[Congressional Record Volume 150, Number 76 (Thursday, June 3, 2004)]
[Senate]
[Pages S6452-S6458]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. LIEBERMAN:
S. 2497. A bill to amend the securities laws to provide for enhanced
mutual fund investor protections, and for other purposes; to the
Committee on Banking, Housing, and Urban Affairs.
Mr. LIEBERMAN. Mr. President, today I am introducing legislation that
[[Page S6453]]
would bring needed changes to our financial markets so that the
interests of America's small individual investors are protected and
defended.
The recent revelations about unethical and illegal practices in the
mutual fund industry have been deeply disturbing--to me and to ordinary
investors throughout the country. In November 2003, the Governmental
Affairs Committee's Subcommittee on Financial Management, the Budget,
and International Security heard testimony from the Director of the
Securities and Exchange Commission's (SEC's) Enforcement Division about
a survey of fund practices that the SEC had just completed. The survey
found that half of the largest 88 mutual funds had permitted a practice
called market-timing, which allows some investors to trade quickly in
and out of the funds, even though many of those funds had explicit
policies against such trading because of its detrimental impact on
other investors in the fund. The survey also found that a full one-
quarter of the brokerage firms it looked at indicated that they had
allowed certain customers to engage in late-trading, an illegal
practice that allows favored investors to execute trades based on that
day's price after the market had closed, when new information had come
to light. Perhaps most shocking, the survey found that, in some cases,
fund company officials profited personally at the expense of their
customers by market-timing their own funds. In a later hearing, we
learned about the problem of excessive fees at some funds and the fact
that such fees may not be prominently disclosed to investors or, as is
the case with some types of fees, not disclosed at all.
These concerns are of particular importance because, in a very real
sense, mutual fund investments are investments in the American dream.
They hold the nest eggs, the retirement savings, and the college funds
for millions of America's working families. But they also feed capital
into today's economy, fueling the engine that creates and maintains
American jobs. Mutual funds are where so many Americans put their
money: 95 million people, at last count, own shares in these funds.
Indeed, in the wake of the Enron scandal, when investigators uncovered
widespread deceptions and conflicts of Wall Street stock analysts,
conventional wisdom said average investors would find safe haven in
mutual funds rather than in individual stocks. It is therefore
particularly--and--ironically disheartening to see the scandals and
breaches of trust that have now afflicted the mutual fund industry.
The recent revelations about mutual funds, however, provides us with
the opportunity and the responsibility to accomplish real, structural
reform in the fund industry. That is why I have joined with Senator
Akaka and Senator Fitzgerald in introducing S. 1822, the Mutual Fund
Transparency Act, and why I have also joined Senators Corzine and Dodd
in introducing S. 1971, the Mutual Fund Investor Confidence Restoration
Act. Both of these bills take on many of the significant mutual fund
problems that have come to light in recent months. Together, they bar
late trading and discourage market timing; reform mutual fund
governance rules to require that the chairman and 75 percent of board
members of mutual fund companies be independent and strengthen the
definition of independent; require far more extensive disclosure of
fund fees and expenses; and work to increase financial literacy.
But beyond these important, basic reforms, we need to craft new
approaches that address the changing nature of this country's investor
class. In the last two decades, a near-revolutionary expansion in the
number of people participating in the financial markets has occurred.
Since 1980, we've seen the share of U.S. households owning mutual funds
soar from less than 6 percent to nearly 50 percent in 2002. The number
of families owning stocks, directly or indirectly through funds, has
increased 60 percent in the last fifteen years and, as of 2001,
exceeded half of all families. Along with this phenomenon, and
contributing to it, we've seen individuals increasingly taking
responsibility for investing their own retirement money--a
responsibility that was once entrusted to professionals . It used to be
that employees were typically enrolled in so-called ``defined benefit''
pension plans that guaranteed them certain income and for which the
employer took responsibility for investing the money properly. Now
individuals are more frequently given responsibility for investing
their retirement savings themselves through 401(k) plans. In fact,
since 1983, the number of defined-benefit plans has declined over 70
percent, while participation in 401(k) plans has been increasing.
Forty-eight million Americans now have 401(k) plans.
Neither changes in the law, nor changes by federal regulators,
however, have kept pace with the increasing participation and the
increasing responsibilities of small investors. When the Investment
Company Act was enacted in 1940, it brought sweeping changes, and, for
the first time, Federal regulation, to the fund industry, which had
been fraught with fraud and abuse in the 1920's. The 1940 Act and the
other securities laws passed in the wake of the 1929 stock market crash
were instrumental in restoring investor confidence and in establishing
the basic disclosure regime that continues to undergird securities
regulation today. But the 1940 Act remains much as it was when it was
enacted, and disclosure requirements that once appeared radical now
often result in forms of technical compliance that little serve average
investors who have neither the time nor guidance to find their way
through the verbiage of fund disclosures. Nor has the SEC, created in
the same era and charged with protecting investors, adequately kept up
with the shifting makeup and needs of contemporary investors. To its
credit, the SEC in recent months has made a number of changes and
proposals specifically to address the problems uncovered in the mutual
fund industry, and in the 1990's it undertook a serious effort to
ensure that more securities documents were written in ``plain
English.'' The Commission, however, has not accomplished the more
fundamental reorientation that I believe is called for--and that indeed
I did call for in the aftermath of the Enron scandal--to an agency that
does not merely regulate and punish the securities industry but
affirmatively and proactively seeks ways to assist and protect ordinary
investors.
