[Congressional Record Volume 151, Number 24 (Friday, March 4, 2005)]
[Senate]
[Pages S2053-S2081]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005
The PRESIDENT pro tempore. Under the previous order, the Senate will
resume consideration of S. 256, which the clerk will report.
The legislative clerk read as follows:
A bill (S. 256) to amend title 11 of the United States
Code, and for other purposes.
Pending:
Leahy amendment No. 26, to restrict access to certain
personal information in bankruptcy documents.
Feinstein amendment No. 19, to enhance disclosures under an
open end credit plan.
Kennedy amendment No. 44, to amend the Fair Labor Standards
Act of 1938 to provide for an increase in the Federal minimum
wage.
Dorgan/Durbin amendment No. 45, to establish a special
committee of the Senate to investigate the awarding and
carrying out of contracts to conduct activities in
Afghanistan and Iraq and to fight the war on terrorism.
Pryor amendment No. 40, to amend the Fair Credit Reporting
Act to prohibit the use of any information in any consumer
report by any credit card issuer that is unrelated to the
transactions and experience of the card issuer with the
consumer to increase the annual percentage rate applicable to
credit extended to the consumer.
Reid (for Baucus) amendment No. 50, to amend section
524(g)(1) of title 11, United States Code, to predicate the
discharge of debts in bankruptcy by a vermiculite mining
company meeting certain criteria on the establishment of a
health care trust fund for certain individuals suffering from
an asbestos-related disease.
Cloture Motion
Mr. McCONNELL. I send a cloture motion to the desk on the underlying
bill.
The PRESIDENT pro tempore. The clerk will report the cloture motion.
The legislative clerk read as follows:
Cloture Motion
We the undersigned Senators, in accordance with the
provisions of rule XXII of the Standing Rules of the Senate,
do hereby
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move to bring to a close debate on Calendar Number 14, S.
256, a bill to amend title 11 of the United States Code, and
for other purposes.
Bill Frist, Arlen Specter, Chuck Grassley, Judd Gregg,
Thad Cochran, R.F. Bennett, Wayne Allard, Lindsey
Graham, Jeff Sessions, Trent Lott, Rick Santorum, John
Warner, John Thune, Orrin Hatch, Lisa Murkowski, Mel
Martinez, Sam Brownback.
Mr. McCONNELL. I ask unanimous consent that the live quorum under
rule XXII be waived.
The PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. McCONNELL. For the information of our colleagues, this vote will
occur on Tuesday. As I just mentioned, we are working on an agreement
for the precise timing of this vote, and we will announce that later
this morning.
I yield the floor.
Mr. McCONNELL. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. SESSIONS. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SESSIONS. Mr. President, I am pleased we have had a good week of
debate on the bankruptcy bill, which I believe is a very important
piece of legislation. It is something this Congress has a
responsibility to deal with since bankruptcy procedures are Federal
court procedures and bankruptcy judges, although not article III
judges, are Federal judges.
The court system, over the last 20, 30 years, has grown incredibly.
We have gone from a few hundred thousand bankruptcies a year, to 1.6
million personal bankruptcies in 2003. It has been driven by a lot of
things. Some say it is economic problems, but our economy compared to
other times has not been as bad. We have had some tough years, but we
have also had some good years. We have seen bankruptcies exceeding
everything that could be based on the economy. I suspect a good part of
it is because of the advertising of lawyers in the newspapers.
People who have built up some debt and are having a hard time dealing
with it, and creditors are calling, they see an ad that says something
like this: Come on down. We can take care of those debts and help you.
So people have been filing bankruptcies at a record pace, caused
somewhat by these ads. Many of the people work their way out of it;
many of them cannot.
We absolutely believe and support the classic American view that you
should be able to have a fresh start; that if debts overpower a family
or individual, they can go to bankruptcy court and wipe out those debts
and not pay a dime. That is the way the law is, no matter the income of
the person who files. A person who has a quarter of a million in income
today can go into bankruptcy court, if they have, say, $150,000 in
debts, debts they could pay if they put their mind to it, they can just
wipe out those debts and keep making $250,000 a year and not pay their
local banker, their local hospital, doctor, car dealer, or whoever they
bankrupt against. It is an unhealthy practice.
We thought a lot about how to deal with the problems and how to deal
with the abuses. Having practiced law a good bit, I have a hard time
blaming the lawyers who take advantage of the laws that we in Congress
have provided. They look at the legal system, they see what helps the
debtor the absolute most, and they file the bankruptcy in that fashion,
taking full advantage of the law.
It is appropriate for the Senate, for the first time since 1978, to
pass a reform of those laws to deal with the problems we know arise, to
help people who legitimately need relief from their debts to start
afresh. Those who can pay some of it ought not to get off scot-free.
That is the fundamental principle of this bill.
Let me mention one of the best things about bankruptcy. When people
fall behind in their debts, penalties get assessed against them. They
have to take out even higher interest rate loans to stay afloat, and
they begin a downward spiral. They have creditors--in most instances,
many creditors. These creditors call debtors, they file lawsuits and
they file liens against the debtor's property. It can be a crushing,
hard time for them.
When they file bankruptcy--either in chapter 7 where all the debts
are wiped out, or in chapter 13 where they pay back a portion of those
debts--the creditors cannot keep bothering them. They cannot be sued.
Any lawsuits that have been filed against them are stayed, stopped. The
court manages their money under chapter 13. They wipe away all their
debts if they file under chapter 7, and they can start afresh. That is
a provision of law in America that is worthy of continuing. But we also
see there are some problems and abuses.
As we look at the changes in this legislation, I will mention a few
as we get started this morning.
One is there was a consensus of those working on the bill that if
individuals had a higher income and could pay back a portion of their
debts, at least--perhaps all of them, but most likely not all of them--
they ought to do so. Why should they not pay back something if they are
able to do so? So we put in the bill a means test.
This has been in the legislation for the last 8 years. It has come
before this Congress four separate times. This is the fourth time. And
it has received a strong majority vote, bipartisan vote every single
time. But for one reason or other, we have not been able to make the
bill law. We are going to do that this time, I am confident.
But on the question of, What about the changes? How does it impact a
person who would go and file in bankruptcy? We know that 80 percent of
the people who file for bankruptcy make below median income. That means
under the provisions of this bill, no fundamental changes will occur.
They cannot be made to go into chapter 13 unless they choose to do so.
They can wipe out all their debts, not pay a single one, under the
provisions of chapter 7, unless it is a debt that is not dischargeable,
such as a result of an intentional or fraudulent act.
If they make above median income, and there are no special
circumstances that apply that might excuse them from that, such as a
health problem or a problem with an ill child or something that
requires extra expense, then they could be moved into chapter 13, where
they pay back a portion of their debts. The judge would decide how much
they could pay, and they could be made to pay a portion of those debts
for a period of up to 5 years.
We think that is a reasonable and fair approach. In fact, this Senate
certainly did during the 107th Congress when we passed a similar bill
83 to 15. So I think that is the basic procedure.
It also provides that before you file in bankruptcy, you should at
least examine the possibility of credit counseling. There are credit
counseling agencies all over America. They have proven to be effective
for a large number of creditors. These agencies are able to negotiate
reduced payments for the debtors, to reduce interest rates and to help
the debtor sit down and work out a family budget. They bring in the
whole family. They sit around the table. They work out a budget. They
help teach them how to manage their money. They reduce interest rates.
They reduce debts through negotiation. Many families are finding they
can work their way out of debt without filing for bankruptcy, without
walking out on their solemn obligations and actually feeling better
about themselves, as well as learning a lesson for the whole family.
So we say they at least ought to know about this option and ask them
to consider that. It can be to go by and have a brief meeting, a
discussion, and receive some paperwork on it, and discuss it before
they file for bankruptcy. We think that can make a big difference for a
lot of people. How many bankruptcies might be avoided by that? I don't
know--5 percent, 10 percent--but I think it could be a significant
improvement in our system.
We also say that before you can be discharged and finally walk away
from your debts, you should go through a financial course on how to
manage money because we want to see people manage money wisely, to
avoid high interest debts when they can, to keep their interest rates
low, their borrowing low, to manage their money wisely. This bill would
also require that.
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These are things that have gained strong bipartisan support. I know I
offered the amendment on credit counseling. I visited credit counseling
agencies in Alabama and talked to them. I think they provide a
tremendous service for a lot of people.
That is where we are with the fundamentals of the bill. It has, as I
said, come before Congress four different times. In 1998, during the
105th Congress, we passed the bill with a 97-to-1 vote. The most recent
vote, as I noted, was in 2001, and it was 83 to 15. We reported this
bill out of the Judiciary Committee last week with a vote of 12 to 5,
with strong bipartisan support again. So we are confident that if we go
forward and we have an up-or-down vote on the bill, it will pass. I
believe the House of Representatives will pass it again this time, and
we can make some progress in that Federal court system that we have the
responsibility to monitor.
We have the responsibility to analyze it on a regular basis, and if
it is not performing up to standards, we ought to fix it. That is what
we are doing. We have had a surge of bankruptcies. We have had a surge
of abuses in bankruptcies where people, for example, lawyers, run ads
in newspapers saying: Are you about to be evicted from your apartment?
File bankruptcy. Call us. And they have their phone number there.
People are filing bankruptcies to stay an eviction for not a house
they own but an apartment. That is not legitimate. So when the case is
heard in the bankruptcy court, the apartment owner, who oftentimes is a
small businessperson or retiree, has to go down to bankruptcy court,
hire a lawyer, and then they win because the debtor does not have any
property interest in the apartment. The lease has expired. They owe
money on it. They are due to be evicted. Then it comes back to the
State court for eviction proceedings, and they have to pick that up
again. And they extend, for months, their stay in people's houses or
apartments through the manipulation of the bankruptcy system. That is
one of the things we tightened.
We raised the priority for women and children with regard to alimony
and child support. Those payments are going to be far more high on the
priority of payments when there is a limited amount of money by the
debtor. So now, instead of money going strictly to lawyers or to other
debts, it is going to go straight to children for child support and
also for alimony. We had testimony in the Judiciary Committee, of which
I am a member, from professionals in child support who say this will be
a magnificent advance for women and children. We are excited about that
potential.
There is so much more in the bill. I believe it is a sound bill. It
has been on this floor, as I said, four times. It has been in the
Judiciary Committee four times. We have had 15 hearings on the bill. I
believe every possible objection has been considered, and I believe we
are on the verge of making some positive change in our bankruptcy
system. It is certainly overdue.
I yield the floor.
The PRESIDENT pro tempore. The Senator from Montana.
Amendment No. 50
Mr. BAUCUS. Mr. President, I rise to speak on my pending amendment,
amendment No. 50, to the bankruptcy reform bill. This is an amendment
to correct an enormous injustice in my home State. And that is not an
understatement. That is accurate. It is very accurate. It is not an
overstatement. It is dead on.
My amendment is based on a bill I have introduced in past Congresses
to set up a permanent health care trust fund for current and former
Libby residents, and former workers at the W.R. Grace vermiculite mine
in Libby, MT. The trust fund would help pay for the costs of treating
asbestos-related illness caused by exposure to deadly tremolite
asbestos and other fibers released by Grace's mining operations.
This amendment would require a company such as W.R. Grace--which has
willfully harmed the innocent citizens of Libby, MT--to set up a health
care trust fund for its victims before it can emerge from bankruptcy.
As a result of this amendment, W.R. Grace cannot emerge from bankruptcy
until it has established a trust fund of at least $250 million to cover
the cost of health care for the people of Libby.
The people of Libby, the Libby community, and the State of Montana
face an immediate health care crisis. This crisis was caused by
alarming rates of asbestos-related exposure, disease, and illness.
Former Libby residents face their own personal health care crisis
because they are denied access to private health insurance. Why?
Because they have been diagnosed with an asbestos-related disease or
illness, or show signs that they have been exposed to asbestos. They
have been denied insurance for that reason only. Projected health care
costs to treat all sick people in Libby, MT, run into the hundreds of
millions of dollars.
This dire situation was created because the responsible party in this
case, the W.R. Grace Company, which had the mine in Libby, MT,
willfully harmed the people of Libby--willfully harmed the people of
Libby. There is immense documentation showing that the company knew the
mine operations were causing illness, asbestos-related diseases, in the
form of tremolite, which is the worst kind of asbestos disease, and
caused the death of many people in Libby and the very serious illness
of very many people in Montana. The company knew that. They willfully
knew that. The documents prove it.
After harming Libby, Grace ignored its responsibility for Libby's
health care needs. Grace ignored the harm it inflicted on Libby. They
turned their back to it. They showed no accountability. They ignored it
even though they knew they were the cause of the disease in Libby.
More than that, the actions of W.R. Grace were criminal. The U.S.
Attorney General's Office has filed a historic indictment against
current and former W.R. Grace executives for knowingly concealing
information about asbestos pollution in Libby. This pollution led to
the death of more than 200 people in Libby, and made hundreds of others
sick.
Mr. President, I wish you could go to Libby, MT. Go see it. Any
Member of this body who would visit Libby, MT, would know exactly what
I am talking about and understand why this amendment is needed. Seeing
is believing. I know we hear lots of stuff around here. We hear lots of
Senators stand up and talk about problems they see. I tell you, Mr.
President, I tell my colleagues, if you were to visit Libby, MT--just
to see it, spend a couple hours--you would know exactly what I am
talking about and you would support this amendment.
It is one of the most tragic situations I have ever seen in my life.
That is not an overstatement. It is one of the most tragic situations I
have seen in my life. That is why this amendment is so important.
It is also very unfortunate that my amendment is so necessary, but it
is. It is vital. It is just. And the people of Libby should not have to
hope they will be treated fairly in the Grace bankruptcy. They should
know they will be treated fairly and that at the very least they will
not have to worry about how to pay for costly medical care. These costs
should not be borne by Grace's victims, nor should the taxpayers have
to pick up the tab through Medicare or Medicaid or through other
publicly funded programs. The responsibility lies squarely with the
company that caused the sickness in the first place--W.R. Grace.
Mind you, this is not a company that is struggling. According to
Grace's recent financial results, issued in January, W.R. Grace
reported that 2004 fourth quarter sales were up 15 percent over the
fourth quarter of 2003. And for the full year of 2004--a full year--
Grace reported sales of over $2.2 billion, which is a 14-percent
increase over the previous year.
That is right. As Libby's economy struggles, and people are waiting
for health care, and dying, W.R. Grace's business is booming, with
operations in nearly 40 countries. And Libby residents are left to die.
They are left to die because of Grace's actions. A Grace spokesman once
boasted, as this was happening, ``We are very pleased with our business
progress and results for 2004.''
