers 
     over another. Export rules, for example, favor exporters over 
     companies that sell in the US. The ``runaway plant loophole'' 
     favors companies that hire foreign workers over companies 
     that strive for the ``Made in the USA'' label.
       Most broadly, corporate tax breaks generally favor wealthy 
     Americans over the less-well off. Tax benefits are designed 
     to help businesses create jobs, but when corporations win a 
     tax break it is the owners of the company who gain most.
       Last December, with Republicans and Democrats deadlocked 
     over a plan to end a 21-day shutdown of the federal 
     government, 91 corporate chief executives signed a two-page 
     newspaper advertisement that urged Congress to balance the 
     budget. ``Without a balanced budget, the party's over. No 
     matter which party you're in,'' the ad said.
       Seven of the CEOs were from companies that take advantage 
     of a major tax break for purchasing new equipment, which 
     costs the US $26 billion a year. Exxon saved $760 million 
     because of the so-called accelerated depreciation rules, 
     according to calculations by the Center for the Study of 
     Responsive Law, a Washington-based Ralph Nader group. Ford 
     Motor Co., Chrysler Corp., DuPont and others that signed the 
     ad saved hundreds of millions dollars more.
       General Motors is a major recipient of federal technology 
     grants. Kodak claimed $37 million in export and manufacturing 
     tax credits last year. In 1994, IBM paid no US taxes on $11 
     billion in profits it earned overseas, while the US Labor 
     Department reported that 1,755 IBM jobs were moved abroad.
       ``How can you demand that the budget be balanced when 
     you're taking tax breaks like this?'' asked Janice Shields, a 
     former accounting professor now with the watchdog group. 
     ``These things save the companies from going into debt, but 
     it's causing the country to do that.''
  Ms. MIKULSKI. Mr. President, I rise in support of the jobs export 
subsidy amendment. This amendment will help to end the exodus of U.S. 
manufacturing industry overseas by eliminating a provision in the tax 
law that encourages and rewards that exodus.
  How does the Dorgan amendment do this? It ends the tax deferral on 
profits of overseas U.S. companies who move plants to foreign tax 
havens then ship products back to the United States for sale.
  This amendment eliminates a tax subsidy that is unfair to America's 
workers, that is unfair to taxpayers, and that is unfair to domestic 
companies.
  Current law provides an incentive to move. We are actually rewarding 
companies for killing U.S. jobs. That

[[Page S10182]]

makes absolutely no sense. How can this Congress say it is for working 
families when we reward multinational firms who move their jobs 
overseas?
  Since 1979, our country has lost 3 million good-paying manufacturing 
jobs. This tax break is one reason why. We can't afford to lose one 
more job, and that's why we need this amendment.
  Current law costs the American taxpayer. The Joint Economic Committee 
estimates this subsidy will result in $2.26 billion over 7 years in 
lost revenues. If we are serious about giving taxpayers a break, and in 
reducing our deficit, this is one tax subsidy we just can't afford.
  Current law actually puts companies that remain in the United States 
at a competitive disadvantage. We don't reward the good guys. We don't 
provide a tax break for them for keeping jobs here at home. Instead we 
make it harder for them to compete by giving an edge to those who move 
jobs overseas. This amendment will help create a level playing field so 
the ``good guys'' have a fair chance to compete.
  It's important to understand what this amendment does not do. It does 
not hinder U.S. companies that produce abroad from competing with 
foreign firms in foreign markets. It does not burden companies with a 
new tax. It simply eliminates the special tax treatment given to 
overseas U.S. companies.
  I urge my colleagues to support this amendment. It's good for 
America's workers. It's good for the taxpayers. It's good for America's 
domestic companies.
  The PRESIDING OFFICER. Who seeks recognition?
  Mr. KERREY. Mr. President, I am going to talk here for a bit until we 
can get a final group of amendments, which we would like to offer. Both 
the chairman and I have agreed to those. We should be able to get that 
list put together soon. One is an amendment that I and about 10 or 12 
other Senators offered, having to do with reorganization of the IRS. 
The language of the amendment says:

       The Internal Revenue Service is prohibited from expending 
     funds for field office reorganization until the National 
     Commission of Restructuring the IRS has had an opportunity to 
     issue the final report.

