Congressional Record, Volume 149 Issue 72 (Wednesday, May 14, 2003)

[Congressional Record Volume 149, Number 72 (Wednesday, May 14, 2003)]
[Senate]
[Pages S6148-S6226]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003

The PRESIDING OFFICER. Under the previous order, the Senate will
proceed to the consideration of Calendar No. 97, S. 1054. The clerk
will state the bill by title.
The legislative clerk read as follows:

A bill (S. 1054) to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for
fiscal year 2004.

The PRESIDING OFFICER. Under the previous order, there are 14 hours
of debate on the measure to be equally divided.
The Senator from Iowa is recognized.
Mr. GRASSLEY. Mr. President, I yield to our majority leader whatever
time he might consume.
The PRESIDING OFFICER. The majority leader is recognized.
Mr. FRIST. Mr. President, we are now on the jobs and economic growth
package. By statute, the clock is running and we will have a very
healthy and productive debate in the next 14 hours, as the assistant
minority leader said.
It is critically important that we do this in a disciplined and
organized way. The rules are different than on the usual debate. They
are very clear. What it means is that we need to have participation as
early as possible with the two leaders who will be managing this bill.
I want to reiterate what the assistant leader said.
The legislation that we will be discussing--and, ultimately, I
believe will pass--will clearly lower tax burdens, increase jobs, and
expand and grow the economy in the short term, midterm, and in the long
term. That is an objective I think both sides of the aisle share--
expansion of the economy. With that, you have job creation and an
increase in savings and investment.
The House has done its work on the bill, and now it is time for the
Senate to do the same, to send a very clear message to the American
people that we are serious as a body, as an institution, as a
Government, as the Congress, about creating jobs. When you say creating
jobs, you are really saying to give job security to the people who have
jobs, and also to those people across America who don't have jobs
but who want jobs and are willing to work, to have that opportunity.

Growing the economy is sort of a surrogate of what we say because if
you look at the economy and you make that pie larger and larger, in
truth, you are creating jobs and growing our gross domestic product in
a way that is consistent with the increased productivity of individuals
that has occurred over the last 15, 20 years.
A lot of people ask how much. It is hard to give an exact number. We
all look for those exact numbers. How much will the Senate Finance
Committee jobs and tax package grow the economy? We make references to
other proposals, and the other side of the aisle put a package on the
table and quantified it. The President's proposal has been quantified,
and those numbers have been used. People are asking: What about the
package that passed out of the Finance Committee last night? How many
jobs will it create?
The Heritage Foundation's Center for Data Analysis specifically
studied the Senate Finance bill, and the results paint a very clear
picture of growth--growing the economy. The study shows that the
Finance Committee package will raise the economy's growth rate in 2004
from 3.3 to 3.6 percent. That six-tenths of 1 percent may not seem to
be much, but what it does do is translate into an additional 437,000
jobs in 1 year, in 2004 alone, and an increase in gross domestic
product that year of more than $42 billion.
I want to remind my colleagues that outside of the White House, the
Senate is perhaps the only place in Washington where one person
literally can make the difference. We have seen that play out in many
of the votes thus far this year in our very closely divided Senate. One
vote makes a difference.
So I say to each of my colleagues, please remember that the people
back you, and how you participate in this debate and in growing the
economy is important to our constituents--constituents in your State
but indeed people all across the country. We will, through this bill,
make a difference in the lives of each and every one of our
constituents. Our constituents want to feel good again about the
economy. They want to be able to find a job or get a better job. They
want to be able to grow their businesses, most of which are small
businesses, as we all know. They want a fighting chance to grab a piece
of that American dream.
In closing, I urge my colleagues to move this jobs and growth package
through the Senate quickly over the course of today. We can complete
our job in this body in preparation for a final vote in the conference
committee before we leave for the Memorial Day recess. In the form that
is created over the next really 24 to 36 hours, building upon the very
solid package put forth by the Finance Committee, we will be able to
create jobs and we will be able to put Americans to work.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I yield myself such time as I might
consume.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Mr. GRASSLEY. Mr. President, we are in a position where there is a
lot of anxiety about the economy. That anxiety probably started back in
March of 2000, when we first saw a downturn in the manufacturing index,
and the manufacturing index has been in a downturn for 33 months, at
least as far as it relates to employment.
There is anxiety that the economy might go back to mid-2000 and later
in 2000 when Nasdaq lost half its value. Then September 11 happened.
There is anxiety about the war on terrorism, reinforced by the murder
of Americans in Saudi Arabia yesterday. There is anxiety about the
economy because of the war in Iraq and the war in Afghanistan. As far
as war and foreign relations are concerned, there is not a lot we in
Congress can do about it because people expect us to fight a war
against terrorists. They expect us to make sure that bases for
terrorism training against American citizens are not maintained by
protection of foreign countries, such as Afghanistan.
Americans expect us to not allow a nation such as Iraq, where there
has been a great deal of evidence of the existence of weapons of mass
destruction that could be used against American citizens, to continue
to exist, or a nation such as Iraq that supports terrorist
organizations such as Hezbollah or Hamas, to create greater turmoil in
the Middle East, threatening the oil supply coming to the United States
which will affect our economy. There is not much we can do about that,
but the American people expect us to do what we can.
Also, there are some actions we can take domestically that deal with
the anxiety about the economy, whether it

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is related to the downturn of the domestic economy or whether that
downturn is related to our international relations, our international
responsibilities, or the protection of American citizens.
What we are doing today is responding, as best we can, through the
tax policy of our country, to the anxiety about the economy. We have
had the good fortune of a President with vision, with ideas to
stimulate the recovery and, in the process of this legislation, as
economists will tell us, create more than 1 million new jobs through
changes in tax policy.
We are responding to the issues that are on the minds of Americans,
and those issues are the need to create jobs and bringing robust growth
to the economy.
I have the good fortune of serving in the Senate at the same time we
have a President who has a tax policy that tries to accomplish what I
have been working for in the Senate as a member of the Finance
Committee for a much longer period of time than President Bush has been
President of the United States.
As chairman of the Senate Finance Committee, that good fortune gives
me the opportunity to work for my goals simultaneously with the goals
the President seeks. Many times being a member of the Senate Finance
Committee--I was not chairman at that particular time--I found myself
trying to fight what I thought were bad ideas put forth by Presidents
of the United States on tax policy. Today I have the good fortune of
trying to accomplish for President Bush good things for our economy
along the lines that I have tried to accomplish over a long period of
time. Not often do Senators have that opportunity.
On the other hand, we faced a challenge in meeting the President's
goals. As many of my colleagues know, several weeks ago the Senate
agreed upon the size of the reconciled tax relief cuts for jobs and for
growth. I join many of my colleagues in wishing the reconciliation
amount had been larger, and I believe we have put together a good
proposal, given the limitation we face of the realities of compromising
on the budget which we adopted 1 month ago.
I am pleased that the Finance Committee was able to report out
legislation that received bipartisan support, although not as broadly
bipartisan as I had hoped. While I wish the number of supporters from
the other side of the aisle had been greater for final passage, I think
the vote reflects broad bipartisan support for a significant majority
of the provisions in this bill.
The vote also reflects a common goal: to see our economy strengthened
by tax relief policies. At least three-fourths of this bill enjoys
bipartisan support, for instance, with major parts of the income tax
policy that is in this legislation, meaning personal income tax policy.
I believe the bill before us today is a balanced package of
consumption and investment incentives that will provide short-term
stimulus and provide the building blocks for meaningful future economic
growth.
There is wide support for the provisions that accelerate the child
tax credit, the marriage penalty relief, expansion of the 10-percent
bracket, almost all of the marginal rates expanding small business
expensing, and providing much needed alternative minimum tax relief.
These six provisions make up approximately $300 billion of the total
package of economic growth proposals before the Senate and represent
the three-fourths of the bill that I described that had broad
bipartisan support. Unfortunately, from the statements by a few of my
colleagues, one would never know about these items having broad
bipartisan support.
I believe the American people sent us here to get the people's
business done. Sadly, despite a bill that provides so much benefit to
working families and will create over 1 million new jobs, there are
many who put partisanship first and turn the other song on its head:
accentuate the negative and eliminate the positive.
Let me try to counter the efforts to eliminate the positive by
briefly taking Members through key provisions of the bill. I will
emphasize first those that I can say categorically would have
overwhelming support, meaning overwhelming bipartisan support, if they
were voted upon separately.
With regard to the child tax credit, we immediately bring the child
tax credit to $1,000 per year instead of waiting for that to be phased
in over the rest of this decade. In addition, we also accelerate the
refundable portion of the child credit.
In other words, we are going to speed up the giving of money to
people who have not even paid income tax so that they benefit from our
emphasis upon helping families with children.
Finally, we simplify the definition of a child for several different
tax programs. I know it is not imaginable to the average taxpayer that
somehow we would complicate the Tax Code by having half a dozen
different definitions of the world ``child,'' but we do have. We
simplified this by expanding who is eligible and making more families
eligible for certain tax benefits. This is what that means: Over $75
billion that hard-working families will get to keep in their pockets.
Thus, by far and away the biggest part of this bill is direct benefits
that help middle and lower income families.
There is one more thing. Not only are hard-working families getting
the biggest benefits, they are first in line to get the benefits of
this bill because we include the President's proposal that would send
checks--rebate checks, if you want to call them that--to those who
receive the child credit in their 2002 tax year. The Treasury
Department states that these checks will be sent out within 6 weeks of
Congress approving this bill. So in just a few weeks, eligible families
will receive a check from the Treasury of up to $400 per child.
Why $400 per child? Because presently the child credit is $600 and it
would not reach $1,000 until later in this decade, gradually phased in.
We make that $1,000 credit effective right now for the year 2004.
Now, there is another very popular change in this bill that a vast
majority of this body believes should have been done a long time ago
and was done in the year 2001 tax bill but phased in over this decade.
What we do is provide marriage penalty relief of $51 billion in this
package to de-emphasize the penalty for people being married, meaning
they pay a higher tax bill than people who would have the same incomes
not being married. So these people will not be penalized for being
married and having both husband and wife working.
It also enhances tax relief for those families where one spouse
decides to stay home and spend their time, rather than outside the
family and the workforce, doing that work in the family, raising kids.
As my wife reminds me, raising the family is one of the hardest and
most important jobs, and that has been emphasized very effectively by
the President of the United States.
So the marriage penalty would have been phased in over this decade,
and now, retroactive to January 1, 2004, we are going to have the
marriage penalty fully brought in under the 2001 tax bill policy.
There is another problem particularly for middle-income taxpayers,
and that is how the alternative minimum tax is hitting an increasing
number of American taxpayers. The bill before us actually ensures that
fewer Americans will be subject to the alternative minimum tax through
the year 2005, and we devote $49 billion in this bill to addressing the
alternative minimum tax.
I want to be candid with the taxpayers of America and tell them that
we are not doing in this bill, because of costs now, what we did in
1999 when, during the Clinton administration, the Senate and House sent
to the President a bill abolishing the alternative minimum tax. That
was vetoed by President Clinton. I am sure I am going to have Members
on the other side of the aisle saying we are not doing enough for the
alternative minimum tax. I hope they remember that when it was not as
far down the road as it is now on covering more Americans being hit by
the alternative minimum tax, this Congress had the foresight to do away
with the alternative minimum tax and President Clinton vetoed it.

In this regard of how we handle the alternative minimum tax, we
eliminate more people from being hit by the alternative minimum tax
than we would have under the 2001 tax law.
In another area where we want to increase investment to create jobs,
the bill provides for increasing expensing of depreciable investment by
small

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business. We increase that from a $25,000 a year write-off to a $75,000
a year write-off, to encourage expansion and investment by small
business today and the new jobs that will result from that small
business investment.
The acceleration of the expansion of the tax brackets at the 10
percent bracket benefits all taxpayers and will mean thousands of
taxpayers no longer even owe Federal income tax. That 10 percent
bracket relief reports $44 billion of revenue loss in this bill,
meaning that people hit by the 10 percent bracket will pay $44 billion
less in taxes. This is another one of the provisions in the 2001 tax
bill that would have been phased in over the next decade that we are
bringing back effective January 1, 2004, fully implemented.
The reduction of tax rates at all other levels--and this does reduce
marginal tax rates back to January 1, 2004, rates that would have
otherwise been reduced gradually over the rest of this decade, making
those marginal tax rates fully effective this year. The reduction of
the top rate amounts to less than 7 percent of the total cost of this
package, although I fear that many speakers will have us think it is 93
percent from all the words spent on this matter.
The reduction of all tax rates will help the husband and wife who,
after years of hard work, have finally achieved good paying jobs and
now face the triple threat. That triple threat is the cost of paying
for their children going to college, saving for their own retirement
and, oddly enough, probably helping their own parents in retirement.
The reductions of rates as well as expensing will help small business
owners, as in my own city of Dubuque, IA, and small business owners
across the country. These small business folks are key to job creation.
If they hire more workers, if they expand their businesses, we are all
better off.
That brings me to the point of who most benefits from the reductions
of rates as well as small business expensing: The people who are hired
by the small business owner. What this bill is all about is the
creation of jobs. Of all the people benefiting, it is going to be those
who want to work and will have an opportunity to work because of the 1
million-plus jobs that will be created by this legislation. These new
jobs and the people who will be in them do not show up on any of the
charts that we will see. They do not show up on the benefit table. But
it is those people and their families who benefit greatly from this
bill.

This is jobs creation legislation. This is based on the presumption
that if money is in the taxpayers' pockets and 110 million taxpayers in
America decide how that money is going to be spent or invested, it will
do more economic good, turn over the economy many more times, than if
it comes through the Federal Treasury and 535 Members of Congress
decide how it will be divided.
Do not buy into the argument: How can we afford a tax cut when the
budget deficit is what it is. A lot of the same Members who are going
to be bringing that issue forward are some of the same Members who
offered amendments on the Budget Act or offered amendments on the
appropriations bill in January to spend more money. A lot of the votes
on the budget took money away from tax relief in the budget and spent
it somewhere else. Anyone who is concerned about the budget deficit
ought to have reduced taxes and put it against the bottom line, not
spend it someplace else.
The conclusion can be drawn that a lot of Members expressing concern
over the budget deficit are not really concerned about the budget
deficit but want more tax money coming through the Federal budget,
through the Federal Treasury, so 535 Members of Congress can spend the
money rather than 110 million American taxpayers having it in their
pockets.
I happen to believe how 535 Members of Congress spend the money is
not going to respond to the dynamics of our free market system,
compared to 110 million taxpayers making the decision of how that money
is spent.
Much of the discussion I have spoken about, worry of the budget
deficit, is going to be related to discussion regarding the top rate
and whether or not we should reduce the top rate from 38.6 to 35.
Remember, that was already legislated in 2001 but not going to be fully
effective until the year 2006. We made a judgment that putting money
into the pockets of people who will invest it and create jobs,
particularly small business owners, is better to do now, starting
January 1, 2004, rather than waiting until 2006.
For those listening, do not look exclusively at the number of
taxpayers impacted by those rates. Such an analysis fails to tell a
complete story about the efficacy and efficiency of lowering top rates
and seems to focus instead on who gets what in a distributional sense,
not the economic good that comes from the policy decisions.
In my opinion, the better way to think about it is to focus on: One,
what most efficiently changes behavior of taxpayers; two, what provides
incentives for the creation of jobs; and, three, what has the largest
multiplier effect on the economy. And by ``multiplier effect,'' I mean
what is going to be done with the money by the 110 million taxpayers
who create jobs. That has to be one of two ways. Either they spend it
and it enhances two-thirds of the economy related to consumer spending
or it will be invested and, with investment, the creation of jobs.
We will hear a lot about distributional analysis of how this tax bill
might affect certain classes of taxpayers. It also ignores the fact
that successful businesses--in other words, profitable businesses that
pay proportionately higher taxes and the highest marginal tax rates--
are the ones who will disproportionately add the most labor and
capital. This is an important point to keep in mind.

Everyone knows most of my livelihood outside of Congress or even
while I have been in Congress has been from farming. But throughout my
lifetime I have had jobs with small business people in the Waterloo-
Cedar Falls area of Iowa. I have had those jobs because I started out
as a small farmer. If you are farming 80 acres, you cannot make a
living so you moonlight someplace else to provide income to support
your family. I had an opportunity to work at a little business called
Universal Hoist. We made grain-moving equipment for farmers and grain
elevators to buy. That business is still operating in Cedar Falls. I
worked 10 years, from 1961 to 1971, as an assembly line worker at a
company called Waterloo Register Company. We made furnace registers. I
had the beautiful job of putting screw holes in those registers. Do
that for 10 years and you have a lot of time to think about public
policy, too, I guess. Regardless, that is what I did. That factory
closed down in 1971. It no longer exists.
The point I make about higher income people, they provide jobs for
people in my State. They probably provide a lot more jobs than the John
Deeres and Maytags. These are outstanding businesses in my State and I
do not denigrate their contribution to the economy. I had jobs because
of small entrepreneurs investing and creating a job for me that I could
not create for myself on an 80-acre farm. I created a part-time job on
an 80-acre farm. Someone else invested money. These were middle-income
taxpayers, as I knew them at that time. It takes people with money to
create jobs.
Also, people who have money have not always been rich. And they are
not always going to be rich. We have economic mobility studies that
show that. One might get the opinion from debate on this bill--and I
hope I am accurately anticipating because I have heard these debates
before. One gets the idea from the debates on class warfare that
somehow people who are poor in America are poor throughout their
lifetime, and people who are rich are rich throughout their lifetime.
People at the top levels have problems and they come down, and there is
great mobility upwards in our society. I want people who discuss we are
not doing enough for the poor or we are doing too much for the rich in
America, I want these Members to understand the studies show as we
divide our working people into quintiles of income, these studies show
the people in the lowest quintile after 10 years have moved to the
second, third, and fourth quintile, maybe some even up to the fifth
quintile. But there is only 10 percent of the original 20 percent in
the lower quintile after 10 years. That is 2 percent of our workforce.
There is great upward mobility. Those studies also show a lot of
people

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in the top quintile after 10 years are not in the top quintile. There
is mobility downward.
What we are talking about in this legislation to create jobs, to give
tax relief to American workers, is to give small business, and even
large business, an incentive to create jobs in one of two ways: Either
take the money and invest it and create jobs rather than spending it
for you or for consumers to take their extra money and buy things and
create consumer demand, in turn creating jobs.
It also has something to do with enhancing the capital-to-labor
ratio. That is because when capital is more available, when there is a
surplus of capital, that is when labor in America does its best because
labor is going to be much more in demand when there is a surplus of
capital. That is where labor is going to make its progress, with higher
wages and more jobs being created. This bill will enhance the capital-
to-labor ratio.
To further be definitive on what I have said as a philosophical
statement with statements that are backed up by studies that have been
made, we have, as far as cutting the marginal tax rate is concerned,
studies suggesting that a 5 percentage point reduction in the top
marginal tax rate would increase small business investment by as much
as 10 percent. The Treasury has indicated that 80 percent of the
benefits from the top rate acceleration go to small business.
I will digress for a minute to talk about something that troubles me
about the debate on bringing down the top rate to 35 percent. Some
folks, especially those who have acquired their wealth through
professions, big business, or inheritance, are the ones most violently
opposed to reducing the top rate. It makes you wonder why these people
so oppose bringing down the tax burden on businesses that they probably
do not even know about--small business.
I gave this some thought while I was out in the field helping to
plant corn the other day. I asked myself, Could it be that they are
envious? No, that doesn't make sense because these folks generally have
more money than successful small business people.
I asked myself another question: Could it be they do not want others,
maybe those looking to make the transition from modest success to very
successful status, to make that transition that is possible given the
economic mobility of our society? Could it be that they see high taxes
as a way to bar others from moving up? Could it be that they believe
high taxes are the necessary tool to block successful small business
people? Could it be that these elitists want to block a class of people
who move up because of hard work rather than by pedigree? Could it be
that high taxes on small businesses is a way to sustain the status quo?
I hope that is not true, but it makes you wonder. I know in the
heartland of America people do not resent or try to block success of
those who acquire it through developing small businesses. In my State
of Iowa, the opinion of a successful small business person is very
important, if not more important, than that of a corporate CEO.
I was amused to read some press reports about how K Street lobbyists
and the Fortune 500 have reservations about this Finance Committee bill
before us. There were too many revenue raisers, too many loophole
closers, too much to ask from big business.
I would like to ask a different question. Are we doing enough for
small business and the people who want to hire them? I want to focus on
that question. Small businesses, as I have indicated, are engines of
growth for our economy. In the recent past, they have been the source
of most newly created jobs. I also continue to believe it is important
to ensure that small businesses do not operate at a competitive
disadvantage vis-a-vis large corporations because they are forced to
pay higher marginal income tax rates. Currently, successful small
businesses incur a 10-percent rate penalty when compared to their big
business counterparts. In other words, if you are not incorporated, you
pay the higher marginal tax rate of 38 percent. There is a bias in
favor of corporations away from small business, individual
entrepreneurs, because of the 38-percent bracket on personal income
versus the 35-percent bracket for the corporate tax rate.

Even common sense would tell you that does not make good economic
sense. Why should you have a bias in the Tax Code against people who do
not want to incorporate?
I want to leave that issue now and turn to the last major part of the
bill, and that is the part of the bill that provides for a partial
exclusion of dividend income from taxes. As my colleagues know, the
President called for a complete end to this double taxation of
dividends. He would even go further, as I would, and say that double
taxation of anything is wrong, dividends or otherwise. I have to admit
that our bill is not a bill that is an absolute victory against double
taxation because the proposal as reported covers only 86 percent of
dividend-receiving taxpayers and is a good step in the effort to
eliminate economic distortion resulting from that tax policy framework.
When in full effect, this policy would ensure that dividends would be
subject to the top rate of 28 percent. All other ordinary income would
be subject to a top rate of 35 percent. This means that dividend income
would enjoy a significant preference over other forms of periodic
investment income such as interest.
Let me note to my colleagues that we provide State fiscal relief in
this bill. A lot of Senators, over a 2-year period of time, have talked
to me about the necessity of doing this, both members of the Senate
Finance Committee as well as people even in my own Republican caucus,
and people who are not on the Senate committee. They have been
indicating to me that they view State fiscal relief as a key component
to an overall agreement on taxes and on growth.
To be perfectly candid, we have Members of this body, right or wrong,
who are telling us if we don't have something in here for fiscal
relief, this bill is not going to get 51 votes to pass. Like it or not,
they have a great deal of leverage. So we are dealing with that and
hopefully dealing with it in a responsible way, through programs where
there has been a Federal/State partnership, such as Medicaid. There are
some areas where there has not necessarily been a State/Federal
partnership. These funds, under our agreement--and there will be an
amendment that fleshes this out to a greater extent--could be used for
education, health care, law enforcement, and essential Government
services. I look forward to continuing to work with my colleagues on
this important issue as we start filling in the details of that that
will be part of an amendment offered later on.
I conclude by commenting briefly about the offsets that are in this
bill.
Let me first note that there has been some surprise in the media
about the fact that these are offsets. I respond by saying that if the
media is somehow shocked that we would have offsets, they haven't been
paying attention to a lot of tax bills which have been going through
here. The fact is you are not going to get a tax bill through this body
under what you call regular order unless there is unanimous consent to
do it without a point of order. If there is a point of order, you have
to have 60 votes, or you have to avoid a point of order, which is hard
to do, by having offsets, meaning it would be revenue neutral.
As the President's own spokesperson stated, the President in his
budget provided several billions of dollars in offsets--not necessarily
the same ones we are using in this bill. In addition, my counterpart in
the House has stated that he will look to offsets to pay for
improvements in the international tax arena. Offsets are not new.
I will not discuss all the offsets at this point. But my colleagues
should know that many of these offsets deal with the scandals we have
seen recently at Enron and many other bad actors in corporate America.
That is not denigrating corporate America because the bad actors are
a few compared to tens of thousands of legitimate, ethical, honest
corporations in America.
It is my view that while we are trying to help shareholders with
reductions in dividends, we should also be closing down the loopholes,
the games and the gimmicks that executives have been playing. The
shareholders and the workers--and many of the workers who also own
shares--have been greatly

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harmed by the actions of corrupt executives. This bill takes great
strides in ending these loopholes.
Thus, shareholders benefit greatly from the dividend deductions as
well as our efforts to end the fast and loose games being played in
some corporate suites.
I haven't thanked Senator Baucus yet for his continued efforts to
work with me despite our inability to find common ground on all the
elements of this economic recovery package. Senator Baucus, ranking
Democrat and former chairman of the committee, has worked very hard to
help me move this bill along even though he could not vote for it in
committee. That is particularly in the tradition of our committee.
Rarely does a bill come to this floor where he and I are not on the
same side of the fence. Yet there are going to be a lot more bills
coming to the floor this year, as before, on which we are on the same
side of the fence.
I look forward to continuing to work through our differences to
produce legislation that will be helpful and getting things moving
again as quickly and effectively as possible.

Amendment No. 555

Mr. GRASSLEY. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER (Mr. Graham of South Carolina). The clerk will
report.
The assistant legislative clerk read as follows:

The Senator from Iowa [Mr. Grassley] proposes an amendment
numbered 555.

Mr. GRASSLEY. 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:

(Purpose: To increase the criminal monetary penalty limitation for the
underpayment or overpayment of tax due to fraud)

At the end of part I of subtitle C of title III add the
following:

SEC. 335. INCREASE IN CRIMINAL MONETARY PENALTY LIMITATION
FOR THE UNDERPAYMENT OR OVERPAYMENT OF TAX DUE
TO FRAUD.

(a) In General.--Section 7206 (relating to fraud and false
statements) is amended--
(1) by striking ``Any person who--'' and inserting ``(a) In
General.--Any person who--'', and
(2) by adding at the end the following new subsection:
``(b) Increase in Monetary Limitation for Underpayment or
Overpayment of Tax Due To Fraud.--If any portion of any
underpayment (as defined in section 6664(a)) or overpayment
(as defined in section 6401(a)) of tax required to be shown
on a return is attributable to fraudulent action described in
subsection (a), the applicable dollar amount under subsection
(a) shall in no event be less than an amount equal to such
portion. A rule similar to the rule under section 6663(b)
shall apply for purposes of determining the portion so
attributable.''.
(b) Effective Date.--The amendments made by this section
shall apply to underpayments and overpayments attributable to
actions occurring after the date of the enactment of this
Act.

Mr. GRASSLEY. Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I very much thank my friend and colleague,
Senator Grassley, chairman of our committee. He has done an excellent
job working on this bill. As he said, I do not support the bill but I
do support the process and the will of the Senate to proceed; let
Senators vote as they wish. That is, frankly, why we are standing
here--to get things done, although we may not always agree.
I now yield to the Senator from Illinois 15 minutes from the time on
our side.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. I thank the Senator from Montana.
I would like to acknowledge my friendship and respect for the Senator
from Iowa. We have been working together, as we will in the future. We
come from neighboring States and have a lot of neighboring concerns. I
think we will find common ground in the future to work on many issues.
I look forward to that opportunity.
Let me tell you that today we couldn't be further apart. There is
such a chasm and such a divide between those who support this bill and
those who oppose it. It really comes down to a very fundamental issue.
It is not a question of who is good and who is evil or who is right and
who is wrong. It comes down to the way you look at the world. The way
Senator Grassley looks at the world as he describes it in his opening
remarks and the way he puts the reasoning forward for this legislation
describes a vision of the world. I have a different view of the world.
It comes down to this: From Senator Grassley's point of view, when it
comes to taxes in America, our Government should find ways to provide
more comfort, more help, and more financial assistance to the elite in
America, the investors who have made a lot of money, successful
businesspeople--those who have done well in America, some by their own
hard work, some by virtue of being born into a family with a lot of
money. But the belief of the Senator from Iowa and those who support
the President's tax package is that those are the people who really are
the future and hope of America; if we can just make life more
comfortable for them, if we can give them more of our national
resources, then the economy will move forward and all boats will rise.
That is their view of the world--help the elite and America will be
better off.

On this side of the aisle, we see it a little differently. We kind of
view the world in terms of the people who get up every morning and go
to work and struggle--teachers, policemen, firefighters, people who own
small businesses, those who get up and work every day for a paycheck
and pay more in payroll taxes than they do in income taxes--and some
who are struggling under difficult family circumstances. From our point
of view, if we focus on these God-fearing, middle-income, hard-working
Americans and give them a helping hand, give them an additional small
slice of the pie so they can enrich their lives, we on this side of the
aisle believe that America will be stronger; these people will have
stronger families, stronger neighborhoods, stronger churches, stronger
schools, and they will spend their money building a stronger economy in
each community.
We have two very different views of the world.
Senator Grassley, a Republican, sees the Bush tax plan as a way of
helping the elite. We on the Democratic side believe it is far more
important to make certain that what we do is fair and balanced,
particularly when it comes to working families who are struggling to
get by.
Senator Grassley said in his opening remarks that ``it takes people
with money to create jobs.'' I quote him. That is his point of view.
That is his philosophy. It takes people with money to create jobs. What
he overlooks is the fact that people who may not be rich, when given a
tax break, will spend it. They will buy washers, dryers, refrigerators,
and stoves in addition to a house, paying their bills, and making
certain their kids are taken care of and the school tuition is paid.
I suggest to the Senator from Iowa and those of his point of view
that it not only takes people with money to create jobs, but to create
jobs you ought to give people who are struggling every single day with
the burdens of family life a helping hand. In so doing, they will help
us create jobs.
The Senator from Iowa said, incidentally, that this is about class
warfare; the speech I am giving is about class warfare.
A month ago, we had a visit from a man named Warren Buffett. He is
one of my favorites. You may have heard of him. He is one of the most
successful businessmen in the world. He lives in Omaha, NE. He owns a
company called Berkshire Hathaway. He is extremely successful. Warren
Buffett came to talk to us, as he does once in a while, about his view
of the world. I always enjoy it. I think his annual report should be
must-reading for anybody interested in American business because he has
such a refreshing and honest point of view.
We asked Warren Buffett, the second wealthiest man in America, about
this claim of class warfare and this tax bill. He said: You bet there's
class warfare going on, and my class is winning. He said: My class is
winning. And he is right.

This bill is designed so Warren Buffett and the wealthiest people in
America will get the tax breaks. Warren Buffett knows that is unfair.
He said that publicly. I think most Americans know it is unfair.
Take a look at this morning's New York Times. Consider this for a
moment: Despite all of the hectoring by

[[Page S6153]]

rightwing television, despite all of the best efforts of the President
of the United States visiting America from one corner to the next,
despite all the speeches by Republicans in Congress, this is what the
American people think about the debate in which we are engaged.
Question to the American people, across the board: Which is a better
way to improve the national economy: cutting taxes or reducing the
Federal budget deficit? Simple choice. Well, 31 percent said: cut
taxes, which is what Senator Grassley, President Bush, and the
Republicans propose. But 58 percent said: reduce the deficit--almost 2
to 1.
The American people get it. They understand this cutting taxes is not
the answer to every problem, and yet that is all we hear from this
White House.
Then they asked the American people: Have the reductions in Federal
taxes enacted since 2001 under President Bush been good for the
economy, bad for the economy, or have they made much difference? So
think about this, for a tax cut which most people usually applaud, they
asked the American people: Take a look at the President's last tax cut.
Did it help the economy or did it not? Those who said it was good for
the economy, 19 percent; those who said it was bad for the economy, 12
percent--not much difference: 63 percent.
We took $1 trillion out of the Federal Treasury, gave it to the
wealthiest people in America, ran our deficit to record levels, and by
a margin of 63 percent to 19 percent the American people said it did
not make much difference to those who said: Good idea. Do it again.
Then they asked the American people: If adopted, do you think
President Bush's latest tax cut will or will not make a significant
difference in the amount of money you have after taxes? Will: 33
percent; will not: 58 percent.
The American people understand. The winners in the Bush tax bill are
the elite in America. It isn't the working families and small
businesses that will come out ahead. They are going to be saddled with
this deficit created by a tax cut when the country is in recession, a
tax cut when we are still trying to find out how much we are going to
pay for the war in Iraq and the war in Afghanistan and the war against
terrorism.
Then, the final question: Would a new tax cut be good for the
economy, bad for the economy, or won't have much effect? Good: 41
percent--not bad, huh?--and then those who said bad or won't have much
effect: 52 percent. So a majority of the American people think it is
either not going to have any impact or it is going to be bad.
They get it. They understand it.
I listen to my fiscally conservative Republicans come to this floor
and say: For goodness' sake, don't mention the ``D'' word. Don't
mention deficits. Deficits don't count anymore. Deficits aren't
important. Why are you Democrats tied in knots over deficits?
Well, the reason they do not want to talk about it is because the
record is so miserable. Look where we are ``Stuck in the Bushes'':
Federal deficits, surpluses, and then deficits again. Here we have a
runup, from the first President Bush, a bad deficit situation; then the
beginning years of the Clinton administration, deficits, still red ink;
finally, at the end of the Clinton years, we break out of it, and for
the first time in over 30 years we start generating surpluses in
America; and then comes President George W. Bush, and here we go again,
red ink for as far as the eye can see. My fiscally conservative
Republican friends say: It doesn't count.

Mr. REID. Will the Senator yield for a question?
Mr. DURBIN. I am happy to yield.
Mr. REID. Is the Senator aware of some statements made by some of our
friends on the other side of the aisle?
For example, I quote Senator Santorum. And this is from the
Pittsburgh Post Gazette on November 15, 1995:

The American people are sick and tired of excuses for
inaction to balance the budget. The public wants us to stay
the course towards a balanced budget, and we take that
obligation quite seriously.

I quote the majority leader at the time, Senator Trent Lott:

I think the most important thing really does involve the
budget, keeping a balanced budget, not dipping into Social
Security, and continuing to reduce the national debt.

I quote Senator Hagel, from the Omaha World Herald, on February 6,
1997:

The real threat to Social Security is the national debt. If
we don't act to balance the budget and stop adding to the
debt, then we are truly placing the future of Social Security
in jeopardy.

Final quote--there are others--but the final quote I will give you is
from Senator Judd Gregg. This is from the New Hampshire Sunday News,
February 1, 1998:

As long as we have a Republican Congress, we're going to
have a balanced budget, and if we can get a Republican
President, we can start paying down the debt on the Federal
government.

I give you these quotes.
Also, very soon, in the next few days, we are going to take up the
issue of increasing the national debt by almost $1 trillion. So will
the Senator comment on these direct quotes from Republican leaders and
the fact we are being asked by the President of the United States to
increase the national debt by almost $1 trillion in the next few days?
Mr. DURBIN. I say to the Senator from Nevada, it is totally unfair to
call out the quotes of our Republican colleagues about deficits because
he has failed to take into account this new era of compassionate
conservatism. Things have changed. The Senator from Nevada, in all
fairness, should understand when Republicans stood on the floor of the
Senate and the House and railed against deficits, it was before we came
into this new era where deficits don't count. We are now in a new era
where the debt we are leaving our children is not important. What is
important is giving tax breaks to the elite in America.
The Senator, once he comes to grips with this, once he comes to
understand this, will really understand the Bush economic policy. But I
say to the Senator, he is in good company because I struggle with this
concept, and the majority of the American people do. This just does not
compute and it does not work.

For the President and his supporters to stand before us and say this
Bush tax plan is going to increase jobs--take a look at the job growth
we have seen in the last few years. Take a look, starting with
President Truman, at all the job growth, and then take a look at what
has happened when we get to President George W. Bush.
The President told us, 2 years ago: If you will just let me cut taxes
on the wealthy, America is going to have more jobs.
Well, we have lost 2 million jobs. Sorry, Mr. President, you missed
it by a mile.
Now he says, this time around, the best thing for us to do is more of
the same. I can tell you that more of the same is not good for America.
Take a look at those who are facing long-term unemployment: 6 percent.
It is back to the highest rate--President Bush has not matched his
father's 7.5-percent unemployment rate, but he is creeping up there. It
is higher and higher each year. That does not say much for his economic
plan.
I think America gets it. The President, as Commander in Chief, is
sounding retreat when it comes to the economy of America. He is walking
away from the greatest challenge our families face today. It is not
just the threat of terrorism; it is the threat of economic insecurity.
Let me be specific. The Republican plan does not address, does not
spend one dollar, does not even concern itself with an overwhelming
issue I find from businesses across Illinois: the cost of health
insurance. Go to any business--large or small--and ask them what they
are facing. Ask them what the premiums are. They are going to tell you
that the health premiums are killing them, killing their
competitiveness, killing their ability to offer health insurance
protection to their employees. Many of them are facing absolutely awful
choices they have to make.
Not one penny, not one word, not one provision in the Bush plan for
businesses deals with health insurance, but the Democratic plan does.
The Democratic plan provides that we are going to increase the tax
credit, a small business tax credit for those offering insurance for
their employees.
I will tell you, I will take that to any chamber of commerce, any
meeting of

[[Page S6154]]

the National Federation of Independent Businesses--you pick it--and let
them decide which is better for the future of their business, a tax
credit for health insurance or reducing the tax rate on the wealthiest
people in America. I will take that referendum and I will go to the
bank on that one. I know what the outcome is going to be.
What we believe is that there should be a tax cut, if there is going
to be one, for every American taxpayer, particularly for those in lower
income categories. We should accelerate the child tax credit to $800,
even higher than the Republicans have proposed. We should eliminate the
marriage penalty. We should have a small business health tax credit. We
should triple the amount that small businesses can expense. We should
encourage business investment. We should make certain that we limit the
amount of this tax cut to what we can afford; otherwise, we are digging
ourselves deeper and deeper and deeper in this deficit hole.
The Republicans who push this tax plan have to face stubborn facts,
and facts can be stubborn. The last time they got a tax cut through,
the American economy fell backward. We did not make progress. We lost
jobs. We lost opportunity. We lost a lot of hope in this country.
We need to move forward. We can do it with a sensible tax plan, one
that does not reward the elite but rewards working Americans across the
board.
I yield the floor.
Mr. BAUCUS. Mr. Chairman, I yield 5 more minutes to the Senator from
Illinois.
Mr. REID. If the Senator would allow me to ask him a question.
Mr. DURBIN. I would be happy.
The PRESIDING OFFICER. Does the Senator from Montana yield?
Mr. BAUCUS. I yield 5 minutes off the amendment to the Senator from
Illinois.
Mr. REID. Is the Senator from Illinois aware that the Congressional
Budget Office, the White House Council of Economic Advisors, and the
private sector economists who helped the President analyze this
proposal have stated that the President's tax break plan will weaken
the long-term health of our economy? This is from the Congressional
Budget Office, the first part of April of this year. Is the Senator
aware that these institutions and individuals have so stated?
Mr. DURBIN. I say to the Senator from Nevada, the interesting thing
about that is--I was aware of it--this is the new Congressional Budget
Office that brought us the new economic concept of dynamic growth. The
Republican conservatives have been screaming for years that the
Democrats and those following their point of view were too
conservative: We don't take into account what a tax cut will do, that
it will just mushroom growth. Here comes the new Congressional Budget
Office. They are now believers in this new dynamic growth economic
religion, and they still don't buy it. As the Senator from Nevada said,
they believe as we do, that this Bush tax plan for the elite investors
is not going to create jobs or create the kind of growth that we want
to see. I think the Senator from Nevada has pinpointed one of the
weaknesses in their argument.
Mr. REID. Is the Senator aware that in the State of Illinois the
number of jobs lost since the beginning of the Bush administration is
nearly 200,000, and last month alone it was almost 20,000 jobs?
Mr. DURBIN. I am aware of it. Virtually every State has lost jobs. We
have lost over 20,000 manufacturing jobs in the last 12 months with the
last Bush tax cut. Adding insult to injury is the fact that this
administration resists providing additional unemployment compensation
for people who are out of work. When his father faced recession, five
different times we increased unemployment compensation, three times
under President Bush, and twice under President Clinton. We have only
done it twice in this situation.
To me, it is heartless to ignore what is happening to unemployed
people. They have lost good jobs. Some of them have been victims of
corporate scandals. They are in trouble, trying to find some way to get
by. Every single day is a challenge. We find over a fourth of them have
had to leave their homes and move in with family and friends. We find
over half of them struggling to pay utility bills. More and more of
them are paying less for food and clothing for their family and
ultimately many of them are losing health insurance--words Republicans
don't want to talk about, the cost of health insurance. That is an
indication of what we should be focusing on in terms of our priorities.
Instead, what we are doing is increasing the deficit at the expense of
Social Security and Medicare. That is not fair.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the pending
amendment be temporarily laid aside and that the amendment to be
offered by the Senator from North Dakota be in order.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from North Dakota.

Amendment No. 556

Mr. DORGAN. 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 North Dakota [Mr. Dorgan], for himself and
Mr. Baucus, proposes an amendment numbered 556.

Mr. DORGAN. 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:

(Purpose: To repeal the 1993 income tax increase on Social Security
benefits and to offset the revenue loss)

Strike section 102.
Strike title II.
At the end of subtitle C of title V, add the following:

SEC. __. REPEAL OF 1993 INCOME TAX INCREASE ON SOCIAL
SECURITY BENEFITS.

(a) Restoration of Prior Law Formula.--Subsection (a) of
section 86 is amended to read as follows:
``(a) In General.--Gross income for the taxable year of any
taxpayer described in subsection (b) (notwithstanding section
207 of the Social Security Act) includes social security
benefits in an amount equal to the lesser of--
``(1) one-half of the social security benefits received
during the taxable year, or
``(2) one-half of the excess described in subsection
(b)(1).''
(b) Repeal of Adjusted Base Amount.--Subsection (c) of
section 86 is amended to read as follows:
``(c) Base Amount.--For purposes of this section, the term
`base amount' means--
``(1) except as otherwise provided in this subsection,
$25,000,
``(2) $32,000 in the case of a joint return, and
``(3) zero in the case of a taxpayer who--
``(A) is married as of the close of the taxable year
(within the meaning of section 7703) but does not file a
joint return for such year, and
``(B) does not live apart from his spouse at all times
during the taxable year.''
(c) Conforming Amendments.--
(1) Subparagraph (A) of section 871(a)(3) is amended by
striking ``85 percent'' and inserting ``50 percent''.
(2)(A) Subparagraph (A) of section 121(e)(1) of the Social
Security Amendments of 1983 (Public Law 98-21) is amended--
(i) by striking ``(A) There'' and inserting ``There'';
(ii) by striking ``(i)'' immediately following ``amounts
equivalent to''; and
(iii) by striking ``, less (ii)'' and all that follows and
inserting a period.
(B) Paragraph (1) of section 121(e) of such Act is amended
by striking subparagraph (B).
(C) Paragraph (3) of section 121(e) of such Act is amended
by striking subparagraph (B) and by redesignating
subparagraph (C) as subparagraph (B).
(D) Paragraph (2) of section 121(e) of such Act is amended
in the first sentence by striking ``paragraph (1)(A)'' and
inserting ``paragraph (1)''.
(d) Maintenance of Transfers to Hospital Insurance Trust
Fund.--There are hereby appropriated to the Hospital
Insurance Trust Fund established under section 1817 of the
Social Security Act amounts equal to the reduction in
revenues to the Treasury by reason of the enactment of this
section. Amounts appropriated by the preceding sentence shall
be transferred from the general fund at such times and in
such manner as to replicate to the extent possible the
transfers which would have occurred to such Trust Fund had
this section not been enacted.
(e) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years beginning after December 31, 2003.
(2) Subsection (c)(1).--The amendment made by subsection
(c)(1) shall apply to benefits paid after December 31, 2003.
(3) Subsection (c)(2).--The amendments made by subsection
(c)(2) shall apply to tax

[[Page S6155]]

liabilities for taxable years beginning after December 31,
2003.

Mr. BAUCUS. Mr. President, I ask unanimous consent that the following
staff of the Joint Committee on Taxation be granted the privilege of
the floor, and I send the list to the desk. We worked out an
arrangement so they rotate.
The PRESIDING OFFICER. Without objection, it is so orderd.
The list is as follows:

Thomas A. Barthold.
Ray Beeman.
John H. Bloyer.
Nikole Flax.
Roger Colinvaux.
Harold Hirsch.
Deirdre James.
Lauralee A. Matthews.
Patricia (Tricia) McDermott.
Brian Meighan.
John F. Navratil.
Joseph W. Nega.
David Noren.
Cecily W. Rock.
Carol Sayegh.
Gretchen Sierra.
Ron Schultz.
Mary M. Schmitt.
Carolyn E. Smith.
Allison Wielobob.
Barry L. Wold.
Tara Zimmerman.

Mr. DORGAN. Mr. President, let me briefly describe the amendment I
offer on behalf of myself and Senator Baucus. This amendment deals with
repealing the 1993 provision that would increase the amount of Social
Security income received by a senior citizen to be reported for tax
purposes. Let me describe the history of this a bit and then talk about
why I believe we ought to do it.
For a good many years after Social Security was created, the Social
Security receipts that a senior citizen would receive would not be
required to be reported for tax purposes on their income tax return. It
was exempt income. Then at one point the Congress decided that one-half
of the payments for Social Security that go to a recipient should be
described as income on their income tax return. So we went for a long
while with 50 percent of the Social Security payments to senior
citizens being required to be reported for tax purposes.
In 1993, in a rather large piece of legislation that moved this
country towards a different fiscal policy in a very significant way--
the results of which throughout the 1990s expanded the economy, created
jobs, did a number of things--one of the provisions was to increase
from 50 percent to 85 percent the amount of income that would be
required to be subject to income tax and reported on the tax return for
single beneficiaries with incomes over $34,000, married couples income
over $44,000. So moving that 50 percent to 85 percent now means that
roughly 8 million senior citizens pay an average increased income tax
of about $1,500 a piece per year. I propose that we repeal that
provision, go back to previous law which is a 50-percent reporting
requirement.
Let me talk for a moment about the Social Security issue and senior
citizens. There is discussion on the Senate floor--and there will be
much more, I expect--that this tax proposal that comes to the Senate
will use all of the trust funds that are to be set aside for Social
Security to pay for tax cuts. I don't think that is going to be
disputed. I don't think that is subject to contest. There will not be
Social Security trust funds if we pass this tax cut.
This is a circumstance where upper income Americans will receive very
generous tax cuts and senior citizens will see their Social Security
trust funds depleted in order to finance it.
I mentioned yesterday that on page 4 of the Budget Act, which brings
us to the floor under reconciliation, the description of what is
happening to the debt is it goes from $6.7 trillion to $12 trillion in
a decade.
Some say: That is not much to worry about. Don't worry about debt.
I don't understand that. The debt, of course, is going to be
inherited by our children because they will inherit this economy and
this country. We are saying to them: We have a new plan. Our fiscal
policy plan will double the Federal debt to $12 trillion in 10 years.
I have never heard of a plan doubling the debt described as a
success. But that is what I am hearing in the Senate. This is a plan
that is gearing this country towards long-term economic solvency,
economic opportunity, growth, hope, and most especially jobs by
doubling the Federal debt to $12 trillion--a rather curious argument.
I managed to teach economics for a couple of years. I don't think
there is anything in any book anywhere that would have you teach this
lesson. This is apparently a new form of economic theory.
I recall the book written by Tom Brokaw called ``The Greatest
Generation.'' I have visited with many of the folks described in that
book, the folks who lie on their belly on the sands of Normandy,
risking their lives for their country, seeing their comrades die in
foxholes beside them, those who were asked to go halfway around the
world to fight for liberty and did so without complaint, never asked
for much, but were told by this country a couple things: When you get
back from serving your country, we will provide free health care for
life for you in the veterans health care system.
That turned out to be a promise this Congress is unwilling to keep,
regrettably. They also were told: When you come back, there will be a
Social Security system you can count on; you can rely on. Of course,
what is happening now is we have people who don't support that system,
don't believe we ought to keep the promise, don't believe trust funds
ought to include the word ``trust.''
If I can digress for a moment, I recall one day going to a veterans
hospital in Fargo, ND, about which I have told my Senate colleagues
before.
When we talk about the greatest generation and senior citizens, I
went to a veterans hospital on a Sunday morning to provide the medals
that had been earned by a Native American veteran. His name was Edmond
Young Eagle. He was dying of lung cancer. I learned later that he died
a week after I had been there. His sisters asked if we could get his
medals, and so I did. I presented them to him at the VA hospital that
Sunday morning. The doctors and nurses gathered, and his sisters were
there. We cranked up his bed so that he was in a seated position, and I
pinned the medals he had earned during the Second World War on his
pajama top.
Edmond Young Eagle never had much in life. He fought in Africa and in
Europe, and he went where this country asked him to go. He risked his
life and served America with great distinction. He came back to live on
the reservation, and he never had very much, never had a very good
life. He had it pretty tough. That day, on a Sunday morning, having the
medals that he earned 50 years previously pinned on his pajama tops,
Edmond Young Eagle, 7 days from dying of lung cancer, said: ``This is
one of the proudest days of my life.'' He didn't have much, but he
deeply valued the service he had given his country. I told him how much
this country valued the service he had provided and how proud we were
of him.
Edmond Young Eagle and millions of others have answered the call to
serve this country in so many ways. I talk about the greatest
generation. Yes, it was the soldiers and it was ``Rosie the Riveter''
back then. Moving forward, so many people have served this country, and
this country made a bargain with them and a promise to them. We said to
them: If you will pay from your paycheck, every time you receive a
paycheck, a tax that goes into a trust fund to fund something called
Social Security, when you reach retirement age, that Social Security
payment will be there for you. Yes, we want you to save and invest
yourself, but at least this will be a basic insurance retirement
payment for you.
We have always made that promise. In fact, we changed that promise in
1983 and said: You know what? Because the largest baby crop in the
history of this country will retire after the turn of the century--and
that is called the war babies, the group of babies who came after the
soldiers came home after the Second World War and the largest
outpouring of affection in the history of the country occurred, and we
had so many babies born, the largest baby crop in the history of
America. They will begin to retire now. When they retire and hit the
retirement rolls, then we have maximum strain on the Social Security
system.
So in 1983, we put in place a little different approach. The approach
was to say we are actually going to collect more money than we spend on
a current basis in order to have a trust fund

[[Page S6156]]

balance that begins to save so that the resources are there when the
baby boomers retire. That is what the trust fund is about. I mentioned
that if we decide to increase the Federal debt--as is the case in the
bill brought to the floor of the Senate, and as was the case with
respect to the Budget Act--from $6 trillion roughly to $12 trillion,
there won't be a Social Security trust fund. It is to say that that
which is to be put away in a trust fund for Social Security will be
used as an offset to provide tax cuts for Donald Trump. I know I should
not use his name, but he likes to have his name used. I think he is an
interesting guy, a good businessman and investor. He does very well. He
puts his name on his buildings, so he certainly won't mind my using his
name.

The question is, Should we decide that the trust funds we are trying
to save for the future, which we need when the baby boomers retire,
will be used as offsets so that we can give Donald Trump, or others in
the upper income bracket in the country, large tax cuts?
Is that what you would sit around a table and decide as an American
family that represents the priorities, values, and needs? Is that what
you would decide we ought to do now? Is that the urgency for our
country in public policy? I don't think so.
In addition to trying to save money in a trust fund, in 1993 we
changed the mechanisms by which we assessed taxes, and especially with
respect to senior citizens. We said: We will require you to report more
of our Social Security payments as income on your tax returns--from 50
percent to 85 percent. That means about 8 million senior citizens now
pay $1,500 a year in additional taxes.
I wish we had not done that in 1993. I voted for a bill that included
it because it had a lot of things in it that put this country back on
track, but I wasn't pleased that was in it. Twice since then, I have
voted to try to repeal it. Now if we are going to have a substantial
change in tax laws and evaluate who ought to get a tax break and who
should not, and where should we cut taxes or where should we not,
perhaps we ought to consider this at the top of the list. Why not make
this change now? Why not go back to the 50 percent? That is where it
was. Why not say that senior citizens--those who reached their
declining income years--are those who ought to get the tax breaks?
That is what my amendment does. It is fairly simple. Senior citizens
are living longer and better lives. Really, people say we have all
these problems with Social Security and Medicare. Do you know what they
are? They are problems of success. Just go back to the old life
expectancy. People are living longer and better lives. I know a woman
who is 89 years old. She bought a car a while back, and she used 5-year
financing. God bless her. I have an uncle who is 81 years old. He runs
in the Senior Olympic events. He has 43 gold medals. He runs the 400
and the 800. Thirty years ago when one reached 80 years of age, they
had to find a La-Z-Boy. You were then at that age where it was time to
find an easy chair because you were not going to run races or buy a car
and finance it for 5 years.
Now things have changed in a very dramatic way. People are living
longer and much better lives. But it is true that as they live longer
lives, they reach a period of time when their income declines.
Inevitably, they stop working and retire. Their income declines. As
they reach the declining income years, then the question of what kinds
of taxes they pay is a very important question. Do they, as some are
required, go into a grocery store, where the pharmacy is in the back,
and have to ask themselves: Should I buy groceries first so I can see
how much I have left for prescription drugs? Of course, they make those
choices.
When they reach their declining income years, the question is, What
should their tax obligation be? How should we construct this tax
obligation? My amendment is devastatingly simple: Let's relieve them of
that 30 percent in extra income on Social Security they are required to
report, which will save 8 million people $1,500 a year. These are not
the top-income folks. These are folks who have retired and now have
less income than they had during their working years. In many cases,
they are folks who saved and are trying to help their kids and
grandkids. They have less income, and they are now in the last 10
years, and they are required to pay higher taxes.

This provision will relieve them of some of that burden. I was
thinking the other day about this tax debate because it is the case
that some will benefit and some will not. There is an old saying: When
you rob from Peter to pay Paul, you can always count on Paul being
grateful.
The fact is, this bill is going to make some people in this country
very grateful--but it is not the senior citizens, unless we pass this
amendment; it is the folks at the very top of the income ladder. We
have people come to the floor of the Senate and say the big priority
here is to exempt dividends from taxation.
First of all, most dividends are not double taxed. I will make that
point. Second, if you want to talk about double taxation, why talk
about double taxation just for the top of the income heap--those who
clip coupons to get unearned income to the tune of millions of dollars
a year? Why talk about them being exempt? Why do you have a philosophy
that says let's exempt investment and tax work? What kind of value
system is that? Nobody is saying let's exempt work, let's just exempt
investment. I don't understand that.
The tax system ought to be about values. But if you are talking about
double taxation, which I think is the principle by which some brought
to the floor this issue of dividends, how about double taxation of
Social Security? That is a good example. Wages. We tax on your wage,
you put some money away, and then you come back and get a Social
Security payment, and you have to pay a tax on part of that. It is 85
percent now. I propose 50 percent. Double taxation on Social Security.
Is that more or less important? I guess you could talk about almost
anything, could you not? Go buy a car this afternoon. You pay taxes on
the wages you earn, and when you buy a car, they are going to charge a
big old excise tax. Double taxation.
So the question I have is, When some people apparently got bottled
water and sat around a big old mahogany table and started thinking, the
biggest problem in America is double taxation so let's try to get rid
of that, how did they come up with the notion that dividends
represented that priority? Were there people smoking Cohibas there who
were getting a lot of dividends and said: The biggest problem for me is
that I get $10 million of dividends and, by God, that is double
taxation? Is that where that came from?
Or were there perhaps some senior citizens who were supposed to be
there and their chairs were empty? I assume they would have said:
Double taxation? Here is an example of double taxation. Help us.
No, that is not the priority. The priority is not about helping them.
The priority is helping the folks at the top and then saying: And if we
do that, we are going to create a massive amount of new jobs in
America.
We have heard this argument before--massive new jobs--new jobs. Jobs
is a four-letter word, but it is a good one, as long as jobs are
present someplace. We went through this with a very large tax cut 2
years ago, and now we have 2.3 million fewer jobs. It might be because
other events happened. They certainly did.
One wonders, if the first dose of medicine makes you sick, whether
you ought to trot out the same bottle and label another batch to an
unsuspecting public. Is there a time perhaps when we decide maybe the
way we create new jobs in America is to put the economy back on track
and say we are not going to double the debt, we are not going to run
the largest deficits in history, and we are not going to tell the
working folks who represent, in my judgment, the engine of our economy
and of our country: By the way, you do not matter much.
I will finish my remarks. I am going afield. The fact is, in the
Senate, you speak when you have the opportunity to do so.
My amendment deals with senior citizens. I am trying to describe some
of the circumstances that would persuade senior citizens to think they
have not been treated fairly in this bill, and this is a way to remedy
that.

[[Page S6157]]

It seems to me both political parties have something to offer this
country that is constructive in discussing taxation and economic
policy. I happen to think those on the Republican side are a little
better at trying to make sure we tamp down spending. They are a little
better at that than we are. Sometimes I do not think they have the
judgment they should have when they tamp down spending, but the fact is
they are a little better at it than we are.
It seems to me we are a little better at the notion of how you do
things that give people confidence in the future that can provide the
buoyancy, the growth, and the lift to the American economy. Getting the
best of what both parties have to offer is better than getting the
worst of either. I think often we get the worst either party can offer
this country.
My proposal is just to begin to amend this tax bill. I am not saying
the bill is worthless. There are some provisions in this bill that have
great worth, some provisions I support. The child tax credit and
others, I think, make sense. We should do what is contained in these
provisions, even as we try to put this economy on track so that the
numbers add up.
There is not any way the numbers add up. My colleague, Senator Conrad
from North Dakota, has spoken on the floor at great length about this
issue. We also were together yesterday at a presentation. Even as we do
these things, some of which have great worth and some of which, in my
judgment, are just waving a flag to the upper income folks in America
to say our party is still with you--those on the other side of the
aisle--it seems to me you need to do them in the context of saying to
the American people that the future of this economy is not going to be
a future mired in debt and choking on yearly deficits.
I will make one final point. As we do this, understand that what is
being proposed now is the largest deficits in history, in fiscal
policy, on top of the largest trade deficits in history. Those two
problems together potentially can cause very significant problems for
the value of this country's currency.
As Mr. Friedman says in ``The Lexus and the Olive Tree,'' when the
electronic herd runs and begins to move to other currencies, it has a
profound impact on your economy, and we should be concerned about that.
To come back to my amendment, this amendment is about priorities--
what is important and what is not; what should we do and what should we
not do. It seems to me one of the high priorities for us in dealing
with reducing taxes ought to be to say to senior citizens, among them
the greatest generation and others who are struggling and who are
trying to make sure they get through these difficult times, those who
have reached their lowest income years: We are going to repeal that
portion of the law that was passed 10 years ago. We are going to do it
because we believe the 8 million people who are now required to pay
$1,500 apiece in additional taxes ought to be relieved of that burden.
As I indicated, I have on two previous occasions voted to repeal this
tax. It has never gotten done. I know there is disagreement as to
whether it should get done. I believe it should get done because,
frankly, this is double taxation. It is not just dividends. It is this
as well.
I am proud to offer this amendment with my colleague, Senator Baucus
from Montana, and I assume many other colleagues would like to
cosponsor it before they vote. I hope we have a vote on it.
I did not mention this will be paid for by offsets. We would not
accelerate the scheduled rate reductions in the highest rates, and we
would strike the dividend income relief in the bill. We do not increase
taxes. If someone stands up and says what you are going to do is
increase taxes with your offset, that is not the case. There is no
increase in taxes in this amendment, but we do not accelerate the top
rates and, at the same time, we decide not to proceed with the dividend
income tax relief in the bill, the bulk of which goes to upper income
Americans.
I hope, perhaps, this amendment will be accepted on a voice vote. If
that is not the case, we will have some debate and then I am hoping we
will have a successful record vote. Perhaps I will be inspired to speak
again after I have heard the debate on this amendment. I yield the
floor.
The PRESIDING OFFICER. Who yields time? The Senator from Iowa.
Mr. GRASSLEY. Mr. President, the Senator from Alaska has asked for
time to speak as in morning business for whatever time she needs. I
will be glad to yield time to the Senator from Alaska.
Mr. REID. Mr. President, it is my understanding the Senator is asking
that in the form of a unanimous consent agreement she speak in morning
business.
Mr. GRASSLEY. Off our time, not extra time.
Mr. REID. I am not going to object to this request, but I do want
everyone to understand that the majority leader asked that we expedite
the tax bill. We are trying to do that, but speaking in morning
business is not going to expedite consideration of this bill. There is
limited time. We have 7 hours on our side. We are going to try to spend
all 7 hours on tax matters. I want everyone to understand this when the
majority leader is asking why this is not moving more quickly
Mr. GRASSLEY. Let me explain why the distinguished Senator from
Nevada is wrong. We are going to take it off the time on the bill, not
extra time. This will come off the 7 hours we have on the bill.
I yield whatever time the Senator from Alaska may consume. I
understand she is only going to take about 5 minutes.
The PRESIDING OFFICER. The Senator from Iowa has that right. Without
objection, the Senator from Alaska is recognized.

National Police Week 2003

Ms. MURKOWSKI. I thank the Chair. Mr. President, I do appreciate the
consideration of my colleagues and the chairman in allowing me a brief
opportunity to speak. I do recognize that taking this time out of the
very important consideration of the legislation that is before us is
significant, but I remind Members that the events that happened last
evening, at the National Law Enforcement Officers Memorial, are equally
significant. I will take a few moments this morning to speak to that.
Last evening, some 10,000 law enforcement officers, representing all
corners of our Nation and foreign lands, gathered at the National Law
Enforcement Officers Memorial to pay tribute to 377 of their colleagues
and comfort their survivors.
Each of the 377 honorees bears the distinction of having lost his or
her life in the line of duty. The attendees represented a cross-section
of many different agencies that make up the law enforcement community,
including Federal law enforcement officers, State troopers, municipal
cops, sheriff's deputies, corrections officers, game wardens, and
National Park Service rangers. Most came in uniform. Many were joined
by their spouses. Many were joined by their children, not only those
who are old enough to understand, but also the little ones.
At dusk, thousands of candles were lit, and the names of each of the
377 departed officers was read.
The purpose of this annual event is not to reflect on the events that
prematurely ended the lives of these brave officers, but those who
created this memorial remind us that ``It is not how these officers
died that made them heroes, but how they lived.''
This year, the names of three Alaskans were added to the memorial.
Two of the three died in the line of duty in 2002, while the third died
in the line of duty in 1917, in the days when Alaska was still a
territory. This third individual was added to the memorial as a result
of diligent research by the City of Seward, AK and its police
department. I would like to introduce these exemplary Alaskans to the
Senate.
Correctional Officer James C. Hesterberg, was known as ``Jamie.'' At
age 48, he was killed in the line of duty. A 19 year veteran of the
Alaska Department of Corrections, he was contemplating retirement in
September 2003. On November 19, 2002, Officer Hesterberg, and his
partner, Officer Dennis Nilsen, were transporting seven prisoners to
the Spring Creek Correctional Center by van on a snow and slush covered
highway. Their van was struck by a large semi truck, killing Officer
Hesterberg and four prisoners.

