[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.

                          ____________________