  The chairman has agreed to accept that language into this bill. Let 
me be clear that my intent is to change it when we get into conference. 
The idea is not to postpone this until after the final commission 
report. That, to me, would be an inappropriate thing for us to do.
  What is appropriate is to ask the Treasury Department to come up with 
a justification on customer service, a justification on cost-
effectiveness, and a number of other areas, which they currently have 
not done. They are talking about actually doing a reduction of force of 
about 2,300 at a time. For example, they are also proposing to fire 
another 14 or 15 upper-echelon executives. Some other questions have 
been raised by a number of Members. That is what this amendment is 
attempting to do.
  It will be my intent to modify that language once we get to 
conference.
  Mr. SHELBY. Mr. President, I ask unanimous consent that the pending 
committee amendments be temporarily laid aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


               Amendments Nos. 5225 through 5232, En Bloc

  Mr. SHELBY. Mr. President, I send a group of amendments to the desk, 
en bloc, and ask for their immediate consideration.
  The amendments are as follows: One is for myself to extend the pilot 
program authority provided by the GMRA until December 31, 1999; one for 
Senator Stevens to clarify section 645 of the bill; one for Senator 
Mikulski regarding closure of an alley in the District of Columbia for 
construction of a Federal building; one for Senators Mack and Graham to 
transfer a property for animal research; one for Senator D'Amato to 
provide criminal sanctions for fictitious financial instruments; one 
for Senator Gregg regarding distribution of Federal employees' names; 
one for Senator Kohl, a sense-of-the-Senate resolution, regarding IRS 
telephone service; one for Senator Kerrey regarding the IRS 
reorganization.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Alabama [Mr. Shelby] proposes amendments 
     numbered 5225 through 5232, en bloc.

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

                           amendment no. 5225

    (Purpose: To extend the OMB's authority to streamline financial 
           management authority under the GMRA pilot program)

       On page 135, after line 4 insert the following new section:
       Sec.   . Subsection (b) of section 404 of Public Law 103-
     356 is amended by deleting ``September 30, 1997'' and 
     inserting ``December 31, 1999''.
                                                                    ____



                           amendment no. 5226

 (Purpose: To provide for a Government accounting of regulatory costs 
          and benefits of major rules, and for other purposes)

       On page 134, line 7 strike all through page 135, line 4, 
     and insert the following:

     SEC. 645. REGULATORY ACCOUNTING.

       (a) In General.--No later than September 30, 1997, the 
     Director of the Office of Management and Budget shall submit 
     to the Congress a report that provides--
       (1) estimates of the total annual costs and benefits of 
     Federal regulatory programs, including quantitative and 
     nonquantitative measures of regulatory costs and benefits;
       (2) estimates of the costs and benefits (including 
     quantitative and nonquantitative measures) of each rule that 
     is likely to have a gross annual effect on the economy of 
     $100,000,000 or more in increased costs;
       (3) an assessment of the direct and indirect impacts of 
     Federal rules on the private sector, State and local 
     government, and the Federal Government; and
       (4) recommendations from the Director and a description of 
     significant public comments to reform or eliminate any 
     Federal regulatory program or program element that is 
     inefficient, ineffective, or is not a sound use of the 
     Nation's resources.
       (b) Notice.--The Director shall provide public notice and 
     an opportunity to comment on the report under subsection (a) 
     before the report is issued in final form.
                                                                    ____



                           AMENDMENT NO. 5227

 (Purpose: To provide for the closing of an alley owned by the United 
   States to allow construction of a facility for the United States 
                Government in the District of Columbia)

       On page 93, after line 19 insert the following new section:

     SEC.  . FACILITY FOR THE UNITED STATES GOVERNMENT

       (a) Closing of Alley.--The alley bisecting the property on 
     which a facility is being constructed for use by the United 
     States Government at 930 H Street, N.W., Washington, District 
     of Columbia, is closed to the public, without regard to any 
     contingencies.
       (b) Jurisdiction.--The Administrator of General Services 
     shall have administrative jurisdiction over, and shall hold 
     title on behalf of the United States in, the alley, property, 
     and facility referred to in subsection (a).
                                                                    ____