[[Page S6158]]

Officer Hesterberg was the first employee of the Alaska Department of
Corrections ever to die in the line of duty. He leaves behind his wife,
Debra, his three children, Scott, Catherine and Mark, his mother and
father, and many good friends and fellow officers. The people of Alaska
mourn his loss. Jamie's commitment to protecting Alaska's citizens and
to fulfilling the mission of the Department of Corrections will not be
forgotten.
Thomas Patrick O'Hara, at age 41, was a protection ranger and pilot
for the National Park Service at Katmai National Park and Preserve in
the Bristol Bay region of Alaska. On December 19, 2002, Tom and his
passenger, a Fish and Wildlife Service employee, were on a mission in
the Alaska Peninsula National Wildlife Refuge. Their plane went down on
the tundra. When the plane was reported overdue, a rescue effort
consisting of 14 single engine aircraft, an Alaska Air National Guard
plane, and a Coast Guard helicopter quickly mobilized. Many of the
single engine aircraft were piloted by Tom's friends. The wreckage was
located late in the afternoon of December 20. The passenger survived
the crash, but Ranger O'Hara did not.
Tom O'Hara was an experienced pilot with 11,000 hours as a pilot-in-
command. He was active in the communities of Naknek and King Salmon
where he grew up, flying children to Bible camp and coaching young
wrestlers. Tom provided a strong link between the residents of Bristol
Bay and the National Park Service.
Tom leaves behind his parents, Dan and Sharon O'Hara, who are in
Washington, DC, today and who are distinguished leaders in the Bristol
Bay region, his wife Lucy, and three children, Jonathon, Nicole and
Heidi. I also had an opportunity to meet with his brother this morning.
The deputy director of the National Park Service characterized Tom as
one of its finest and he will be missed deeply by all of us.
The third Alaskan, Charles H. Wiley, came to Seward from California
to work on the construction of the Alaska Railroad. He was appointed to
the post of night marshal in April 1917. On the evening of October 2,
1917, Marshal Wiley went to the Overland Hotel in Seward to investigate
an incident. Marshal Wiley knocked first, but entered the hotel room
when nobody answered. He was met by a round of gunfire. Marshal Wiley
died two days later.
I thank the Chair for allowing me to share a bit of the lives of
these brave Alaskans. I want to thank the organization Concerns of
Police Survivors and the staff of the National Law Enforcement
Officers' Memorial for their hard work in organizing the candlelight
memorial last evening.
To the children of Jamie Hesterberg and Tom O'Hara, I to say, your
fathers lost their lives doing something important for Alaska and the
Nation. Public service is an honorable profession and I hope that each
of you will consider making it a part of your lives. In valor, there is
hope.
I yield the floor.
Several Senators addressed the Chair.
The PRESIDING OFFICER. Who yields time?
The Senator from Minnesota.
Mr. COLEMAN. Mr. President, I ask unanimous consent that I be
permitted to speak as in morning business for up to 5 minutes and that
the time be charged against the majority's control of time on S. 1054.
Mr. DORGAN. Mr. President, reserving the right to object, I shall not
object, but I want to clarify with the Chair, do I control the time on
the amendment on this side?
The PRESIDING OFFICER. The Senator does, and the Chair recognizes the
Senator from Minnesota as the first person seeking recognition.
Mr. DORGAN. Mr. President, following the presentation, then, it would
be my opportunity to yield time; is that correct?
The PRESIDING OFFICER. That is correct.
Mr. REID. Mr. President, reserving the right to object.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. My dear friend from Iowa was wrong in saying that the time
would be used up anyway, and here is the point I am making: We have
been asked to move the tax bill. That is what we should be doing. We
have turned down a number of requests on this side of people wanting to
speak, no matter how important it might be, on issues other than those
relating to the tax bill. The time used on the bill talking about
morning business, no matter how important it might be, does not deal
with the tax issues of this country. The majority leader has asked us
to cooperate in trying to move this bill along. It is obvious as the
day is clear that we are not moving this along when we are talking
about extraneous matters. That is the point I am making. I have no
objection.
The PRESIDING OFFICER. The Senator from Minnesota.

bring your daughter to work day

Mr. COLEMAN. Mr. President, today I am engaging in my own version of
``Bring Your Daughter to Work Day.'' As we all know, this day does not
fall on May 14, nor does it involve the daughter bringing along 40 of
her friends, but this was the unique situation I faced today when my
daughter Sarah stopped by my office with some of her schoolmates from
the Twin Cities Academy in St. Paul, MN.
Like many other students from across the Nation, seventh and eighth
graders from the Twin Cities Academy are in Washington this week for a
school trip. Their plans include visiting the countless museums and
monuments throughout the city, a Capitol tour, and also the chance to
be with us today in the Senate Chamber.
I want to again welcome Sarah and her schoolmates to the Senate, and
I am glad they have the opportunity to observe the activities of this
body.
In honor of their visit, I want to talk a while on the importance of
young people understanding how Government works. So that they can
better follow along, and since I trust the students are familiar with
it, I am going to use parts of the Twin Cities Academy mission
statement as an example.
The Twin Cities Academy mission stresses collaboration between the
school, parents, and the community to develop each child's talent,
potential, and character. When this process succeeds, the mission
statement says that the end result is a group of productive citizens
who will contribute to sustaining American democracy.
Thomas Jefferson, one of the great leaders and legislators of this
Nation, had a vision for public schools and the role they were to play
in America, to create a public of informed and engaged citizens capable
of sustaining the Republic he and his colleagues had formed. Twin
Cities Academy had modeled its vision after these ideals, and they are
committed to fostering productive citizens, as stated in its mission.
Having a strong history program at school is a good thing for young
people like my daughter Sarah. Students need to understand how the
three branches of Government work together. Also import is having the
opportunity to come to Washington and witness first hand the rights and
duties of citizens. It helps them realize what it means to celebrate
freedom, to celebrate opportunity, and to be an optimist and have a
hopeful spirit.
My good friend and colleague Senator Alexander understands the
importance of sharing these values with the next generation, which is
why he introduced The American History and Civics Education Act, an act
which will help us ensure young people grow up learning what it means
to be an American. I was pleased to have the opportunity to cosponsor
this legislation.
When their school trip comes to an end, I hope that my daughter Sarah
and her schoolmates have thoroughly enjoyed all that they experienced
in Washington, particularly my version of ``Bring Your Daughter to Work
Day.''
I mentioned earlier in this statement how I hoped to give them an
understanding of how Government works. If these Twin Cities Academy
students were to look up the word ``understand'' in a thesaurus, they
would see as a synonym the word ``appreciate.'' I hope at the end of
the day, these students have even a greater appreciation, not just
understanding, of this great institution and our process of Government
that makes us the greatest Nation in the world.
I yield the floor.
Mr. DORGAN. I yield 5 minutes to the Senator from Montana.
The PRESIDING OFFICER. The Chair advises the managers of the bill and
those controlling time that there

[[Page S6159]]

is no requirement that the Senator speak on this legislation when
yielded time.
Mr. BAUCUS. I thank the Senator.
The amendment the Senator from North Dakota is offering, that I
cosponsor, is a tax cut amendment. Most Members of this body like to
cut taxes. That is what this amendment is all about. It is cutting
taxes.
Second, which group is getting the benefit of the tax cut under this
amendment? Under the amendment offered by the Senator from North
Dakota, cosponsored by myself, it is senior citizens who get the
benefit of the tax cut.
I join the Senator in offering this amendment. It repeals the 1993
tax of Social Security benefits, the tax this body imposed on certain
senior citizens in 1993.
We are currently debating a $350 billion tax cut reconciliation bill.
This bill is about priorities, about values. That is what budgets are
about. Part of the budget is $350 billion in tax cuts. The budget we
are working under that was adopted by the Congress set those numbers. I
am pleased there was a commitment to limit that reconciliation bill
through conference to $350 billion. That was the commitment made by
certain key Senators on this side.
It is within this tax reconciliation bill we debate and decide how
the changes in revenues and outlays affect our constituents. The debate
is about who the $350 billion benefits: do we give more money to some
taxpayers or others? The choices are real. We are here to make
decisions. We are here to decide.
We need to make sure our Nation's seniors receive a significant
benefit. If this bill before the Senate will allocate benefits to
certain groups, certainly senior citizens in our country should be a
main beneficiary of a tax reduction. This amendment offered by the
Senator from North Dakota is just that, a tax reduction for senior
citizens. It repeals the 1993 provision which imposed taxes on certain
senior citizens.
The bill reported by the Finance Committee provides a tax break for
taxpayers with dividend income. That proposal costs $81 billion over 10
years out of the $350 billion. That proposal provides a few seniors,
not very many, a few with a small amount of tax relief; 77 percent of
seniors in our country will receive no relief, no tax reductions, under
the Finance Committee bill on dividends; 77 percent of Americans do not
receive any of the $81 billion that will go to very few Americans, the
most wealthy, the least in our country.
In contrast, our amendment will provide 8 million seniors with a
significant tax cut. All the cost of this goes back to America's
seniors. That means $150 billion over 10 years is put back into the
pockets of our senior citizens.
The current law enacted in 1993 has two significant flaws. First, in
1993 we changed the rules in the middle of the game for people
receiving Social Security benefits. I will never forget. Suddenly that
was enacted. It came out of the blue, an additional tax on our senior
citizens and their benefits. We began to tax Social Security benefits
at a higher rate for individuals at certain income levels.
The second flaw in 1993, we failed to adjust the income levels for
inflation. For the past 10 years, there has been no adjustment. This
means more and more seniors will be subjected to this tax as each year
passes. We need to correct those flaws.

Again, this debate is about choices. We make choices here. Life is
making choices. We think the choice here is clear. If we have $150
billion to spend, spend it on seniors. As such, we offset the cost of
our amendment to repeal the tax to Social Security benefits. That is
the purpose of the underlying amendment by striking the dividend
proposal in the bill and also striking reductions in the top rates.
Again, this is a tax cut amendment. Those seniors I mention are
currently paying that tax. We are proposing that tax be repealed. That
is a tax cut amendment. It is being paid for by a promise to the
future. Those provisions of the Finance Committee dealing with
dividends are not currently in effect. They are future promises, we
suggest, to be repealed so our seniors get the benefit of the repeal of
the taxes imposed upon them in 1993.
A couple of numbers: Repealing the 1993 tax of Social Security
benefits gets an average of $1,500 into the hands of 8 million seniors.
Contrast that with the dividend proposal in the Finance Committee bill.
The dividend proposal in the bill gets an average of $19,000 to fewer
than 5,000 seniors. Again, what is better: $1,500 in the hands of 8
million seniors or $19,000 in the hands of the most wealthy, only 5,000
seniors? And fewer than 1 million taxpayers, regardless of whether they
are 65 or 25, would benefit from the top rate reductions. Remember,
there are 130 million filers in America. Fewer than 1 million taxpayers
who are not seniors, who are between 65 and 25 get reductions from the
top rate reductions.
Members on the other side of the aisle have supported this in the
past. Repealing the 1993 Social Security tax is a better choice for our
constituents than enacting dividend proposals in the top rate
reductions contained in the underlying bill.
Mr. REID. Will the Senator yield?
Mr. DORGAN. Mr. President, I yield 2 minutes to the Senator from
Nevada.
Mr. REID. Mr. President, the amendment offered by the Senator from
North Dakota will be voted on as it stands. If there is any suggestion
that there will be an offer or attempt to second-degree the amendment
or somehow not give us a straight up-or-down vote, we will continue to
offer this second-degree amendment on other things. There will be a
vote on this amendment.
It would be to everyone's best interest to get that out of the way as
quickly as possible and vote on this very important amendment offered
by the Senator from North Dakota.
Mr. DORGAN. I yield 10 minutes to the Senator from North Dakota, Mr.
Conrad.
Mr. CONRAD. Mr. President, I ask unanimous consent I be named as a
cosponsor of the amendment of my colleague.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. Mr. President, I wish my colleague a happy birthday. This
is his birthday, and I hope it is a happy one for him. I hope what
helps make it a happy birthday is this amendment passing.
This is a good amendment. This is reversing a tax increase previously
imposed on recipients of Social Security. That was part of a deficit
reduction plan back in the 1990s that helped get us back on track. We
did that. Now in the context of this bill, since there will clearly be
tax reductions, we ought to do it in a way that is fair and balanced
and that recognizes a tax increase previously imposed that could be
reversed at this moment.
My colleague mentioned what is happening to the Federal debt under
the President's budget plan. This chart shows it in graphic form. The
debt of the United States is absolutely skyrocketing. It is over $6
trillion now, and it will be over $12 trillion in 10 years if the
President's plan is adopted, including the overall tax bill before the
Senate.
All of this is at the worst possible time. Right now, the trust funds
of Social Security and Medicare are running surpluses. The blue bar is
the Medicare trust fund; the green bar is the Social Security trust
fund; the red bars are the tax cuts, both those enacted already and
those proposed. You can see that when the trust funds that are now
running big surpluses turn cash negative within the next decade, at
that very time the cost of the tax cuts proposed by the President
explode, driving us deep into deficit and deep into debt. That is right
as the baby boom generation retires, right as we are least able to have
deficits. You don't have to take my word for it or the word of the
Congressional Budget Office; this is the President's own analysis of
the long-term effects of his plan.

Some have said these deficits are small. The deficits currently are
at record levels. We are going to have the biggest deficit this year we
have ever had in our history. That is right here.
But look where we are headed, according to the President's own
analysis. This is from his budget document. It shows deficits now are
small compared to what they will be, even though they are at record
levels now. These are the biggest deficits we have ever had, and they
are tiny compared to what is to come if we adopt the President's plan,
because the costs of

[[Page S6160]]

the retirement of the baby boom generation explode at the very time the
costs of the President's tax bill explode.
Some on the other side are saying if you cut taxes you are going to
get more revenue. Let's do a reality test. They said that 2 years ago.
This was the range of possible outcomes, looking forward, that was
given to us 2 years ago by the Congressional Budget Office. They
adopted the midpoint of this range. That was what told them we were
going to have nearly $6 trillion of surpluses over the next decade.
Republicans said, Oh, wait a minute, that is too conservative. If you
cut taxes, as we did 2 years ago, you will get much more revenue. They
are making the same claim now: If we cut taxes again, we will get more
revenue.
Let's look back at history. Let's look at the record. What it shows
us is here is what actually happened. This is what the projections
were; this is the midpoint of those projections that said there would
be nearly $6 trillion of surpluses. This red line is what has actually
happened. We didn't get more revenue. We didn't get more surpluses. We
got less revenue and no surpluses. Instead, we got deficits, massive
deficits, record deficits. Now we get the same old song: Let's just do
another big round of tax cuts; we will get more revenue.
It didn't work last time. It didn't come close to working. In fact,
we just got the latest numbers from the Treasury Department. Revenue
this year is running $100 billion below the forecast made just 7 months
ago. They said, based on the tax cuts of 2 years ago, we would get more
revenue. We are not getting more revenue. In fact, if this trend
continues this year, we will have the lowest revenue as a percentage of
our gross domestic product since 1959.
All those who claimed we were going to get more revenue were wrong.
The President was wrong. Our Republican colleagues who told us we were
going to get more revenue with the big tax cut enacted 2 years ago were
wrong. They were not wrong just by a little bit; they were wrong by a
lot.
That is why some of the most distinguished economists in the country
are telling us that this tax cut plan is not going to do the job. These
are the names of the economists who signed this statement. Ten of them
are Nobel laureates in economics, the most distinguished economists
America has produced. This is what they say:

The tax cut plan proposed by President Bush is not the
answer to these problems--of weak economic growth.
Regardless of how one views the specifics, there is wide
agreement that its purpose is a permanent change in the tax
structure and not the creation of jobs and growth in the near
term. The permanent dividend tax cut, in particular, is not
credible as a short-term stimulus. As tax reform, the
dividend tax cut is misdirected in that it targets
individuals rather than corporations, is overly complex, and
could be, but is not, part of a revenue-neutral tax reform
effort.
Passing these tax cuts will worsen the long-term budget
outlook, adding to the nation's projected chronic deficits.

They conclude:

To be effective, a stimulus plan should rely on immediate
but temporary spending and tax measures to expand demand, and
it should also rely on immediate but temporary incentives for
investment.

It is not just 10 Nobel laureates. This morning a distinguished
Republican economist was quoted in the Washington Post reacting to a
plan to phase-in and later sunset the President's dividend proposal.
Here is what he wrote in a website editorial:

Administration sources admit that dividends will likely
decline relative to today under this plan between now and
2005.

Dividends are going to decline.

How can that be a harmless event, given that increases in
dividend payments are viewed to be so wonderful?

This Republican economist, distinguished Republican economist whom
they have called to testify before committees of Congress repeatedly
concluded:

Clearly, this proposal is one of the most patently absurd
tax policies ever proposed.

This is from a Republican economist whom they have called repeatedly
before committees to testify on economic proposals.
It is not just 10 Nobel laureates. It is not just a distinguished
Republican economist. It is even the people they have hired to do the
analysis of their plan, Macroeconomic Advisers, hired by the White
House, hired by the Congressional Budget Office to do macroeconomic
forecasting. Do you know what they say? The President's plan will give
you a little boost, less than half of 1 percent of additional GDP,
until 2004. Then look: straight down. That is what this policy
provides. It hurts economic growth. In fact, past 2004 it is worse than
doing nothing. That is a great economic growth plan. That is a great
jobs plan. It is worse than doing nothing, according to the people they
have hired to give them advice on what the results will be.
It is not just those Nobel laureates, it is not just a distinguished
Republican economist, it is not even the firm the Congressional Budget
Office and the White House have hired to do macroeconomic analysis.
This is the chairman of the Federal Reserve: ``Greenspan Says Tax Cut
Without Spending Reductions Could Be Damaging.''
He is saying:

With a large deficit . . . you will be significantly
undercutting the benefits that would be achieved from the tax
cuts.

The President of the United States is not proposing cutting spending.
He is proposing increasing spending and he is proposing massive tax
cuts when we already have record deficits. There can only be one
result: massive deficits, massive debt, that will hurt economic growth,
that will hurt the economic security of the country, and finally, on an
amendment that involves Social Security, that will take virtually every
penny of Social Security surplus over the next decade to pay for these
tax cuts. What a profoundly mistaken policy.
The PRESIDING OFFICER. The time of the Senator has expired. Who
yields time?
Mr. BAUCUS. Mr. President, how much time is remaining on both sides?
The PRESIDING OFFICER. The Senator from North Dakota has 20 minutes
on the amendment. The Senator from Iowa has 1 hour.
Mr. DORGAN. Mr. President, I was unable to hear.
The PRESIDING OFFICER. The Senator from North Dakota has 20 minutes.
The Senator from Iowa has an hour.
Mr. DORGAN. I ask if the Senator from Iowa wishes to use some of his
time at this point.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I yield myself such time as I consume.
I have enjoyed listening to this debate. It is just like being in
another world. The reason I say that is, why do you think that we tax
85 percent of Social Security income for certain Americans in the
higher income tax brackets--I would say even in the middle-income tax
brackets--at 85 percent? That was done in 1993. Do the people who have
just spoken forget that every one of them voted that increase, to have
the Social Security income be taxed at 85 percent of that income that
has to be reported? Every one of the people who have spoken are
responsible for that level of income reporting of 85 percent being on
the tax books. Why do they want to repeal what they are responsible for
passing? During the debate on the tax bill, every one of the Democratic
Senators now serving in the Senate, except for Senator Bingaman from
New Mexico, voted to have this money taxed. Now they are trying to take
it out.

On June 24, 1993, there was an amendment offered by Senator Lott to
change the amendment which was in the Democrat tax increase bill at
that time to not report 85 percent of Social Security income for
taxation. The rollcall shows that the motion to table was agreed to 51
to 46. The 51 Members who voted at that particular time were the ones
who were voting to keep the level of Social Security income that was
taxed at 85 percent and which needed to be reported. Every Democrat
still serving in the Senate voted to table Senator Lott's amendment.
Every Republican voted not to table the Lott amendment, which meant
that every Republican was voting against that. We had the support of
Senator Bingaman--the only Democrat from whom we had support.
They wonder why I am amused? If they think it is so bad today, why
didn't they think it was bad 10 years ago? And we wouldn't even be
debating this issue. It looks to me as if they want to maybe detract
from the mistakes of the past. I don't know.

[[Page S6161]]

But also, earlier this year, on an amendment by Senator Bunning to
the Budget Act, the very same Members opposing this amendment voted
against the very same amendment when Senator Bunning offered it. What
has happened in the last month? Do they realize that maybe the vote at
that time was wrong and they have to have cover? I don't know. But
every one of the Members who are proposing this amendment or speaking
for it voted just the opposite way on Senator Bunning's amendment. That
amendment was defeated 48 to 51.
But there are bigger things to worry about than how people voted in
the past. I want the public to understand that there is some game
playing going on here. We are talking about serious business as well.
We are talking about a jobs bill before the Senate to give tax relief
to American working men and women so they can have more money in their
pockets.
To get the cover that some people need for previous votes, they are
going to take tax decreases away from middle-class Americans to pay for
that. I will be a little more specific on that in just a minute.
I have to repeat something I said in my opening remarks. We just
heard a speech on the debt situation which might be forthcoming if we
grow the economy. Reducing taxes is one way to grow the economy and
will not have the debt situation we found with the growth we had in the
1990s. We paid down the national debt $550 billion.
We hear about this debt situation. My friends on the other side of
the aisle are worried about the debt. They said if we adopt the
President's plan, we are going to have greater debt. If they are so
concerned about the debt, why didn't they offer all of their amendments
on the budget bill about a month ago? They wanted to take money away
from the tax reduction aspect of the budget. It begins at the bottom
line. They took money away from tax decreases and spent it someplace
else. If they are concerned about the national debt, it seems to me--
and they believe that one more dollar coming into the Federal Treasury
is going to reduce the national debt--they shouldn't have been offering
amendments to spend it someplace else. But they are very consistent in
doing that. Amendment after amendment after amendment took money away
from the tax reduction figure in the budget, which this bill is a
result of, and spent it someplace else.

Do you know why? I think there is a difference in philosophy between
my party and the other party. That difference in philosophy is very
basic to this debate going on today. I just think people ought to
realize that this is not a Republican-Democrat fight, or some little
cat fight over some little bill in the Senate.
There is the difference between one party that believes money in the
pockets of 110 million taxpayers is going to do more economic good if
the 110 million taxpayers spend it or invest it than if I, Senator
Grassley, and 534 others here in DC are going to make that decision. We
have to believe that if the money is in the pockets of 110 million
taxpayers and they spend it or invest it, it is going to do more
economic good. It is going to turn over more times in the economy. It
will respond to the dynamics of our free market economy rather than a
political decision being made about what to do with it.
Obviously, I believe people on the other side of the aisle have the
attitude that we in Congress know better than they do how to spend the
taxpayers' money. If we are going to have a tax reduction, that will
mean less money for us to spend. But it ignores the economic good that
comes from private sector investment and private sector spending as
opposed to public sector spending.
I think there is very much an inconsistency here. What we are talking
about is a $430 billion tax reduction package--net $350 billion. As we
have been told, we have been led to believe that this is responsible
for doubling the national debt. This tax package is only one-half of 1
percent of all the dollars that are going to be collected by the
Federal Government under existing tax law over the next decade. That is
going to be $24.7 trillion. Tell me things are so tight here in
Washington, DC, that somehow one-half of 1 cent on the dollar left in
the taxpayers' pockets is going to be responsible for doubling the
national debt. No. What is going to be responsible for doubling the
national debt--if it were to happen; I don't think it is going to
happen--is not because the people of this country are undertaxed; it is
because this Congress overspends.

There again I would remind the Senator from North Dakota, the
distinguished ranking member of the Budget Committee, the President's
plan does not follow the pattern of the last few years, where back to
back we had 9-percent increases in domestic discretionary spending each
of those years. But the President's program, plus the budget of this
Congress, has domestic discretionary expenditures not at 9 percent but
at 4 percent. Now, yes, that is an increase. That is an increase, but
that is an increase that is sustainable over the long haul. Nine-
percent budget increases are not sustainable.
We are in a situation where nothing around here surprises me anymore.
The very people offering this amendment are the same ones who created
this tax increase back in 1993. As I indicated, they even voted against
repealing the tax just 2 months ago on the budget resolution.
I think this is an amendment that is trying to fool the American
people. Just about every Member on the Republican side has vehemently
opposed the Democrats' 1993 tax increase on Social Security. Except for
Senator Bingaman, every Democrat in the Senate today voted for that
back in 1993. Now they want to try to cover up their votes supporting
this tax, and they want to do it by destroying the underlying jobs and
growth bill.
This is how they destroy it: The Dorgan amendment strikes our efforts
to reduce all marginal tax rates above 10 percent. The efforts to
reduce marginal tax rates for the middle class are eliminated by this
amendment. As a result, a single mom making $40,000 in taxable income
will see no reduction in the tax on her small pay increase. A family
with taxable income of $70,000 will see no reduction in their marginal
tax rate.
The Dorgan amendment takes away our bill's tax cuts for middle-income
Americans. The Senator from North Dakota says this isn't a tax
increase. I would like to have you tell that to the single mom, who is
one of the targets of this amendment, who, on her pay raise, will not
see a reduction in her tax. A vote for this amendment is, in fact, a
tax increase, no matter how the authors want to try to dress it up.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. DORGAN. Mr. President, I yield myself such time as I may consume.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, this was an interesting and clever
argument to listen to. I have great respect for my colleague who chairs
the Finance Committee. We have worked on many issues together. But I
listened to his argument, which was more about motives with respect to
this amendment than it was about merits.
It is, I guess, perfectly plausible to talk about the motives of
others. I won't do that at this moment, but he was describing the
motives of people dealing with this amendment. Let me talk a bit about
the merits and correct some of the misstatements, if I might, and then
describe why this is an important amendment.
Let me take the last point first. My colleague says this is going to
take away the tax cuts for middle Americans. Nonsense; simply untrue.
Is this going to take away the tax cuts for the child credit, which is
going to be very significant to that single mom? Does this take that
away? The answer is no.
So if someone says this takes away the tax cuts for middle Americans,
they are wrong, just wrong. It is not supported by the facts. I will go
through a whole list of others that this does not take away.
This does take away the tax cut that accelerates the rate reductions
going down to the 28 percent. It is not all those above 10 percent, as
my colleague suggested. But let me go back to the top and take his
arguments one by one.
The Senator from Iowa is right, this was put in place 10 years ago as
part of a large plan. I was not happy it was there 10 years ago, but it
was part of a plan we passed.

[[Page S6162]]

Twice, since that time, I have supported efforts to get rid of this
tax on Social Security--the 50 percent to 85 percent--but we have been
unsuccessful. The question now is, Are we willing to cut taxes now by
abolishing the 85 percent back down to 50 percent? That is the question
for us now.
As a result of the 1993 new economic proposal, which included this
piece, we had unprecedented economic growth that turned this country
around, turned the biggest budget deficits then into the biggest budget
surpluses we have ever had. Now, we have people who are still huffing
and puffing that it really was not the result of that economic plan,
but, notwithstanding that, the fact is, that put this country back on
track. This piece was a part of it. I am not pleased it was, but it
was. As I said, I voted previously to try to get rid of this piece. Now
we have the opportunity.
If the prospect of the majority is to come to the floor of the Senate
and say, let's have very large tax cuts, the question is, it seems to
me, Where do you start? Who benefits most? Wouldn't it be a good thing
to cut these taxes so 8 million senior citizens who are paying $1,500 a
year more in taxes as a result of that change 10 years ago would be
able to begin to pay less as a result of our repeal of that provision?
My colleague said: Gee, there was just an amendment offered by
Senator Bunning on the floor of the Senate that dealt with this very
issue. Total nonsense. It was offered during the budget debate, and the
budget debate did not have anything to do with what we were going to do
on specific tax cuts. That can only be done with respect to the Finance
Committee and on the floor of the Senate.

The Bunning amendment was a proposal to increase the overall tax cut
by $146 billion. But the Bunning amendment--if I just ask you to go
read it--says nothing about this issue that I have as a matter of the
amendment today. I assume my colleague will say: Everybody knew what he
was doing. No, you can't do that during a budget debate. There is no
vote during the budget debate that is going to affect what the Finance
Committee does to cut taxes at some point later. So the Bunning issue
is a specious issue.
We are told this is a jobs bill, and we are also told by my colleague
as to this ``debt situation,'' don't worry so much about that because
we are going to grow the economy and the debt isn't going to happen.
This reminds me of that old joke in the movies: Who are you going to
believe, me or your own eyes? Well, let's take a look with our own eyes
here.
When somebody says, this doubling of the Federal debt, from $6 to $12
trillion, is probably not going to happen, let me refer you to the
budget that was passed by this Senate, embraced by the previous speaker
and all on his side of the aisle, I believe--or almost all--except two.
On page 4 of that conference report, they say, if they get all they
want--they grow the economy, they create the jobs, they get all they
want in budget and appropriations and tax cuts and so on--they say they
will have a $12 trillion debt in the year 2013. This isn't a case of,
well, if we grow the economy, the debt situation will not happen. No.
This is what they predict will happen if they get all they want.
So I would refer you to page 4 of the conference report, that you
voted for--I say to those who voted for it--and ask yourselves: Were
you creating a plan and supporting a plan that doubles the Federal
debt? The answer is yes. Case closed. No more discussion about that, I
am sorry.
Now, the question was asked: Do we want to repeal this or don't we
want to repeal this? The reason I have offered the amendment is, yes, I
think we ought to repeal that provision. I did not like that provision
when it was put in, but it was. It was part of a larger plan we all
protected in order to make that plan work. The fact is, I did not like
it then. I do not like it now. I think we ought to repeal it.
The question now is not, What did you think about someone doing that
10 years ago? The question is, In the year 2003, do you support
repealing this provision or don't you?
This, in fact, is a tax cut for senior citizens, 8 million of them
who have reached their declining income years and who have earned the
opportunity to go back to the provision we used to have where 50
percent of their Social Security payments are counted as income for tax
purposes rather than the 85 percent. That is what my proposal does.
We are told that what this larger tax bill is about is putting money
in the pockets of American taxpayers. That is true. It will be
borrowed, of course. We are going to borrow money to provide tax cuts.
But if we are going to provide tax cuts, it is perfectly appropriate to
ask the question: What are the priorities? Who ought to be first in
line? Those at the very top of the income ladder who earn the biggest
dividends, should they be first in line? Is that who edges up to the
trough here? Or perhaps should we take a look at the issue of the tax
burden on senior citizens and especially the income they receive from
Social Security?
If this is about putting money in the pockets of the American
taxpayers, I say without respect to the motives of those who disagree
with me, if the motive is to put money in the pockets of senior
citizens who have had to pay a higher tax than they should have to pay,
this amendment gives you the opportunity to vote yes or no.
We can have people stand and steam and bluster about other people's
motives, but in the end, we will vote on this. And the vote is going to
be, do you believe we ought to relieve senior citizens of this tax
obligation they have had to pay? In my judgment, the answer ought to be
yes. My hope is that enough colleagues will join me so we can make this
kind of affirmative change that will be helpful to cut taxes for 8
million senior citizens to the tune of $1,500 a year. These are taxes
that ought to be cut. I hope my colleagues will support this amendment.
One more time. There are a lot of mirages created in this Chamber, a
lot of word castles being built: We will grow; we will create jobs; we
will grow the economy; we will expand all these things that we hear
about.
It is not contestable that we have a fiscal plan passed by one vote
in this Congress that says: Let us borrow a great deal of money,
provide very large tax cuts mostly to upper income folks, double the
Federal debt from $6 to $12 trillion, increase funding on defense,
increase funding for homeland defense and security, and then shrink
domestic discretionary and at the same time double the Federal debt.
That is a legacy we will leave to our children if everything goes as is
predicted.
I happen to think this fiscal policy makes little sense. If we are
going to cut taxes, let's make sure we have a priority in terms of the
value system we want to exhibit as we cut taxes. I say those who have
reached their declining income years and who are now paying higher
taxes because of this provision put in 10 years ago deserve the
opportunity to see this provision repealed, and my amendment does
exactly that.
I yield 3 minutes to the Senator from Montana.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, there isn't anybody in this body for whom
I have higher respect and more affection than the Senator from Iowa. I
must say when I listened to his arguments against this amendment,
virtually nothing was said that addressed the merits. In fact, there
were some statements which were a little bit misleading. Lawyers like
to call them red herrings. That is when you say something to try to get
people off track so they don't think about the subject at hand. It is
called a red herring.
One of the red herrings we heard was that Democrats voted against
this amendment in the past, and it was Democrats who voted for this
increase in Social Security taxes back in 1993. That was 10 years ago.
That is a different time, a different situation, different
circumstance. Back then the Congress voted to reduce deficits, and that
was part of a large deficit reduction package. This is 10 years later,
2003. We are faced with the question, within a $350 billion tax bill,
how should the tax cuts be allocated. That is the question before us.
Many of us believe it is a far wiser policy that seniors receive more
of the tax benefit as a result of the cuts than is the case under the
Senate Finance Committee bill. That is why we think the 1993 provision
should be repealed

[[Page S6163]]

because then seniors will receive significant benefits if it is
repealed, and we believe that is a higher priority than giving a lot
more dollars to very few Americans who are the elite, the extremely
wealthy Americans.
Repealing the 1993 tax on Social Security benefits gets an average of
$1,500 in the hands of 8 million Americans. Eight million seniors will
receive, on average, a benefit of $1,500 under our amendment.
Otherwise, if this amendment does not pass, then by contrast, under the
committee bill, which gives dividends to all Americans tax free, a few
seniors, 5,000 seniors, will get $19,000.
We are saying there should be a better priority; that is, the money
should be given to people who are going to spend it. It should be
spread out more evenly rather than have the benefits, as in the Finance
Committee bill, so heavily skewed to the Nation's elite. This should
not be an elite bill. This should be an American bill. This should be a
bill for Americans, and American seniors should be included as the rest
of America.
There are other provisions of the bill that give tax benefits other
than to seniors. We believe seniors should get a significant part of
the benefit. I strongly urge passage of the amendment.
The Senator from Iowa also said there is a difference in philosophy:
One party wants to put money in the pockets of people; the other does
not.
That, too, is not a valid argument. We are talking about whose
pockets this money should be put into, if you want to put it in those
terms. We on our side are suggesting that the people whose pockets
should receive the money are the seniors, that they should receive the
benefits, much more than is the case in this bill. In this bill, the
people who receive the money, whose pockets get the money, are the
elite, the wealthy elite of America generally. That is not right. That
doesn't work. It is not fair. It is not American. We believe this
should be a bill that is more evenly balanced for all Americans.
For all those reasons, I urge my colleagues to support the amendment.
It is good for America.
The PRESIDING OFFICER. Who yields time? The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I ask how much time remains on the
Dorgan amendment on both sides.
The PRESIDING OFFICER. The Senator from Iowa has 45 minutes; the
Senator from North Dakota has 7 minutes.
Mr. GRASSLEY. Forty-five minutes on my side?
The PRESIDING OFFICER. The Senator is correct.
Mr. GRASSLEY. I rise to address a couple of issues that have been
presented before we go to other people who want to speak. This is on
the Dorgan amendment. It might be in the form of asking rhetorical
questions or what have you. But first of all, I want to say to my
friend from Montana, the distinguished ranking member of this
committee, that for this farmer to be called a lawyer, if he were not a
good friend of mine, I would take offense.
Regardless, before us is this amendment that reduces the amount of
Social Security income that must be reported for taxation. One of the
issues I didn't mention in my debate against the amendment is the fact
that all the money raised from this tax goes into the Medicare health
insurance trust fund. We all know the Medicare Program is in much more
serious condition than the Social Security Program.
The Medicare trust fund has a drop dead date of 2026. The Social
Security trust fund has a drop dead date of 2042. None of those dates
are anything that I am making light of, that they are so far off that
we should not be concerned. We have to be very concerned. But people
ought to understand that to the extent this amendment is adopted, it
would take money out of the Medicare health insurance trust fund. And I
don't think we ought to be doing anything to weaken the Medicare trust
fund. I would rather refer to a point made by the two Senators from
North Dakota, most often made by the sponsor of this amendment. I
cannot help but ask both of these Senators who are trying to make an
issue about this bill by saying that this bill will increase the debt.
Somehow that just doesn't add up, when you consider the thrust of their
amendment.

How does this amendment they have before us reduce the debt? The
bottom line of the bill is exactly the same with or without the Dorgan
amendment. In other words, it costs the same as the underlying bill.
So, again, we have people speaking on three sides of a two-sided coin.
Senator Dorgan's amendment will increase the debt, so I don't hear any
more about increasing the debt on the part of the underlying bill,
because with their amendment, we end up exactly in the same place.
The PRESIDING OFFICER (Ms. MURKOWSKI). The Senator from North Dakota
is recognized.
Mr. DORGAN. Madam President, my colleague from Iowa just won a debate
we were not having. That is an interesting thing to do. I wasn't
proposing this amendment as one that would dramatically reduce the
Federal debt. I never suggested that or proposed it.
My point is, we lost on that issue when my colleague and his party
passed in the Senate this budget which, on page 4, says they want to
double the Federal debt from $6 trillion to $12 trillion. They passed
that without my vote. I didn't support it. But I didn't propose this
amendment saying it will reduce the Federal debt. I am saying this:
Since they won, and since they are going to cut taxes, the question is
of choice and priority: Which of the taxes ought to be cut? Which ought
to be cut first?
My amendment simply says I think it is more important to cut these
taxes for senior citizens--8 million of them who pay $1,500 a year, at
this point, more than I think they should pay. I think the priority
ought to be to cut taxes for them at this point. Is it more important
to do that than to, as I said earlier, cut dividend taxation? I think
it is. I think those individuals are in the highest income levels.
Again, I hope Donald Trump won't mind, but since he names everything
after himself, and he is a very successful businessman, he probably
doesn't mind my using his name. He is at the top of the income ladder,
and God bless him. But it is a reasonable thing to ask: what is the
priority? Is it providing tax exemptions that will provide large tax
cuts to those at the top or to provide tax exemptions for senior
citizens who have reached the lower part of their income in their lives
and are struggling to make it?

What I propose has nothing to do with the debt. This doesn't reduce
the debt. I am not saying it does. If we are going to cut taxes, the
question ought to be one of choice and priority. That is what this
amendment is. I am going back to the question of debt because it is the
very reason I voted against the budget in the first place. We cannot
come to the floor and say this debt situation ``isn't real'' because it
may not happen because we have this policy or plan that will grow the
economy, and if and when we do these debts won't appear.
I am sorry, that just doesn't wash. This plan is a plan that says if
we get all we want, if we get this economic growth, if we create these
jobs, if our plan is approved, we will then double the Federal debt.
Are we concerned about that? You bet your life we are. Are some others
around here concerned about it? No. There is a lot of thumbing of
suspenders and saying, ``Aw shucks, this doesn't matter.'' Well, it
matters. Our kids and their kids will inherit this debt. It will be
their burden to pay this.
We just came through a war, and God bless the soldiers we called on
to ask to fight that war. This country is enormously blessed that it
lasted only a very short time. But I think it is very unusual that
America sends her sons and daughters to war but says we don't choose to
pay for it at this point. It is a very costly enterprise. Nobody is
saying we ought to pay for this. What we said was: When you come back
from the war, you can come back to the welcome arms of your family and
then inherit the burden of paying the costs. That is my point about the
debt and deficit.
Have I used my 7 minutes?
The PRESIDING OFFICER. Yes.
Mr. DORGAN. I yield the floor.
Mr. BAUCUS. Madam President, I yield myself 5 minutes off the bill.
For the record, I want to make a correction. I know it was an oversight
by the Senator from Iowa when he mentioned that the Medicare trust fund
will be somewhat in jeopardy in future years.

[[Page S6164]]

That is true, but I know it was an oversight when he failed to state
that, under the terms of our amendment, the trust fund will be made
whole through transfers from the general fund over to the Medicare
trust fund, so it will be made whole or kept whole and held harmless
under this amendment.
I know that was an oversight, but I wanted to say that for the
record.
Mr. REID. Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DORGAN. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
Madam President, my understanding is that when I asked whether I had
used the 7 minutes, the response was not accurate and that there are,
in fact, 3 minutes left.
The PRESIDING OFFICER. The Senator is correct.
Mr. DORGAN. I knew I talked fast, but I didn't think I finished all 7
minutes then. I thank the Presiding Officer and the Parliamentarian as
well.
I wanted to make a point in response to something said earlier that,
well, if this amendment passes, the tax cuts for American families will
be gone. That is simply not the case. I will describe that I don't,
with this amendment, change the child tax credit. That moves to $1,000.
It has nothing to do with that. That stays in place. I don't propose
changing expensing to $75,000. That stays in place. The increase in the
AMT, the alternative minimum tax, exemption stays in place.
Acceleration to the 10 percent bracket stays in place. Acceleration to
the 15 percent bracket stays in place.
My point is that a lot of things are said on the floor of the Senate,
and they are often said by someone who might mean them, but they might
be mistaken. It is a mistake to say that this amendment somehow, in
some way, jeopardizes tax cuts to most American families. It doesn't.
It simply does not.
The only question the Senate will be voting on with respect to this
amendment is the following: Do we, at long last, repeal the provision
put in place 10 years ago? And, yes, many voted 10 years ago for that
large package and put the country on track, and that led to awfully
good economic times. But do we repeal that provision? I felt 10 years
ago it would be better not to have that provision in the package. I
have on two occasions voted to repeal it. Let's try again.

If we are on the floor saying there will be very large tax cuts,
let's ask the question: Should this tax cut be one of them, a tax cut
for senior citizens that says to them the $1,500 in additional taxes
that 8 million of you are now paying, because we changed the rules on
what percent of the Social Security receipts you get should be reported
for tax purposes, should that be cut? The answer is yes.
While we are talking about double taxation, yes, some dividends--
fewer than 50 percent--are subject to double taxation in this country,
but all of this is double taxation--all of this. Senior citizens pay a
tax on their wage when they are working. When they retire, they get a
Social Security benefit and pay a tax on now 85 percent of that. That
is double taxation.
If, in fact, the culprit we are chasing is double taxation, why do we
start with dividends first? What about double taxation that results in
Social Security recipients being taxed while they work on the same
income we will now tax when they retire? It does not make any sense to
me. The only question is not one of motives of someone who might be
supporting this or offering it, as my colleagues suggested a moment
ago, the question is when the roll is called, do you believe we ought
to repeal this tax increase that senior citizens face? My answer is
yes, let's repeal this tax increase. That ought to have a priority over
other provisions in the bill.
One last point. The Senator from Montana clarified the point with
respect to Medicare. I appreciate he did that. I failed to do it. This
bill does not jeopardize the Medicare trust funds at all. They are
restored in the bill.
I yield the floor.
Mr. LEVIN. Mr. President, I support the amendment offered by Senator
Dorgan that would cut taxes for 8 million of our seniors that pay
Social Security taxes.
This boils down to a question of priorities. If we are going to pass
a huge tax cut as the majority insists, who would we rather provide the
tax cuts to? This amendment would provide tax relief to senior citizens
who pay taxes on their Social Security benefits. Those who oppose this
amendment apparently would rather provide tax breaks that mostly go to
the wealthiest among us. They apparently would rather cut taxes on
dividends that studies show will disproportionately benefit upper
income folks. They apparently would rather accelerate tax cuts for
taxpayers in the top bracket making over $300,000 a year. I would
rather cut taxes for seniors than do these things.
I will support the Dorgan amendment as a major improvement to the
underlying bill reported by the Finance Committee.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Madam President, I ask unanimous consent that the pending
amendments be temporarily laid aside so the Senator from Nevada may
offer an amendment.
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator from Nevada.

Amendment No. 560

Mr. REID. Madam President, I ask that amendment No. 560 be reported.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Nevada [Mr. Reid] proposes an amendment
numbered 560.

Mr. REID. Madam 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:

(Purpose: To ensure that Social Security surpluses are not raided in
order to fund tax cuts on corporate dividends)

At the appropriate place, insert the following:

SEC. __. MECHANISM TO PROTECT SOCIAL SECURITY

(a) Certification.--
(1) In general.--Each year, beginning in 2003, when the
Final Monthly Treasury Statement for the most recently
completed fiscal year is issued, the Secretary of the
Treasury shall--
(A) certify whether there was a on-budget balance or
surplus in that fiscal year; and
(B) estimate whether there would be an on-budget deficit in
any of the succeeding 10 fiscal years if section 201 of this
Act takes effect January 1 of the following year.
(2) Estimate.--The calculations for the estimate under
paragraph (1)(B) shall be consistent with the baseline rules
specified in section 257 of the Balanced Budget and Emergency
Deficit Control Act of 1995, except for the assumption that
these provisions take effect and remain in effect
permanently.
(b) Delay in Dividend Tax Cut.--Notwithstanding any other
provision of law or this Act, section 201 of this Act shall
not take effect until January 1 of the year following--
(1) a certification by the Secretary of the Treasury
pursuant to paragraph (a)(1)(A) that no on-budget deficit
existed in the preceding fiscal year; and
(2) an estimate by the Secretary of the Treasury pursuant
to paragraph (a)(1)(B) that no on-budget deficits will occur
in any of the 10 succeeding fiscal years even if section 201
takes effect.

Mr. REID. Madam President, I can remember as a little boy my
grandmother getting what she referred to as her old-age pension check.
That is what she called it. We have refined the name. That is not
politically correct anymore. We now refer to someone receiving a Social
Security check.
The Social Security check my grandmother received gave her dignity.
She had eight children. The children helped her, but my grandmother, a
proud widow, did not want to feel dependent on people, even her own
children. I repeat, that old-age pension check gave her dignity. It
gave her independence. She had money of her own that she could spend.
She was unable to work. My grandmother, for all the time I remember
her, could not walk very well. She was very heavy and did not move
around very well. But that check still gave her the ability to feel
free to do things on her own.
Social Security is the most important, the most successful social
program in the history of the world. There has never been a program
that has worked as well as Social Security. In addition to helping my
grandmother as it did, Social Security has other important effects. It
helps those who are widows.

[[Page S6165]]

I have said on this floor before and I will repeat it, I was in my
Senate office in the Hart Building, and a woman was there representing
an agency from Nevada. It was obvious she was very anxious to make her
flight. I asked: You can make your plane easily; why are you so
nervous? She had to get home to her children. She proceeded to tell me
she was a widow. She was a young woman. I asked her what happened to
her husband. He was murdered. Social Security steps in in situations
such as that to help widows and orphans. Social Security also helps the
disabled.
Social Security is more than a check for my grandmother. It is a
check for the widow whose husband was murdered. It is a check for
someone who has a debilitating disease and cannot work. Social Security
is an important program. Our Social Security program is the envy of the
rest of the world. It is a program that came about during the Great
Depression, the brainchild of Franklin Delano Roosevelt, and the
program has been remarkable.
Not every Member of this body is committed to protecting Social
Security. That is a fact. The former majority leader of the Senate, my
friend, the distinguished Senator from Kansas, Mr. Dole, is proud of
the fact he voted against Medicare. He acknowledges, as do a number of
other distinguished Republican leaders, that Social Security and
Medicare are bad programs.
I carry in my wallet--I still have them here; I have read them so
many times and I am not going to do it again--quotes from Republican
leaders--Gingrich, Armey, Dole, and there are others who are not as
nearly forthright as these three men who acknowledge their dislike for
these programs, but we know there are people in the other body who do
not like these programs. We know there are people in this body,
Senators who do not like these programs.
As has already been stated on this floor by the distinguished Senator
from North Dakota, the former chairman of the Budget Committee, Senator
Conrad, part of this tax program of the majority is simply to do away
with programs they cannot defeat head up. They cannot get rid of
Medicare and Social Security with votes on the Senate floor. So these
tax programs will starve domestic discretionary spending and cause us
to cut back and maybe even eliminate, if they get what they want, these
important programs.

I repeat, not every Member of this body is committed to protecting
Social Security. The amendment I have offered will give Members an
opportunity to show not only seniors, but others, that Social Security
is a program believed to be important to this country.
Young people believe in Social Security, and there has been this myth
propounded by the majority that Social Security is about to go broke.
Social Security is not about to go broke. We need to do things in the
outyears, probably around 2040, to make Social Security a better
program than it would be without our help, but even if we did nothing,
Social Security recipients would be able to draw 75 to 80 percent of
their benefits. We need to do something.
What is being done is exactly the wrong approach. The Republican tax
bill that is before this Senate--call it growth and opportunity, call
it whatever you want--is a tax bill that is devastating to the security
of this country. It is devastating to the Social Security program.
My amendment is very simple. It says Congress cannot raid Social
Security surpluses to fund tax cuts on corporate dividends. It is as
simple as that. The Social Security trust fund is being raided as we
speak.
During the Clinton years, we came to the conclusion that it was not
appropriate to mask the yearly deficit with Social Security surpluses.
So we had an accurate accounting system. When we talked about there
being a surplus, there was a real surplus. What we have here is a
report in the newspapers by the administration of what the deficit is,
but that deficit is masked because of Social Security surpluses.
As we speak, there are huge amounts of money coming in to the Social
Security trust fund, and these moneys are not being spent. There is a
surplus.
As the late Senator Moynihan and I, in a dialog in the Senate one
afternoon, talked about, it should be a Social Security trust fund, not
a Social Security slush fund.
It is being used as a slush fund to cover deficits. The deficit this
year will approach $600 billion. So I believe that we should protect
Social Security. We used to have debates going on about lockboxes. What
was a lockbox? A lockbox was a box that the Social Security surpluses
were in and it could not be raided. We said: You cannot have the key to
unlock that lockbox for Social Security surpluses. That debate is gone.
Nobody talks about it anymore because everyone knows this
administration has not only given the key away to the lockbox but
thrown away the lockbox. Social Security surpluses are raided every day
in this country.
The last 3 years of the Clinton administration there were huge
surpluses, retiring hundreds of billions of dollars of debt. Now we
have the direct opposite. We are creating hundreds of billions of
dollars of debt, and in the next few days we are going to be asked to
vote upon increasing the national debt ceiling by a trillion dollars,
approximately, some 980-odd-billion dollars. Round it off to a trillion
dollars.
My amendment is about priorities. Are we going to protect Social
Security or are we going to take the money raised with payroll taxes
and use it for a tax cut for the elite of this country?
Every worker pays payroll taxes. Yet every worker will not benefit
from a corporate dividend tax cut. So it hardly seems right that we
would support using payroll tax money to fund a tax cut that will
benefit a select few of the elite of this country.
A short time ago the county assessor from Washoe County, NV, Reno,
NV, came to my office. He came for one reason, to tell me: Please,
Senator, do not do anything to allow this dividend tax cut to go
through. It will devastate Washoe County. How we build roads, bridges,
and schools is through floating bonds. That is how we do our assessment
districts, to put in water systems, curbs and gutters. If the dividend
tax cut goes through, State and local governments are going to be
devastated. They will not be able to raise money as they did before.
So as far as I am concerned, this dividend tax cut is not good for
our country. In just 6 years, the baby boom generation will begin to
retire and our senior population will double--almost double from 44
million to 77 million. We need to make sure that we are prepared to
meet the obligations we have made to our parents, our grandparents, as
well as our children and our grandchildren.
When the Bush administration came into office, there was a projected
$5.6 trillion 10-year surplus. Some say it was over $7 trillion. Now,
the Government will have a record of a $1.8 trillion deficit, and maybe
a $2 trillion deficit, and spend every dollar of the $2.2 trillion
Social Security surplus over the next 10 years.
Before Social Security, 1 in 3 older Americans lived in poverty.
Social Security has reduced that number to 1 in 10. Over the past few
decades, millions of older Americans have been lifted out of poverty by
Social Security.
I believe Social Security is one of the greatest success stories in
the history of our country. I have already stated that.
As I said, Social Security is something everyone in this country
wants to believe is going to continue to be as successful as it has
been. Yet it is a success story that will be rewritten with a tragic
ending if we decide to plow ahead with the corporate dividend tax cut
before we meet our commitment to future generations. If we are going to
build on the success of the Social Security Program, we cannot allow
Congress to raid the Social Security surplus in order to fund corporate
dividend tax cuts. New tax cuts will run up debt, make it harder for
Social Security to meet its future obligations, and further threaten
its long-term solvency. Simply, this means future generations of
seniors can look forward to uncertain retirements. For many, this will
mean retirements into poverty.

Social Security is a guarantee of some measure of security in
retirement. It is not everything, but it is a guarantee of some
security in retirement. The collapse of corporations like Enron and
WorldCom underscore the importance of maintaining this guarantee and
not forcing workers to depend entirely on pensions for their retirement
savings.

[[Page S6166]]

We have just started to see what is happening to the retirements of
people who have worked all their lives. For example, in the airline
industry we have real concern about the future. Are they going to be
able to maintain their programs so people can draw their benefits? The
airline industry is only one. We have battled with the steel industry,
coal miners. We have had all kinds of problems and that is only a small
portion of what is probably going to happen in the future.
Not everyone agrees on how to approach Social Security reform. But
one thing is certain, nearly every single Social Security reform plan
that has been proposed requires additional resources, not less
resources. In fact, the plan recommended by the President's own
commission to strengthen Social Security required over a trillion
dollars. What has happened to that? The true question is, Where does
Social Security rank on the page of important issues voted on? Will
this Senate say that protecting Social Security is more important than
giving a dividend tax cut to the elite of this country? I hope the
answer is yes. I hope people vote to put Social Security first. I hope
every Member in this body agrees we should not raid Social Security
trust fund dollars so we can offer tax cuts for the elite of this
country.
Let's show our seniors and future generations we are serious about
fulfilling our obligations to them. It is time, and this amendment is
the time to demonstrate that Social Security is a top priority for this
Congress and for the Nation.
A constituent said it best in a recent e-mail that he wrote to me. I
do not know if that is a proper term for e-mail, but I received it. He
said:

Tax cuts are nice . . . but if we can't depend on what the
Federal Government promises, then what is left for us to
believe in?

Of course, that was referenced directly to Social Security.
I hope we will join to do the right thing for the millions of people
who are on Social Security, the millions of people who will go on
Social Security, and for those people who recognize that this program
is the most successful social program in the history of the world.
The PRESIDING OFFICER. Who yields time?
Mr. REID. I ask for the yeas and nays on my amendment.
The PRESIDING OFFICER. Is there a sufficient second? There is not a
sufficient second.
Mr. REID. 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. GRASSLEY. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Madam President, the arguments we hear for various
amendments are very interesting. It is kind of like the other side is
going in a circle. In regard to the amendment of the distinguished
Senate minority whip, the Senator argues against the jobs bill because
Social Security funds are used.
Well, let's compare that argument to the arguments Senator Dorgan was
using. How does the Senator from Nevada think the Dorgan amendment he
supports is paid for? As the Senator from Montana pointed out, general
revenues will be used to cover the costs of the Dorgan amendment.
We are in a deficit situation. Everybody acknowledges that. So where
does the Senator think these revenues will come from? They will raid
the Social Security trust fund to pay for the Dorgan amendment.
Once again, it seems to me the other side is trying to be on three
sides of a two-sided coin. Maybe if we keep this up long enough with
their circular arguments they will be supporting the jobs bill when we
finally get to final passage.

I yield the floor.
Mr. REID. Madam President, I personally think we should have a real
jobs bill. For example, there has been a lot of talk about how many
jobs this tax bill will create. Let's analyze this.
There is no dispute that for every $1 billion we spend on public
works projects--for example, building highways, roads, bridges, dams,
water systems, sewer systems--for every $1 billion we spend, we create
47,000 jobs. The math is simple. By spending just a few billion dollars
compared to the multitrillion-dollar tax program that has been
recommended, we could create many more jobs. Those are direct, high-
paying jobs. Every $1 billion, 47,000 jobs. Multiply that and it comes
out to lots of jobs, especially those that would be created indirectly.
I hope some day we have a real jobs bill, instead of what we are
talking about, jobs and growth; call a pig a horse all you want, but it
is still a pig. You can talk all you want about this tax bill and how
much growth it will create; the fact is it is a program for the elite
of this country.
Simple and direct to the point, it is what it is. It is an effort to
devastate the ability for domestic discretionary spending and cause
tremendous harm to programs such as Social Security and Medicare.
I hope when we vote on this measure there will be a resounding yes
vote. I understand there will be a technicality raised because, under
this rule, germaneness is a very tight rule and it will require 60
votes. That is not such a high burden.
We should be able to have 60 Senators vote to put Social Security
before giving tax cuts to the elite. My amendment goes only to the
dividend tax cut. I hope we have support on that. If 60 Senators do not
agree to support Social Security over a dividend tax cut, I feel very
sorry for the remainder of the session and what it will do to the
American people.
Mr. GRASSLEY. Madam President, I yield such time as he might consume
to the Senator from Utah to either speak on the pending amendment or to
speak on the bill.
Mr. REID. Will the Senator withhold for a brief minute?
Madam President, there are Senators wondering what will happen this
afternoon. It is my understanding that the distinguished Senator from
Iowa will propound a unanimous consent request that we will have a vote
around 2 p.m.; is that right?
Mr. GRASSLEY. I am prepared to do that. The answer is, yes, we will
have a vote at 2 o'clock, but I don't want to propound the unanimous
consent right now.
Mr. REID. It is my understanding, though, that we will have a vote,
try to have a unanimous consent agreement and vote on the Dorgan
amendment and the Reid amendment, and the Senator from Iowa may raise
points of order against those.
Mr. GRASSLEY. I could make the unanimous consent request and then
raise a point of order later.
Mr. REID. That is right.
Mr. GRASSLEY. Madam President, I ask unanimous consent,
notwithstanding the remaining debate time, it be in order for me to
raise a point of order against the pending Reid amendment No. 560;
provided further that Senator Reid then be recognized and ordered to
move to waive. Finally, I ask consent that the vote in relationship to
the amendment occur at 2 p.m.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Madam President, I yield such time as the Senator from
Utah might consume.
Mr. BENNETT. Madam President, I thank the chairman of the Finance
Committee for his support.
We continue to hear about jobs in this debate and the question of
what creates job. We heard the assistant Democratic leader say for
every $1 billion we put into the economy, we get 47,000 jobs. I am not
sure what study produced that number, but if it were absolutely true,
any time we wanted we could say, let's appropriate another $1 billion
and get another 47,000 jobs. If we need to put 470,000 people to work,
appropriate $10 billion and go buy the jobs--as if jobs are used cars
sitting in a car lot which can be purchased if you have enough money.
Unfortunately, the economy is not that simple and does not work that
way. Jobs are created by two things. No. 1, enterpreneurism, risk
taking, somebody does something. A human activity is required. No. 2,
accumulated capital. Jobs come because somebody accumulates enough
capital to fund the risk taking. In many instances the risk that is
being taken is that the capital will be lost.
If we look at the creation of jobs through this prism, that it
requires

[[Page S6167]]

risk taking and it requires accumulated capital, we see things a little
differently. It is not a matter of the Federal Government spending $1
billion to purchase 47,000 jobs. It is a matter of the Federal
Government creating an atmosphere in which those who are willing to
risk their accumulated capital--or in the case of borrowing, somebody
else's capital--and produce the jobs that come out of that activity.
If I may be personal, I will outline my own experience as an
entrepreneur in risking some accumulated capital and creating some
jobs. I was given the award as Entrepreneur of the Year by Inc Magazine
in 1989 for the Rocky Mountain area. Frankly, I had not thought of
myself as an entrepreneur prior to that time when I received the award.
I sat down and said to myself, Self, let's draw up a little tally of
whether or not I have, indeed, been involved in entrepreneurial
activities in my life. Because I had not kept track before, I did that
inventory. I was a little surprised at what I found. I had been
involved in 11 different startup or turnaround activities. That is, 11
different attempts to create new economic activity where none had been
before. Then I tallied up the record of success.

Four of these efforts failed outright. The money represented by the
accumulated capital being risked in our attempt to create new jobs did
not work. The money was all lost. Four of these efforts were sold
without having succeeded or failed. In other words, we started it, we
got it going, we decided to bail out before we found out whether or not
we were going to make it, and someone else took us out. We neither made
money nor lost money. We lost money in the sense of our opportunities
in the period of time we were working on these efforts was gone, but at
least we did not lose the accumulated capital with which we went into
the venture.
That left only 3 out of the 11 that had been successful.
Interestingly enough, enough money was made out of those three to cover
all of the expense of the other eight. Enough jobs were created out of
those three to compensate for everything that went down the drain with
the other eight. I decided, having done this 11 times in my life, I
guess I did deserve to be called an entrepreneur, a risk taker.
Now, I will focus on one of those companies with which I was
involved, to make the point that cannot be stressed too often or too
strongly in this debate. I was recruited to be the chief executive
officer of a company that at the time had four full-time employees. It
was doing somewhere between $250,000 and $300,000 per year. Frankly,
its long-term prospects were not all that bright, if you looked solely
at where it was. It was not making any money. It was just barely able
to support those four full-time employees, and it probably couldn't
have afforded me.

Indeed, when I became the CEO, I was part-time and I was paid a
consulting fee rather than a CEO's salary because the company couldn't
handle that.
That was in 1984. The reason I point out that year is because that is
the year many of our friends who are discussing this bill in
apocalyptic terms would describe as part of the Decade of Greed. The
Decade of Greed, as that phrase is used--usually in the Democratic
Party and on the editorial page of the New York Times--refers to that
period of time when Ronald Reagan was President of the United States
and the top marginal tax rate was ultimately brought down to 28
percent.
Think of it, how greedy rich Americans were that they demanded, and
Ronald Reagan and the Republicans responded, a tax rate of 28 percent.
Why, that is terrible. We should clearly have moved away from that, and
we have. The tax increase that occurred under President Bush the first,
and then the tax increase that occurred under President Clinton, has
brought us up to the rates they now insist are right and proper, an
effective marginal tax rate--when combined with the Medicare tax--of 42
percent on the Nation's highest paying taxpayers.
They say 42 percent is about right; 42 percent shows the rich are
paying their fair share. They say 28 percent is giving in to the
demands of the greedy and isn't life much better when the effective
rate is 42 percent.
Now they say President Bush the second is trying to bring us back
down into the area of the Decade of Greed. He is not going as far as 28
percent, but he is going to bring us down to 35 or 32, depending on the
brackets. He is going to bring us down away from the 42 and back toward
the attitudes of the Decade of Greed.
So, as I say, back to my own experience. We were building that
business in the Decade of Greed. I can assure you, no one in our
company was earning a six-figure salary. We couldn't afford to pay that
on the amount of revenue we got. But we had high hopes. We were taking
big risks. I signed a guarantee on the bank loan that would have cost
me my house if we had not been able to pay it, and every other
shareholder in the business did the same thing. We were on the line. At
that point, that was the only real asset I owned. But I signed it
because I believed we could make it go.
We were on the line then, for losing our houses--talk about taking a
risk--in order to get the accumulated capital that we needed to build
that business in the form of a business loan. It was $75,000.
Madam President, $75,000 doesn't sound like a lot of money, but when
you are going to lose your house, $75,000 is a huge amount of money. It
was added to $75,000 that had been there before I showed up, so the
total debt of the company was $150,000, and they were going to take
after me to take $150,000 out of my house and I didn't have $150,000 in
equity in the house. We had to add it all up with everybody else's
houses to get to the $150,000, and then the amount on top that the bank
wanted.