The Small Investor Protection Act that I am introducing today would
bring about these needed changes by ensuring that the SEC is more
routinely attuned to the needs of average investors. In doing so, this
bill serves as an important complement to, though surely not a
replacement for, the other mutual fund reform legislation I have
cosponsored. And I am pleased that the bill has the support of the
Consumer Federation of America, Fund Democracy, Inc., Public Citizen's
Congress Watch, Consumer Action and Consumers Union.
To accomplish the goal of better protecting small investors, the bill
would take the following four steps:
1. Create a Division of the Investor. Too often in recent years, the
interests of ordinary investors have not seemed to be the driving force
behind the Commission's regulatory actions. Wall Street's
representatives regularly meet with Commission staff to comment on each
new Commission proposal but the voice of the small investor has been
harder to hear. To ensure that the voices of small investors are heard,
my bill would create a separate division within the Commission--coequal
with the other four major divisions at the SEC--to provide for a
permanent and institutionalized advocate for the interests of ordinary
investors. The Division of the Investor would be responsible for such
things as providing the small investor's perspective on new rule and
policy proposals, identifying new issues of particular concern to small
investors, and serving as a conduit for the concerns of outside
advocates for small investors.
2. Establish an Office of Risk Assessment. As part of the
Governmental Affairs Committee's investigation into the Enron scandal,
former Senator Thompson and I released a bipartisan staff report
concluding, among other things, that the SEC needed to move away from
simply reacting to cases of financial fraud to actively rooting out
fraud. In other words, the SEC needed to ``reconceptualize its role as
a more proactive force in protecting the marketplace against financial
fraud.'' This conclusion has only been reinforced by
[[Page S6454]]
the fact that the recent and widespread problems in the mutual fund
industry were apparently not identified by the Commission but were
uncovered by others. I am therefore very encouraged that Chairman
Donaldson has announced the creation of an Office of Risk Assessment to
gather and analyze data on new trends and risks and identify new areas
of concern for the Commission. This effort, in my view, is critical to
protecting small investors because it will increase the likelihood that
practices detrimental to small investors will be proactively identified
and addressed before they reach scandalous proportions. To ensure the
SEC continues to pursue this important function, my bill would provide
formal legislative recognition to the Office of Risk Assessment and
institutionalize its responsibilities.
3. Require Consumer Research to Gauge Whether Disclosures are Easily
Understood by Consumers. The disclosure of information to investors is
fundamental to securities regulation in the U.S. With respect to mutual
funds, for instance, the SEC requires a wide array of disclosures to be
made in prospectuses, annual reports to shareholders, advertising, and
in other media. None of these disclosures, however, is likely to serve
its intended purpose if ordinary investors can't understand them. There
is little empirical evidence on whether investors do in fact understand
the disclosures being made. Although the SEC has from time-to-time
engaged in consumer research, such as surveys, focus groups, etc., it
does not routinely or systematically test its proposed disclosures to
determine if they are likely to be understood by ordinary investors. My
bill would change that by requiring that the Commission consider
empirical consumer research to determine whether a proposed
disclosure--including its wording, format, and the context in which it
appears--is likely to improve the understanding of ordinary investors.
4. Require Investment Companies to Provide Brief, Easy-to-Understand
Disclosures of Mutual Fund Characteristics. All too often, the
important details of a mutual fund purchase are lost among the pages
and pages an investor receives from his or her investment company. That
is why the Small Investor Protection Act would also require investment
companies to provide purchasers with a brief summary that will clearly
and succinctly outline the relevant characteristics of a mutual fund.
Ideally, this summary would be on a single page, and it could not
exceed four pages; it would include information such as expenses and
risks associated with the fund, as well as the degree to which the fund
is diversified. By providing this information in an easy-to-understand
format, the Act would help investors make decisions about which funds
are best suited to their particular needs and financial goals.
If enacted, these proposals, taken as a whole, would go a long way
towards reorienting the regulation of our financial markets to better
address the needs of the small investors who have become such an
integral part of our economy and for whom investments in the market
have become such a large part of their economic security. These
proposals would ensure that the concerns of ordinary investors receive
as much prominence in regulatory decisions as the concerns of Wall
Street giants, that average investors receive relevant information in a
form they can understand, and that they are better protected from
existing conflicts of interest.
In short, this legislation would help level the playing field for
small investors. That is something that we need to do to restore
confidence to our financial markets, which have been damaged by more
than two years of scandals, and that we must do because it is the right
thing for the millions of Americans who are saving and investing to
provide a better future for themselves and their children. They deserve
nothing less.
