[Congressional Record Volume 144, Number 146 (Wednesday, October 14, 1998)]
[Senate]
[Pages S12535-S12536]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page S12535]]
            HOME HEALTH CARE, R&D TAX AND THE WORLD ECONOMY

  Mr. GRAMM. Mr. President, let me now turn to home health care, R&D 
tax credit and the world economy.


                            Home Health Care

  We put together a bill in the Finance Committee to provide $1 billion 
to the home health care industry, which has been hit by a failure of 
HCFA to implement a workable program to try to control the exploding 
cost of home health care.
  As my colleagues will remember, we passed a bill to have a simple $5 
copayment for home health care. That copayment would not apply to 
moderate-income people who would have their cost paid by Medicaid. The 
administration said, no, that they could save the money in another way, 
that they could reform the system. So in the omnibus reconciliation 
bill for the 1997 budget last Congress, we gave them the ability to do 
that. Now they have come up with a totally unworkable program which 
they say they can't fix.
  We responded in two ways: No. 1, we in the Senate Finance Committee 
came up with a bill to provide $1 billion for home health care, and we 
paid for it by going back and correcting a technical error in the 1997 
bill. We meant in that bill to require the Federal Government to reduce 
payments to health care providers for bad debt because it was producing 
perverse incentives where they were not trying to collect debts, since 
the Government paid them off 100 cents on the dollar, and where they 
were basically extending credit where there was no hope of collection 
because, again, it wasn't their money.
  We meant to do that for every health care provider, but by a 
technical drafting error, it only applied to hospitals. So we were 
going to expand it to every other health care provider. It saved us 
about $1 billion from current law, and we were going to provide $1 
billion for home health care relief to give the administration another 
year or 18 months to try to fix the problem that they have created. We 
have now had Members of the Senate--at least one Member--object to that 
funding mechanism.
  Look, I don't object to the fact that Senators have a right to stop a 
bill in the waning hours of the session. I think that represents part 
of the strength of the Senate and, quite frankly, if you are going to 
make laws in the last hour of the session, you ought to have unanimous 
agreement.
  I am disappointed, because I thought that was a reasonable way to try 
to fix the problem. We now have many other people trying to come up 
with ways of funding this $1 billion, including some proposals that we 
have a bunch of little tax increases.
  I don't think that is the way to go. I hope we can work out a 
compromise, but there has been so much said about this issue that I 
wanted to come to the floor and go on record as saying I am for the 
solution that we reached in the Finance Committee that would pay for 
another $1 billion of aid to home health care by changing the 1997 law 
to stop payments for bad debt so that if you don't collect your bills, 
you have to pay for it, and not the taxpayer. I hope we can work out 
something.
  I certainly believe it is possible to come up with a solution. I 
thought we had a good one. Someone objected to it. So now we are 
scrambling trying to find another solution.


                               R&D Credit

  I am for the R&D tax credit. I think it should be extended. I think 
the House has come up with a good extender bill. I am for the House 
bill. I am afraid that if we fool around trying to add items, like tax 
credits for biomass energy, which I think is a wasteful subsidy, that 
we are going to end up with one bill in the Senate, one bill in the 
House, and we are not going to get the tax extenders. I hope we can 
just adopt the House bill which deals fundamentally with the major 
issue in the tax extenders, and that major issue is the R&D tax credit.