We were successful. I will not bore the Senate with the details of
what happened, but we were successful. Madam President, 6\1/2\ years
later, when I stepped down as the CEO of that company, prior to my
decision to run for the Senate, we were doing $80 million a year.
The debt had grown from the original $75,000 to $7.5 million, but we
didn't care about the debt because we had more than enough money to
cover it. As a percentage of our sales, as a percentage of our profits,
the debt was now de minimis. I make that point because the argument has
been made on the floor today that the debt of the United States is
going to go from $6 trillion to $12 trillion and isn't that awful?
The answer is, yes; that is awful if the U.S. economy is not going to
grow. Then the debt is going to double. But if the U.S. economy is
going to double in size in the period that the debt doubles in size,
the debt will be no more of a problem in 10 years than it is now. And
now the debt as a percentage of the economy is lower in the United
States than it is in any other industrialized nation. The other
countries of the world would kill to get the kind of debt-to-GDP
relationship we have already. So I am not alarmed by the statistic that
has been quoted on the other side because I have lived with it
personally.
I have seen the debt of the company over which I presided go from
$75,000 to $7.5 million, and I recognize that the $7.5 million was a
benign figure whereas the $75,000 was threatening to shut us down
because the sales of the company had gone from $300,000 to $80 million.
The margins had gone from zero--at $300,000 we weren't making any
money--to 20 percent before taxes, so we had an aftertax margin of
about 10 percent. Twenty percent of $80 million is $16 million. We had
a $16 million pretax profit, which makes it very easy to service a $7.5
million debt. So let's not talk about the debt figures in the aggregate
and scare everybody with relationships that make no sense.
However, back to the point of the marginal tax rates. As we built
that business from $300,000 a year to $80 million, we did it during the
Decade of Greed when the top marginal tax rate was 28 percent. That
meant of every pretax dollar we earned, we got to keep 72 cents of it
to finance the growth of the business. We went from 4 full-time
employees to over 700 in that period. We created 700 new jobs, and we
did it without a dime of Federal money. Nobody walked out and said:
Here is your portion of the $1 billion we are going to use to purchase
47,000 jobs.
The way the Federal Government helped us was they said to us, for
every pretax dollar you earn, you get to keep

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72 cents. We funded the growth of that company, from 4 employees to 700
employees, out of the earnings of the company.
Just for a moment, look at what would happen if we had founded that
in 1994 instead of 1984. The Federal Government would have said to us,
in 1994: For every pretax dollar you earn, you get to keep 58 cents
because we are going to take 42 cents. The difference between 58 cents
and 72 cents would have made, for that company, the difference between
rapid growth and stagnation. I am not saying we couldn't have made it
under the effective tax rate of 1994, but I am saying, with great
certainty, that it would have been much more difficult and the growth,
even if it had come, would have been much slower. In other words, the
number of jobs created would have been substantially less with a
marginal tax rate of 42 percent than it was with a marginal tax rate of
28 percent.
In the spirit of full disclosure I should point out that once I left
the company, it then grew from 700 jobs to 4,000, and I have to say
there is a direct cause and effect relationship. Getting me out of
there made it grow substantially faster.
The point of focusing so firmly on a single firm and the experience
is this: We were an S corporation. That is a tax designation which
means that the profits of the company flowed through the company to the
personal tax returns of the investors. I would show at some point in
that situation a private tax return--a 1040--of over $1 million of
personal income.
You can say: Good Heavens, he is the richest man around. He is
earning $1 million a year. No. I was earning my salary, which was
$140,000. Then I was reporting my share of the company's income so that
the income didn't get taxed twice. If the company had paid taxes at the
company level, and then had given me my share of the income, the
company would have paid taxes and I would have paid taxes.
Does this sound familiar? That is what this debate is about with
respect to the taxation of dividends. We could have avoided taxation of
dividends because we had a small enough number of shareholders to
qualify as an S corporation as opposed to the C, referring to the
chapters in the Tax Code that describe all of this. But I was not
taking home $1 million a year. I was not taking home after tax $1
million a year. All the company gave me of the million dollars that the
company put on my personal tax return was 28 percent; in other words,
enough to pay the taxes that were being reported on my form. But the
company kept the other 72 cents to grow the business.
That was true of every other shareholder in the company. We had five
shareholders, every one of whom was reporting over $1 million a year in
personal income but who were in fact receiving only their salaries and
giving back to the company 72 cents out of every dollar they were
reportedly receiving. That is how we were able to grow the company.
That same pattern still exists even though it was badly damaged when
we went to a 42-percent marginal tax rate in 1993. There are still S
corporations and sole proprietorships and partnerships where the owners
of the company receive a tax form saying they have $1 million or
whatever their share of the profit of the enterprise might be, but they
give back everything except that which is necessary to pay the taxes.
That means there are small businessmen who have tax returns that very
quickly get into the top marginal rate. They are small businessmen who
are struggling, and increasingly small business women who are
struggling to make the business grow, only being able to keep 58 cents
out of every dollar they earn. They may report tax returns that put
them in the top 1 percent of taxpayers, but they are not Michael Jordan
or Donald Trump. They are doing their best to get along with a little
business that employs 5 or 6 people and the business is earning
$200,000 plus the salary they pay themselves. They need that $200,000
desperately back in the business to keep it growing. But Uncle Sam
comes along and says: The business may be earning $200,000--that shows
up on your personal tax return--we are going to take $84,000 of that
$200,000 in taxes. Good luck making the business grow.
If there are entrepreneurs good enough and working hard enough, they
can make the business grow, but they have to delay hiring that extra
person because they are paying $84,000 out of the $200,000 instead of
paying at the 28 percent that we paid when we were making our business
grow.
When we talk about, the rich don't need this tax cut, the rich don't
need to have their effective rate rolled back from 42 percent to, say,
35 percent, and Donald Trump doesn't need that, let's make him pay his
fair share, or Michael Jordan doesn't need that, let's make him pay his
fair share, we are ignoring the fact that it is the small businessman
and the small businesswoman hiring the extra employee, be it in Alaska,
Utah, or Colorado, or wherever it is, who will drive the opportunity
for new jobs to be created all over the country.

Most of the new job creation in this country comes from small
business. That is a truth that has been repeated over and over on this
floor. Everybody says they are in favor of small business. Everybody,
regardless of where they sit on the floor, says small business is the
backbone of the American economy. They are right.
One of the reasons other industrialized countries, such as Germany,
France, Japan, and others, have been unable to see their economies grow
at the rate ours does is that they have been unable to see their job
growth come anywhere close to the rate of ours because they don't have
small business. They don't have anything like the network of small
business and entrepreneurial activity that is the hallmark of the
American economy.
It is right and proper for us to come to the floor regardless of
party and tell everybody how much we love small business. But it is
deceptive to say that this is a tax cut for the Michael Jordans of the
world when we realize that the primary economic activity of rolling
back the top marginal rates will be for the small business men and
women of this country, if they could ever get back to the level of
effective tax rates during the decade of greed, who could create the
kind of jobs that were created in that period, could create the kind of
momentum that was created in that period.
Back to my company, it was founded in 1984. They say when I stepped
down as the CEO in 1991, we had gone from 4 employees to 700, and we
had created the momentum that produced that growth in that period where
the top marginal rate was 28 percent. That momentum carried forward
into the 1990s. That carried forward to the point where they eventually
got to 4,000 jobs instead of 700.
We hear in this Congress that some of us in this Congress took credit
for that. Some in this Congress looked at that and said: The Clinton
increase to an effective rate of 42 percent has created jobs. This
company went from 700 to 4,000; that was created by President Clinton;
that was created in the Clinton administration. I submit to you it was
created in the Decade of Greed. It was created when Ronald Reagan
helped the Congress get the effective rate down to 28 percent when we
laid the groundwork and sowed the seeds for the kind of explosive
growth for which the harvest took place in the 1990s.
I submit that by establishing a top marginal rate of 42 percent in
the 1990s, when that momentum of growth was going on coming out of the
1980s, we are now harvesting an opposite kind of situation. Small
business faced with an effective tax rate of 42 percent, where they can
only keep 58 cents out of every pretax dollar to help grow the
business, is growing more slowly than they were. Just as the excitement
of the 1990s was harvest of the low tax period of the 1980s, now some
of the problem in 2000-plus is the harvest of the high tax rates of the
1990s.
What we have to learn around here is that there is a lag in fiscal
policy. People ask me, What is the difference between fiscal policy and
monetary policy? Very simply, monetary policy is what the Federal
Reserve does about the monetary supply, and fiscal policy is what the
Congress does about taxes.
We can pass a tax bill and say, We handled this problem. But the
reality is what we have done in a tax bill either for good or ill is
sow some seed that will be harvested later on.
As we look back over what was done in 2001, we begin to understand
some of

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the things about the sowing of seeds. In 2001, we had a balanced tax
cut--balanced politically, not economically. The political balance
said: We have to put some money in people's hands immediately because
there are those who insist that is the thing that will cause the
economy to grow. So let's put money in customers' hands right away.
That was the genesis of the $300-per-person rebate.
Then there are those who said: No, we have to bring down the top
marginal tax rate, for all of the reasons I have been discussing. For
small business to create new jobs, for all those S corporations that
are reporting on their personal tax returns the corporate income that
is placed there, we have to see to it those people get back down into
the level where they can create jobs at the same energy and same rate
in which they were creating jobs in the late 1980s.
All right. What have we learned in the 3 years since we passed the
2001 tax cut? We learned that amount of money that went out in the
rebate had little or no impact on creating jobs. All of us took credit
for it. We stood out in front of the Capitol, we waved the $300 check,
and we had our pictures taken. We had people come up to us in airports
and shopping malls and say: Thank you, Senator. I got my $300. That is
terrific. But the economic impact of that, looking back on it, was
negligible. Why?
Didn't you want all those people to go out and spend that money? Yes.
And a very large percentage of them did not. What do you mean? Did they
put it in their mattress? No. They paid down their Visa card. They paid
down their MasterCard. They lowered their own personal amount of debt,
which was a prudent thing for them to do. But that did not produce very
much economic activity.
Also, if you take the total amount of money involved in that rebate,
and then compare it to an economy of $11 trillion, you realize we were
talking about a tiny percentage. There was no leverage in that amount
of money. And while it was a good thing to do, and it helped a lot of
people--and I am glad they got their credit card debt down by an extra
$300--it did not produce any jobs. And that is what we are talking
about.
However, simply the promise that the top marginal tax rate would come
down did, in fact, cause some small businesspeople to say: All right,
the effect is not immediate, the relief is not here right now, but I
can see it coming, and I can plan on it.
The most important quality a small business man or woman has to have
in order to succeed in business is the ability to somehow, some way
correctly see the future because every business enterprise is involved
in selling in the future. No business enterprise survives on the basis
of what it did in the past. It is all tied to what it can see in the
future.
So as these small business men and women looked out into the future,
they said: This 42-percent effective rate that came in with President
Clinton is going to start to come down. And as I make my plans for what
I will do, as I try to invest and I try to create jobs in the future, I
can plan on that coming down. And the mere anticipation and sense of
certainty that came out of being able to plan for a reduction in the
amount of money that Uncle Sam would take out of their businesses
caused some beginning stirrings in the small business community toward
the creation of new jobs. But those stirrings were not enough.

We are in recovery, but the recovery is far from robust. Chairman
Greenspan calls it a ``soft patch.'' And the soft patch, unfortunately,
has gone on longer than he or any of the rest of us would like.
So how do we get out of this soft patch? The most important thing we
could do is say to these small business men and women: Guess what. You
were planning on this reduction in the amount of money Uncle Sam takes
out of your entrepreneurial activity in a few years. We are going to
make that reduction effective right now. As a matter of fact, we are
going to make it effective January 1, 2003.
All right. Now, as I make my plans as a small businessman, I can say:
I am going to be able to keep more than 58 cents. I will be able to
keep 60 cents, 62 cents, maybe even 65 cents. Now I can plan on having
that much more money coming out of my enterprise. I can go hire that
extra person. I can go buy that extra piece of machinery, which means
that the manufacturer of the machinery can hire an extra person. Now
that I see that marginal rate coming down, and coming down more rapidly
than was promised in 2001, I can react accordingly. And now we can
start to see the small business job machine get cranked up.
We all need to understand this about economics: Economics turns on
incentives. No one will invest in an enterprise where the Government
would take 100 percent of the profits because there is no incentive.
You say, all right, the Government will take only 99 percent of the
profits, and there is still no incentive. So the Government says, all
right, we will take 80 percent of the profits. Well, maybe you begin to
get my interest now. The Government will only take 50 percent of the
profits. All right, now there is an incentive for me to invest.
In the 1980s, the Government said to small business, we will only
take 28 percent of the profits, and you saw a period of job growth, job
creation, and economic expansion unparalleled in our history. And,
based on my own experience, I believe it was an impetus and an inertia
of job creation that carried over into the 1990s, for which the
Congresses and the President in the 1990s took credit.
But the inertia, as I say, has changed because the incentive got a
little less in 1991 when President Bush went to Andrews Air Force Base
and said: Let's tell the small business man and woman we are going to
take more of their pretax money away from them. And there was a sense:
Well, we better not buy that new piece of machinery. We better not hire
that new person. We are going to have a problem.
And then President Clinton said: Let's tell the small business man
and woman we are going to take even more in 1993, and bring the top
marginal tax rate up to the level that I have described.
You sow the seeds of incentive, you reap the fruits. If the incentive
is to invest, if the incentive is to hire, if the incentive is to take
risk, you get the benefits of higher economic activity and higher job
creation. If you sow the seeds of negative incentive that says the
Federal Government will take more of your money than it has been, you
reap the rewards of higher unemployment and slower economic activity.
It always takes time. It never happens, in fiscal policy, overnight.
But I submit we are now in a position where we need to move clearly and
firmly back toward the time when the incentive was to invest, when the
incentive was to take risk, when the incentive was to build a small
business.
I think it disingenuous, therefore, to attack all of the reduction in
the marginal tax rate as if every single tax return that shows income
being taxed at the top marginal tax rate is coming from a Michael
Jordan or a Bill Gates or a Donald Trump.
It ignores the fact that the majority--I don't have the exact
statistic; I have heard it as high as two-thirds, but it varies from
time to time--of the tax returns filed in the top marginal tax rate are
tax returns with small business income on them, tax returns such as the
one I described for myself when I had my salary on there and then I had
an extra million dollars as my share of the company's profits
transferred on to my tax return, none of which money I saw, none of
which money I got because all of which had to go back to the company to
help it grow and help it create jobs.
Let us understand that this is not a debate about whether Bill Gates
should get a tax cut. This is a debate about whether small businessmen
and small businesswomen all across this country should get an incentive
to hire, an incentive to invest, an incentive to build for the future,
whether to plant seeds of growth which will yield a significant harvest
for us later on. I believe the sooner we can plant those seeds, the
better off we will be.
I believe the lesson of the tax cut of 2001 tells us that what we did
there, however salutory, was not good enough and not strong enough,
that it has not gotten us through the soft patch that it was supposed
to help with, and we need to get on with this.
For that reason, I will support a cut in the top marginal tax rate,
and I will

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rejoice in the years to come as new jobs are created, new economic
activity occurs, and, yes, new tax revenues start to roll in to the
Federal Government. At that time whoever is in the Senate will take
credit for those tax revenues, whoever is in the Senate will take
credit for the good economy that we have. And whoever is managing
Presidential campaigns will say it was President this or President that
who was personally responsible for it.
We should understand that the economy is much more sophisticated than
that. We should do what we can to let the economy do its work by
creating the incentives that will produce the two things that produce
jobs: risk taking and accumulated capital. This bill moves in the
direction of rewarding both.
I yield the floor.
The PRESIDING OFFICER (Mr. Hagel). The Senator from Nevada.
Mr. REID. Mr. President, I have the deepest affection for my friend
from Utah. He lives in a different political world than I do. He just
did a stunning job in his debate, but he was debating himself. The
matter pending before the Senate is whether we should have tax cuts for
the elite--that is, dividend tax cuts--or whether those moneys should
be kept for Social Security. That seems pretty simple to me.
I did mention, and the Senator from Utah responded briefly, that my
proposal to have public works projects is not in keeping with his idea
of how to create jobs. The only way to create jobs, he said, is through
entrepreneurship.
Well, Frainer Construction of Nevada, Helms Construction of Nevada,
Granite Construction, Las Vegas Paving--large by Nevada standards--are
companies that believe in entrepreneurship. Every road they build,
every water project they work on, every bridge they repair is
entrepreneurship. What is the difference in these huge tax cuts that go
to the elite, that create no jobs, as I will shortly show? If past
experience means anything, I think we are better off directly doing
something.
My friend from Utah has acknowledged that there is not going to be
anything happening in the near future. He is talking about future
Presidents taking credit, future Congresses. He has acknowledged that
nothing is going to happen in the near term with this foolish tax cut
that has been proposed.
All this talk about growth and jobs, as this bill is intended to do,
simply will not work. I direct my friend to a few people on this chart.
These are the economists who support the Bush tax plan. You can see
them on the left hand side, few in number. The economists opposing the
Bush tax plan are 450 in number. Those who support the plan are 13 in
number. Those opposing are 10 people who have won Nobel Prizes for
their work. We have, in fact, professors from the University of Utah,
Gail Blattenberger, Samuel Jameson, David Kiefer, Thomas Maloney, James
M. Rock, Norman Waitzman, all distinguished scholars from Utah who are
on this chart who say this tax plan the President has proposed is not
good.
The question before the body--the vote will take place at 2--is
whether this body will vote to have a tax cut for the elite as it
relates to dividends or whether Senators will vote to protect Social
Security. The Social Security debate has left this body since
Republicans became the party that dwells in the White House. We used to
talk about a lockbox. Not only the key has been lost but the whole
lockbox has been thrown someplace we can't find. Social Security is not
part of the equation anymore. Suddenly deficits don't matter.
I say to my distinguished friend who was a courageous soldier for the
United States, somebody who was valiant in battle and who I have the
greatest respect for as a legislator, I want to bring to his attention
some of the problems that exist with this new philosophy that deficits
don't matter.
I refer the distinguished Presiding Officer to a statement he made on
the 6th of February 1997, in the Omaha World Herald:

The real threat to Social Security is the national debt. If
we don't act to balance the budget and stop adding to the
debt, then we are truly placing the future of Social Security
in jeopardy.

I ask my friend, when he comes down to this table in 40 minutes and
votes, to remember what he said in 1997. This is clearly an indication
that we are driving this country into a terribly difficult situation as
it relates to the deficit.
Deficits don't matter? I hope they do. But apparently there has been
a new philosophy from the other side of the aisle.
We are going to be asked in a few days to increase the national debt
by almost $1 trillion. I hope people will be more concerned about the
debt. I agree with the statement made by the Senator from Nebraska.
I believed the chairman of the Federal Reserve System when he told us
in the Appropriations Committee that the most important thing we could
do is get rid of the deficit. We did that. We took him at his word. As
a result of that, we had years where we paid down the debt to the tune
of $600 billion.
When the Bush administration took office, they promised to eliminate
the national debt and spur the economy with a massive tax cut for the
elite. I didn't vote for that tax cut because I thought it would do
exactly what it has done. I have been through the years in the past
when we were told that the trickle down theory was a great one and
would help the country economically. It didn't then, and it didn't
during the Bush 2 program. This plan has failed the vast majority of
people in America who are worse off than 2 years ago when this man took
office.
Since this administration took office, the economy has lost almost 3
million private sector jobs. The economy has shed 500,000 jobs in the
past 3 months alone. About 9 million people are looking for work. The
unemployment rate is 6 percent. The number of unemployed workers has
increased 47 percent since the President took office. A growing share
of the unemployed workers are long-term unemployed. In February, nearly
2 million people had been unemployed for 6 months, which is triple what
it was before this man became President. The Bush administration is on
track to post the worst job creation record of any administration in
almost six decades. This tax cut raids Social Security, and that is
what this amendment is all about.
I have been here long enough to know that the majority are not very
independent. I believe--and I hope my belief is unfounded--that come 2
o'clock people will march down here and vote against this amendment.
They will vote that it is not germane. It takes 60 votes. We know the
rules of germaneness. They will march down here just like lemmings over
the cliff and throw Social Security to the wind, I am sorry to say, but
I think that is what is going to happen.
Even without the new tax break for the elite, this Government will
spend every dollar of the $2 trillion Social Security surplus over the
next 10 years--even without this. So with this, it will be done more
quickly.
The real reason for the deficit is the tax cut--the tax cut
previously made, which I voted against. It is not easy to vote against
tax cuts. People love them. It will be used against me in my campaign.
That is the way it is.
The Congressional Budget Office says that only 14 percent of the
deficit is as a result of homeland security and defense spending. Over
10 years, Federal spending on interest on the public debt will amount
to $2.4 trillion. Of course, every dollar directed toward interest is
diverted from Social Security. It is diverted from Medicare, education,
defense, and homeland security.
The additional interest burden on a family of four will be $30,000.
That is the additional burden. State and local governments are in the
midst of the worst fiscal crisis since World War II. Last month, the
cumulative 2004 budget shortfall was about $54 billion. A billion of
that is in the small State of Nevada. State and local governments,
which bear primary responsibility for most education, health care, and
first responder expenditures, will bear the brunt of the consequences
of this irresponsible tax plan.
The second phase gets even worse. Sixteen States have cut education
programs in elementary schools. In Nevada, the Clark County School
District is considering going to a 4-day week for kids because it is
having trouble paying for a 5-day week. Twenty States have cut health
care programs, even though we are living in a heightened risk of
bioterrorism and SARS. It makes no sense to just chop to pieces

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our State public health budgets. But that is a consequence of what is
happening in this administration.
What is wrong with this plan we are being asked to approve? It fails
to help working people, for one thing. Our top priority is to create
jobs. I will say it again, Mr. President--creating jobs. The moneys
that would be given in these public works projects, which are not new
jobs--I bet in the States of Utah and Nebraska there are many projects
on the drawing board that simply cannot be completed because there is
no money to do it--roads, water and sewer projects, bridges, dams, all
those activities. They are on the drawing boards now and would go
forward tomorrow if there were money to do it.
As I indicated before, for every billion dollars spent, 40,000 jobs
are created. Those are direct jobs, all high-paying jobs. These people
would buy refrigerators, carpets, cars, all kinds of consumer items.
There are a lot of indirect jobs as a result. The Republican plan fails
to help working people. It fails to preserve Social Security. It offers
no relief to the 9 million Americans who want to work but cannot find a
job.
People on the other side refer to this as a ``jobs and growth
package.'' As I said earlier today, you can call a pig a horse, but it
doesn't matter how many times you call a pig a horse, it is still a
pig. Or you can call a horse a pig; it doesn't matter; that animal is
still a horse. You can call this program jobs and growth all you want,
but it doesn't make it a jobs and growth program. Calling this a jobs
and growth program--there could not be anything further from the truth.
The CBO, the White House Counsel of Economic Advisers, and the
private sector economists who helped the President analyze this
proposal have stated that his tax break plan won't create jobs and will
weaken the long-term health of this country. In fact, some economists
have forecast that the plan will cause an annual .25 percent drop in
GDP and will result in a loss of almost a million jobs in the next 10
years. That is in addition to the jobs that have already been lost.
There are the 400 economists there on the chart. And I am sure there
would be more if we spent a little extra time. So 400 economists,
including 10 Nobel laureate prizewinners, signed a statement warning
that the President's plan would do long-term harm to the economy,
adding to the Nation's projected deficits.
Mr. President, you were not standing there alone saying deficits
matter. Some of your colleagues also felt the same. A number of very
distinguished colleagues felt the same. For example, somebody for whom
I have the greatest respect, Trent Lott--we worked together on the
floor very closely for 4 years--said on the 27th day of January, 2002:

I think the most important thing really does involve the
budget--keeping a balanced budget, not dipping into Social
Security, and continuing to reduce the national debt.

He gave that quote to the Chattanooga Free Press. What has changed?
Nothing has changed in a little over a year. Senator Judd Gregg--here
is a man who has wide-ranging experience. He served in the House of
Representatives, he was a Governor, and now he is a Senator. He said to
the New Hampshire Sun News on the first day of February 1998:

As long as we have a Republican Congress, we are going to
have a balanced budget. And if we can get a Republican
President, we can start paying down the debt on the Federal
Government.

What has happened to that? Do deficits not matter anymore? Obviously,
they don't. We are going to be asked to increase the national debt a
trillion dollars in a few days.
Mr. DURBIN. Will the Senator yield for a question?
Mr. REID. I am happy to yield to the Senator from Illinois for a
question.
Mr. DURBIN. I ask the Senator from Nevada, it is not just a question
of the national debt--which is bad enough--that has to be repaid, and
interest has to be paid on it, not just by us but by our children and
grandchildren, but is it not a fact that the money we are putting into
the President's program for tax breaks for elite investors in America
is coming out of the Social Security trust fund, out of the Medicare
trust fund? These are trust funds that are going to struggle with more
and more elderly Americans needing their help, and we are going to give
a tax break to wealthy people at the expense of Social Security and
Medicare. Is that not a part of the problem as well?

Mr. REID. Mr. President, I say to my friend in answer to his
question, the Senator is absolutely right. What is happening boggles my
mind. I am certainly not a genius, but I did OK in school, and I can
understand some basic facts. How can people, for whom I have the
highest respect, say one thing about deficits mattering and Social
Security mattering and vote for this awful program?
I say to my friend, the distinguished Senator from Illinois, what I
said earlier today. I believe this is all part of a program to do away
with some of these programs in which we really believe. I repeated in
different words what the Senator said today in responding to a
statement made by the distinguished chairman of the Finance Committee.
I said the same thing to the distinguished junior Senator from Utah.
They live in a different world than I live in. It is as simple as that.
They live in a different world. They care about the trickle down
theory. I do not. I do not think it has worked. Over the years I have
seen it trying to work where you give money to the elite of this
country. It does not trickle down.
We have significant problems in the State of Nevada. We are battling
budget problems in the little State of Nevada, and the Republican
Governor in the State of Nevada--I am sure it was very difficult for
him--because there is no alternative because of the unfunded mandates
the Federal Government passed on to the State of Nevada, is trying to
find ways to create new revenues. I say the word, the Republican
Governor of the State of Nevada has asked for new taxes.
Mr. DURBIN. Mr. President, if I may ask the Senator from Nevada, if
the argument has been made by the Republicans that if we give the
President another tax cut for elite investors and wealthy people that
this will somehow create jobs, is it not fair for us to look back and
see how successful the President was the last time he made this
promise?
If I recall correctly, we gave this President a $1 trillion--some say
$2 trillion--tax cut just 2 years ago. If I am not mistaken, we have
lost jobs. Under this Bush administration, we have lost somewhere in
the range of 2 million jobs. In my State of Illinois, under the Bush
administration, we have lost 191,000 jobs, 20,000 manufacturing jobs in
the last 12 months.
If the President's plan of tax cuts for wealthy people is exactly the
medicine to cure our problems, how do we explain the fact that the
economy is still so sick 2 years after the President tried this tax cut
the first time?
Mr. REID. I respond to my friend, I voted against the first tax cut.
It was not an easy vote. Just on general principle you want to vote for
tax cuts. I believe the payroll taxes are something most people pay
much more than they do in income taxes. I would like to figure out some
way to give them a break from payroll taxes. I think there are ways we
can reduce taxes.
At first glance, you do not want to vote against a tax cut, but I had
an inkling, I had a belief, I had a conviction that doing what was done
with the first big tax cut would throw this country into an economic
downturn, and that is what it has done.
When the Bush administration took office, they promised to eliminate
the national debt and spur the economy with a massive tax cut for the
wealthy. They failed to deliver. Most people are not better off; they
are worse off than they were 2 years ago, I say to my friend.

Mr. BENNETT. Will the Senator yield for a question?
Mr. REID. I will be happy to yield for a question from my friend from
Utah without losing my right to the floor.
Mr. BENNETT. I ask the Senator, if he is interested, if I gave him
the names of another 400 economists who were in favor of the Bush tax
cut if he would put them on his chart? Such names are available.
Mr. REID. I respond to my friend from Utah, I borrowed this chart
from somebody else. I am not much on this chart business, but I know
that if there are that many who favor the tax cut, you should do your
own chart.

[[Page S6172]]

Mr. BENNETT. I further ask, Mr. President, a question of the Senator
from Nevada.
Mr. REID. I yield for a question. I will do that.
Mr. BENNETT. Reference has been made by the Senator from Illinois to
the effect of a $2 trillion tax cut. Is it not true that what we are
asking for in this bill is that the effect of that tax cut be made now
because the effects of that tax cut, as you get up to the number of $2
trillion, was stretched out over a number of years and, in fact, the
marginal tax rate cut that has actually occurred now, to which the
Senator from Illinois referred, has been minimal and we are trying to
accelerate the effect?
It does not seem to me fair to say it failed and, by the way, we have
not had any effect from it. The reason we have not had the effect is
because they have not been put into effect.
Mr. REID. I will be happy to respond to the question. First, it seems
a little unusual to me, the huge tax cuts written by the Republicans
and passed virtually by Republican votes, with very few Democratic
votes, now they are saying the tax cut was not big enough and not quick
enough. So now what we are going to do is come back with a bigger tax
cut and I guess they say it is not quick enough.
The majority has written both tax bills. I voted against the first
tax cut, and I will vote against the second tax cut because I believe
the tax cut certainly is not going to help Social Security. Remember,
the issue before the Senate today, and we are going to vote on it at 2
o'clock, is whether this body should give tax cuts to the elite of this
country in the form of reducing the tax on corporate dividends or
whether that money should be put back in Social Security. That is the
issue before the Senate. It is a very simple issue.
I have talked about what I think is wrong with the plan in general.
Remember, my statement has been directed toward what I feel is a very
pertinent question: Does this body, the Senate, want to preserve Social
Security or destroy Social Security? The vote at 2 o'clock will take
that into consideration.
I believe when we had discussions on the Senate floor dealing with
lockboxes and keys to lockboxes that it was a good discussion because I
felt very strongly that we should do something to preserve Social
Security.
It is interesting to me that there was a constitutional amendment
offered on the Senate floor to balance the budget. It was offered by
Republicans. I offered a counter amendment. I said that is a great
idea, let's do it, but we are going to do it without using the Social
Security surpluses. That was not enough for my friends on the
other side of the aisle. My amendment received 44 votes. I was six
votes short. I wanted a constitutional amendment to balance the budget
but not use the surpluses of Social Security. The majority disagreed.
They wanted to use Social Security surpluses to balance the budget.
That is unfair. I have no regret having done that.

Mr. DURBIN. Will the Senator yield?
Mr. REID. I yield to my friend for a question.
Mr. DURBIN. I would like to speak for a moment to this. Is it not a
fact that we are only a few years away from the baby boom generation
showing up for Social Security? Isn't it the height of irresponsibility
for us to be dragging this Nation deeper in deficit at the expense of
the Social Security trust fund when we know that parents and
grandparents are going to be asking for the Social Security benefits
which they paid for a lifetime? Isn't the same true when it comes to
Medicare, that these same senior citizens will need Medicare to make
sure they are healthy, independent, and lead strong lives as long as
possible, and what we are doing is jeopardizing Social Security and
Medicare to provide tax breaks for the elite investors in America?
How in the world can you rationalize that once we have a promise to a
generation that has paid for over 40 years into Social Security? I
wonder if the Senator from Nevada can remember when President George W.
Bush came to us with his first tax cut, he said: This should be easy.
We are going to have a surplus over the next 10 years of $5.6 trillion.
For goodness' sake, you do not need the money in Washington to waste on
programs. Send it back home to the families so they do not have to pay
taxes.
A lot of people were enthralled by this message. I was not. Neither
was the Senator from Nevada. Today, is it not a fact, I ask the Senator
from Nevada, that same projection over 10 years has gone from the
President's $5.6 trillion surplus to a $1.8 trillion deficit and that
this bill will make the deficit even worse over the next 10 years?
Mr. REID. The Senator is absolutely right. The baby boom generation
is upon us.
Our senior population will nearly double from 44 million to 77
million in just 6 years. That is what it is all about. I am just
stunned by--I believe in intellectual consistency, and I try to be
consistent on what I do in my legislative voting on the Senate floor. I
try to remember statements I have made, so I do not want to be
inconsistent, to say something today that is inconsistent with
something I said previously.
What has happened to our friends on the other side of the aisle who
cared so much about deficits and balancing the budget, who offered a
constitutional amendment on the Senate floor to balance the budget? Of
course, they wanted to use Social Security surpluses, but still they
were concerned about balancing the budget.
Senator Rick Santorum, the junior Senator from Pennsylvania, who is
one of the leaders on the other side of the aisle, is quoted in the
Pittsburgh Post Gazette:

The American people are sick and tired of excuses for
inaction to balance the budget. The public wants us to stay
the course towards a balanced budget, and we take that
obligation quite seriously.

Take it quite seriously, when we are going to be asked to increase
the national debt in a few days by a trillion dollars--by a trillion
dollars; not a billion, not a million but a trillion? Where are all of
these statements? What happened to them? What happened to the
consistency? Why all of a sudden do deficits not matter, the national
debt does not matter, Social Security does not matter, Medicare does
not matter, education does not matter, just give tax cuts to the elite
and it will all be fine?
It is going to take care of all the environmental problems we have in
America today. We do not have to worry about Superfund, endangered
species, clean air, clean water. Just cut taxes. That takes care of it
all.
Mr. DURBIN. I ask the Senator from Nevada, if we have now reached a
point in our history where deficits do not count, can you not also
conclude from that statement that it does not count that our children
and grandchildren will have to pay off that debt; that it does not
count that the money coming out of Social Security is going to be at
the expense of our parents and grandparents--and some of us will be
knocking on those doors in just a few years? If deficits do not count,
then, frankly, we are counting out millions of Americans who count on
us to be financially responsible, fiscally responsible.
This bill is fiscally irresponsible. It was irresponsible 2 years
ago. It devastated the economy. It added to our deficit. It has created
more problems economically than this country has seen in many years.
I ask the Senator from Nevada this: Do we have a Democratic
alternative we are going to offer on the floor of the Senate that is
smaller in scope but more focused on the issues we are hearing about,
for example, that addresses the costs of health insurance for
businesses? Has the Senator met any business leader in America today
who has not told him that the cost of health insurance is breaking the
bank?
I say to the Senator from Nevada, if we are going to have a tax cut
to invigorate the economy, tell us what the Democratic alternative
would do and the scope of it and whether or not it reaches the level
suggested by the Republicans.
Mr. REID. The Senator from Illinois has raised a question, and I am
sure the people watching this have the same question, which is: Okay,
you do not like the Republican plan. What is your idea?

Well, we do have an idea. It costs much less money and has a direct
impact. We would want a new wage credit, which would provide $300 for
each adult in a family; $300 for the first two

[[Page S6173]]

children. We want to accelerate the child tax credit to $800 from the
current $600. It eliminates the marriage tax penalty. It provides
marriage penalty relief for recipients of the earned-income tax credit,
which by the way, Ronald Reagan said was the most important tax policy
this country has ever had, the earned-income tax rate. What is that? It
creates a desire for people to work rather than try to go on, say,
welfare, because they can actually make money by working with their
hands.
Ronald Reagan loved this program, the earned-income tax credit, and
we want to make it even more important.
We want to have a 50-percent tax credit to help small businesses pay
for health insurance premiums. These estimates are not exact, but there
are from 21 million to 25 million Americans with no health insurance.
There are millions more who are underinsured. Now, this is not going to
answer all the problems, but it sure is a step in the right direction.
It will help small businesses pay for health insurance premiums.
Mr. DURBIN. Just so it is clear, I ask the Senator if the Democratic
plan provides a tax credit for small businesses to pay for health
insurance? The Republican plan provides no benefit for the health
insurance cost to small business. That is as clear as can be. Has the
Senator from Nevada found in that Republican approach any help for
small businesses to pay for health insurance?
Mr. REID. As I mentioned, the answer to all of the problems--
environmental problems, better schools, homeland security--is cut taxes
for the elite of this country. That will handle everything. I am sure
that is their reasoning for this no-tax policy on health insurance.
In answer to the Senator's question, we would allow small business
expensing that I think is very important. That is in the Republican
plan. I think it is important we have that in ours. We want a bonus
deduction for businesses on depreciation rules. We want a 20-percent
tax credit for businesses that invest in the broadband high-speed
Internet infrastructure. We want $40 billion direct relief to States
and local governments. It is so important we do that.
As I mentioned to the Senator earlier in responding to one of the
questions, the State of Nevada is devastated because of unfunded
mandates. Leave No Child Behind, as I said, according to the State
legislature, is leaving lots of kids behind because they have no money
to implement all the testing requirements and things that our school
districts are being forced to do. They do not have the money to do it.
Homeland security, we have all kinds of burdens upon us as a result
of 9/11, and I think we should be helping with that.
With our tax plan, which we are going to have a chance to vote on and
which I think is going to be offered by the Senator from Louisiana, we
are going to have an opportunity to do something about unemployment
benefits. Our plan calls for unemployment benefits. I think that is
extremely important.
Our plan is so much better. It creates over a million jobs right
away. It is a program that has something the working men and women in
this country will benefit from. We had a meeting with one of the most
successful businesspeople in the country, Warren Buffett, a man who is
a study in how entrepreneurship should work. We have heard a lot about
entrepreneurs in speeches on the other side.

He is what the free market system is all about. When asked a direct
question about what he thinks of the Bush tax cut plan, after he wiped
the smile off his face, he said: You know, if this tax cut plan passes,
next year I will receive--and this figure might not be exact but real
close--an extra $390 million for me, Warren Buffett.
He said: I do not need that. I do not want that. It is not going to
create jobs. What we should do, if there is $390 million to go around,
is give 390,000 people a thousand dollars.
He said: They will spend that. That will help the economy.
That is the difference between our plan and their plan. The Warren
Buffett understanding of what our economy is all about is about people
spending money.
Mr. DURBIN. I ask the Senator from Nevada, does this not reflect the
basic difference in outlook and vision from the Republican side of the
aisle to the Democratic side of the aisle, that Warren Buffett--who
happens to be the second wealthiest man in America and happens to be a
Democrat, by his own professed political faith--understands that
helping elite investors in America is not the key to a strong economy,
yet that is what the Republicans return to time and time again?
We believe, as Warren Buffett believes, if we want to strengthen
America's economy, have faith in America's working families, give them
the helping hand they need to cope with the reality of life, the
demands of life, and provide a helping hand to the unemployed who,
through no fault of their own, are out of work. There are three times
as many long-term unemployed in America today--that is, those out of
work for over 6 months--than when President George W. Bush took office.
His economic plan has failed, and what we are hearing again is this
vision that the way to help the unemployed, the way to help the working
families is to give to Warren Buffett a $390 million tax break. It is a
wide chasm of thought between the two sides of the aisle.
I would argue, for those who want to make up their mind, take a look
at what happened to the President's last tax cut. It did not work. It
provided some assistance for the wealthy, but it did not create jobs.
It did not revive the economy. And this time the President says we need
to rerun that play, we need to try it again and again at the expense of
Social Security and Medicare.

I ask the Senator from Nevada, as we listen to people such as Warren
Buffett talk about this issue, how would the Senator respond to our
Republican critics who say: There you go again, class warfare; that is
all you Democrats want to do, set the wealthy off against the people
who are not so wealthy?
I ask the Senator from Nevada, in this coalition of the willing that
we would put together in this class warfare, wouldn't we include an
awful lot of people today who are struggling to make ends meet, a lot
of seniors who face cuts in Social Security for their own benefits, a
lot of people who do not have health insurance because their businesses
cannot afford it? I suggest the coalition on our side of class warfare
is a pretty broad one across America. I ask the Senator to respond.
Mr. REID. I say to my friend, in parroting something the Senator said
earlier today, those people on the other side of the aisle who are
pushing this tax plan are not evil people; they are not bad people.
They are good people. They just live in a different political world.
They live in a world where they are willing to change their political
philosophy according to who is in the White House. People who used to
say that deficits matter now say they do not matter. People who said we
had to balance the budget no longer say we have to balance the budget.
They simply are not willing to approach the world the way I think the
world needs to be approached.
I think I am right. I believe I am right. Everyone is entitled to
their opinion. I have a little substantiation. I have 10 Nobel
laureates who believe I am right, that this tax cut is not good; it
will not help the economy. However, no one has to accept these Nobel
laureates. Ask the Congressional Budget Office. They, the Republicans,
picked who runs that, we did not, and the Congressional Budget Office
says it will not help anything.
I say to my friend from Illinois, this vote we will take in a few
minutes is an example of the difference in philosophy between what is
going on with the majority and we, the Democrats. What we are saying is
the dividend tax cuts for the elite of this world should not go
forward. That money should be saved for Social Security. That money
that will go to elite people is coming out of the Social Security trust
fund.
If there was ever an example of how we should vote for constituents,
it is now. Do you vote for people who want to maintain the strong
Social Security Program or do you vote for the people who are going to
give big tax cuts to Warren Buffett? There is a simple answer to the
question.

[[Page S6174]]

Remember the vote today at 2 p.m.: Dividend tax cuts or saving Social
Security. It is as simple as that. We recognize that anyone can puff it
any way they want; anyone can slam it any way they want. That is what
the vote is about. The first vote we will take on this tax cut bill is
whether you are going to vote for Social Security or the wealthy of
this country. It is as simple as that.
The PRESIDING OFFICER. The Senator from Wyoming.
Mr. THOMAS. I understand we will vote in 5 minutes.
The PRESIDING OFFICER. That is correct.
Mr. THOMAS. Mr. President, this has been an interesting dialog and
certainly does show a different point of view on that side of the aisle
as opposed to this side of the aisle.
The Senator from Nevada summed it up pretty well when he said it is
all about spending. That is exactly what it is. The question is whether
you are trying to do something to stimulate the creation of jobs or
whether you want to throw money out and spend it, such as $40 billion.
What we are talking about is doing something about the economy. It
seems as we go through this, we do not ever recognize the situation we
are in. One of the reasons we have a problem is that sources of revenue
have been reduced substantially because the economy has weakened. They
do not talk about that. That is why we are doing some of the things
that are different than we may have done before. Revenues registered in
2000 were over $2 trillion, and they fell to the low $2 trillions; and
in 2002 we are $1.8 trillion because the economy is not working. What
we are trying to do is to stimulate that economy, of course.
There is talk about doing everything for Warren Buffett. That talk is
not true, and it has nothing to do with what we are seeking to do. Do
you think acceleration of the 10 percent regular income tax rate is
good for Warren Buffett? I don't think so.
What we are talking about is raising the amount of money that is tax
free for people in the bottom line. We are talking about the
acceleration of the regular income tax cuts that were put into place to
make it happen more quickly.
What we are trying to do is stimulate the economy. Do you think
acceleration of the marriage penalty tax is for Warren Buffett? I don't
believe so. It is for everyone. On the question of fairness in taxation
for people who are single or married, Warren Buffett has nothing to do
with it.
Acceleration of child tax credit that is Warren Buffett? I don't
believe so.
How about small business expensing? This is one of the most important
things we can possibly do with regard to the economy. It has nothing to
do with Warren Buffett.
What we really have is a real declaration of difference in what we
are seeking to do. We are seeking to recognize the situation we are in,
recognize that part of the reason for reduced income is the economy,
and that instead of spending, we are seeking to create jobs.
It is time for a vote.
On this bill, Mr. President, this language is not germane to the
legislation now before the Senate. Therefore, I raise a point of order
under section 305(b)2) of the Congressional Budget Act, 1974.
The PRESIDING OFFICER. The point of order is in order at this time.
Mr. REID. Pursuant to section 904 of the Congressional Budget Act, I
move to waive the section of the Budget Act for the pending amendment,
and I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the motion. The yeas and nays have
been ordered. The clerk will call the roll.
The bill clerk called the roll.
Mr. REID. I announce that the Senator from North Carolina (Mr.
Edwards), the Senator from Massachusetts (Mr. Kerry) and the Senator
from Maryland (Mr. Sarbanes) are necessarily absent.
I further announce that, if present and voting, the Senator from
Massachusetts (Mr. Kerry) would vote ``Aye''.
The PRESIDING OFFICER (Mrs. Dole). Are there any other Senators in
the Chamber desiring to vote?
The yeas and nays resulted--yeas 44, nays 53, as follows:

[Rollcall Vote No. 147 Leg.]

YEAS--44

Akaka
Bayh
Biden
Bingaman
Boxer
Byrd
Cantwell
Carper
Chafee
Clinton
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Feingold
Feinstein
Graham (FL)
Harkin
Hollings
Inouye
Jeffords
Johnson
Kennedy
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Nelson (NE)
Pryor
Reed
Reid
Rockefeller
Schumer
Stabenow
Wyden

NAYS--53

Alexander
Allard
Allen
Baucus
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chambliss
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
DeWine
Dole
Domenici
Ensign
Enzi
Fitzgerald
Frist
Graham (SC)
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Kyl
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Nickles
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Specter
Stevens
Sununu
Talent
Thomas
Voinovich
Warner

NOT VOTING--3

Edwards
Kerry
Sarbanes
The PRESIDING OFFICER. On this vote, the yeas are 44, the nays are
53. Three-fifths of the Senators duly chosen and sworn not having voted
in the affirmative, the motion is rejected. The point of order is
sustained, and the amendment falls.
Mr. GRASSLEY. I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. BREAUX addressed the Chair.
The PRESIDING OFFICER. Who yields time on the pending amendment?
The Senator from Montana.
Mr. BAUCUS. Madam President, I yield whatever time the Senator from
Louisiana would desire to have.
The PRESIDING OFFICER. The Senator from Louisiana.
Mr. BREAUX. Madam President, I ask the Chair to notify me if I go for
10 minutes. I do not want to go more than that.
The PRESIDING OFFICER. Is the Senator yielding time from the bill?
The Senator from Montana.
Mr. BAUCUS. Yes.
The PRESIDING OFFICER. The Senator from Louisiana.
Mr. BREAUX. I thank the Chair and I thank my distinguished ranking
member, the Senator from Montana, for yielding me this time.
My colleagues, let me just say that the bill the Finance Committee
has brought to the floor is a tax cut piece of legislation which also
raises significant amounts of taxes on American citizens. Tax cuts are
a wonderful thing to do, for those of us who are elected officials. It
is great to say we have cut taxes by x billions of dollars, to send out
a press release to our constituents back home saying we cut taxes by x
billions of dollars.
It is also important to read the fine print. The fine print in this
legislation tells the rest of the story. And the rest of the story is
that, among other provisions in the bill, there is a provision that
increases taxes by $35 billion on American citizens.
Tax cuts have to be done in one of two ways. You can cut taxes by
increasing the size of the deficit and passing it on to the next
generation. This bill does that. We have the largest deficit
projections we have ever had in the history of our country. And now we
are saying, on top of that, we want to make it larger. We are going to
have a tax cut in order to make the deficit larger in the hopes that it
may generate some jobs. That is one way to pay for the tax cut.
The other way is to raise taxes in other areas. This bill does that,
too. Lo and behold, during the markup of the Senate Finance Committee,
there was a provision that had not had 1 day of hearings, had not had 1
hour of hearings--in fact, it had not had 1 minute of hearings because
it was never brought up in the committee--to discuss a $35 billion tax
increase on American workers who work overseas, sometimes in very
difficult parts of the world. That tax break they got was

[[Page S6175]]

being eliminated--totally eliminated--without one word of discussion,
one day of hearings about whether this was the right thing to do, or
about whether it should be to this extent, whether it should be less
than this, or anything.
In addition to increasing the size of the deficit, we have in just
this one provision a $35 billion tax increase on American workers. Why
do American workers get a credit for working overseas? Because, No. 1,
they are not in this country. They don't enjoy the benefits and the
security of living in this country, and, therefore, the argument
correctly says that in order to encourage American workers to have jobs
overseas instead of hiring foreign citizens, the Tax Code says that we
are going to give American workers an $80,000 tax exemption on wages
that they earn overseas. In many cases, they work in very dangerous
places. In most cases, they don't get the privileges and the security
of living in the United States.
The paper just today talks about seven such Americans who lost their
lives in Saudi Arabia because of a terrorist activity. That is just in
one country.
At the appropriate time I will be offering an amendment to strike the
tax increase of $35 billion in the legislation which is currently
before this body. We have had expressions of support for my amendment
to take out the elimination of this tax credit for American citizens
from the Chamber of Commerce, from the National Association of
Manufacturers, from the National Foreign Trade Council, from the
Financial Executives International, from the U.S. Council for
International Business, from the Association of General Contractors of
America, from the American Council of Engineering Companies. To show
that the support is there from companies other than business-oriented
companies, we have nonprofit organizations such as the Catholic Relief
Services, with which the Chair is familiar, and the International
Rescue Commission that have expressed support for retaining section 911
which the current bill eliminates.
The point is, we are going to have to find a way to reinstate. We
will have to find a way to cover $35 billion because tax cuts are not
for free. We have to pay for them. That is the problem this bill
presents.
My amendment would reduce the amount of the dividend tax exclusion
above $500 to 5 percent instead of the 10 percent that is currently in
the bill. I think that is a fair tradeoff. It makes no sense to say: We
are going to give, for example, a dividend tax exemption for the people
in my State of which only 8 percent would be affected by it in order to
have a tax increase on over 400,000 other American citizens who work in
far off places around the world.
It makes no sense to say: All right, we will help a small number, and
we will adversely affect a very large number. The type of people we are
adversely affecting are wage earners who work month to month, many of
them earning $50,000, $60,000, $75,000 a year to help pay for tax
benefits for those who are relying on dividends as a part of their
income, many of which go to the very highest income earners.
In Louisiana, 92 percent of the citizens are not affected by the so-
called double taxation on dividends. We ought to get rid of it, but we
ought to find a way to pay for it. Only 8 percent of my citizens are
affected by the tax on dividends. Quite frankly, most people who earn
dividends put them in retirement accounts or put them in investment
portfolios that are already tax exempt.
Ninety-two percent of my people in Louisiana are not affected by it
at all. Yet in order to pay for something that only adversely affects 8
percent of the citizens in Louisiana, we are going to eliminate a
foreign tax credit that will be adverse to literally hundreds of
thousands of people, over 400,000 people.

The type of people we are affecting are really Americans who are
working overseas for relatively modest salaries in far off places doing
important work that ultimately creates jobs in this country. We have
had many statements from organizations that have workers working
overseas who say, look, if this exemption is gone, we will have to
terminate those American workers and give the jobs to foreigners
working in their own country. We will be having foreign citizens hired
by American companies doing work that is now currently done by American
citizens. That is not good tax policy.
We could have argued in the Finance Committee, if we wanted, move in
that direction. We should have had hearings on it. We never had one
witness come in and say, look, this section 911 of the Tax Code is bad
policy; we need to change it.
It came up overnight because someone said, here is a nice pay-for.
Let's raise $35 billion. Let's increase taxes by $35 billion in order
to pay for the dividend tax cut which, in most cases, affects only a
very few American workers and American citizens.
As I have said, the groups that support retaining 911 are contracting
groups, oil and gas company groups, but also some of them are
organizations and groups that I read, for instance, the Catholic Relief
Services, the International Rescue Commission, workers who we have to
depend on for doing humanitarian work on behalf of the United States
around the world. If this provision is taken out of the current Tax
Code, you will have foreign citizens replacing American workers to do
work for American relief agencies around the world. What kind of a
message does that send to the world when all of the workers for the
Catholic Relief Services of the United States are foreign workers? We
need these American workers in these areas.
My amendment will preserve section 911 and we will offer it at an
appropriate time. It should receive a majority of the support of our
colleagues, both Republicans and Democrats. There is a very simple way
to pay for it--by simply not increasing the dividend tax deduction as
much as the current bill does. We can accomplish this in a fair manner.
If someone wants to talk about this later on, about a pay-for, someone
wants to eliminate this rate for American workers, if someone wants to
make an argument that it is appropriate to have a $35 billion tax
increase on American workers, let them make the case in the appropriate
forum which is the Senate Finance Committee. Don't let it be slipped
into the bill overnight as a pay-for for something that is questionable
as far as short-term tax policies.
At the appropriate time, I will offer an amendment to preserve this
provision which is very important to American workers.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. Mr. President, an amendment will be offered tomorrow
which Senator Breaux has already spoken in favor of. I wanted to speak
in support of the language that is in the bill. I am speaking against
the amendment which will be offered by Senator Breaux tomorrow.
The policy issue presented by repeal of section 911 is whether
taxpayer dollars should be used to underwrite an employer's cost of
sending employees overseas. Section 911 excludes from tax the first
$80,000 of foreign wages and additional foreign housing costs that are
paid for by the employer. Under normal tax rules, these amounts would
be taxable. According to the latest IRS data, 358,000 taxpayers claim
this exclusion, yet repeal of the exemption raises $35 billion.
The reason repeal raises so much is because many U.S. citizens living
overseas don't pay tax to either the United States or even to the
foreign country. The section 911 is skewed heavily towards upper-income
taxpayers. The more a person owns, the more they can exclude free
foreign housing.
Section 911 then is a subsidy to an employer for the costs of sending
employees overseas. Section 911 only applies to private sector
employees who move overseas of their own free will. It is not available
to government or military employees stationed overseas who are
obviously there through somebody's command and not by their own choice.
Most employers offer their overseas employees ``tax equalization''
packages which guarantee the employee will not pay more taxes working
overseas than they would pay if they were working within the United
States.
Section 911 reduces the amount of tax an employer has to reimburse
under those agreements, making it then a help to the employer as much
as to the employee.
Why does this make any sense? Obviously, I feel it makes sense or it

[[Page S6176]]

wouldn't be in this bill that I present to the Senate. If an employer
sends an employee from Florida, which has no income taxes, to
Massachusetts, which has very high income taxes, we do not provide such
a subsidy.
Why do we subsidize moving employees overseas? I think sending
employees overseas should be a business decision, not a tax decision.
Repeal will not cause U.S. citizens to be double taxed. A U.S. citizen
who earns income that is taxed by a foreign country is allowed to
reduce their U.S. taxes for any foreign income taxes paid. A foreign
tax credit is not allowed, however, for foreign property and gas taxes
and levies for social programs sponsored by the governments of foreign
countries.
We do not subsidize those taxes or those policies. Many claim U.S.
exports are enhanced by sending U.S. personnel overseas. However, there
is no basis for such a claim. Whether a U.S. company uses U.S. products
in its foreign operations is a business decision of the U.S. employer.
It is not determined by the nationality of the foreign manager.
It has come to our attention that certain nonprofits, charities, and
religious organizations use section 911 to further their overseas
activities. We plan to work with these organizations to exempt these
activities.
Section 911 is a tax loophole that forces you and me, as well as
every other taxpayer out there throughout the United States, to
subsidize high-paid corporate employees and their companies. It is
unfair, and the Congress needs to fix it, and the legislation before us
fixes it.
The Breaux amendment, if agreed to, would take that fix out of this
legislation. Everyone voting for the Breaux amendment will be voting
for these tax benefits the rest of us are paying for.
So obviously, tomorrow, I urge the defeat of the Breaux amendment.
I yield the floor.
Madam President, I yield the Senator from Pennsylvania such time as
he may consume.
The PRESIDING OFFICER. The Senator from Pennsylvania.

Amendment No. 569

Mr. SPECTER. Madam President, I send an amendment to the desk and ask
for its immediate consideration.
Mr. BAUCUS. Madam President, it is my understanding the Senator from
Pennsylvania wishes to offer an amendment. I ask unanimous consent that
the pending amendments be set aside so the Senator from Pennsylvania
may offer his amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report.
The senior assistant bill clerk read as follows:

The Senator from Pennsylvania [Mr. Specter], for himself,
Mr. Grassley, and Mr. Bennett, proposes an amendment numbered
569.

Mr. SPECTER. Madam 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:

(Purpose: To urge the Senate Finance Committee and the Joint Economic
Committee to hold hearings and consider legislation providing for a
flat tax)

At the end of subtitle C of title V as the following:

SEC. . FLAT TAX.

(a) Findings.--The Senate finds the following:
(1) The current Internal Revenue Code, with it myriad
deductions, credits and schedules, and over 17,000 pages of
rules and regulations, is long overdue for an overhaul.
(2) The current Internal Revenue Code has over
6,900,000,000 words compared to the Bible at 1,773,000 words,
the Declaration of Independence at 1,300 words, the
Gettysburg Address at 267 words, and the Pledge of Allegiance
at only 31 words.
(3) It is an unacceptable waste of our nation's precious
resources when Americans spend more than 5,800,000,000 hours
every year compiling information and filling out Internal
Revenue Code tax forms. In addition, taxpayers spend
$194,000,000,000 each year in tax code compliance. America's
resources could be dedicated to far more productive pursuits.
(4) The primary goal of any tax reform is to promote growth
and remove the inefficiencies of the current tax code. The
flat tax will expand the economy by an estimated $2 trillion
over seven years.
(5) Another important goal of the flat tax is to achieve
fairness, with a single low flat tax rate for all individuals
and businesses.
(6) Simplicity is another critically important goal of the
flat tax, and it is in the public interest to have a ten-
lined tax form that fits on a postcard and takes 10 minutes
to fill out.
(7) A comprehensive analysis of our tax structure has
concluded that a flat tax of 19% could be imposed upon
individuals and be revenue neutral.
(8) If the decision is made to include deductibility on
items such as interest on home mortgages and charitable
contributions, the flat tax would be raised from a 19% to a
20% rate to accommodate the deductions and remain revenue
neutral.
(9) The flat tax would tax business at a 20% rate on net
profits and be revenue neutral and lead to investment
decisions being made on the basis of productivity rather than
for tax avoidance.
(10) The flat tax would lead to the elimination of the
capital gains tax. This would become a powerful incentive for
savings and investment--which translates into economic growth
and expansion, more and better jobs, and raising the standard
of living for all Americans.
(11) The flat tax would lower the cost of capital by
allowing businesses to write off the cost of capital purchase
in the same year the purchase was made as opposed to
complying with complicated depreciation schedules.
(12) By eliminating the double tax on dividends, the flat
tax eliminates the distortions in the tax code favoring debt
over equity financing by businesses.
(13) The flat tax would eliminate the estate and gift tax.
With the elimination of the estate and gift tax, family-held
businesses will be much more stable under the flat tax
system.
(14) As tax loopholes are eliminated and the tax code is
simplified, there will be far less opportunity for tax
avoidance and fraud, which now amounts to over $120 billion
in uncollected revenue annually.
(b) Sense of the Senate.--It is the sense of the Senate
that--
(1) the Senate Finance Committee and the Joint Economic
Committee should undertake a comprehensive analysis of
simplification including flat tax proposals, including
appropriate hearings and consider legislation providing for a
flat tax.

Mr. SPECTER. I am offering this amendment on behalf of Senator
Grassley, Senator Bennett, Senator Thomas, Senator Sununu, and myself.
This amendment calls for consideration by the Senate Finance Committee
and the Joint Economic Committee of tax simplification including a flat
tax.
The essence is set forth in the brief resolution clause:

It is the sense of the Senate that the Senate Finance
Committee and the Joint Economic Committee should undertake a
comprehensive analysis of simplification including flat tax
proposals, including appropriate hearings and consider
legislation providing for a flat tax.

Madam President, this is a subject that I have addressed virtually
every year since introducing a flat tax proposal in the spring of 1995.
The flat tax proposal was introduced in the House of Representatives by
Congressman Armey in the fall of 1994. After extensive consideration
and analyses of these proposals by two distinguished professors from
Stanford, Professors Hall and Rabushka, it seemed to me that it was
long overdue that a serious effort be made to simplify the U.S. Tax
Code.
At the present time, we have a Tax Code which has grown to 6.9
million words. That is the count in the year 2000. When the Tax Code
was counted in the year 1955, there were 744,000 words. There are 325
forms to be filled out, and the American taxpayers spend more than 5.8
billion hours each year preparing them. And it is estimated by the Tax
Foundation that $194 billion is spent each year in complying with the
tax laws. I have seen other estimates that place the issue of
compliance as high as some $800 billion.
But there is no doubt that the Federal Tax Code and the forms are
burdensome, onerous, and unduly complicated. The vast majority of
Americans require professional help to fill out a tax return. Some
people say even a Philadelphia lawyer cannot figure it out. I am
inclined to agree with that.
Senator Grassley, may the record show, concurred with my last
statement. He has never been a devotee of a Philadelphia lawyer. The
Congressional Record is replete with comments to that effect with
reference to one of his colleagues who was elected in the same year,
1980.
Back to the subject at hand, Albert Einstein said: The hardest thing
in the world is to understand the income tax. That is quite a statement
for Albert Einstein to make. I think it shows what the complications
are.
We are considering now a tax proposal that will probably end up in
this body as $350 billion because the distinguished Senator from Iowa,
Mr. Grassley, has said that is his word on what

[[Page S6177]]

is going to come back out of the conference. The House of
Representatives is talking about $550 billion. The President's original
proposal was $726 billion. I support the full proposal offered by the
President.
When we consider that we have a $10 trillion economy, and we are
talking about $726 billion or $550 billion or $350 billion over a 10-
year period, and looking at a gross economy of $10 trillion a year now,
and over 10 years it will amount to $140 trillion, it is questionable
as to what the impact would be of any tax cut. But I think the
President's proposal is worth a try. I am prepared to vote for that
figure--the highest figure we can have for this body on a conference
report.
What should be done is to take, finally, some bold, innovative action
and at least consider tax simplification and a flat tax. It has never
been considered or analyzed, and there are some very thorough
comprehensive distinguished studies.
The leading study, by Professors Hall and Rabushka, analyzed the
revenue picture and concluded that, at 19 percent, the flat tax would
be revenue neutral. That would be eliminating all deductions.