I ask unanimous consent that a letter in support of this legislation
from Consumer Federation of America, Fund Democracy, Inc., Public
Citizen's Congress Watch, Consumer Action and Consumers Union be
printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Consumer Federation of America, Fund Democracy, Inc.,
Public Citizen's Congress Watch, Consumer Action,
Consumers Union,
May 18, 2004.
Hon. Joseph I. Lieberman,
U.S. Senate, Washington, DC.
Dear Senator Lieberman: We are writing on behalf of
Consumer Federation of America, Fund Democracy, Public
Citizen, Consumer Action, and Consumers Union, to express our
strong support for your draft bill to give greater prominence
to the concerns of individual investors, particularly small
investors, in the policy and rulemaking of the Securities and
Exchange Commission.
The last several decades have seen a dramatic expansion of
the investor class. Many of these new investors are middle
class workers with little financial sophistication and less
experience with the securities markets. The major laws that
govern our markets were not written with these investors in
mind. Although the laws have been continually updated and
revised to address changing market conditions, individual
investors often find it difficult to have their voices heard
during those policy debates.
The recent mutual fund reform efforts offer a number of
examples of how policies are often developed with little
apparent thought to the needs of average, unsophisticated
investors. One such example involves the Securities and
Exchange Commission's efforts to improve mutual fund cost
disclosure. Among other reforms they advocated, investor
advocates argued in favor of individualized cost disclosure
on mutual fund account statements on the grounds that this
was the place where the disclosures were most likely to be
seen by average investors and their impact understood. The
SEC quickly rejected that approach, however, echoing industry
arguments that the disclosures would be too costly.
In reaching its conclusion, the Commission gave little
apparent consideration to how the account statement
disclosures might be provided. In fact, one mutual fund
company, MFS, has since announced that it has found an
economical way to do so. This suggests that, had the SEC not
been so quick to dismiss the views of investor advocates, it
might have been equally successful in finding a cost-
effective way to provide account statement cost disclosures.
Instead, the Commission opted for new hypothetical
disclosures in annual and semi-annual reports. Again, despite
serious questions raised by investor advocates, the
Commission appears to have made no effort to determine
whether their alternative approach would be effective in
reaching the unsophisticated investors who are not well
served by the current disclosure system.
Your legislation would help to rectify this situation
through several means. First, it would create an office with
a formally recognized role representing the interests of
individual investors, and small investors in particular, in
identifying areas of concern or where additional protections
are needed, analyzing rule proposals, and serving as a
liaison between investor organizations and the Commission. In
particular, the provision requiring that the views of the
Director of the Division of the Investor be included, in
summary form, in all rule proposals should help to give real
clout to this office as those rule proposals are being
developed.
We also support the requirement that the Commission
consider content, format, and placement when developing new
disclosure proposals to ensure that they are likely to be
effective. Too often, disclosures investors receive read as
though they had been written by lawyers to communicate with
other lawyers. Your legislation should help to ensure that
new disclosures are written with an eye toward how to convey
information effectively to average investors. We would like
to see this provision expanded, to require a review over
several years of all existing disclosures in light of the
same considerations.
The bill's specific requirement for pre-sale disclosure
covering key information about mutual funds would also
benefit investors by giving them the bare minimum information
they need to make an informed decision, at a time when it is
useful to them in making their purchase decision, and in a
form they are able to understand. Investor advocates have
long advocated such an approach, and our organizations have
recently reiterated our support for simplified pre-sale
disclosure as part of a comprehensive mutual fund reform
agenda.
Finally, our organizations have applauded Chairman
Donaldson for his publicly stated commitment to improving the
Commission's risk assessment practices. Your legislation
supports that goal by codifying it. This will help to ensure
that this important initiative does not get left by the
wayside once new leadership, with new priorities, takes over
the agency.
Small investors play a crucial role in our markets. They
should be given equally prominent consideration in the
policies that govern those markets. Your legislation would
help to bring that about. We look forward to working with you
to win its passage.
Respectfully submitted,
Barbara Roper,
Director of Investor Protection.
Travis Plunkett,
Legislative Director Consumer Federation of America.
[[Page S6455]]
Frank Clemente,
Director Public Citizen's Congress Watch.
Sally Greenberg,
Senior Counsel Consumers Union.
Mercer Bullard,
Founder and President Fund Democracy, Inc.
Kenneth McEldowney,
Executive Director Consumer Action.
______
By Mr. LUGAR:
S. 2500. A bill to amend the Foreign Assistance Act of 1961 to
provide assistance for orphans and other vulnerable children in
developing countries, and for other purposes; to the Committee on
Foreign Relations.
Mr. LUGAR. Mr. President, I rise to introduce the Assistance for
Orphans and Other Vulnerable Children in Developing Countries Act of
2004.