Ask those who died or who fell ill last year because of W.R. Grace
whether they are pleased with the progress and results of 2004. I
suspect you will get a different answer.
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The Congress cannot make right what happened to Libby. No amendments,
no legislation, no resolutions will bring back those who died or
prevent the afflicted from getting sicker. But we can ensure that those
afflicted do not have to pay health care costs incurred through no
fault of their own. And we can ensure that the party responsible--in
this case W.R. Grace--does.
I urge my colleagues to support this amendment. It is so important,
it is a matter of accountability, it is a matter of fairness, and it is
a matter of time before more folks from Libby, MT, get sick as a result
of W.R. Grace.
The PRESIDING OFFICER (Mr. Sessions). The Senator from Alaska, the
President pro tempore.
Mr. STEVENS. Mr. President, is it proper to speak on a matter not
concerning bankruptcy at this time without consent?
The PRESIDING OFFICER. It would take consent.
Mr. STEVENS. Mr. President, I ask unanimous consent to be permitted
to speak for up to 10 minutes on a matter not concerning the bankruptcy
bill.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Alaska is recognized.
High Energy Prices
Mr. STEVENS. Mr. President, I hope all Members of Congress saw the
news yesterday, that oil prices reached $55 a barrel. Now, some of us
reacted with shock and amazement, but others knew the reality that this
day would come.
We have witnessed the impact of these high energy prices every time
we fill up our gas tanks and pay our heating or electric bills.
These high prices are unsustainable, jeopardizing jobs and
threatening the long-term health of our economy. The impact of high
energy prices can be seen at all levels of our economy. High energy
prices have produced job losses, trade deficits, and constraints on
consumer spending and economic growth. Demand for energy in the United
States is outstripping supply, and Americans are feeling the impact of
Congress's failure to act to solve the problem. Our people rely on our
ability to stabilize energy prices and provide them with the energy
resources all of us need.
The good news is that this worsening crisis is avoidable. The United
States has the natural resources to increase our energy supply. But
inconsistent Government policies discourage the exploration,
development, and use of our own energy resources. Almost 30 percent of
all the lands in this country are owned by the Federal Government. That
is 657 million acres--almost four times the size of Texas. Under those
lands lies 90 percent of the predicted undiscovered oil and 40 percent
of our undiscovered natural gas. Those public resources are needed to
meet our energy needs and secure our future.
Since 1983, access to our Federal lands has declined by 60 percent.
Over half of the lands that are designated currently as multiple use--
in other words, ones that oil and gas exploration could take place on--
are subject to highly restrictive land classifications or lease
stipulations which effectively restrict energy exploration and
development.
The effect of these policies is clear. In 1981, 91,533 oil and gas
wells were drilled in the United States. In 2000, that number declined
to 29,284, almost down to 25 percent of what we did some 20 years ago.
As a result, crude oil production in the United States is at a 50-year
low, and permitting for oil and gas projects on Federal lands that once
took 18 months--and that was considered a long time then--can now take
up to 10 years. In some instances, it takes 10 years to clear a permit
to start exploring for oil on Federal lands. Those delays force
companies to pursue projects overseas rather than develop U.S.
resources.
Some people have commented upon the fact that the U.S. oil industry
is no longer seeking to support the concept of drilling on Alaska's
Arctic plain. They have opportunities all over the world where they can
proceed much more rapidly than in this country, and there is no
question that they need to find oil to meet our needs. What industry is
going to put up the money for 10 years to explore for and develop
energy here at home when it can go abroad and do that in less than 1
year?
In a hearing before the House Subcommittee on Energy and Mineral
Resources, Stephen Entin, a former staff economist for the Joint
Economic Committee and currently president of the Institute for
Research On the Economics of Taxation, argued that our current policies
actually support OPEC, the Organization of the Petroleum Exporting
Countries, and enhance its power. By locking up our own lands we have
basically manipulated prices because we have restricted competition
from American companies, and OPEC reaps the benefits from an
inequitable playing field. As a matter of fact, we encourage them to
raise prices because our demand constantly increases and our domestic
supply constantly decreases. Jobs and energy security have been
outsourced, as we seek our energy security in places where there are
unfriendly and unstable regimes. I have had personal talks with some
members of the oil industry. They know that those are unstable regimes,
but they have no alternative.
For every $1 billion we spend to develop petroleum resources
domestically we would create 12,500 jobs. That would mean that last
year we lost over 1.3 million jobs by importing oil instead of
producing it. People wonder why our jobs are going abroad. When we
withdraw lands from oil and gas exploration, that is not free. Many
people in this country think it is an easy decision and it doesn't cost
anything. It is a very expensive policy. We are paying a huge price now
because we have locked up our lands and made them inaccessible, when
they purportedly are open, by restrictive policies, restrictive
stipulations that take so long to comply with that no industry is going
to put up the money and wait so long for the opportunity to see if
there is oil and gas in those lands.
The American taxpayer picks up the tab, and the American consumer is
severely punished by this policy. Consumers are paying more for food,
goods, and energy bills. According to Daniel Yergin, an economist from
Cambridge Energy Associates, high energy and gasoline prices
essentially act as a consumer tax, leaving Americans with less
disposable income for travel, home buying, restaurants, and retail
establishments, all of what we call our quality of life.
Only yesterday, I received this estimate. It is estimated now that
for every one-cent increase for gasoline at the pump, there is $1
billion lost in consumer spending. Just look at the price of gasoline
now. The price of gasoline is at an alltime high, and it will not come
down. It is going to continue to go up.
In China, 5 years ago only 5 percent of their people were using
energy. Now 15 percent are using it. Even at that low rate of 15
percent of their people using energy, talking about oil and gas energy,
they have now passed Japan in consumption annually of oil and gas. They
are second only to the United States, and only 15 percent of their
people are using oil and gas so far. People blame a lot of things for
these high prices, but the fact is the world is starting to use oil and
gas. We are competing for the world's oil production and ignoring
completely our capability to produce right here at home.
Unless Congress acts to ensure greater domestic production of our oil
and gas resources, our energy security is jeopardized. I am talking
about security. We had one embargo since I have been in the Senate in
the 1970s, when we were totally embargoed by OPEC. They would not sell
us oil. At that time about 33 percent of our oil was coming in from
OPEC countries. Today it is 60 percent. An embargo today would destroy
our economy.
There are many people who advocate quick fixes to use alternative
sources. I believe there must eventually be alternative sources to oil
and gas in our economy, but just relying on them and saying we are
going to do it and never bringing that about has led us to the point
where we no longer have the capability to produce the oil and gas to
meet our needs in the event of national security.
We believe that it is time now that we should review these policies,
and one of the key policies, of course, is an area that comes from the
development of an area in my State. In 1980, we passed the Alaska
National Interest Conservation Lands Act, an act that withdrew over 100
million acres of Alaska's lands for national purposes.
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One provision in that bill guaranteed the right to explore the Arctic
plain, a million and a half acres, for oil and gas, probably even then
known as the area most probable to produce substantial quantities of
oil and gas. It is estimated to contain 10.4 billion barrels of oil.
Just as a comparison, when we first drilled at Prudhoe Bay, the
estimate was it might contain 1 billion barrels of oil. We have already
produced 16 billion barrels of oil from Prudhoe Bay. In other words,
this area now considered to be capable of producing 10.4 billion
barrels of oil is probably the last most significant oil and gas area
in the country, and we have worked, now since 1981, to try to fulfill
the promise made to us in the 1980 bill that that area could be
explored.
It is high time that we take action to reduce our dependence on
foreign oil. As I said, we rely upon foreign sources for 60 percent of
our energy needs. The area of the Arctic plain, 1.5 million acres
guaranteed to be available for oil and gas exploration, is there.
Allowing exploration and development of this area that is known as
ANWR, although it is not part of the refuge until oil and gas
development is over, would improve our U.S. balance of trade, reduce
the amount of money we spend abroad, and improve our national security
by having available the capability to produce that amount of oil.
It is estimated that by 2025, the United States will spend
approximately $200 billion on foreign oil and petroleum products. By
opening this area, and when it produces, we could save a considerable
portion of that by producing our own oil and gas. It means we could
create tens of thousands of jobs and contribute greatly to the overall
economy.
There is no question that we are now in an energy crisis. Anytime we
see $55-dollar-a-barrel oil, that is a crisis. I cannot believe that
Congress wants to wait until the price goes up to somewhere around $80.
I believe it is going that high unless we start developing our domestic
resources and look to alternative supplies of energy right here at
home.
I yield the floor.
The PRESIDING OFFICER (Mr. Isakson). The Senator from South Dakota.
Mr. JOHNSON. Mr. President, I ask unanimous consent to speak for up
to 10 minutes as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
Steve Metli
Mr. JOHNSON. Mr. President, it is with great honor and appreciation
that I recognize the leadership and the many achievements of Mr. Steve
Metli. Steve will soon retire from his post as city planner for the
city of Sioux Falls, SD, a position he has held since 1974. He embodies
the highest qualities of public service and has aptly earned the
respect and admiration of his colleagues and leaders throughout South
Dakota. I am proud to claim Steve as a friend.
Steve Metli consistently addressed challenges with determination and
foresight which significantly improved the strength of the local
economy and the quality of life in Sioux Falls and thus expanded
opportunities for all South Dakotans. His success is rooted in
enthusiasm, vision, leadership, and progressive South Dakota values
that will undoubtedly continue to echo in the growth and prosperity of
the entire region for many years to come.
In 1974, Mayor Rick Knobe appointed him to head an overburdened four-
person planning and zoning staff. Since that time, the city has swelled
in population from about 75,000 to over 141,000 people, and Sioux Falls
has become a major regional center for health, education, culture,
recreation, and job growth.
Steve now oversees the city departments of planning, transit,
building services, media services, and arena, airport, convention
center, and Washington Pavilion.
Steve Metli's fortitude and resolve is evident in his private life as
well as his public service. As an adult, he has survived three bouts
with cancer, two changes in the form of city government, and the
administrations of five mayors--Rick Knobe, Joe Cooper, Jack White,
Gary Hanson, and Dave Munson. He devoted significant attention to the
Big Sioux River greenway project and on expanding the city's park
system, which now consists of 76 parks covering 2,600 acres. He has
sought to reinvigorate and revitalize the downtown community. His
vision of Sioux Falls downtown centers on the beautiful natural
resource of the Big Sioux River.
He led development of the city's growth management plans, which
include infrastructure direction as well as parks, schools, and fire
services. His vision of the Phillips to the Falls project was recently
completed and he stood at the ribbon cutting with the pride of a parent
whose child achieved a long-time dream and accomplishment. He has
developed plans for the Big Sioux River Greenway, Falls Park and
Downtown Development, and served as project manager for the
construction of the Sioux Falls Convention Center.
I have greatly appreciated the opportunity to work with Steve. His
leadership and vision were critical to the successful growth of the
Sioux Falls region. National publications have consistently recognized
Sioux Falls as among the best communities of its size in which to live
and do business. I am proud to recognize Steve Metli's critically
important contributions to the success of the City of Sioux Falls, SD,
and to our entire State.
I yield the floor.
The PRESIDING OFFICER. The Senator from Montana is recognized.
Mr. BAUCUS. Mr. President, I ask unanimous consent to speak as in
morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
the history of social security
Mr. BAUCUS. Mr. President, the ancient text teaches: ``Honor your
father and your mother so that you may live long and that it may go
well with you in the land the Lord your God is giving you.'' And Paul
noted that `` `Honor your father and mother' is the first commandment
with a promise--`that it may go well with you and that you may enjoy
long life on the earth.' ''
That's what Social Security is about. It is about honoring our
fathers and our mothers. And like the commandment, Social Security also
carries with it a promise. Social Security benefits not just our
elders. It also benefits their children, and us all.
Families throughout history have faced uncertainties, old age,
disability, and death of the breadwinner. Before Social Security, the
extended family provided what economic security they had.
President Franklin Roosevelt described those times:
In the early days of colonization and through the long
years following the worker, the farmer, the merchant, the man
of property, the preacher, and the idealist came here to
build, each for himself, a stronghold for the things he
loved. The stronghold was his home the things he loved and
wished to protect were his family, his material and spiritual
possessions. His security, then as now, was bound to that of
his friends and his neighbors.
In the 18th and 19th centuries, most Americans lived and worked on
farms. Before 1840, 9 out of 10 Americans lived in rural areas. And as
late as 1880, 7 in 10 did.
This chart on my right shows the degree to which Americans lived in
rural America and over time moved to cities. Back in 1790, about 95
percent of Americans lived in rural areas. Right now, the trend line is
down to 1990, where about 20 percent lived in rural areas. Everybody
else moved to the cities.
Back then, in the early days, life was hard and often short. A boy
born in the year 1850 could expect to live 38 years. That is all. By
1900, the male life expectancy rose to about 46 years. As this chart
shows, things changed with the Industrial Revolution. America changed
from an agricultural to an industrial economy. People moved away from
the family farm into the city, and by 1920, most Americans lived in
urban areas. The extended family and family farm failed to provide the
security they once did.
At the same time, the people of a more prosperous nation began to
live longer. As this chart shows, around 1930, a baby boy could expect
to live 59 years--13 years longer than in 1900. And a 60-year-old man
could expect to live to age 75. More and more Americans had to address
the challenges of living into old age.
This chart shows the male life expectancy at birth has risen
significantly, from 39 in 1850 to 68 years of age 100 years later, in
1950. Of course, today the lifespan is longer.
[[Page S2058]]
Senator Robert Wagner of New York described how the burdens of
supporting those growing numbers of seniors fell heavily through a
patchy safety net and onto their grown children. He said:
In truth . . . every civilized community does and must
support its old and dependent people in some way. In this
country, we have been doing it largely by inefficient relief
methods, by shabby pension systems, and by imposing burdens
upon millions of younger members of families, with consequent
impairment of their industrial efficiency, their morale, and
their own opportunities for future independence.
And President Roosevelt looked back on those times, saying:
Long before the economic blight of the depression descended
on the Nation, millions of our people were living in
wastelands of want and fear. Men and women too old and infirm
to work either depended on those who had but little to share,
or spent their remaining years within the walls of a
poorhouse. Fatherless children early learned the meaning of
being a burden to relatives or to the community.
President Roosevelt saw America's social changes as grounds for a
change in government's role. In his June 1934 message to Congress, he
said:
[S]ecurity was attained in the earlier days through the
interdependence of members of families upon each other and of
the families within a small community upon each other. The
complexities of great communities and of organized industry
make less real these simple means of security. Therefore, we
are compelled to employ the active interest of the Nation as
a whole through government in order to encourage a greater
security for each individual who composes it.