In the flat tax legislation that I have introduced, I have retained
two deductions. I introduced the flat tax again this year in advance of
April 15, on April 11. We were not in session on April 15. During the
104th, 105th, and 106th Congresses I introduced the flat tax
legislative proposal to coincide with income tax day. The proposal I
have introduced retains the deduction for home interest and charitable
contributions. So I have taken the two items that are the most popular
and that cost money. That requires the flat tax to be raised from 19
percent to 20 percent.
It may be that the Finance Committee or the Joint Economic Committee,
in their wisdom, would want to have other deductions, or perhaps no
deductions, leaving it at the flattest rate of 19 percent.
This, Madam President, is a tax return form under the flat tax. It is
genuinely the size of a postcard and could be filled out in some 15
minutes. Similarly, for the corporate tax, the calculation has been
made that it would be revenue neutral at 20 percent. Today, there is an
enormous amount of time with the lawyers, the accountants, the tax
specialists, figuring out loopholes, figuring out tax avoidance, where
it is legal, contrasted with tax evasion, where it is illegal.
If, once and for all, we directed our attention to what is
economically productive--that is, what makes sense from an economic
point of view, without regard to the tax consequences--there would be a
burst of energy and productivity, and it would do wonders for our
economy. That is the way to stimulate the American economy, instead of
tinkering at the edges, which is what many of the tax modifications
have been.
The flat tax would expense all so-called capital investments by
deducting them immediately in the first year. If that were to be done,
there would be a tremendous stimulus for entrepreneurs to invest in new
capital instead of having to depreciate it over a long period of years
on complicated depreciation schedules.
The flat tax eliminates the estate tax, capital gains tax, and the
double taxation of dividends. For families of modest means and their
conflicting schedules, they would pay less under a flat tax. The
various schedules that have been proposed are complicated and sometimes
conflicting. That is why I would like to see the hearings on a
comprehensive analysis, to really find out what it would mean at all
levels.
Today, when the loopholes are applied, the sky is the limit. The
wealthiest people, who earn the most money, can avoid paying taxes
altogether, and that would be eliminated. There is a tremendous amount
of money lost through fraud. That, too, would be reduced substantially,
if not virtually eliminated with a flat tax proposal. So, in essence,
my point is when we have had so much controversy and argument in the
Congress of the United States about the $726 billion over 10 years, and
$550 billion over 10 years, and $350 billion over 10 years, the way to
really give the economy a shot in the arm is to eliminate all of this
nonproductive time filling out tax returns and the numerous forms
attendant thereto and allow American ingenuity to focus on what makes
economic sense, productivity sense, and not what you can do by
contortions and gyrations to reduce your tax bill.
It would be a godsend if on April 15 we sat down and filled out a
postcard. We will all go through it. The flat tax is something which is
certainly worthy of consideration and study.
My best judgment is that the flat tax would be very worthwhile, but I
would want to reserve my best judgment today on a study that I have
made. I would like to see the Finance Committee and the Joint Economic
Committee undertake the kinds of hearings and analyses which would give
appropriate consideration.
Today the Internal Revenue Code constitutes cruel and unusual
punishment. A flat tax would be an enormous step forward.
I thank the Chair and yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Madam President, besides being willing to accept the
amendment offered by the Senator from Pennsylvania, I add that there
are some portions of this bill which further make the Tax Code more
complex. We often do that as we are trying to, on the one hand, balance
the budget or fit within certain budget restrictions and, on the other
hand, help a certain tax policy which, in effect, adds a lot more
complexity to the code. Regrettably, the code is going to be much more
complex after this legislation is passed, and it will be passed, than
is the code today.
We did, however, include one measure of tax simplification at my
behest. It is small, but it is important, I think. There are many
definitions in the code. There is a definition of a child for the
purpose of the child tax credit or the earned-income tax credit or as
an exemption as a dependent or for purposes of a head-of-household
exemption. It depends on how many children the household has in terms
of what additional credits or exemptions that head of household has.
There are five definitions in the code, each different for each of the
conditions I mentioned. We simplified that situation.
We said, whether it is earned-income tax credit, the child credit, a
dependent for the purpose of exemption or head-of-household exemption,
the definition of child is the same. That will make the code a bit
easier for taxpayers and practitioners.
I appreciate the amendment offered by the Senator from Pennsylvania.
It is helpful always to look for ways to simplify the code. I am not
terribly encouraged we are going to get the code simplified very much
in the next several years. It would be great if we could. We should
make those efforts. If history is any guide, regrettably the President
and the Congress together are making the code more complex every year.
Some day the straw will break the camel's back. The code, in my
judgment, is going to collapse. It is going to get so complex and
finally people are going to get fed up and make significant changes. We
are not there. I do not think that will occur for several years.
The amendment offered by the Senator from Pennsylvania is a step in
the direction toward forcing us in the Congress to grapple with the
undue complexity of the code, whether the flat tax, consumption tax,
value-added tax--who knows what is the right approach; that is to be
decided another day--or just stay with our current code and make a lot
of simplifications. For example, phasing out so-called Peps and Peases.
That is the section of the code that says we will give you a tax break
on the one hand but take them away on the other. We will give a tax
break, but it phases out in a few years. There are lots of provisions
in the code like that. One major simplification would be to get rid of
those provisions.
I compliment the Senator for advancing the ball and thinking more
about simplification. I thank him for offering the amendment.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SPECTER. Madam President, I note for the record, in a brief
colloquy with the Senator from Montana, his thrust at simplification I
think is a hallmark of what we are looking for. That is one of the
principal objectives,

[[Page S6178]]

perhaps the principal objective, although it goes alongside trying to
increase productivity and growth.
When I talked to the Senator from Montana briefly in showing him the
amendment, I added a modification which would call for simplification
including the flat tax, but in the resolve clause, to call for that
simplification.
I appreciate the comment by the Senator from Montana. I hope he will
join me in this amendment. It advances the ball not anywhere near the
goal line, but I think everyone will agree there has never been a
serious study of this proposal, and I hope there will be some impetus
given by this amendment. I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Madam President, I am a cosponsor of the amendment by
the Senator from Pennsylvania. I very much support this amendment. I do
not think we have a hard time convincing the people of this country
about the complicated aspects of the Tax Code and the need for
something more simple to replace it. There seems to be an overwhelming
consensus on the part of the American people about that point.
What we need a national dialog about--and I think this amendment
encourages that dialog--as well as a study is what is going to take its
place. Seventy percent of the people think the present Tax Code ought
to be thrown out, partly because of how complicated it is and because
it may be viewed as unfair. There does not seem to be that sort of
consensus as to what takes its place.
For instance, I have had opportunities to see surveys where
approximately 20 percent of the people want a national sales tax and 30
percent of the people want a flat rate income tax. Maybe Congress ought
to show leadership and follow up on that 20 percent or 30 percent, but
I do not think that is going to happen until we get some consensus
among the American people that is in the 40-percent range of what ought
to take the place of the present income tax mess.
The amendment before us is very useful from the standpoint of
encouraging congressional committees to do the proper work, but I
believe in the final analysis, to get the consensus that it is going to
take to bring about a simplified tax system, replacing the present
complicated system, is when it becomes part of the national debate
between two candidates for President.
For instance, ideally, we have President Bush seeking reelection next
year, and he would make an issue out of how complicated the Tax Code is
and offer an alternative. Ideally, a flat rate income tax along the
lines of what Mr. Forbes did a few years ago when he was running for
the Republican nomination and made this type of reform a major plank of
his campaign. Ideally, we would have a Democratic candidate who says
the current progressive system, even though it is a mess, is what is
best for the country. Then we will have a winner out of this that shows
a clear division of keeping what we have, which I hope does not happen,
or coming up with something new.
That mandate from an election will move the people and the people
then will move the Congress. Being chairman of the Senate Finance
Committee, I should not have to wait for that to happen, but it seems
that we have so much work before us dealing with short-term issues that
we do not spend time on the long-term policies, which this amendment
encourages.
I thank the Senator from Pennsylvania for his amendment. I am going
to obviously vote for it. I hope it is adopted overwhelmingly, but I
hope it has an impact beyond what we in the Congress will be called
upon to study. I hope it has an impact on the next Presidential
election.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SPECTER. Madam President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. Madam President, we do not want this vote now. We want
to have this vote later.
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. BAUCUS. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Madam President, I ask unanimous consent that the pending
amendments be temporarily set aside so I might offer an amendment.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.

Amendment No. 570

Mr. BAUCUS. Madam 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 Montana [Mr. Baucus] proposes an amendment
numbered 570.

Mr. BAUCUS. Madam 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:

(Purpose: To ensure that the limit on refundability shall not apply to
the additional $400 child credit for 2003, to make the dividend
exclusion effective for taxable years beginning in 2003, and to
eliminate the increase in the dividend exclusion from 10 percent to 20
percent of dividends over $500)

On page 19, lines 12 and 13, strike ``(20 percent in the
case of taxable years beginning after 2007)''.
On page 26, lines 18 and 19, strike ``(80 percent in the
case of taxable years beginning after 2007)''.
On page 26, lines 21 and 22, strike ``(80 percent in the
case of taxable years beginning after 2007)''.
On page 27, line 19, strike ``2003'' and insert ``2002''.
At the end of subtitle C of title V, insert:

SEC. . GUARANTY OF ADDITIONAL $400 CHILD CREDIT FOR 2003
AND MODIFICATIONS OF DIVIDEND EXCLUSION.

(a) In General.--Section 24(d) (relating to portion of
credit refundable) is amended by adding at the end the
following new paragraph:
``(4) Special rule for 2003.--
``(A) In general.--In applying this subsection--
``(i) in the case of any taxable year beginning in 2003, or
``(ii) for purposes of determining the amount of the credit
allowed under this section for the taxpayer's first taxable
year beginning in 2002 in computing the child tax credit
refund amount under section 6429, the increase under
paragraph (1) for such taxable year shall be determined
under subparagraph (B).
``(B) Additional increase.--For purposes of subparagraph
(A), the amount of the increase under paragraph (1) for a
taxable year shall be equal to the sum of--
``(i) the amount of such increase determined without regard
to this paragraph, plus
``(ii) the lesser of--
``(I) $400, multiplied by the number of qualifying children
of the taxpayer for the taxable year, or
``(II) the amount determined under paragraph (1)(A) for the
taxable year, reduced by the amount of the credit allowed
after the application of section 26 and this subsection
(without regard to this paragraph).
For purposes of applying subclause (II) to the taxable year
described in subparagraph (A)(ii), the amount determined
under paragraph (1)(A) shall be computed by taking into
account the adjustments described in section 6429(b).''
(b) Effective Date.--The amendment made by subsection (a)
shall take effect as if included in the provisions of section
106 of this Act and section 108 of this Act shall apply to
such amendment as if it had been so included.

Mr. BAUCUS. Madam President, this amendment is designed to take
effect earlier rather than later and provide substantially more
benefits than the tax bill that is presently before us. It is designed
to help stimulate the economy with more wallop, more punch, earlier
rather than later.
How does it do that? Two ways. First, it would speed up the dividend
tax relief. It would make it take effect earlier rather than later.
Second, it would simplify the mechanism that will be sending checks out
to people who qualify for the child tax credit. So, there are two ways
that this amendment will help provide more income relief, more quickly,
to more Americans, than what

[[Page S6179]]

is contained in the bill. It is an improvement upon the bill.
First, with respect to speeding up the dividend relief, the dividend
proposal in this bill is not effective until the year 2004. Many
provisions of this bill take effect in 2003, but the dividend
provisions of the bill do not take effect in 2003; rather, a year
later, in 2004. I suspect it is to save revenue. There will be no
dollars injected into the economy, as a consequence of the dividend
proposal, in the year 2003. It will be later, in 2004, and even then it
is going to take some time for Americans to change their tax returns to
take advantage of this change.
As I stated earlier, we are here today because the economy demands
that we act quickly to help our anemic economy. Let's see what we can
do to help create more jobs. To rebuild the economy. To rebuild
America.
In my State of Montana, we desperately need jobs. Many of our high
school and college graduates are leaving Montana. Why? Because they
cannot find a job in the State. They go elsewhere. There is a better
chance of finding a job in one of the larger cities. But, even that is
difficult. Lack of jobs is a national problem, it is not just a problem
in Montana. I think over 2 million jobs have been lost in the last
couple of years because of an anemic economy. We want to get moving
quickly. We want to get moving earlier than we otherwise would. We
should seek policies to help the economy grow as soon as possible.
I disagree with the current dividend proposal for several reasons.
One, it creates a three-tiered regime. It makes the Tax Code even more
complex. It creates a three-tiered regime for investment income.
Interest income would be fully taxed, as it is today. Capital gains
would be taxed at about half the rate of ordinary income, as it is
today. But we now add a third complexity of taxation of investment
income, and that is dividend income which would fall to the new regime;
that is, the first $500 of dividend income would be excluded from one's
income tax, and then, beginning in later years, in 2004, the next 10
percent of dividend income would be excluded, and then in the year
2008, 20 percent of dividend income would be excluded. A new layer, a
new complexity, certainly with respect to investment income.
My point is, if we are going to include a dividend proposal in this
bill, why not make it take effect earlier? Our economy needs the boost
right now, not when taxpayers file their returns in 2005. The dividend
provision takes effect in 2004 but, frankly, it does not really take
effect until 2005 when people file their tax returns. The dividend
proposal has no stimulative effect in the year 2003. Most people do not
even get the benefit in 2004. Most individual taxpayers will have to
wait until they file their tax returns in 2005 to reap the benefit of a
dividend exclusion in the bill.

My amendment will advance the effective date of the dividend
provision in the bill to January 1, 2003--this year. This means
taxpayers will get relief for dividends they receive this year.
I have my doubts whether the dividend tax relief has much stimulative
effect generally, but some will praise the economic virtues of dividend
tax relief. I ask, if there are virtues, why wait? Make the proposal
effective for 2003 at least to provide the possibility that the economy
will see some benefit.
The second provision in my amendment will get more dollars to
families by simplifying the distribution of the increased child credit
that we passed this year. The President has proposed accelerating the
full $1,000 child credit to 2003. It is currently $600. The President
has proposed accelerating that, the full $1,000 to take effect this
year, 2003. Instead of making taxpayers wait until next spring when
they file their tax returns to get the credit, the President has
proposed sending the checks out this summer for the $400 increase in
the credit. That is the same provision which is included in the Finance
Committee bill. I support the acceleration of this credit for working
families. It is the right thing to do. I think sending this increase
out to taxpayers right away also makes good economic sense. Why wait?
This gets money into the people's hands immediately so they can spend
it. This will spur consumption and boost the economy, which is exactly
what we should be doing in this bill.
My concern, however, deals with the millions of families who will not
receive the full $400 check due to refundability limits. I might remind
our colleagues that a couple of years ago, when we sent out the so-
called $300 check for individuals and the $600 check for married
couples, a lot of people did not get the $300; married couples did not
get the $600. Why? Because of the tax brackets the taxpayer happened to
fall into when they did the calculation to find out what portion of the
$300 an individual might receive. If the taxpayer had a lower income,
the taxpayer might not receive the full $300. It was a mess. Some got
the full $300, some did not. It was a mess.

Under current law, the credit is partially funded. Families can take
part of the credit if they pay payroll taxes but do not have income tax
liability. Not the whole credit, but part of it. The amount that a low-
income family can get refunded is to increase in 2005. The President's
proposal did not accelerate the refundability of the credit.
Fortunately, during consideration of the bill, the Finance Committee
adopted an amendment offered by Senator Lincoln. Her amendment was to
accelerate the refundability of the credit. This will allow many low-
income families to see some benefit from the increased tax credit.
However, even with the inclusion of the refundability amendment, many
low-income families will not be eligible to receive the full $400.
Millions of working families who have incomes between $10,000 and
$20,000 will not get the full $400 check. They will receive a partial
check. Again, people are not getting what they are promised.
We are increasing the child tax credit from $600 to $1,000 to take
effect in 2003 and telling people they get an additional $400 in 2003
and many will not get it. We tell them that is the law, but they will
not get it because their incomes are in certain brackets. Those whose
incomes are between $10,000 and $20,000 will get less than the full
$400 and receive only partial checks, and they will not know how much
unless the IRS tells them how much the following year.
That does not make sense. The families who are most likely to spend
the check, those who spend most of their income, will not get the full
amount.
My amendment guarantees each and every working family eligible for
the child credit would get the full $400 check. This fulfills two of
the goals of the stimulus package, getting more money out of the door
immediately and getting it to the people who will spend it, lower
income people. These two changes to the bill will inject an additional
$15 billion into the economy in 2003 and 2004, more than provided for
in this bill. That makes sense. The additional dollars in the next 2
years will help create more jobs, help boost demand, and help rebuild
the economy.
To pay for the modifications, my amendment merely eliminates the
increase of the dividend exclusion from 10 percent to 20 percent in the
year 2008. To repeat, in the bill, the 10 percent exclusion is
increased to a 20-percent exclusion, and does not take effect until
2008. I say that is too far off. Let's repeal the increase that is
scheduled to take effect in 2008 and take that $15 billion and dedicate
it to the working families. That will take effect in the early years,
2003 and 2004. We could make the dividend proposal, therefore,
effective now, not later.
The current provisions in the bill provide that the dividend
exclusion does not take effect until 2004, not 2003. This amendment
leaves in place the 10-percent exclusion that is still in place but
takes effect a year earlier; that is, 10 percent above the $500 goes
in. We are simply saying that the exclusion in 2008 will still be 10
percent. That is so far off. Why schedule an increase that does not
take effect until 5 years from now?
I urge my colleagues to support this amendment. Briefly, it moves
money upfront. It does not change the total amount of the bill but
moves it upfront a little more so there is more stimulative effect in
the short run. Thus, the bill does what it is purported to do, which is
to create more jobs.
I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. I yield myself such time as I might consume.

[[Page S6180]]

I find it necessary to explain what our legislation does because a
lot of times there are explanations about it that are not very
accurate. One of the impressions is our bill is not very well balanced.
Our bill does, in fact, attempt to strike a good balance between
consumption on one hand and investment on the other hand. We do this to
provide incentives such that we can provide both short-term economic
stimulus and the building blocks for meaningful future economic growth.
The refundable tax credit outlined in the amendment before the
Senate, which I oppose, would be paid irrespective of whether a person
had any income tax liability at all. If the person owes no tax, we are
to view this proposal as effectively refunding payroll taxes. But we
already have a provision that refunds payroll taxes. It is called the
earned-income credit and the child tax credit. This proposal, the
Baucus amendment, a refundable tax credit proposal, would be
duplicative of the earned-income tax credit and the refundable child
tax credit to refund payroll taxes for those with insufficient income
to have tax liability with the result of encouraging people to work as
opposed to receiving welfare or unemployment compensation.
In my estimation, such refundable credits do not provide incentives
to work. They do not create jobs, and they do not stimulate the
economy.
Providing incentives to work, creating actual jobs, and stimulating
the economy are the purposes of the legislation from the Senate Finance
Committee that I presented.
Job creation is a handup, not a handout. It is a handup to help
people out of poverty. Refundable tax credits are handouts which may
have just the opposite effect. We should ensure that we are providing
building blocks for long-term growth and the economic stability that
comes from that growth.
I appreciate Senator Baucus's support for our dividend proposal and
his desire to accelerate into this year. However, acceleration means we
subject more dividends to double taxation because the exclusion never
reaches 20 percent. In other words, ours goes from 10 percent through
the year 2007; 2008 to 2013, it is 20 percent, whereas his proposal
always stays at 10 percent.
People invest in stock for long-term gain. We need to provide long-
term tax relief. This bill contains a lot of short-term stimulus
already.
I appreciate the points he has raised regarding the child credit. The
largest item in this bill is the child credit, and that amounts to over
$95 billion. It includes a simplification of definition that Senator
Baucus has already mentioned. In addition, I note we expand the
refundable portion of the child credit that targets help to the low-
income families he seeks to assist with his amendment.
I appreciate his position. I believe our bill provides proper balance
in encouraging the economy.
Finally, I note this amendment violates section 202, page 35 of the
Budget Act, so I will be raising a point of order later on.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. KENNEDY. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Who yields time?
Mr. KENNEDY. Madam President, I yield myself an hour on the bill.
The PRESIDING OFFICER. Is there objection?
Mr. GRASSLEY. Would the Senator from Massachusetts yield? I do not
intend to object, but we have always been promised copies of
amendments. I assume the Senator is going to offer an amendment.

Amendment No. 544

(Purpose: To provide for additional weeks of temporary extended
unemployment compensation, to provide for a program of temporary
enhanced regular unemployment compensation, and for other purposes)

Mr. KENNEDY. I intend to do that right at this very moment. I have
sent an amendment to the desk, and I ask for its immediate
consideration. It is amendment No. 544.
The PRESIDING OFFICER. The Chair informs the Senator, it requires
unanimous consent to set aside the pending amendment.
Mr. GRASSLEY. I ask Senator Kennedy, would he speak without our
consenting to the hour so we could look at the amendment for a while?
Mr. KENNEDY. I am prepared to accommodate the chairman of the Finance
Committee. We had a general concept of an hour. I will not personally
take an hour. We have 25 cosponsors.
The PRESIDING OFFICER. Without objection, the Senator may proceed to
debate.
Mr. KENNEDY. I thank the Chair. I was asking them what time they
need, and I will let the chairman know in just a very few minutes who
intends to come over here and exactly how much time we need.
I intend to speak about 20 minutes.
Mr. GRASSLEY. I thank the Senator.
Mr. KENNEDY. Madam President, this amendment is of enormous
importance to the matter we are debating in the Senate, which is
basically legislation that is targeted on strengthening and improving
our economy.
We all know when the Senate of the United States has acted in the
past to strengthen and improve our economy, on a number of very
important occasions we have had a very positive impact. Later in the
discussion and debate, we will have what is called a Democratic
alternative, which will provide what I consider to be a very compelling
amendment that will result in stimulating the economy and really
provide additional jobs.
It will be fairly balanced in helping hard-working Americans. It will
assist small businesses with accelerated depreciation and will also
provide assistance to the States so they can use funds to provide for
the No Child Left Behind legislation, and perhaps offset some of the
anticipated cuts in Medicaid and also deal with some of the other State
priorities.
One of the most important aspects of economic recovery that this
underlying proposal that has come out of the Finance Committee is
missing is a provision to deal with the millions of Americans who are
currently unemployed as a result of economic policy. We have seen at
other times in our country when we have taken action here in the
Senate, going back to the early 1960s. We had economic stimulus
programs and we had the longest period of economic growth and price
stability, in the early period of the 1960s, that we had had up to that
time in this century.
Then, in 1993, we also took action here on the floor Senate and we
have had the longest period of economic growth, again with price
stability, and the creation of some 22 million additional jobs.
We on our side are strongly committed to taking steps that are going
to revive our economy, stimulate the economy. We will have an
opportunity to debate that later in the afternoon.
This amendment is targeted on those Americans who have lost their
jobs through no fault of their own but because our economy is in
stagnation. At other times in American history, we have responded to
the needs of these families. These are hard-working American families
who have played by the rules, have paid into the unemployment
compensation fund, and now are entitled to benefit from it.
Without this amendment, starting at the end of May there are going to
be 80,000 workers a week who will lose their unemployment compensation.
This is an emergency, and it is a matter which I hope we will address
and will have the strong support of Republicans and Democrats alike.
Effectively, this amendment extends the temporary unemployment
compensation program through November. The program is currently
scheduled to prohibit any new enrollees after May 31, leaving 80,000
workers a week to run out of their benefits. It provides 26 weeks to
all eligible workers, with an additional 7 weeks available to the
States with the highest unemployment. That would be some six States as
of today. It provides an additional 13 weeks to unemployed workers who
have exhausted their initial 13 weeks of extended benefits prior to the
enactment, and it does provide help and assistance to low-wage workers.

[[Page S6181]]

It provides temporary funding for States to implement alternative
base periods. What we mean is, in a number of instances workers should
be entitled to unemployment compensation. But if they seek part-time
work, they lose all eligibility for unemployment compensation in almost
every state. Yet they want to go back to work to provide for their
families, and all this does is permit the States to make these
adjustments so they can go back to work, maybe part-time, and not lose
their unemployment compensation. The amendment also provides some
technical provisions to add just for the railroad workers to permit
greater parity.

Historically, unemployment insurance has been a bipartisan issue. In
the recessions of the late 1950s, President Eisenhower proposed a
temporary program of extended unemployment assistance. In the recession
of the early 1970s, President Nixon signed into law two extensions of
unemployment compensation. In the mid-1970s, President Ford proposed a
temporary Federal extension of benefits. In the early 1980s, President
Reagan signed into law four unemployment extensions. And in the early
1990s, President Bush, after twice vetoing unemployment extensions,
ultimately saw the importance of this policy and signed into law three
extensions. Each of these 1990 extensions, some for 26 weeks of
benefits, received overwhelming bipartisan support.
In November of 1991, we passed an extension by a vote of 91 to 2. In
February of 1992, we passed, by a vote of 94 to 2, a bill to provide 26
weeks of benefits to most States, 33 weeks in high unemployment States.
Many of the Senators currently in this body voted for that extension,
which today they are calling unprecedented. We have seen, over the
years, Republicans and Democrats alike have supported this legislation.
In July of 1992, the vote was 93 to 3; in November of 1993, 79 to 20;
and in the last 2 years we have had a number of bipartisan votes. The
Temporary Federal Unemployment Benefit Program passed, 85 to 9, in
March of 2002. This is not a partisan issue. Layoffs do not
discriminate by party. This is a matter of fairness.
I urge our colleagues to put aside partisanship and to support this
particular proposal.
There are those who raise these kinds of questions in opposition to
this program. They say people want handouts. They do not want handouts.
They want jobs. People want jobs, but there are not any jobs in the
economy. There is only one job available for every three unemployed
workers. The Democrats have a plan to create the jobs. But today we
have to help the millions of people without jobs because of the bad
economy. They need help paying the mortgage and putting food on the
table.
Some say the unemployment rate isn't high by historic standards, and
only a few States have reached the trigger for extended benefits. But
we know that we have now 2.5 million fewer jobs than we had some 2
years ago. Look at this. We had 2.8 million additional unemployed over
the period of these last 2 years; 6 million unemployed in January of
2001; and we have 8.8 million as of April this year.
We have seen over this period of time the fact that the total number
of private sector jobs has decreased by 2.7 million--2.7 million jobs
lost. We had 111.7 million in January 2001, and 109 million now.
We are seeing a significant increase in the total number of the
unemployed, and we have also seen a reduction in the total number of
jobs that are out there. These are hard-working Americans. We are
trying to get the economy into an expansion. But at this particular
time they are hurting. That is why we need to have an extension of the
unemployment compensation.
Let me mention who these people are and what the state of our economy
is at the present time.
All Americans understand the economy has been deteriorating for more
than 2 years. President Bush claims the tax cut for the rich will
create jobs. We tried that his way in 2001. We lost 2.5 million jobs.
Alan Greenspan and Warren Buffett and the Nation's leading economists,
including 10 Nobel laureates, all agree that the President's plan is
the wrong prescription for the sick economy. Average Americans are
hurting. It is time for a change. We need an economic plan that helps
our fellow citizens and which creates new jobs. Yet, there is not a
penny in this bill to provide the unemployment compensation for the
Americans laid off prior to the time the new jobs are created.
Unemployment benefits expire in just 2 weeks for many of these workers.
This amendment is cosponsored by 13 of my colleagues. I ask unanimous
consent that they be listed as cosponsors on this amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KENNEDY. Madam President, this amendment provides for allocating
$12.7 billion from the acceleration of the upper tax bracket reduction.
This effectively does not change the law. The President's 2003 bill
asks for an acceleration of the reduction of the tax brackets for 2001
and 2002, and this defers that. In fact, it collects some $35 billion.
We use $12.7 billion of that to pay for this extension.
Our workers take pride in doing a good job and providing for their
families, putting their children through school, and saving for a
secure retirement. But for millions of Americans that dream is gone.
Years of saving and sacrifice have disappeared with a single pink slip.
Instead of looking to a bright future, now they must look in their
children's eyes, and say, I am sorry; you can't go to college; you
can't buy new shoes. We can no longer afford to stay in this house. In
fact, since losing their jobs, one in every four have moved to less
expensive housing or moved in with their friends or their families.

These are the figures about the impact on the family because of
unemployment. We are talking about Americans who have worked, want to
work, and are being laid off because of economic conditions. They have
collected unemployment compensation for a period of time, which is
about a third of their pay. Now they are in danger of losing that at
the rate of 80,000 Americans per week at the end of this month.
It is interesting that we now have 18,000 American servicemen who
have returned from Iraq and are now on the unemployment line. Now they
are receiving unemployment compensation because the jobs were not there
when they came back. That number is growing every single week because
their jobs have effectively been eliminated.
The unemployment impact on the family is that more than 3 in 4--77
percent--of the unemployed Americans say the level of stress in their
family has increased. Two-thirds--65 percent--of those with children
have cut back in spending for all of their children; 26 percent say
another family member has to start a job or increase the work hours;
and 23 percent have had to interrupt their education or that of a
family member--one-quarter of all the unemployed now. That is happening
in America. We have an opportunity to do something about it with this
bill by just deferring the upper tax rates--not cancelling them out but
deferring those. Now we have the financial hardship on the unemployed.
More than one-half of the unemployed adults have had to postpone
medical treatment--57 percent--or cut back on spending for food--56
percent. One in four--26 percent--had to move to other housing or move
in with their friends or relatives. Thirty-eight percent have lost
their telephone service. These are hard-working Americans who have lost
their telephone service.
Without this amendment, 80,000 per week will lose all kinds of help
and assistance from unemployment compensation.
This is what is happening to them already.
Thirty-eight percent have lost their telephone service. Twenty-two
percent are worried about losing their phone service. More than a third
have had trouble paying gas or electric bills.
That is just the beginning. If you look at the number of workers who
have lost their health insurance, one-half of them have already lost
their health insurance when they were laid off, and the others who have
been able to retain their health insurance are in danger of losing
that. One-third of the unemployed covered by health insurance have lost
their benefits as a result of just being unemployed. The rest of them
are going to lose that when they lose their unemployment compensation.

[[Page S6182]]

In fact, since losing their jobs, one in every four have moved into
less expensive housing or moved in with friends or families, more than
a third can't pay their electric and gas bills, and more than one-half
cut back on their food.
One-half million men and women have joined the unemployment lines in
the past 3 months. That is 500,000 fellow Americans who have joined the
unemployment lines in the last 3 months. No end is in sight.
In Massachusetts, the jobless rate has jumped to a 9-year high--5.7
percent. Nationally the unemployment rate has reached 6 percent, with 9
million Americans out of work and 2 million of those out of work for
more than 6 months.
These Americans are not the first priority--they are not even a
priority--in this administration's tax reduction program because there
is not a nickel in extended unemployment compensation for any of these
workers who have lost out.
In fact, in this economy with no jobs, they have learned a lot about
being second-class citizens with second mortgages and secondhand
clothes to make ends meet. Our first priority on the economy is to get
these working Americans back to work--not just to reward the wealthy. A
major part of that effort must be help for the unemployed.
The current Federal unemployment benefit program runs out at the end
of this month. With a continued troubled economy, this extension cannot
be business as usual. Our amendment extends the current program for 6
months, but it also helps the 1.1 million Americans who are long-term
unemployed and the hundreds of thousands who are part-time and low-wage
workers who would otherwise get no help.
Our amendment provides 26 weeks of benefits to out-of-work Americans,
just as we provided during the last recession in the bipartisan bills
signed by the first President Bush.
Nearly 1 million more private sector jobs have been lost during this
recession than over the same period of the early 1990s recession. The
impact in the 1990s, in terms of workers being able to find jobs, was
not nearly as bad as it is currently, and yet we did twice as much for
them.
It is inconceivable why we are not willing to take the steps to help
our fellow Americans when they have already paid into the fund. These
workers have contributed to the fund. The fund is in surplus today. All
we are asking is, let's use that fund that is in surplus today to
assist them during this period of transition. This should be a no-
brainer. This ought to be embraced overwhelmingly.
Where are the votes that we received in the early 1990s--by 90
votes--with bipartisanship. And still we have the reluctance by our
friends on the other side to support this program.
In the last recession, we also made sure that workers who ran out of
Federal benefits but still could not find work were not left out in the
cold. Today, one in five unemployed workers has been out of work for
more than 6 months. In January, we left out 1 million of these long-
term unemployed without jobs and without any safety net. Today, there
are 100,000 more. Our amendment provides 13 more weeks of benefits for
these long-suffering Americans.
Clearly, we owe it to all Americans who have lost their jobs in this
economy to provide help while they look for new jobs. They paid into
the unemployment compensation. They have to be out looking for jobs or
they do not qualify, and they are doing that, and still they are going
to be left high and dry without this amendment.
The actions in recent months to extend the benefits have left out too
many workers, particularly compared to America's response in the past.
In 1975, 75 percent of unemployed workers were eligible for
unemployment benefits, compared to only half of such workers last year.
And that is because unemployment insurance has not been updated to meet
the changing times; and that is because our good friends on the other
side have changed the terms of who was going to be eligible. Isn't that
amazing. You are only going to find half of all unemployed workers who
are eligible, even though they are certainly similar in terms of their
working and contributing. Many of the unemployed who fail to receive
benefits are part-time and low-wage workers. Part-time and low-wage
workers pay into the system, and they should be able to rely on it
while searching for new jobs. Our amendment offers the States the
option--does not require it; it offers the States the option--to
request Federal assistance to provide benefits for these workers.
Out-of-work Americans have worked hard all their lives. They have
paid into the unemployment insurance fund, which has $21 billion. We
cannot now say to these citizens: Now that you are out of work,
struggling to pay your bills, we will not let you collect on your
insurance policy.
I urge my colleagues to vote for this amendment which will provide a
lifeline to those hurt the most by the protracted economic downturn.
The extension runs out in just 2 weeks. We cannot wait. Congress must
act now to provide the assistance out-of-work Americans deserve.
We may have some difference on the floor of the Senate about who has
the best economic stimulus program. And we do have significant
differences--significant differences--but we ought to be able to agree,
whether you support the Republican or the Democratic program, that we
are not going to hold unemployed workers hostage until it kicks in and
provides job opportunities for workers. We ought to all be able to
agree to that. We have done that in a bipartisan way historically.
The trust fund is in surplus. People are hurting. They are our fellow
workers. We cannot deny them the kind of hand they need and they have
been working with over the course of their working lives. We should
accept this amendment.
The PRESIDING OFFICER. The Democratic whip.
Mr. REID. Madam President, I have cleared this with the distinguished
chairman of the committee. I ask unanimous consent that the pending
amendments be temporarily set aside so the Senator from Massachusetts
may offer his amendment.
Will the Senator from Massachusetts call up his amendment?
Mr. KENNEDY. Madam President, I call up my amendment.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The clerk will report.
The bill clerk read as follows:

The Senator from Massachusetts [Mr. Kennedy] for himself,
Mr. Daschle, Mr. Bingaman, Mr. Durbin, Mr. Reed, Mrs.
Clinton, Ms. Cantwell, Mr. Sarbanes, Mr. Levin, Mrs. Murray,
Mr. Rockefeller, Mr. Kerry, Mr. Baucus, Mr. Schumer, and Mr.
Dodd, proposes an amendment numbered 544.

Mr. REID. Madam President, I ask unanimous consent reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
Mr. REID. Madam President, I ask unanimous consent that the time used
by the distinguished Senator from Massachusetts be charged against the
time on this amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Madam President, how much time does that leave on this
amendment on the side of the minority?
The PRESIDING OFFICER. Thirty-six minutes.
Mr. REID. So the Senators from Washington and Rhode Island will have
36 minutes, or whatever time they need.
I ask Senator Kennedy, will you yield time to the Senator from Rhode
Island?
Mr. KENNEDY. I yield such time as he may use.
The PRESIDING OFFICER. The Senator from Rhode Island.
Mr. REED. Madam President, I rise in strong support of the Kennedy
amendment. I am amazed that at a time when there are over 1.1 million
workers who have exhausted all their unemployment benefits--who are
looking for work, who are not finding work--at a time when our fund to
pay for these benefits is in surplus by billions of dollars, we are not
extending this program.
This is perhaps the last chance we will have. The program expires in
just a few days. Yet we are here on the floor of the Senate talking
about many other things: tax benefits for affluent Americans who are
doing quite well.

[[Page S6183]]

But we are not responding to the demands, the needs of countless
numbers of our fellow citizens. I am just amazed this would happen.
This UI, temporary Federal unemployment insurance program, will
expire at the end of May. What is happening in our economy today is
that people are desperately looking for jobs, but the economy is
changing. As I go about Rhode Island, I do not find lots of people who
say: Well, I don't want to take a job because these benefits are so
good. These benefits are a fraction of what these people were making
when they were working. They are hardly sufficient to pay the mortgage,
to pay for their children's needs, to pay for all the items they have
to buy each and every day.

What has happened in the economy, in our case in Rhode Island, is we
used to be a manufacturing center where there were 20 or 30 or 40
different manufacturing plants all requiring foremen and supervisors
and vice presidents for human resources. Those factories have been
closing. Work has been going overseas.
In many cases, it is not a question of losing a job nowadays; it is a
question of the company going away, leaving the small towns of Rhode
Island and southern New England and the small towns of North Carolina
and South Carolina, leaving people highly skilled but with no place to
work.
These are the true victims of this current economic malaise and
recession. And we are not responding by simply giving them some more
time, giving them resources to pay the debts that pile up every day in
every family in this country? I think it is just appalling.
Madam President, 1.1 million workers have exhausted their benefits
and have not found work. That is the current situation. We have to help
them. The unemployment rate today is 6 percent. That rate is higher
than when this temporary program was initiated in March of 2002. It is
higher today than when the program was extended in January 2003. Yet we
are not extending the program. The situation is worse, but our response
is not appropriate to that situation.
Over the last 3 months, 540,000 private sector jobs have been lost
and the economy has lost, since the beginning of the recession, a total
of 2.7 million private sector jobs. This is not a question of jobs
being there and workers being unwilling to take those jobs.
As a result, we only have one recourse--frankly, they only have one
recourse: They must have these benefits. And we must provide these
benefits.
Private payrolls are 2.4 percent below their level in March 2001 at
the beginning of this recession. The job losses in this recession now
exceed those in the recession of 1990.
One other very compelling point is, on average, if you look at the
recessions in this century, at least, job losses tend to bottom out
after 15 months and are erased within 2 years. The persistent job
losses in this recession are at the 25-month mark--25 months, not 15
months--and as a result, in that dimension, this is the worst
recession, most severe recession since the 1930s in terms of the
duration of long-term unemployment.
The latest employment report paints a bleak labor market picture for
the future.
There are 8.8 million unemployed Americans, but we only count on our
unemployment rolls those Americans who are actively seeking employment.
There are millions more who are unable or so frustrated by the lack of
jobs that they are not actively seeking--4.4 million Americans. They
want a job. There is no real prospect, and as a result they are not
even counted.
Then add to that the number of Americans--4.8 million--who work part
time. They want to work full time but they work part time because there
are no full-time jobs.
Then throughout these numbers, there is this persistent overhanging
population of long-term unemployed Americans, about 1.9 million jobless
for more than 26 weeks, about 20 percent of the total unemployed. This
is a number that is not going down; it is persistent. These are the
individuals who need our help, and we should help. We must help. Yet
the bill that comes before us today, the bill that is supposed to
stimulate the economy, ignores all of these millions of Americans.
Frankly, I can't think of a more efficient way to stimulate the economy
than to continue extended unemployment benefits. It puts money in the
hands of working families. That money is not going to be hoarded. That
money will not be spent on impressionist art. That money is going to be
spent immediately at Kmart and Target and Wal-Mart.
So this is not just about fairness. This is about getting the economy
moving again, at least in a very direct way. I believe we have to do
this. We have to do it now. The time literally is running out. As
Senator Kennedy pointed out, even today's program is less generous than
programs in the past. Indeed, the fund has over $20 billion of assets
that were contributed by these people when they worked. They paid into
these funds. Now they are simply asking in their time of need to be
supported, to be helped. It is not fair to ignore them.
There is no good economic argument to say we should not do this.
First, it is stimulative. It puts money directly in the hands of
Americans who will spend it. That is the best stimulation we can find.
Second, the notion that these people are just sitting around because
they don't want to work is preposterous. These people, many of them our
contemporaries, in their forties and fifties, would love to work simply
for the sake of working but, more importantly, because their expenses
far exceed whatever payment they will receive from this unemployment
compensation fund. We have to do something and we have to do it now.
Alan Greenspan, in January of 2002, dispelled this whole myth that
the administration is trying to foster that this program is not any
good, it is not worthwhile; they are just sitting around; it
discourages people from finding jobs.
He said:

[C]learly, you cannot argue that somebody who runs past the
26-week level is slow for not looking for a job or not
actively seeking to get re-employed. There are just no jobs
out there.

This is January 2002. The situation is worse today.

And consequently, to adhere to the 26-week limit doesn't
serve its actual purpose, which is essentially to prevent a
misuse of the unemployment insurance system. So I've always
been in favor of extending benefits when the job market
itself begins to dry up.

Frankly, this is the Sahara of the job market that we see today. It
is very dried up.
That was January 2002. It is worse today. Yet we are not responding
today. Since January 2002, we have lost over three-quarters of a
million more jobs. There is no economic argument against this
amendment. In fact, all of the economic arguments, all the arguments on
fairness, all the arguments about letting people get access to the
benefits before they find work again argue strenuously for this
amendment. I urge my colleagues to support the Kennedy amendment.
I yield back whatever time I have to the Senator from Massachusetts.
The PRESIDING OFFICER. Who yields time?
Mr. KENNEDY. I yield 7 minutes to the Senator from Washington.
Ms. CANTWELL. Madam President, I rise today in support of the Kennedy
amendment, and I hope my colleagues will see that the essence of this
amendment is about setting priorities in America.
Yes, we are discussing a tax bill that could end up including $350
billion in tax cuts directed at the most wealthy people in America.
While we are doing that, we are doing it in the face of the fact that
millions of Americans are unemployed and that their unemployment
benefits are running out.
So what are we saying by setting this priority, setting a bill in
motion out of the Senate that some Members believe is going to help
stimulate the economy, that it will really start us on the right track?
And instead of paying attention to the very people who have helped
build this economy, those in the aviation sector who lost their jobs
because of the downturn in aviation after 9/11, those who lost their
jobs because of corporate manipulation in the energy crisis, who lost
their jobs because of those market schemes and manipulations, and those
people who are simply just out of a job because of 9/11 and the economy
has not returned, we are saying, we don't have a plan to help you.
Instead, we want to propose one of

[[Page S6184]]

the biggest tax cuts in history hoping that somehow this will trickle
down to help you.
The point is, when in our history as a country have we proposed a
dividend tax cut as a way to stimulate the economy? Yet we have had two
of the last administrations, a Democrat and Republican administration,
which said one of the best things we can do during times of high
unemployment is to make sure we extend unemployment benefits. Why is
that? Well, it is quite simple. For every dollar spent on unemployment,
it generates $2.15 of stimulus. This is a proven economic plan. For my
State in Washington, where over 100,000 people would be impacted by
this amendment and would qualify, we are talking about real numbers. We
are talking about millions of dollars to our economy over the next
several months that can help pay mortgage payments, health care costs,
and as Senator Kennedy said, keep the lights on at home in a region of
our country that has seen some of the highest energy rates in a long
time.
What we are doing in this amendment Senator Kennedy is proposing is
putting forth an idea of how to help stimulate the economy that has
been tested and proven successful by two administrations, both
Republican and Democrat. Instead, we are saying we are not going to
include this in this package.
I must remind my colleagues that we came to this brink in December of
last year. While some of us might think we rectified it when we came in
in January, there were people in my State, as those unemployment
benefits were curtailed in December, who did lose their health care
benefits. They did lose the ability to take care of the health care
needs of their families. I am sure there were people who probably even
lost their homes because of that time period, because of the
uncertainty, because of our lack of commitment for these unemployed
workers. So here we are at the same point again, 2, 3 weeks away from
having this unemployment benefit extension evaporate on May 31 and no
commitment, no commitment to say we will extend unemployment benefits,
again at a time when we have had administration after administration
say, in times of tough economic situations and no job growth, the best
thing we can do is keep the stimulus going by making sure there is
unemployment.
So where are we? Well, as we know, the impact over the last 2 years,
the private sector has lost more than 2 million jobs. Unemployment has
jumped by 50 percent. As a State that has 7-percent unemployment now
and as a region, the Pacific Northwest, with Oregon, Washington and
Alaska, that has the highest unemployment in the country, this is no
simple matter. This is about priorities. This is about whether we are
going to take care of the working families who have helped build this
economy and sustain them until job opportunities increase again.
We will look for other opportunities to make sure the training
programs and the educational opportunities are there to retool the
workforce for the jobs of the future.
One of the amendments we were successful in getting on the budget
bill earlier in setting our priorities was to say that we should not
cut the job training programs. We still have people in Washington State
who are willing to hire this workforce that has been laid off, but they
want them to be retooled. They want them to gain expertise. What better
time to do that than now, as they are working through their
unemployment, to offer to give them training benefits, make sure they
are retooled for the economy of the future--whether it is in
nanosciences, in biotechnology, in new aviation construction, in new IT
fields, or in nursing where we have over 130,000 openings for nurses in
this country, and the people who want to have those jobs. Instead, we
are allowing outside people to come in and take them because we are not
willing to take care of American workers. This is not a priority. We
are simply saying instead of giving the largest tax cut in history, and
passing this out of the Senate, knowing that thousands of workers are
going to lose their benefits in 3 weeks, we believe we should give them
that helping hand.
Make no mistake. Nobody in America wants an unemployment check. They
would rather have a paycheck. But until we can guarantee to these
people that we are going to get them that paycheck, we better extend
that opportunity, from a trust fund that they have paid into, the
things that they and their employers have paid into, the opportunity to
sustain them and benefit our economy.
The PRESIDING OFFICER. The Senator has used 7 minutes.
Ms. CANTWELL. I yield the floor.
The PRESIDING OFFICER (Mr. Cornyn). Who yields time?
Mr. KENNEDY. Mr. President, how much time do I have?
The PRESIDING OFFICER. The Senator has 18 minutes 7 seconds.
Mr. KENNEDY. I will yield 4 minutes to the Senator from Montana, 10
minutes to the Senator from Connecticut, and 4 minutes to the Senator
from Iowa, Mr. Harkin.
Mr. BAUCUS. I see Senator Dodd ready to speak. I suggest that he
speak, and I will speak after him.
The PRESIDING OFFICER. The Senator from Connecticut is recognized.
Mr. DODD. Madam President, I thank my colleague from Massachusetts
for yielding me some time. I have just a few observations.
First of all, on the amendment being offered by our colleague from
Massachusetts, it has been said by others, by my colleague from
Washington, and my colleague from Rhode Island, and certainly the
Senator from Massachusetts, as well, that this is difficult for many of
us to understand. I have served in this Chamber for more than two
decades now. I don't recall another time when we had a downturn in the
economy, where we had as many as 2 million jobs lost in the last 27
months, where 80,000 workers a week are losing their benefits. I don't
recall under any administration--I have served here under Republican
administrations and Democratic administrations, and I have served when
this Chamber was controlled by Democrats and also under Republicans,
and in the House also with both Democrats and Republicans; I know of no
other time in the more than two decades I have been here where in a
moment like this we would not provide an extension of unemployment
benefits.
It is truly shocking to see a piece of legislation designed to offer
relief to people, allegedly, through the tax cuts the President is
suggesting, with no assistance to the unemployed. We literally have
thousands of people who are facing difficult times, whose ability to
take care of their families, and to make ends meet have been hindered.
We are talking about putting people back to work and getting them jobs.
We are talking about 80,000 people a week running out of benefits. And
yet we find no space in the legislation to provide assistance to them.
I am really stunned in many ways that this is not part of this effort.
I can only hope our colleagues, regardless of political party, will
endorse the Kennedy amendment as part of this package. The
administration says they are still deciding whether an extension of
unemployment insurance is necessary. What do they need to know? Well,
80,000 people a week are losing their benefits. They are hard-working
Americans trying to hold together families, pay mortgages, pay car
payments, keep their kids in school. What do we need to know when
80,000 people a week are losing their benefits? Why can we not provide,
in this legislation, which involves billions of dollars, some relief
for these people?
Our unemployment insurance amendment would protect the unemployment
insurance safety net for 4 million out-of-work Americans. So I
sincerely hope the managers of this bill, and others, would see fit to
provide some space here. In my State alone, 58,000 people who are out
of work would be helped by the Kennedy amendment; in California,
562,000; in Florida, 161,000.
I ask unanimous consent that a State by State list, totaling the 4
million people who would be benefitted by this amendment be printed in
the Record at this time.
There being no objection, the material was ordered to be printed in
the Record, as follows:

FOUR MILLION AMERICANS WILL BENEFIT FROM THE ECONOMIC SECURITY AMENDMENT
------------------------------------------------------------------------
Number of out of
work Americans who
State would be helped by
the Kennedy
amendment
------------------------------------------------------------------------
Alabama............................................. 43,800

[[Page S6185]]

Alaska.............................................. 17,500
Arizona............................................. 44,700
Arkansas............................................ 33,300
California.......................................... 562,900
Colorado............................................ 56,300
Connecticut......................................... 58,500
Delaware............................................ 9,300
DC.................................................. 9,700
Florida............................................. 161,900
Georgia............................................. 100,800
Hawaii.............................................. 8,100
Idaho............................................... 16,100
Illinois............................................ 187,000
Indiana............................................. 71,000
Iowa................................................ 29,100
Kansas.............................................. 30,100
Kentucky............................................ 38,500
Louisiana........................................... 33,000
Maine............................................... 10,600
Maryland............................................ 44,700
Massachusetts....................................... 140,700
Michigan............................................ 154,200
Minnesota........................................... 58,700
Mississippi......................................... 28,500
Missouri............................................ 67,400
Montana............................................. 8,000
Nebraska............................................ 16,900
Nevada.............................................. 26,300
New Hampshire....................................... 7,300
New Jersey.......................................... 190,300
New Mexico.......................................... 13,300
New York............................................ 332,300
North Carolina...................................... 128,100
North Dakota........................................ 4,600
Ohio................................................ 116,700
Oklahoma............................................ 26,900
Oregon.............................................. 77,400
Pennsylvania........................................ 258,500
Rhode Island........................................ 15,800
South Carolina...................................... 52,700
South Dakota........................................ 1,800
Tennessee........................................... 69,100
Texas............................................... 242,100
Utah................................................ 23,200
Vermont............................................. 6,300
Virginia............................................ 62,500
Washington.......................................... 102,000
West Virginia....................................... 13,600
Wisconsin........................................... 69,100
Wyoming............................................. 4,600
Total \1\..................................... 3,886,100
------------------------------------------------------------------------
\1\ Including the part-time and low-wage workers, the total is 4.4
million. We do not have state-by-state break-downs for those workers.

Mr. DODD. Madam President, I really cannot believe that at this
moment in our history we would pass a bill that would not provide help
to the many, many Americans who need it. Let me also say, because I
know we are under time constraints--and I am probably not going to have
a chance to have any extended time for discussion of this later--that I
will speak briefly on an amendment that I have filed and intend to
offer later, to reduce the tax cut package to increase resources for
programs designed specifically to assist middle- and low-income
families with the cost of higher education--and those are the Hope and
Lifetime Learning tax credits and the Pell Grant program. And, I also
would have an equivalent amount of resources go to deficit reduction.
If we are serious about having this bill contribute to our economic
growth, then we ought to dedicate these resources to higher education.
I don't need to lecture anyone in the Chamber about the value of
providing higher education opportunities for people. Yet, in spite of
his rhetoric, the President's fiscal year 2004 budget includes cuts in
the maximum Pell Grant available to low-income students, and he would
do nothing to expand the Hope and Lifetime Learning credits, which are
specifically designed to help middle-income families. Nothing could be
more devastating to a family than to discover that they cannot afford
to send their son or daughter to college, regardless of their child's
talent, determination, or ambition. Or others who want to continue
learning throughout their lifetime of learning, but cannot, because
instead of helping them, we decide to provide a tax cut that primarily
benefits the wealthiest among us. For us to say to middle-income
families that your opportunity to send a child to college is going to
have to take a back seat to providing a tax break to the top 1 or 2
percent of income earners is something I don't think we ought to do.
So I am going to try, with this amendment, to focus our attention on
higher education. Of course, last week, we discovered the Government
has reported that the unemployment rate jumped to 6 percent. There are
economists in the country who believe the unemployment rate, by the
first quarter of next year, will hover near 8 percent. It is beginning
to become clear to this Senator that this possibility, as farfetched as
it may have seemed a few months ago, is not so farfetched at all if we
don't do something to stem the tide here.
Nothing in this legislation is designed to do that. Now we are going
to have, according to the Congressional Budget Office, the largest
single deficit ever accumulated in the history of the United States of
America. What a record that is. This is, of course, just 27 months
after we came off of a period of economic growth, of accumulating
surpluses, and putting our country on sound fiscal footing. Yet in 27
short months, we have gone from surpluses to the record high deficits
ever accumulated in this country's history. That is an incredibly
stunning record, not to mention the more than 2 million jobs that have
been lost.
In the midst of this massive tax break which will go mostly to the
few elite in the country, we are also going to be raising the national
debt to a point where it is almost a trillion dollars more than the
present national debt. If you are out there paying mortgage payments,
car payments, and student loans, you don't need to have a Ph.D. in
economics to know that as you accumulate these deficits and debts
eventually interest rates are going to start to go up.
When interest rates go up, that is a tax increase on average
Americans. When you start paying more for that house payment, that car
payment, that student loan that your child may need in order to receive
a higher education, that is a tax increase for middle Americans. If we
do not stem this tide and become more fiscally responsible, then those
interest rates are going to have a huge impact on literally millions of
Americans.
Again, you do not need to have me lecture about that point. I think
most Americans understand it. We have seen periods in our recent past
when that has happened. We are going to see it again, in my view, if
this proposal is adopted as presented.
Two years ago when we were debating the tax cuts of 2001, we were
told we could expect almost $6 trillion in surpluses over the next
decade. Instead, we are now getting record high deficits. Two years ago
we were told that if we enacted the President's tax cut plan, we would
virtually pay off the publicly held debt by 2008. We are headed in
exactly the opposite direction.
How many more signals do we need to get this Chamber to understand
that as we are digging this hole deeper and deeper, we need to pull out
of the hole. Instead, we are just as determined to dig that hole deeper
to the point where we will be spending years trying to recover from
this mistake.
After this Chamber passes part of the President's so-called growth
plan, and after we vote to increase the debt by almost $1 trillion, how
many more trillions of dollars are we going to have to increase the
debt limit to in order to make room for this irresponsible tax cut
affecting such a small percentage of taxpayers?
Let's consider what breaks people get. Again, I do not have to
present all of the charts here, but so people understand what I am
talking about, according to the Urban Institute Tax Policy Center,
those who have incomes above $1 million will receive, on average, a tax
cut of $64,400. For those in the middle-income spectrum, their tax cut
will be $233. That is what we are about to adopt at a time when we are
driving the deficit hole even deeper; and at a time when we are denying
an extension of unemployment benefits to the 80,000 people a week who
have and will be exhausting their benefits.
It seems to me that we are headed in the wrong direction on both
fronts. The Kennedy amendment would extend unemployment benefits. The
very least we ought to do in this Chamber is to say to hard-working
people: When you are caught up in an economic downturn, Republicans and
Democrats alike in recent history have extended a hand to these
families and said: Through no fault of your own, you have ended up in
that situation. This Congress is not going to ignore you. This Congress
is not going to pretend you do not exist.
We are saying nothing about those people.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. DODD. This tax cut is way too excessive, in my view, and will
benefit a small percentage of income earners, creating deficits from
which we will spend years recovering as it squeezes our ability to
provide help to working families and for education. I urge the adoption
of the Kennedy amendment. I ask for an additional 30 seconds.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DODD. We have 20 hours for debate on a reconciliation bill, which

[[Page S6186]]

may be the most significant debate we are going to have in this
Congress. Twenty hours--that is all we get to talk about the importance
of what we are about to do. I am deeply disappointed. We are
constrained in the Senate of the United States to have a more
meaningful debate about something as important as this.
I, again, urge adoption of the Kennedy amendment to at least provide
relief for those who have lost their jobs and ought to have some help
to provide for their families.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I ask all Senators to heed the words of
the Senator from Connecticut. I think he is accurate. I think he is on
target.
The amendment before us, of which I am a cosponsor, is very simple.
The answer of whether it should be adopted is also very easy.
Getting to the point, the question is, Should we extend unemployment
benefits to those millions of Americans who do not have jobs and whose
unemployment insurance is about to expire?
The provisions in Federal law that give unemployment insurance
benefits will expire in a few weeks. The number of unemployed people is
rising. These are people who have lost their jobs not because of their
fault but because they have been laid off, because the economy is
anemic. They lost jobs because their employers are laying them off.
The question is, Should the Congress extend unemployment benefits?
Should they extend unemployment benefits to these hard-working men and
women who are not making a lot of money? They are basic wage earners.
Should we extend unemployment benefits? To ask the question is to
answer it: Of course, we should.
I hear from the other side that maybe they will not look for jobs
because they are getting additional benefits. They are not getting more
dollars in benefits, they are just getting more weeks during which they
can receive about $200 a week while they are looking for a job. The
obvious answer to that charge is these are not good times. Two-hundred
dollars a week is not a lot of money. I daresay no Member of this body
can live on $200 a week. We are so used to living on more than $200 a
week. I see the Presiding Officer smiling, knowing there is probably a
little truth in that. I am suggesting we should do the obvious and
extend unemployment benefits.
Another argument I hear against this proposal is that it is not a
stimulus to extend the period during which people get unemployment
benefits. Of course it is a stimulus. Those people are going to spend
that $200-a-week check. Of course, they are going to spend it.
Economists will tell us that for every $1 of unemployment benefits,
there is a multiplier effect of $2.15 to the economy; that is, for
every $1, an additional $2.15 is spent in the economy. It is pretty
simple.
I also think it is pretty simple because we are paying for this by
repealing the top bracket, repealing the acceleration of the reduction
of the top tier. Some people say: That is a small business bracket.
Those people are all small business people. We should do this to
stimulate the economy.
That is totally wrong. It is totally incorrect. Less than 5 percent--
probably 2 or 3 percent--of the people who receive benefits in the top
bracket are small businesses. Let me put it differently; 2 to 3 percent
of small businesses in America are in that top bracket. Just 2 to 3
percent. Most of the people in the top bracket are not small business.
They are other people. They are very wealthy people. I have nothing
against wealthy people getting a tax break. Everybody should get a tax
break. It would be wonderful if we all could get a tax break.
We are elected to make choices and set priorities. The economy today
is not in great shape. This bill before us is designed and intended to
stimulate the economy by reducing taxes. I suggest the right course
would be, instead of giving the elite a tax break right now--a lot of
them tell me they do not want it; they do not need it--take some of
that money and extend unemployment benefits.
The PRESIDING OFFICER. The Senator has used 4 minutes.
Who yields time? The Senator from Iowa.
Mr. GRASSLEY. Mr. President, we will extend unemployment
compensation. We will support an extension, though, of current law. We
will do it before its expiration at the end of May. But this amendment
goes beyond extending unemployment compensation as it is written in
current law.
This is unprecedented for sure, and I also think it is an unjustified
expansion. There might be legitimate debate on that point, but there is
no legitimate opposition to a statement that this is unprecedented.
Also, this extension and this change in law comes at a time when
unemployment is not as high as it has been in previous recessions. The
current unemployment rate is 6 percent. That is compared to 7 percent
at times during the 1990s and more than 8 percent during the 1980s.
It was in the 1990s at 7 percent, in the 1980s at 8 percent. Those
happen to be the last two times that Congress provided extended
benefits.
I also point out the unemployment rate right now in 23 States is
lower than it was 1 year ago. When it comes to people who have
exhausted benefits, this amendment would provide 26 weeks of Federal
benefits even without regard to the duration of State benefits. So this
violates an insurance principle that we followed for a long time
inherent in the unemployment program, and it violates it by breaking
the link between the time someone has worked and the time that person
can collect unemployment benefits.
This amendment additionally would also allow someone who worked as
few as 20 weeks to collect as much as 26 weeks of federally-funded
benefits.
This amendment also deals with part-time workers. In offering this
amendment, what they forget at the Federal level is that we already
give States the option of covering part-time workers. So why a national
policy of covering part-time workers when this has been historically a
State program that has been financed through some Federal taxation?
There are a lot of details left to individual States to decide. It is
not possible for us to legislate at the Federal level the conditions
that exist in various States for deciding whether part-time workers
should be included.
This provision would allow those seeking only part-time work to
collect unemployment benefits. What this basically means is a worker
could turn down a full-time job and continue collecting unemployment
benefits.
There is a provision of this amendment that changes policy in regard
to low-wage workers. This is another provision under Federal law where
States already are given the option of doing this. This provision would
require States to use what is referred to as an alternative base
period. That means using the most recent quarter to calculate benefits.
In 1997, this was offered to the Senate and we voted 85 to 15 to
overturn a Federal court decision that would have required the States
to use the most recent quarter. In other words, Congress decided in
1997 against a court decision doing what this amendment does. We
decided 85 to 15 to leave it to the respective States, as has
historically been the case, to make this decision of using an
alternative base period.
So as I mentioned, I will support, and I believe the Senate will
pass, an extension of current law for unemployment benefits before it
runs out.
This amendment is paid for in a way that discourages job creation.
Remember, the fundamental purpose underlying this legislation is to
give incentive for investment for the creation of jobs. So how is this
amendment paid for? By attacking small businesses, by delaying the tax
relief that is in this bill for 80 percent of those who are taxed at
the 39 percent rate. Remember, we reduce the highest marginal tax rate
down to the same as the highest corporate tax rate. Why? Because there
should not be a bias in our tax law against small entrepreneurs,
unincorporated entrepreneurs.
As we have been told so often by Joint Tax and by the White House, 80
percent of the benefits go to small business. Now, that does not mean
all small business is taxed at the 39 percent level, but by reducing
this we are taking away a bias against small business. There should not
be an 11 percent penalty for being an unincorporated small business. It
is unfair. When we had a lower marginal tax rate for small

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business at 28 percent for the top individual rate, as we did after
1986 until it was raised, we had a 5 percent differential between the
corporate rate of 33 percent and the highest individual rate of 28
percent. During that period of time, we had an explosion of small
business, setting the stage for the massive growth we had in the
economy in the 1990s.
What does this amendment do? It will kill the opportunity for job
expansion that we have prepared in lowering the marginal tax rate for
self-employed people, doing away with the bias in favor of corporations
so that where 80 percent of the jobs are created in small business,
there will be an incentive to create new jobs.
The National Bureau of Economic Research shows that the surest way of
expanding small business is from their own equity, by reducing the
marginal tax rates, which is going to encourage the sort of investment
that creates jobs.
The Senators who have offered this amendment are complaining about
lost jobs, but then this amendment undermines the very provisions of
the basic bill that will create the jobs we need.
Obviously, I urge the defeat of this job-killing amendment.
I yield the floor.
Mr. LEVIN. Mr. President, I rise to support the amendment being
offered by Senator Kennedy to extend and authorize additional
unemployment benefits.
This is a tumultuous time for millions of Americans. Our economy is
struggling right now and millions of Americans are down on their luck.
Businesses and manufacturing plants are closing, the stock market is
down and most importantly, jobs are being lost. It is critical that we
in Congress, at a minimum, do what we can to help every day Americans
hurt by this downturn, especially the increasing number of people who
are unemployed and having trouble getting back into the workforce.
There are currently over 8.7 million unemployed Americans--the
highest number in a decade. Since January 2001, the national
unemployment rate has risen from 4.2 percent to over 6.0 percent. Since
President Bush took office, the United States has lost over 2.7 million
private sector jobs--the most of any President in modern history. The
downturn has especially hit my home State of Michigan hard. Michigan
has an unemployment rate of 6.7 percent--among the highest in the
Nation. According to the Bureau of Labor Statistics, Michigan lost
17,700 jobs just last month--the most of any State in the country. That
brings the total number of Michigan jobs lost since the Bush
Administration took office to over 178,000.
Earlier this year, Congress extended Federal unemployment benefits
for an additional five months to June 1, 2003. However, Congress did
not authorize additional Federal benefits. Therefore, over 1 million
workers who already had exhausted their 13 weeks of federal
unemployment benefits and received no benefit from what Congress did
earlier this year. Now is the time to assist those workers and all
other Americans who are on the verge of exhausting either their state
or federal unemployment benefits and in some cases, both.
It is ironic that during the week the Senate is taking up the
President's ``Jobs and Growth'' package--the majority is not addressing
the immediate need for job assistance for millions of Americans.
Instead of pressing Congress for a ``robust'' tax cut to help the
wealthiest Americans, the President should be fighting for additional
unemployment benefits for working families who need them and will spend
them, stimulating the economy. That is why I support Senator Kennedy's
amendment to authorize an additional 13 weeks of Federal unemployment
benefits, including coverage for those one million workers who have
already exhausted their benefits. Senator Kennedy's amendment also
expands unemployment coverage to low-wage and part-time workers.
Finally, the amendment extends the Federal unemployment benefit program
through November 2003 to accommodate new enrollees.
This is not just about doing what is right. It is also about doing
what is helpful to our economy. It is elementary economics that
providing additional unemployment benefits is a great way to jump start
our stagnant economy. The money we are talking about here is money that
will be spent. According to a 1999 Department of Labor study, every $1
dollar invested in unemployment insurance generates $2.15 in gross
domestic product. So we are going to be putting money into the hands of
people who need it, people who will spend it, people who will help the
economy.
Over 47,000 Michigan residents have exhausted their Federal
unemployment benefits as of February of this year. If we fail to act,
in 2 weeks, over 1.1 million Americans, including nearly 54,000
Michigan residents, will be without unemployment insurance benefits.
This is unacceptable, especially given the fact that the Federal
unemployment insurance trust fund currently has a surplus of more than
$21 billion. The contrast couldn't be more evident than in this debate.
Instead of pushing for a huge tax cut sharply slanted to upper income
folks, I would hope that the Senate will show real leadership and
support unemployment insurance that benefits working families.
The President accuses us of engaging in ``class warfare.'' Well, what
he calls class warfare, I call reality. Under the President's tax cut
plan, the wealthiest 1 percent of Americans are expected to receive an
annual tax cut of about $90,000 a year, or a little more than $1700 a
week. Under the Kennedy amendment, unemployed workers in my home state
of Michigan would receive a maximum benefit of $362 a week. This bill
will put money into the hands of people who need it and people who will
spend it. That's good for our economy and it helps sustain the jobs
that other people do have. The Senate should unanimously adopt this
amendment.
The PRESIDING OFFICER. Who yields time?
The Senator from Montana.
Mr. BAUCUS. Mr. President, I have the highest regard for my friend
from Iowa, but for him to characterize this as a job-killing amendment
is just beyond the pale. The fact of the matter is that less than 5
percent of small businesses are in the top bracket that will be
repealed under the amendment. That is a very conservative estimate.
Second, when we are talking small businesses under terms of this
amendment, we are talking about law firms, we are talking about
partnerships of all kinds. We are talking about dental partnerships and
doctor partnerships. When people use the word ``small business,'' it
conjures up a 15 or 20-person operation that is working hard to make
ends meet. When we talk about small business, however, we must be clear
as to which small businesses are in that top rate. Less than 5 percent
of all small businesses pay that top rate, so we are not hurting small
business with this amendment, by any stretch of the imagination.
Second, this roughly 5 percent of small businesses includes the mom-
and-pop small businesses we have all talked about, but also the
partnerships like law firms and dental partnerships. I do not think the
latter really conjures up what we are talking about when we talk about
helping a small business. Maybe we are, but I think most Americans are
not. That is a fact I want to get in the record, that really so few
small businesses are in that top rate.
I ask unanimous consent that the pending amendments be temporarily
set aside so that the Senator from Arkansas may offer her amendment.
Mr. DODD. Reserving the right to object, Mr. President, and I will be
very brief.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. I want to follow up. I know the chairman of the committee
is here, and I missed a little of the discussion because I had to step
outside the Chamber with some police officers from my State. I will
take a minute or so and obviously then move to the amendment of the
Senator from Arkansas.
I understand the chairman made a statement about this issue of
unemployment insurance at some point. I wonder if the distinguished
chairman of the committee might share with Members when that might
happen and why we cannot do it now. We know this is a growing problem,
and we always delay these things. When 80,000 people a week are running
out of benefits, we have had more than 2 million people

[[Page S6188]]

lose work since the President came into office, why not extend
unemployment insurance on this bill? It would be a great gesture to the
American public. My question is, simply, to ask if the chairman of the
committee might respond.
The PRESIDING OFFICER. The time on the amendment has expired.
Mr. GRASSLEY. I ask unanimous consent that immediately following
action on S. 1054, the Senate turn to consideration of legislation
introduced by the majority leader or his designee to extend emergency
unemployment benefits until November 30, 2003; that the bill be
considered as read three times and passed; further, that the motion to
reconsider be laid upon the table, with all this to occur without
intervening action or debate.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. This is the first I have heard this. I don't know what
this is all about. Pending a better understanding of the request, I
respectfully object.
The PRESIDING OFFICER. The objection is heard.
Is there objection to setting aside the pending amendment?
Mr. DODD. Further reserving the right to object, I ask unanimous
consent that I be allowed to proceed for 1 minute.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DODD. I want to know why this could not be adopted as part of
this passage. We have an amendment here right now to do it. This is the
time to do it. We all care about this and have people in every State
adversely affected. Why wait another series of weeks? Why not do it
right now and adopt the Kennedy amendment and move this issue beyond us
and deal with the rest of the bill? That is my question to my
distinguished chairman.
Mr. GRASSLEY. Mr. President, I will answer his question, if I am
permitted.
Two reasons: One, this amendment is not germane to this bill; two, it
goes to the expansion of unemployment benefits as opposed to extension
of existing benefits.
Mr. DODD. I further understand that the bill the chairman is talking
about would not expand this at all but really just extend it; is that
correct? So we will have a debate about that, obviously.
Mr. GRASSLEY. Yes.
Mr. DODD. I thank the chairman for responding.
I am sad in a way, and maybe the amendment will be adopted by
majority if that is the case and we can move beyond this.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. I ask unanimous consent that the pending amendment be set
aside and the Senator from Arkansas be recognized to offer her
amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 578

Mrs. LINCOLN. Mr. President, with the amendment set aside, I call up
my amendment.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Arkansas [Mrs. Lincoln], for herself and
Mr. Rockefeller, Mr. Bingaman, Mr. Breaux, Mr. Daschle, Mr.
Levin, Ms. Cantwell, Mr. Pryor, Mr. Kerry, Mr. Kennedy, and
Mr. Dodd, proposes an amendment numbered 578.