The unprecedented AIDS orphan crisis in sub-Saharan Africa has
profound implications for political stability, development, and human
welfare that extend far beyond the region. Sub-Saharan African nations
stand to lose generations of educated and trained professionals who can
contribute meaningfully to their countries' development. Orphaned
children, many of whom are homeless, are more likely to resort to
prostitution and other criminal behavior to survive. Most
frighteningly, these uneducated, poorly socialized, and stigmatized
young adults are extremely vulnerable to being recruited into criminal
gangs, rebel groups, or extremist organizations that offer shelter and
food and act as ``surrogate'' families. It is imperative that the
international community respond to this crisis that threatens stability
within individual countries, the region, and around the world.
An estimated 110 million orphans live in sub-Saharan Africa, Asia,
Latin America, and the Caribbean. The HIV/AIDS pandemic is rapidly
expanding the orphan population. Currently an estimated 14 million
children have been orphaned by AIDS, most of whom live in sub-Saharan
Africa. This number is projected to soar to more than 25 million by
2010. The pandemic is orphaning generations of African children and is
compromising the overall development prospects of their countries.
Most orphans in the developing world live in extremely disadvantaged
circumstances. Poor communities in the developing world struggle to
meet the basic food, clothing, health care, and educational needs of
orphans. Experts recommend supporting community-based organizations to
assist these children. Such an approach enables the children to remain
connected to their communities, traditions, rituals, and extended
families.
My bill seeks to improve assistance to orphans and other vulnerable
children in developing countries. It would require the United States
Government to develop a comprehensive strategy for providing such
assistance and would authorize the President to support community-based
organizations that provide basic care for orphans and vulnerable
children.
Orphans are less likely to be in school, and more likely to be
working full time. Yet only education can help children acquire the
knowledge and develop the skills they need to build a better future.
Studies have shown that school food programs provide an incentive for
children to stay in school. School meals provide basic nutrition to
children who otherwise do not have access to reliable food.
For many children, the primary barrier to an education is the expense
of school fees, uniforms, supplies, and other costs. My bill aims to
improve enrollment and access to primary school education by supporting
programs that reduce the negative impact of school fees and other
expenses. It also would reaffirm our commitment to international school
lunch programs.
Many children who lose one or both parents often face difficulty in
asserting their inheritance rights. Even when the inheritance rights of
women and children are spelled out in law, such rights are difficult to
claim and are seldom enforced. In many countries it is difficult or
impossible for a widow--even if she has small children--to claim
property after the death of her husband. This often leaves the most
vulnerable children impoverished and homeless. My bill seeks to support
programs that protect the inheritance rights of orphans and widows with
children.
The AIDS orphan crisis in sub-Saharan Africa has implications for
political stability, development, and human welfare that extend far
beyond the region, affecting governments and people worldwide. Every 14
seconds another child is orphaned by AIDS. Turning the tide on this
crisis will require a coordinated, comprehensive, and swift response. I
am hopeful that Senators will join me in backing this legislation.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 2500
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Assistance for Orphans and
Other Vulnerable Children in Developing Countries Act of
2004''.
SEC. 2. FINDINGS.
Congress makes the following findings:
(1) More than 110,000,000 orphans live in sub-Saharan
Africa, Asia, Latin America, and the Caribbean. These
children often are disadvantaged in numerous and devastating
ways and most households with orphans cannot meet the basic
needs of health care, food, clothing, and educational
expenses.
(2) It is estimated that 121,000,000 children worldwide do
not attend school and that the majority of such children are
young girls. According to the United Nations Children's Fund
(UNICEF), orphans are less likely to be in school and more
likely to be working full time.
(3) School food programs, including take-home rations, in
developing countries provide strong incentives for children
to remain in school and continue their education. School food
programs can reduce short-term hunger, improve cognitive
functions, and enhance learning, behavior, and achievement.
(4) The lack of financial resources prevents many orphans
and other vulnerable children in developing countries from
attending school because of the requirement to pay school
fees and other costs of education. Providing children with
free primary school education, while simultaneously ensuring
that adequate resources exist for teacher training and
infrastructure, would help more orphans and other vulnerable
children obtain a quality education.
(5) The trauma that results from the loss of a parent can
trigger behavior problems of aggression or emotional
withdrawal and negatively affect a child's performance in
school and the child's social relations. Children living in
families affected by HIV/AIDS or who have been orphaned by
AIDS often face stigmatization and discrimination. Providing
culturally appropriate psychological counselling to such
children can assist them in successfully accepting and
adjusting to their circumstances.
(6) Orphans and other vulnerable children in developing
countries routinely are denied their inheritance or encounter
difficulties in claiming the land and other property which
they have inherited. Even when the inheritance rights of
women and children are spelled out in law, such rights are
difficult to claim and are seldom enforced. In many countries
it is difficult or impossible for a widow, even if she has
young children, to claim property after the death of her
husband.
(7) The HIV/AIDS pandemic has had a devastating affect on
children and is deepening poverty in entire communities and
jeopardizing the health, safety, and survival of all children
in affected areas.
(8) The HIV/AIDS pandemic has increased the number of
orphans worldwide and has exacerbated the poor living
conditions of the world's poorest and most vulnerable
children. AIDS has created an unprecedented orphan crisis,
especially in sub-Saharan Africa, where children have been
hardest hit. An estimated 14,000,000 orphans have lost 1 or
both parents to AIDS. By 2010, it is estimated that over
250,000,000 children will have been orphaned by AIDS.