                           AMENDMENT NO. 5228

(Purpose: To transfer certain property to be used as an animal research 
                               facility)

       At the appropriate place in the bill, insert the following:
       Sec.   . (a) Notwithstanding any other provision of law, 
     the Secretary may, on behalf of the United States, transfer 
     to the University of Miami, without charge, title to the real 
     property and improvements that as of the date of the 
     enactment of this Act constitute the Federal facility known 
     as the Perrine Primate Center, subject to the condition that, 
     during the 10-year period beginning on the date of the 
     transfer--
       (1) the University will provide for the continued use of 
     the real property and improvements as an animal research 
     facility, including primates, and such use will be the 
     exclusive use of the property (with such incidental 
     exceptions as the Secretary may approve); or
       (2) the real property and improvements will be used for 
     research-related purposes other than the purpose specified in 
     paragraph (1) (or for both of such purposes), if the 
     Secretary and the University enter into an agreement 
     accordingly.
       (b) The conveyance under subsection (a) shall not become 
     effective unless the conveyance specifies that, if the 
     University of Miami engages in a material breach of the 
     conditions specified in such subsection, title to the real 
     property and improvements involved reverts to the United 
     States at the election of the Secretary.
       (c) The real property referred to in subsections (a) and 
     (b) is located in the county of Dade in the State of Florida, 
     and is a parcel consisting of the northernmost 30 acre-parcel 
     of the area. The exact acreage and legal description used for 
     purposes of the transfer under subsection (a) shall be in 
     accordance with a survey that is satisfactory to the 
     Secretary.
       (d) For the purposes of this section--
       (1) the term ``Secretary'' means the Secretary of Health 
     and Human Services; and

[[Page S10183]]

       (2) the term ``University of Miami'' means the University 
     of Miami located in the State of Florida.
                                                                    ____



                           AMENDMENT NO. 5229

(Purpose: To prohibit the fraudulent production, sale, transportation, 
  or possession of fictitious items purporting to be valid financial 
    instruments of the United States, foreign governments, States, 
   political subdivisions, or private organizations, to increase the 
    penalties for counterfeiting violations, and for other purposes)

       At the appropriate place in the bill, insert the following 
     new section:

     SEC.   . CRIMINAL SANCTIONS FOR FICTITIOUS FINANCIAL 
                   INSTRUMENTS AND COUNTERFEITING.

       (a) Increased Penalties for Counterfeiting Violations.--
     Sections 474 and 474A of title 18, United States Code, are 
     amended by striking ``class C felony'' each place that term 
     appears and inserting ``class B felony''.
       (b) Criminal Penalty for Production, Sale, Transportation, 
     Possession of Fictitious Financial Instruments Purporting to 
     be Those of the States, of Political Subdivisions, and of 
     Private Organizations.--
       (1) In general.--Chapter 25 of title 18, United States 
     Code, is amended by inserting after section 513, the 
     following new section:

     ``Sec. 514. Fictitious obligations

       ``(a) Whoever, with the intent to defraud--
       ``(1) draws, prints, processes, produces, publishes, or 
     otherwise makes, or attempts or causes the same, within the 
     United States;
       ``(2) passes, utters, presents, offers, brokers, issues, 
     sells, or attempts or causes the same, or with like intent 
     possesses, within the United States; or
       ``(3) utilizes interstate or foreign commerce, including 
     the use of the mails or wire, radio, or other electronic 
     communication, to transmit, transport, ship, move, transfer, 
     or attempts or causes the same, to, from, or through the 
     United States,

     any false or fictitious instrument, document, or other item 
     appearing, representing, purporting, or contriving through 
     scheme or artifice, to be an actual security or other 
     financial instrument issued under the authority of the United 
     States, a foreign government, a State or other political 
     subdivision of the United States, or an organization, shall 
     be guilty of a class B felony.
       ``(b) For purposes of this section, any term used in this 
     section that is defined in section 513(c) has the same 
     meaning given such term in section 513(c).
       ``(c) The United States Secret Service, in addition to any 
     other agency having such authority, shall have authority to 
     investigate offenses under this section.''.
       (2) Technical amendment.--The analysis for chapter 25 of 
     title 18, United States Code, is amended by inserting after 
     the item relating to section 513 the following:

``514. Fictitious obligations.''.