Mrs. LINCOLN. 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:

(Purpose: To expand the refundability of the child tax credit)

At the end of subtitle C of title V, insert the following:

SEC. __. FURTHER EXPANSION OF CHILD TAX CREDIT REFUNDABILITY.

(a) Expansion of Child Tax Credits.--
(1) In general.--Clause (i) of section 24(d)(1)(B)
(relating to portion of credit refundable), as amended by
section 106(b) of this Act, is amended to read as follows:
``(i) the sum of--

``(I) 5 percent of so much of the taxpayer's earned income
(within the meaning of section 32) as is taken into account
in computing taxable income for the taxable year which
exceeds $5,000 and is less than $13,250, and
``(II) 15 percent of so much of the taxpayer's earned
income (within the meaning of section 32) as is taken into
account in computing taxable income for the taxable year
which is more than $13,250, or''.

(2) Effective date.--The amendment made by this subsection
shall apply to taxable years beginning after December 31,
2002.
(3) Application of EGTRRA.--The amendment made by this
subsection shall be subject to title IX of the Economic
Growth and Tax Relief Reconciliation Act of 2001 to the same
extent and in the same manner as the provision of such Act to
which such amendment relates.
(b) Delay of Dividend Exclusion.--Subparagraph (B) of
section 116(a)(2) (relating to partial exclusion of dividends
by individuals), as amended by section 201 of this Act, is
amended by striking ``2007'' and inserting ``2010''.

Mrs. LINCOLN. I thank all of my colleagues for their attention today
because I believe I brought something to the floor that is of the
utmost importance to American families.
I compliment the chairman of the Finance Committee. Having worked
with limits on a multitude of issues, he is always reaching out and
working hard with all the members of the Finance Committee. I applaud
him for his efforts in working with me early in the committee to
accelerate the child credit we have in this stimulus package. The
acceleration of the child credit is very important in terms of reaching
out to families and providing them the utmost resources to be able to
care for their families, to be able to do what they need to do not only
in taking care of their families but playing a role in stimulating this
economy.
We certainly know that with our businesses and industries operating
at roughly 70 percent, it is critical, if these industries are going to
create the jobs we want created for the sustainability of growing this
economy, that they have a demand. They are going to need people
demanding their products and services, and that will be critical. The
way to do that is to provide families the resources and the means with
which to provide for their families.
That acceleration we provided in the committee went a long way in
doing that. My hope is we will continue to move in that fashion, in the
right direction of providing families the resources they need, the
hard-working American families who are out there today working hard to
provide for their families.
This amendment does that through the expansion of the child credit.
Basically, what we do is expand the child credit refundability by
lowering the earnings threshold to $5,000. This is a reasonable request
in light of what we are talking about--again, assistance to families in
order to raise their children and provide for their needs, as well as
stimulating the economy.
I point out to my colleagues, there are 8 million children from
working families in this great country at the very bottom of the income
scale who get no benefit from the current child care tax credit, 8
million children in this country we are trying to raise in working
families who get no benefit from this child tax credit; 4.4 million of
those 8 million children would benefit from the child credit under the
amendment I have offered today.
By providing tax relief to those who need it the most, our amendment
will have a direct and meaningful stimulative effect on the economy.
I am joined in this amendment by several other cosponsors: Senators
Rockefeller, Bingaman, Breaux, Daschle, Levin, Cantwell, Pryor,
Kennedy, Dodd, and I think many others, when they realize what we are
trying to do and the effect we can have on their States and, more
importantly, the working families who are out there every day trying to
make ends meet. The families of these kids play by the rules. These are
individuals who are working. They go to work every day at extremely low
wage jobs. They pay significant payroll, State, and local taxes, excise
taxes, and property taxes. Oftentimes they struggle to make ends meet,
yet they get no benefit from the child tax credit.
Now, I hope my colleagues will indulge me for just a moment. One of
the things many reflect on is that raising children is probably one of
the most important and expensive undertakings that anyone has. We do it
for good reason. We talk about what a great nation we live in. We talk
about how wonderful it is to be a part of the greatest

[[Page S6189]]

country on the face of this Earth. Then we think about the face of our
country tomorrow. Who will be the face of this country tomorrow? What
will it look like?
The face of this country, tomorrow and in the future, will be shaped
by how well we raise our children today. That is what I am asking my
colleagues to focus on. It is not just our children. I don't just worry
about my children and their well-being. I worry about the other
parents' children who are out there, who will be the coworkers with my
children, who will be the leaders of tomorrow. They will be the face of
this country when we are working in a global economy with multitudes of
nations across the globe. These are the children we are raising today.
My colleagues, we have an opportunity today to give a hand to these
parents in raising these children with a simple child credit, a
refundable child credit. These are people who are hard-working. To be
eligible, they have to be in a job. They have to meet an earnings
limit. They have to have children. We are not just giving a freebie; we
are reaching out to these hard-working parents and saying let us help
you shape the face of this country tomorrow.
Just one more indulgence. As I talk about raising children and the
importance of that face of tomorrow, I reflect on the time I have spent
in my State visiting with and shadowing some of our low-income workers,
particularly some single moms who have been out there working. They are
working parents with children in childcare, struggling with challenges
of childcare and transportation. There are multitudes of challenges
they face.
I look at what I spent my time doing during the Easter break, during
the 2 weeks we are off from Congress, home in our States. I spent a lot
of time on the road, visiting with children, parents, chambers of
commerce, Rotary groups, development groups, planning districts--all of
those different groups. But I also switched my hat around for a few
days and spent some time myself out there as a mother, as a parent.
I went to the store after looking at the fliers and seeing where the
sales were, and I thought about what I did with my time and my
resources. I thought that with two growing boys, age almost 7, I had to
replace wornout blue jeans, wornout tennis shoes, that I wrote a check
to my school for their lunchroom tab, the fact I wrote a check to make
sure they would be on the Little League team and made sure they had
their uniforms. I looked at the other things, the county summer
programs I wanted to include them in so they would have good
activities, exercise, and grow just like any 7-year-old little boy
ought to be growing.
I looked at what we did. We didn't go to Disney World. We didn't do
anything expensive. They went fishing with their grandfather and spent
some time with their cousins and grandmothers. But I looked back at the
time and the resources I spent in molding and shaping those two little
boys. Let me tell you, it was no different than any other working mom.
If we want to stimulate this economy, if we want to develop a nation
with the kind of leadership and future I think everyone in this body
wants us to have, then it is absolutely critical that we look at
expanding that child credit to these working families.
Under the current law, the President's proposal, and the Finance
Committee bill, a working family with earned income of $10,000 gets no
benefit from the child credit. Our amendment today would give such a
family with two children a total benefit of $500. This does not seem to
be much money to many of us perhaps, but it amounts to a significant
increase in the amount of money available to these families to provide
for the most fundamental needs for their children. Again, we are
talking about basic needs that also will drive the economy. These
people are not going to be able to participate in stimulating the
economy if they don't have the extra resources they need. These are
working individuals.

Children have a variety of needs at a variety of ages, the most
fundamental of them being shelter, food, clothes, education, and health
care, and $500 can make a substantial difference to a family with an
earned income of $10,000 or less. This sort of benefit can go a long
way in helping these families raise their children, encouraging them to
excel in their jobs and to set a good example.
It is the least we can do for these struggling and impoverished
families who, again, are working hard every day earning money and at
the same time trying to care for their children. They have the same
kind of love and compassion, the same kind of ability to give them the
basic needs that every one of us tries to have every day.
I just implore my colleagues, please look at this opportunity we have
before us today, an opportunity to reach out to working American
families who are struggling day in and day out to do what is right.
They are struggling to do what is right by their children, perhaps
simply out of their own compassion and love for their children, not
knowing that we as a nation are depending on those children to be the
leaders and the providers, the employees of tomorrow.
I ask my colleagues to take a look at this amendment. Recognize all
we are doing is postponing the 20 percent exclusion on dividends--only
postponing it for 3 years, postponing that exclusion in order to mold
and shape the future of this country.
I would like to share with my colleagues in just a few of my
neighboring States what they would see. Arkansas would see the number
of added kids, when we move to that $5,000 threshold, an increase in
Arkansas of 60,000 children we could cover. I look around at my
neighbors: Mississippi would see 100,000 children additionally covered.
In Tennessee, you would see 108,000 children eligible who would not be
eligible otherwise. In the State of Texas, my neighbor to the south,
you would see 467,000 children added with a benefit if we passed this
amendment.
I implore my colleagues to really take a look at what our purpose is
today, what we have been striving to do. Let's not just try to
stimulate the economy but use the opportunity we have in growing this
economy to grow this great country. I daresay there will not be anyone
in this Chamber who could argue with me that the future of this country
lies in the future of our children.
Once again, we have a tremendous opportunity. I hope my colleagues
will realize that 4.4 million of the 8 million kids who are left out
under the current bill would begin to benefit from a child credit under
this amendment. By providing this tax relief to those, again, who need
it the most, we will have a direct and meaningful stimulative effect on
the economy. Let me tell you, just as I did as I turned my hat around
and became a mother during my break time, these families will spend
those dollars. They will spend them on our greatest asset this country
could possibly have, and that is our children.
I thank you for the time. I yield the floor and encourage my
colleagues to support my amendment.
The PRESIDING OFFICER. Who yields time?
The Senator from Iowa.
Mr. GRASSLEY. Mr. President, we all owe the Senator from Arkansas a
debt of gratitude for a lot of leadership she has shown in this area,
not only on the present bill that is before us, because she did get
some amendments adopted in committee. She voted for our bill on final
passage. I appreciate very much that being the case because it made it
a bipartisan piece of legislation. But also, she has expressed the same
concern because she was a member of the committee, 2 years ago, when we
passed the existing tax law that we are adjusting now to bring it up to
date and fully implement it in 2003, rather than as we decided 2 years
ago, to implement it over a 10-year period of time. She was very active
in these areas in that basic legislation.
So she is very consistent in expressing concerns about families of
low income, and particularly low-income families with children. I wish
I could do all the things she asked us to do, but we have to craft
legislation that is pretty well balanced. One of the largest parts of
our bill is the $95 billion that is provided for families with
children.
Obviously the Senator from Arkansas would like to make this more
generous. I wish we could. But I don't feel we can. The provisions that
are in this $95 billion have been, to a great extent, because of the
work of the Senator from

[[Page S6190]]

Arkansas. It includes expanding benefits for low-income families, a
provision that is included in great part because of the hard work of
the Senator from Arkansas. Moreover, this legislation creates a new
benefit.
But I think that the exception I take to her amendment is just
basically because it hurts the balance of this bill between investment
and spending.
I appreciate the Senator's work on these matters. It would be subject
to a budget point of order. I will raise that at the appropriate time.
I will not do it taking exception to policy but taking exception to
what can be accomplished at one time, and the fact that we are trying
to have a balanced package between investment and spending. I think it
would put us over the balance on the spending side.
For that reason, I will raise that point of order but do it without
prejudice.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. GRASSLEY. 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. GRASSLEY. Mr. President, I am going to yield to the Senator from
Oklahoma what time he might consume either on amendments or on the
bill.
Mr. NICKLES. Mr. President, I thank my friend and colleague, the
manager of the bill, chairman of the Finance Committee. I want to make
a few comments concerning unemployment compensation.
It is my understanding that the chairman said he would not object to
and he is trying to facilitate a clean extension of the current
unemployment compensation program. That is what the Senator from New
York, Senator Clinton, and I did twice on this floor. We did it last
December and early this year. The first piece of legislation we passed
this year was the clean extension of the unemployment compensation
program. That is a 13-week Federal program.
Senator Kennedy is being consistent. He is trying to make a 13-week
program into a 26-week program. That costs $12.7 billion. A clean
extension costs $5.6 billion. We will agree with a clean extension. We
will not agree with doubling the program.
Keep in mind this is a 13-week program. Current law is a 13-week
Federal program on top of up to 26 weeks of State benefits. That is a
total of up to 39 weeks. That is a total of 9 months. If we adopted
Senator Kennedy's amendment, that would be a 26-week State program, and
a 26-week Federal program, the second part of it paid 100 percent by
the Federal Government. That is a year. In addition to that, there are
additional weeks for high unemployment States.
This is not going to pass. It was tried several times on the floor of
the Senate last year and it never passed. It is not going to pass this
year. We are not going to double the program. We will be happy to work
with our colleagues to extend the current law. We will not double or
triple this program.
I appreciate the work of the chairman of the Finance Committee and
other Members who want to truly give assistance to people who are
unemployed and who need temporary assistance. But we don't want to turn
it into a year-long program. If we did that, frankly, the trust fund
would be running out of money if another extension was passed. That
would be very foolhardy.
I also tell my colleagues that a budget point of order lies against
Senator Kennedy's amendment. A germaneness point of order lies against
Senator Kennedy's amendment. We should be trying to work to create
jobs. That is really the essence of what the President's proposal is--
and the chairman of the Finance Committee--to help create jobs and not
just write checks for the unemployed but create an environment that
will be more conducive towards investment, more conducive to encourage
people to make investments to create jobs. That is what we are trying
to do.
We do that several different ways. One is to reduce tax rates.
Somebody says that is a tax cut for the wealthy. I disagree. By the
time we are finished, the maximum rate is 35 percent. I believe that is
still more than a third--still a lot more than 31 percent--which was
the maximum rate when President Clinton was elected.
In 2001 they cut taxes for the wealthy and reduced the maximum rate
from 39.6 to 38.6, 1 percentage point. President Clinton raised it, and
many in this Congress raised it from 31 percent to 39 in 1 year
retroactive. By the time we are done, the rate is going to be 35
percent, which is still almost 20 percent higher than it was when
President Clinton was elected.
I just want to make a few additional points. Also in the chairman's
mark we have expensing for small business. They will be able to expense
items up to $75,000. We are looking to maybe even accelerate that
similar to a provision in the House. That will create an incentive for
small business so people can write off that investment in the year that
investment is made instead of amortizing over years. That will create
jobs because more people will make that investment.

We are also talking about eliminating this very unfair double
taxation on dividends. Why should we tax distribution of corporate
profits at the second highest rate in the world? That makes no sense
whatsoever.
The President has proposed that we eliminate double taxation.
President Carter said in the past we should eliminate the double
taxation of corporate dividends. I hope we will be able to do that, and
I expect we will be presenting an amendment to enhance or strengthen
the dividend proposal that is before us today which would actually
eliminate the double taxation of dividends. We tax dividends now at the
second highest rate in the world, higher than France, Belgium, and
Italy. We don't need to do that. We can fix that in this bill today. By
doing so, we will be encouraging a much better environment for
investment, and encourage, I think, a much greater prospect for the
stock market. I think the stock market would improve substantially and
as a result, therefore, there would be more equity, more equity
investments, more private sector jobs. That ultimately should be our
goal.
I urge our colleagues not to be mislead by Senator Kennedy's
amendment. Let's pass a clean extension of the unemployment
compensation program. We can do that by unanimous consent. We passed
the previous one by unanimous consent, or we can have a recorded vote.
We can do that outside the reconciliation bill. We can do that and have
it on the President's desk, and extend the present law.
I yield the floor.
The PRESIDING OFFICER. The Senator from Maryland.
Mr. SARBANES. Mr. President, I yield myself 2 minutes off of the
bill.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SARBANES. Mr. President, I want to respond to the Senator from
Oklahoma, and urge my colleagues to support the Kennedy amendment.
What are workers to do in terms of supporting their family if they
exhaust the 39 weeks of unemployment insurance benefits that they are
eligible to receive? Senator Kennedy's answer is that under the current
circumstances we provide an additional 13 weeks of benefits.
The labor market is not improving. It is worsening. The unemployment
rate is rising, not falling. This notion that there are jobs to be had
does not square with the facts. The economy is continuing to lose jobs.
We lost 48,000 jobs last month. We have lost over half a million jobs
already this year. The unemployment report stated that almost 9 million
workers were unemployed in April. Just under 2 million workers have
been unemployed for 27 weeks or more. The number of long-term
unemployed is as high as its been since January 1993.
The average duration of unemployed has risen to 19.6 weeks. This is
the longest average duration reported during this recession, and it is
the highest level in almost 20 years. What are these people to do?
The Kennedy amendment is very simple. It says that providing some
continued support for those who have lost their jobs through no fault
of their own is more important than providing some

[[Page S6191]]

of these tax cuts that are proposed in this legislation.
It makes sense for the individuals, and it makes sense for the
economy. We are talking about trying to stimulate the economy. Extended
unemployment insurance benefits are scheduled to stop and that will
withdraw that much purchasing power out of the economy.
So I urge my colleagues to be supportive of this amendment. We face a
worsening economic situation. Unemployment is rising. The opportunities
in the job market are shrinking. We need to provide help to our workers
and to their families to help them through this very difficult period.
The Kennedy amendment seeks to do that.
The unemployment insurance trust funds have surpluses of almost $20
billion.
The PRESIDING OFFICER (Ms. Collins). The Senator's time has expired.
Mr. SARBANES. Madam President, I yield myself 30 more seconds.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. SARBANES. The unemployment insurance trust funds have surpluses
of approximately $20 billion. These moneys were paid into the trust
fund for the announced purpose of paying unemployment insurance
benefits in an economic downturn. Now we have an economic downturn. We
have people out of work. We have the job market worsening, not
improving. These surpluses ought to be used for the purpose for which
they were intended; and that is, to provide extended unemployment
insurance benefits. And those benefits ought to come ahead of any of
the tax cuts.
I urge my colleagues to support the Kennedy amendment.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
The Senator from Montana.
Mr. BAUCUS. Madam President, I ask unanimous consent that the pending
amendments be temporarily set aside so the Senator from Washington can
offer an amendment.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The Senator from Washington.

Amendment No. 577

Ms. CANTWELL. Madam President, I call up amendment No. 577.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Washington [Ms. Cantwell], for herself,
Mr. Nelson of Florida, and Mr. Baucus, proposes an amendment
numbered 577.

Ms. CANTWELL. Madam President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The amendment is as follows:
Ms. CANTWELL. Madam President, I rise today, along with my
colleagues, Senator Nelson of Florida and Senator Baucus, to offer an
amendment to revise and extend the research and development tax credit.
I know my colleagues will be familiar with this amendment, but I want
to clarify three things this amendment does. First, it will extend the
research credit through June 30, 2014, which is the end of this
reconciliation period. Second, it will increase the rates of the
alternative incremental credit; and third, it will create a new
alternative simplified credit for qualified research expenses.
This language is identical to the language that was originally
included in S. 664, introduced by Senator Hatch from Utah and
cosponsored by 27 bipartisan Senators. The amendment pays for this tax
credit by eliminating the underlying legislation's section reducing the
dividend tax credit.
Since its increment in 1981, the research tax credit, I believe, has
demonstrated that it is a powerful incentive for companies to increase
research spending. The tax credit lowers the cost of doing research in
the United States, so it encourages companies to continue to make
investments in critical R&D. The bottom-line benefit is that research
and development creates new jobs in the United States.
The current R&D tax credit is expected to expire on June 30, 2004.
Many of my colleagues know we play this annual game of continuing to
say the R&D tax credit is important, but not renewing it on a permanent
basis, thereby saying to companies and organizations: You don't know
whether you will actually get this research credit or not. It is
important for companies to have access to this information because the
kind of planning it takes to do research and development, to increase
productivity in America, is not necessarily done in 1 year or 2 years.
The major investments in nanotechnology and biotechnology, in software,
and in the computer sciences take several years of investments. So what
we are talking about is giving businesses the predictability they want
to see in research and development so they can move ahead.
The long-term nature of these research projects, I believe, is
something Congress should recognize today and make part of a priority
package for reinvigorating America. This is a tried and true program,
again, for creating jobs in America.
In this tax cut bill--we are trying something that is new,
effectively saying, let's cut taxes on dividends for individuals, and
hope it trickles down to create jobs in America. We know the R&D tax
credit works--it works, and it works effectively.
The point I want to make to my colleagues is, what we need to
understand, is the changing nature of businesses today in an
information economy. So many of the businesses that have been the great
engines of growth in the 1990s are companies that now spend 27 percent
of their overall dollars on research and development. So research and
development has become a bigger percentage of a company's overall
plans, and predictability about that research and development has
become more important.
That is why two years ago Federal Reserve Board Chairman Alan
Greenspan told a Senate Budget Committee:

Had the innovations of recent decades, especially in
information technologies, not come to fruition,
productivity growth during the past five to seven years,
arguably, would have continued to languish at the rate of
the preceding twenty years.

So here was someone in charge of advising us on Federal investment
and tax policy basically saying these companies have been able to
invest in R&D, and have gotten us to that productivity rate we are so
interested in. So why aren't we including that in this package--
something we know is tried and true, something we know many
organizations have come before us to argue for, asking, why not make
this permanent? So in my amendment, we expand that tax credit through
June 2014--which will help the economy turn around.
I would like to enter into the Record comments--I have no idea where
my colleague will be on this particular amendment, but I would like to
enter into the Record, or reenter into the Record, I guess--comments
from my colleague from Utah, who I think spoke eloquently on this
particular issue. As my colleague from Utah said:

As it stands, companies have to take account of the fact
that Congress could allow the credit lapse for a few months,
as it did a number of years ago. So companies hedge their
bets, they spend a little less on R&D, and our economy
suffers as a result. By contrast, permanence helps planning.
The sooner we make this permanent, the sooner companies can
begin to enlarge and expand their research and development
units, and the sooner their innovations will strengthen
economic growth.

He quoted a variety of studies that I think are very important. He
went on to say:

A permanent extension of this credit may seem costly in
terms of lost revenue. However, when you consider the value
this investment will create for our economy, it is a bargain.
In fact, one study estimates a permanent research credit
would result in our gross domestic product increasing by $10
billion after 5 years and by $31 billion after 20 years.

The Senator is quoting a study and analysis of various economists who
are saying this is really how we get to productivity in our economy. I
am quoting the Senator because I believe in what he said.
I understand my colleagues may not think that now is the time for
this particular amendment. I argue that it is exactly the time for this
amendment because let's think about it. Who has created jobs in the
last decade? Who has stimulated our economy to move

[[Page S6192]]

forward? It is a lot of companies that have invested in R&D. It is the
Microsofts. It is the Amazons. It is the variety of companies from my
State and others that have made the investments which increase the
productivity of their workforce, where they can then hire new people as
new products and services are delivered.
That is something with which we have had good experience. I want to
get back to 3.5-percent economic growth. I know the economic engine
that will take us there will be these companies and corporations that
know about producing product and services in an information age
economy. What they tell us is important to them, is making permanent
the R&D tax credit. They say this because there is currently no
certainty--they come to us every few years to try to understand whether
we are going to give them these tax credits.
I ask unanimous consent to print in the Record a statement from the
R&D Credit Coalition.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Research Equals Jobs Growth and Economic Growth

now is the time to strengthen and make permanent the r&d tax credit

Productivity growth in recent years has been driven by the
combination of accelerated technical progress and the
resultant investment in tangible capital assets, research and
development, human capital, and public infrastructure.
Technological innovations have accounted for more than one
third of our nation's economic growth during the last decade
and are critical to sustained growth in the future.
With government support, private investment in R&D would
fall short of the socially optimal amount. (Congressional
Research Service, ``Small Business Tax Relief: Selected
Economic Policy Issues for the 107th Congress'' (RL31052))
The research credit creates jobs. More than 90 percent of
the costs eligible for the credit are salaries and wages paid
to researchers. The only way for a company to increase its
credit is to increase its R&D payroll in the U.S.
First authorized in 1982, the credit has been reauthorized
8 times (with a gap from June 1995 to June 1996). The current
credit expires in June 2004. However, its effectiveness is
limited because businesses cannot rely on it in their long-
term planning, and most R&D projects are long-term.
In order to provide stability and broaden the reach of this
proven incentive, Congress should make the credit permanent,
increase the rate for the alternative incremental credit
(AIRC), and provide an alternative simplified credit
calculation to induce even more research-intensive businesses
to undertake additional research spending.
A bolstered and permanent R&D tax credit is essential to US
competitiveness. In a global economy, many companies can
choose where to conduct their R&D. A 2000 study based on OECD
data that measures the impact of government fiscal support
for R&D shows that Spain, Portugal, the Netherlands, Canada,
Australia, and Japan each provide more generous--and
permanent--fiscal incentives for R&D investment than those
provided for by the United States.
Private investment in R&D results in new medicines, medical
technologies, cleaner manufacturing technologies, advanced
weapon systems and other tools in the war on terror.

Ms. CANTWELL. They write:

Growth in our high tech economy depends on solid R&D, and
there is no good reason to delay making the credit permanent.
A permanent tax credit will go a long way to providing the
planners and investors the certainty that they need.

Another document by that same coalition states that research jobs
that are created by this R&D are quite significant; that more than 90
percent of the costs eligible for credits from the R&D tax credit go
directly into salary and wages of researchers. So the only way for the
company to go ahead and increase the credit is to get an R&D payroll.
That is what we are talking about, getting the R&D payroll.
We are sitting here discussing how we are going to move forward. I
know my colleagues have a variety of ideas. We all probably have ideas
that we think are an avenue or path within this tax proposal that will
be effective. I know as somebody who has been in the private sector,
has seen a company grow from 10 people to 1,000 people in a short time,
the major focus of that company was in research and development.
Let's turn our attention to those very companies that we think are
the basis for our future. We still see great growth and opportunity in
medical devices and research. We see great opportunities in
biomedicines, as I mentioned, in nanosciences, in computing sciences,
in supercomputing. We see great opportunity in energy technology, in
the new energy economy we think will be so important. We certainly see
from the State of Washington how the great investment in software and
communications technologies can move our country forward.
Let's take this amendment that I believe is a bipartisan amendment
supported by many of my colleagues and say that this is a priority.
Let's not make these organizations, which have been the engine of job
creation, continue to come back to us as we pass the largest tax cut
without including something that the very job creators have told us
they need to move forward.
I urge my colleagues to support this amendment. Let's make the
research and development tax credit permanent.
I retain the remainder of my time.
The PRESIDING OFFICER. Who yields time?
Mr. BAUCUS. Will the Senator from Washington yield me 10 minutes?
Ms. CANTWELL. I yield the Senator from Montana as much time as he
needs.
Mr. BAUCUS. Madam President, the R&D tax credit has been an issue
before us for quite some time, almost as long as I can remember since I
have been in the Senate. The basic questions are, Should we extend the
R&D tax credit and, second, should we make it permanent? Much too often
the Congress has decided, yes, to extend the credit, which I agree
with, but not to make it permanent. For the life of me, I cannot
understand why we have not made this credit permanent.
I have introduced legislation, bipartisan legislation, which Senator
Hatch and myself introduced, to make the R&D tax credit permanent.
Similar legislation has also been introduced in the other body by
Congresswoman Nancy Johnson and Congressman Robert Matsui, along with
other members of each of their parties. This is bicameral. It is
bipartisan. We believe very strongly that the research and development
tax credit should be made permanent. In fact, there are about 28
sponsors of our legislation in the Senate. It is about evenly divided
between both sides.
I would like to make a couple of points. The very bottom line is,
this amendment will very much help the American economy. Making the R&D
tax credit permanent will give U.S. businesses, particularly in the
technology sector, the confidence that those companies can invest in
research and development and not have to keep guessing whether Congress
is going to extend or not extend this tax credit.
I can remember years past, sometimes we would extend it and other
times the Congress would not extend the R&D tax credit. There would be
a hiatus. I have forgotten how long those gaps were, but, as I recall,
they were in the nature of 8 months, 10 months, something like that.
Technology companies were wondering, is Congress going to extend the
credit? They have in the past. Maybe they will in the future--but will
they? This causes great uncertainty in the business world.
The R&D tax credit has a proven track record. It lays the foundation
for technological innovation which in turn is an extremely important
driving force in the American economy.
Most economists look to productivity gains. When there are
productivity gains in the economy, the economy grows. When we have had
high productivity gains, our economy has done quite well. In fact, it
is important to recall the words of Chairman Alan Greenspan of the
Federal Reserve who said, the reason why our economy has continued to
grow so well is because of advances in technology that occurred in
America and also in the world, which dramatically increased
productivity in our country. This is one of the main reasons the
economy grew at such a rapid rate in the 1990s.
Granted, some of that was, as the Chairman would say, irrational
exuberance. There was a bubble in effect at the time. There were too
many people investing because the idea sounded good, without looking
closely and directly at the bottom line, whether it was a good
investment or not. Nevertheless, it is very clear that technology was a
driving force in the 1990s.

[[Page S6193]]

There is extensive research showing that tax credits are a very cost-
effective way to promote research and development. The General
Accounting Office, the Bureau of Labor Statistics, the Congressional
Research Service, the National Bureau of Economic Research, and many
others have found significant evidence that the R&D credit stimulates
additional domestic R&D spending by U.S. companies. Perhaps more
importantly, the R&D investment tax credit benefits American companies
and American workers.
A full 75 percent of the R&D credit dollars are used for salaries of
employees associated with R&D activities. These are good paying jobs.
These are not service industry jobs at the local fast food store. These
are very high paying jobs.
Seventy-five percent of the R&D tax credit dollars are used for
salaried employees associated with R&D activities. R&D activity creates
some of the most intellectual, stimulating, high-paying, high-skilled
jobs in the country, encouraging individuals to pursue advanced science
and math degrees in order to obtain these job opportunities. That
clearly is a big plus for our economy. They create more disposable
income for employees which provides additional indirect returns to the
economy.
There are ripple effects. Innovations achieved through R&D make a
company much more productive, enhances its competitiveness. Downstream
companies are also helped. Once a company develops a new product
because of research, in most cases, downstream companies get benefits
as well--to say nothing of the national security benefits. The more our
technology companies engage in research and development, the more
likely it is that we are going to have technological advances and
developments that help our national security. That, too, is a given.
There is no doubt that if R&D is going to decrease generally,
national security is also going to decline. Did you know that the
United States lags far behind other countries in giving incentives to
businesses to invest within its own borders? Most of our trading
partners offer very generous tax and nontax incentives to encourage
companies in their countries to invest in R&D. These incentives lower
the cost of investing in R&D outside of the United States and give
companies receiving these benefits outside the United States a
competitive advantage over U.S. companies that don't benefit from
similar incentives.
In 2000, the United States ranked ninth behind other nations, in
terms of the amount of tax credit allowances for business R&D spending
at large manufacturing firms. Countries that provide more generous R&D
tax benefits than the United States include Spain, Canada, Portugal,
Austria, Australia, the Netherlands, France, and Korea.
This disparity encourages U.S. companies to locate more R&D
activities offshore, resulting in a permanent loss of technology
advancements, loss of jobs, and a loss of industrial innovation in the
United States. Once R&D moves offshore because of other countries
giving a tax comparative advantage, then what happens? Then companies
tend to manufacture in those same locations and often use available
labor in those markets, rather than American workers. Once you are in a
location for a period of time, you are more likely to stay. You learn
the procedures and the ropes and you feel comfortable. The country
starts to be comfortable with you and they start giving you more
incentives to stay there. It starts to cascade and go downhill.
I remember years ago, in Saudi Arabia, I was talking to officials
there, and the big question was, Who is going to provide the technical
advice in setting up a phone system in Saudi Arabia? Is there going to
be a big German company, such as Siemens, or an American firm? Which
firm will provide the technological specifications for a telephone
system in Saudi Arabia? Well, guess what happened. A U.S. company lost;
the big German company won. What is even more important about that?
Guess who built the telephone system? You got it, the German company.
In this case, I am talking generally about R&D going offshore. Once
your foot is in the door offshore, there is a strong likelihood that
there are going to be other benefits that will accrue to those other
countries, not to the United States.

The timing of this proposal is very important. There is new data
compiled for R&D Magazine that projects that U.S. companies spending on
R&D will be mostly flat this year, 2003. This makes for flat growth for
the second year in a row. This compares with 2001, when R&D spending
grew by 5 percent over the previous year. Investment in R&D is not a
function of simply economic uncertainty. Businesses often invest less
in R&D because of the expense and the long-term planning requirements
and the difficulty of capturing all or some of the returns from the
investments.
Many economists generally agree that without government support,
private sector investment in R&D often falls short of the optimal level
of spending necessary to provide maximum benefits to the U.S. economy.
There has to be some government assistance. I might add that other
countries certainly provide a lot more government assistance to their
companies than we Americans do for our own U.S.-based companies--at
least in the area of R&D.
One can debate the degree to which there should be any government
support to the private sector. I believe there should be support in
some cases. In this case, when it comes to R&D, it is clear that we
want to maintain productivity advantages, technological advantages, and
good jobs for American workers. We want to be as competitive as we can
be in the world because that benefits the United States not only in the
short term, but very much in the longer term.
Investments by U.S. businesses in research and development can prove
very costly over time. Leading edge competitors in Europe and Japan
continue to gain ground.
To sum up, we are presented with a great opportunity. What is it?
That opportunity is to make our current R&D tax credit permanent--at
least as much as we can under the constraints of the bill; second, we
also have an opportunity to modify the tax credit to include the
additions suggested by the Senator from Washington that will make the
credit even more meaningful, including the incremental changes in the
credit rates and the addition of a third credit option that is in this
legislation.
Madam President, this is a no-brainer. I cannot, for the life of me,
understand why this amendment won't pass. That is not just a glib
statement that rolls easily off my tongue into the Senate Chamber. I
just think that if the tradeoff is between research and development on
the one hand, and helping American companies with more incentives to do
more R&D on the other hand, compared with the accelerating reduction of
the top rate or, in the alternative, of the dividends proposal, we have
to make choices as to which is more likely to help this country get
more jobs in the short term and in the long term.
I think the answer to that question is pretty easy and clear, and
that answer is by making the R&D tax credit permanent. So I argue very
strongly in favor of this legislation and this amendment offered by the
Senator from Washington. She is on the right track. I think we should
pay attention to what she says. She is from Washington. The State of
Washington is the home to a lot of high-tech companies.
The PRESIDING OFFICER. The time of the Senator has expired.
Mr. BAUCUS. I thank the Chair and I thank my good friend from
Washington.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Mr. GRASSLEY. Madam President, first of all, I think it is pretty
unanimous in this body about the need for the R&D tax credit, and I
think it enjoys pretty broad support. I suppose it is not a case of
``if'' we will do it; it is a case of ``when'' and exactly how. I would
say there is probably not much disagreement within this body yet. I
have visited with my colleagues so much during this debate about the
purposes of the legislation and the balance that we brought to this
between investment and enhancing consumer spending, and between those
things that are tax reductions versus tax expenditures, it is this
balance that I want to preserve in this legislation.
Every attempt we have had, as well intended as it is, obviously,
takes away

[[Page S6194]]

from the job creation aspects of our tax reduction. It is to do
something special and, in many cases, is worthy, but it detracts from
the overall approach to our legislation. So this is another example
where I must rise in opposition to an amendment, but not because of the
good intent or because I have a disagreement with the amendment, but
because of how it is accomplished. And most of that is on the side of
where they take the money to pay for the proposal in this amendment, or
any other amendment that we have had before us.
I am very confident that we will extend the R&D credit this year. I
call the attention of my colleagues to the fact that the President has
proposed extending it in his budget. I note that the extension is paid
for in this amendment by eliminating partial exclusion of dividends,
and this exclusion of dividends is meant to encourage the investment we
are talking about here.
Obviously, the amendment on R&D is a tax incentive to encourage R&D,
and it takes a lot of R&D to get jobs, but it is a very indirect way of
creating jobs, whereas we believe the dividend exclusion, at least if
it were fully implemented the way the President proposed, and I know
our underlying legislation does not do that, but at least the way the
President proposed, according to economists, would create 400,000 new
jobs, besides making our capital costs for our industry much more
competitive with those of our competition internationally because our
cost of capital is as high as that of any nation with which we compete.
If we were to adopt the President's program, it would put us in the
middle of the advanced nations for cost of capital and make us much
more competitive.
This detracts from the investment efforts in our legislation which is
where the money is being taken to pay for the R&D amendment.
I say to the Senator from Washington that I look forward to working
with her at another time--not this time--to extend the R&D credit down
the road.
There is another point that should be made about the R&D credit, and
that is that it does not benefit all businesses and taxpayers equally
or apply as broadly as do the provisions of this underlying growth bill
that I have been trying to demonstrate is a well-balanced bill to
create jobs. It is well balanced between larger businesses and smaller
businesses, particularly where it brings equity between a corporation
form of business and individual proprietorship form of business. It
does that by eliminating the bias in favor of corporations that is in
our present tax system.
I look at R&D credit as not benefiting all businesses equally as our
underlying bill does. The R&D credit provides a benefit to a limited
number of large corporations in certain industrial sectors. While the
purpose of the R&D credit is very important, as it encourages higher
levels of technology development and innovation which brings about
greater productivity, it does not help small businesses that will
provide so many new jobs for the economy under our underlying
legislation.
I ask the Senator from Washington to think about whether or not she
has checked with organizations or their tax representatives that
support R&D credits. I think the last thing they would want to happen
is for the extension to lose at this time. If they want their
extension--and I am sure they do, and I have indicated a willingness to
work on this--they should be working with the Finance Committee and not
against it as we try to accomplish this goal.
Right now, I have to consider this amendment counterproductive in
that it slashes job-creating provisions to give generous tax breaks to
large corporations to do research and development. Many may ask: Why do
rich corporations need a tax break to do something that is essential to
their business anyway?
As I indicated, I do support the R&D tax credit, but I also support,
more importantly and more eminently, the provisions of this bill which
are more broad based in helping to create jobs and doing it in a
balanced way, not in the targeted way of this amendment.

There is nothing wrong with the amendment. It is just the wrong time
and wrong place. I ask my colleagues to vote against it.
The PRESIDING OFFICER. The Senator from Washington.
Ms. CANTWELL. I thank the Chair.
Madam President, I have the utmost respect for the Senator from Iowa
and his comments about the R&D tax credit amendment and his great work
on trying to put together a package to bring before the Senate. It is
clear that my colleague from Iowa has had a tough challenge working
with a variety of people, and I am sure he will face an even tougher
challenge working in conference with the House of Representatives and
the White House on their priorities.
I respect his commitment to working on the R&D tax credit expansion
or permanency and I take him at his word that he is very earnest and
will work towards this.
I guess the reason we are bringing this up today is that we do have a
fundamental difference about how to move forward with the economy and
where the White House is on this proposal. What I am trying to say is
not extension of R&D, but permanent R&D tax credits are a better
economic stimulus than what the current underlying proposal gives to
the American public.
Let's think about it: A dividend tax cut that would give some money
back to investors who may or may not reinvest that versus companies
that have proven they have taken the R&D tax credit and turned that
into new products and services, and have hired people to, in fact, do
the R&D which we are talking about. I think we can easily look at
history and say corporations have done a better job of that because
they know what products and services can be created in the marketplace
and have used this incentive to do that.
The second point I wish to make is that small businesses can take
advantage of this credit. In fact, in the past decade we saw a lot of
increases in productivity by large corporations because they were able
to take advantage of research and development and new technologies, and
they were able to deploy that, while small businesses that had less
flexibility, not as much revenue, and had smaller operations had a much
harder time making those productivity improvements.
I have heard from small businesses throughout our State that said: I
am a subcontractor, or I do business with some of the larger companies
in the State, but our computer systems and our software do not
communicate. The way I now have to talk to my customers and providers
of service I work with throughout the State is being challenged by new
systems and operations, and I need to upgrade and move forward. So
small businesses, to maintain their competitive edge, also need help in
the research and development area.
Oftentimes it is the small business that is created prior to becoming
a large organization. As I said, the companies that grow from 10 jobs
and take advantage of R&D tax credits and then grow to 1,000 jobs are
the very companies about which we are talking. So both small and large
companies will benefit.
The third point is that this is about priorities. In an information
economy, it is very important for us to keep our deficits down and to
get access to capital.
Think about it. In the industrial age, when we were making
automobiles, Mr. Ford said: Just give me the hands. I do not even need
the brain that goes with it.
Why? Because it was about a manufacturing process, that was not
necessarily about the worker, and the increase in productivity. The
process and system had been set in place.
Well, the information age is just the opposite of that. It is all
about new ideas in a global economy where information flows quickly and
competition is created quickly, and whether we are going to maintain
our competitive edge by making the right levels of R&D investment.
Actually, the U.S. economy is so strong in biotechnology, in
pharmaceuticals, and in software. Why? Because we make the investment
in R&D that keeps that technological advantage in an information age.
So while some of my colleagues, argue that a dividend tax break is an
issue of fairness, I say there are lots of things about our Tax Code
that I do not think are particularly fair. But

[[Page S6195]]

given the 7 percent unemployment rate in my State of Washington, with
over 2 million jobs lost and no sight of what we are going to do to
stimulate the economy that will create jobs, it is imperative to make
this tax credit permanent now.
My colleague has offered to look at this at another time. But the
issue is, are we going to make it permanent at another time? In an
information age this is the best thing we could do for companies that
are spending almost 30 percent of their company's overall expenses in
R&D. An information economy means so many new products and services are
going to come into creativity by thousands of ideas floating around,
things that we never even imagined before--who thought 20 years ago we
were going to be buying our books online or communicating with global
media through the Internet? But those are the products and services
that have been created. The good news is we are at the infancy of this
information age. So let's take advantage of that. Let's harness that
information age economy with one of the best tools we have to encourage
them, and that is make permanent the R&D tax credits so those products,
those services, those job-creating activities, will take place in our
economy.
If we asked economists, or asked businesspeople, sure, they would
like both. I am sure there are people who would say: Give us the
dividend and give us the R&D tax credit. But ask them to prioritize,
and I have no doubt they would say the R&D tax credit is more important
because they know it will give them certainty and predictability in a
time and age where research and development is going to be the way for
us to continue the productivity.
Make no mistake, that opportunity for productivity is great. We had
great increases during the industrial age--a constant 3\1/2\, 4, 5
percent economic growth in the last decade. If we harness the ability
for new products and services by making the right level of investment
in research and development, we can have that kind of productivity
increase and we can have that kind of GDP.
For all of us here, we want to get back to that. We want to get back
to having families who have jobs and communities that are healthy and a
government that can own up to its responsibilities in the future for
Social Security and Medicare. So let's make the investment now.
This is about making a priority statement today. It is about saying
that R&D tax credit has a higher priority and ranking over some of the
proposals that are in this bill, and that it will benefit both small
and large companies, and ultimately will benefit many Americans by
getting them employed.
I yield the floor.
The PRESIDING OFFICER. The Democratic whip is recognized.
Mr. REID. I ask unanimous consent that the pending amendment be
temporarily set aside and ask that the Senator from Vermont be
recognized to offer an amendment.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The Senator from Vermont is recognized.

Amendment No. 587

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

The Senator from Vermont [Mr. Jeffords] proposes an
amendment numbered 587.

Mr. JEFFORDS. Madam 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:

(Purpose: To accelerate the elimination of the marriage penalty in the
earned income credit)

After section 107, insert the following:

SEC. 107A. ACCELERATION OF MARRIAGE PENALTY RELIEF FOR EARNED
INCOME CREDIT.

(a) In General.--Section 32(b)(2)(B) (relating to joint
returns) is amended by striking ```increased by--'' and all
that follows and inserting ``increased by $3,000.''.
(b) Inflation Adjustment.--Clause (ii) of section 32(
j)(1)(B) (relating to inflation adjustments) is amended to
read as follows:
``(ii) in the case of the $3,000 amount in subsection
(b)(2)(B), by substituting `calendar year 2003' for `calendar
year 1992' in subparagraph (B) of such section 1.''.
(c) Conforming Amendment.--Section 303(i)(2) of the
Economic Growth and Tax Relief Reconciliation Act of 2001 is
amended by striking ``2004'' and inserting ``2003''.
(d) Adjustment of Highest Individual Income Tax Rate.--In
lieu of the rate specified for taxable years beginning during
calendar year 2003 and thereafter in the last column of the
table contained in section 1(i)(2) of the Internal Revenue
Code of 1986, as amended by section 102(a), the Secretary of
the Treasury shall adjust such rate for 1 or more of such
taxable years to provide such revenues as are necessary to
equal the loss in revenues which would result in the
enactment of the amendments made by subsections (a), (b), and
(c) of this section.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
(2) Conforming amendment.--The amendment made by subsection
(c) shall take effect on January 1, 2003.

Mr. JEFFORDS. Madam President, when we passed the last big tax
package in 2001, we included in the bill a title called ``Marriage
Penalty Relief.''
That title had three sections aimed at easing the burden faced by
taxpayers, who find themselves paying higher tax bills after they get
married than what they would have paid if they had stayed single.
One of these provisions increased the standard deduction for married
taxpayers, so that it would equal twice the amount of the standard
deduction allowed single taxpayers, making marriage an advantage.
The second provision increased the size of the 15 percent income tax
rate bracket for a married couple to twice the size of the
corresponding bracket for a single taxpayer.
The third provision addressed the marriage penalty in earned income
tax credit, and provided for a larger credit for married couples. All
three of these provisions were phased in gradually, not becoming fully
effective until 2008 or 2009.
The bill under consideration today accelerates the scheduled phase-in
of two of the three marriage penalty relief provisions we adopted in
2001.
The standard deduction marriage penalty relief is accelerated to
2003. And the expansion of the 15 percent rate bracket for married
couples is similarly accelerated to 2003.
There is no acceleration, however, of the marriage penalty relief for
taxpayers who claim the earned income tax credit. The earned income tax
credit, the EITC, provides an income supplement for low-income workers.
It is one of the Nation's most effective anti-poverty programs. It
was the brainchild of the late Senator Russell Long, whose death we
sadly recognized yesterday, who characterized it as a ``work bonus''
and Senator Long called it one of his proudest accomplishments.
However, the way the EITC is presently structured can result in high
marriage penalties. Two single, low-income workers may be entitled to a
much smaller EITC from their combined incomes when they get married
than what they would have gotten separately had they stayed single.
Take, for example, a man and a woman, each with an income of $15,000,
and each with one child. If they are single, each can claim an EITC
benefit of roughly $2,750, a total of $5,500.
However, if they get married and combine their incomes, the EITC that
they can claim is only $1,200. This is a marriage penalty of $4,300, 14
percent of their combined income.

Think of a young couple who finds they have an unexpected pregnancy.
If they get married, they have to pay an additional $4,300 in taxes.
That is not a very good situation.
The 2001 tax bill addresses this problem by increasing the EITC
allowed to married low-income taxpayers. But this provision is
gradually phased-in and does not become fully effective until 2008. So
we have a gap.
My amendment calls for acceleration of the phase-in of the EITC
marriage penalty relief. It will benefit working families with incomes
between $15,000 and $37,000.
I propose to pay for this amendment by paring back the reduction in
the top rate in an amount sufficient to pay for this amendment. This
would mean a relatively modest decrease in the reduction in that top
rate. We believe it is less than one-quarter of 1 percent.

[[Page S6196]]

I have been involved in trying to fix the problems of the marriage
penalty since the 1970s, when I co-sponsored the first bill with
Congresswomen Millicent Fenwick, who was a pioneer in fighting this
problem. I would like to remember her.
If we are going to accelerate marriage penalty relief, we should do
it for the poorest of the poor. These people really feet the effects of
the marriage penalty.
In testimony before the Senate Finance Committee two years ago, a
representative from H. and R. Block, which prepares returns for many
low-income taxpayers, expressed the opinion that the EITC marriage
penalty had a real detrimental effect on the choices of low-income
taxpayers.
In other words, it deters marriage and adversely affects family life.
The EITC marriage penalty relief is also the most effective economic
stimulus of any of the marriage penalty relief provisions. It is
targeted at low- and middle-income workers, who are most likely to
spend any additional funds.
A considerable amount of this bill is targeted to help the very
richest taxpayers. Roughly $35 billion goes towards reduction of the
top income tax bracket, which doesn't kick in until a couple's income
is over $300,000.
Another $80 billion goes toward the exclusion for dividends, which
will not affect most taxpayers. In my state of Vermont, about seventy
percent of the taxpayers have no dividend income.
My amendment is modest. It costs about $4 billion over several years.
We can make room for this amendment in this bill. We should not
overlook those who need help the most.
I urge my fellow senators to support this amendment, and I ask for
the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is not a sufficient second.
Mr. BAUCUS. I ask for the yeas and nays on the amendment.
The PRESIDING OFFICER. Is there a sufficient second?
At the moment, there is not a sufficient second.
Mr. BAUCUS. Madam President, I ask for the yeas and nays on the
amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The Democratic whip is recognized.
Mr. REID. It is my understanding the Senator has completed debate on
this amendment.
I recognize the Senator from Kentucky, who, as the gentleman he is,
very graciously allowed the Senator from Vermont to go first. The
Senator from Vermont had been waiting for a long time. We appreciate
the courtesy of the Senator from Kentucky.
The PRESIDING OFFICER. Is there objection to setting aside the
pending amendment?
Hearing no objection, the Senator from Kentucky is recognized.
Mr. BUNNING. Madam President, I will shortly offer an amendment to
the pending bill. We need to have just a little time for consideration
of this amendment. It is not complicated. It is very straightforward
and to the point. We have a need to have our majority leader show up on
the floor to make a statement before I offer the amendment. Therefore,
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. FRIST. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER (Mr. Alexander). Without objection, it is so
ordered.

Unanimous Consent Agreement

Mr. FRIST. Mr. President, I ask unanimous consent that following my
remarks, Senator Bunning be recognized to offer an amendment for
himself, Senator McConnell, and others, regarding taxation of Social
Security benefits; provided further that there be 1 hour equally
divided in the usual form. I further ask consent that following the
conclusion of time, the amendments be set aside and the Senate proceed
to vote in relation to the Bunning amendment, to be followed by a vote
in relation to the Dorgan amendment, No. 556, at a time determined by
the majority leader, after consultation with the Democratic leader;
further, that no amendments be in order to the amendments prior to the
votes.
The PRESIDING OFFICER. Is there objection?
Mr. REID. No objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. FRIST. I ask unanimous consent when the Senate resumes
consideration at 9:15 of S. 1054, on Thursday, May 15, that all time
under the statutory limit be expired; I further ask consent that the
Senate then proceed to a series of stacked votes on or in relation to
the pending amendments in the order offered, beginning with the Bunning
amendment, provided that there be 2 minutes equally divided for closing
remarks prior to vote in relation to any of the amendments pending from
Wednesday's session.
I further ask consent that following the disposition of the pending
amendments and any other offered amendments, the bill then be read a
third time, the Senate then proceed to the consideration of H.R. 2, all
after the enacting clause be stricken and the text of S. 1054, as
amended, if amended, be inserted in lieu thereof, the bill then be read
a third time and the Senate then proceed to a vote on passage of the
bill, with no intervening action or debate. I further ask consent that
following that vote, the Senate insist on its amendment, request a
conference with the House, and the Chair be authorized to appoint
conferees on the part of the Senate with a ratio of 3 to 2. Finally, I
ask consent no points of order be waived by this agreement.
Mr. REID. Reserving the right to object, Mr. President.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. As I said earlier this morning, we have two of the most
experienced Senators that we have in the Senate managing this bill. We
would not be at the point we are today but for the good work of the two
Senators, the Senator from Iowa and the Senator from Montana. It
doesn't matter how you feel about the underlying bill, the work that
has been done on the floor by these two men here today has been
outstanding, and that is why we are able to enter into this agreement.
There is no objection on this side.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. FRIST. Mr. President, I ask unanimous consent that immediately
following passage of H.R. 2, the Senate proceed to Calendar No. 86,
H.R. 1298, the Global AIDS bill. I further ask unanimous consent that
only relevant first-degree amendments be in order; further, that only
second-degree amendments which are relevant to the first-degree
amendment to which they are offered, when offered, be in order; that
upon disposition of all amendments the bill, as amended, if amended, be
read a third time and the Senate then vote on passage of the bill
without further intervening action or debate.
The PRESIDING OFFICER. Is there objection?
Mr. REID. No objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. FRIST. Mr. President, just to summarize very quickly, let me
restate what the assistant Democratic leader said. A lot of discipline
and organization has taken us very successfully to this point. We
encourage people who are going to be offering amendments either tonight
or tomorrow to report that and discuss that with the two managers of
the bill.
At 9:15 tomorrow morning, all time will have been exhausted and we
will start at 9:15 with our voting on whatever pending amendments there
are based on what has been carried out so far today and tonight. We
will be looking at those amendments starting at 9:15 in the morning. If
additional amendments arise, they will be considered after the
disposition of all of the pending amendments. We will have final
consideration and passage of this bill tomorrow at the conclusion of
that sequence of votes.
Immediately following passage, we will go to the global HIV-AIDS
bill, and I intend to complete that bill this week as well.
Thus, tonight we expect no further rollcall votes and our voting will
begin at 9:15 sharp tomorrow morning.

[[Page S6197]]

The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. One area of clarification: I am confident there is no
problem. We want to make sure motions to waive would also be in order
on these amendments that are pending.
Mr. FRIST. Mr. President, we understand that. That is correct.
The PRESIDING OFFICER. Under the previous order, the Senator from
Kentucky is recognized.

Amendment No. 589

Mr. BUNNING. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Kentucky [Mr. Bunning], for himself and Mr.
McConnell, proposes an amendment numbered 589.
Mr. BUNNING. 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:

(Purpose: To amend the Internal Revenue Code of 1986 to repeal the 1993
income tax increase on Social Security benefits)

At the appropriate place, insert the following:

sense of the senate on repealing the 1993 tax hike on social security
benefits section .

SECTION .