                             World Economy

  Finally, in the few minutes I have left, let me say a little bit 
about the world economy. I think that something fundamentally is 
getting lost in all of this discussion in the last couple of weeks 
about the world economy. One would think in listening to the 
administration and the many commentators that the problem in the world 
economy is that there is some economic equivalent to the flu which is 
going around the world and it is being caught randomly.
  The plain truth is, the collapse of the economies in Asia was due to 
crony capitalism where government was directing capital politically 
rather than economically. That system failed. As a result, it pulled 
down the economies, first of Thailand, and now several countries in 
Asia, including Japan.
  The solution to the problem is to end crony capitalism. The solution 
to the problem is to open their markets for competition from American 
goods and goods produced all around the world, and eliminate the crony 
capitalism in places like Japan, where American goods had been kept out 
and in the process it has weakened their economy and it has hurt the 
world economy. The solution is not to engage in capital controls. And 
the solution is not to simply have the world use its money to support 
economic systems that do not work.
  So I think it is important to remember that the problem in the world 
economy is that we had countries practicing crony capitalism. I think 
in the end this can turn out to be a good thing, not a bad thing. I 
think if we reform economies in Asia, if we learn the lesson in America 
that the Government should not be deciding where investments are made, 
I think the world economy can come back and be strong.
  I am very concerned about the International Monetary Fund. It was set 
up at the end of World War II as part of the Bretton Woods agreement. 
In those days, we had fixed exchange rates, and the IMF was supposed to 
provide financing to make the system work. The United States, in 1969, 
went on flexible exchange rates. The Bretton Woods agreement died. We 
have not had an international financial crisis come out of America 
since. So IMF has been scrambling to try to find something to do.
  I do not believe they have done a good job. I think in Russia they 
provided money most of which was simply stolen. I think they did not 
get the economic reforms they sought, and they squandered their money 
and ours. I am very concerned about what is happening in much of Asia. 
But I have decided, with some concrete reforms, to go along with 
additional money for IMF. But they are going to have to make the 
reforms to get the money.
  The reforms are: If you want to use your money, you can do anything 
you want to do economically in the world. If you want to shoot your 
economy in the foot, or someplace worse, you have a right to do it, but 
you do not have a right to do it with our money. If you want our money, 
you are going to have to set out a plan to open up your economy for 
world trade, you are going to have to have movement toward free trade 
and free capital movement, you are going to have to set up a system 
where you give everybody equal justice under the law in areas like 
bankruptcy, and you are going to have to end crony capitalism where the 
kinfolks of rulers, where politically favored members of political 
parties, end up getting ownership of property and end up getting 
investment under their control.
  The point is, these reforms are critically important if we are to 
avoid a world financial crisis. And these reforms are going to have to 
be made if we are going to provide the IMF the money.
  I just want to respond very briefly to the representative from 
France, and others, who said, ``How dare the United States of America 
try to tell us what to do.'' Let me make it clear, we do not care what 
they do with their money. But if they are going to spend our money, 
they are going to have to use it on programs that we believe can work. 
And if they do not want to do it our way, that is great, just do not 
take our money; and they are not going to get it unless they do it our 
way.
  Finally, I think in some ways we are adding to the world financial 
crisis by using rhetoric that seems akin to the sort of ``The sky is 
falling'' logic. Crony capitalism failed. Government does not work as 
an allocator of capital. That is hardly a surprise, but it is a lesson 
that is proven in Japan and all over Asia.
  I remember not long ago sitting down with a President and with a 
Cabinet Member and another Member of the Senate, and there was really a 
discussion about our Government funding

[[Page S12536]]

high-definition television as part of industrial policy; the Japanese 
were doing it, and we could lose our cutting edge in technology.
  Well, what happened? Fortunately, we did not do it. I opposed it. The 
Japanese invested over $1 billion in their technology, which failed. 
The world adopted our private technology, and we now dominate the world 
market. Crony capitalism does not work in America, it does not work in 
Japan, it certainly did not work in Korea and Thailand, and the sooner 
they change their system, the better off they are going to be.
  If they want to set their economy right by using a system that we 
know works--capitalism and democracy--then we want to help. If they 
want to keep trying crony capitalism and socialism, we wish them good 
luck, we will include them in our prayers, but we will not fund that 
experiment, because we know it does not work.
  I yield the floor.
  Mr. SPECTER addressed the Chair.
  The PRESIDING OFFICER. The Senator from Pennsylvania.

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