       (c) Period of Effect.--This section and the amendments made 
     by this section shall become effective on the date of 
     enactment of this Act and shall remain in effect during each 
     fiscal year following that date of enactment.

  Mr. D'AMATO. Mr. President, I would like to commend the distinguished 
chairman and ranking minority member of the Treasury Appropriations 
Subcommittee. Thanks to their efforts, we have reached an agreement to 
include my amendment into this important legislation. This amendment 
incorporates the text of S. 1009, the Financial Instruments Anti-Fraud 
Act. This bill has bipartisan support and has been cosponsored by 
Senators Lieberman, Grassley, Johnston, Bryan, Bond, and Frahm.
  Mr. President, over the past several years, innovative criminals have 
exploited a loophole in Federal anti-counterfeiting laws. These laws do 
not specifically criminalize the production or passing of a phony 
check, bond or security if is not a copy of an actual financial 
instrument. Criminals are now making and passing completely fictitious 
financial instruments. These instruments may involve, for example, a 
bank, an asset or a security that does not even exist.
  Under existing Federal and State law, in order to prosecute a 
criminal who produces or passes a completely fictitious instrument, the 
criminal must use the wires or mails, or deposit the instrument in a 
bank. These laws simply do not prohibit the making and passing of 
fictitious financial instruments.
  The International Chamber of Commerce estimates that frauds involving 
fictitious financial instruments cost investors around the world $10 
million per day. The Office of the Comptroller of the Currency reports 
that in the first 6 months of 1996, con artists have attempted to pass 
more than $3 billion in fictitious instruments in the United States.
  In many cases, criminals who are caught attempting to perpetrate 
these frauds cannot be prosecuted. That is wrong. This loophole must be 
closed.
  On July 17, the Banking Committee held hearings on this issue. 
Charitable institutions such as the Salvation Army and the National 
Council of Churches of Christ testified that they lost millions of 
dollars in these scams. The committee also heard testimony from a 
private institution in North Carolina that paid out on a fictitious 
financial instrument.
  Mr. President, there is another sinister side to these frauds. 
Antigovernment groups use fictitious financial instruments to commit 
economic terrorism against Government agencies, private businesses, and 
individuals. Prior to their 81-day siege, the Montana Freemen passed 
fictitious instruments called comptroller warrants. The Freeman used 
these instruments to stockpile food, water, gasoline, and even 
vehicles.
  This past April, a California woman, Elizabeth Broderick, was 
arrested for mail fraud and conspiracy for passing comptroller warrants 
to banks, automobile dealers, bail bondsmen and even the IRS. Ms. 
Broderick, who calls herself the Lien Queen, has held seminars on how 
to produce and pass phony checks, charging her students $125 each. 
Federal authorities monitored the Lein Queen's activities for several 
years. They finally were able to arrest her only after she slipped and 
used the mails to send some of her phony checks.
  Fictitious instruments are an important source of funds for 
antigovernment groups. The Lien Queen attempted to pass more than $124 
million in phony checks. LeRoy Schweitzer, the founder of the Montana 
Freemen, successfully passed more than $85 million in phony notes, 
netting more than $670,000 in profits.
  Armed antigovernment groups such as the Freemen use fictitious 
instruments to undermine the banking and monetary systems of the United 
States. These groups believe that the Federal Government has declared 
war on its citizens, and that Federal institutions such as the Federal 
Reserve must be destroyed.
  My amendment would close this loophole. The amendment would give 
Federal agents the tools necessary to prevent millions of dollars in 
losses to banks, mutual funds, and individuals.
  Under this amendment, criminals found guilty of trafficking in 
fictitious financial instruments would face up to 25 years in prison.
  Mr. President, the Banking Committee has worked closely with the 
Treasury Department and the Secret Service to develop this legislation. 
I would like to thank my colleagues who are cosponsors of the bill and 
the floor managers. Federal law enforcement officials need this weapon 
to combat this new brand of financial fraud and to protect our 
financial institutions.