The Great Depression triggered government's response.
As this chart shows, the American economy in 1933 produced barely
more than half the output that it did in 1929.
And as the next chart shows, by 1933, a quarter of the American labor
force was unemployed.
Look at this next chart. From its 1929 high of 381, the Dow Jones
Industrial Average fell to a trough of 41 in 1932. That's nearly a 90
percent drop in the Dow, in just 3 years.
Lifetimes' worth of private accounts evaporated into thin air.
Senator Royal Copeland of New York recounted:
[T]here are thousands of families, I suppose millions, who
thought they had prepared for the rainy days, but by reason
of the Depression, and the circumstances involved in it, they
have come to be almost as bad off as many who were born and
have lived all their lives in poverty.
State governments found themselves under an increasing burden. This
chart shows unemployed men in line. Senator Daniel Hastings of Delaware
said,
[T]he individual States are laboring under a strained
financial condition; with many of them believing that they
cannot take care of their own.
As with economic hardship throughout history, the Depression hit
widows and orphans particularly hard. This chart shows a careworn 32-
year-old woman's face. Congressman William Sirovich of New York painted
the picture, in 1935:
Death, through the loss of the breadwinner, has broken many
a home. For centuries the widows, orphans, and dependent
children have cried aloud for help and assistance in their
tragic periods of economic insecurity. In the past the only
recourse for orphaned children was the poorhouse, alsmhouse,
and the orphan asylum. The twentieth century of civilization
has awakened our citizens to the duty and obligations they
owe to these unfortunate orphans.
And Congressman Fred Crawford of Michigan spoke of children with
disabilities:
One only needs to come in contact with a home which is
unable to provide any means of relief for a little child who
has been stricken with paralysis to appreciate what this will
mean to those homes so darkened with the suffering that
follows such a catastrophe.
Remember what happened back then. I am not saying we are going to
again suffer the same cataclysmic and dire consequences of the
Depression. I don't think we will. But we could suffer bad times in the
future. The stock market could fall precipitously. Two speakers ago on
the floor, the Senator from Alaska was talking about the economy,
saying it would be devastated if there was an oil embargo; that would
be the end of the American economy. The stock market would clearly
fall. We don't know. We live in times that are a little more
precarious, uncertain, and it is harder to predict the future. We just
don't know. I am presenting these charts and this information to remind
us that we don't know. Again, I doubt we will have another depression
that severe--we may, but I doubt it. But things can go south sometimes.
Things don't always go well all the time.
President Roosevelt sought a comprehensive solution. To that end, in
June of 1934, he issued an Executive Order creating the cabinet-level
Committee on Economic Security. He charged them to, ``study problems
relating to the economic security of individuals.''
Labor Secretary Frances Perkins chaired the committee, which also
included the Treasury Secretary, the Attorney General, the Agriculture
Secretary, and the Federal Emergency Relief Administrator. Secretary
Perkins relied heavily on her assistant secretary, Arthur Altmeyer, who
would become the first Social Security Commissioner.
And to address the need, President Roosevelt and other leading
thinkers turned to the idea of ``social insurance.'' President
Roosevelt said of social insurance: ``This is not an untried
experiment. Lessons of experience are available from States, from
industries and from many nations of the civilized world. The various
types of social insurance are interrelated; and I think it is difficult
to attempt to solve them piecemeal. Hence, I am looking for a sound
means which I can recommend to provide at once security against several
of the great disturbing factors in life--especially those which relate
to unemployment and old age.''
Social insurance programs began in Europe in the 19th century. By the
time America adopted Social Security as a national social insurance
program in 1935, 34 European nations and several States in the Union
already operated some form of social insurance program--34 nations
before 1935.
I am very proud to say my home State of Montana played a leading role
when, in March of 1923, it enacted its old age pension law. Montana's
was the first State law to stand the test of constitutionality for an
old age pension law. Its sponsor was Lester Loble of Helena, MT.
I would like to show a picture of Lester Loble, who later became a
State judge, Judge Loble. I knew him. He was a wonderful, wise man.
Frankly, I did not know of his history until I did a little research
into Social Security and was delighted to find Judge Loble played a
prominent role in developing Social Security.
He had been a delegate to the 1921 national convention of the
Fraternal Order of Eagles, which had devoted a special focus to pension
laws for seniors. Mr. Loble's old age pension law provided each
county's fund would pay a modest monthly income--up to $25 a month--to
the poorest of Montana's seniors, those earning less than $300 a year.
In a legislative session torn by struggle over taxes on mining
property, the bill passed, and Governor Joseph Dixon, a Republican,
signed it into law, saying:
You Eagles have planted this seed and you can no more stop
the progress of old age pensions than you can stem the tide
of the Pacific Ocean.
In November of 1934, on behalf of President Roosevelt's Committee on
Economic Security, Secretary Perkins invited Mr. Loble to Washington,
saying:
We are extending this invitation to you because you have
the honor of having been the author of the first old age
pension law in this Country.
The committee set to work on the idea of social insurance. Like all
insurance, social insurance protects against a defined risk. The
insurance pays beneficiaries when they need to bear a large expense,
often at times when they would otherwise not be able to provide for
themselves. Like all insurance, social insurance spreads the burdens of
the risk broadly across a large pool of those who may encounter the
risk. When the risk does occur to one beneficiary, the sharing of the
risk makes it easier to bear.
Social insurance spreads these risks over the largest possible pool
of potential beneficiaries--society as a whole. And social insurance is
shaped by broader social objectives, helping to promote the Nation's
overall economic security.
President Roosevelt's Committee on Economic Security made its
recommendation to Congress in January 1935. The committee reported:
[[Page S2059]]
At least one-third of all our people, upon reaching old
age, are dependent upon others for support. . . . There is an
insecurity in every stage of life.
They went on:
Children, friends, and relatives have borne and still carry
the major cost of supporting the aged. . . . [T]his burden
has become unbearable for many of the children. . . .
They responded to that challenge with a proposal for Social Security,
and they concluded:
The measures we suggest should result in the long run in
material reduction in the cost to society of destitution and
dependency and we believe will immediately be helpful in
allaying those fears which open the door to unsound
proposals.
The Finance Committee held hearings on the proposal. At one hearing,
Senators watched as several elderly gentlemen who were totally blind
were led into the committee room by their guide dogs and told of their
life of need. This is before Social Security. Finance Committee
Chairman Pat Harrison of Mississippi said:
I do not know of any committee that was ever moved more
than was the Finance Committee.
During the Senate's floor debate on the bill, Senator Wagner from New
York said:
The social security bill embraces objectives that have
driven their appeal to the conscience and intelligence of the
entire Nation. We must take the old people who have been
disinherited by our economic system and make them free men in
fact as well as in name. We must not let misfortune twist the
lives of the young. We must tear down the house of misery in
which dwell the unemployed. We must remain aware that
business stability and prosperity are the foundation of all
of our efforts. In all of these things we are united, and in
this unity, we shall move forward to an era of greater
security and happiness.
This chart shows the signing of the Social Security Act. In signing
the Social Security Act in August 1935, President Roosevelt said:
Today a hope of many years' standing is in large part
fulfilled. The civilization of the past hundred years, with
its startling industrial changes, has tended more and more
to make life insecure.
That was in 1935. Think how insecure now.
Young people have come to wonder what will be their lot
when they came to old age. The man with a job has wondered
how long that job would last.
This Social Security measure gives at least some protection
to . . . millions of our citizens who will reap direct
benefits through unemployment compensation, through old-age
pensions and through increased services for the protection of
children and the prevention of ill health.
President Roosevelt continued:
We can never insure 100 percent of the population against
100 percent of the hazards and vicissitudes of life, but we
have tried to frame a law which will give some measure of
protection to the average citizen and to his family against
the loss of a job and against poverty-ridden old age.
The law established two social insurance programs on a
national scale to help meet the risks of old age and
unemployment: a Federal system of old age benefits for
retired workers and a Federal-State system of unemployment
insurance.
President Roosevelt saw the 1935 Social Security law as an economic
foundation. He said:
This law . . . represents a cornerstone in a structure
which is being built but is by no means complete. It is a
structure intended to lessen the force of possible future
depressions. It will act as a protection to future
administrations against the necessity of going deeply into
debt to furnish relief to the needy. The law will flatten out
the peaks and valleys of deflation and inflation. It is, in
short, a law that will take care of human needs and at the
same time provide the United States an economic structure of
vastly greater soundness.
President Roosevelt justly concluded:
If the Senate and House of Representatives in this long and
arduous session had done nothing more than pass this bill,
the session would be regarded as historic for all time.
President Roosevelt's prophecy that Congress would build on Social
Security was soon proved true. The Old-Age Insurance Program had not
yet come fully into operation when Congress enacted significant
changes. In 1939, Congress added benefits for dependents of retired
workers and surviving dependents of deceased workers, and Congress made
the first benefits payable in 1940 instead of 1942, as originally
planned.
In the 1950s, Congress broadened Social Security to cover many jobs
that previously had been excluded.
In 1956, Congress added disability insurance. Benefits were provided
for severely disabled workers aged 50 or older and for adult disabled
children of deceased or retired workers.
Two years later, in 1958, Congress provided benefits for dependents
of disabled workers similar to those already provided for dependents of
retired workers.
In 1960, Congress removed the age-50 requirement for disabled worker
benefits.
And in 1967, Congress provided disability benefits for widows and
widowers aged 50 or older.
There used to be a yearly annual ritual in Congress to provide cost-
of-living increases to Social Security beneficiaries. This sometimes
happened right before an election. In 1972, Congress did away with this
uncertainty and provided for automatic cost-of-living increases in
benefits tied to increases in the consumer price index. The 1972
amendments also increased benefits for workers who retired after full
retirement age.
In 1977, Congress changed the method of benefit computation to ensure
stable replacement rates over time. Earnings included in the
computation were to be indexed to account for changes in the economy
from the time they were earned.
In 1983, as a consequence of the Greenspan Commission, to strengthen
and extend the life of Social Security, Congress made coverage
compulsory for employees of the Federal Government and nonprofit
organizations. State and local governments were prohibited from opting
out of the system once they had joined. The amendments also gradually
increased the age of eligibility for full retirement benefits from 65
to 67, beginning with persons who reach the age of 62 in the year 2000.
For certain higher income beneficiaries, benefits became subject to
income tax.
In 1996, Congress relaxed earnings limits for seniors who reached the
full retirement age.
In 1999, Congress reformed certain provisions under the disability
program to create stronger incentives and better supports for
individuals to work.
And in 2000, Congress eliminated the earnings for seniors who have
reached the full retirement age.
What we now know is Social Security touches almost every American.
Social Security covers 96 percent of American workers and their
families. In 2003, Social Security provided $471 billion in benefits to
47 million people. One in six Americans collects Social Security
benefits today.
In my home State of Montana, 164,000 of our 927,000 residents, or
about 18 percent of all Montanans, receive Social Security benefits.
Nearly 7 percent of all Montana personal income comes from Social
Security payments. Montana ranks fifth among the 50 States in terms of
the share of our State's income that comes from Social Security.
Social Security is, in effect, three programs: an earned retirement
benefit, a disability insurance policy, and a life insurance policy.
Most people think of Social Security as a retirement program, but 3
in 10 beneficiaries collect survivors' or disability insurance
benefits.
Of today's 20-year-olds, 28 percent will become disabled. That is
quite startling when one stops to think about it. Of today's 20-year-
olds, 28 percent will become disabled, and 17 percent will die before
reaching retirement. Look around the room in any college classroom: 3
in 10 students will become disabled, and 2 in 10 will die before
retirement. But if a young worker should experience a period of
disability, Social Security will provide for the worker and the
worker's family. In the same vein, Social Security will provide for the
worker's family if the worker experiences an untimely death. For a
young married worker with two children, Social Security provides the
equivalent of a $400,000 life insurance policy and a $350,000
disability policy. Think of that. For a young married worker today with
two children, Social Security provides the equivalent of a $400,000
life insurance policy and a $350,000 disability policy. Only about 3 in
10 workers have access to long-term disability benefits, aside from
Social Security.
Social Security provides retirement benefits for retirees who worked
at least 10 years. President Roosevelt said:
There are other matters with which we must deal before we
shall give adequate protection to the individual against the
many
[[Page S2060]]
economic hazards. Old age is at once the most certain, and,
for many people, the most tragic of all hazards. There is no
tragedy in growing old, but there is tragedy in growing old
without means of support.
Social Security provides the primary source of income for two-thirds
of America's seniors. Stop and think about that a moment. Social
Security provides the primary source of income for two-thirds of
America's seniors. For one-fifth of our seniors, it provides the only
source of income. For one-fifth of our seniors in our country, Social
Security is the only source of income. The average retiree benefit is
$822 a month, or about $10,500 a year in my State of Montana, and about
$900 per month, or about $11,000, nationally.
This is hardly a king's ransom, but as President Roosevelt said on
the third anniversary of the law's enactment:
The act does not offer anyone, either individually or
collectively, an easy life--nor was it ever intended to do
so. None of the sums of money paid out to individuals in . .
. insurance will spell anything approaching abundance. But
they will furnish that minimum necessity to keep a foothold;
and that is the kind of protection Americans want.
Before Social Security, poverty and dependency threatened all who
could no longer work, but with its guarantee of benefits to seniors for
life, progressive benefit structure, spousal and survivor benefits, and
annual cost-of-living adjustments, Social Security provides a solid
foundation of economic security for all workers and retirees.
Look at the effects of this chart. Because of Social Security,
poverty among American seniors has fallen from roughly half of seniors
in 1935 to roughly a third of seniors in 1959 to 1 out of 10 seniors
now. Just think of that. Before Social Security, half of America's
seniors were in poverty. That is this bar off to the left. Gradually,
fewer of America's seniors were living in poverty. Social Security
brought them out of poverty, and so today only 1 in 10 is living in
poverty. Just think what would happen if they did not have those
current Social Security benefits. Think what would happen to future
retirees who had benefits reduced by 50 percent, as would be
contemplated under the President's proposal.
Social Security provides a guarantee of economic security for
America's workers, for current workers and for retired workers. Social
Security protects all Americans, whether they are fortunate and living
a long and healthy life or unfortunate and facing early disability or
death.
Social Security benefits are adjusted for inflation, so the buying
power of beneficiaries does not erode over time. Social Security
benefits increase with family size, and they are progressive to ensure
that even low wage earners have sufficient income. Beneficiaries cannot
outlive their benefits. This is an insurance policy. It is a life
insurance policy. Seniors cannot outlive their benefits. Seniors keep
getting those monthly benefits as long as they live.