(9) Although a number of organizations seek to meet the
needs of orphans or other vulnerable children, extended
families and local communities continue to be the primary
providers of support for such children.
(10) The HIV/AIDS pandemic is placing huge burdens on
communities and is leaving many orphans with little support.
Alternatives to traditional orphanages, such as community-
based resource centers, continue to evolve in response to the
massive number of orphans that has resulted from the
pandemic.
(11) The AIDS orphans crisis in sub-Saharan Africa has
implications for political stability, human welfare, and
development that extend far beyond the region, affecting
governments and people worldwide, and this crisis requires an
accelerated response from the international community.
(12) Although, section 403(b) of the United States
Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of
2003 (22 U.S.C. 7673(b)) establishes the requirement that not
less than 10 percent of amounts appropriated
[[Page S6456]]
for HIV/AIDS assistance for each of fiscal years 2006 through
2008 shall be expended for assistance for orphans and other
vulnerable children affected by HIV/AIDS, there is an urgent
need to provide assistance to such children prior to 2006.
(13) Numerous United States and indigenous private
voluntary organizations, including faith-based organizations,
provide assistance to orphans and other vulnerable children
in developing countries. Many of these organizations have
submitted applications for grants to the United States Agency
for International Development to provide increased levels of
assistance for orphans and other vulnerable children in
developing countries.
(14) Increasing the amount of assistance that is provided
by the Administrator of the United States Agency for
International Development through United States and
indigenous private voluntary organizations, including faith-
based organizations, will provide greater protection for
orphans and other vulnerable children in developing
countries.
(15) It is essential that the United States Government
adopt a comprehensive approach for the provision of
assistance to orphans and other vulnerable children in
developing countries. A comprehensive approach would ensure
that important services, such as basic care, mental health
and related services, school food programs, increased
educational opportunities and employment training and related
services, and the protection and promotion of inheritance
rights for such children, are made more accessible.
(16) Assistance for orphans and other vulnerable children
can best be provided by a comprehensive approach of the
United States Government that--
(A) ensures that Federal agencies and the private sector
coordinate efforts to prevent and eliminate duplication of
efforts and waste in the provision of such assistance; and
(B) to the maximum extent possible, focuses on community-
based programs that allow orphans and other vulnerable
children to remain connected to the traditions and rituals of
their families and communities.
SEC. 3. ASSISTANCE FOR ORPHANS AND OTHER VULNERABLE CHILDREN
IN DEVELOPING COUNTRIES.
Chapter 1 of part I of the Foreign Assistance Act of 1961
(22 U.S.C. 2151 et seq.) is amended by adding at the end the
following section:
``SEC. 135. ASSISTANCE FOR ORPHANS AND OTHER VULNERABLE
CHILDREN.
``(a) Findings.--Congress finds the following:
``(1) There are more than 110,000,000 orphans living in
sub-Saharan Africa, Asia, Latin America, and the Caribbean.
``(2) The HIV/AIDS pandemic has created an unprecedented
orphan crisis, especially in sub-Saharan Africa, where
children have been hardest hit. The pandemic is deepening
poverty in entire communities, and is jeopardizing the
health, safety, and survival of all children in affected
countries. It is estimated that 14,000,000 children have lost
one or both parents to AIDS.
``(3) The orphans crisis in sub-Saharan Africa has
implications for human welfare, development, and political
stability that extend far beyond the region, affecting
governments and people worldwide.
``(4) Extended families and local communities are
struggling to meet the basic needs of orphans and vulnerable
children by providing food, health care, education expenses,
and clothing.
``(5) Providing assistance to such children is an important
expression of the humanitarian concern and tradition of the
people of the United States.
``(b) Definitions.--In this section:
``(1) AIDS.--The term `AIDS' has the meaning given the term
in section 104A(g)(1) of this Act.
``(2) Children.--The term `children' means persons who have
not attained the age of 18.
``(3) HIV/AIDS.--The term `HIV/AIDS' has the meaning given
the term in section 104A(g)(3) of this Act.
``(4) Orphan.--The term `orphan' means a child deprived by
death of one or both parents.
``(c) Assistance.--The President is authorized to provide
assistance for programs in developing countries to provide
basic care and services for orphans and other vulnerable
children. Such programs should provide assistance--
``(1) to support families and communities to mobilize their
own resources through the establishment of community-based
organizations to provide basic care for orphans and other
vulnerable children;
``(2) for school food programs, including the purchase of
local or regional foodstuffs where appropriate;
``(3) to reduce barriers to access to primary education
through the elimination of school fees where appropriate,
helping to otherwise cover costs of education, and improving
the quality of teaching and education infrastructure;
``(4) to provide employment training and related services
for orphans and other vulnerable children who are of legal
working age;
``(5) to protect and promote the inheritance rights of
orphans, other vulnerable children, and widows with children;
and
``(6) to provide culturally appropriate mental health
treatment and related services to orphans and other
vulnerable children.