                           amendment no. 5230

    (Purpose: To prohibit distribution of federal employee personal 
             information without consent of the individual)

       On page 135, after line 4, add the following new section:
       Sec.  . None of the funds appropriated by this Act may be 
     used by an agency to provide a Federal employee's home 
     address except when it is made known to the Federal official 
     having authority to obligate or expend such funds that the 
     employee has authorized such disclosure or that such 
     disclosure has been ordered by a court of competent 
     jurisdiction.

  Mr. GREGG. Mr. President, earlier this year the Vice-President of the 
United States, Albert Gore, directed the Office of Personnel Management 
[OPM] to make available to the Federal Employees' Union the home 
addresses of all Federal employees regardless of their affiliation with 
the Federal Employee Union. The Administration claims this is just a 
step to enable the unions to communicate with employees in an 
emergency.
  Subsequently, on March 8, 1996, OPM published in the Federal Register 
a notice of proposed rulemaking which raises considerable privacy 
concerns and in my opinion severely undermines the Privacy Act of 1974. 
Citing as its reason for the new rulemaking--the confusion and turmoil 
caused by the Government shutdowns--OPM proposed permitting Federal 
agencies to release employee addresses to recognized Federal labor 
organizations. This notice went on to state that, ``OPM has determined 
that the most current home addresses of OPM employees are contained in 
the payroll system records.

[[Page S10184]]

 Because this system is updated for changes annually by OPM employees 
and is automated, it is the most efficient, as well as the most 
accurate, mechanism for releasing this information.''
  What perplexes me is that if the Federal Employee Union is interested 
in obtaining the addresses of all Federal employees, the union itself 
should ask for the addresses. The idea of mandating the availability of 
Federal employee addresses is outrageous and a direct violation of the 
Privacy Act of 1974. The Federal Government cannot and should not make 
available to the Federal labor unions the addresses of all Federal 
employees regardless of their union or non-union affiliation. This 
would not be permitted under my amendment.
  My amendment is a simple one. It states that no Federal funds will be 
made available to the OPM or any other Federal Government agency to 
provide Federal Government employee addresses to anyone unless 
authorized by that given employee or ordered by a court of competent 
jurisdiction.
  I ask unanimous consent that a July 28, 1996 Washington Post article, 
and a subsequent letter to the editor appearing in the Washington Post 
on August 12, 1996, be printed in the record following my remarks.
  I want to thank the chairman and ranking member for making my 
amendment part of their managers' amendment and I yield the floor.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               [From the Washington Post, July 28, 1996]

                       The Era of Job Insecurity

                            (By Mike Causey)