Social Security uses a common system to administer all three
programs--retirement, survivors, and disability--resulting in
administrative costs of less than 1 percent. Administrative costs of
all three, since they are combined with the same administration, are
just 1 percent. Think of the administrative and other costs associated
with other forms of retirement payments, particularly in the private
sector, which we must have, which are important and critical. It is
important also to note the factual difference of the administrative
costs of some systems compared with some others.
These unequaled benefits make Social Security invaluable for
individual workers, retirees, and all Americans.
In future statements I hope to go further into other aspects of
Social Security. It is somewhat complicated, but it is somewhat
simple--very important. I hope to address how the President's plan
would cut benefits, not increase benefits, not stabilize benefits but
cut them, and what benefit cuts would mean for Americans. I hope to
address the concerns caused by the mounting debt and how the
President's plan would make that mounting debt problem worse, not
better but worse, much worse--much, much, much worse. I hope to address
why we should be concerned about the savings and what changes we should
be considering to increase savings in America, both public and private
savings.
Yes, Social Security faces long-term challenges. We all know that. We
should work hard to address those. We should work together to
strengthen Social Security for the long term. We all know we must do
that. We want to do that, but we need to do it right. We should no
longer endanger the valuable legacy we have built over so many years.
It is important, to say the least.
Privatization plans would cut Social Security's funding, weaken the
program, and make its problems worse, not better. Plans like option 2
of the President's Social Security Commission would cut benefits by
one-third or more for future retirees, even for those who choose not to
have a private account. That is important to note. Under the
President's plan as we know it so far, Americans who do not choose to
have a private account would find their benefits out in the future cut
by one-third or more, even if they do not want to participate in the
private or personal accounts--whatever one wants to call them.
Those investing in those accounts--personal accounts or private
accounts--will be hit twice. Those who do invest, who choose to opt to
invest, would be hit twice, as their benefits would be subject to a
substantial privatization tax. I am not going to go into great detail,
but if one chooses to participate in the President's plan, their total
benefits when they retire are going to be less than they would be if
there is no change in Social Security, just as long as we find ways to
keep it going.
Cuts of this magnitude would leave many seniors in poverty, requiring
more taxpayer assistance, not less, and the President's privatization
plan would cause the Government to borrow $5 trillion in additional
debt in the next 20 years. Five trillion dollars additional of publicly
held debt in the next 20 years. Today the publicly held debt is about
$4 trillion or $5 trillion. It will practically double over the next 20
years. We cannot do that. That does not make sense. This is not the
legacy we should be giving to our kids and grandkids.
Yes, clearly, we should address Social Security. We should stop using
Social Security surpluses for other Government purposes. We should save
more as a nation. We should address the Government's record budget
deficits by restoring fiscal discipline and avoiding massive new debt.
We should reinstate enforceable budget restrictions such as the pay-as-
you-go rules, and we should work to develop new and innovative ways to
help Americans save separate and apart from Social Security.
We should honor the words of Congressman Joseph Monaghan of Montana,
who said in April of 1935:
When the sun of life begins to set upon the aged of our
country, the . . . Government should extend to them a relief
from the weary toils of the day and to bring relief, comfort,
and security to them when the burdens of life are hardest to
bear and when the darkening shadows of approaching night
begin to fall upon his path to make further toil impossible,
to make further travel insecure, a just reward which their
toil has merited; an adequate old-age pension and not a
pauper's dole.
We should also honor the words of President Roosevelt, who said to
Congress in 1934:
We must dedicate ourselves anew to a recovery of the old
and sacred possessive rights for which mankind has constantly
struggled: homes, livelihood, and individual security. The
road to these values is the way of progress. Neither you nor
I will rest content until we have done our utmost to move
further on that road.
We should honor our fathers and our mothers. We should honor this
important social insurance, honor this protection that keeps our
fathers and mothers from these darkening shadows of approaching night.
We should do so not just for them, we should do so also because it will
help their children. It will help the economy to go well for us. It
will help us to live better lives, all the days we are on this good
land that the Lord has given us.
I yield the floor.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, I ask unanimous consent that I be
permitted to speak as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BINGAMAN. Mr. President, I first commend my colleague from
Montana for his statement about Social Security and his leadership on
that issue. He has been the leader in the Senate in
[[Page S2061]]
trying to keep us focused on the real importance of maintaining Social
Security and avoiding a privatized proposal, and I commend him for it.
It is an honor for me to serve with him on the Finance Committee and
follow his leadership on this issue.
As we all know, Social Security and proposals to change Social
Security are very much the priority today in Washington, and
particularly this President. The President just yesterday, I believe,
announced that he will take the next 2 months to do a 60-city tour or
to at least have events in 60 cities to try to promote his suggestion
or his proposal for privatizing Social Security. Of course, this is a
decision he has made about how to use the political capital that he saw
himself coming out of the last election with.
Social Security is clearly an issue that deserves attention. There
will be serious difficulties with Social Security. I believe 38 years
from now, with current projections, the system will not be able to pay
full benefits. I favor trying to find something that can be done to
head that off. I do not believe the President's proposal is the right
solution, and I have spoken out on that before.
First Things First
What I want to do today is speak very briefly on a couple of other
issues that I believe are more urgent and more priority issues that we
in the Congress should be addressing and that the President should be
addressing. If we are looking to how to spend the next 60 days, let us
focus on first things first. I remember reading a book Peter Drucker
wrote many years ago called ``The Effective Executive.'' According to
Peter Drucker, one of the attributes of an effective executive was that
he or she would work on first things first.
In my view, first things first today in our circumstance is not
changing Social Security. First things first is dealing with our budget
deficits and dealing with our trade deficits. Unfortunately, I believe
we are failing to deal with either of those issues in a responsible
way.
First I will talk about the budget deficit. In 2004, we had a record
deficit of $412 billion. That was a turnaround from the $128 billion
surplus we had 4 years ago. In 2005, this year, the deficit is
projected to grow to $427 billion, and clearly this is an unsustainable
course. We need to look carefully at the decisions we are making in
Washington and what those decisions will do with regard to this very
large budget deficit.
The first step in addressing the budget deficit is to make some tough
choices in this year's budget. The process starts with the President's
recently released proposal, and it will conclude with Congress's
actions when we actually appropriate funds.
I support the President's stated intention to cut the deficit in half
by 2009, although it is also clear to me that we cannot do so if we
adopt his proposed budget. The budget claims to get us to that goal,
but, in fact, it falls short because it excludes so many large-ticket
items.
The budget does not include the real costs of going forward with the
conflicts in Iraq and Afghanistan. The Congressional Budget Office has
estimated that cost will be roughly $383 billion over the next 10
years. The President has put in his budget an estimate for $81 billion.
We are going to be passing a supplemental appropriation for $81 billion
just for current operations in Iraq, to say nothing of the next 5 or 10
years of cost.
The second item the President's budget does not include is anything
for these so-called private accounts that the President wants to have
us establish in Social Security. Again, the estimate in the President's
budget is zero. The phased-in cost of the administration's Social
Security plan during the first 10 years is projected at $754 billion,
and over 20 years it is projected at $4.5 trillion. The Senator from
Montana spoke about that issue.
The third item the budget does not include is anything to deal with
the alternative minimum tax. Taxpayers must pay the alternative minimum
tax if they have too many deductions and credits and, therefore,
otherwise are not paying a sufficient percent of their income in taxes.
If we made the President's tax cuts permanent, we would go from roughly
3 million alternative minimum tax payers, which we had last year, to
roughly 40 million alternative minimum tax payers at the end of the
decade. That is a very expensive proposition. If the tax cuts are to be
made permanent, reform of the alternative minimum tax is going to cost
a very substantial amount of money: $774 billion is the 10-year cost of
reforming the alternative minimum tax during the years 2006 to 2015.
The failure to deal with the short-term cost of our defense budget
and the proposal to make recent tax relief permanent is going to leave
future generations with no options except to drastically raise taxes or
to drastically cut services and benefits. Most of this should be
avoidable, but first we need a realistic plan about how to move
forward. It is clear that simply cutting discretionary spending
accounts, as the President's budget proposes, is not the answer.
To put this in context, the administration estimates that the deficit
of 2005 is $425 billion. That is about the same as our entire
nondefense discretionary spending for 2005. So you can eliminate all of
these departments whose spending levels we are going to be arguing
about here over the next several months: the Energy Department,
Education Department, Transportation Department, Department of
Commerce, Department of Homeland Security. You can eliminate the
Department of Homeland Security and you still do not solve the problem
of the deficit. No one is proposing to eliminate all of that, but I
think it gives you a sense of the magnitude of the problem when you
look at the fact that we cannot solve this problem strictly by cutting
domestic discretionary spending. That is the point.
As we all know, debt matters. There are three obvious reasons why
debt matters. First, debt prevents us from dealing with the costs
involved with the aging of our population. Second, we need to find
other countries to lend us money as long as we are going to keep
running this kind of enormous debt.
We have a chart here that shows where we are getting the money we are
borrowing every day, every week, every month. These are the top 10
countries that hold our national debt. Over 60 percent of our debt is
purchased by foreign government banks. The top 10 countries are Japan,
and we owe them $715 billion; China, $191 billion; United Kingdom, $152
billion; ``Caribbean banking centers,'' we owe $76 billion; South
Korea, we owe $69 billion. This was as of November 2004, so all of
those figures are now larger than this chart reflects.
A third reason why debt matters is that high deficit levels will
eventually result in higher interest rates. All of us know that higher
interest rates depress economic activity, hurt consumers, and clearly
it does not make sense for us to take action here to adopt budgets that
have the ultimate effect of driving up interest rates.
What we need is a real plan, one that can be supported by a majority
of the Members of the Congress, one that can become law. We need a
budget that is honest. We need to provide voters with clear choices,
letting them know what the real impact of different options is.
One of the areas we need to deal with honestly and not just to
demagog is the issue of taxes. I believe there is sufficient bipartisan
support to make permanent many of the tax provisions that are now
scheduled to expire in 2010. For example, the marriage penalty relief,
child tax credit, 10-percent income tax bracket--those are provisions
that were adopted at the urging of President Bush which enjoy broad
support here in the Congress and around the country. We should find a
way to make that a permanent part of the tax package that we have
earlier adopted.
Even though the administration requested that we make all of the 2001
and 2003 tax cuts permanent, I do not believe there are sufficient
votes in the Senate to do that. There are not enough votes because
there are enough Senators who realize we do not have the resources to
do that. Overall, making all of the tax cuts permanent will put us an
additional half trillion dollars in debt over the next 10 years.
Here is the chart that shows what happens after 2010, if you go ahead
and do what the President is urging and make all these tax cuts
permanent. You can see essentially that 10-year cost, from 2006 to
2015, is $1.6 trillion. This is unsustainable. We need something
responsible we can negotiate and
[[Page S2062]]
on which we can arrive at a consensus. We need a real plan for dealing
with our budget deficit.
Let me say a few words also about the trade deficit. As we know, the
trade deficit is the difference between what we sell to the rest of the
world in goods and services and what they sell to us. On February 10,
the Department of Commerce released the trade data for 2004. The trade
deficit in 2004 was $617.7 billion. That is a new record for trade
deficits for the United States. It is a new record for any country.
There is no other country in the world that has ever had such a trade
deficit. It was $121 billion more than the previous record of $496
billion we set in 2003.
To emphasize the point a little more, it was a 24-percent increase in
1 year, in spite of 3 straight years of declines in the value of the
dollar.
Let me show a couple of charts here. This first one shows what has
happened to trade deficits starting in 1992. It went up a little, then
sort of leveled off during the mid-1990s, and then it started up again
in 1998 and it has been going up ever since and there is no end in
sight. I believe this is a major problem. Let me give you the reasons
why.
If you look at historical context, in the mid-1980s the Reagan
administration found itself in a similar circumstance. This is a more
complicated chart, but what it tries to do is show the trade deficit,
which is this red line, and also show the value of the dollar compared
to other currencies. The trade deficit started up in the mid-1980s, in
the Reagan administration. It was a concern then. The Reagan
administration was not known for its policies of Government
intervention, but the Secretary of the Treasury then understood that
something had to be done to deal with this growing trade deficit. The
result was the 1985 Plaza Accord, which bound the governments of the
then G-7 countries to pursue specific actions related to currency
valuations, market access, deregulation, deficit spending, and
workforce investment. And the deficit, the trade deficit, came down.
The value of the dollar came down relative to other currencies and the
trade deficit came down.
What we have now, and this chart makes the point very emphatically,
is the value of the dollar went up and in the last 3 years it has been
coming down, but the trade deficit continues to go up. This is an
unsustainable situation, just as the budget deficit is an unsustainable
situation. This affects people throughout the country in very obvious
ways.
This chart shows the trade deficit. Again, the red line is going up
as compared to manufacturing exports, which have been going down in the
last 4 or 5 years. So you have people losing their jobs. You have U.S.
companies finding it impossible to export. Accordingly, we have a very
serious issue with decline in manufacturing jobs in the United States.
It is a long-term decline. It seems to continue unabated. While the
trade deficit continues to grow, manufacturing jobs continue to drop.
These charts speak to a very significant problem I believe needs
attention. Let me suggest four concrete actions we could take to
address the trade deficit.
First, we need to recognize the importance of research and technology
development in our own country. Across the board, we need to have
targeted investments in critical emerging technologies. We need to see
to it that we remain on the cutting edge of new technologies.
Unfortunately the administration's budget actually decreases support
for science and technology and engineering research and development. In
my view, that is moving us in the exact wrong direction.
This chart shows the budgets, proposed budgets the administration has
given us for all of these agencies that are very involved in science
and technology. You can see, with the exception of one agency, NASA,
everyone else is slated for a cut. That is moving us in the wrong
direction.
A second step we can take is to actually step up and begin enforcing
our trade agreements in a meaningful way. I think we have assumed that
other countries will play by the rules, and the more trade agreements
we could enter into, the better off we will be. That has not proven to
be the case. The administration has done little to make many of these
countries abide by their agreements. China is the most salient example.
We have a $162 billion trade deficit with that country today. It is up
31 percent from 2004 over 2003. We have lost well over a million jobs
to China in the last decade or 15 years. China continues to manipulate
the value of its currency, continues to subsidize its exports. I
believe it is time the administration insists on better treatment. It
needs to start by pressing the Chinese to revalue their currency. We
have a circumstance now where everything the Chinese send to us is
artificially undervalued and everything we send to them is artificially
overvalued, and that hurts us badly.
The third suggestion I have is we need to improve our education and
workforce training systems. There is no question we need to have people
who can fill these jobs if we are going to hope to attract and retain
these jobs. Again, I point to the President's budget and say that it is
wrongheaded in the extreme in this regard. The administration proposes
elimination of these 48 educational programs. I am not suggesting all
of those are meritorious, but many of them are, and many of them are
helping local school districts and States to improve their education
system.