``(d) Authorization of Appropriations.--
``(1) In general.--There is authorized to be appropriated
to the President to carry out this section such sums as may
be necessary for each of the fiscal years 2005 and 2006.
``(2) Availability of funds.--Amounts made available under
paragraph (1) are authorized to remain available until
expended and are in addition to amounts otherwise available
for such purposes.
``(3) Relationship to other laws.--Amounts made available
for assistance pursuant to this subsection, and amounts made
available for such assistance pursuant to any other provision
of law, may be used to provide such assistance
notwithstanding any other provision of law.''.
SEC. 4. STRATEGY OF THE UNITED STATES.
(a) Requirement for Strategy.--Not later than 180 days
after the date of enactment of this Act, the President shall
develop a strategy for coordinating and implementing
assistance programs for orphans and vulnerable children.
(b) Content.--The strategy required by subsection (a) shall
include--
(1) the identity of each agency or department of the
Federal Government that is providing assistance for orphans
and vulnerable children in foreign countries;
(2) a description of the efforts of the head of each such
agency or department to coordinate the provision of such
assistance with other agencies or departments of the Federal
Government or nongovernmental entities;
(3) a description of a coordinated strategy to provide the
assistance authorized in section 135 of the Foreign
Assistance Act of 1961, as added by section 3 of this Act;
and
(4) an analysis of additional coordination mechanisms or
procedures that could be implemented to carry out the
purposes of such section.
______
Mr. CRAIG:
S. 2502. A bill to allow seniors to file their Federal income tax on
a new Form 1040S; to the Committee on Finance.
Mr. CRAIG. Mr. President, today I am introducing the Simple Tax for
Seniors Act. This bill would allow seniors age 65 and older with Social
Security and pension income to file a short form similar to the 1040EZ
Internal Revenue Service form.
Under current IRS rules, millions of Americans are prohibited from
using the 1040EZ short form simply because they are age 65 or older.
Many currently file using only the standard deduction.
The Simple Tax for Seniors Act would crate the new 1040S form,
allowing seniors who receive pension income to avoid filing the
burdensome and complicated itemized deduction forms. As many as 11
million seniors would be able to file in the first year, in less time,
on a simplified, two-page form. Seniors no longer would be forced
annually to disclose more information on their retirement savings and
pension plan than necessary.
The Simple Tax for Seniors Act makes no change in the tax code
itself, so taxpayers using the new form would pay the same amount as
under Standard Form 1040.
This is common sense legislation. It is a win for seniors because it
will make life easier and it is a win for taxpayers since it will cost
less to process the new form. It is also non-controversial. On Tuesday,
the House of Representatives passed similar legislation by a vote of
418-0.
I invite my colleagues to cosponsor this sensible legislation. I ask
unanimous consent that the text of the bill appear with this statement
in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 2502
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Simple Tax for Seniors Act
of 2004''.
SEC. 2. FORM 1040S FOR SENIORS.
(a) In General.--The Secretary of the Treasury (or the
Secretary's delegate) shall make available a form, to be
known as ``Form 1040S'', for use by individuals to file the
return of tax imposed by chapter 1 of the Internal Revenue
Code of 1986. Such form shall be as similar as practicable to
Form 1040EZ, except that--
(1) the form shall be available to individuals who have
attained age 65 as of the close of the taxable year,
(2) the form may be used even if income for the taxable
year includes--
(A) social security benefits (as defined in section 86(d)
of the Internal Revenue Code of 1986),
(B) distributions from qualified retirement plans (as
defined in section 4974(c) of such Code), annuities or other
such deferred payment arrangements,
(C) interest and dividends, or
[[Page S6457]]
(D) capital gains and losses taken into account in
determining adjusted net capital gain (as defined in section
1(h)(3)), and
(3) the form shall be available without regard to the
amount of any item of taxable income or the total amount of
taxable income for the taxable year.
(b) Effective Date.--The form required by subsection (a)
shall be made available for taxable years beginning after
December 31, 2004.
______
By Mr. KYL:
S. 2503. A bill to make permanent the reduction in taxes on dividends
and capital gains; to the Committee on Finance.
Mr. KYL. Mr. President, I join my colleagues in celebrating the first
anniversary of the Jobs and Growth Tax Reconciliation Act of 2003,
which was signed into law by President Bush on May 28, 2003. Also, I
want to announce that today I am introducing legislation to make the
dividends and long-term capital gains tax cuts permanent.
It has been one year since Congress and President Bush joined
together to enact pro-growth, supply-side tax cuts. Now, since some in
the Senate are proposing that we repeal the tax cuts--this would be one
of the largest tax increases in history--let's review the impact these
cuts have had on our economy.
The 2003 tax cuts have triggered the fastest growing economy in two
decades. Real gross domestic product grew at an annual rate of 8.2
percent in the third quarter of 2003, 4.1 percent in the fourth
quarter, and 4.4 percent in the first quarter of 2004. If we sustain
this pace, our economy will double in 13 years. When the tax cuts were
enacted last year, the national unemployment rate was 6.3 percent.