       If you think the words ``Uncle Sam'' still mean total job 
     security, chances are you have been out of touch for a while.
       In the past, about 33 percent of the people who hired on 
     with government made it to retirement. Turnover was low 
     compared with many private companies. But the image of the 
     government as a rock-steady employer may be gone with the 
     wind.
       Even the Internal Revenue Service--one of the government's 
     few moneymaking operations and an agency that has detailed 
     plans to keep trucking AFTER a major nuclear attack--is 
     having layoffs.
       The Defense Department is shrinking rapidly. The once-
     glamorous National Aeronautics and Space Administration is 
     getting smaller, and congressional Republicans still want to 
     see the Commerce Department disappear altogether.
       Working for the government today is a little like being in 
     a big crowd at an outdoor rock concert during a violent 
     electrical storm: Some people won't even get wet, or know it 
     if they do. Others will get wet but won't get hurt. But a few 
     may end up on the receiving end of a bolt of lightening. 
     Welcome to ``stable'' federal employment, 1996 style.
       Several things have combined to make government service 
     less binding. They include the new retirement system (with 
     its portable 401(k), which doesn't lock employees into a 
     pension plan); the end of the Cold War; the new emphasis on 
     deficit reduction and the adoption of ``reengineering'' as a 
     form of New Age religion.
       Federal unions have taken reengineering in stride. They are 
     supporting President Clinton for reelection, even though he 
     is campaigning on his success in eliminating 231,000 federal 
     jobs. It could have been worse, and it will be if Republican 
     Robert J. Dole is elected, unions tell members.
       Unions soon will be able to reach members (and nonmembers) 
     at home, thanks to a White House order telling agencies to 
     give their employees' home addresses to unions. This isn't a 
     political payoff, both sides say, but a way to allow 
     unions to communicate with employees during emergencies. 
     House Republicans are furious, contending that the 
     arrangement violates the privacy rights of federal 
     workers.
       In the meantime, congressional Republicans have shut down 
     two styles of buyouts, which, for want of better terms, might 
     be called the ``Golden Handshakes'' and ``Zombie Buyouts.''
       Golden Handshakes involved paying retirement-age workers as 
     much as $25,000 to retire. Zombie Buyouts are so named 
     because some agencies revived the program (which legally died 
     last year) to offer another chance at buyouts to employees 
     this year.
       Members of Congress think some agencies milked buyouts when 
     they offered employees as much as $25,000 to leave and then 
     paid them big-buck bonuses to delay their departure. Those 
     employees got bonuses and buyouts.
       Because of concerns about past buyouts, future buyouts in 
     non-Defense agencies will be selective and closely monitored.
       In parts of the IRS, one in every four employees is facing 
     layoff. That includes about 2,000 workers in the Washington 
     area. The IRS has asked for limited buyout authority, and the 
     Senate is working on allowing the agency to give buyouts to 
     early retirees. But the IRS has determined that nobody who is 
     eligible for either regular or early retirement will get a 
     buyout, even if Congress approves them for early retirees.
       The Agency for International Development also is seeking 
     limited buyout authority. Rep. Benjamin A. Gilman (R-N.Y.) is 
     pushing the plan. It would allow AID to pay severance of as 
     much as $25,000 to as many as 100 workers--none of them 
     eligible to retire--who agree to resign. Normally employees 
     who resign can't get severance. The plan, supported by the 
     White House and congressional leaders, would let AID--and 
     maybe other agencies--have what amounts to buyouts without 
     offering buyouts. It also sends a message to retirement-age 
     workers that the era of buyouts, for them, may be gone.
                                                                    ____


                       [From the Washington Post]

               Safeguard the Privacy of Federal Employees

       As the concerned wife of a federal employee, I implore The 
     Post: Please tell me that Mike Causey misspoke in his July 28 
     column ``The Era of Job Insecurity'' [Metro]. Mr. Causey 
     reported that the Clinton administration has ordered federal 
     agencies to give the home addresses of their employees, 
     including nonmembers, to federal unions. The unions and the 
     Clinton people claim this is just a step to enable the unions 
     to communicate with employees in emergencies.
       While government employees' names, grades and salaries are 
     matters of public record, until now, their home addresses 
     have not been publicly available.
       How are the unions going to ensure that some disgruntled 
     person with access to the lists of home addresses--someone 
     who is currently undergoing a tax audit, for example--doesn't 
     start sending threatening letters to the home of the auditor 
     who is assigned to her case? Or what if she decides to drop 
     by the auditor's home for a personal confrontation?
       I have no doubt that agencies will try to withhold the 
     addresses of some of their employees--FBI agents, IRS 
     criminal investigators, etc.--because they might be harassed 
     at home. One has to wonder, through, why a secretary at the 
     FBI or a personnel staffer at the National Archives shouldn't 
     be entitled to the same respect for her privacy. 
     Additionally, many federal workers are married to other 
     federal employees. What happens when the FBI secretary is 
     married to an FBI agent? How does the FBI manage to give the 
     union the secretary's home address without also handing over 
     the home address of the agent?
       It's true that we give our addresses out to our friends, 
     associates and businesses, such as bank and department 
     stores, all the time. But that choice is ours, and we freely 
     assume any risks attached to the release of our addresses. 
     Additionally, we can limit the amount of information we 
     provide to any particular person or institution. The public 
     library has my home address, but it has no information on 
     what either my husband or I do for a living. The same is true 
     of various museums and charities. No one who comes across our 
     address on a membership renewal form has any reason to 
     associate us with the government, unless we choose for them 
     to have that information.
       Having been both a tax law specialist in the disclosure 
     function at IRS and a personnel staffer with that agency, I 
     am somewhat familiar with the obligation of federal agencies 
     to safeguard information they collect. I'm curious as to 
     whether any privacy considerations come into play here. My 
     own gut reaction is that federal agencies have no business 
     handing over the addresses of their employees to unions or to 
     anyone else who asks for them.
       Regina F. McCormick--New York.