(a) Findings.--
The 1993 tax on Social Security benefits was imposed as
part of President Clinton's agenda to raise taxes;
The original 1993 tax hike on Social Security benefits was
to raise income taxes on Social Security retirees with as
little as $25,000 of income;
Repeated efforts to repeal the 1993 tax hike on Social
Security benefits have failed; and
Seniors rely on Social Security benefits as well as
dividend income to fund their retirement and they should have
taxes reduced on both sources of income:
(b) Sense of the Senate--
It is the Sense of the Senate that the Senate Finance
Committee should report out the Social Security Benefits Tax
Relief Act of 2003, S. 514, to repeal the tax on seniors not
later than July 31, 2003, and the Senate shall consider such
bill not later than September 30, 2003 in a manner consistent
with the preservation of the Medicare Trust Fund.
Mr. BUNNING. Mr. President, I am offering an amendment as a sense of
the Senate on the Social Security tax; that the 85-percent tax repeal
be set at a certain time during the year 2003 and final consideration
of the bill be no later than September 30, 2003. I want to bring the
Senate up to date on this specific tax.
Prior to 1993, seniors were taxed on 50 percent of their Social
Security benefits if their incomes were above a certain level. This
money went back into the Social Security System. In 1993, Congress
passed a provision requiring that 85 percent of a senior's Social
Security benefits be taxed if certain income levels were met. This
additional money went back into the Medicare system. This tax was
unfair to seniors back in 1993, and it certainly is unfair today.
The amendment I am offering as a sense of the Senate allows the
Finance Committee to pass legislation by July 31, 2003, which repeals
this unfair tax to our seniors and requires the Senate to act on this
legislation no later than September 30, 2003.
I am offering this amendment to counter an amendment that would
destroy the very bill that is before us. An unwise amendment by the
Senator from North Dakota would repeal this tax and thus reduce the
amount of tax reduction for our country and for our citizens.
I want to try to put this in a little perspective for the American
people, for my fellow Senators, and you, Mr. President.
In the overall aspects of the budget bill, the total amount as far as
this bill is concerned is a reduction of $350 billion in tax
reductions. Our economy is a $10 trillion-per-year economy. How
minuscule is the tax reduction? If you look at the overall bill as a
10-year bill, and the overall economy as a 10-year economy, we are
looking at about $120 trillion, and we are talking about $350 billion
in that $120 trillion economy as a tax reduction.
If the amendment of the Senator from North Dakota is agreed to, we
will have no tax reduction, not even a dividend tax reduction, as
minuscule as it is, and not any of the advanced tax reductions we
passed in the year 2001.
If we want to take action to create jobs, and if we want to do it as
quickly as we can, my amendment allows us to vote on the reduction in
the Social Security tax from 85 percent to 50 percent later on--after
we get this job-creating incentive bill into conference, out of the
Senate, and back to the floor of the Senate for a final vote.
I want you to know that seniors age 65 and older depend on taxable
dividends. These are real Americans who need this money because they
are on fixed incomes. They have to scramble and scrimp to have enough
dollars to live on fixed incomes. This will allow just a portion of
that dividend income to be tax free. Seventy-one percent of all taxable
dividends go to Americans who are over age 55. With the rising cost of
prescription drugs, seniors depend on this income from dividends. If we
can make just a little bit of it tax free, that will be a big help for
those senior citizens--15 percent of seniors' total income, but 50
percent of dividend income in this country comes to those senior
citizens.
Under the President's package, 99.8 million seniors would have saved
$936 a year. That was the President's proposal. We cut that more than
in half.
I just think it is a wrongheaded way to approach the reduction of
this ominous tax on senior citizens, particularly those who definitely
have no other income except Social Security.
I hope the Senate will consider this as a sense of the Senate to make
sure we get to this bill before the end of this legislative calendar.
I yield the floor.
The PRESIDING OFFICER. The Senator from Kentucky.
Mr. McCONNELL. Mr. President, I commend my friend and colleague from
Kentucky, Senator Bunning, for his excellent amendment.
What we are hearing from the other side of the aisle is that they do
not want the dividend exclusion, and they want to finally address an
issue they created 10 years ago, which is this additional tax on Social
Security recipients. But they are saying, you can't have both. And, as
the Senator from Kentucky, Mr. Bunning, has pointed out, most seniors
can benefit from both. Obviously, they all benefit from Social
Security, and they would like to not have this Clinton tax on Social
Security continued any longer; second, seniors account for only 15
percent of the total income in America, but they get 50 percent of the
dividend income.
So I gather what Senator Dorgan is saying is, we are going to take
away the dividend exclusion from seniors in order to finally reduce the
Social Security tax which we put on 10 years ago.
What the Senator from Kentucky is saying is: We want to do both. And
we ought to do both. We should never have levied this Social Security
tax in the first place, 10 years ago, for which neither of us voted.
And we ought to now do the dividend exclusion as close to the
President's suggested manner of doing that as possible.
June could be a pretty good month for seniors around here. If we
could get the dividend exclusion through, get rid of the Social
Security tax, and begin to address prescription drugs, which is on the
agenda of the majority leader for June, I say to my friend and
colleague from Kentucky, we would have a pretty good month around here
for seniors, pretty soon, wouldn't we?
Mr. BUNNING. Yes, sir.
Mr. McCONNELL. So this Bunning amendment makes it clear that we would
like to act on the repeal of the Social Security tax hike of 1993, and
we will do that in the very near future.
Mr. BUNNING. Will the Senator yield?
Mr. McCONNELL. I yield to my friend from Kentucky.
Mr. BUNNING. As the Senator knows, I offered this very same amendment
on the budget bill to repeal the Social Security tax from 85 percent to
50 percent, and the very same people who would support that today voted
unanimously against it on the budget bill.
So the inconsistency that the Senator from North Dakota shows today
is something I have a very big problem understanding. If you are for it
today, and you want to take these away from seniors, and you also want
to take tax away from seniors, you ought to have been consistent and
voted to take it away during the budget resolution debate we had on the
floor.

[[Page S6198]]

I know this Senator voted with me on the budget resolution when we
tried to repeal it. And I hope we are able to get this amendment
accepted.
Mr. McCONNELL. I know the Senator from Kentucky agrees with me that
we ought to do all three. We ought to get rid of this Clinton Social
Security tax. We ought to do a significant dividend exclusion that is,
to the maximum extent possible, permitted under our overall ceiling in
the growth package. And we ought to begin to address prescription
drugs, which the leader has indicated we are going to do in June. If we
do those three things, I would say we are well on the way to providing
the kinds of relief for seniors--both on the tax side and on the
prescription drug side--that they richly deserve, that we have talked
about for entirely too long around here and have never done anything
about.
So let me conclude by commending my friend and colleague from
Kentucky for an excellent amendment. I hope it will be approved
overwhelmingly. I thank him for his continuing contribution to this
whole Social Security debate. The Senator from Kentucky, Mr. Bunning,
was the chairman of the Social Security Subcommittee of the House Ways
and Means Committee and is now on the Senate Finance Committee, and is
one of the real experts on Social Security in America.
When Senator Bunning talks about Social Security, we all listen, and
once again he has proposed an excellent idea which I fully support. I
thank him and commend him for his outstanding work.
Mr. President, I yield the floor.
The PRESIDING OFFICER. Who yields time?
The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I think the Democrats have the next
opportunity.
The PRESIDING OFFICER. The Senator from Iowa has the floor.
Mr. GRASSLEY. I yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, what is the parliamentary situation?
The PRESIDING OFFICER. The Bunning amendment is pending. There is 1
hour evenly divided.
Mr. BAUCUS. I thank the Chair.
Mr. President, I understand Senator Bunning yields back his time.
Mr. BUNNING. Yes.
Mr. BAUCUS. Mr. President, I yield 10 minutes on the amendment to
Senator Rockefeller.
The PRESIDING OFFICER. The Senator from West Virginia.
Mr. ROCKEFELLER. Thank you, Mr. President, and I thank my friend and
leader from Montana.

Amendment No. 578

Mr. President, I rise to speak about an amendment which was offered
earlier. I am particularly proud to be cosponsoring, with Senator
Blanche Lincoln of Arkansas, and others, improvements to the child tax
credit. I will speak on it very briefly.
I think it is one of the most valuable provisions. I thank the
chairman of the Finance Committee--while I see he is still in the
Chamber--for accepting one of Senator Lincoln's amendments on the child
tax credit. It is a particularly welcome addition.
I think common sense tells us that if we put money in the hands of
people who will indeed spend it, and will spend it on clothes and
kitchen utensils, and all kinds of other items, there is a stimulative
effect.
But quite apart from that, almost half of the benefits of this child
tax credit go to families who make less than $50,000. In the State that
I represent--this Senator represents the State of West Virginia--only
20 percent of the people make more than $50,000 a year. So this is very
welcome.

The bill we are looking at, what is in the package, makes very
important improvements to the child tax credit. Basically, it increases
the value of the credit from $600 to $1,000, which is real money, as
they say, for real people, who need it and deserve it.
I was happy that we did this. I was grateful that it was accepted by
the Finance Committee chairman. It is going to have a big effect.
I will say this: Refundability will go from 10 percent to 15 percent
of earnings above $10,500. That means families can benefit from this
bill more than otherwise would have been the case. On the other hand,
the bill still does not do anything--and I have to say this in
fairness--for 72,000 kids who do not qualify for any child tax credit
in West Virginia because their parents do not have enough income to
qualify on a low-income basis.
But all things being equal, as they rarely are in this life, one has
to take what one can work out in the democratic process. And the
Finance chairman was extremely fair and helpful. Obviously, the Senator
from Arkansas was outstanding in her leadership on these matters.
I am proud to a be a cosponsor of the amendment that Senator Lincoln
offered today that will expand the reach of the child tax credit to
more of our nation's poorest families. In my own state, 27,000 more
kids would qualify for the child tax credit. This amendment would
increase the amount of the child tax credit that can be refunded to low
income parents. Specifically a parent would qualify for a child tax
credit equal to 5% of earnings between $5,000 and $13,250.
These folks whom we are helping are at risk. That is important. And I
am very proud this is happening. I ask my colleagues to support this
amendment when it comes up for a vote on tomorrow.
I thank the Presiding Officer and yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I yield to the Senator from Montana
whatever time he might consume.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BURNS. Mr. President, I ask unanimous consent that the amendment
offered by Senator Bunning be laid aside.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.

Amendment No. 593

(Purpose: To amend the Internal Revenue Code of 1986 to allow the
expensing of broadband Internet access expenditures, and for other
purposes)

Mr. BURNS. Mr. President, I rise today to offer an amendment to this
bill, and I ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Montana [Mr. Burns], for himself, Mr.
Rockefeller, Mr. Baucus, Mrs. Clinton, and Mr. Johnson,
proposes an amendment numbered 593.

Mr. BURNS. 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 printed in today's Record under ``Text of
Amendments.'')
Mr. BURNS. Mr. President, I come to the floor today with an amendment
that is offered by Senator Rockefeller and myself that provides some
incentives to accelerate the deployment of broadband high-speed
Internet access across the country. There are other cosponsors of the
amendment. My colleague from Montana, Senator Baucus, is a cosponsor.
Senators Clinton, Kennedy, and Johnson of South Dakota also are
cosponsors.
Broadband has always been of interest to both Senator Rockefeller and
myself. Both of us serve on the Commerce Committee. We have worked on
this a lot. We both represent States that have quite a lot of rural
outdoors. What this amendment does is affords tax incentives for the
buildout of broadband. Although many urban and suburban areas now have
access to broadband connections, many rural areas across the country
and, of course, in Montana do not. That places rural areas at a
disadvantage in a number of ways.
Just for economics, why should folks in rural areas be denied access
to the Internet, or the Internet economy as some would say, just
because they live where they do to merchandise and to exchange ideas in
this economy and find some way to supplement their primary income? We
have people who market their grain and livestock every day through the
commodity markets around the world. In terms of educational
opportunities in rural areas, why should a young person, just because
he is born in Garfield County, MT, be denied the same educational
opportunities as those who were born and raised in the more urban areas
where their curriculum is broadly taught.

[[Page S6199]]

These young folks deserve the same opportunity. Distance learning is an
important part of the education system in rural areas. Broadband is the
technology that takes them those distances.
In the area of health care, I have 14 counties in Montana that do not
have a doctor. People receive their health care from physician
assistants and in other ways. We know from rural demographics that the
folks are getting older, so our health care for the elderly is very
important, and part of that is supplied by broadband technologies.
Our amendment would create a temporary tax incentive for providers in
the form of expensing, allowing an immediate deduction of a capital
expenditure in the first year of service rather than depreciating that
investment over time. In the case of the current generation broadband
investments in rural and underserved areas, the bill would allow a 50
percent expensing on the investment, with the rest to be depreciated
according to the normal depreciation schedules. And where the providers
build out next generation broadband networks, which are typically more
expensive, the bill would provide for 100 percent expensing in that
year.
Our amendment would have a tremendous impact on the economy. In fact,
we know it would. For instance, Robert Crandall, an economist at the
Brookings Institute, has estimated that accelerated deployment of
broadband would generate $500 billion in economic growth annually. I
think we would all be delighted to have that happen. I believe we
should take the steps to allow it to do so. This amendment is a very
important step in that direction.
This is an opportune time to take advantage of such a provision.
Currently South Korea and Japan are ahead of the United States in
broadband deployment. I believe it is extremely important that the
United States avoid falling behind in telecom and Internet technology,
and the financial incentive of the type provided by this legislation
will help us ensure that we will not.

As we take a look at this issue, this means new technologies on the
wired system but also on the wireless system. It says technology
neutral, which means it allows the new technologies that are being
offered and the R&D work going on with new technologies, it allows
those technologies to be deployed and taken advantage of. Just
remember, 50 percent expensing for investments in rural and underserved
areas of current generation broadband technologies. It provides 100
percent expensing for the investments in the next generation of
broadband technologies in rural areas.
It is technology neutral. It makes no difference if you are using a
medium copper wire, coaxial cable, optical fiber terrestrial wireless,
satellite or something else. If you deliver the threshold speeds, you
are eligible for the benefit. And it sunsets after 1 year. The intent
is not to provide a permanent benefit to the telecom sector but,
rather, an incentive to build out new infrastructure within a short
period of time.
Think of the generation of business and our economic setup and the
jobs and the job climate in that area in the first year of deployment.
It is a very important amendment. Not only do we deliver better and
quicker services to rural America, but we put a lot of people to work.
I hope more of our colleagues will join with Senator Rockefeller and
me in supporting it, and I hope we can work with Senator Grassley to
include this in the jobs and growth package.
Mr. President, I ask unanimous consent to add as cosponsors of the
amendment Senators Baucus, Clinton, Kennedy, and Johnson.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from West Virginia.
Mr. ROCKEFELLER. Mr. President, I thank the Chair.
I rise in support of the amendment offered by Senator Burns and a
number of others. This is an amendment I have been working on for many
years. At times it has had 75 cosponsors. It is one of those amendments
that always comes up. Everybody knows it should get done and it never
seems to. The answer to that is you keep trying. You just keep trying.
For individuals, businesses, schools, libraries, hospitals, there is
no end to the need for this amendment. We did the E-rate. The E-rate is
still being done. But we all know we have moved past that. We need much
faster telecommunications now.
What the Burns-Rockefeller broadband amendment does is it says to
broadband providers, if you will extend your networks to hard-to-reach,
underserved and/or rural areas, you will get a break on your taxes. As
the distinguished Senator from Montana indicated, it also encourages a
leapfrog to the next generation. It has two different categories of tax
breaks depending upon what generation of broadband you are dealing
with. In any event, it is going to be faster than the DSL and cable
modem services most typical today.
The best thing is to say that you don't obviously get a tax credit
unless you make a whole lot of things happen in this amendment. There
is nothing automatic about it. You have to make an investment. You have
to buy new equipment. You have to pay people to install that new
equipment.
I am very pleased to join with my friend from Montana in what I think
can very well be described as the future competitiveness of America. He
mentioned South Korea and Japan. He is absolutely right. We all
remember what happened with the VCR. We had it all, then all of a
sudden we had none of it. We do not want this to happen in the most
important form of telecommunications. I hope my colleagues will support
the Burns amendment.
I yield the floor.
Mr. KENNEDY. Mr. President, I urge the Senate to support this
amendment to accelerate broadband high-speed Internet access across the
country. The widespread availability of broadband technology is
essential to maintaining our technology leadership in the world.
The spread of the information revolution to rural communities and
underserved areas in our cities depends on affordable access to the
Internet. For too long, these regions have been unable to enter the
information age because of their location and the high cost of making
service available. One of our greatest challenges is to close this
growing economic gap in access to computers and the Internet. If we do
not act to close it now, the ``digital divide'' will soon become an
unacceptable opportunity gap.
The broadband tax incentive is an important step in developing a
national broadband policy. The incentive has widespread support in
Congress because it goes to those who bring broadband to places beyond
the current reach of the private sector.
Many of us joined our colleague, Senator Moynihan, when he first
introduced legislation along these lines 3 years ago. Last year, the
bill had 65 cosponsors from both sides of the aisle, and a companion
bill in the House had 227 cosponsors. Our colleagues clearly support
this idea, and we hope that it will be enacted.
In Massachusetts, I have seen how broadband has transformed the
economy of the entire Berkshire County region in the western part of
the State. Like many rural areas across the Nation, the Berkshires were
not an area that could easily attract private investments in Internet
access. But business and government leaders worked out an initiative
called Berkshire Connect, a partnership with Internet providers to
build a multimillion-dollar network of microwave towers and fiberoptic
lines linking the county's villages and small cities with fast Internet
access.
That project put the Berkshires on a more equal footing with the rest
of the global marketplace because the Internet helps to level the
playing field between large and small businesses and rural and urban
areas. I am confident that passage of the broadband tax incentive will
bring similar success stories across the Nation for residents and
businesses.
Another prime broadband application is telemedicine. A fascinating
moment occurred in medicine 2 years ago when a surgeon in New York
operated by remote control on a patient in France using robot arms at
the patient's location, and the operation was successful. Broadband
technology can enhance the medical miracles, but it needs a very high
bandwidth connection for those kinds of applications. You can't perform
remote-control surgery over a narrowband connection.

[[Page S6200]]

Broadband's potential is immense, and I commend my colleagues from
Montana and West Virginia for their leadership. This is the kind of tax
incentive we need, and I urge my colleagues to support it.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I yield to the Senator from Oklahoma
such time as he may consume.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. I thank my friend and colleague from Iowa for his
leadership and chairmanship of the committee. I am going to briefly
describe an amendment that Senator Kyl and myself, Senator Grassley,
Senator Lott, and several others will be offering tomorrow to enhance
the dividend portion of this bill. The dividend portion that we now
have in the bill is for 10 years; $500 per person would be excluded
from taxation, plus for the first 5 years, an additional 10 percent; in
the second 5 years, an additional 20 percent on top of 500.

I stated publicly that I think that leaves a lot to be desired. So
the amendment we will be offering tomorrow will enhance that, improve
that. It would say for all taxpayers, for dividend exclusion, our
effort is to eliminate double taxation of dividends. Unfortunately, we
find ourselves presently where we tax dividends more than almost any
other country in the world. Now we are, as a free enterprise, as
capitalistic as anybody in the world, but we tax the distribution of
profits, i.e., dividends from corporations, higher than almost anybody,
i.e., dividends, higher than Great Britain, France, and Italy. Japan is
basically tied with us.
We tax dividends at 35 percent of the corporate level and whatever
the individual taxpayer's rate is. So if the taxpayer is at 38.6, it is
that amount plus 35. So their tax is 73 percent; almost three-fourths
of the distribution of profits is taxed. That makes no sense.
Many people, including President Jimmy Carter, said that is wrong and
it needs to be changed. I believe several people--Democrats and
Republicans--have said that is unfair and is too high of a tax and it
needs to be fixed. Now we have a President who said we should fix it.
There are different ways of doing it. He is proposing that we exclude
it from income for individuals.
Unfortunately, the bill that came out of the Finance Committee didn't
do that. It said let's exclude the first $500 for individuals plus 10
percent, then 20 percent. I think we can do a lot more. I think we can
do a lot better. If we do a lot better, we will have a much more
positive impact on the stock market and on the economy. When I say the
stock market, certainly I believe what we are proposing will have a
significant increase on the stock market--maybe 10, 15, 20 percent.
That is positive and real. Why would that be? If somebody is investing
in stock under present law and they own a company and they get a
distribution and it is taxed on top of being taxed at the corporate
level, they may realize it is not a very good investment. A lot of
people buy growth stocks that pay very little, if any, in dividends
because they don't want to go through this scenario. They don't want to
pay capital gains.
The House at least said let's tax capital gains and stock dividends
equally. They reported out a bill and said let's tax capital gains and
stocks at 15 percent; and for some lower incomes, maybe lower than
that, at 5 percent. That is a significant step in the right direction.
The President said let's eliminate double taxation of dividends.
The proposal we are going to be offering tomorrow says let's do that.
In year 2003, let's exclude 50 percent. In year 2004, 2005, and 2006--
for the next 3 years--let's make it 100 percent. We can do that. Then
we sunset it. This is sunset after 4 years. If I am wrong and the stock
market doesn't react positively--if it is not a positive thing, we will
know it after 4 years. It makes sense to try it. The President has a
proposal and many economists have said you should eliminate double
taxation of dividends, and this is a way of doing it. We can do it.
We will have a provision, also as part of this amendment, to adopt
the House provision dealing with expensing items. You might say, what
does that mean? The present law is that a small business that invests
basically $200,000 or less per year can expense $25,000. The Finance
Committee said let's raise that to $75,000 and allow people with a much
greater income to qualify as a small business. They said let's triple
that, up to $75,000, and we will do that for 10 years.

The House said let's try this, make it $100,000, and do it for 5
years. In other words, if a business wanted to write off 100 percent of
their investments, up to $100,000, they could do so if it is done in
the first 5 years. It doesn't cost much over 10 years because it
sunsets after 5 years. Somebody might say we did that when we did the
bonus depreciation and it generated positive economic investment. This
is another way of encouraging small business, and we increase the level
up to $400,000 for this 5-year period. That is what the House has done.
The House passed it. I think there is wisdom there. Every once in a
while, we can say they did something right and we can emulate it. I
think they have a good provision.
I used to be a small businessperson. I owned a janitorial service,
and I used to have a manufacturing company. I believe these provisions
will create jobs. So we are proposing in our amendment that we adopt
the House expensing provision, the so-called section 179. And they also
have created a new dividend proposal that will have a 50-percent
exclusion in 2003 and 100 percent in the years 2004, 2005, and 2006.
I thank my friend and colleague, Senator Kyl, and several other
members, Democrats and Republicans, who have had significant input. I
believe it will help make a significant economic impact.
When you step back and say, what are we doing in the bill that will
help the economy, shake it up, improve it, and create jobs, I believe
the two things I mentioned, in addition to the acceleration of rates,
are the three things that will positively create jobs, have a positive
impact on the stock market, on wealth, investment, and will encourage
people to make investments, get money out of banks or CDs that are not
paying any interest to speak of and put it to work, help it create
jobs. I believe all three of these provisions will do so.
I am speaking tonight before it is introduced because it looks as if
all debate should be transpired on the amendments tonight because we
are going to have significant votes tomorrow. I thank my colleague
again, the chairman of the committee, for his work and cooperation, for
his leadership on this bill, and for his support in helping us to try
to come up with a more robust package that would create more jobs in
the process. That is what we are trying to do--have a jobs creation
bill. I think by adopting this amendment tomorrow we will help improve
it dramatically.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Mr. GRASSLEY. Mr. President, I ask unanimous consent to set the
pending amendment aside.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 594

(Purpose: To amend title XVIII of the Social Security Act to enhance
beneficiary access to quality health care services in rural areas under
the medicare program)

Mr. GRASSLEY. 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 Iowa [Mr. Grassley] proposes an amendment
numbered 594.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
Mr. GRASSLEY. Mr. President, I put before you not a tax amendment,
but I am addressing a funding crisis that affects rural America. I am
talking about the issue of Medicare.
We have heard a lot about relief to States and about Medicaid during
this debate, and legitimately so. But there has been no discussion of
the role Medicare plays in keeping our health care infrastructure
strong in rural States like mine.
Today, our rural health infrastructure is falling apart. Hospitals
and home health agencies in rural areas lose money on every Medicare
patient they see. Services are being slashed

[[Page S6201]]

and staff are being cut, all to make ends meet and keep the facility
open--but not to keep it open with the quality of care that ought to be
there, or to meet necessarily all the needs of the community.
Medicare formulas penalize rural physicians in 30 States by reducing
their payments below those of their urban counterparts for the very
same service. Small physician clinics, and especially solo
practitioners, who are facing rising malpractice premiums on top of the
Medicare formula inequities are on the verge of closing up shop. My
amendment takes important steps toward correcting geographic
disparities that penalize rural health care providers.
I will summarize some of the key provisions of the amendment. On
hospitals, we eliminate the disparity between large urban hospitals and
small urban and rural hospitals by equalizing inpatient-based payment.
The hospitals in my State and in other rural areas are paid 1.6 percent
less on every discharge. That is a $14 million loss every year in my
State.
We received bipartisan support to temporarily end this inequity in
the fiscal year 2003 omnibus appropriations bill, but it is time to end
this inequity in a permanent way.
We also revise the labor share of the wage index for inpatient
hospitals. The wage index calculation is killing our hospitals in rural
areas. They have to compete with larger hospitals in the big cities for
the same small pool of nurses and physicians. But because of the
inequity in the wage index, these hospitals are not able to offer the
kinds of salaries and benefits that attract health care workers. This
amendment would reduce the labor share of the wage index from 71
percent to 62 percent.
We strengthen and improve the Critical Access Hospital Program which
has been so successful in keeping open the doors of some of our most
remote hospitals. We also create a low volume adjustment for those
small rural hospitals that are not able to benefit from the Critical
Access Hospital Program. These hospital corrections are not partisan
rhetoric. They are supported by the nonpartisan Medicare Payment
Advisory Committee, by the CMS administrator in a recent letter to the
House Ways and Means Committee, and by 31 bipartisan Members of the
Senate rural health caucus.
For doctors, my amendment ends once and for all the penalty Medicare
imposes on doctors who choose to practice in rural areas of our
country. Medicare adjusts payments to doctors downward based on where
they live, but, in fact, the value of a physician's service is the same
in Brooklyn, IA, as it is in Brooklyn, NY, but the Medicare formula
does not think so. My amendment changes that and sets a floor for all
physician payments that will end the negative adjustment doctors in
Iowa and 30 other States currently face.
My bill also provides assistance to other rural health care
providers, such as ambulance services and home health agencies which
millions of seniors in rural areas rely on every day.
Providers in rural States, such as Iowa, practice some of the lowest
cost, highest quality medicine in the country. This is widely
understood by researchers, academics, and citizens of those States, but
it is not recognized by the impersonal formulas of Medicare. Medicare
instead rewards providers in high-cost, inefficient States with bigger
payments that have the perverse effect of incentivizing overutilization
of services and also poor quality.
My legislation is paid for not by taking resources away from our
growth and jobs package, nor by taking money away from those high-cost
States that I mentioned, but by other modifications to the Medicare
Program that make good policy sense.
I want to emphasize that because every other amendment we have had
before the Senate today has taken money out of the tax package to spend
someplace else. My amendment does not affect the tax provisions of this
legislation.
This amendment represents a fair and balanced approach to improving
equity in rural America. I urge my colleagues to support its adoption
today. For those of us from rural States, our doctors, hospitals, and
whole communities are counting on us.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. I yield such time as the Senator from Maine may
consume.
Ms. COLLINS. Mr. President, I believe we are about to have an
agreement on the order for proceeding, but I need to consult with my
colleagues, so I suggest the absence of a quorum.
The PRESIDING OFFICER. Who yields time for that purpose?
Mr. GRASSLEY. The Senator from Maine suggested the absence of a
quorum.
Ms. COLLINS. Mr. President, I ask that time be taken equally from
both sides.
The PRESIDING OFFICER. Is there objection?
Mr. BAUCUS. Mr. President, under the rules, as I understand them, the
author of the amendment has control of her time, which is 1 hour.
I ask unanimous consent that the pending amendments be laid aside so
that the Senator from Iowa, Mr. Harkin, may offer an amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Iowa.
Mr. HARKIN. Mr. President, I ask if the Senator can yield me 15
minutes.
Mr. BAUCUS. Mr. President, I inform the Senator from Iowa that he has
1 hour.
Mr. HARKIN. I appreciate that. I will not take an hour.
Parliamentary inquiry: The Senator asked that the amendments be set
aside; right?
Mr. BAUCUS. Yes.

Amendment No. 595

Mr. HARKIN. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:

The Senator from Iowa [Mr. Harkin] proposes an amendment
numbered 595.

Mr. HARKIN. 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:

(Purpose: To help rural health care providers and hospitals receive a
fair reimbursement for services under Medicare by reducing tax cuts
regarding dividends)

On page 281, between lines 2 and 3, insert the following:

SEC. . FAIR REIMBURSEMENT FOR RURAL HEALTH CARE PROVIDERS
UNDER MEDICARE.

(a) Reduction of Geographic Disparity Under Medicare.--
(1) In general.--Subject to paragraph (3), the Secretary of
Health and Human Services shall promulgate the regulations
described in paragraph (2) by December 31, 2004 (unless
legislation has been enacted having the effect of such
regulations before the conclusion of the first session of the
108th Congress).
(2) Regulations described.--The regulations described in
this paragraph are regulations that reduce the geographic
disparity in payments under the medicare program under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) to
health care providers by--
(A) equalizing urban and rural standardized payment amounts
under the medicare inpatient hospital prospective payment
system under section 1886(d)(3) of such Act (42 U.S.C.
1395ww(d)(3));
(B) improving the medicare incentive payment program under
section 1833(m) of such Act (42 U.S.C. 1395l(m)) to ensure
that bonus payments under such section are made on behalf of
all eligible physicians;
(C) providing fairness in the medicare disproportionate
share hospitals adjustment for rural hospitals under section
1886(d)(5)(F) of such Act (42 U.S.C. 1395ww(d)(5)(F));
(D) establishing a medicare inpatient hospital bonus
payment for low-volume hospitals under section 1886(d) of
such Act (42 U.S.C. 1395ww(d));
(E) adjusting the medicare inpatient hospital prospective
payment system wage index to revise the labor-related share
of such index to account for 62 percent of such index under
section 1886(d)(3)(E) of such Act (42 U.S.C.
1395ww(d)(3)(E));
(F) revising the physician fee schedule wage index under
section 1848(e)(1) of such Act (42 U.S.C. 1395w-4(e)(1)) to
establish a minimum geographic cost-of-practice index value
of not less than 1 for physicians' services furnished under
the medicare program;
(G) extending the temporary increase under section 508(a)
of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (114 Stat. 2763A-533), as enacted into
law by section 1(a)(6) of Public Law 106-554, for home health
services furnished in a rural area; and
(H) making any other change to a payment system under the
medicare program that the Secretary determines is
appropriate.
(3) Hold-Harmless.--The regulations promulgated under
paragraph (1) may not result in a lower level of
reimbursement for a

[[Page S6202]]

health care provider under the medicare program under title
XVIII of the Social Security Act than such provider would
have received but for the enactment of this section.
(b) Funding.--
(1) Appropriation.--There are appropriated, out of moneys
in the Treasury not otherwise appropriated, $50,000,000,000
for the purpose of implementing the regulations described in
subsection (a)(2).
(2) Reversion of excess funds.--Any funds appropriated
under this subsection that are not used to implement such
regulations shall revert to the Treasury and shall be used to
reduce the Federal deficit.
(c) Funding offset.--Paragraph (2) of section 116(a)
(relating to partial exclusion of dividends received by
individuals), as added by section 201(a), is amended to read
as follows:
``(2) Limitation.--Paragraph (1) shall apply to qualified
dividend income of a taxpayer only to the extent such income
does not exceed the sum of $500 ($250 in the case of a
married individual filing a separate return).''.

Mr. HARKIN. Mr. President, I will speak to my amendment in a moment.
Before I do, I wish to make preliminary comments about the tax bill
before us which the President and the Republicans have called a jobs
and growth package and they say it is to grow the economy. I certainly
agree that the economy is in dire straits and we are in desperate need
of taking action. That is true.
Since President Bush took office, the United States has lost 2.6
million jobs, more than 36,000 of those in my State of Iowa.
Unemployment rates, including long-term unemployment rates, continue to
rise. That is a fact. The economy is in a shambles. Unemployment
continues to go up. This is not just some academic process. It is
causing real hardship for millions of Americans and families who are
without a job and without health care coverage.
Senator Specter and I had a hearing in our appropriations
subcommittee talking about the lack of access and affordability of
health care. You can read the story of the man who testified, Mr.
Kurilko. He was referred to in the Wall Street Journal. He is 57 years
old, worked 37 years on a job. He now has a heart problem, diabetes. He
is out of a job. He and his wife now face the prospect of losing their
life savings because his health care costs, just for insurance, are
over $2,000 a month. This is a man who worked in a blue-collar job, a
steel mill, all of his life.
That is what is happening in America today. Families without work,
and the high cost of health care, go without coverage, and they see
their life savings vanishing before their eyes.
We see it affecting other areas of our economy, our families, and our
States. The tuition fees in Iowa have increased sharply at our public
universities. However, the tuition does not make up for the shortfall
in the loss of State funding. We are seeing cuts to critical public
health initiatives, including those that help indigent dialysis
patients, and a program that helps immunize low-income kids.
Public schools in Iowa have cut 350 teachers statewide. Schools are
forced to share nurses and counselors and eliminate programs such as
music and art and enrichment classes entirely from their schools.
In our hearing this morning, we had a teacher from a small school in
Iowa testify. The cost just in her school district for health care
coverage went up 61.5 percent over the last year.
As he said, they are now approaching the point where their health
care costs are going to equal the salary of a first-year teacher. So
this is the real America that is happening in my State, in every State,
to people who have worked all their lives and now do not have any
health care coverage. Our schools are being cut. Our infrastructure is
deteriorating in this country, as well as our bridges, roads, sewer,
and water systems.
What is the answer before us for growth and jobs in our economy? An
enormous tax cut, in large part for the wealthy in our country. That is
the answer. If I believed this tax bill before us would help the
economy, create the jobs we need, and help provide health care
coverage, I would be all for it. But the fact is, we have tried this
before.
In 1981, under President Reagan, we had a supposedly big supply side
cut in taxes. We lost 1.3 million jobs in the two years after the
passage of that bill. Then OMB Director David Stockman called it a
riverboat gamble. Guess what. Working Americans all over this country
lost that gamble. In 1982, part of that measure was reversed and the
Federal Reserve sharply dropped interest rates allowing for things to
start to get better.
After much hard work in the 1990s, we passed a bill in 1993 that put
us on the path towards a balanced budget, restored confidence and
creating 22 million jobs. Productivity went up. It was a bill with a
policy totally out of line with the supply side philosophy of the 1981
bill. Almost every Republican senator predicted that the economy would
be severely hurt. The economy grew, and 6.5 million jobs were created
in just the first two years after that bill passed. The United States
enjoyed 40 consecutive months of unemployment below 5 percent.
Twenty years after 1981, we had another supply side riverboat gamble
in front of us. President Bush assured the country in 2001 that

We can proceed with tax relief without fear of budget
deficits, even if the economy softens.

And on another occasion, he said

A tax cut now will stimulate the economy and create jobs.

Yet what we are now facing, almost two years after the passage of
that measure is a loss of another 1.8 million jobs to our economy.
The President, and the Republicans, passed a $1.3 billion tax cut
like the one we are considering today. It was targeted to the
wealthiest. Unfortunately, the President's predictions were dead wrong.
I want to get this chart back up. Two years after the 1981 bill, we
lost 1.3 million jobs. Since the 2001 tax bill was passed 20 years
later, we have lost 1.8 million jobs in almost 2 years.
Now, 22 years after the first try, we are going to try it again. It
is not enough that the riverboat gamble failed in 1981. It is not
enough that it failed in 2001. By gosh, we are going to try it again,
folks--another riverboat gamble. One would think history would teach us
something.
If history does not, then how about some of the economists and what
they are saying. Federal Reserve Chairman Alan Greenspan said:

There is no question that as deficits go up, contrary to
what some have said, it does affect long-term interest rates.
It does have a negative impact on the economy . . .

He twice testified before Congress in opposition to the tax cut plan,
warning that these deficits would stunt long-term growth. Ten Nobel
laureates and 400 other economists disagree with the President's
approach. In a statement made February 10 of this year, they wrote:

Regardless of how one views the specifics of the Bush plan,
there is wide agreement that its purpose is a permanent
change in the tax structure and not the creation of jobs and
growth in the near term.

The economists also said that:

Passing these tax cuts will worsen the long-term budget
outlook, adding to the nation's projected chronic deficits.
This fiscal deterioration will reduce the capacity of the
government to finance Social Security and Medicare benefits,
as well as investments in schools, health, infrastructure,
and basic research. Moreover, the proposed tax cuts will
generate further inequities in after-tax income.

That is what these 400 economists said.
What we are talking about is fairness. We want fairness in the Tax
Code. We want fairness to the working families of America in how they
are taxed and who pays the burden in this country.
Every time we talk about fairness, President Bush says, class
warfare. Why is fairness class warfare? Why is it in President Bush's
head that if we try to have fairness in the Tax Code, he thinks it is
class warfare?
That is what this is about. It is about basic fairness. We have tried
it before. It failed horribly, and yet I guess we are going to do it
again.
Why should we do this? Why should we go against the advice of some of
the most renowned economists and why should we go against what we know
from history? Why take a risky gamble when people's lives are at stake?
Why take a risky gamble when 9 million Americans cannot find jobs?
If I were out of work, I would want my representatives in Washington
to do what has been proven to grow the economy, proven to create jobs,
not what has twice proven to fail.
In fact, the more I think about this tax bill before us, I think of
Bill Bennett. It is like a gambling addiction, putting $500 in the slot
machine and

[[Page S6203]]

pulling the handle. That is what this tax bill is like. It is like
putting $500 in and pulling the handle and hoping he hits it. Now we
know that Mr. Bennett did not hit it. He lost millions of dollars over
several years of gambling.
That is what this bill is like. It is a riverboat gamble, like David
Stockman called it in the 1980s.
I am getting to my amendment now, and there is an interesting
comparison I wanted to make on Medicare. How much does the plan before
us cost? Well, when we throw out figures of billions of dollars, eyes
sort of glaze over. No one can understand exactly how much money that
is. So I thought I might compare it.
The President's plan if made permanent costs more than the entire 75-
year shortfall in both Social Security and Medicare, about 1.8 percent
of GDP. The Bush tax cuts made permanent over a 75-year period will
amount to 2.3 percent to 2.7 percent of GDP.
We hear all the talk about the shortfall we are going to have in
Social Security and Medicare when the baby-boomers retire, and that we
have to do something about it. Here is your answer: The Bush plan will
cost more than the shortfall in Social Security and Medicare. Think
about it. Are we going to have this riverboat gamble, a tax cut that
basically benefits the wealthiest in our society, when we could be
using this to secure Social Security and Medicare for 75 years? But
maybe that is what this is all about.
It was Newt Gingrich, after all, who said that they--the
Republicans--wanted to have Medicare ``wither on the vine.'' Maybe that
is what this is all about. Pass this tax cut, reward the wealthiest in
our society, and when it comes time to do something about Social
Security and Medicare, we will not have enough money. Maybe that is
what it is all about.
That is not what we should be about. We should be about a jobs and
growth bill that helps the working families of America. We ought to be
about a bill to help secure Medicare and Social Security for the baby
boomers. One of the ways we can do this is by making sure we have
equity in the Medicare system. The amendment I sent to the desk will
help do that by making sure we have better equity in the Social
Security system and Medicare system.
I tried to listen as my colleague from Iowa offered his amendment. I
did not receive a copy of it earlier, so I did not have a chance to
look at it. I heard some of the things that my colleague from Iowa was
talking about in terms of helping right some of the wrongs in Medicare
to provide for less disparity under Medicare.
Most of what I heard I agree with. I think a number of the provisions
in Senator Grassley's Medicare amendment are similar to provisions in
my amendment. I commend him for that.
However, his amendment uses a different offset. I don't know exactly
what that is. I plan to analyze it overnight. It may have some merit, I
don't know. Both are trying to help rural hospitals and providers. I
hope we can work together to get that done sometime this year.
Basically, what my amendment would do is, say, if the Congress does
not pass legislation by December 31, 2003 then the Secretary of Health
and Human Services would promulgate regulations by December 31, 2004.
We would have to enact additional legislation. If none passed, the
Secretary would have to act by the end of 2004. Those regulation
changes would have to have the following parts:
One, to equalize urban and rural base payment rate. This increases
the rate for all hospitals in cities below one million people.
Two, improve the Medicare incentive payment program to ensure that
bonus payments are made on behalf of all eligible physicians; three, my
amendment would eliminate the Medicare DSH cap. The current cap
disproportionately hurts rural states; four, it would establish a
Medicare inpatient hospital bonus payment for hospitals with low
Medicare patient volumes; five, it would adjust the Medicare inpatient
hospital prospective wage index to revise the labor-related share of
such index to account for 62 percent of such index. Currently, payments
are 71 percent based on labor costs. I heard Senator Grassley's
amendment did the same thing; next, reinstate a bonus payment to home
health care providers in rural areas. A 10 percent bonus has expired
and this would reinstate it. Next adjust the work GPCI to no less than
1 for physicians; lastly, this amendment I am offering would say we
would have a hold harmless clause that whatever we do could not result
in the lower level of reimbursement for a health care provider under
title XVIII, that such provider would have received but for the
enactment or these of this amendment or these regulations.
The offset I used would be to limit, to put a cap on any tax
deductions for dividend income not to exceed $500. In other words, you
could get an exclusion of up to $500 on dividends in terms of a tax
benefit, but no more than that. That offset would fully pay to make
sure our hospitals in Iowa or Washington State--I know Washington is
very low on the payment schedule--Montana, other States, make sure that
we have an equalization so the Medicare payments in those States are
not so skewed as they are right now.

We can get this done simply by capping at $500 the tax benefits under
the present bill before the Senate on dividends. It seems to me that
would be a small price for the wealthiest in our country to pay to make
sure we had a working Medicare system that was fair to all.
In closing, regarding the tax bill, do we take a risky gamble as we
have before, sort of a Bill Bennett gamble, as I have said, pull the
handle on the slot machine and hope something comes up? Or do we go
with proven methods to grow the economy and create jobs? Do we break
the bank on tax cuts for the wealthy or do we invest in education? Do
we break the bank on dividend tax breaks or do we cap them and use that
offset as a way of helping equalize Medicare payments in our States? Do
we break the bank on tax cuts for the rich or help families afford
college tuition? Do we break the bank on tax cuts for the rich or do we
help families afford health care coverage? Do we break the bank on tax
cuts for the rich or do we keep Social Security secure? Do we break the
bank on tax cuts for the rich or do we keep Medicare benefits intact?
Do we break the bank on tax cuts for the rich or do we start to work on
having smaller deficits?
These are our choices. The choice is clear. This bill needs some
serious amendments. There will be a number of amendments offered and,
quite frankly, if some of the amendments are accepted, maybe the bill
would be worthy of support. As the bill sits right now, the bill must
be opposed, unless we can adopt some of these amendments that I think
would make it, A, more fair and equitable, and B, to make sure we
invest in the long-term security of Social Security and Medicare.
How much time do I have remaining?
The PRESIDING OFFICER (Ms. Murkowski). The Senator has 39 minutes
remaining.
Mr. HARKIN. Parliamentary inquiry, Madam President: In terms of the
time, can this time be reserved?
The PRESIDING OFFICER. It can be reserved for use today.
Mr. HARKIN. I reserve the remainder of my time.
I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Madam President, before we move on with the next
amendment, I think it would be accurate for me to say that the speech
by my good colleague from the State of Iowa emphasizes the difference
of philosophy I have tried to emphasize that our bill tries versus
other approaches. These are honest, faithfully held ideas about the
role of the Government in our society.
The alternatives my colleague from Iowa has given--tax cuts on the
one hand, or spending money on the other hand--is exactly the point I
have been trying to make of whether or not the resources of this
country should go through the Federal Treasury and have 535 Members of
Congress divide them up, keep taxes high in the process, or whether it
is better to reduce taxes to create jobs and create the jobs by leaving
the money in the hands of 110 million taxpayers making their own
individual decisions; the dynamics of our free market system respond
very well to that. Money that is spent by individuals or invested by
individuals turns over in the economy many more times than it does if I
make a decision on how that is spent.

[[Page S6204]]

Some believe, as evidenced by the recent speech, it is better to have
higher levels of taxation, bring the money through the Federal Treasury
and decide how to spend it. The other approach is that we will, as we
do through this bill, give tax reduction with the taxpayers of this
country deciding on investing and spending, or both, and enhancing the
economy that way and creating jobs.

Another goal of this bill is to bring taxation of the people of this
country within the band that it has been for about 50 or 60 years, of
about 17 percent or 19 percent of the resources of this Nation coming
to the Federal Government for us to finance programs and to make
decisions on how that will be spent. About 17 to 19 percent of the
gross domestic product has generally, over 40 years, been taxed. In
recent years that has gotten as high as 21 percent, as high as it was
in World War II, so the highest in peacetime history.
This tax bill, besides the motive of creating jobs, is to bring the
level of taxation down so it falls within that historic band, based on
two propositions. One is it is a level of taxation that has not been so
high to be harmful to our economy and to our people, because our
country has advanced tremendously well with the Federal Government
operating within that band of deciding how to allocate 17 percent to 19
percent of our resources. The other is it is a level of taxation that
has been accepted by the people of the United States.
Some of them would say it is still too high, but I guess I would have
to say over the long haul I have not heard too much complaint about the
level of taxation that has existed over that long period of time of 17
percent to 19 percent.
So I do not find fault with anything my colleague from Iowa said. He
is expressing one very legitimate philosophy of government and the
financing of that government and the distribution of resources and
having that done by political decision. I am expressing another
philosophy of government shared by some Democrats and hopefully by a
lot of Republicans, that a level of taxation can get so high it hurts
the economy, and the way to enhance the economy and grow the economy is
to let people have a lower level of taxation.
Another way to say it is if we have any budget problems and any
deficit problems, they are not related to the undertaxation of the
American people. They are related to the overspending by the Congress.
Now we move on to another issue. But before I yield whatever time she
might consume to the Senator from Maine, we are adopting policy with
her amendment, in a bipartisan way, that is unrelated to the policy
that is in the bill. That is because as chairman of the committee,
responding to the people in my committee, both Republicans and
Democrats, as well as responding to people outside the committee as
represented by Senator Collins and Senator Nelson of Nebraska, there
was a desire to have more people involved with the policy of how to
meet the needs of the States through some State aid. So we have
deliberately left kind of a vacuum in this legislation that is now
going to be filled by the good work of Senator Collins and Senator
Nelson off the committee, and by Senator Rockefeller and others on my
committee. I commend them for their hard work.
There is an awful lot of compromise that has gone into this product
and I am proud to be affiliated with this product. But the product is
not mine, because it was my determined effort to leave it to people who
have worked on this issue for about 2 years now. For about 2 years
people have been promoting this concept. I compliment them for their
stick-to-it-iveness. Tonight proves that hard work pays off.
The PRESIDING OFFICER. The Senator from Maine.
Ms. COLLINS. Madam President, let me begin by thanking the
distinguished chairman of the Senate Finance Committee for his hard
work.
Mr. BAUCUS. Madam President, if I might ask the Senator to yield just
for the sake of orderly process here in the Senate, as I understand it,
the Senator means to offer her amendment. Is that correct?
Ms. COLLINS. That is correct.
Mr. BAUCUS. Technically, as I understand it, we should put aside
pending amendments.
Ms. COLLINS. I was about to ask.
Mr. BAUCUS. I ask unanimous consent the Harkin amendment and the
amendment by Senator Grassley be temporarily set aside, as well as the
other amendments, so the Senator from Maine can offer her amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 596

(Purpose: To provide temporary State and local fiscal relief)

Ms. COLLINS. Madam President, I ask unanimous consent that the Senate
proceed to amendment No. 596, which is a Collins-Rockefeller-Nelson, et
al, amendment, regarding State aid, which is at the desk.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:

The Senator from Maine [Ms. Collins] for herself, Mr.
Rockefeller, Mr. Nelson of Nebraska, Mr. Smith, Mr. Schumer,
Mr. Coleman, Mrs. Clinton, Mrs. Murray, and Mr. Wyden,
proposes an amendment numbered 596.

Ms. COLLINS. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The text of the amendment is printed in today's Record under ``Text
Of Amendments.'')
Ms. COLLINS. Madam President, I was beginning with my thank-yous to
the distinguished chairman of the Finance Committee, who has worked so
hard to produce not only the bill on the floor but also has worked very
closely with the sponsors of this amendment to come up with a proposal
for fiscal aid to the States that I believe is carefully drafted and is
going to make a real difference to the 49 States that are struggling to
close budget shortfalls.
I am pleased to have a number of cosponsors, including Senators
Rockefeller, Ben Nelson, Smith, Schumer, Coleman, Clinton, Murray, and
Wyden. But I particularly want to pay tribute to Senator Ben Nelson and
Senator Rockefeller, who have worked night and day with not only
Senator Grassley and myself but others interested in this issue to
forge a compromise that I think will result, at the end of the day, in
the conference report with $20 billion in much needed fiscal relief for
our States.

Half of this funding would be through a temporary increase in the
Federal Medicaid share, to ensure that States can continue to protect
millions of vulnerable Americans who rely on the Medicaid program as
part of the health care safety net.
The attacks of September 11, coupled with the subsequent recession
and resulting unemployment, have placed tremendous and unanticipated
strains on State budgets. The States are, after all, our partners in
providing health care, education, and other essential services to the
citizens of this Nation. They are, however, facing a dramatic and
unexpected decline in government revenues at precisely the time when
the demand for government services has never been higher because of a
lagging economy.
States from Maine to Nebraska to West Virginia to Alaska are facing
their most serious budget shortfalls in 50 years. States face deficits
of between $70 and $85 billion for the next fiscal year, which begins
in most States on July 1. They also face deficits of $26 billion trying
to close the books on the current fiscal year.
Moreover, while the President's proposal for excluding dividends from
taxation would spur needed investment in American businesses, it would
cost the States nearly a billion dollars over the next 3 years. That
strengthens, to me, the case for providing aid to the States.
Let me tell you what the State of Maine, my home State, is facing.
The State of Maine faces a budget shortfall for this year and the next
of approximately $1.2 billion. Let me put that in perspective.
The entire budget for the State of Maine is only $5.3 billion, which
means it faces a shortfall of approximately 20 percent. Imagine if the
Federal Government were struggling with a budget shortfall of 20
percent. It would have to close a $440 billion budget gap, and it would
have to do so without borrowing a single dime. That summarizes the
dilemma facing our State.

[[Page S6205]]

Forty-nine States have balanced budget requirements. They have to
balance their budgets. They cannot print more money. They can't run
temporary deficits. They can't borrow the money to close the deficit.
As a consequence, States have been cutting spending, increasing taxes,
using rainy day funds, and delaying capital projects. They are doing
whatever they can because they must balance their budgets.
All of the States have cut programs--even programs that provide
lifelines to our most vulnerable citizens. At a time when the number of
people without health insurance is climbing, 49 States have either
already cut their Medicaid Programs or are planning to do so.
Medicaid provides a critical health care safety net for 44 million of
our most vulnerable low-income citizens, including 218,000 in my State
of Maine. States, as a result of trying to balance their budgets, are
slashing Medicaid Programs. As a consequence, approximately 1.7 million
Americans are at risk of losing their health insurance. That means they
are going to be added to the growing number of 41 million Americans
lacking health insurance.
Moreover, not only is our proposal compassionate, not only will it
help the most vulnerable Americans keep their health care services, but
our proposal makes sound economic sense. Putting money into the hands
of States is a great way to stimulate economic growth in conjunction
with the tax provisions of this package. As States cut spending and
raise taxes to balance their budgets, they weaken the overall economy.
A recent Goldman Sachs analysis underscores the stimulative effect of
State fiscal relief. The report notes that ``State governments could
provide significant support to the economy without large long-term
budget cuts, reducing the need for these jurisdictions to raise taxes,
and cut spending.''
After all, if we cut taxes here in Washington only to have taxes
increase in State capitals across the country, we will wipe out some of
the good we are trying to do by cutting Federal taxes.
I am not saying Congress should bail out the States. I am not saying
States should not have to make hard choices. I am not saying States
should not balance their budgets. The States are going to have to make
hard, painful choices, even with the $20 billion we are proposing to
assist them. The nature and the severity of the fiscal crisis facing
our States has convinced me that we simply have to help them. The
consequences are too dire otherwise, and too many vulnerable low-income
American families will suffer if we do not step in and lend a helping
hand.
I am encouraged that the economic stimulus package approved by the
Senate Finance Committee authorizes temporary fiscal relief to the
States. As the distinguished chairman has indicated, tonight we are
deciding how to fill in the blanks and how that help should be
allocated. We focus particularly on Medicaid because of our concern
about the impact of State budget cuts on low-income families
in America.

But there is another reason it makes sense to target one-half of the
assistance to the Medicaid Program. That is that Medicaid is the
fastest growing component of State budgets. While State revenues are
stagnant, or declining in most States, Medicaid cuts are increasing at
a rate of more than 13 percent a year. That is why States have no
choice but to look to the Medicaid Program.
If you look at home State budgets, the vast majority of State
spending is for education and Medicaid. If we want to help protect low-
income Americans, the best thing we can do is to approve an increase in
the Federal match for the Medicaid Program.
As to the State of Maine, our amendment would mean $116 million over
the next 2 years for health care and other services that will help our
most vulnerable Americans.
There is another advantage to using the current Medicaid structure--
what is known as the Federal Medicaid matching rate, or FMAP. That is,
the States don't have to take any new legislative action or establish
any new administrative structures in order to use these additional
Federal matching funds. They can go straight into the Medicaid Program.
The remaining $10 billion could be used by States and local
governments to fund education or job training, health care or other
social services, transportation or other infrastructure needs, and law
enforcement or public safety. In other words, we provided a great deal
of flexibility for that remaining $10 billion.
Our amendment would allocate $4 billion of those funds directly to
counties and local governments.
Our amendment is strongly supported by a wide range of health care
groups, which I will submit as part of my formal statement in the
interest of time.
The support for our proposal--the Collins-Rockefeller-Nelson-Smith,
et al, amendment--underscores the critical importance of providing
assistance to States right now. Now is when they need it. Now is when
we must act.
Congress is most effective when it stands arm in arm and not toe to
toe with our partners, the States. Our States face a fiscal crisis of
expanding dimension. We need to help, and this bipartisan, carefully
crafted amendment is the critical step forward in doing just that.
I hope we will have a strong bipartisan vote for this important
amendment. It is similar to proposals that my colleagues and I advanced
last year and this year which garnered the overwhelming support of the
Senate. Now we can make sure that it happens.
I would like to yield at this time to the Senator from West Virginia
who has been stalwart in arguing for fiscal relief for the States. It
has been a great pleasure to work with him. I yield to him as much time
as he needs out of my time.
The PRESIDING OFFICER. The Senator from West Virginia.
Mr. ROCKEFELLER. I thank my dear friend, the very distinguished
Senator from Maine. I thank the Presiding Officer for allowing me to
talk briefly about this amendment of Senator Collins, myself, Senators
Nelson and Smith, and Senators, et al, as the Senator from Maine kept
saying, including Senator Clinton and many others. It is something we
have been working on for 2 years. It is something we have been working
very hard on for 2 years. It is something the National Governors
Association has worked hard for, for obvious reasons, which I will get
into in a moment, although my remarks will not be long.
The Senator from Maine really did cover the logic and the need in
very clear terms. If those who are listening heard her, they heard the
best possible argument. I just want to add a few comments.
I also thank the chairman of the Finance Committee, Senator Grassley
from Iowa, for his generosity and good judgment in accepting this $20
billion package as part of the chairman's mark. Is it everything in
amount and scope that the Senator from West Virginia would wish? No.
Because the Senator is from West Virginia and the needs on a
proportional basis across the country are greater in West Virginia than
many other places. I would support $30 billion. I support $40 billion
provided that one-half is used for Medicaid, and then others could be
negotiated out.
So I do not think the $20 billion is enough, but $20 billion is what
we have, and $20 billion is more than we started out with last year. We
will hope people forget that, even though 75 of them on this floor
voted for it then, and then, for a $30 billion bill, 80 on this floor
voted for it this year. That does not happen a lot around here.
That was not a free vote. That was not a trivial vote. That was a
vote people made after thinking about it. So we will prevail, and we
will rejoice in that. And we will not do that just because we win an
amendment; we do that because we know we are helping real people.
We have almost 300,000 people in West Virginia who are on Medicaid.
One of the things that always strikes me: We always talk about health
care in statistics, and somehow that separates us from being able to
get down to what the Senator from Iowa, Mr. Harkin, calls ``real
people.'' And I am of that school, the so-called real people school.
I picked up the paper this morning. I read that 60 million Americans,
at some point during the year, do not have health care. That is not a
Medicaid statement. That is a health care statement. That means some of
them

[[Page S6206]]

never have it, and others of them only have it on a part-time basis.
But that means that all of them--60 million Americans out of 260
million, how ever many we are--worry all the time about health care.
But here comes a Medicaid amendment in which we can do some good for
people. The Senator from Maine mentioned 1,700,000 people are at risk
if we do not. I am not sure the $10 billion will take care of all those
1,700,000 people, but it will take care of a lot of people, and it is
going to take care of them with very good health care. People need to
understand that Medicaid, unlike Medicare, does provide a prescription
drug benefit. And Medicaid, probably known to most of my colleagues,
provides 6 million elderly, poor Americans--who do not have health care
otherwise and prescription drugs otherwise--it provides this to them.
So it has an enormous capacity and reach. It is superb health care. It
does EPSDT for children. That is early screening. It does all kinds of
things that Medicare, obviously being a different area, does not do. So
it is a superb program.
The Senator from Maine pointed out it is very good in terms of being
a stimulus to the economy. She is quite correct about that. And it is
about a 3 to 1 relationship. For every $1 you spend in the State, about
$3 is actually churned beyond that. So it is a stimulus program. Yes,
it is actually a stimulus program. I think that is one of the reasons
the chairman of the Finance Committee put it in the mark.
But there is another aspect here. The Senator from Maine used the
words ``safety net.'' I will use the word ``underpinning.'' Either one
is the same. This is a sacred concept. This is a country, because of
our original history under the British crown, in which we wanted to
protect the minority, not protect the majority. The majority, we
figured, were able to do that.
There are protections and checks and balances in all these things,
but people sometimes say: Well, if somebody is on Medicaid, that means
they are not working or they don't deserve it. That is so untrue.
When I go back to the way I was introduced to West Virginia--and what
caused me to stay in West Virginia--when I became a Vista volunteer for
2 years, and I dealt with people, none of whom had health care, they
fed me every meal I had, because I ate in some home or some mobile home
or whatever it was. I depended upon them. My life was them. If it was a
good day for them; it was a good day for me. If it was a bad day for
them; it was a bad day for me. It changed me in every single way.

But these are people who need this. There is nothing that hurts so
much as to know a child cannot get screened for autism when they should
be, or that a child has no dental care whatsoever. I had to deal with
that. I would have to load kids from this little community into my
jeep, and we would go down to the one place in Charleston, WV, which
offered free dental care. And, obviously, you can't do that for 38
years. So it is a tragic situation.
These are good people. These are people sometimes who cannot find
work simply because they live too far out in the country, as was the
case in this community, or they did not have automobiles to be able to
get to work. Or if they got to work, they didn't know how to take a job
exam or have a job interview, or they had never been up in an elevator
and they were scared by that, or they were asked to lower a Venetian
blind because the Sun was in their eyes, and they had never seen a
Venetian blind before, so they would just sort of shut up and hunker
down and be defeatist.
Don't tell me those people are not worth keeping healthy because
things did not break their way. Things broke well in my life. Things
have not broken well in some people's lives in Maine and Alaska and
West Virginia, and we cannot pretend that somehow these are not people
and that they don't deserve help. The spirit of America is one in which
you try to protect those who cannot protect themselves, as much as
possible, within reason.
Incidentally, this also happens to do an enormous amount for our
hospitals and nursing homes. And that was the one thing that was not
said by the Senator from Maine. Eighty-five percent of any hospital in
West Virginia depends on Medicare and Medicaid--all of them.
So by doing this--and by pouring millions of dollars into West
Virginia, and $10 billion across America--for a temporary period of 18
months, we strengthen our entire health care system as well as
stimulating the economy. So it helps the economy and it helps the
people--and people who really do need it.
The Senator pointed out that the other $10 billion--which I was less
involved with because I was focused on the Medicaid relief--is spent
wisely: in education, job training, transportation. She talked about
it. And it is a good expenditure. Governors and local groups can decide
how to spend that.
I was worried it would be kind of a revenue-sharing thing. I remember
back when I was Governor in 1982, we had revenuesharing, and, all of a
sudden, county courthouses all over the State of West Virginia got new
roofs and got refurbished, which is not exactly what I think the
revenuesharing was meant to be for.
So it is a serious business when you give Medicaid help to people who
need it.
I will conclude with this. And this really gets my goat. I have heard
a lot around here the argument that you cannot give money to States.
What are we, two nations? Are we 50 States, on the one hand? Is that
called America? Or are we a Federal Government? Is that America? Or are
we somehow bound up that we work together and that we help each other?

I was not elected by a country. I was elected by a State. I am a
Senator from West Virginia. That means we work together.
To say the States have been irresponsible is so wrong because if you
go back to the end of the Second World War or if you go back just 10
years, you will find the States have been far more discrete and
responsible in their spending than has the Federal Government.
Now, you can say: Well, the Federal Government has very broad
responsibilities, the Department of Defense, and other endeavors. And I
understand that. But the fact is, the States have been responsible.
When we took in less money in 1982 than we did in 1981, I had to fire
10,000 Department of Highway workers. I had to fire them. I had to fire
those people--good people who worked. So don't tell me that States
don't sacrifice.
West Virginia has just raised its cigarette tax to 55 cents, and all
of the money is being spent by the Governor on Medicaid. And, at the
same time, the State is having to cut services.
This morning, I talked to the president of our very largest
university, with 31,000 students, West Virginia University. His budget,
and every other State public education budget at the college/university
level, has been cut by 13 percent. And it will happen again next year.
It is a devastating cut. Why? Because, as the Senator from Maine said,
you have to balance the budget.
So we are dealing with real States here, but, most importantly, we
are dealing with real people who need the help in an America which was
created to protect those who needed that help.
I ask my colleagues to join the Senator from Maine, the Senator from
Nebraska, and others who have sponsored this bill, and been working on
it for a long time. I am thrilled that, at last, it has a very good
chance of passing.
I thank the Presiding Officer and I yield the floor.
The PRESIDING OFFICER. Who yields time? The Senator from Iowa.
Mr. GRASSLEY. Madam President, I yield myself off the bill such time
as I may consume.
The PRESIDING OFFICER. The Senator has that right.
Mr. GRASSLEY. I am in support of this amendment. I am very glad that
such a compromise has been worked out. I am very happy with the team of
people both on and off the committee who have put it together. I would
like to emphasize one thing about the amendment. I am sure it has been
stated very well by other sponsors, but this is meant to bring
temporary--and I want to stress ``temporary''--fiscal relief to the
States. I have heard from my State and many others about the difficult
budget situations they are currently experiencing. This amendment will
help to bring temporary relief to all States during this difficult
fiscal time.
It is important for the Senate to successfully pass a strong growth
bill, and

[[Page S6207]]

this amendment helps to achieve that goal. Numerous Senators have
indicated that State fiscal relief is a key component of this growth
package. Some of my colleagues believe strongly that we should direct
some State fiscal relief through the Federal Medical Assistance
Percentage Program or something we call around here by the acronym
FMAP. This is the funding structure for Medicaid. This amendment uses a
temporary adjustment in the FMAP formula.
Some of my colleagues feel strongly about giving flexible grants to
the States and localities. This amendment also uses flexible grants to
those States and localities. Many Members both on and off the Finance
Committee have worked hard to reach this agreement. As I stated in the
Finance Committee markup, I believe all Senators should have an
opportunity to weigh in. The amendment before us reflects the hard work
of many Senators who care deeply about State fiscal relief. It is a
good compromise. For these reasons, I am going to vote for this
amendment, and I urge my colleagues to do the same.
I want to state a couple more times, just so it is not forgotten, to
any State and local people listening or who will read about it or for
sure will be reminded about it a year or so from now: This is meant to
be temporary.
The PRESIDING OFFICER. The Senator from Maine.
Ms. COLLINS. Madam President, I thank the distinguished chairman of
the committee for his remarks. I thank the Senator from West Virginia
for his eloquent statement, and I now yield time to the other great
leader on this issue, my colleague and friend, Senator Ben Nelson of
Nebraska.
The PRESIDING OFFICER. The Senator from Nebraska.
Mr. NELSON of Nebraska. Madam President, I come to the floor today to
support and urge my colleagues to join in support of the amendment
before the Senate for State fiscal relief. I begin by thanking my
friend and colleague from Maine, Senator Collins, who has been stalwart
in pushing for State fiscal relief for 2-plus years. We have worked
very carefully, very closely to bring about this amendment that is
before us today.
On two other occasions, we have had overwhelming support. We believe
this amendment will potentially have that same level of support. I
thank her for all of the work and leadership she has provided in making
this possible.
I thank also the distinguished chairman of the Finance Committee, my
friend to the east of Nebraska in Iowa, Senator Grassley. He has been a
man of his word. We have worked very carefully, very closely on this
issue and others. I thank him for contributing significantly to our
effort to bring this amendment to the body.
Most of what needs to be said has been said already. I do want to
emphasize, as Senator Grassley has, that this is temporary. It is for a
2-year period. And why is it temporary? Because one would expect that
if we are going to grant stimulus programs to grow the economy, that
after a reasonably short period of time, the economy will respond. That
is the hope, that is the expectation, and that clearly is the goal, not
only of this amendment but of the entire growth package before the
Senate.
Our goal is to make sure that we grow the economy faster than we grow
the deficit. It doesn't make a lot of sense to cut taxes in Washington
and ignore what is happening in the State capitals. ether it is in
Juneau or Lincoln or wherever it may be, what happens in State capitals
with the State legislatures does matter.