I think there are many things that can be done. I have various
recommendations of bills to try to help. I hope we can seriously push
back against the administration on these proposed cuts in education and
training, job training funds.
The final point I would suggest is the final concrete action we can
take to deal with the trade deficit is to encourage foreign firms to
contribute to the U.S. economy, to come here and establish here and
create jobs here to a much greater extent than we have in the past.
What we need is a national strategy to do the very same thing our
States are doing and our local communities are doing, and that is they
are working hard to attract business and to create jobs. We need an
aggressive effort on the national level to do the same. We need a
concerted effort to market the United States to other countries as a
place to do business, a good place to do business.
I am working on legislation that I will introduce soon that would
increase the U.S. Government's efforts in this regard to establish a
very visible, assertive entity where the primary mission would be to
promote increased foreign investment in the United States.
Once we take these steps, the four I have outlined, then we at least
would have some strategy in place to increase domestic investment and
to draw foreign investment to our country to a greater extent. Maybe
those actions could help shrink the trade deficit.
We should be working on our highest priority problems, our most
urgent problems. It is my firm belief that the budget deficit and the
trade deficit are those problems.
Let me finish by saying we should not allow politics as usual to
prevail in this 109th Congress. The decline in the value of the dollar
and the decisions that we have seen in recent weeks by foreign banks to
begin shifting their reserves from dollars to other currencies, those
are our signals that financial markets want responsible action by this
Government to deal with these two problems, the budget deficit and the
trade deficit.
I ask unanimous consent an editorial from earlier this week in the
Washington Post be printed in the Record following my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. BINGAMAN. Mr. President, that editorial makes the point that
these issues deserve attention, and we cannot postpone action on these
issues indefinitely. We in Congress and the administration need to get
the message that foreign governments and foreign banks are sending to
us. We need to face up to the challenge. We need to begin addressing
the budget deficit and the trade deficit as first priority issues, and
not push them off while we continue to deal with other matters.
I yield the floor.
Exhibit 1
[From the Washington Post, Mar. 1, 2005]
Dollar Jitters
Last week brought a warning to economic policymakers on
both ends of Pennsylvania Avenue. A rumor that South Korea's
central bank had decided to shift its reserves away from
dollars triggered a sharp fall in the
[[Page S2063]]
greenback and a retreat on Wall Street. The fact that the
South Koreans later denied this rumor is only half-
comforting. Economic logic is pushing Asia's central banks to
quit propping up the dollar. If a hollow rumor can rattle the
currency, what would a real policy change do?
The dollar's vulnerability reflects the nation's trade
deficit. To sustain their appetite for foreign goods,
Americans need to convert their dollars into other
currencies, depressing the greenback's value. This didn't
stop the dollar from being strong in the 1990s, because the
trade deficit was smaller then and because foreign investors
were hungry for American stocks, bonds and other assets,
reflecting the U.S. economy's eviable performance. But now
foreign investors' appetite for dollars lags behind
Americans' demand for foreign goods and services. The gap is
being filled by Asian governments, whose central banks have
accumulated vast piles of U.S. bonds in an attempt to slow
the dollar's slide.
A year or so ago, a fashionable theory held that this Asian
government support could continue indefinitely. Asian
policymakers, according to this theory, would prop up the
dollar to keep their own currencies competitive. It's true
that export-led growth is a quasi-religion in East Asia and
that China's dictators fear their grip on power might falter
if they can't keep growth and job creation humming. But China
and its neighbors have proved themselves capable of fast
growth even in periods when they haven't been artificially
depressing their own currencies. So it seems dangerous to bet
that Asian central banks will think it worth the risk of
holding ever-expanding dollar portfolios that can falter on a
rumor.
The other optimistic theory is that while Asians may not
want to prop up the dollar, they are prisoners of their own
policy. By now they've bought so many dollars that if they
quit buying, the value of their existing reserves would tank.
But what if one central bank worries that others will stop
buying dollars first? Such fears could trigger a stampede for
the exit.
None of this is to say that a dollar crash is inevitable.
The dollar may fall gently, as it has over the past year or
so, or a renewed appetite for U.S. assets among private
investors could even stabilize its value. But the risk of a
currency crash grows every day. In 2003, the United States
had to attract $530 billion of foreign capital to finance its
purchases of foreign stuff; in 2004 it had to attract $650
billion; this year, it may have to pull in as much as $800
billion. Every year of vast borrowing increases borrowing in
later years; as Brad Setser of Oxford University notes, just
paying interest on the $800 billion borrowed in 2005 might
add $40 billion to the overall 2006 deficit.
To stabilize this house of cards, Congress and the
administration should pull the one lever they have: They
should reduce the nation's reliance on foreign capital by
cutting government borrowing. This isn't going to be possible
through spending cuts alone. It's going to take higher taxes.
The PRESIDING OFFICER. The Senator from Tennessee.
Federal Consent Decree Fairness Act
Mr. ALEXANDER. Mr. President, I thank my colleague, the Senator from
Connecticut, for giving me an opportunity to speak, and also my
colleague, the Senator from Alabama.
The Senator from Connecticut and I, Senator Dodd, on behalf of
ourselves, and Senators Enzi, Kennedy, Roberts, and Hatch, yesterday
introduced the Caring for Children Act of 2005 which reauthorizes the
Child Care Development Block Grant Program. This is a program that is
very important to families across this country. I am pleased that our
committee is progressing in a bipartisan way on the very important
piece of legislation.
Today I want to talk about a piece of legislation I introduced
earlier this week. It is called the Federal Consent Decree Fairness
Act. It has to do with federalism, with democracy, with
responsibilities of State and local government. It has to do with our
effort to try to restrain the growth of the cost of Medicaid so that we
can properly fund other programs such as higher education, elementary
and secondary education, and research. I introduced that legislation,
along with Senator Pryor of Arkansas, who is the lead Democratic
sponsor. Senator Cornyn and Senator Kyl joined us at that time.
Since that time, 12 other Senators have asked to join us. I ask
unanimous consent that the following Senators be added as cosponsors to
S. 489, the Federal Consent Decree Fairness Act: Senators McConnell,
Bennett, Cochran, Craig, Domenici, Hutchison, Inhofe, Lott, Roberts,
Santorum, Smith, and Warner.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ALEXANDER. I failed to mention an early sponsor and a principal
sponsor, Senator Ben Nelson of Nebraska.
Senator Nelson of Nebraska is a former Governor. Senator Pryor is a
former attorney general. Senator Cornyn is a former attorney general. I
am a former Governor. That explains part of our interest in this.
Congressman Jim Cooper, by the way, a Democrat from Nashville, will be
the principal Democratic sponsor of this legislation in the House. It
has strong bipartisan support.
As I will show in a few minutes, it strongly supports the idea of
limiting what we call democracy by court decree. Limiting the idea of
Federal courts running the Government has strong bipartisan appeal. It
has strong support from the left and the right, because democracy by
court decree interferes with democracy. It interferes with the ability
of voters to elect officials who are accountable, and then throw them
out if they don't like what they are doing.
Consent decrees, which are judicial orders based on the consent of
the parties engaged in civil court action, can be an effective judicial
tool when drawn narrowly, and with respect to State and local policy
choices. Congress passes legislation and sets conditions on grants that
must be followed by State and local governments. When they are not
followed, it is important for citizens to be able to turn to the court
to see that their rights and the rule of law are upheld. That is the
heart of the idea of federalism.
Unfortunately, in many cases, rather than preserving the separation
of powers between the Federal Government and the State government,
consent decrees have the opposite effect. What we are seeing in State
after State is government policy controlled by courts and judges
instead of by Governors, mayors, and legislators.
For example, in Maine in 2003, the Governor had to propose deep cuts
to mental health services for children because consent decrees made it
almost impossible to restrain other parts of the budget.
In New York City, Latino parents are upset because schools are
forcing their children into bilingual education programs when they want
them in a different kind of program to learn English. And why is that
happening? Because for the last 30 years, bilingual education in New
York has been mandated by a consent decree that the schools have no
choice but to obey.
In Los Angeles, a consent decree has forced the Metropolitan Transit
Authority to spend $110 million per year on improving city buses. That
sounds like a good idea. But that is 47 percent of the Metropolitan
Transit Authority's budget spent on just buses, leaving the remaining
53 percent to pay for street and freeway improvements, rail systems,
transportation planning programs, and the reduction of debt. Meanwhile,
ridership on MTA buses increased only marginally in the first 6 years
of judicial management, and residents of Los Angeles complain that
other MTA services are suffering, and their elected officials are not
able to do anything about it because the courts are running the transit
authority.
The State of Tennessee has also become a victim of democracy by court
decree. Tennessee, like every State, has to balance its budget. I can
speak from experience. I did it for 8 years. I know it involves some
difficult choices. Our Democratic Governor Bredesen of Tennessee is
making some of those choices. But he can't do it because the Federal
Government has refused to let him to do what he feels he needs to do to
balance the budget.
Late last year, it became apparent that the costs of the Medicaid
program in Tennessee are rising at an unsustainable rate. The Medicaid
caseload has gone up 40 percent across this country in the last 5
years. When you combine that with sharp increase in the rate of
inflation for health care costs over the regular inflation rate, we get
a staggering impact, not only on the Federal Government but especially
on State Governors who are balancing their budgets. The inevitable
result of that is the Governors reach to find somewhere else to get the
money to balance their budget. Where does it come from? It comes from
education. It comes from especially higher education. In the last 4
years, Federal spending for K-12 education has gone up about 40
percent. In Tennessee, spending for K-12 education over those same 4
years has gone up about 11 percent.
[[Page S2064]]
In other words, Federal spending is going up three times the rate of
State spending. The reason is Medicaid is eating up the money, and the
Governor is unable to control the growth of Medicaid because the
Federal court says it can decide better than the Governor can where
those dollars ought to be spent. For example, pre-K education is
something on which Governor Bredesen wants to spend the money. He can't
charter a preschool program, an important program such as I suppose the
distinguished Senator from Connecticut is advocating nationally. His
hands are tied. Governor Bredesen has tackled TennCare. He ran for
office and said, ``I wanted to be elected to fix the TennCare
Program.'' He has come up with a plan that would result in Medicaid
spending in Tennessee rising only $75 million this year instead of the
$650 million it will rise without those changes. But he is constrained
by a series of four Federal court consent decrees entered into by his
predecessors going back 25 years.
These consent decrees dictate policies on medical screening for
children, requiring the States to provide patients with high-cost,
brand name prescription drugs, and affecting the ability of States to
verify the eligibility of the patients they serve. But most
importantly, they deny the voters the opportunity to have a new
Governor and a new legislature look at all of their programs and make
choices about how and where to spend the money.
In the face of enormous pressures, the Federal courts are going to
force Tennessee to maintain programs that the Governor says he would
rather not maintain because he would rather spend the money for
education.
Governor Bredesen is making painful, difficult decisions. He has
proposed cutting 323,000 adults from TennCare and limiting the benefits
for the remaining 396,000 adults because he wants to strengthen
Tennessee's pre-K and K-12 programs, and have a first-rate system for
colleges and universities.
I might emphasize that the services the Governor hopes to limit are
not required by the Federal Government. They are optional services that
States may or may not offer, according to the Federal law, except they
are not as optional as we might think. On January 29, Judge William
Haynes, U.S. District Judge, declared he must approve any of those
changes. So we have a Federal court judge, not the Governor and
legislature, making those decisions.
The Federal Consent Decree Fairness Act contains three main
provisions that address many of these concerns. First, it lays out a
series of guidelines that will guide Federal courts in approving future
consent decrees. Basically, these guidelines follow suggestions which
the U.S. Supreme Court made in the year 2004 in a decision in which it
expressed concern about the fact that old consent decrees were limiting
the actions of newly elected officials and interfering with democracy.
The bottom line of these guidelines is to narrow the consent decrees
and encourage the courts to get the decision-making back in the hands
of the elected officials as soon as possible.
Second, our legislation creates term limits for consent decrees.
Fundamentally, it says any new Governor may go into the court and ask
the judge to vacate or modify that consent decree; or a Governor or
mayor may do that 4 years after the original date of the consent
decree.
Seventy-five of the 100 Senators in this body have served in State or
local government before. I am sure they can understand the frustration
of being elected to fix the schools, or improve the roads, or repair
the prisons, or restrain growth of Medicaid, or improve colleges, and
discover they don't have the authority to do it because the Governor or
mayor 15 years ago entered into a consent decree and the court approved
it, and the newly elected official can't change it.
Finally, the bill shifts the burden of proof from the State and local
governments to the plaintiffs in the case.
Under current law, State and local governments must prove that a
decree is no longer necessary to protect the plaintiffs' rights. In
other words, they must prove a negative. Now the plaintiff will have to
prove that the court interference with the decisions of elected
officials is still needed.
The court still retains full control of the case. The court still
retains the ability to protect the rights of Americans. But the court
would have instructions to say that if the parties come to you and say,
``Mr. Court, Ms. Court, we can't solve this problem, will you approve
this consent decree?'' The court will say, ``I will temporarily get
involved in what is your responsibility, but I will do it under a
narrowly defined set of terms and very shortly I will make sure that it
gets back in the hands of elected officials.''
I have in my remarks, which I will submit in complete form for the
Record, some of the comments of the Supreme Court in Frew v. Hawkins in
2004. The Court took an extraordinary step in inviting the Congress to
pass legislation such as this and in suggesting to the Federal courts
that they might narrow their consent decrees and as soon as possible
get these decisions back in the hands of elected officials.
In other words, the principle here is democracy and whether unelected
people or elected people will make the decisions.
This is an especially important piece of legislation at a time when
we are considering Medicaid. We are asking States to restrain the
growth of Medicaid. We are still spending a lot of money. Over the next
10 years, we propose to spend $1.2 trillion--new dollars. We are not
restraining spending much. But if the caseload is growing by 40
percent, and if the cost of health care is rising faster than the
normal cost of living, and if we still require Georgia, or Connecticut,
or Alabama, or Tennessee, to pay for 43 percent of Medicaid, and we
haven't changed the eligibility requirements, and we don't give the
States much flexibility, and the Federal court tells the Governors they
can't do it, we are giving the States an impossible assignment. The
only result will be the gradual destruction of our system of higher
education, which is principally funded by State governments.
I strongly urge my colleagues to seriously consider this legislation.
I am glad to see 17 Senators of both parties have already signed on. I
am glad a leading Democrat in the House, Congressman Jim Cooper, will
be sponsoring a version of this bill as well.