                           AMENDMENT NO. 5231

(Purpose: To express the sense of Congress that the level of telephone 
assistance provided by the Internal Revenue Service to taxpayers should 
                             be increased)

       At the appropriate place in the bill, insert the following 
     new section:

     SEC.   . SENSE OF CONGRESS REGARDING TELEPHONE ASSISTANCE 
                   PROVIDED BY INTERNAL REVENUE SERVICE.

       It is the sense of the Congress that the Internal Revenue 
     Service should, in implementing any reorganization plan or 
     otherwise, make all efforts to increase the level of service 
     provided to taxpayers through its telephone assistance 
     program. It is further the sense of the Congress that the 
     Internal Revenue Service should establish performance goals, 
     operating standards, and management practices which ensures 
     such an increase in customer service.


                           AMENDMENT NO. 5232

       On page 26 after line 9 add the following new section:
       The Internal Revenue Service is prohibited from expending 
     funds for the field office reorganization plan until the 
     National Commission on Restructuring the Internal Revenue 
     Service has had an opportunity to issue their final report.

  Mr. CONRAD. Mr. President, this amendment would disallow funds for 
the Internal Revenue Service to execute their field office 
reorganization plan until the National Commission on Restructuring the 
IRS has had an opportunity to issue its final report.
  The amendment addresses the recent proposal by the IRS to downsize 
the offices of its headquarters and those in

[[Page S10185]]

the field. Recently, the IRS announced that it will cut back 3,300 
employees at sites around the country and hire 1,400 new employees to 
do the same work at another location. While this Congress has routinely 
supported initiatives to eliminate unnecessary positions at Federal 
agencies, I worry that this recent decision at the IRS will do nothing 
to aid taxpayers in America and may reduce the level of customer 
service taxpayers deserve.
  The IRS formulated this plan, without regard to final decisions on 
fiscal year 1997 spending levels, in order to consolidate the 
administrative operations of their field offices. Because these offices 
are to remain open, there does not seem to be a reason for rehiring 
1,400 people to perform the jobs that are capably being done in the 
field. In my own State of North Dakota, our taxpayers will lose many 
people who provide front-line services such as a public affairs 
officer, a taxpayer education coordinator, and several others who 
provide the critical liaison between the taxpayer and the IRS. I fail 
to see how shifting these positions to larger metropolitan areas will 
increase the efficiency of work already being done.
  Mr. President, I receive many letters every year from concerned North 
Dakotans who have exhausted several hours and days attempting to reach 
representatives of the IRS. Their complaints have only intensified over 
the years. This recent decision by the IRS will only worsen an already 
tenuous relation between taxpayers and the IRS.
  This amendment prevents the IRS from taking these actions in their 
field offices until the National Commission to Restructure the Internal 
Revenue Service has had a chance to report back to Congress on the 
troubles facing the IRS and their possible solutions. Until the 
Congress has had a chance to evaluate and propose solutions to many of 
the predicaments at the IRS, it does not make sense to frustrate 
taxpayers with a pointless restructuring plan which does nothing to 
better serve their needs. I ask my colleagues to support this 
amendment.
  Mr. SHELBY. I ask unanimous consent that these amendments be 
considered and agreed to, en bloc, and that accompanying statements be 
placed at the appropriate place in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments (Nos. 5225 through 5232), en bloc, were agreed to.
  Mr. SHELBY. Mr. President, I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