Over the weekend, I was home in Nebraska and the local news media was
covering in great detail the travail of the Nebraska Legislature in
trying to take care of a growing budget deficit caused by declining
revenues and increasing costs. Therefore, the news was replete on the
subject day in and day out. So if we are going to try to change the
attitude and improve the economy with active results in Washington, DC,
it does not make sense to ignore what is happening in the State
capitals.
We only have one tax pocket. The Federal Government is trying to put
in some money. States have their hand in taking more out. That
certainly is counterproductive to the goal we have if we ignore what is
happening at the State level.
I have said that it is the equivalent of trying to drive a car with
one foot on the accelerator and the other on the brake. We don't want
what we are attempting to do here negated by what is going on in State
capitals. This will permit us to do as much as we can to help avoid
that.
There is the human side. Quite honestly, in Nebraska, for example,
with this projected budget shortfall, the University of Nebraska, the
State colleges are all taking significant cuts. Nebraska teachers are
out of work because of lower State aid to education. In fact, when it
comes to health care coverage and child care options, more than 15,000
children have already been cut from Medicaid benefits and another 2,000
families have lost their child care. More harsh cuts are on the way
unless we do something to help fill the revenue gap. This amendment
does that.
Some have suggested that this is bailing out the States or somehow it
is a gift that we are doing out of the generosity of Washington. I have
encountered the generosity of Washington, generally, as a former
Governor when things were given to us. They were called underfunded and
unfunded Federal mandates. This is not what we are about today. We
recognize that one of the best ways to help the States with their
problems today is to take care of these needs and make sure that we
don't have what we are doing here negated by action at the State level,
which is to respond by supporting additional FMAP funding for a period
of 2 years, as well as recognizing that the State and local governments
are also feeling the pinch with the fast growing requirements due to
hometown security under homeland security requirements. They do not
have the luxury to run deficits, nor should they.
Therefore, what we propose is $10 billion to be split between the
States and local governments on a block grant basis. This will help
provide some relief from property taxes that would otherwise most
assuredly rise as the cost of local governments are passed on to
taxpayers.
As we look at this package, as we look at State fiscal relief, I hope
we will continue to have the bipartisan support we have had in the
past. Whether it is 75 or 80 votes is secondary. I certainly hope it
would be overwhelming support for this effort.
For those who would say what kind of stimulus will come from this
effort, there are studies that show that 1.24 will be returned in one
year. From my perspective, a 24-percent return on this sort of
investment to take back to the States is a good return, and it is
certainly a stimulus to the economy. Therefore, it is a stimulus to the
future of this great country.
I appreciate the opportunity. I thank my colleague, the Senator from
Maine, for her support, for her constant counseling on how we should go
about this effort. I thank her for the time to speak on this very
important amendment.
I yield the floor to the Senator from Maine.
Ms. COLLINS. I would like to ask my friend from Nebraska how he would
respond to a valid question that has been raised about our amendment:
Will the increase in the FMAP, Federal share of Medicaid, be a
temporary one?
Mr. NELSON of Nebraska. I am glad my friend from Maine has asked that
question so that I can provide some assurances to our colleagues. On
behalf of our group of Senators offering this amendment, let me be
clear: We have drafted this provision in such a way that the increase
in the FMAP will end June 30, 2004. My colleagues will be glad to know
that there is precedent for Congress passing short-term Medicaid
matching rate increases that have not become permanent.
In 1981, the Omnibus Budget Reconciliation Act reduced Medicaid
matching rates for 3 years, while also creating exemptions for States
that had high unemployment rates, special hospital review programs, or
strong fraud and abuse recovery systems. At the time when this was
enacted, some in Congress worried that these changes would be
permanent, but these provisions expired on schedule without any
particular controversy or efforts to extend them.
There is even a more recent example: The Omnibus Consolidated
Rescissions and Appropriations Act of 1996 granted

[[Page S6208]]

a temporary increase in the FMAP to Louisiana. The State's matching
rate rose from the normal rate of 72.08 percent to a special enhanced
rate of 84.28 percent in State fiscal year 1995-96 and from the normal
rate of 71.49 percent to an enhanced rate of 81.46 percent in State
fiscal year 1996-97. This temporary State relief was granted because
the Omnibus Budget Reconciliation Act of 1993 tightened
disproportionate share hospital payment policies and posed a hardship
for Louisiana at a time when the State's economy was faring badly. The
State was able to use these temporary funds to avoid disruptions in
essential services. The temporary increase in Louisiana's FMAP expired
as scheduled.
These provisions expired as planned after fulfilling their mission of
temporary relief to help these States transition through a difficult
period. Congress has been able to maintain discipline in the past.
There is no evidence that a temporary increase in Medicaid matching
rates will inevitably become permanent. In fact, because our amendment
in no way adjusts how future FMAPs are calculated, it does not effect a
permanent change in FMAPs for States.
Ms. COLLINS. I thank my colleague for that valuable clarification.
Let me ask my colleague from West Virginia about another question that
has come up regarding the impact of our proposal on the baseline for
future Medicaid calculations. There is some concern that this provision
might increase FMAP rates in future years. Would you clarify this issue
for our colleagues?

Mr. ROCKEFELLER. I am happy to address that issue. The FMAP is
currently calculated annually under the following formula. The FMAP is
at least 50 percent and is calculated based on the ratio of a State's
3-year average of per capita income to the 3-year average of per capita
income of the Nation. Given the nature of this formula, the previous
year's FMAP in no way affects the calculation of future FMAPs.
Basically, if the State's average per capita income is below the
national per capita average, the State gets a higher FMAP. The FMAP is
calculated usually 6 months to a year in advance of the start of a
Federal fiscal year. The amendment would take the FMAP that has already
been calculated by HHS under this formula for fiscal year 2003 and
fiscal year 2004 and increase it by 2.95 percentage points for a
portion of those years. It does not adjust the underlying formula.
Because the FMAP is calculated annually, and the calculation is still
based on the current per capita income ratio, our amendment in no way
increases the baseline for future FMAP calculations.
I would like to add that I completely concur with the Senator from
Nebraska's statement on the temporary nature of the FMAP.
Ms. COLLINS. I would like to add one other point of clarification on
this provision. By no means do we intend to prohibit States from using
the revenuesharing portion of this amendment on services or other
spending that the State cut in its most recent budget. If a State
wanted to use a portion of these funds to restore all or part of a
vital service it was forced to eliminate or reduce, it should be
allowed to do so. We know that the State is the best judge of how to
prioritize these funds, not the Federal Government.
Madam President, I thank my colleague and close friend, the Senator
from Nebraska, for his leadership and for making such an excellent
case. I know there are others who are waiting, so I will conclude the
debate on this by making just one final point. Forty-nine States are
facing severe budget shortfalls. This is not an isolated problem. It is
a problem that affects all but one State. This isn't a case where
States have been fiscally irresponsible, spending wildly.
In fact, the States are coping with the demand for services and a
decline in revenues at the same time. It is not something they brought
upon themselves. That is why we should step in temporarily--these are
not permanent assistance programs--to provide help. It will help ensure
that 1.7 million Americans will not lose their Medicaid services. It
will help ensure that they might just have a little bit of help as they
make the painful, difficult choices that are necessary to close their
budget gap. It will help ensure that it has a direct stimulative
effect, which is, after all, the entire purpose of this package. It is
to get our economy growing again and create good jobs. Fiscal aid to
States will help to achieve that critical goal.
I want to take this opportunity to ask for the yeas and nays on my
amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Ms. COLLINS. I thank the Chair and I yield the floor.
Mr. SMITH. Mr. President, I rise today in support of this amendment
to allocate State fiscal relief funds to Medicaid and State and local
governments.
I have been supportive of State fiscal relief since the last
Congress. Last year, I introduced a bill with Senators Rockefeller,
Nelson, and Collins to provide states with fiscal relief, which
garnered the support of 75 Senators.
This year, I reintroduced State fiscal relief legislation with
Senators Rockefeller, Nelson, and Collins that would provide States
with $20 billion--half through FMAP.
And earlier this year, 80 Senators supported a sense of the Senate
that $30 billion should be spent on State fiscal relief, with half of
the money going to Medicaid. Eighty votes is a pretty clear signal that
this is important to a lot of folks in a lot of States.
And make no mistake, FMAP is good economic stimulus for the States
which need it badly. By providing State fiscal relief in the form of
FMAP back to our states, we improve the health of our workforce,
protect or expand health coverage, create new jobs, and infuse the
economy with new money.
By providing a temporary boost to FMAP in the form of $10 billion,
Oregon would see more than $300 million in new economic activity, more
than $110 million in new wages would be generated, and more than 3,500
jobs would be created.
As you can see, State fiscal relief is one of the most effective
policies the Congress could and should enact as part of the economic
stimulus/growth package. There is no question that States will spend
any additional Federal funds they receive quickly, putting money
directly into the economy rather than curtailing economic activity.
As many economists have noted, we need to increase demand in the
economy--but State budget actions to balance their budgets right now
are reducing demand significantly. This is precisely the wrong medicine
at the wrong time for our economy.
As you know, States are facing budget deficits of approximately $100
billion that need to be closed over the next few months. States are
closing these deficits by cutting education, health care, and public
safety--and sometimes by considering raising taxes.
Unfortunately, the economic impact of State budget cuts and possible
tax increases have wide-reaching impacts. A dollar cut from Medicaid
results in far more than one dollar less in health care.
Fortunately, the opposite is also true: every single dollar spent on
Medicaid results in over $3 in the State and local economy.
Some of our colleagues will tell us that the States spent their own
way into the current fiscal crisis. But most of the spending increases
in health care were driven by the fact that health care costs grew
almost twice as quickly as general inflation, and that Medicaid
enrollment rose among disabled individuals and the elderly--two groups
with expensive health care needs.
In addition, States expanded health care coverage among low income
children and pregnant women.
Since the economy began to falter, virtually every State has taken
Medicaid cost-containment action. Additional cuts are expected next
year as States struggle to fill budget shortfalls of billions of
dollars.
Of course, this means that the number of uninsured Americans will
continue to grow.
According to the CDC, Medicaid and SCHIP provided coverage for 2
million children and 1 million adults who lost their health coverage
last year. I suspect this year, those numbers will be even larger.
My home State of Oregon has been hit hard by the economic downturn.

[[Page S6209]]

The number of uninsured is up, way up. Children and adults, parents
have lost their jobs and they are turning to Medicaid. Will Medicaid be
there for them?
Without additional resources, 100,000 Oregonians will lose their
health coverage, and the people who retain their coverage are facing
drastically reduced benefits. This loss will have a ripple effect in
the local economy. In some counties, a quarter of the population is
eligible for Medicaid.
While we need to strengthen our economy in the long run, it is
imperative that we address the immediate economic problems by tackling
the State fiscal crisis.
This amendment will provide millions of dollars to needy State and
local governments to provide essential services that benefit all of us.
I urge my colleagues to support this amendment.
The PRESIDING OFFICER. Who yields time?
Mr. BAUCUS. Madam President, I yield such time as the minority leader
himself may use.
Mr. DASCHLE. Madam President, I thank the distinguished ranking
member, the Senator from Montana. I will just take a couple of minutes.
I think this is a critical amendment. I hope, as we consider what it
is we need to do to ensure that our country can be put back in economic
balance, that we recognize the importance in providing meaningful
assistance to the States.
Of all the amendments we have before us, this is one of the most
important. I just spoke to the Governors yesterday. They have an $80
billion shortfall. So I am very hopeful that, as we consider where it
is we can do the most good, where we can get the greatest traction,
where we can do the most to ensure that we have the greatest degree of
economic recovery, we recognize the importance of helping States deal
with the crisis they are facing in dealing with medical costs.
Likewise, we must recognize that we have an obligation to offset the
costs of the Leave No Child Behind Act and realize that transportation
infrastructure has to be addressed. Our legislation would do that.
So I applaud my colleagues for the extraordinary effort they have
made to bring us to this point. I congratulate our colleagues on both
sides of the aisle for their effort. I hope our colleagues will see fit
to pass the amendment when we vote on it tomorrow.
If I may say briefly, I wish we were not here tonight with the
legislation that is pending before us. Our country is mired in debt. We
could exceed $400 billion in debt this year--the single largest 1-year
level of indebtedness our country has ever faced. I cannot imagine,
with all of that debt, with the recognition that we have gone from a $5
trillion surplus to a $2 trillion deficit, that anyone could possibly
feel comfortable supporting a tax cut of the magnitude we are talking
about tonight.
I only wish that somehow we could resolve our differences and
recognize that fiscal responsibility has to have some important part in
our calculation as to what makes the most sense as we look to economic
recovery. An independent analysis by Economy.com found that we could
actually lose jobs in the outyears. The objective report indicated that
not only do we not create many jobs in the next year because most of
this legislation doesn't kick in until 2004, we actually could harm the
economy in the outyears because of increasing long-term indebtedness as
a result of higher interest rates.
So from a jobs point of view, we can do better. From a cost point of
view, we can certainly do better. From the point of view of fiscal
responsibility, we must do better. So we will be offering a Democratic
alternative that will allow us that fiscal responsibility and allow us
an immediate response to the economic circumstances we are facing right
now.
Our bill does what the economic experts told us we must do. They said
make it temporary, make it immediate, make it broad-based and, above
all, make it fiscally responsible. That is what the Democratic
alternative will do tomorrow. It will provide help for the States, as
this amendment does. It will provide a broad-based wage credit for
every working family in the country today. It will provide meaningful
help to small business with the business expensing allowance. It will
provide unemployment insurance for those who have seen it terminated.
So it does exactly what the Nobel laureates, the economists, have told
us must be done if indeed we are cognizant and sensitive to the many
pressures and challenges and the many real problems we are facing as we
look to our fiscal responsibilities in the coming years.
We can do better than this. I am very hopeful that we can persuade
our colleagues to look carefully at what repercussions there will be if
the legislation currently pending passes. I hope we can persuade our
colleagues that indeed working together we can find a better approach.
Our Democratic alternative is that better approach. I urge my
colleagues to look at it tonight and support it tomorrow.
I yield the floor and I thank my colleagues for the opportunity to
address the alternative, as well as the State amendment.
The PRESIDING OFFICER. The Senator from Montana is recognized.
Mr. BAUCUS. Madam President, I, too, am pleased we are going to be
voting to increase aid to the States. Earlier this year, I offered
legislation to cut taxes, but its centerpiece was aid to the States. In
fact, I suggested $75 billion in aid to the States. That sounds like a
pretty large sum, but I suggested in the introduced legislation to
provide up to $75 billion because, in my judgment--and I think it is
the judgment of most economists--dollars that are spent to help States
to balance their budgets will significantly help the economies in those
States. Unfunded mandates by the U.S. Federal Government has caused
some of the problems the States are facing. No Child Left Behind has
been mentioned, and there are others, such as IDEA and special
education. There are various unfunded mandates.
We in the Congress have said that the States must provide these
services, but the President and the Congress have not provided the
money to the States so they can provide these services. So the States
have had to figure out how to pay for these services because that is
Federal law, they must do so.
In the meantime, as we all know, States have suffered dramatic
reductions in revenues because the economy has been down. States all
across the country have not received near the amount of revenues they
expected in their last budgets. When you add to that rising health care
costs in the country, which are averaging 12 to 13 percent higher each
year, this is a huge increase to the States' Medicaid budgets and other
health care budgets. So it is very important to give increased aid to
the States. I am disappointed, frankly, that this bill provides only
$20 billion when the need is so great.
I remind our colleagues also, as the occupant of the chair knows
well--particularly because her father is Governor of a State--States
have to balance their budgets. That is not true for the Federal
Government. When States face all these unfunded mandates and a
reduction in revenue, they have huge budget deficits, which they have
to somehow solve, and they can only do so by raising taxes or by
cutting various State services, such as Medicaid--their share--and
whatnot.
So that is why we are here today and why so many Senators have spoken
out in favor of aid to the States. We are soon to have an amendment
offered by the Senator from Washington, which I support. She is going
to suggest even more aid to the States. This $20 billion is merely a
drop in the bucket. As we all know, the budget deficit in California is
$35 billion alone. This bill provides just $20 billion. One State alone
is much more than that. My State of Montana is running a budget deficit
of about $260 million. We are a small State, but $260 million in
deficit is a lot for my State with a population of 19,000 people.
So I join in the chorus, and I particularly thank the Senator from
Maine and the chairman of the committee. I also thank the other
Senators who are working to put this together. I must say I will
support it, but I wish we were a little wiser, frankly, and providing
more aid to the States. Certainly $20 billion is low, but if that is
all we can get, that is what we face. I thank all my colleagues who
have worked on this.

Madam President, I now yield 3 minutes to the Senator from New York.
The PRESIDING OFFICER. The Senator from New York.

[[Page S6210]]

Mr. SCHUMER. Madam President, I thank my colleague from Montana. I
add my remarks to his. I agree with him completely. I am in full
support of the Collins-Rockefeller-Nelson amendment. Our localities and
States desperately need aid. It makes no sense to tell John Q. Citizen
that he will get a $100 rebate from the Federal Government and then
have his State and local taxes rise $100. That does not put money in
his pocket and stimulate the economy.
Madam President, $20 billion is a decent sum, half going to FMAP and
half to direct aid. I would like to see a little more going to
localities. It is 60-40, as I understand it. My original proposal with
Senator Collins and Senator Snowe was 50-50. That would be a little
fairer because localities need help in property taxes a lot. But this
is a good start. I am glad it is in the bill. I hope it will stay in
the bill because our localities desperately need aid.
Property taxes are going through the roof, and the best property tax
circuit breaker is local aid. I wish it was higher as well, and I am
glad that in a few minutes, my colleague from Washington will be
offering an amendment that doubles that amount.
The original legislation that Senator Snowe and I introduced was $40
billion. I know my friend from Montana originally proposed $75 billion.
Even that would not be enough to do what we need to do. I hope we can
raise the amount. Again, States and localities need it.
Cities and counties throughout my State are raising taxes. That is
going to put a real damper not only on New York's economy but on
America's economy. Local aid prevents some of that from happening.
This is one of the most important provisions in this bill. There are
a lot of provisions in the bill that Senator Grassley has proposed with
which I agree. There are some with which I disagree. But there is
probably none that is more needed, more demanded by the Governors,
mayors, county officials, town and village officials than the proposal
the Senator from Maine, the Senator from West Virginia, and the Senator
from Nebraska have brought before us.
I am going to support it rather enthusiastically, only tempered by
the fact that I think it should be more. I hope it can be more. I hope
it does not get any lower, I say to my good friend from Iowa, in
conference and in other places. He is shaking his head yes, let the
record show. I hope he is saying, yes, it should not get lower not,
yes, it should get lower.
This is a very important amendment. I will fully support it. I was
involved in helping to push this local aid issue. I hope we can
increase the amount with the amendment of the Senator from Washington.
I yield back the remainder of my time.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Madam President, it is my understanding that all Senators
who wished to speak on the Collins amendment have spoken.
I ask unanimous consent that all pending amendments be temporarily
laid aside so the Senator from Washington can offer her amendment.
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator from Washington.

Amendment No. 564

Mrs. MURRAY. Madam President, I call up amendment No. 564.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:

The Senator from Washington [Mrs. Murray], for herself, Mr.
Daschle, Mr. Baucus, Mr. Rockefeller, Mr. Wyden, Mr. Schumer,
and Mr. Corzine, proposes an amendment numbered 564.

Mrs. MURRAY. Madam 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:

(Purpose: To provide temporary State fiscal relief)

Strike section 371 and insert the following:

SEC. 371. GENERAL REVENUE SHARING WITH STATES AND THEIR LOCAL
GOVERNMENTS.

(a) Appropriation.--There is authorized to be appropriated
and is appropriated to carry out this section $20,000,000,000
for fiscal year 2003.
(b) Allotments.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, allot to each of the States as
follows, except that no State shall receive less than \1/2\
of 1 percent of such amount:
(1) State level.--$16,000,000,000 shall be allotted among
such States on the basis of the relative population of each
such State, as determined by the Secretary on the basis of
the most recent satisfactory data.
(2) Local government level.--$4,000,000,000 shall be
allotted among such States as determined under paragraph (1)
for distribution to the various units of general local
government within such States on the basis of the relative
population of each such unit within each such State, as
determined by the Secretary on the basis of the most recent
satisfactory data.
(c) Definitions.--For purposes of this section--
(1) State.--The term ``State'' means any of the several
States, the District of Columbia, and the Commonwealth of
Puerto Rico.
(2) Unit of general local government.--
(A) In general.--The term ``unit of general local
government'' means--
(i) a county, parish, township, city, or political
subdivision of a county, parish, township, or city, that is a
unit of general local government as determined by the
Secretary of Commerce for general statistical purposes; and
(ii) the District of Columbia, the Commonwealth of Puerto
Rico, and the recognized governing body of an Indian tribe or
Alaskan native village that carries out substantial
governmental duties and powers.
(B) Treatment of subsumed areas.--For purposes of
determining a unit of general local government under this
section, the rules under section 6720(c) of title 31, United
States Code, shall apply.

SEC. 371A. TEMPORARY STATE FMAP RELIEF.

(a) Permitting Maintenance of Fiscal Year 2002 FMAP for
Last 2 Calendar Quarters of Fiscal Year 2003.--
Notwithstanding any other provision of law, but subject to
subsection (e), if the FMAP determined without regard to this
subsection for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this section.
(b) Permitting Maintenance of Fiscal Year 2003 FMAP for
Each Calendar Quarter of Fiscal Year 2004.--Notwithstanding
any other provision of law, but subject to subsection (e), if
the FMAP determined without regard to this subsection for a
State for fiscal year 2004 is less than the FMAP as so
determined for fiscal year 2003, the FMAP for the State for
fiscal year 2003 shall be substituted for the State's FMAP
for each calendar quarter of fiscal year 2004, before the
application of this section.
(c) General 4.95 Percentage Points Increase for Last 2
Calendar Quarters of Fiscal Year 2003 and Each Calendar
Quarter of Fiscal Year 2004.--Notwithstanding any other
provision of law, but subject to subsections (e) and (f), for
each State for the third and fourth calendar quarters of
fiscal year 2003 and each calendar quarter of fiscal year
2004, the FMAP (taking into account the application of
subsections (a) and (b)) shall be increased by 4.95
percentage points.
(d) Increase in Cap on Medicaid Payments To Territories.--
Notwithstanding any other provision of law, but subject to
subsection (f), with respect to the third and fourth calendar
quarters of fiscal year 2003 and each calendar quarter of
fiscal year 2004, the amounts otherwise determined for Puerto
Rico, the Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa under subsections (f) and (g) of section
1108 of the Social Security Act (42 U.S.C. 1308) shall each
be increased by an amount equal to 9.90 percent of such
amounts.
(e) Scope of Application.--The increases in the FMAP for a
State under this section shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(1) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4);
(2) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.); or
(3) the percentage described in the third sentence of
section 1905(b) of the Social Security Act (42 U.S.C.
1396d(b)) (relating to amounts expended as medical assistance
for services received through an Indian Health Service
facility whether operated by the Indian Health Service or by
an Indian tribe or tribal organization (as defined in section
4 of the Indian Health Care Improvement Act)).
(f) State Eligibility.--
(1) In general.--Subject to paragraph (2), a State is
eligible for an increase in its FMAP under subsection (c) or
an increase in a cap amount under subsection (d) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on July 1, 2003.
(2) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX

[[Page S6211]]

of the Social Security Act (including any waiver under such
title or under section 1115 of such Act (42 U.S.C. 1315))
after July 1, 2003, but prior to the date of enactment of
this Act is eligible for an increase in its FMAP under
subsection (c) or an increase in a cap amount under
subsection (d) in the first calendar quarter (and any
subsequent calendar quarters) in which the State has
reinstated eligibility that is no more restrictive than the
eligibility under such plan (or waiver) as in effect on July
1, 2003.
(3) Rule of construction.--Nothing in paragraph (1) or (2)
shall be construed as affecting a State's flexibility with
respect to benefits offered under the State medicaid program
under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) (including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)).
(g) Definitions.--In this section:
(1) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(2) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(h) Repeal.--Effective as of October 1, 2004, this section
is repealed.

SEC. 371B. ELIMINATION OF 20 PERCENT PARTIAL EXCLUSION OF
DIVIDENDS RECEIVED BY INDIVIDUALS.

Section 116(a)(2)(B), as added by section 201 of this Act,
is amended by striking ``(20 percent in the case of taxable
years beginning after 2007)''.

Mrs. MURRAY. Madam President, I rise to offer an amendment that will
help address the real needs of families in cities and States all across
this country. I thank my cosponsors Senators Daschle, Baucus,
Rockefeller, Wyden, Kohl, Schumer, Edwards, and Corzine.
As I look at the current tax proposal, I do not see much that will
provide an immediate stimulus to our economy or help working families
who are struggling during this recession. In fact, today's Washington
Post said that even some Republicans consider this plan ``bizarre and
economically suspect.''
This tax bill ignores the real needs that families are facing, and it
dramatically increases the deficit, all to give massive tax cuts to a
very few. That is an approach that has already failed us. Simply put,
this tax bill fails America's families. So tonight I am offering an
amendment to put some stimulus and relief into this no-stimulus bill.
The Murray amendment provides direct help where it is so badly
needed--in our States and in our local communities. My amendment
addresses a crisis in health care that jeopardizes access for all
Americans.
Currently, the underlying bill, as we just heard, offers $20 billion
in aid to the States. By the way, that funding is only there because
Democrats fought for it. That is a major accomplishment considering the
President's plan included nothing for our ailing States, and the House
also failed our States.
While $20 billion is a victory in our current political environment,
we all know it is not enough to help our States recover quickly. So my
amendment offers an additional $20 billion for our struggling States
and local governments. In total, my amendment provides $40 billion in
immediate assistance to our ailing States.
Here is how the money will be divided: $20 billion will go to general
revenue sharing. Of that, $16 billion is for State governments,
including Washington, DC, and Puerto Rico; $4 billion is for local
governments, and each State will receive a minimum of $100 million.
The other $20 billion goes to States for Medicaid relief. This
provision would temporarily increase the Federal matching rate for
Medicaid. If we are going to help our economy recover, we need to help
our States and local governments get through this crisis.
All of my colleagues know the plight of our States. My home State of
Washington continues to suffer real economic problems, and it
illustrates the importance of adopting the Murray amendment. Washington
State has the second highest unemployment rate in the Nation at 7
percent. My colleague from Oregon, Senator Wyden, who is going to be
speaking in just a few minutes, shares the distinguished record of
having the highest unemployment in the Nation go back and forth between
Oregon and Washington in the last 2 years.
In Washington State, since the spring of 2001, we have lost tens of
thousands of jobs. In fact, one in nine Washington residents does not
have health care coverage today, and 150,000 people in my State have
lost health insurance in the last 2 years. In the last 2 years alone,
we have faced in my State an earthquake, an energy crisis, declines in
our technology sector, the downturn of Boeing, and the loss of
thousands of jobs. And now we face a State budget deficit of $2.7
billion. That translates to dramatic cuts in education, health care,
transportation, and social services.
These programs are more important now than ever because times are so
tough. Unfortunately, as we all know, many other States are facing very
similar challenges. In fact, today our States are experiencing the most
severe economic crisis since World War II. Nationwide, States are
facing deficits totaling $70 billion to $85 billion.
Experts are warning us that 1.7 million people nationwide risk losing
Medicaid coverage as States cut their budgets. In fact, in Washington
State, according to our insurance commissioner, 60,000 children will
lose access to health care unless we help. That is 60,000 children in
Washington State alone. Unlike the Federal Government, States do not
have the option of deficit spending. Instead, States are forced to cut
existing programs or raise new revenues to balance their budgets.
To add to the State's budget crises, the Federal Government has
created costly new mandates in areas such as education and homeland
security.
The ``No Child Left Behind'' law required States to implement new
accountability measures, but the assistance that was promised has never
been delivered.
On homeland security, State and local law enforcement must work
overtime whenever the threat level is raised. For many States and
localities, homeland security is on the verge of becoming another
unfunded mandate. Unfortunately, in response to the crises in our
States, the President proposed nothing to help them. It is like the
famous newspaper headline: ``Ford to City: Drop Dead.'' The House of
Representatives followed the President's lead in leaving States in
crisis. It took Democratic efforts in the Senate to build bipartisan
support for our States.
I am proud of the work that Democrats have done to add $20 billion to
the tax legislation to help our States get through this difficult time.
I also commend my colleagues on the other side who are working on this
issue. I applaud their work in the face of strong opposition from the
President and the Republican party leadership.
My amendment will help States deal with education, as many State
universities and community colleges are facing double-digit tuition
increases. My amendment will also help States address their Medicaid
shortfalls by temporarily raising the Federal share of Medicaid
payments.
Given the fiscal crisis in our States, this additional support is
critical today. This aid will allow our States to maintain health care
coverage for our most vulnerable citizens.
Some of my colleagues may hear the word ``Medicaid'' and think I am
just talking about helping low-income families. That is true and it is
critical, but it is much more than that.
Yes, Medicaid does provide coverage for more than 42 million low-
income, disabled, and elderly Americans, but let's not forget that
Medicaid plays a major role in America's health care delivery system.
It pays for about half of all nursing home care. It pays for 17
percent of prescription drug coverage.
Hospitals, doctors and clinics in every State rely on Medicaid as a
significant source of revenue.
Cuts in Medicaid could close nursing homes. Cuts could make it harder
for middle class families to pay for long-term care for their aging
parents or relatives. It could mean lower wages for nurses in long-term
care facilities. Finally, let me emphasize, it could have a major
impact on women because 70 percent of Medicaid beneficiaries over age
15 are women.
Unless we address the Medicaid shortfall, we will feel the impact
everywhere.
When poor kids, families, and moms do not have health care, kids show
up at school sick, moms cannot care for families, and parents do not go
to work. That affects everyone. It will add to the 41 million Americans
who do not have health insurance, and that will add to the costs we all
pay for health

[[Page S6212]]

care. This affects families and businesses in the form of much higher
insurance premiums.
Finally, when Medicaid is underfunded, it puts more pressure on our
doctors, hospitals, and clinics that are already struggling. We are
losing doctors and seeing hospitals close today.
We cannot afford to let things get worse. We need to improve the
underlying tax bill so it addresses the real challenges facing families
in our States and local communities. States are facing a fiscal crisis,
and my amendment provides $20 billion in aid. States are facing a
healthcare crisis, and my amendment provides another $20 billion to
make up the Medicaid shortfall.
This amendment is a chance to improve what has been called a
``bizarre and economically suspect'' tax plan.
Before I close, I want to clarify something that we may hear during
this debate. I want my colleagues to know that this is not about
bailing out States that have overspent. We are talking about individual
Americans and their access to services like vision and dental care,
asthma medicine, hospice care, and physical therapy. So when my
colleagues blame the States for this crisis, they are choosing their
words carefully. They do not dare blame the disabled, the elderly, poor
children and their parents, but that is who they are really talking
about, the people who will lose access to health care unless we pass
the Murray amendment.
Let's not forget that our States have had to pick up the bills
because the Federal Government has not done its job in certain areas.
For example, because we have not reformed health care at the Federal
level, States have had to deal with more and more residents on
Medicaid. Because Federal assistance for tuition has been cut, there is
more pressure on State-funded universities. To those pressures we can
add the Federal Government's failure to fund the education law and new
homeland security mandates.
So this is not about bailing out States that have done something
wrong. This is about recognizing our responsibility to pay for the
things we have required at the Federal level. We know there is an
economic crisis in our States, and this is a chance to provide some
critical support.
Unless we provide some real aid to our States, Congress and the
President will just be passing the tax burden on to the local level.
Let's do the responsible thing.
I think that any Senator who votes against the Murray amendment will
have a hard time explaining to their Governor, their mayors, and all
their citizens why they left their State hanging in order to provide a
massive tax cut to the few, which will not result in immediate economic
growth.
I urge my colleagues to vote for the Murray amendment, and I thank my
co-sponsors.
I yield 15 minutes to my colleague from Oregon, who is a cosponsor of
this amendment and who knows in his State how much they are struggling
as they try to meet a crisis, as so many other States are.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. WYDEN. Madam President, I thank Senator Murray, the lead sponsor
for this legislation.
Oregon and Washington are really ground zero as far as the economic
hurt in this country, and I thank her for all of her leadership and
support.
I will take only a few minutes tonight because I know we have had a
number of speakers on this topic, but I think it is time to put a human
face on this issue and try to make sure that people really understand
what is at stake.
In Eugene, OR, where I went to school, parents have recently been
selling their own blood plasma--that's right, their own blood plasma--
to pay for a math teacher's salary for one more year because the school
district has been unable to come up with the cash to pay for a math
teacher. I think that really says it all.
As Senator Murray and other colleagues talked about, we are not
talking about luxuries. We are not talking about something that would
be frivolous or on somebody's wish list. We are talking about the most
essential services in our society, making sure that kids get a good
start, and decent health care.
What it has come to in my State, which is in its third year now of
financial meltdown, is we have parents actually going out and selling
blood.
Something is really out of whack in this country when somehow the
Congress is going to find ways to come up with billions of dollars to
rebuild Iraq, but the Congress of the United States will not come up
with the dollars that are needed to rebuild the States. That is what
this effort on a bipartisan basis is all about.
In my home State, we now have schools closing a month early. We
brought an end to the medical-needy program which helped nearly 9,000
low-income Oregonians with unusually high health costs who do not
qualify for our innovative health plan. More than 2,500 older adults
and persons with disabilities have lost adult care, assisted living
care, nursing home care, and the list really goes on.
I particularly wanted to highlight the fact that these cuts and the
hardship that has been engendered as a result of these cuts comes about
at a time when some of our States have been on the cutting edge of
innovation.
I will take a minute to describe our health plan. The State of Oregon
has been the only State in the country--in fact, the only political
jurisdiction on the planet--that has been willing to force a discussion
about tough calls in health care. Many feel, given the demographics
tsunami that is ahead with millions of baby boomers retiring and the
technology explosion, it is not on the level if you are not willing to
make some tough choices in health care. That is what my home State did
a number of years ago with the Oregon Health Plan; we held the first
nationwide debate about how to go about making choices in health care,
making sure you are doing prevention first in kids and pregnant
mothers. And all the services we know will reap great benefits in the
years ahead.
That is the program that has been slashed. It was not a program that
engendered a lot of fancy services or Cadillac health care or
profligate spending. It was a program that focused on the basics, on
the essential health care services, on services that by anyone's
analysis are just plain vanilla, essential services for our citizens.
I bring this up by way of saying, as we move tonight to close out the
discussion of these amendments, I certainly support the Collins
amendment. It is very helpful. I would like to go further, for all the
reasons Senator Murray has described tonight, that we think about these
consequences in human terms: What is going on today in Eugene, OR, what
is going on with the Oregon Health Plan where people did make tough and
courageous calls.
A lot of the States must be wondering now, what was the point of
trying to be innovative? What was the point of trying to be innovative
because when there were tough financial circumstances nationally beyond
their control, the Federal Government said: That is the way it goes, we
are not going to do anything to help tide you over so innovative
programs such as the Oregon Health Plan are not decimated.
These are critical issues. The budget cuts we have seen in health
care and education are not going to be quickly healed. Regarding the
national economy, we all hope for a speedy recovery, but it seems to
me, by any calculation, the States are going to need significant and
ongoing help to ameliorate the damage that has been done and to start
pulling together the tatters of the social safety net and begin to help
our citizens again. We are not going to repair that tattered safety net
with just a few needles and thread; we will do it with real and
tangible help, the way the Murray amendment seeks to do.
I come to the Senate tonight to make it clear, what we seek to do in
these important amendments is to try to give our States the tools in
this struggle to provide the most critical of services, to tell them
they are going to have a little bit more to get by with during
unprecedented times.
School finance in Oregon has been cut so drastically they have
curtailed the school year in some districts. We have been laying off
teachers left and right. We have no way to attract them. Senator Smith
and I co-hosted an important economic development summit at the end of
last year with 1,300 business leaders from all over the State.

[[Page S6213]]

They are worried, as a business community, that with the shortening of
the school year in the country, it will be very tough to grow existing
businesses and to attract new ones.
Suffice it to say, we are not really happy about the Doonesbury
cartoons either. We have been first so often in my home State--with
environmental protection, mass transit--but we are not pleased to be
first in terms of economic hurt and unemployment and the kinds of
problems we have been outlining on the floor tonight.

We have to start filling the holes in these devastated budgets. The
situation is dire. In the face of this unprecedented suffering, many in
the Senate believe the $20 billion allocated is not enough and the
Senate must do better.
Ultimately, budgets are about choices. Budgets are not just about
charts and graphs and figures and lots of dark ink on paper. Budgets
are about hopes and aspirations and what kind of country we want. I
don't want a country and I don't want a State to have to sit by while
the Government does not respond when people have to sell blood to
finance a teacher's salary and we end up having the devastation to an
innovative state-of-the-art health plan, the way the Oregon Health Plan
was at the outset.
I don't want to tell the people of my home State, and I don't think
others in this body want to either, that the U.S. Congress can figure
out a way to come up with billions and billions of dollars to
reconstruct Iraq, hundreds of millions of dollars for tax cuts, and
simply not come up with the critical dollars needed to keep our kids in
school for a full year, to keep older people in health care systems
that are a lifeline for them.
I hope our colleagues will support the Murray amendment. The very
least the Senate can do is to keep the huge budgetary hole the States
have found themselves in from getting deeper and wider. The Murray
amendment ensures that can be done.
I urge the passage of this critical amendment. I yield the floor.
Mr. SCHUMER. Madam President, I first thank my colleague, Senator
Murray, for her sponsorship of this vital amendment. I also want to
specifically recognize Senator Grassley, the distinguished chairman of
the Finance Committee, and Senator Baucus, the distinguished ranking
member, for their leadership in putting State and local fiscal relief
on the agenda. I should also note the bipartisan effort of Senators
Collins, Rockefeller, Smith and Nelson which helped establish State aid
in the budget debate. Finally, Senator Snowe deserves special
recognition for her early and steadfast support of this legislation.
The fiscal crisis in our States and cities is a national problem that
requires bipartisan cooperation in the best spirit of the Senate, and I
am proud to be working together with my esteemed colleagues.
I support the Murray amendment.
This amendment is critical to New York. It will help thousands of New
Yorkers keep their jobs, maintain the State services they rely on, and
most importantly avoid the burden of increasing taxes. I cannot state
that more clearly--without this legislation the tax burden on citizens
in my State will go up. That threatens to undo the very stimulus we all
believe is necessary.
As we all know, New York is not alone. States are facing their worst
fiscal crisis since World War II. The Governor of New York, George
Pataki, stated the situation in all of our States and cities clearly,
``We face a fiscal crisis today of a magnitude that we have not faced
in our lifetime.''
According to estimates provided by the National Conference of State
Legislatures, the total budgetary shortfall for all States in fiscal
year 2004 was in the range of $80 billion, and an approximate $22
billion gap still remains from fiscal 2003. Many believe these figures
remain significantly understated.
Almost every State is running a significant, multi-hundred million
dollar deficit. In many States, the figure runs into the multi-billions
of dollars. In several States, the deficit's percentage of the total
State budget is estimated to be in the range of 25 percent or more. New
York State's budget shortfall alone is $12 billion dollars.
The situation at the local level is just as dire. According to the
National Association of Counties, nearly 72 percent of counties are
facing budget shortfalls, 37 percent are reducing services, and 17
percent are increasing taxes--all at a time when the demand for
services and the need for tax cuts is rising given the sour economy.
This is not a regional issue. It is a national crisis.
Unlike the Federal Government, which has seen its fiscal position
change from a budgetary surplus in 2000 to a newly estimated deficit of
over $300 billion in fiscal 2003, almost every state is required by law
to have a balanced budget. To achieve this the only options are to
raise taxes and/or cut spending.

State taxes are increasing in three ways. First, state income tax
rates are increasing. Second, property tax rates are skyrocketing. In
New York City, Mayor Bloomberg was forced to raise property taxes over
18 percent to preserve vital services. Third, States are increasing
sales taxes, excise taxes, and other fees. As the New York Times
recently reported ``at least 15 states have raised taxes, five of them
by 5 percent or more.''
This increasing tax burden falls heavily and squarely on the backs of
our working families. It will make it harder for them to make ends meet
in these already difficult economic times when every dollar counts.
State spending cuts follow 2 years of a deteriorating economic
environment and fiscal outlook. During that time, States have cut the
fat from their budgets and depleted reserves. They now are cutting
muscle. To balance their budgets for fiscal 2004, States are in the
process of eliminating thousands of jobs.
In many States, the jobs that will be lost are vital to our
communities: policemen, firefighters, teachers, postal workers, and bus
drivers. In New York these were the jobs of the everyday heroes that we
celebrated after the tragedies of September 11.
States also are eliminating many critical programs and reducing funds
available for those programs that remain.
Among the most vulnerable targets are those services that working
families rely on, such as childcare and elementary and secondary
education. Without funds, school improvements will not be made.
Libraries will not be upgraded. Staff will be cut. Class sizes will
dramatically increase.
All of this is happening today. As one school superintendent stated,
``It is the worst thing that has happened in my thirty years in public
education.''
This comes at a time when, as a nation, we are striving to raise our
children's test scores and improve overall school performance. In
addition, in many states the cost of higher education is increasing.
Tuition at some State colleges and universities has been raised over 20
percent. Also vulnerable are programs that help those most in need
during difficult times.
States now bear the responsibility for numerous programs and services
that provide the safety net that our citizens rely on. For example, as
we know well, states fund a large percentage of the cost of Medicaid.
During the current fiscal crisis, according to the Kaiser Commission on
Medicaid and the Uninsured, Medicaid programs have been cut
substantially. This will place an enormous burden on our society.
States clearly need funding to pay for Medicaid.
In addition, programs such as job-training, housing subsidies, and
other services for lower-income citizens are at risk.
Most importantly, states now face extraordinary demands to provide
the protection citizens require in the new post-9/11 world. They face
increased responsibilities to patrol ports, bridges and tunnels, to
train emergency response personnel, and to put in place the
infrastructure to protect their citizens.
In the current world, with threats on our home soil at high levels,
and on the brink of a war with a nation accused of sponsoring
international terrorism, we cannot abandon our States and cities. We
must give them the funds they need to protect our citizens.
The solution is to provide direct Federal aid to the States and
localities within the budget. We have had bipartisan agreement to
provide $20 billion in direct Federal aid to the States and

[[Page S6214]]

localities on a one-time basis. I commend Senator Grassley for his
leadership in getting this done. It is a very good start, but it not
enough.
I have heard some argue that state aid is not good economic policy,
but numerous reports indicate that a very large number of economists
believe that aid to the States is, in fact, an extremely effective
means of providing fiscal stimulus, as it quickly puts money in the
hands of people who need it and will spend it.
State and local aid also alleviates the need for States to cut more
jobs, cut more programs, and raise taxes, which acts as an
``antistimulus'' on the economy. Without any State aid, an individual's
or family's decreased in Federal taxes could be surpassed by an
increase in State and local taxes.
We should not support policies where, ``What one hand giveth the
other taketh away.'' We should not ``rob Peter to pay Paul.''
This modest increase in the amount of aid is a one-time shot in the
arm for the States. It is not an enormous, multi-year change that
threatens to build more deficits. It is a short-term proposal in
response to a crisis that threatens to further drag down our economy
and further increase the tax burden on our citizens.
Some argue that States and cities have dug their own fiscal graves,
and should now lie in them. I could not disagree more. Our States and
cities face the same economic forces as the Federal Government. As the
economy has forced a dramatic reversal in fiscal health in our Federal
budget, so has it wreaked havoc on local budgets.
Why should we hold States and localities to a different standard than
we hold ourselves?
If we want to teach States a lesson, why should we force citizens to
bear the brunt of that discipline through higher taxes on their income,
bigger class sizes for their children, and less services for those in
need?
The money we are discussing is not a bailout. Nowhere close. States
and locals will still need to make painful cuts and possibly raise
taxes. But we can help alleviate the pain which will fall not on
lawmakers, as we all know, but on our citizens.
As President John Kennedy once said, ``Let us seek not the Democratic
solution or the Republican solution, but the right solution.''
This is the right solution. I fully and enthusiastically support
Senator Murray's amendment.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. Madam President, I spoke earlier in support of the
Collins amendment which is a $20 billion fiscal relief package. We have
been told that $20 billion is a drop in the bucket. I don't think $20
billion is a drop in the bucket. We have been told that maybe $75
billion is not enough for State aid.
We have to be fiscally responsible as we approach this. I do not
fault the good intentions behind people who have higher figures in
mind, including the amendment by the Senator from Washington. There are
Members on both sides of the aisle for whom fiscal relief is a key
component of any larger tax and jobs package. I have worked hard to
accommodate Members' priorities relative thereto.
A number of provisions in this amendment have been addressed by the
State fiscal conservative relief amendment offered by Senator Collins.
The State fiscal relief amendment offered by Senator Collins represents
a significant boost to States. It provides $20 billion. To me, that is
lots of money. This is much more money than some would like to spend at
all. However, there will be those for whom no amount of spending will
ever be enough.
I am not saying Senator Murray is one of those for whom no amount of
money would ever be enough. All I am saying is that at some point we
have to determine a final dollar amount for State aid.
We have an amendment that provides $20 billion for States, and I
think we should stick with that number. Therefore, Senator Murray's
amendment at $40 billion is too expensive and must be opposed. I urge
my colleagues to vote against this amendment. I urge them to support
the Collins amendment.
I yield the floor.
Mr. BAUCUS. I yield whatever time the Senator from Washington
desires.
The PRESIDING OFFICER. The Senator from Washington.
Mrs. MURRAY. Madam President, I know there are many other Senators on
the floor who wish to speak to their amendments. Let me conclude this
amendment debate by saying how important it is for our States that are
struggling today with $75 billion or $80 billion in debt, that we do
everything we can to get the economy going in a true economic stimulus
package to provide funds for those States to assure they do not lose
people off health care, that their education systems are intact, and
they have the ability to deal with their budget crisis and we don't add
to it with fiscally irresponsible tax cuts that preclude them from
being able to provide the services that are so critical today.
I ask for the yeas and nays on this amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Madam President, I ask unanimous consent all pending
amendments be temporarily set aside and the Senator from Michigan be
recognized for the purpose of offering an amendment.
The PRESIDING OFFICER. Is there an objection? Without objection, it
is so ordered.
The Senator from Michigan.

Amendment No. 614

Ms. STABENOW. Madam 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 Michigan (Ms. Stabenow) proposes an
amendment numbered 614.

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

(Purpose: To ensure the enactment of a medicare prescription drug
benefit)

At the end of end of subtitle C of title V, add the
following:

SEC. . ENSURING ENACTMENT OF A MEDICARE PRESCRIPTION DRUG
BENEFIT.

(a) Trigger.--Notwithstanding any other provision of this
Act, the provisions as described in subsection (b) shall not
take effect except as provided in subsection (c).
(b) Provision Described.--A provision described in this
subsection is--
(1) section 102 of this Act to the extent such section
accelerates the scheduled phase down of the top tax rate of
38.6 percent to 37.6 percent in 2004 and to 35 percent in
2006; and
(2) section 116(a)(2)(B) of the Internal Revenue Code of
1986, as added by section 201 of this Act.
(c) Delay Until Enactment of a Medicare Prescription Drug
Benefit.--The provisions described in subsection (b) shall
apply to taxable years beginning in or after the calendar
year in which a prescription drug benefit under the medicare
program under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.) is enacted that is--
(1) available to all beneficiaries under such program; and
(2) actuarially equivalent to the Blue Cross and Blue
Shield benefit offered through the Federal employees health
benefits program.

Ms. STABENOW. Madam President, I rise this evening to offer an
amendment that seeks to set the right priorities for us in the Senate
and in the Congress as we move forward this year with the budget. My
amendment is simple. It says before the dividend tax cut and the
acceleration of the top tax rate go into effect, Congress must pass a
Medicare prescription drug bill that is actuarially equivalent to the
value of the Blue Cross standard option under the Federal Employees
Health Benefits Program, known as FEHBP, for all Medicare
beneficiaries.
This is a question of our values and priorities. My amendment is a
promise to our Nation's seniors. It says you are as important as the
elite in this country; we are finally going to get something done; and
that it will be something that is equal to what we receive in the U.S.
Senate. This is the third consecutive Congress that has considered
adding an outpatient prescription drug benefit under Medicare. In the
last two Congresses we were unsuccessful. To be fair, we were
unsuccessful with a Democratic President, a Republican President, a
Democratic Congress, a Republican Congress. The reality is we have not
yet been able to

[[Page S6215]]

deliver for our seniors the promise of prescription drug coverage under
Medicare.
I believe the time is up. Our seniors and those who are disabled, who
depend on Medicare, are counting on us to get this done this year.
In order to be able to do that, we need to impose some discipline on
ourselves. We have to hold our feet to the fire in order to get this
done. This amendment says to the House and Senate and the
administration that we must all work together to pass a meaningful
prescription drug benefit or a major component of the tax cut that is
supported by the majority will not go into effect.
I would like to make it clear that my amendment does not eliminate
the tax cuts on dividends or those for the people who pay the highest
rates. As long as we pass a meaningful prescription drug benefit, these
tax cuts would take effect as scheduled.
Having said that, I want to also indicate that I do not believe, from
an economic standpoint, that is the best way to stimulate the economy.
I agree with the over 450 economists who have said this will not create
jobs; it will not create growth. But if in fact there is support to
pass the tax breaks geared to the elite in the country, I ask my
colleagues to at least be willing to hold off. At least be willing to
hold off until we can fulfill the promise of an outpatient prescription
drug benefit under Medicare.
My amendment says this should be available to all seniors, not just
seniors in private insurance, as has been proposed by the President and
by others, but all seniors should be able to get the same prescription
drug coverage.
In addition, this amendment says the prescription drug benefit we
pass should be actuarially equivalent to the plan that is most often
used by Federal employees, including Members of Congress. In other
words--and I have heard other colleagues say this--the seniors of this
country should get no less in prescription drug help than we get
through our insurance plan. That is what my amendment says, simply. The
tax cuts geared to the most wealthy among us, the elite in the country,
should wait until we can fulfill the promise of a prescription drug
benefit that is equal to what we receive as Members of the Senate.
I have heard many friends on the other side of the aisle extol the
virtues of our plan, the FEHBP plan. I have also heard the President
and members of his administration make similar comments. They say a new
prescription drug benefit should be modeled after the benefit in the
Federal employee plan. In fact, on May 6 my distinguished colleague
from Idaho, Senator Craig, held a hearing in the Aging Committee, which
I am on, that highlighted the Federal employee program, its benefits,
and so on. While the witnesses disagreed on whether it would be
appropriate to go to the structure of that plan--and I have great
concerns about anything outside of Medicare--they all agree that this
plan that we and other Federal employees have offers excellent
prescription drug coverage for Federal employees.
I think most of us agree our seniors deserve the same opportunity to
have prescription drug coverage equal to what we or other Federal
employees receive. However, the current budget resolution does not
allow for that. It does not provide for the resources to do that. So
despite the comments I have heard on a number of occasions from
colleagues that, in fact, we ought to be providing similar coverage,
the budget resolution does not provide the resources. So this, again,
is a question of priorities. It is a question of values. What should
come first, fulfilling the promise of a quality prescription drug
benefit for our seniors under Medicare or proceeding with a tax cut
geared to the elite in this country?
I think it is particularly of concern that we focus on this,
particularly in light of the overwhelming evidence that those
particular tax cuts will not stimulate the economy in the short run,
will not create jobs, will not create growth. No matter how many times
Members say that, with all due respect, we have overwhelming evidence--
450 economists, 10 Nobel laureates, concerns by Chairman Greenspan--and
only 13 economists on the side, saying it is a good idea.
Before we go ahead with something we know is not a short-term
stimulus, doesn't create jobs, doesn't create growth, and, in fact,
created red ink as far as the eye can see, I ask that we stop.
Whether Members wish to have a dividend tax cut and a top rate cut or
wish not to, we should come together and agree we would not proceed
until we provide prescription drug coverage that is quality and is
similar to what we have as Members of the Senate.
This is a trigger. As I indicated, it is not eliminating those parts
of the tax bill. It is simply a trigger on those.
If I might take just another moment on the broader issues of
Medicare, on this question of whether we will have the resources to
update Medicare to provide a real prescription drug benefit, one that
we could probably support because it would be similar to what we are
able to receive as Members of the Senate. The larger issue is where we
are going in terms of the huge national debt projected for the future.
The actual question is whether we will be able to meet our obligations
overall for Medicare and Social Security in the long run without going
into more and more deficit.
I refer to the study that was recently done that indicates if we were
to take the proposals that have been put forward by the President--I
realize in the Senate there is a modified version of that. We don't
have exactly this amendment in front of us. But if we are to take what
the President has suggested in totality over the next 75 years, we
would see a cost of over $14 trillion.
At the same time, the projected Medicare and Social Security deficit
is $10 trillion.
I go back again to my concern that this an issue of priorities. We
have one proposal that creates a $14 trillion cost. At the same time
that we know we have an unfunded liability in Social Security and
Medicare of $10 trillion, why in the world would we do that? Why in the
world would anybody? This is what the economists are talking about.
Over 450 economists have come out against this, saying it will not
create jobs; it will just create more massive debt; it will create
instability long term in the economy; it jeopardizes Medicare and
Social Security.
These are the numbers they are looking at. Why in the world would
anybody with common sense looking at this say we ought to go in this
direction? If we didn't go in this direction, and if we agreed to the
amendment we are talking about, we would be sending a clear message
that we are committed to really providing Medicare prescription drug
coverage and not just talking about it for another session but really
providing it for our seniors and for the disabled. And we would be
sending a message that we are making a long-term commitment to Medicare
and Social Security.
My fear is, if we proceed down the road as we currently are as a
Congress, that we are creating a situation which will lend itself to
the argument of those who say we can't afford Medicare and Social
Security anymore. We heard that. We heard we can't afford prescription
drug coverage; we can't afford Medicare as we know it; we can't afford
Social Security as we know it. We can afford to update it for
prescription drugs if we do not pass irresponsible tax policy that
creates trillions and trillions of dollars in debt.
That is my concern overall. I am hopeful that we will reconsider
this. I am very hopeful that in the meantime, regardless of the broader
picture, colleagues will join to be able to send a strong message that
we are going to put the seniors of the country first and a real
prescription drug benefit first. As many colleagues have said, our
seniors deserve the same kind of benefit that we receive in the Senate.
This amendment would allow that to happen.
With the passage of these other provisions, it then would allow them
to take effect after the prescription drug benefit is passed.
I reserve the remainder of my time. I yield to my colleagues who are
possibly wishing to speak. I would like the opportunity to respond at
the appropriate time.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. WARNER. Madam President, I see my distinguished colleague from

[[Page S6216]]

Ohio who arrived a few moments before me. I simply ask of my colleague
whether I can proceed for 4 or 5 minutes without being disruptive to
the statement on which he is proceeding.
Mr. VOINOVICH. I am happy to yield my distinguished colleague 3 or 4
minutes prior to submitting my amendment.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. WARNER. Madam President, I ask unanimous consent to lay the
pending amendments aside.
The PRESIDING OFFICER (Mrs. Dole). Without objection, it is so
ordered.

Amendment No. 550, As Modified

Mr. WARNER. Madam President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The senior assistant bill clerk read as follows:

The Senator from Virginia [Mr. WARNER], for himself and Ms.
Collins, Mr. Allen, Mr. Craig, and Ms. Murkowski, proposes an
amendment numbered 550, as modified.

Mr. WARNER. Madam 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:

(Purpose: To amend the Internal Revenue Code of 1986 to increase the
above-the-line deduction for teacher classroom supplies and to expand
such deduction to include qualified professional development expenses)

At the end of subtitle C of title V, insert the following:

SEC. __. EXPANSION OF ABOVE-THE-LINE DEDUCTION FOR CERTAIN
EXPENSES OF ELEMENTARY AND SECONDARY SCHOOL
TEACHERS.

(a) In General.--Subparagraph (D) of section 62(a)(2)
(relating to certain trade and business deductions of
employees) is amended to read as follows:
``(D) Certain expenses of elementary and secondary school
teachers.--The deductions allowed by section 162 which
consist of expenses, not in excess of $400, paid or incurred
by an eligible educator--
``(i) by reason of the participation of the educator in
professional development courses related to the curriculum
and academic subjects in which the educator provides
instruction or to the students for which the educator
provides instruction, and
``(ii) in connection with books, supplies (other than
nonathletic supplies for courses of instruction in health or
physical education), computer equipment (including related
software and services) and other equipment, and supplementary
materials used by the eligible educator in the classroom.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2002.

Mr. WARNER. Madam President, I thank the distinguished Presiding
Officer. I thank the managers of this bill and my colleague from Ohio.
I will proceed for a few minutes with regard to amendment No. 550, in
which I am privileged to be joined by Senators Collins, Allen, Craig,
and Murkowski, the Presiding Officer. It relates to the teachers of
America.
I learned, as other colleagues have learned on their trips to
schools, to my utter astonishment that so many teachers reach into
their own pockets and take their own dollars, after paying taxes in
those instances where they pay taxes, and buy school supplies for the
children. They have to use their own money for further teacher
education.
Last year, the Congress of the United States, at the initiative of
myself and many others, finally passed a law by which they got a $250
above-the-line deduction. That was a remarkable achievement
legislatively. Unfortunately, that piece of legislation sunsets at the
end of this calendar year.
The purpose of this amendment is, first, to increase $250 to $400 as
the amount of deduction and, second, to enable that amendment now, by
virtue of this amendment, to become permanent law so that they can plan
their futures a little bit better. This deduction will be there for
those wonderful and courageous teacher expenditures which they take out
of their own pockets. I find it to be very touching.
I was talking to my colleague from Ohio while waiting to take the
floor, and he told me that at the time he was Governor, they put
similar legislation into State law. This, of course, will be Federal
law and apply to all 50 States.
This amendment will make this important tax benefit permanent for our
teachers. In addition, it will increase the above the line deduction to
$400 and expand the allowable uses for the deduction to include
professional development expenses.
It is important to note that the President's budget calls for this
tax relief. I also note that the amendment has been endorsed by the
National Education Association.
I ask unanimous consent to have printed in the Record a letter from
the NEA endorsing my amendment.
There being no objection, the material was ordered to be printed in
the record, as follows:

National Education Association,

Washington, DC, May 14, 2003.
U.S. Senate,
Washington, DC.
Dear Senator Warner: On behalf of the National Education
Association's (NEA) 2.7 million members, we urge your support
for the Warner amendment on teacher tax deductions when it is
offered during consideration of the tax reduction plan. A
similar amendment was approved by the Senate during the last
Congress by a vote of 98-2. This year's vote may be included
in the NEA Legislative Report Card for the 108th Congress.
The Warner amendment, which was originally introduced as
the Teacher Tax Relief Act (S. 695), would increase to $500
and make permanent a tax deduction for educators' out-of-
pocket classroom supply expenses. The amendment also would
help educators access quality training, much of it mandated
by the No Child Left Behind Act, by expanding the deduction
to include professional development.
Last year, Congress enacted a $250 tax deduction for
educators' out-of-pocket expenses as part of the economic
stimulus package. The current deduction expires at the end of
the year. The Warner amendment would make a real difference
for many educators, who often sacrifice other personal needs
in order to pay for classroom supplies and professional
development. Two important reasons for supporting this
amendment are:
According to a study by the research firm Quality Education
Data, a division of Scholastic, elementary school teachers
spend more than $1 billion a year on classroom supplies. The
study found that the average elementary educator spends $521
annually, with first-year teachers spending over $700 a year
for classroom supplies.
Teacher quality is the single most critical factor in
maximizing student achievement. Ongoing professional
development is essential to ensure that educators stay up-to-
date on the skills and knowledge necessary to prepare
students for the challenges of the 21st century.
We urge you to support this important amendment.
Sincerely,
Diane Shust,
Director of Government Relations.
Randall Moody,
Manager of Federal Relations.