I will have printed in the Record a series of comments about a book,
``Democracy By Decree,'' which is the scholarship on which this
legislation is based. This book is by Ross Sandler and David
Schoenbrod, professors at the New York Law School. The book is
published by Yale University Press. It has been widely praised by
columnists as evenhanded. Among those who praise the scholarship are
former Senator Bill Bradley, Ed Koch, Diane Ravitch, John Sexton,
president of the New York University and Dean of the NYU Law School,
and Chris DeMuth, president of the American Enterprise Policy Institute
for Public Policy Research. Not many pieces of scholarship have support
from such a broad spectrum.
I ask unanimous consent to have printed after my remarks the complete
comments of those individuals I just mentioned, as well as a column by
George F. Will in Newsweek on November 28th, saying that ``Democracy By
Decree'' is one of the most important books on governing in the last 10
years. I ask unanimous consent also to have printed an article from the
Wall Street Journal on December 31, 2002, by Thomas J. Main, assistant
professor at the School of Public Affairs of Baruch College. I ask
unanimous consent that a review of the book by Ross Weiner in the Legal
Times also be printed.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit A.)
Mr. SESSIONS. Will the Senator yield for a question?
Mr. ALEXANDER. Of course.
Mr. SESSIONS. Senator Alexander, I appreciate your remarks, having
been a U.S. attorney involved in urging certain consent decrees and
having been an attorney general and seeing it from the side of the
State.
My question is this: What your legislation would do is provide a
mechanism to guarantee a periodic review of a consent decree so it
would not continue indefinitely. There are many in this country that
are well over 20 years in which judges are intimately involved in
details of governing and the local people have to seek approval for any
of the most minute changes.
[[Page S2065]]
This would not eliminate consent decrees. It would not eliminate
their enforcement, but it creates a mechanism by which they are
periodically reviewed so as to determine whether they should be
extended.
Mr. ALEXANDER. The Senator is absolutely right. Perhaps Congressman
Cooper had the best phrase. He said the purpose of this legislation is
to keep democracy fresh.
The people are entitled to two things. One is to have their
constitutional and Federal rights enforced in the Federal courts. This
will continue under this legislation. But they are also entitled to
have democratically elected leaders that can make the policy decisions
and do the governing, which is what we say to the rest of the world.
We are fighting in Iraq and Afghanistan, sacrificing lives and
hundreds of billions of dollars to promote the idea that people have a
right to elect their own officials, yet we have drifted into the
situation somewhere, as in the Tennessee case, where we have four prior
consent decrees that will leave in the Federal courts these decisions
and the Governor cannot change them. Even though a previous Governor
entered into them, the standards are such he cannot change them.
He has a right to go in there and say, Judge, I hope you will review
it. The plaintiff, not the Governor, has to persuade the judge that it
needs to be continued. And if it does, the court may continue the
consent decree if he considers it to be useful.
Mr. SESSIONS. I say to the Senator, I think that is a very thoughtful
and important change he is proposing. We need to give it the most
serious consideration. It would strike me that it does go to the heart
of what democracy is. We created a legislative and executive branch
elected by the people and empowered to deal with certain of these
issues. It should be only for extraordinary things that a court would
maintain extended jurisdiction over the elected representatives.
Mr. ALEXANDER. I thank the Senator from Alabama.
When the word ``judges'' is mentioned in this Chamber, we
automatically divide, especially during this season. That is why I am
so glad Senator Pryor of Arkansas, Senator Nelson of Nebraska, and
Congressman Cooper have joined in this. Former Senator Bill Bradley has
praised the ideas found in ``Democracy by Decree.''
This is not a Democratic or Republican idea. Democracy is everyone's
idea in this country. One reason it has such broad support is that it
is not just the court's fault that this is happening; sometimes
Governors and mayors do not want to deal with the prison problem. They
do not want to deal with the Medicaid problem, so they unload it on the
courts. That hurts the people who should be helped. It deprives the
voters of their right to choose elected officials.
The bill has broad bipartisan support. I hope it continues to have. I
am grateful to the Senator from Connecticut for giving me an
opportunity to make my remarks today before he made his remarks.
Exhibit A
Praise for Democracy by Decree
(By Ross Sandler and David Schoenbrod)
``The first book that shows how courts can do their proper
job of protecting rights without allowing elected officials
off the hook for their proper job of making policy.''--Former
Senator Bill Bradley
``A fascinating book for someone like me who regretted
agreeing to a court-approved consent decree limiting the
city's authority in programs involving prisons, welfare,
education, homeless shelters, etc.''--Ed Koch, former mayor,
New York City
``A brilliant, well-written, and brave account of how
federal courts have distorted our political system by taking
control of complex institutions like schools and prisons--
sometimes for decades--instead of enforcing rights, which is
their proper domain.''--Diane Ravitch, New York University
``With fascinating blow-by-blow accounts, Sandler and
Schoenbrod expose how advocates for one interest group
inevitably undermine the interests of others and thwart the
ability of those in responsibility to balance interests for
the common good.''--Philip K. Howard, author of The Death of
Common Sense
``Democracy by Decree is an impressive and thoughtful
analysis of the current court-centered rights culture in
which it is too easy for elected officials to `pass the buck'
to courts while taking actions that are blatantly
unconstitutional.''--Nadine Strossen, president, American
Civil Liberties Union, and professor, New York Law School
``Democracy by Decree shows how courts can protect rights
and still let mayors and governors do their job.''--John
Sexton, president of New York University and dean of New York
University School of Law
``Sandler and Schoenbrod's account--really a discovery--of
the existence of a second government in our midst is
meticulous, nuanced, and alarming. By showing how unilateral
judicial government undermines both democracy and individual
rights, they have done a significant service to both.''
Christopher DeMuth, president, American Enterprise Institute
for Public Policy Research
____
[From Newsweek, Feb. 28, 2005]
Judges and ``Soft Rights''
(By George F. Will)
On Feb. 15 the New York Times carried this headline: Judge
Orders Billions in Aid to City Schools. The derangement of
American government, and the decay of democratic
sensibilities under rule by the judiciary, are apparent in
the fact that such headlines do not enrage, or even startle.
In a case that began 12 years ago, and will surely run at
least 12 more, Leland DeGrasse of the New York Supreme Court
has decreed that an extra $5.6 billion, a 43 percent increase
in the school budget, must be spent on the schools every
year--presumably until he decides that the schools are
delivering a ``sound basic'' education. And over the next
five years another $9.2 billion must be spent to improve
class sizes and facilities.
Why? Because the state constitution says, ``The legislature
shall provide for the maintenance and support of a system of
free common schools, wherein all the children of the state
maybe educated'' and this has been interpreted to guarantee a
``sound basic'' education. Those two adjectives are the
slender reeds supporting this latest excess by the imperial
judiciary.
In 1993 the Campaign for Fiscal Equity, a self-generated
group, unelected and accountable to nobody, sued, charging
that the constitution's adjectives were not being fulfilled.
Between 1997 and 2003 spending on the city's schools rose
$4.8 billion--54.5 percent. But DeGrasse, who apparently
thinks he learned in law school how to fix urban education,
believes the canard that in primary and secondary education
there is a clear causal connection between financial inputs
and cognitive outputs--that the best schools are the ones on
which the most money is spent. Actually, New York ranks third
among the states in per-pupil spending ($11,218; the national
average is $7,734). The highest per-pupil spending is in
Washington, D.C., which probably has the nation's worst
schools.
DeGrasse's ruling is just the latest of thousands of such
instances of judicial overreaching involving schools,
prisons, hospitals, transportation, environmental policies
and other matters. Constitutional or, more often, statutory
language stipulates praiseworthy but vague goals to
be enforced by courts. Then ``public interest'' groups,
eager to wield the power of elected officials without the
tiresome matter of running for office, go to courts.
The courts, with an arrogance often tacitly encouraged by
elected officials eager to avoid difficult choices, wander
beyond their competence. They do not merely enforce
compliance with the law, they dictate in minute detail what
shall constitute compliance--e.g., the water temperature in
prison showers, the soap used to wash prison floors, the
frequency with which prison windows are washed. Really.
In 2003 two professors at the New York Law School, Ross
Sandler and David Soenbrod, published ``Democracy by Decree:
What Happens When Courts Run Government'' (Yale), perhaps one
of this decade's most important books on governance. They
explain how federal standards are attached to federal money
by Congress's heroically transmuting aspirations into rights-
enforceable claims. Congress has become a bestower of mass-
produced rights--to ``healthy'' air, to ``appropriate''
education for the handicapped, etc.
These are what Sandler and Schoenbrad call ``soft rights'':
``Traditional common law rights, such as the right against
trespass, are typically negative. They tell government what
it cannot do. Soft rights, such as the right to healthy air,
are typically positive. They tell government what it must
do.'' In practice, judges--unelected, unaccountable and
inexpert--often dictate what it must do.
Some political activists have decided that, the dismantling
of segregation proved that the primary means of social
improvement should be through judicially enforceable rights.
And many liberals, frustrated by the public's increasing
conservatism, are unwilling to have the patience required by
democracy--the politics of persuasion. They know that rights
claims can truncate debate and trump policy considerations
about the community's conflicting imperatives and priorities.
And ``public interest'' groups have become skilled at getting
themselves entitled to control a sphere of public policy.
They negotiate consent decrees, many of which have empowered
courts-as-legislatures to formulate public policies for 20 or
30 years. All of which confirms Sandler and Schoenbrod's
central point: Not all that lawyers do in their various
venues amounts to the rule of law, as a democracy ought to
understand that.
In responding to DeGrasse's hubris, New York might consider
Andrew Jackson's strategy. In 1832 the Supreme Court rendered
a decision favoring two imprisoned missionaries in Georgia, a
decision Jackson disagreed with, vehemently. He reportedly
said:
[[Page S2066]]
``[Chief Justice] John Marshall has made his decision, now
let him enforce it.'' Marshall could not; the missionaries
remained in prison.
New York's Supreme Court can neither tax nor spend. The
state legislature is not a party to the suit, so it cannot be
held in contempt. Perhaps it should just ignore the court's
ruling as noise not relevant to the rule of law. Which
happens to be the case.
____
[From the Wall Street Journal, Dec. 31, 2002]
Closed Doors, Open Season
(By Thomas J. Main)
Ten prisoners in a Philadelphia prison sued Mayor Wilson
Goode in the early 1980s claiming that conditions there
violated their rights. The result was a consent decree, in
1986, that limited the number of prisoners who could be held
in the city's jails.
And the result of the decree itself? ``A blood-chilling
crime wave,'' write Ross Sandler and David Schoenbrod. In 18
months, ``police rearrested 9,732 defendants released because
of the consent decree.'' They were charged with ``79 murders,
959 robberies, 2,215 drug dealing crimes, 701 burglaries,
2,748 thefts, 90 rapes 14 kidnappings, 1,113 assaults, 264
gun-law violations and 127 drunk-driving incidents.'' This is
only one of the hair-raising stories in ``Democracy by
Decree,'' (Yale, 280 pages, $30) a critique of astonishing
efforts to govern society through the miracle of what the
authors call ``institutional reform litigation.''
The tactic is simple: A crusading lawyer notices that some
public entity--a prison, a hospital, an environmental or
child-welfare agency--is performing below expectations, as
the lawyer sees it. He then finds ``parties'' willing to say
they have been injured and searches for a legal hook--a
statute, regulation or right whose violation offers the basis
for a lawsuit.
And legal hooks abound. Congress regularly passes laws with
sweeping guarantees vaguely phrased. Did the Americans with
Disabilities Act (1990) really require curb ramps at every
intersection within just five years? Did the Clean Air Act of
1970 really promise that the air will be entirely clean by
the end of the decade? (And when, precisely, is air
``clean''?) Can schools immediately offer a free and
appropriate education to all children with learning
disabilities, as the Education for All Handicapped Children
Act (1975) seemed to require?
These may be worthy goals, if they are indeed required by
statute. But they are not easily achieved. Indeed, state and
local governments are likely to act on them as they act on
everything else: incrementally, tentatively and piecemeal.
Thus it is often possible for public-interest lawyers to make
a prima facie case for one violation or another. Not that
they need do much more than that. Many public officials--
rather than submit to trial and the risk, however slim, of
draconian punishment--settle such cases by entering into
consent decrees with plaintiffs.
Consent of the sued? Public officials would rather settle
than fight.
From this point on, as Messrs. Sandler and Schoenbrod show,
the powers of elected officials ``are eroded in favor of a
negotiating process between plaintiffs' attorneys, various
court-appointed functionaries, and lower echelon officials.''
This controlling group, as the authors call it, ``works
behind closed doors'' to draft complicated decrees. Its
members bargain, log-roll and cut deals, and the judges
before whom the original suit was brought rarely intervene.
Under such circumstanes, the concerns of ordinary public
managers get short shrift. In Jose P. v. Ambach, for
instance, a consent decree dictated the terms of ``every
aspect of [New York's] special education; from staffing to
teaching and collecting data.'' With appendices, it filled
515 pages.
And once a consent decree is agreed on, it is very
difficult to change, even in the face of dramatic
developments. In 1971, for instance, the New York City
Housing Authority was accused of failing to give rent-
delinquent tenants due process. The city signed a consent
decree that imposed elaborate, court-supervised procedures
for eviction. Twenty years later, the crack-cocaine epidemic
hit public housing, and everyone--city officials and law-
abiding tenants alike--wanted to speed along the eviction of
drug-dealers.
The decree's controlling group, however, objected to
quicker procedures. Its members even disputed ``whether
living next door to a drug dealer actually increased the risk
of criminal violence.'' It took two years of legal wrangling
before the Housing Authority could make its changes, and
by then the tenants had hired new lawyers to fight
``against the lawyers who theoretically were representing
them.''
It should be said that Messrs. Sandler and Schoenbrod do
not oppose all public-interest litigation. They note that
lawsuits have helped put an end to racial segregation and to
the abominable conditions in various prisons and mental
institutions. They accept court intervention in even less
dramatic cases, as long as some common-sensical reforms are
put in place, like opening controlling-group meetings to the
public and making it easier to change outdated provisions.
They note as well that the rights asserted by Congress are
too often ``aspirations rather than practical
possibilities.'' In any case, making minute policy
adjustments is best left to the political branches of
government, not the courts.
One of the book's most striking anecdotes illustrates this.
In the early 1990s, New York tried to install sidewalk
toilets, only to run into the problem of making them large
enough for wheelchairs--as required by regulators
interpreting federal law--without making them inadvertent
criminal dens. At a public meeting, the spokesmen for the
toilets' maker, whose designs were apparently not generous
enough, found themselves confronted by angry citizens in
wheelchairs. Then in walked another advocate, whose
disability, the authors write, ``was that he grew to be only
about three feet high.''