          WESTERN STATES HIGH INTENSITY DRUG TRAFFICKING AREA

  Mr. CAMPBELL. Mr. President, I take this opportunity to join my 
distinguished colleagues from the West in recognizing the alarming rise 
in drug trafficking plaguing our region of the country. Included in the 
committee report to accompany this measure, there is language giving 
consideration for this problem, with special consideration for the 
State of Colorado. The committee further directed the Office of 
National Drug Control Policy to evaluate the drug problem in the Rocky 
Mountain region and elsewhere, and report its findings back to the 
committee.
  Would the Senator from Alabama yield a few moments at this time to 
enter into a brief colloquy?
  Mr. SHELBY. I would be happy to yield to the Senator from Colorado.
  Mr. CAMPBELL. I thank the Senator from Alabama.
  As chairman of the subcommittee with jurisdiction, the Senator from 
Alabama is aware of the drug problem facing the entire country.
  I would like to point out the efforts of the Rocky Mountain Division 
of the Drug Enforcement Agency. In cooperation with numerous State and 
local law enforcement agencies, DEA has presented a proposal to the 
Office of National Drug Control Policy to have the region identified as 
a high intensity drug trafficking area. For example, at the Treasury, 
Postal and Government Operations Subcommittee hearing of June 26, the 
ONDCP Director, General McCaffrey, cited the drug smuggling problem in 
Denver, CO. Thorough investigations by law enforcement personnel 
indicate that the trafficking problem centered in Denver impacts not 
only the neighboring States of Utah and Wyoming, but also the rest of 
the Nation. In addition, evidence suggests that Denver serves as a 
transshipment point between Los Angeles, Mexico, and the east coast.
  Based upon the actions taken by the appropriate law enforcement 
agencies in the Rocky Mountain region, as well as the advanced stage of 
their pending request to be identified as a high intensity drug 
trafficking area, I take this opportunity to request that the Senator 
continue to work with me to address this matter.
  Mr. SHELBY. I look forward to working with the Senator on this 
matter. I know how important combating the drug trafficking problem is 
to the communities in the Rocky Mountain region.
  Mr. CAMPBELL. I thank the distinguished Senator from Alabama for his 
consideration and I yield the floor.
  Mr. HATCH. Mr. President, I want to commend my esteemed colleague 
from Colorado, Senator Campbell, for his vision and hard work on the 
drug trafficking problem in the Rocky Mountain region. I join him today 
in supporting the committee's focus on the unfortunate, growing tragedy 
in our region.
  The Rocky Mountain region contains three important States. My home 
State of Utah, Colorado, the home State for my colleague, Senator 
Campbell, and the State of Wyoming. It is important that the DEA and 
other Federal and State drug enforcement officers be able to accomplish 
their important tasks in each of these States, and the citizens of each 
one will benefit greatly from this project. It clearly is appropriate 
to this Senator that the Office of National Drug Control Policy should 
designate the States of Utah, Colorado, and Wyoming for increased 
assistance in the fight against drug traffickers.
  Again, I want to thank my colleagues Senators Shelby and Kerrey for 
their leadership and hard work on this important legislation. I yield 
the floor.


             gang resistance education and training program

  Mr. GRASSLEY. Would the distinguished chairman of the Treasury-Postal 
Appropriations Subcommittee yield to a question?
  Mr. SHELBY. I would be happy to yield to my friend, the Senator from 
Iowa.
  Mr. GRASSLEY. I fully agree with the statement in the committee's 
report that the Gang Resistance Education and Training [GREAT] Program 
has proven to be highly successful. It is my understanding that the 
committee has provided funding for an expansion of the GREAT Program. 
Is my understanding correct?
  Mr. SHELBY. I thank the Senator from Iowa for his support of this 
worthwhile program. It has proven to be very successful and very 
popular with State and local law enforcement authorities. The Senator 
is correct. The committee has provided funds for an expansion of the 
GREAT Program.
  Mr. GRASSLEY. The Sioux City, IA, police department was one of the 
first agencies in my State to do a pilot GREAT Program in a public 
school environment. Because of their participation in the GREAT 
Program, this school in Sioux City went from a high-risk school to 
being recognized as one of Iowa's First In the Nation in Education 
[FINE] schools this past year. This is a significant and very important 
turnaround. I would urge my friend, the Senator from Alabama, to give 
serious consideration to adding Sioux City to the GREAT Program during 
the conference on this bill.
  Mr. SHELBY. I can assure the Senator from Iowa that we will give 
Sioux City every consideration during the conference on this 
appropriations bill.
  Mr. GRASSLEY. I thank the Senator for his assurance.
  Mr. SHELBY. Mr. President, I yield the floor.
  Mr. KERREY. Mr. President, as I understand it, we are going to go out 
relatively soon.

                          ____________________