Mr. WARNER. Madam President, why do teachers need this kind of
relief? It is now estimated that the average teacher spends $521 out of
their own pocket each year on classroom materials--materials such as
pens, pencils and books. First-year teachers spend even more, averaging
$701 a year on classroom expenses.
Why do they do this? Simply because school budgets are not adequate
to meet the costs of education. Our teachers dip into their own pocket
to better the education of America's youth.
Moreover, in addition to spending substantial money on classroom
supplies, many teachers spend even more money out of their own pocket
on professional development. Such expenses include tuition, fees,
books, and supplies associated with courses that help our teachers
become even better instructors.
The fact is that these out-of-pocket costs place lasting financial
burdens on our teachers. This is one reason our teachers are leaving
the profession. Little wonder that our country is in the midst of a
teacher shortage.
Without a doubt the Teacher Tax Relief Act of 2001 took a step
forward in helping to alleviate the Nation's teaching shortage by
providing a $250 above-the-line deduction for classroom expenses.
However, it is clear that our teachers are spending much more than
$250 a year out of their own pockets to better the education of our
children.
This amendment that I have offered today is the same as the
administration's request. Again, the amendment will increase the above-
the-line deduction for educators from $250 allowed under the current
law to $400; allow educators to include professional development costs
within that $400 deduction (under current law, up to $250 is deductible
but only for classroom expenses); and make the Teacher Tax relief
provisions in the law permanent.

[[Page S6217]]

Current law sunsets the teacher tax provisions at the end of this year.
Our teachers have made a personal commitment to educate the next
generation and to strengthen America. And, in my view, the Federal
Government should recognize the many sacrifices our teachers make in
their career.
This amendment is another step forward in providing our educators
with the recognition they deserve.
In my view, America's teachers deserve better.
I ask unanimous consent that an analysis of the President's budget
request which depicts exactly the same amendment about which I am
speaking also be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Extend, increase and expand the above-the-line deduction for qualified
out-of-pocket classroom expenses

Under current law, teachers who itemize deductions (do not
use the standard deduction) and incur unreimbursed, job-
related expenses are allowed to deduct those expenses to the
extent that when combined with other miscellaneous itemized
deductions they exceed two percent of AGI. Current law also
allows certain teachers and other elementary and secondary
school professionals to treat up to $250 in annual qualified
out-of-pocket classroom expenses as a non-itemized deductions
(above-the-line deduction), effective for expenses incurred
in taxable years beginning after December 31, 2001 and before
January 1, 2004. Unreimbursed expenditures for certain books,
supplies and equipment related to classroom instruction
qualify for the above-the-line deduction. Expenses claimed as
an above-the-line deduction cannot be claimed as an itemized
deduction. The Administration proposes to extend the above-
the-line deduction to apply to qualified out-of-pocket
expenditures incurred after December 31, 2003, to increase
the deduction to $400, and to expand the deduction to apply
to unreimbursed expenditures for certain professional
training programs.

Mr. WARNER. Madam President, the amendment is in compliance with the
President's program. It is the desire of this National Education
Association just to take existing law, make it permanent, and to
increase it to $400, given the calculations of the amounts that are
expended each year by teachers all across America, which is larger than
existing law, $250.
I appreciate the indulgence of my colleagues. I hope this amendment
will receive the support of the Senate tomorrow as we proceed to vote.
I thank my colleague from Ohio and yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. BAUCUS. Madam President, I ask unanimous consent that the pending
amendments be temporarily laid aside so the Senator from Ohio may offer
an amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. VOINOVICH. Thank you, Madam President.

Amendment No. 592

Madam President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The senior assistant bill clerk read as follows:

The Senator from Ohio [Mr. Voinovich] proposes an amendment
numbered 592.

Mr. VOINOVICH. Madam 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:

(Purpose: To establish a blue ribbon commission on comprehensive tax
reform)

At the appropriate place insert the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Fundamental Tax Reform
Commission Act of 2003''.

SEC. 2. ESTABLISHMENT OF COMMISSION.

(a) Establishment.--There is established the ``Blue Ribbon
Commission on Comprehensive Tax Reform'' (in this Act
referred to as the ``Commission'').
(b) Membership.--
(1) Composition.--The Commission shall be composed of 12
members of whom--
(A) 1 shall be the Chairman of the Board of Governors of
the Federal Reserve System;
(B) 1 shall be the Vice Chairman of the Board of Governors
of the Federal Reserve System;
(C) 1 shall be the Commissioner of Internal Revenue;
(D) 2 shall be appointed by the majority leader of the
Senate;
(E) 1 shall be appointed by the minority leader of the
Senate;
(F) 2 shall be appointed by the Speaker of the House of
Representatives;
(G) 1 shall be appointed by the minority leader of the
House of Representatives; and
(H) 3 shall be appointed by the President, of which--
(i) no more than 2 shall be of the same party as the
President; and
(ii) 1 may be the Secretary of the Treasury.
(2) Federal employees.--The members of the Commission may
be employees or former employees of the Federal Government.
(3) Date.--The appointments of the members of the
Commission shall be made not later than July 30, 2003.
(c) Period of Appointment Vacancies.--Members shall be
appointed for the life of the Commission. Any vacancy in the
Commission shall not affect its powers, but shall be filled
in the same manner as the original appointment.
(d) Initial Meeting.--Not later than 30 days after the date
on which all members of the Commission have been appointed,
the Commission shall hold its first meeting.
(e) Meetings.--The Commission shall meet at the call of the
Chairman.
(f) Quorum.--A majority of the members of the Commission
shall constitute a quorum, but a lesser number of members may
hold hearings.
(g) Chairman and Vice Chairman.--The President shall select
a Chairman and Vice Chairman from among its members.

SEC. 3. DUTIES OF THE COMMISSION.

(a) Study.--The Commission shall conduct a thorough study
of all matters relating to a comprehensive reform of the
Federal tax system, including the reform of the Internal
Revenue Code of 1986 and the implementation (if appropriate)
of other types of tax systems.
(b) Recommendations.--The Commission shall develop
recommendations on how to comprehensively reform the Federal
tax system in a manner that generates appropriate revenue for
the Federal Government.
(c) Report.--Not later than 18 months after the date on
which all initial members of the Commission have been
appointed pursuant to section 2(b), the Commission shall
submit a report to the President and Congress which shall
contain a detailed statement of the findings and conclusions
of the Commission, together with its recommendations for such
legislation and administrative actions as it considers
appropriate.

SEC. 4. POWERS OF THE COMMISSION.

(a) Hearings.--The Commission may hold such hearings, sit
and act at such times and places, take such testimony, and
receive such evidence as the Commission considers advisable
to carry out this Act.
(b) Information From Federal Agencies.--The Commission may
secure directly from any Federal department or agency such
information as the Commission considers necessary to carry
out this Act. Upon request of the Chairman of the
Commission, the head of such department or agency shall
furnish such information to the Commission.
(c) Postal Services.--The Commission may use the United
States mails in the same manner and under the same conditions
as other departments and agencies of the Federal Government.
(d) Gifts.--The Commission may accept, use, and dispose of
gifts or donations of services or property.

SEC. 5. COMMISSION PERSONNEL MATTERS.

(a) Compensation of Members.--Each member of the Commission
who is not an officer or employee of the Federal Government
shall be compensated at a rate equal to the daily equivalent
of the annual rate of basic pay prescribed for level IV of
the Executive Schedule under section 5315 of title 5, United
States Code, for each day (including travel time) during
which such member is engaged in the performance of the duties
of the Commission. All members of the Commission who are
officers or employees of the United States shall serve
without compensation in addition to that received for their
services as officers or employees of the United States.
(b) Travel Expenses--The members of the Commission shall be
allowed travel expenses, including per diem in lieu of
subsistence, at rates authorized for employees of agencies
under subchapter I of chapter 57 of title 5, United States
Code, while away from their homes or regular places of
business in the performance of services for the Commission.
(c) Staff.--
(1) In general.-- The Chairman of the Commission may,
without regard to the civil service laws and regulations,
appoint and terminate an executive director and such other
additional personnel as may be necessary to enable the
Commission to perform its duties. The employment of an
executive director shall be subject to confirmation by the
Commission.
(2) Compensation.--The Chairman of the Commission may fix
the compensation of the executive director and other
personnel without regard to chapter 51 and subchapter III of
chapter 53 of title 5, United States Code, relating to
classification of positions and General Schedule pay rates,
except that the rate of pay for the executive director and
other personnel may not exceed the rate payable for level V
of the Executive Schedule under section 5316 of such title.
(d) Detail of Government Employees.--Any Federal Government
employee may be detailed to the Commission without
reimbursement, and such detail shall be without
interruption or loss of civil service status or privilege.
(e) Procurement of Temporary and Intermittent Services.--
The Chairman of the Commission may procure temporary and
intermittent services under section 3109(b) of

[[Page S6218]]

title 5, United States Code, at rates for individuals which
do not exceed the daily equivalent of the annual rate of
basic pay prescribed for level V of the Executive Schedule
under section 5316 of such title.

SEC. 6. TERMINATION OF THE COMMISSION.

The Commission shall terminate 90 days after the date on
which the Commission submits its report under section 3.

SEC. 7. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated such sums as are
necessary to the Commission to carry out this Act.

Mr. VOINOVICH. Madam President, I rise today to commend Chairman
Grassley for the outstanding job he has done to bring this
reconciliation bill to the floor and to focus attention on our urgent
need to address fundamental tax reform.
When the Senate enacted the budget resolution for fiscal year 2004,
it presented Chairman Grassley with a very difficult challenge--to
report to the Senate meaningful, stimulative tax deductions while
keeping the overall growth in the deficit below $350 billion. Many
observers, in and out of Congress, considered that task impossible. But
I believe the Finance Committee has accomplished that goal.

The reconciliation bill before the Senate today contains $430 billion
in tax cuts and $80 billion in offsets, for a net cost of $350 billion.
Equally important, both the tax cuts and the offsets are real. The
Joint Committee on Taxation, a highly respected, neutral scorekeeper,
has analyzed this bill and certifies the revenue effects of both the
tax cuts and the offsets.
Many people claim this economic growth package is too small and they
would like to see larger tax relief for small businesses and working
families. So would I, but only if we can offset the additional cost.
And some people claim the tax cuts are too large and will limit funds
available to low-income support programs. I sympathize with their
concern, but we must recognize that the most effective low-income
support program is a job. And we can only provide jobs by jump-starting
the economy.
Too many of our fellow Americans are out of work, too many of our
fellow Americans are worried about whether they are going to have a
job. Small business owners and investors in Ohio have told me this is a
good plan that will help them create jobs in my State. We accelerate
the reduction of tax rates, we end the marriage penalty, we accelerate
small business depreciation, we increase the size of the child tax
credit, and we begin to eliminate the double taxation of dividends.
Another area of contention is the nature of the offsets. It is in
this area, more than any other, that Senator Grassley has been unjustly
criticized. He was asked to produce offsets that would limit the total
cost of tax reform to $350 billion, and he has done it.
Members of Congress who oppose some or all of the offsets because of
their impact on special interest groups have had ample time to present
their own alternatives and failed to do so. It is easy to criticize,
but it is difficult to legislate. Let us acknowledge that regardless of
our individual opinions regarding the offset package Chairman Grassley
and a majority of his committee have chosen to legislate.
However, the current disagreements over the offset package inevitably
begs the question: Why is the Tax Code so complicated? How did we get
into this situation? And how can we return to a simple, fair, and
honest Tax Code? What is stimulative to the economy? What isn't
stimulative? What tax expenditures came in several years ago which are
no longer relevant? All these issues need to be discussed. That is why
I am offering this amendment.
Many of my colleagues have said: We need fundamental tax reform, but
now is not the time. I have heard that over and over. I have heard that
for years: Tax reform but now is not the time.
I think the debate over offsets demonstrates this is precisely the
time to abandon piecemeal tinkering and embrace fundamental tax reform.
This Congress--not the next or the one after that--should seize the
opportunity to focus national attention on the need for comprehensive
tax reform in the United States of America.
I am proposing the establishment of a commission to examine the Tax
Code from top to bottom. And I recommend fundamental restructuring. The
goal of any Government revenue program should be to raise sufficient
funds to operate public programs with the minimum disruption of the
economy. Tax structures should be simple, fair, effective, and honest.
Our current Tax Code achieves none--none--of these objectives.

Proof of the complexity of our current Tax Code is demonstrated by a
few, simple observations:
The Internal Revenue Code consists of approximately 1,395,000 words.
There are 693 sections of the Internal Revenue Code that are
applicable to individual taxpayers; 1,501 sections applicable to
businesses; 445 sections applicable to tax-exempt organizations,
employee plans, and governments.
As of June 2000, the Treasury Department had issued almost 20,000
pages of regulations containing over 8 million words.
The current 1040A short form has doubled the number of lines that
once appeared on the 1945 version of the standard 1040 tax return. It
has an 85-page instruction booklet which now tops the long form 1040
instructions published just 7 years ago. This is the short form, 85
pages; and it is more than the instructions that we had 7 years ago on
the long form.
The IRS prints at least 1,101 publications, forms, and instructions,
containing 16,339 pages, up from 943 documents with 12,933 pages. That
is 2 years ago.
Over 56 percent of the taxpayers in this country need professional
people to help them prepare their tax return.
Americans toil for about--listen to this--6.4 billion hours on tax
forms and recordkeeping, accounting for 84 percent of the Federal
Government's paperwork burden in this country. And that is associated
with the Internal Revenue Code. This only includes financial
recordkeeping and tax preparation, and these estimates may be too low
since they ignore the countless hours spent on tax minimization
strategies. Everybody is working to figure out a way not to pay taxes.
Included among the items of needless complexity today are the
following:
An alternative minimum tax that treats items such as dependent
exemptions as tax shelters, thereby threatening to tax millions who
never were meant to be affected; phaseout after phaseout of such
allowances as itemized deductions, earned-income tax credits, personal
exemptions, eligibility for IRAs, eligibility for other savings
incentives, eligibility for educational tax breaks; and each of these
is like an additional minimum tax system all of itself, forcing
taxpayers to file multiple schedules for each form.
I have a very simple return. I do not have that much. But the
schedules that are connected with my return are unbelievable. I am sure
my colleagues who think about it think about all the time they spend on
preparing their own individual tax returns.
Also, included among the many items of needless complexity today are:
Pension and saving incentives that add administrative costs and
possibly even reduce net savings by providing different rules for
withdrawals, penalties, Social Security tax treatment, allowable
amounts of exclusion or deduction, and so on; a tax treatment of
dependent children that needlessly causes millions of unnecessary tax
returns to be filed; a capital gains law with at least seven different
tax rates, and that requires taxpayers to fill out pages of forms even
when they have only a few dollars of capital gains; complicated rules
for charitable deductions and charities, including multiple limits on
giving as a percent of income, and a perverse excise tax on foundations
that actually discourages charitable giving; child credits and
dependent exemptions that could easily be folded into one; and
unnecessarily strict estimated tax rules that pick up very little extra
revenue for all the complexity they introduce.

It is unbelievable.
One of the most disturbing aspects of this current Tax Code is the
almost continual growth of so-called tax expenditures. Essentially,
they increase the level of tax rates far beyond what is necessary, and
then mitigate the impact with incentives to special interest groups. It
is the Government equivalent of jacking up prices in the grocery store,
and then accepting coupons at the checkout counter.

[[Page S6219]]

Private sector investment becomes distorted by tax provisions
encouraging both individuals and corporations to allocate their funds
to minimize their taxes rather than to maximize their income.
Ultimately, most people end up paying more than they should for both
their groceries and their taxes.
According to a recent article in the Washington Post, many leading
tax reform advocates believe the only solution for this dilemma is to
propose new and different tax cuts every year. Although I sympathize
with their goal, it will not provide the most effective reforms that
meet the ultimate test the American people demand: a Tax Code that is
fair, simple, and honest. Tax reform, like surgery, is best done
quickly. Do you hear that? Tax reform, like surgery, is best done
quickly and infrequently rather than slowly and often.
That is why I am proposing a commission to propose comprehensive
reform that can be enacted at once, implemented quickly, and establish
a fair, simple, honest, and effective revenue structure for the next
generation.
This commission will examine all aspects of the Federal revenues,
including individual taxes, corporate taxes, capital gains taxes,
excise taxes, user fees, taxes on dividends, tax deductions, tax
credits, and tax complexity.
The commission will recommend fundamental reforms that can be enacted
in a single reform package and implemented quickly. It will allow
Congress and the Nation to focus on tax reform, devise a simple, fair,
honest solution, and move on to other priorities.
The current debate clearly demonstrates the system is broken and
now--not next year, or the year after--now is the time to fix the
problem.
Madam President, I yield the floor.
The PRESIDING OFFICER. Who yields time? The Senator from Montana.
Mr. BAUCUS. Madam President, I think the Senator from Ohio is on
target. It makes excellent sense for the United States to set up some
kind of a tax commission to take a good, hard look at our tax
structure. As I listened to the Senator's amendment being read, one
thought came to my mind, though. That is, commissions sometimes work
and sometimes they don't work. And the goal here, clearly, if we do
this, is to make it work.
That begs the question, how do you make it work? How do you make it
worthwhile, not just some outfit drawing conclusions that are put on
the shelf to gather dust. Most commission recommendations are put on
the shelf to gather dust.
The one commission that comes to my mind that really has worked--and
I can think of many that have not--is the commission on Social Security
back in the early 1980s, when President Reagan nominated Chairman
Greenspan to head the commission on Social Security. Various Senators
were on the commission. Senator Dole was on the commission, and Senator
Moynihan. They had a job to do, and they did a pretty good job. It was
not political. The President, both bodies of Congress, both political
parties, all got together and worked with members on the commission to
come up with recommendations to save Social Security.
Two points: One is, the membership is people who really want to do a
good job. They work together. There is not any political sniping, no
partisan rhetoric. They work together. And it is very important that
the composition of the commission be people who do want to work
together; that is, the commission not be stacked.
The second point is at that time there was a crisis. Social Security
was about to go belly up. A crisis generally creates solutions and
results. The complexity of the U.S. Tax Code and the increasing
complexity of the Tax Code may have become a crisis in the nature of
Social Security back in the early 1980s; I don't know.
I am saying to the Senator from Ohio: It is a good amendment. As most
things in life, it is the followthrough that counts, the followup that
counts. It is making sure that if we do this, the right people are
appointed. I say that in part because when I listened to the Senator,
he mentioned two members appointed by the majority leader, one by the
minority leader, three by the President, and also the House. It has the
possibility of being a stacked deck, possibility of being a partisan
commission. That is the last thing we need around here is a partisan
commission on tax reform.
I would like to work with the Senator, and I know other Senators
would like to work with him, to do the very best we can to make sure
this is not a stacked deck, and it is not therefore a commission whose
recommendations collect dust on some shelf somewhere but rather
something that makes good sense.
One other point I might mention while the Senator from Ohio is here.
I know the Senator is wondering, just as I think most Senators in this
body are wondering, what is the real effect of dividend exclusion. What
effect does it really have. There are a lot of people who have lots of
ideas. A lot of economists have spoken on the effect of excluding
dividends from income. I think in theory most of us agree there is some
inequity between the taxation of equity and the taxation of debt with
respect to companies' decisions as to whether to invest or investor
decisions as to whether to invest.

One point that often rises in the debate is the wealth effect. What
is the wealth effect of a significant reduction in dividend income? Who
knows, really? There are all kinds of analyses; different people have
different points of view. We are trying to do our best to try to get
opinions of people who really don't have an axe to grind, of people who
really, as far as we can tell, are pretty straight, who have their
heads screwed on straight and they are trying to give us the right
recommendation rather than spoon-feed us some political agenda from any
side.
I am trying to do the best I can by trying to find people who are
probably neutral. The three organizations I looked at that have
analyzed the wealth effect of the President's dividend proposal are
Brookings Institute, McKinsey & Company, and Goldman Sachs is the
third. Let me go through first the Brookings analysis briefly. I think
it is instructive.
The total value of equities held by households in the United States
is $10 trillion. That is, the total value of all equities held by
households is $10 trillion. I will get to institutional investors in
just a moment.
The reasonable estimate of the stock price increase due to the
President's dividend proposal, according to Brookings' analysis, is 5
percent. The increase in value effect of equities held by households as
a result of the stock price increase is about $500 billion. The next
question is what is the wealth effect, how much effect of that
increase, if it is 5 percent, is going to be translated into spending
in the economy.
The Brookings analysis is that the wealth effect--that is, the
percent of wealth increase that is consumed rather than saved by
households--will be 3 to 5 percent. So that means the increase in
consumption as a result of the wealth effect is about $15- to $25-
billion, which is about .14 percent to .23 percent of GDP. We all know
that usually to have a real stimulus in the economy you need somewhere
between 1 and 1.5 percent; and .14 and .23 is certainly very small
compared with 1 percent or 1.5. That is the Brookings analysis.
The McKinsey Company's analysis is very similar. I want to read a
quote from the McKinsey analysis. I think it is instructive. It says:

But the proposed tax cut (eliminate tax on dividends) isn't
likely to have a major lasting effect on US share prices,
primarily because the key investors who drive them are
already exempt from taxes. What little impact the proposal
may have was probably reflected in the 2.2 percent gain in
the S&P 500 the day before it was announced.

Continuing on to quote:

Those who believe otherwise draw on classic finance theory.
In a world without taxes, theory suggests, shareholders would
be indifferent to whether a corporation paid dividends, since
the funds to do so would come at the shareholders' own
expense. In a world with taxes, shareholders may face
different tax rates on, for example, dividends as opposed to
capital gains. They would care whether a company retained its
earnings or distributed those earnings as dividends, because
this would affect how much they got to keep. If all investors
paid taxes on dividends, yes, share prices probably would
rise if the tax were eliminated.
The fact, however, is that tax-paying US individual
shareholders own a minority of all US shares--

That is, about 28 percent. That is, individuals own about 28 percent.

whereas tax exempt US institutions and individuals who hold
shares in tax-exempt accounts own 61 percent. (The remainder
was

[[Page S6220]]

in foreign hands.) For the most part, tax-paying individual
shareholders don't drive share prices, whereas nontax-paying
institutional investors do: the trading activity of a
company's top 40 to 100 investors--again, usually big
institutional investors--accounts for 70 percent of its stock
price movement.
Since these investors are indifferent to the issue of taxes
on dividends [because they are tax exempt] they are unlikely
to set in motion the kinds of changes in their portfolios
that would drive up share prices.

I will soon yield to the Senator from Ohio.
The third reason Goldman Sachs gave in their review is that it would
generate no more than a 5 percent increase in stock prices. That is the
Goldman Sachs view.
The PRESIDING OFFICER. The Senator from Ohio.
Mr. VOINOVICH. I will soon ask for the yeas and nays on my amendment.
Second of all, the ranking member of the Finance Committee and I sat
in on meetings together as part of the centrist coalition. The thing
that impressed me, when we met with Alan Greenspan, was the fact--and
he has said this publicly since the time we had our private meeting
with him--that the most significant thing we could do to aid the
economy was to eliminate double taxation, eliminate the tax on
dividends, although it was a short-term benefit, he said, but something
systemic needs to be done to better the Tax Code.
You can argue the dividend issue any way you want, but what I usually
do is ask the people back in Ohio how they feel about it. No. 1, many
of our businesses that have defined pension plans, because their stock
is down, are going to be asked for an enormous amount of money to be
deposited in those fine pension plans, which they don't have. Other
corporations have told me that if their stock price gets a bump, they
will issue stock and they will get cash that way so they won't have to
borrow it the way they are now borrowing the money.
In addition, there are many people, such as my son George, who have
retirement accounts, who have seen those retirement accounts go down in
value. There are millions of Americans in that same position. Other
Americans, who are in a better position, have seen a vast amount of
wealth disappear in the stock market. Many of them say to me that
eliminating the tax on dividends will give a bump to the market.
Because the market will get a bump up, they are going to feel a little
better about the future and, as a result of that, will be more likely
to spend some money.

So you can argue this any way you want.
I have other people who say to me, if you do this, it is going to
impact on municipal bonds, affect real estate trusts, and eliminate or
have an impact on the low-income housing tax credit.
So that is the issue we are talking about here. We will talk about
that today and tomorrow.
What we really need to do is put all of this on a table and not do it
as part of this stimulus package, and have tax reform, so we can start
to look at the wealth factor and look at whether it makes a difference
in terms of our economy. We have tax loopholes and tax expenditures
that are really no longer relevant. We can take that money and put it
into something elsewhere. We can reduce taxes and provide something
that would be really helpful to the economy. But we don't do that
around here. We take things from day to day, week to week, year to
year.
I say to the ranking member of the Finance Committee, my
distinguished colleague, if the commission membership is not what it
ought to be, I am glad to rewrite it so that it is entirely impartial,
so it will get the job done. I want to get the job done. I would like
to have a commission such as they had in 1983 when we looked at Social
Security. They did a good job. I think we ought to do that again. I
think a lot of people agree on that. But unless we get at it now, it
will not happen, we will let it go, and it will be something else next
year.
Mr. BAUCUS. Madam President, I appreciate what the Senator said, and
he is correct. We have had all kinds of theories, and it is hard to
tell what is the most accurate. Maybe we should just not pass this bill
because we are going to make the Code that much more complex by passing
this legislation, and so we will at least be giving the commission a
bit of a break. I appreciate what the Senator has said.
Mr. VOINOVICH. Madam President, I ask for the yeas and nays on my
amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. BAUCUS. Madam President, I ask unanimous consent that the pending
amendment be temporarily laid aside so the Senator from Florida may
offer an amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 617

Mr. GRAHAM of Florida. Madam President, I send an amendment to the
desk.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Florida [Mr. Graham] proposes an amendment
numbered 617.

Mr. GRAHAM of Florida. Madam 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 printed in today's Record under ``Text of
Amendments.'')
Mr. GRAHAM of Florida. Today, the Senate began consideration of the
Jobs and Growth Tax Relief Reconciliation Act of 2003. This is an
appropriately named act because the economy is very much in need of
assistance.
The President's mishandling of the economy since January 20, 2001, is
almost incredible. Two million-plus Americans have lost their jobs
since that date. We have seen a 50 percent increase in the unemployment
rate to last month's 6 percent. The stock market has lost a quarter of
its value. There has been a $7 trillion turn in the Federal
Government's finances--from a $5 billion projected surplus to today's
$2 trillion projected addition to the national debt.
The CBO's most recent estimate is that the deficit this year will top
$350 billion--the largest annual deficit ever. Economic growth has been
anemic--on average, 1 percent, and consumer confidence has dropped 34
percentage points.
What has been the response to this dismal economic record? The
President has proposed the same prescription that he proposes for
nearly all of our mounting domestic problems: tax cuts for the very
wealthy.
Madam President, I don't think we have a problem; we have at least
three interconnecting challenges. The first is to regenerate a moribund
national economy; the second is to prepare for the next decade, when
our Government will be faced with enormous additional expenses,
particularly in Social Security and Medicare; and finally, the
immediate crisis that is occurring because of our States' financial
positions and what that is doing to wage loss, benefits loss, and a
denial of the services that represent the ultimate safety net under
much of our population.
The bill the Finance Committee has reported very closely follows the
President's plan. There are two fundamental aspects of this plan with
which I take the strongest exception. First, the mix of tax cuts that
it includes will do little to stimulate the economy, which we
desperately need. Second, the cost of this program is not offset, so
Federal deficits and the debts that we will pass on to our children and
grandchildren will grow even greater.
Why is a stimulus important--a real stimulus? It is important because
consumer spending makes up two-thirds of our economy; so as consumers
go, so goes our economy. The economy is struggling today not because we
don't produce enough goods and services in the United States but
because consumers are reluctant to spend what they have to purchase
those goods and services.
Madam President, I would like to direct your and my colleagues'
attention to this picture. This picture was taken on a desert airport
in Senator Kyl's State of Arizona. It is a picture of a portion of the
over 300 commercial airliners currently parked on that airfield.
I submit these airplanes are not parked on the airfield in Arizona
because Boeing cannot build enough airplanes. They are parked there
because there are not enough passengers who want to or are able to or
are willing to fly in those airplanes.

[[Page S6221]]

This administration, in spite of that fundamental truth, has pursued
a plan that does not emphasize demand-side stimulus. The administration
believes producing goods and services is more important than selling
those goods and services.
This picture of airplanes parked is evidence that producing goods is
not enough. For the economy to get back on track, more Americans must
shop at our malls, go out to eat, and buy airline tickets. Putting more
money quickly into the hands of those who are the most likely to spend
it is the best formula for jump-starting this economy.
Rather than spread tax cuts broadly to spur consumer demand, the
President's plan directs most of the tax cuts to the wealthiest
taxpayers. President Bush believes we need to reduce the tax burden on
investment by completely exempting dividend income from the income tax.
By doing so, President Bush hopes to spur savings and investments.
Businesses are not going to make such investments when today, on
average, they are only using 75 percent of their capacity.
The plan I offer today provides substantial tax relief for all
working Americans. My plan will give to the typical two-working-member
family paycheck tax relief of up to $1,530 this year and again $1,530
next year. Let me recite a couple of recent experiences.
Last Friday, I taught school at Oyster River High School in Durham,
NH. I talked to some of the teachers at that school. Very few of them
are invested in the stock market. Those who are invested in the stock
market are invested generally through a plan, such as a 401(k)
retirement plan, where the dividends are already exempt from taxation.
So they will get zero benefit from this plan.
On Sunday of this week, I worked at Drake's Diner in Des Moines, IA.
I talked to the bus boys, the waiters, the cooks, and the dishwashers.
I tell you, their salary level is not sufficient for them to have a
significant presence in the stock market. This paycheck relief plan
will put real money in the pockets of real Americans who will spend it
to stimulate the demand that is so critical to getting this economy
jump-started. This paycheck tax relief will inject $200 billion into
the economy over the next 2 years.
During the Finance Committee markup, some criticized the wage tax as
being a threat to the finances of the Social Security trust fund. That
argument is a red herring and has no basis. My amendment makes
absolutely no changes to the payroll taxes paid by employers and
employees and, therefore, does not affect one thin dime of the revenues
that go in to the Social Security and the Medicare trust funds.
My amendment provides a refundable income tax credit for workers
designed to provide the same benefits as would a temporary reduction in
the payroll tax.
My plan also includes tax relief for small businesses. It
substantially increases the amount of machinery and equipment that a
small business can deduct; therefore, creating an incentive for that
business to make its investment now when we need it as opposed to
deferring it to a future date.

My amendment will provide States with over $40 billion in aid over
the next 12 months. This temporary assistance is provided to the States
by the Federal Government, increasing its share of Medicaid costs.
Greater assistance from the Federal Government will help forestall
drastic cuts in State health programs that will affect those least able
to absorb them. Directing relief to the Medicaid reimbursement rate is
the most efficient means by which to get these funds to the States.
Finally, my plan bolsters unemployment compensation benefits. Many of
those over 2 million people who have lost their jobs since January 20,
2001, have lost them for a considerable period of time and, thus, have
exhausted both their State and now their Federal unemployment benefits.
My proposal would extend the Federal program, which is currently
scheduled to expire at the end of this month, through November. It
would provide 26 weeks of benefits to those who are struggling to find
work in this stagnant economy. It would also provide 13 weeks of
benefits to the approximately 1 million workers who had exhausted their
benefits before the end of last year but who were excluded from the
extended program which we enacted in January.
Finally, this proposal gives the States the option of modernizing
their unemployment compensation programs to better cover part-time and
low-wage workers.
In summary, the plan I have submitted will stimulate demand and,
thus, has the better opportunity to stimulate the economy. It focuses
all the money in the next 24 months, as Senator Nelson from Nebraska
commented that one of his objections to several of the proposals was
they would spread the money out over a 10-year period and, in the case
of the President's plan, an infinite period because the tax cuts would
stay in effect assumedly until Congress acted to do otherwise, whereas
what we need to do is the money that is available to stimulate the
economy needs to be focused in the period when the economy needs
stimulation.
Finally, this plan is fair. It treats all Americans, whether they are
teaching school in Oyster River or whether they are busing tables at
Drake's Diner, fairly and gives them an opportunity to be part of the
recovery of the American economy.
Maybe even more important, my plan does not ask our children and
grandchildren to foot our bill. We have had an incredible buildup of
debt. If I could use as an example my own family. My father was born in
1885. On the day he was born, he inherited, as his share of the Federal
national debt, $33. I was born in 1936. On the day I was born, I
inherited a national debt of $264. My oldest daughter was born in 1963.
When she was born, she inherited as her portion of the national debt
$1,634. The last number I am going to give you is stunning, almost
unbelievable. My youngest granddaughter was born 3 years ago. When she
was born, her share of the national debt was $20,163.
In four generations of one American family, we have gone from $33, as
that citizen's portion of the national debt, to $20,163. This expansion
of debt is not only immoral, it is also bad economics. By putting the
cost of their tax plan on the Nation's credit card, the President
jeopardizes the very economic growth we hope to stimulate.
Increasing the debt reduces national safety, crowds out private
sector borrowing, increases the cost of capital for the private sector,
and ultimately reduces economic potential. Even further, there is a
commonsense reason to offset the cost of the stimulus bill so that it
does not increase the national debt. In just 8 years, the first wave of
the baby boom generation, born after World War II, will become eligible
for full Social Security and Medicare benefits.
Today, there are 39\1/2\ million Americans eligible for Social
Security and Medicare full benefits. In the year 2011, 8 years from
today, when the first of the baby boomers become eligible, there will
be 45 million. At the time when the last of the baby boomers turn 65,
which will be in the year 2030, there will be nearly 72 million
participants in these two programs.
Those numbers are hard to comprehend, but what they say is that our
Federal Government has entered into a contract with our citizens paying
through this very payroll tax that we discussed earlier, with the
expectation that upon retirement, they will have purchased some
benefits, both economic and medical security.
My plan is fully offset, primarily by suspending some of the tax cuts
enacted in 2001, tax cuts that have yet to go into effect. My proposal
suspends the reductions in the top three income tax rates planned to go
in effect in 2004 and in 2006. My plan freezes the planned cuts in the
estate tax scheduled beyond 2006. My plan also clamps down on those
Americans who avoid paying taxes by investing in abusive tax shelters,
moving their corporate headquarters to a file cabinet in Bermuda or
hiding assets offshore.
We need to bring America back to a time when our economy was booming
and our Federal finances were sound. The President's plan will not do
that. My plan will.
I ask for the yeas and nays on this amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER (Mr. Graham of South Carolina). The Senator
from Arizona.

[[Page S6222]]

Mr. KYL. I ask unanimous consent that the pending business be set
aside for the purpose of offering an amendment.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.

Amendment No. 575

(Purpose: To further enhance the denial of deduction for
certain fines, penalties, and other amounts.)

Mr. KYL. Mr. President, I send amendment No. 575 to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will read the amendment.
The legislative clerk read as follows:

The Senator from Arizona [Mr. Kyl], for himself, Mr.
Cornyn, Mr. Alexander, and Mr. Ensign, proposes an amendment
numbered 575.

Mr. KYL. 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 text of the amendment is printed in today's Record under ``Text
of Amendments.'')
Mr. KYL. I ask unanimous consent that this amendment be designated
the Kyl-Cornyn amendment and that Senators Alexander and Ensign be
listed as original cosponsors.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KYL. Mr. President, I will address this amendment for a few
minutes, and then I am going to speak on the dividends proposal that
will be offered tomorrow and that hopefully the Senate will approve as
one of the perfecting amendments of the legislation that passed out of
the Finance Committee.
The first thing I would like to do is to describe the amendment that
I have just laid down. I know Senator Cornyn is coming a little bit
later, and he will be talking about it, too.
This amendment is known as the tobacco tax lawyers amendment. The
technical name is different than that, but the gist of this amendment
is that about $9 billion could be returned to the States, the clients
in the tobacco litigation, from the attorneys who overcharged those
clients. This legislation ensures that overcharging be recognized in
law so that the States can apply for that refund.
How does that work? There is an existing IRS Code provision that says
if one is the trustee of a trust, and they overcharge that trust, they
take too much in the way of fees out of it, they have to return those
fees. The IRS will enforce that.
In fact, the Secretary of the Treasury is involved in that process.
We simply apply that same existing IRS Code provision to this situation
where attorney's fees have been charged in excess.
The common thread is a fiduciary relationship, the legal term which
applies where a trustee or a lawyer to a trust or to a client has a
responsibility above and beyond a mere contractual responsibility. As
the court cases all attest--and I will quote a couple in a moment--
whereas a contract between two regular people is enforceable in law,
with respect to a trustee or a lawyer, where you have a fiduciary
responsibility to the client or to the trust, that contract is not the
most important thing. The most important thing is the fiduciary
responsibility, which the law will enforce, above the contracted for
fee. That is what would apply in this particular case.

As a result of the tobacco litigation we are all familiar with, the
fees are being paid to these lawyers at the rate of about $500 million
a year. That exists for 30 years until the year 2028, possibly forever
if the lawyers win their argument for an inflation adjustment. Some
attorneys are receiving fees--if we can believe this now--in excess of
$150,000 an hour.
Senators make about $150,000 a year, and there are a lot of people
who think Senators are overpaid. Think about instead of earning
$150,000 a year, a person earned $150,000 every hour. That is what some
of the attorneys in this tobacco litigation are earning. It is
unconscionable, and no contract that provides for that can be
enforceable in law. It is clearly a breach of the fiduciary
responsibility.
Congress enacted this Tax Code provision in 1996 in response to two
very famous people. I will not mention their names, but they set up a
trust and then proceeded, basically, to pay themselves as trustee most
of the money out of the trust. Congress said: That is not right. We do
not care what the contract says. It is wrong. The IRS can tax you on
that overage.
That is the same provision we would use. The Congress can tax you on
that overage, and I will describe in a minute how we actually describe
what the overage is.
I will first assure my colleagues that the money that would be
returned by the tobacco lawyers is not returned to the tobacco
companies. They have to pay the money. They either pay it to the
lawyers or they pay it to the States. The money would be returned to
the States. As I said, under the original bill that Senator Cornyn and
I introduced, it is about $9 billion. That is the securitized value of
this income stream of over half a billion dollars every year for 30
years, and maybe in perpetuity. So $9 billion is the reduced-to-present
value of this fee award.
I have a chart, which I do not think I will bother to put up on the
easel, which shows what every State would get. My State, for example,
would receive about $164 million, and it could use that money. Since it
is based purely on population, if that is what Arizona, with a little
over 5 million people, received, my colleagues can figure out what
their State would receive.
I will go back to describe what the tobacco settlement really did
because most people are not aware of what happened in the tobacco
settlement. Attorney's fees were not awarded in the tobacco settlement
pursuant to contract. So for those people who say we are trying to
abrogate contracts, as I said, we are not talking about contracts. We
are talking about a fiduciary responsibility. In any event, in the
tobacco settlement, there was not a contract. Nor were they awarded by
a court, which is the other way that ordinarily attorney's fees are
awarded as a result of successful litigation.
So it was not awarded by a contract, and it was not awarded by a
court. Instead, after the tobacco companies' initial offer to settle
the litigation and that offer failed and Congress rejected a
legislative settlement, which some of my colleagues will recall, the
tobacco companies and the lawyers agreed to a $246 billion settlement,
with a special provision for attorney's fees. So this was not between
the lawyers and clients. It was between the lawyers and the other
party, something about which courts always raise a red flag.
That provision included a very unusual agreement by the tobacco
companies to pay the fees of these lawyers who represented their
opponents, the States. The fees were ostensibly set by a panel of three
arbitrators, and there are some very interesting articles about how
this would occur that would make your blood boil. Two of the majority
were effectively chosen by the lawyers.

In this agreement, the tobacco companies and lawyers agreed to
immunize all fee awards from judicial review. In other words, it
stipulates that it cannot be reviewed by a court. And all proceedings
were concealed from the public. That is what we are talking about--a
secret deal by which the tobacco companies agreed, as part of how much
money they had to pay out, that they would pay these substantial fees
to the lawyers.
It does not take too much imagination to figure out that it was in
the best interests of two parties that this arrangement exist--the
lawyers and the tobacco companies. They got together and they concocted
a secret deal which was never reviewed by a court, is not pursuant to a
contract, and which, by the precedence of this Congress, can be
limited.
Now, the amendment we have proposed guarantees that none of these
lawyers receives less than $20,000 an hour for their services. Is that
generous enough? None of them will get less than $20,000 an hour. How
much is a plumber charging these days? A hundred dollars an hour? I am
not sure what it is. How much does a schoolteacher get these days?
Probably not $100 an hour when you add it all up. These lawyers would
be guaranteed $20,000 for every hour they put in. Some claim to have
put in 10,000 hours, 20,000 hours, 30,000 hours. Add it up. They will
not have to sell their yachts.
As I said, there are a lot of descriptions of this, and I will put
some of this in the Record at the appropriate time.

[[Page S6223]]

I wanted to note, if anyone thinks I misspeak, in one of the articles
it is noted that in the case of Michigan, for example--I will be very
specific--the fee worked out to $22,500 an hour for this particular
firm. These lawyers would therefore have to take a little bit of a cut.
Instead of getting $22,500 an hour, they only get $20,000 an hour.
Now, The Economist, a respected magazine published in Great Britain,
notes that tobacco settlement ``arbitration is a mere figleaf. The
money going to the lawyers was clearly part of the overall amount that
the tobacco companies were willing to pay to settle the case. Whatever
the lawyers get, the States do not.''
That is the bottom line. So the money has to be returned to the
clients, the States, not the tobacco companies.
As I said, the proposal is based on the intermediate sanction tax, an
existing provision of the Tax Code that applies a punitive tax to the
excessive portion of a fiduciary's fee and effectively forces the
fiduciary to restore the excessive portion of the fee to the client.
Our amendment applies the same tax formula to the excessive attorney's
fees in the mega-lawsuits.
The suit would have to be $100 million or this provision would not
apply. We are talking about a very minute number of lawsuits per year;
probably 15 to 20 litigations a year, at most, according to experts,
would qualify. You have to exceed $100 million as part of the
settlement or judgment.
Let me note, because one of my colleagues said you have to have
contingent fees in the big complicated cases, that is very true,
lawyers will take tough cases on a contingent fee. In the early stages
of this litigation, it was tough litigation, that is true. So sometimes
lawyers will take a third, sometimes even 40 percent. I have seen fees
as high as 50 percent of the settlements.

What have experts and courts said about that? Courts have made clear
that fee agreements based primarily on the size of the recovery tend to
become unreasonable when judgments reach the $100 million mark, which
is the mark we use here. As one court stated:

In much smaller cases, a fee award of 33 percent does not
present the danger of providing the plaintiff counsel with
the windfall that would accompany a mega fund settlement of
$100 million or upwards, but it is quite different when the
figure hits the really big time.

Whereas the Third Circuit Court notes:

Courts have generally decreased the percentage awarded for
attorney fees as the amount recovered increases and $100
million seems to be the informal marker of a very large
settlement.

It is one of the reasons we chose the $100 million mark.
The logic of avoiding judgment-based awards in the very largest
lawsuits is straightforward:

It is not 150 times more difficult to prepare, try, and
settle a $150 million case than it is to try a $1 million
case, but the application of a percentage comparable to that
in a smaller case may yield an award 150 times greater.

Another said:

There is considerable merit to disallowing standard
percentage awards as the size of the recovery fund increases.
In many cases the increase in the recovery is merely a factor
in the size of the class and has no direct relationship to
the efforts of counsel.

That certainly was the case in the tobacco litigation.
Before the trial lawyers or some of their allies say this is a
Republican lawyer-bashing amendment, I say two things. First, I am a
lawyer. I am not trying to bash any lawyers. A guaranteed fee of
$20,000 an hour would be considered extraordinarily generous by the
standards of most of my colleagues. Second, the fee formula used in
this situation allows attorneys to receive up to 500 percent of what
courts usually determine as reasonable hourly rates but not less than
$20,000 an hour. So you take what a court determines as a reasonable
rate, add 500 percent--no one can contend that is unfair--and that is
the standard used in this typical type of case.
Before you say this is Republican lawyer bashing, this came from
probably the most liberal court in the country, the Florida Supreme
Court, which in a specific case tried to determine what would be a fair
fee in a situation like this.
What it said was that the maximum multiplier that it thought was
appropriate was this multiplier of 5, or 500 percent.
Here is what the court said:

We set the maximum multiplier available in this common-fund
category of cases at 5. . . . [A] multiplier which increases
fees to five times the accepted hourly rate is sufficient to
alleviate the contingency risk factor involved and attract
high level counsel to common fund cases while producing a fee
that remains within the bounds of reasonableness. We
emphasize that 5 percent is a maximum multiplier.

I take this as the most liberal of standards, the reasonable
attorney's fees, plus 500 percent, and then say, but we will guarantee
you that you do not get anything less than $20,000 an hour if it turns
out not to satisfy that. I challenge any of my colleagues, if you vote
against this amendment, you are going to have to justify paying lawyers
$20,000 an hour rather than returning that money to the States.

The original of the bill Senator Cornyn and I filed has this
provision effectively from June of last year. To avoid any question
that it is retroactive, we made it effective on the effective day of
the act, so it is only prospective.
There is one more thing I want to summarize. This act does not alter
the considered fee award standards of any jurisdiction in the country.
Rather, it is intended to enforce those standards and to correct the
occasional extreme outlier. What we are doing is enforcing the court-
imposed law relating to fiduciary responsibilities.
Let me quote a couple of these courts. This is from the Illinois
Supreme Court:

A fiduciary relationship exists as a matter of law between
attorney and client.

The New Jersey Supreme Court:

An attorney's freedom to contract with a client is subject
to the constraints of ethical considerations.

The Massachusetts Appeals Court:

While freedom of contract is the guiding principle
underlying contract law, contractual freedom is muted in the
lawyer-client and lawyer-lawyer context.
That comes from a law professor, Joseph Perillo.

Here is another court:

[A]n attorney is only entitled to fees which are fair and
just and which adequately compensate him for his services.
This is true no matter what fee is specified in the contract,
because an attorney, as a fiduciary, cannot bind his client
to pay a greater compensation for his services than the
attorney would have the right to demand if no contract had
been made. Therefore, as a matter of public policy,
reasonableness is an implied term in every contract for
attorney's fees.

As I noted before, in this case, in the tobacco litigation, you don't
have a contract between the client and the attorney. The contract is
between the attorney and the opposing parties, the tobacco companies,
which make it even more suspect.
Again, as I said, this does not change the substantive law. It simply
enforces preexisting fiduciary standards that bind every attorney in
every State.
I urge my colleagues when we vote on this amendment tomorrow to just
consider the alternative. These lawyers are all going to get a ton of
money, hundreds of millions of dollars, guaranteed $20,000 per hour
that they work. Most of them worked, they claim, thousands of hours on
this case. But we are able to return somewhere, depending upon how the
payment for this amendment is done, between $6.5 billion and $9 billion
to the States. The States could use this money at this time. The
tobacco companies have to pay the money one way or the other.
After compensating lawyers on the basis of a reasonable attorney fee
plus 500 percent, but at a minimum at least $20,000 an hour, the
remainder would be returned to the States. I submit this is a
responsible thing for us to do.
The final comments I would like to make relate to the amendment that
will be offered tomorrow relating to the dividend section of this bill.
The proposal is to join the President in finally bringing to an end the
pernicious practice of taxing dividends in this country twice, which
puts us at a competitive disadvantage with our trading partners, which
is unfair in anybody's book, which drives corporations to fund their
investment by debt rather than equity investment, which reduces the
transparency of corporations because they do not have to account to
shareholders, and which diminishes the value of stock because the
shareholders are going to have to pay a tax on the dividends even after
the corporation has already done so.

[[Page S6224]]

Those are the reasons President Bush understood that this double
taxation of dividends had to be addressed in this tax bill. The beauty
of his proposal is that when combined with two of the other provisions
of the act, the acceleration of the write-off for small business and,
most important, the acceleration of the reductions in the marginal
income tax rates, we will produce in this country 1.4 million jobs next
year, and we could produce half a million jobs this year.
The proposal that is going to be offered tomorrow is ingenious in
that it puts the bulk of this relief right up front where it will do
good for the economy right now; and, second, it sends an unmistakable
message to the stock market that we mean business about reducing the
tax to zero.
What the proposal does is, for this current tax year, before we could
put this all in effect, it gives all of the dividend holders a 50-
percent deduction on their dividends. So for this tax year we are in
right now they can write off half of what they would otherwise have to
pay, and starting next year, 2004, and going into 2005 and 2006, in
other words for 3 straight years, the tax rate for them goes to zero on
these dividends. It is repealed. It is gone.
I challenge anybody at the end of that period of time to suggest at
that point we try to reinstate the double taxation of dividends. It is
not going to happen.
So the message to the stock market, when the vote occurs tomorrow and
you have seen that the Senate is willing to follow the President and
repeal the double taxation of dividends, the message is that you can
finally begin to see the light at the end of the tunnel with respect to
the recovery.

What do economists tell us? One economist, a very prominent
economist, told us at a dinner the other night that he could expect to
see at least a 20-percent increase in the value of stock as a result of
this. The average of the economists we have talked to is closer to 10
percent. But take 10 percent. I think we would all like to see a return
of that much value in our stock portfolio. This exists whether or not
we are holding stock that issues dividends because of the general value
of the market, or increased value of the market that would result from
this. Obviously, those taxpayers who receive dividends from their
corporate holdings would receive a direct benefit in the reduction of
their liability for taxes, in addition to the increase in the value of
their stock.
Obviously, this is going to be very good tax policy. It puts us in a
better competitive position. Do you know that the United States has the
second worst tax rate on dividends in the entire world of economically
developed countries? Only Japan has a slightly higher rate. And every
other country in the economically developed world has a lower tax rate
on dividends than we do. No wonder we are having a problem right now.
But another point I would like to make with regard to this whole
issue is that dividends obviously work in two good ways. By putting
money back in taxpayers' pockets, they can do with those dividends
whatever they like. The distinguished Senator from Florida who was
speaking a moment ago talked about the need for consumers to have more
money in their pockets. This is a way for consumers, and specifically
senior citizens, to get more money in their pockets. There are about 10
million seniors who would receive relief under this proposal, just
under $1,000 a year in terms of the average value they would receive.
This is money in their pocket. This is money with which they can do one
of two things: They can either spend it or they can invest it. In
either case they are helping the economy.
For those who think we need to have people who can spend more, they
can spend more. For those who think we need more investment, obviously
some seniors invest some part of their income.
I would like to make a point in response to the Senator from Florida
because he referred to my beloved home State of Arizona and showed a
photograph of some airplanes sitting out on a tarmac, airplanes that
were mothballed. If you come out to Tucson, AZ, you will see a very
interesting sight. There are literally hundreds if not thousands of
these airplanes. Most of them are military, but there are some
commercial airplanes as well.
The point he was trying to make was this is a consumer-driven
recession and therefore we need to put money in the pockets of
consumers. The two big things we do here is accelerate the marginal
income tax rate--that puts money in the pockets of consumers--and don't
double tax dividends so the people who invest in stocks have that money
to spend. Even for those who believe this is a consumer-driven
recession, which it is not, what the President has proposed, and what
we will be voting on tomorrow, helps put money in the pockets of
consumers.
But there is a fundamental misunderstanding, if you look at airplanes
and say, therefore, because people are not flying as much, this is a
consumer-driven recession. There are two problems: First, regarding 9/
11, the airline industry is almost unique among the businesses in this
country. The airline industry and associated industries went into a
nose dive that they still haven't recovered from because the traveling
public has not traveled as much after 9/11. But the airlines will tell
you a second factor has contributed to their bad financial situation.
In addition to the fact that some people do not travel as much as a
result of 9/11, and we have increased security costs placed upon them,
the biggest single factor, they will tell you, is they have lost the
business traveling public.
The business travelers who buy the first class or business class
tickets and fly a lot are not flying as much. Why? Because the
corporations are trying to save money. Why? Because they can't get
enough money to invest in their businesses. Why? Because there is a
capital asset deficit. This recession, the first of the 21st century,
is the first nonconsumer recession. It is a capital asset deficit
recession. It is a recession that understands that investment income is
what is lacking.
Over the last 2 or 3 years, we have seen, by the count of some
economists, almost $10 trillion sucked out of the stock values of this
country. Something has to be done to put back that value. The way you
put it back is by creating more investment opportunities. Most of the
economists we have talked to said the single best thing you can do to
add to that investment opportunity is to repeal this double taxation of
dividends.
My colleague, Senator Voinovich from Ohio, quoted Alan Greenspan a
while ago, who said if you are going to do something like this, get rid
of the double taxation of dividends. That will help spur investment. He
also said to Congress, stop spending so much money.
This chart on my left demonstrates the situation here. Last year,
consumer spending didn't go down. Those of you who have refinanced your
home or tried to buy a car at 0 percent interest know people are still
buying. Consumer spending went up 3.4 percent last year, and it was up
the year before as well. This green line shows consumer spending
continues to go up. From 1999 to 2002, you can see that consumer
spending is increasing.
It hasn't fallen off. What has fallen off? The gross private
investment is what has fallen off--the investment in our businesses in
the United States. After reaching the peak just after the year 2000, we
all know what happened. We read the paper and see what is happening to
the stock market. You can see investment in the market has plummeted,
and it hasn't come back very much. It will come back if we give people
the means to invest and the incentive to invest because they are not
going to have their profits from their investment in corporations taxed
after the corporation has already paid the tax.
This is clearly a capital asset problem and not a consumer spending
problem, as has been alleged by so many of those on the other side of
the aisle.
Finally, I want to say this: My colleague from Florida said, ``The
President's handling of the economy''--the end of the quote, but the
gist is the President's handling of the economy is why we are in the
bad economic situation.
Under current circumstances, would that the President could handle
the economy. But as all economists know, fortunately 250-plus million
people drive the economy in this free market country of ours. They make
millions of decisions every day. The President

[[Page S6225]]

doesn't run the economy in the United States of America. He has very
little that he can do to change the economic situation in the country
except try to lead by persuasion. He is trying very hard to do that.
The other thing he can do is to propose to the Congress that we try
to do things he thinks will help the economy and he has done that. But
my colleague who spoke these words a moment ago wants to deny him the
ability to put his plan in effect. On the one hand, they complain he is
not doing anything to handle the economy, and on the other hand, they
are going to disagree with whatever he proposes to do. Of course, we
know the truth. He doesn't handle the economy. But he has some
influence over the direction we go by getting his best advisers
together and trying to figure out how we can create the most jobs and
produce economic recovery. He has done that. Most of the Republicans in
this body have agreed his proposal is the best way for us to create
jobs.
Therefore, tomorrow what will be offered is very close to what he
proposed. With this dividend, this elimination of the double taxation
of dividends, we will be able to go a long way toward giving the
President the plan he has asked for--not so that he can handle the
economy, but so we as leaders can help lead the country toward at least
some degree of recovery in this year of 2003.
As I said before, some people say the President's reelection depends
on whether the economy is strong or not. I don't think he would be
proposing something which he thinks won't work. He is proposing
something which he believes will work, and we believe it will work.
That is why I hope my colleagues will support the proposal that will be
offered tomorrow in support of the President's program to eliminate the
double taxation of dividends.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. I yield to the Senator from Texas what time he might
consume.
The PRESIDING OFFICER. The Senator from Texas.
Mr. CORNYN. Mr. President, I appreciate the Senator from Iowa
providing me an opportunity to speak on a matter I know the Senator
from Arizona has already addressed--something called the Intermediate
Sanctions Compensatory Review Adjustment Act of 2003.
This amendment, I believe, is important for a number of reasons.
First of all, nobody in this body is going to get quite everything they
may want in this jobs and economic growth package of 2003. But, for
better or for worse, a deal has been struck in order to obtain
sufficient votes to get the matter out of committee and hopefully
enacted into law to provide $20 billion of State aid as part of this
package.
If it had been up to me, I would have said that notwithstanding the
difficult times States find themselves in--and in my State of Texas
they find themselves with a $10 billion budget shortfall--but
notwithstanding that fact, I would be reluctant to send $20 billion to
the States with no strings attached so they could spend however they
might like when we have no means of establishing accountability for how
that money might be spent. But the collective wisdom of the Finance
Committee and perhaps this body is that $20 billion in State aid will
be sent to the States as part of this overall package.
That being the case and recognizing that no single Senator gets
everything he or she wants, the question then has arisen--and the
Senator from Arizona has raised it--the issue of attorneys' fees
ostensibly earned by lawyers who represented the various States in the
tobacco litigation and other contingency fee arrangements whereby
certain private lawyers have earned, or at least claim to have earned,
literally billions of dollars in attorneys' fees.
I don't speak on this issue without a little bit of history, and
perhaps that would provide some context for why I support this
amendment.
On January 1, 1999, I was sworn in as Attorney General of Texas,
shortly after my predecessor had entered into a settlement with the
tobacco industry, and really I think what we all recognize is an
unprecedented lawsuit ultimately resulting in the largest civil
judgment in the history of the world.
I know the State of Texas and other States filed this lawsuit to
recover Medicaid expenditures they had incurred on smoking-related
illnesses. Certainly, I count myself second to no one in expressing
concern about the number of people in this country and around the
world--some 400,000 in this country alone--who lose there lives
annually as a result of smoking-related illnesses. But that is only
part of the story.
The rest of the story is that a small group of entrepreneurial
lawyers saw an opportunity once they joined league with State attorneys
general to file litigation against the tobacco industry. If that were
more or less the end of the story, then I wouldn't have concerns. But
ultimately, those settlements ended up with the States in a joint
venture with the tobacco industry to keep the tobacco industry alive,
and with the settlements, these huge amounts of money, multiple
billions of dollars being paid out of the profits of the tobacco
industry for continuing to sell more of their tobacco products in the
future, not just in this country but across the world.
So rather than discouraging or limiting tobacco use in this country
and around the world, the States became joint venturers, so to speak,
with the tobacco industry because if the tobacco industry was unable to
sell more of its product, then the States would not get paid under the
settlements, a truly shrewd and ingenuous arrangement on the part of
these entrepreneurial lawyers.
But the real concern I have about this arrangement, particularly in
my home State of Texas, is while the State receives a historic
settlement of $17.3 billion--and actually that purports to be the
present value of the money that is going to be paid in perpetuity--it
is really probably only a part of what ultimately that judgment is
worth.
Once these lawyers settled the case for the client, so to speak, then
they talked to the tobacco industry, and they said: OK, what about us?
We have my client's settlement, $17.3 billion, roughly speaking. Now
what about us? And they engaged in an arrangement which I believe
violated one of the most basic obligations that a lawyer owes to the
client and breached their fiduciary duties to the client.
It simply boils down to this: that the duty of a lawyer who has been
hired by a client is to maximize the recovery on the part of the
plaintiff. Here, rather than do that, they struck a deal with the
tobacco industry for a certain amount of money and then said: Well, on
top of that, now you have to deal with us--which turns on its head the
duty of loyalty that a lawyer has to a client to not let his or her
personal interest conflict with the interests of the client and to
maximize the recovery by the client.
So, simply stated, I believe what we saw in the tobacco litigation,
all across this country, represented an unprecedented breach of
fiduciary duty that the lawyer owed to the client to maximize the
client's recovery and enrich the lawyers in the process.
So the question is, What do we do about it? Well, here again, I
believe that the needs of the States, and particularly the State of
Texas--which is currently in session trying to deal with a $10 billion
shortfall, looking at cutting health care for those who are unable to
pay for health care on their own, for children under the CHIPS program,
for public education--that this provides an opportunity for this body
to correct an injustice, to enforce a fiduciary duty that the lawyer
owes to the client, and to provide aid to the States in the process in
a way that will help ameliorate that loss and vindicate a wrong.
Part of this story, too, involves a tragedy. My predecessor as
attorney general currently stands indicted by a U.S. grand jury in the
Western District of Texas for trying to enrich a friend, a colleague,
to the tune of some $520 million for doing no work.
For those who have not followed the story, I will just say that about
the time the tobacco settlement was struck, there arrived on the scene
another lawyer, whom nobody had ever heard of before, by the name of
Mark Murr. The lawyers who had been involved in the litigation--at
least they had done some work on it--wondered what this arrangement
was. And when push came to shove, ultimately the five main lawyers in
the Texas tobacco lawsuit got their $3.3 billion. But then

[[Page S6226]]

there was an arrangement made to create a separate mechanism, a
collusive arbitration arrangement, whereby Mark Murr would receive up
to $520 million out of the recovery of the State of Texas.
As it turned out, during my investigation as attorney general, we
determined that the contract upon which Mr. Murr claimed a right to be
paid had been falsified, backdated, and literally been cut and pasted
to make it look as if he had done some work on the case and had been
involved in the case much earlier than he really had. In truth, and in
fact, I believe he did not do any work to justify that fee.
During the 4 years that I was attorney general of the State of Texas,
we conducted an investigation into that matter, were successful in
preventing Mr. Murr from making the claim for that money against the
treasury of the State of Texas, and ultimately, I believe, provided the
factual basis under which the U.S. attorney was able to present that
case to the grand jury, and ultimately resulting in the indictment of
the former attorney general of the State of Texas.

I say that with no pleasure at all. It is a tragedy, a terrible
tragedy. But it is a story of how a steward of the public trust has
violated that trust and now must be held accountable for violating that
trust. But in the process, and what this amendment addresses
specifically, is the manner in which five private lawyers enrich
themselves at the expense of the State of Texas and how other lawyers
across the country, during the course of this tobacco litigation,
enrich themselves at the expense of their State clients in breach of
their fiduciary duties.
The Internal Revenue Code provides a mechanism where those who breach
fiduciary duties--whether they be a trustee or, in this case, a lawyer
representing a client--can be taxed. It provides another mechanism, a
nonlitigation mechanism, to enforce that fiduciary duty that is owed by
the fiduciary to the client. In this case, I believe it is an
opportunity for this body to find funds--if, in fact, it is the will of
the majority of this body--and to see Federal dollars, or money that
otherwise is paid by Federal taxpayers, go to State taxpayers. It
provides another opportunity to provide up to $9 billion of additional
funds by simply enforcing the fiduciary duty owed by these lawyers to
their clients, the various States.
So I am pleased to join Senator Kyl and Senator Alexander in
cosponsoring this amendment that would, if adopted by this body,
provide an additional $9 billion in State aid, in a way that I believe
ultimately does justice, by enforcing this fiduciary duty owed by the
lawyers to the client.
Let me just say, Mr. President, in closing, that I support the Jobs
and Economic Growth Act of 2003. Even though I think it will undergo a
number of amendments and will ultimately not be exactly what any of us
would like, I believe it provides a necessary prescription for what
ails the economy and will provide a necessary jump-start to allow
taxpayers, the ones who earn the money, to keep more of that money and
spend it as they see fit, and to allow small businesses that earn the
money to reinvest in their businesses and create new jobs in a way that
will ultimately help us grow our way out of our current economic
doldrums.
So I am happy to support this important legislation and happy to add
my voice to hopefully putting America back to work.
Mr. President, I yield the floor.
The PRESIDING OFFICER. Who yields time?
The Senator from Montana.
Mr. BAUCUS. Mr. President, I ask unanimous consent that all pending
amendments be temporarily set aside so the Senator from Louisiana can
offer an amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Louisiana.

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