``I don't care about wheelchair accessibility,'' this man
declared belligerently. ``I can't reach the higher toilet
seat in the wheelchair-accessible toilets. What about that?''
To this question, the law has no good answer.
____
[From the Legal Times, May 5, 2003]
The Corrosive Consent Decrees
(By Ross Weiner)
Democracy by Decree: What Happens When Courts Run
Government is a thought-provoking book about the fundamental
issues of democracy, federalism, and separation of powers.
Authors Ross Sandler and David Schoenbrod put forward a
forceful critique of the consent decrees that often result
from institutional reform litigation and have, over time,
reduced the power of democratically elected state and local
institutions to make public policy choices.
Yet Democracy by Decree is not a wholesale attack on class
actions or the consent decrees that often settle these cases.
The authors, who both teach at New York Law School, are
content to offer reform proposals, but do not advocate
removing the judiciary from its important place in protecting
the rights of aggrieved plaintiffs. But they do forcefully
attack the habit of using courts, and class actions in
particular, to make public policy decisions that are better
left to the democratically elected.
The authors argue that the courts are the proper forum for
remedial action or for limited prospective action to ensure
that constitutional rights are not violated, but that
institutional reform litigation creates many negative
unforeseen consequences when it encroaches upon the elected
branches of government by instituting widespread oversight of
public institutions.
Sandler and Schoenbrod trace the historical development of
institutional reform litigation to the civil rights movement.
They argue that the heroic achievements of civil rights era
attorneys in dismantling segregation inspired a generation of
attorneys to become ``public interest'' lawyers to fight for
social change. Many elected Southern officeholders at the
time actively worked to subvert the constitutional rights of
their African-American constituents, and this massive
resistance forced the judiciary to take over the management
of several public institutions to ensure that African-
Americans could freely exercise their constitutional rights.
They note that the difference between the attitudes of local
and state officeholders during the civil rights era and the
attitudes of later elected officials is often lost on these
public interest attorneys.
The authors argue that, in much of the recent institutional
reform litigation, the rights at issue and the behavior of
elected officials is less stark than that during the civil
rights era. While their policies may in fact violate
statutory rights, their intentions are far less nefarious.
Rather, this litigation often concerns statutory rights or
federal aspirations, while local elected officials attempt to
balance public policy choices with their constituencies' own
limited financial wherewithal. These officeholders often
support the underlying rights being enforced, but are simply
unable to muster the public resources to attain those
unfunded federal mandates. Such new rights often call for
government to provide something to its citizens, unlike a
more traditional right, which called for government to
refrain from taking something away from the citizenry.
The authors postulate that most of these officeholders are
a far cry from the Southern segregationists, but that
the public interest lawyers and the judiciary have devised
standard remedial actions that do not differentiate
between the attitudes of officeholders and the rights
being enforced.
Democracy by Decree provides many examples of cases that
illustrate the perils and unforeseen consequences of
institutional reform litigation. Jose P. v. Ambach, which
began in 1979, shows how the judicial process usurped special
education policy in New York City.
This case has its roots in the congressional passage of the
Education for All Handicapped Children Act. The legislation
contained vague goals, but with no clear mechanism outlining
for states and localities the means to achieve the nebulous
ends outlined in the statute. The federal right to special
education created by this statute begat class action
litigation to enforce such a right when New York City could
not comply with all the goals outlined in the statute.
The litigation ultimately resulted in a court finding New
York City in violation of the statute, and affirming a very
broad consent decree among plaintiffs and city officials,
which mandated many changes to special education policy in
New York City. Over the decades in which this decree has been
in place, the court and the plaintiffs' attorneys have had
the authority to reject or approve all changes to the city's
special education program. This has shifted policy-making
[[Page S2067]]
power from open forums among the elected City Council and
city agencies to closed-door negotiations between attorneys.
The authors show how this has led to many unintended
consequences, including the locking into place of special
education policy designed more than two decades ago, which
now may be outdated; the reduction of money available for
students in nonspecial education classes; and the awarding to
plaintiffs' attorneys of a significant degree of control over
a large portion of the city's budget.
An intended consequence of these types of consent decrees
is to limit the variety of policy choices available to
elected officials. The authors contend that when public
interest attorneys were confronting massive resistance, this
was the correct choice for the judiciary. But when
confronting public officials who attempt to deal with such
issues by balancing the proper amount of funding for special
and nonspecial education programs, more flexibility is
required.
The authors argue that it is sometimes appropriate to
restrain the future actions of private citizens indefinitely
in private litigation, but in institutional reform
litigation--in the absence of an intent to impede the
constitutional rights of individuals--present day
officeholders should not be allowed to sign away the rights
of the people and their future representatives to make public
policy choices.
Sandler and Schoenbrod emphasize sympathetically that they,
too, were once public interest attorneys. And they avow their
admiration for the efforts of civil-rights lawyers to fight
segregation. Thus, the tone of the book feels similar to that
of a journalist paying homage to Bob Woodward and Carl
Bernstein, while attacking the type of journalism that may
have developed in the wake of Watergate. Such rhetorical
shields appear to be attempts to protect their work from
political criticism by public interest attorneys and the
lobbying groups they populate. Their homage to the roots of
public interest litigation does bolster the credibility of
Democracy by Decree, and it is to their merit that they do
not resort to the tired clichs often heard in the political
arena about judicial activism.
At its heart, Democracy by Decree is an ode to
representative government. The authors demonstrate that the
judiciary has an important role in protecting the rights of
citizens, but argue convincingly that when it comes to making
basic public policy choices, representative democracy may not
be perfect, but it is often better than any viable
alternative.
Mr. ALEXANDER. Mr. President, I am pleased to say that the Senator
from Arizona, Mr. Kyl, the Senator from Texas, Mr. Cornyn, and the
Senator from Nebraska, Mr. Nelson, have joined Senator Pryor and me in
introducing this bill. Congressman Jim Cooper from Tennessee will be
introducing similar legislation in the House of Representatives.
This is bipartisan legislation that will help slow down the practice
of democracy by decree--Federal courts running State and local
governments.
Consent decrees--judicial orders based on the consent of parties
engaged in a civil court action--can be an effective judicial tool when
drawn narrowly and with respect for State and local policy choices.
Congress passes laws and sets conditions on grants that must be
followed by State and local governments, and when they are not followed
it is important for citizens to be able to turn to the courts to see
that the rule of law is upheld. That is at the heart of the idea of
federalism.
Unfortunately, in many cases, rather than preserve the separation of
powers between the Federal Government and State governments, consent
decrees have done just the opposite. What we are seeing in State after
State is government policy controlled by courts and judges instead of
by Governors, mayors, and legislatures.
In Maine, in 2003, the Governor had to propose deep cuts to mental
health services for children because consent decrees made it almost
impossible to cut other parts of the budget.
In New York City, Latino parents are outraged because schools are
forcing their children into bilingual education programs when the
parents want them in all-English classes. Why? Because for the last 30
years, bilingual education in New York has been mandated by a consent
decree that the schools have no choice but to obey.
In Los Angeles, a consent decree has forced the Metropolitan Transit
Authority to send $110 million per year on improving city buses. That
is 47 percent of its budget just on buses, leaving the remaining 53
percent pay for street and freeway improvements, rail systems,
transportation planning programs, and the reduction of its debt.
Meanwhile, ridership on MTA buses increased only marginally in the
first 6 years of judicial management and residents of Los Angeles
complain that other MTA services are suffering.
The State of Tennessee has also become a victim of democracy by
decree.
In Tennessee, like in every State, governments do not have the luxury
we have up here of being able to deficit spend. State governments need
to balance the budget, and I can speak from experience when I say that
is a process that involves making excruciating choices. In Tennessee,
however, Governor Bredesen has had fewer choices to make because the
Federal court has refused to let him do what he needs to do to balance
the budget.
Late last year, it became apparent that the rising cost of providing
Medicaid--and in the case of Tennessee, we have a program called
TennCare on a waiver from CMS would result in an additional $650
million in costs to the State of Tennessee in the upcoming 2006 budget.
Now, Governor Bredesen has a plan that he says would result in costs
only rising $75 million in the next year, but he can not implement it
because he is constrained by a series of consent decrees. These consent
decrees prescribe policies on medical screenings for children, require
the State to provide patients with high-cost, brand-name prescription
drugs, and affects the ability of the State to verify the eligibility
of the patients it serves.
On the face of it, it sounds like these are all good things. Of
course we want children to get screenings that will help prevent
serious illness and of course we want to make sure patients have
prescription drugs. The problem is that whereas the Federal Medicaid
laws say one thing, Federal judges are turning that into a whole series
of requirements that States are then bound by for as long as a Federal
judge decides it is necessary.
For example, regarding medical screenings for children: Medicaid
law--section 1905(r)(5) of the Social Security Act requires that
children receive ``such other necessary health care, diagnostic
services, treatment and other measures . . . to correct or ameliorate
defects and physical and mental illnesses under the State plan.'' Now,
from that one line of Federal code, the court entered a consent decree
that established a deadline for Tennessee to improve its performance to
ensure that 80 percent of eligible beneficiaries were receiving this
screening.
Nonetheless, even in the face of enormous budget pressures, the
Federal courts are going to force Tennessee to maintain the programs
that will keep it on track to meet that 80 percent goal. So Governor
Bredesen had to make a painful decision; he had to cut 323,000 adults
from TennCare and limit benefits for the remaining 396,000 adults.
Let's be clear here--these beneficiaries are people that the State of
Tennessee has decided to provide health care services to even though
the Federal Medicaid laws do not require the State to do so. These are
optional populations and services, and Governor Bredesen was exercising
his option not to provide these services.
But hang on a minute. Maybe they are not as optional as we all
thought. On January 29, 2005, Judge William J. Haynes, Jr., a U.S.
District Court Judge, declared that he must approve any changes to
TennCare. So now, the Tennessee State Legislature is waiting for Judge
Haynes to make a decision and give the State legislature permission to
change the State health insurance program and balance the budget.
In all of these cases, and in many more; we see courts and lawyers
making decisions like this. Not just protecting rights, but running the
government. Courts are making policy choices that are supposed to be
made by elected Governors, mayors, legislators, city councilmen and
women, school board members, and any number of other officials.
When courts run the government, that is no democracy. Federal courts
are not accountable. They do not have to answer to an electorate for
the choices they make. This is not good government.
The Federal Consent Decree Fairness Act contains three main
provisions that address many of these concerns.
First, this bill lays out a series of findings that will guide
Federal courts in approving future consent decrees. The findings give
congressional endorsement to the Supreme Court's call
[[Page S2068]]
for limiting decrees to make sure they are not unreasonably broad. The
findings also advocate the entry of consent decrees that take into
account the interests of State and local governments and give due
deference to their policy choices. Finally, the findings also make it
clear that consent decrees should contain explicit and realistic
strategies for ending court supervision.
Second, the bill creates ``term limits'' for consent decrees. It
provides State and local governments with an opportunity to revisit the
consent decree after either 4 years or 6 months after the end of the
term of the State or local official who consents to the agreement. Four
years is a reasonable amount of time to evaluate the success of
judicial management and to determine whether or not it is still
warranted. Alternatively, a provision allowing a decree to be revisited
following the election of new State and local officials will give these
officials the opportunity to bring fresh ideas to the table. I am sure
that many of my colleagues who served as State and local officials can
attest to the frustration of coming into office and having your hands
tied by an agreement that the last mayor, attorney general, or Governor
made.
Finally, this bill shifts the burden of proof from the State and
local governments to the plaintiffs in the case. Under the current law,
State and local governments must prove that a decree is no longer
necessary to protect plaintiffs' rights; that is, they must prove a
negative. They must also show that they have complied substantially
with all the terms of the existing decree. However, as I have already
mentioned, the terms of these decrees often go far beyond simply
upholding the plaintiffs' rights. By shifting the burden of proof, this
bill requires the plaintiffs to show that judicial management is still
necessary. It allows parents like those concerned about the New York
bilingual education programs to make the point that they do not think
they still need judicial management of this program.
Passage of my bill will not immediately end the consent decree
problem. We have separation of powers in our government, and there is
only so much Congress can do. However, what Congress can do, and what I
hope to do with this legislation, is level the playing field so that
State and local governments can have a fair shot at getting back the
authority that is rightfully theirs.
Judicial management has become a national concern. Federal courts are
running police departments, school districts, foster care programs,
State health insurance programs, and numerous other programs that are
rightfully left to the responsibility of State and local elected
officials.
No less an authority than the Supreme Court has recognized the
overreaching of the Federal courts. In 2004, the court handed down a
decision in the Frew v. Hawkins case. Although the court upheld the
consent decree in this case, its opinion recognized the dangers of
consent decrees and contained some guidance as to how to address these
concerns.
I think the Supreme Court's own words say it most effectively:
The state officials warn that enforcement of consent
decrees can undermine the sovereign interests and
accountability of state governments. . . . The concerns they
express are legitimate ones. If not limited to reasonable and
necessary implementations of federal law, remedies outlined
in consent decrees involving state officeholders may
improperly deprive future officials of their designated
legislative and executive powers. They may also lead to
federal court oversight of state programs for long periods of
time even absent an ongoing violation of federal law.
Referencing a previous Supreme Court decision involving consent
decrees, the Court went on to say:
`principles of federalism and simple common sense require the
[district] court to give significant weight' to the views of
government officials. . . . principles of federalism require
that state officials with front line responsibility for
administering the program be given latitude and substantial
discretion.
The federal court must exercise its equitable powers to
ensure that when the objects of the decree have been
attained, responsibility for discharging the State's
obligations is returned promptly to the State and its
officials. As public servants, the officials of the State
must be presumed to have a high degree of competence in
deciding how best to discharge their governmental
responsibilities. A State, in the ordinary course, depends
upon successor officials, both appointed and elected, to
bring new insights and solutions to problems of allocating
revenues and resources. The basic obligations of federal law
may remain the same, but the precise manner of their
discharge may not.
The Federal Consent Decree Fairness Act comes at a time when
President Bush has called on Congress to offer more flexibility to
State governments to manage Medicaid. That flexibility has to in part
address the Federal courts' assumption of judicial control of these
programs. This bill is one way of doing that. In a broader sense too,
this bill is one small piece of the effort to promote federalism in the
United States.
In recent years, it has become the trend to treat States as the
wayward little brother of the Federal Government. That was never the
intent of the Founding Fathers. State governments provide the basic
necessities of life that citizens demand. They are the laboratories
that can serve as models of good government that the rest of the
country can follow. They are our partners, not our wards. It is time we
begin to treat them that way.