Today, it has dropped nearly 11 percent to 5.6 percent, which is lower
than the average unemployment rate of the 1970s, 1980s, and 1990s. A
growing economy means good, high-paying jobs and a better quality of
life for all Americans.
I want to draw my colleagues' attention to research published by the
National Bureau of Economic Research (NBER)--the Nation's leading
nonprofit economic research organization. This study demonstrates that
the 2003 tax cuts corrected a terrible mistake we made in 2001 when we
phased in the marginal rate cuts. The phase-in of the 2001 tax cuts
prompted workers and firms to delay work until the tax cuts were fully
implemented. Employment, output, and investment actually fell in
response to the phased-in tax cuts.
The NBER study found that, ``Just as the phased-in nature of the 2001
tax law may have delayed production and employment, the immediate tax
relief included in the 2003 law may have contributed towards the
increased pace of economic activity in the second half of 2003.'' I am
confident that, as more economic data comes in and as the 2003 tax cuts
are studied further, we will find that the 2003 tax cuts are directly
responsible for the economic growth we are seeing today.
The NBER study demonstrates that individuals really do delay economic
activity in anticipation of lower future tax rates. It also
corroborates the theory that high marginal tax rates cause individuals
to restrict economic activity in order to minimize the tax burden
imposed on their next dollar earned. Because the tax cuts were
accelerated in 2003, individuals had an incentive to work harder and
longer immediately because their next dollar of income would be taxed
at a lower rate.
Among the taxpayers benefited by the reductions in the individual
rate are America's small businesses. The top individual rate is often
called the small business rate because most small businesses are
organized as pass-through entities, which pay at individual rates.
Owners of pass-through entities, including small business owners and
entrepreneurs, comprise more than two-thirds, about 500,000, of the
750,000 tax returns that benefited from speeding up the reduction in
the top tax bracket. These small business owners received 79 percent,
about $10.4 billion, of the $13.3 billion in tax relief from
accelerating the reduction in the top tax bracket to 35 percent.
The task for us now is to make the individual rate reductions
permanent. If Congress fails to act, the tax cuts will expire at the
end of 2010. The bottom rate would increase from 10 percent to 15
percent, an increase of 33 percent; the top rate would increase from 35
percent to 39.6 percent, an increase of 11 percent. The effect such tax
increases would have on our economy would be devastating.
Not only did Congress and President Bush work together to bring down
individual income tax rates, but we also reduced the tax on dividend
distributions and long-term capital gains. Before the 2003 tax cuts,
our tax code actually discouraged dividend payouts. The 2003 tax cut
lowered the tax rate imposed on dividends from 38.6 percent to 15
percent through 2008. Before 2003, corporate earnings were taxed once
at the corporate level, 35 percent, and again at the individual rate,
as high as 38.6 percent, meaning they were double-taxed. It made no
sense for investors to seek out dividend-paying stocks, from a tax
perspective.
While dividends are still double-taxed, the tax penalty is greatly
reduced. This has made dividend-paying stocks more attractive to
investors, which has helped companies raise capital to expand and grow
their businesses. Further, because dividends must be paid from cash,
companies that pay dividends must have actual profits, thus making it
more difficult for companies to hide financial mismanagement.
Some of my colleagues want to repeal the dividend tax cut. This is
obviously misguided, since we have strong evidence that the dividend
tax cut has worked. Since the 2003 tax cut was signed into law, 374
companies on the S&P 500 pay dividends--an increase of 22 companies.
Companies have increased dividend payments to shareholders by 40
percent, reversing a two-decade decline. The Dow Jones Industrial index
has risen more than 1,400 points since the 2003 tax cuts were signed
into law.
Similarly the capital gains tax cut has also encouraged economic
growth. It reduced the tax imposed on long-term capital gains from 20
percent to 15 percent. This has made it more attractive for individuals
to risk their hard-earned money by investing it in businesses. The
result is that it is easier for businesses to raise needed capital to
expand and create new jobs. Stock market gains, the strong GDP we have
experienced, and falling unemployment all indicate that the economy has
recovered.
Now, to help our economy to continue to grow and create new jobs, the
dividend and capital gains tax cuts must be made permanent. If we allow
the dividend rate to return to the individual rate, we will increase
taxes on dividends by 62 percent. Allowing the capital gains rate to
return to 20 percent will be a 25 percent tax increase. We must make
the 15 percent rate for each permanent, and then we must work to reduce
both the dividends and the capital gains rates to zero, so that we
eliminate the double-taxation of corporate earnings. The Senate bill
actually would have brought the dividend tax rate to zero for three
years, but the agreement that we worked out with the House was to tax
dividends at 15 percent. The dividends and capital gains tax relief
will expire in 2009.
The most important thing we can do next year is make the 2003 tax
cuts permanent. Today I am introducing legislation that will make the
dividends and capital gains tax relief permanent. I will work to make
the individual income tax rate cuts permanent as well. To allow the tax
cuts to expire--or worse, to seek to higher taxes at the very time our
economy has pulled out of the recession and is growing strong--would be
unthinkable.
______
By Mr. COCHRAN (for himself, Mr. Frist, and Mr. Leahy):
S.J. Res. 38. A joint resolution providing for the appointment of Eli
Broad as a citizen regent of the Board of Regents of the Smithsonian
Institution; to the Committee on Rules and Administration.
Mr. COCHRAN. Mr. President, today I am introducing a Senate Joint
Resolution appointing a citizen regent to the Board of Regents of the
Smithsonian Institution. I am pleased that my fellow Smithsonian
Institution Regents, Senators Frist and Leahy, are cosponsors.
The Smithsonian Institution Board of Regents recently recommended the
following distinguished individual for appointment to a 6-year term on
the on the Board: Eli Broad of California.
I ask unanimous consent that his biography and the text of the joint
resolution be printed in the Record.
[[Page S6458]]
There being no objection, the biography and the joint resolution were
ordered to be printed in the Record, as follows:
Eli Broad
Eli Broad is a renowned business leader who built two
Fortune 500 companies from the ground up over a five-decade
career in business. He is chairman of AIG Retirement Services
Inc. (formerly SunAmerica Inc.) and founder-chairman of KB
Home (formerly Kaufman and Broad Home Corporation).
Today, he is focused on philanthropy. The Broad family's
commitment to philanthropy and community is both deep and
wide-ranging. It includes ongoing leadership roles in art,
education, science and civic development.
Avid supporters of contemporary art, Mr. Broad and his
wife, Edythe, have created one of the worlds finest
collections. Since 1984, The Broad Art Foundation has
operated an active ``lending library'' of its extensive
collection to more than 400 museums and university galleries
worldwide. In 2001-2003, an exhibition of the Broads'
collection was shown at the Los Angeles County Museum of Art,
the Corcoran Gallery of Art in Washington, DC, the Museum of
Fine Arts in Boston; and the Guggenheim Museum in Bilbao,
Spain. Mr. Broad was the founding chairman of the board of
trustees of The Museum of Contemporary Art in Los Angeles,
and is currently a trustee and member of the executive
committee of the Los Angeles County Museum of Art, where the
Broads recently announced a major gift to build The Broad
Contemporary Art Museum.
In 1999, the Broads founded The Broad Foundation, whose
mission is to dramatically improve urban public education
through governance, management and labor relations. In its
first five years, the Foundation has committed over $400
million to support new ideas and innovative leadership in the
nation's largest urban school systems. The Foundation also
has launched four national flagship initiatives--The Broad
Prize for Urban Education, The Broad Center for
Superintendents, The Broad Residency in Urban Education and
The Broad Institute for School Boards. Mr. Broad has said,
``I can imagine no more important contribution to our
country's future than a long-term commitment to improving
urban K-12 public schools.''
In 2001, The Eli and Edythe L. Broad Foundation created the
Broad Medical Research Program, which seeks to stimulate
innovative research that will lead to progress in the
prevention, therapy or understanding of inflammatory bowel
disease.
In June 2003, in an unprecedented partnership with the
Massachusetts Institute of Technology, Harvard University and
Whitehead Institute, the Broads announced the founding gift
to create The Eli and Edythe Broad Institute for biomedical
research. The Institute's aim is to realize the promise of
the human genome to revolutionize clinical medicine and to
make knowledge freely available to scientists around the
world.
The Broads have been tireless advocates of Los Angeles,
their adopted hometown. Committed to the belief that all
great cities need a vibrant center, Mr. Broad is currently
leading the effort to turn Los Angeles' Grand Avenue into a
truly ``grand avenue,'' to rival the main boulevards of the
world's greatest cities. In 1996, he and Mayor Richard
Riordan took on the task of raising sufficient funds to build
the Frank Gehry-designed Walt Disney Concert Hall, which
opened to worldwide acclaim in October 2003.
Strong believers in higher education, the Broad Foundations
have made a major contribution to the School of Arts and
Architecture at UCLA toward the construction of The Broad Art
Center, designed by Richard Meier. Mr. Broad is a member of
the board of trustees of CalTech, where the Broads gave the
cornerstone gift to create the Broad Center for the
Biological Sciences, designed by James Freed. Mr. Broad also
served as chairman of the board of trustees of Pitzer College
and vice chairman of the board of trustees of the California
State University system. In 1991, the Broads endowed The Eli
Broad College of Business and The Eli Broad Graduate School
of Management at Michigan State University, from which Mr.
Broad graduated cum laude in 1954.
____
S.J. RES. 38
Resolved by the Senate and House of Representatives of the
United States of America in Congress assembled, That, in
accordance with section 5581 of the Revised Statutes (20
U.S.C. 43), the vacancy on the Board of Regents of the
Smithsonian Institution, in the class other than Members of
Congress, resulting from the death of Barber B. Conable, Jr.,
is filled by the appointment of Eli Broad of California. The
appointment is for a term of 6 years, beginning upon the date
of enactment of this joint resolution.
____________________