This bill is the first of what I hope will be many steps toward
restoring the relationship between the Federal Government and the State
and local governments that do so much.
Mr. KYL. Mr. President, I join Senators Alexander and Pryor in
introducing the Federal Consent Decree Fairness Act. This important
legislation, by placing reasonable limits on the duration of judicial
consent decrees, will help restore democratic control over State and
local institutions.
Lawsuits against public schools, welfare agencies, and other State
and local government agencies and programs often end in judicial
consent decrees. Consent decrees are binding, legal agreements between
plaintiffs and institutions specifying how a particular problem will be
remedied.
Two years ago, two professors at the New York Law School, Ross
Sandler and David Schoenbrod, published an important book about the
effect of consent decrees on our society: Democracy by Decree: What
Happens When Courts Run Government.'' The professors' book describes
how unelected and unaccountable judges and attorneys control many State
and local institutions by imposing rigid plans through consent decrees
and how these decrees prevent newly elected officials from altering
policies in response to the changing wishes of voters. These decrees
allow plaintiffs' lawyers and judges to assume the power to make policy
and dictate in detail what shall constitute compliance with the decree.
They reflect a multitude of motives and often are based on
considerations of the moment, yet they can bind public institutions for
decades.
While plaintiffs must allege violations of rights when filing their
cases, the consent decrees that are produced by the litigation often
have little connection with the enforcement of those rights. Instead,
the decrees in some cases simply reflect the policy preferences of the
controlling group behind the litigation, including the plaintiffs'
attorneys and special interest groups.
One example from ``Democracy by Decree'' illustrates the nature of
this phenomenon. When Congress enacted the Education for All
Handicapped Children Act, it created a Federal right to special
education. This new right required that all handicapped children
receive ``free appropriate public education.'' After the law's
enactment, local school boards had difficulty complying with the new
Federal standards. As a result, parents and children's advocates
brought many lawsuits in Federal courts, including a New York case that
was titled Jose P. v. Ambach.
The Jose P. case ended with a consent decree that dramatically
shifted control over public education in New York. It transferred power
over special education from the board of education and elected
officials to the Federal court. Judge Nickerson, the U.S. District
Court Judge assigned to Jose P., selected a ``special master'' and
extended to him the enormous power to decide what was ``appropriate to
provide the requisite public education to handicapped children in New
York City.''
In an affidavit to Judge Nickerson, New York City School Chancellor
[[Page S2069]]
Macchiarola described how the litigation forced attention to a vast
succession of special education and administrative issues, and diverted
teachers' attention from the education of children. The special
master's orders elevated speed of child placement above all other
educational priorities. The mass processing of children with
disabilities forced by the order, in turn, directly conflicted with
efforts to educate these children. Chancellor Macchiarola wrote:
I believe that however closely the judgment may have
approximated the best professional judgment at a particular
time, it is a mistake to elevate any set of practices and
procedures to the level of an inflexible mandate. Such an
approach robs the school system of the flexibility it needs
to adapt to changing circumstances, increasing practical
experience with alternative approaches to implementation, and
a constantly growing understanding of the nature and
dimensions of the educational issues we face.
In April 1984, New York City Mayor Ed Koch created the Beattie
Commission to review the city's special education programs. Five years
after Judge Nickerson issued the Jose P. consent decree, the city's
programs had grown to serve 116,000 children at a cost of $850 million,
yet it still did not meet the mandates of Jose P. The Beattie
Commission found that special education had been transformed into a
program for handling any child who for one reason or another performed
at less than expected levels or who caused trouble in the classroom.
Eighty-nine percent of all referrals for evaluations were either for
poor academic performance, bad behavior, or both. The program had begun
to function as a quickly expanding and increasingly expensive general
education program.
The New York City Board of Education officials who worked under the
decree conceded that Jose P. caused a restructuring of special
education, but they emphasized that the scope of the judgment and the
detailed procedures that it required shifted attention from what was
truly best for the children to a focus on numerical compliance with
rigid timelines.
In ``Democracy by Decree,'' Sandler and Schoenbrod explain:
The most notable fact after more than twenty years of court
supervision is the size of the special education program. For
the 1999-2000 school year, out of a school system of 1.1
million children, 168,000 received special education--three
times the number when Jose P. was filed. Public school costs
for these services reached $2.7 billion, 25% of the entire
school budget. The board spends in excess of $26,000 per
student in special education, nearly three times more than
the resources devoted to students in regular education.
Jose P. failed to produce sound special education because
it was premised on a basic misunderstanding of institutional
change. The court set about to reform a single program in a
vast educational structure--a fool's errand because special
education could not be reformed without reforming the entire
system. What was needed was to overhaul the system, only part
of which was special education. The New York City board of
education could not stop the gaming of special education
unless it also stopped gaming in other areas such as
seniority, union perks, principal rights, custodial
authority, and inadequate programs of all kinds, from
athletics to grammar. What the court order did was cause the
board to focus effort on one area of institutional
performance without altering the culture of which it was a
part. That, and the very rigidity of the Jose P. decree and
the process it required, made it more difficult for new
mayors, new chancellors, or new boards of education to
improve the entire system.
In their handling of cases such as Jose P., the courts have moved
away from enforcing rights and toward a managerial process of
overseeing the pursuit of general goals.
The Jose P. order and its process could conceivably continue without
end. The court never described what the board must do to terminate
supervision. Sandler and Schoenbrod plead that our conclusion
should not be to fix blame on the individuals in charge of
the case. They are superbly trained, well intentioned, and
widely recognized as outstandingly successful judges and
lawyers. Nor should that attention be fixed on questioning
the worthy objective of special education. Rather, the
failure of such competent people in pursuit of such a needed
objective should compel attention on whether we should
continue to rely so readily on courts to manage the complex
institutions of state and local governments.
Senator Alexander's bill is an important step in addressing the
structural failures behind cases like Jose P. I look forward to the
bill's consideration in the Senate.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Mr. President, before the Senator departs the floor, I
commend my colleague from Tennessee for his comments. I will take a
close look at them myself.
As usual, the Senator from Tennessee makes an awful lot of sense. The
question raised by our colleague from Alabama is an appropriate
question. I underscore the last point he made, as well, this idea of
dumping on the courts a lot of time to resolve matters which are thorny
and difficult. It is a lot easier to do that.
We have learned painfully in the area of education, the area of
equalization formulas, 47 States have enacted or required through the
courts to provide equalization of funding for elementary and secondary
education. I don't know of a single State that has done it yet because
the political community has passed the ball on, in a sense, to the
courts without addressing the issue in a fundamental way themselves. It
is another example of Congress not coming to terms with some of the
difficult issues.
My colleague has pointed out the one dealing with Medicaid. I applaud
him for his comments. I intend to take a close look at his bill and may
join him. I thank him for his comments this morning.
Mr. President, I have been present for most of the votes the past 4
or 5 days but not engaged in the debate on the bankruptcy bill. The
reason for my absence is because my wife and I were very blessed on
Tuesday morning, in the wee hours, to become parents again. So for the
past 4 or 5 days if I looked a little sleepy to my colleagues it is
because we have been up with a wonderful new infant. This child arrived
a little earlier than expected. I intended to be much more involved in
this debate than I have had the ability to. I apologize to my
colleagues and to others who have had a strong interest in this
legislation.
This morning I would like to take a few minutes and talk generally
about the bankruptcy bill, and also to propose a couple of amendments
which I will describe briefly. I realize any votes on these amendments
may occur on Monday or Tuesday, depending on conversation with the
majority in terms of how they will handle these matters.
The fundamental premise behind the bankruptcy bill, as I understand
it and in listening to my colleagues over the last 7 or 8 years who
have talked about this legislation, is that more and more consumers
across this great country of ours are living rather lavish lifestyles
and then filing for bankruptcy to avoid paying the debts which they
have incurred as a result of their irresponsibility. This is one of the
major arguments for this legislation--that bad actors are depriving
credit card issuers of money owed to them as a result of people
lavishly using these credit cards to acquire whatever products or
services they want. This premise, I argue, is categorically and
demonstrably false.
Let me, first, begin with the first chart, if I may, which lays out
the statistics of what happens to an individual in America in the two
years before they file for bankruptcy. I hope it will give my
colleagues some sense of what actually is going on with these families.
Who are these families? Are these people living lavish lifestyles,
accumulating debts that they should have been more responsible about,
and then trying to avoid their obligations by declaring bankruptcy?
Health Affairs, a respected organization in this field, did an
analysis of what happened in the 2 years prior for people who file for
bankruptcy. The study revealed that sixty-one percent of those who
filed for bankruptcy during the previous 2 years had gone without
needed medical care, 50 percent did not fill doctors' prescriptions
they had been given, 30 percent had their utilities shut off, 22
percent went without adequate nutrition and food, and 7 percent moved
elderly parents to cheaper care facilities across the country. These
are hardly people who are leading what you would call a lavish
lifestyle.
In fact, these are people who are desperately trying to hold their
families together, who cannot meet the kind of responsibilities despite
their best efforts.
Credit card issuers, I point out, are earning enormous amounts of
money in
[[Page S2070]]
income from fees, penalties, and interest charges. As one expert said:
The idea that companies are losing their shirts on
bankruptcies is [just not true at all].
Mr. President, I ask unanimous consent that an article that appeared
this morning in the Los Angeles Times be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Los Angeles Times, Mar. 4, 2005]
Credit Card Firms Won as Users Lost
(By Peter G. Gosselin)
Washington.--In the eight years since they began pressing
for the tough bankruptcy bill being debated in the Senate,
America's big credit card companies have effectively
inoculated themselves from many of the problems that sparked
their call for the measure.
By charging customers different interest rates depending on
how likely they are to repay their debts and by adding
substantial fees for an array of items such as late payments
and foreign currency transactions, the major card companies
have managed to keep their profits rising steadily even as
personal bankruptcies have soared, industry figures show.
As a result, while they continue to press for legislation
that would make it harder for individuals to declare
bankruptcy, the companies have found ways to make money even
on cardholders who eventually go broke.
At the same time, under the companies' new systems, many
cardholders--especially low-income users--have ended up on a
financial treadmill, required to make ever-larger monthly
payments to keep their credit card balances from rising and
to avoid insolvency.
``Most of the credit cards that end up in bankruptcy
proceedings have already made a profit for the companies that
issued them,'' said Robert R. Weed, a Virginia bankruptcy
lawyer and onetime aide to former Republican House Speaker
Newt Gingrich.
``That's because people are paying so many fees that
they've already paid more than was originally borrowed,'' he
said.
In addition, some experts say, the changes proposed in the
Senate bill would fundamentally alter long-standing American
legal policy on debt. Under bankruptcy laws as they have
existed for more than a century, creditors can seize almost
all of a bankrupt debtor's assets, but they cannot lay claim
to future earnings.
The proposed law, by preventing many debtors from seeking
bankruptcy protection, would compel financially insolvent
borrowers to continue trying to pay off the old debts almost
indefinitely.
``Until now, the principle in this country has been that
people's future human capital is their own,'' said David A.
Moss, an economic historian at Harvard University. ``If a
person gets on a financial treadmill, they can declare
bankruptcy and have what can't be paid discharged. But that
would change with this bill.''
Debate about the bill continued Thursday, with the
Republican-controlled Senate refusing to limit consumer
interest rates to 30%. The vote was a bipartisan 74 to 24 to
kill a proposed amendment by Sen. Mark Dayton (D-Minn.).
Senate passage of the bill is expected next week.
The House has not taken up the issue this year, although it
passed a version of the bill last year, as did the Senate.
Attempts to reconcile the two bills failed.
Industry officials have sought to minimize the role of
credit card companies in pushing for bankruptcy legislation
since 1998. They have argued that the bill introduced last
month by Republican Senate Finance Committee Chairman Charles
E. Grassley of Iowa and supported by President Bush would
affect about 5% of the roughly 1.6 million Americans who file
for bankruptcy each year.
They have portrayed the measure's principal target as high-
income individuals who are abusing the law to escape their
debts.
``The bottom line is that there are people out there who
are able to pay their bills who are not paying,'' said Tracey
Mills, a spokeswoman for the American Bankers Assn., which
represents most of the major credit card companies.
But consumer advocates, many academics and some judges and
court officials argue that the bill would sharply reduce the
number of Americans able to file for bankruptcy, even in
instances where doing so would buy them time to repay their
debts.
The critics argue that people unable to file would be at
the mercy of increasingly aggressive efforts by lenders--
especially credit card companies--to raise fees and boost
collections.
People like Josephine McCarthy, for instance, a 71-year-old
secretary at the Salem Baptist Church, less than a mile from
where the Senate bill is being debating.
According to papers in her recent bankruptcy, McCarthy
discovered at about the time of her husband's death in 2003
that the couple had a $4,888 balance on a Providian Financial
Corp. Visa card and another $2,020 balance on a Providian
Mastercard.
Over the two years from 2002 until early 2004, when she
filed for bankruptcy, McCarthy charged an additional $218 on
the first card and made more than $3,000 in payments, the
court papers show. But instead of her balance going down,
finance charges--at what the bankruptcy judge termed a
``whopping'' 29.99% rate, together with late fees, over-limit
fees and phone payments fees--pushed what she owed up to more
than $5,350.
In the case of the second card, the papers show that
McCarthy charged an extra $203 and made more than $2,000 in
payments, but again fees and finance charges pushed the
balance up.
McCarthy refused to comment on the case. A spokesman for
Providian could not be reached last night.
But court papers show that McCarthy eventually paid all the
bills in the case, including back taxes. The way she did it,
using provisions of bankruptcy law, illustrates one of the
problems with the proposed new law, critics say.
McCarthy had been making mortgage payments on two houses.
She wanted to sell one of the houses to pay off her debts,
but the house was entangled in legal difficulties. By
declaring bankruptcy, she was able to stop the clock on her
escalating credit card debts and give her lawyer time to
clear up the legal problem, enabling her to sell the house
and pay off the bills.
Under the proposed new law, McCarthy, who makes about
$55,000 a year, would have had a much harder time qualifying
for the bankruptcy protection that allowed her to pay
creditors.
``The McCarthy case shows how hard-working people making
good incomes can end up in situations that they can't dig
themselves out of unless they file for bankruptcy,'' said
Weed, her lawyer.
Credit card companies have come in for harsh criticism in
recent years for their penalty fees and the ``risk-based
pricing'' under which they charge customers different
interest rates depending on their credit histories and their
likelihood of paying.
Consumer advocates have accused firms of not adequately
disclosing such controversial practices as universal default,
when a company can jack up a cardholder's annual percentage
rate, often to ``more than 30%, based on the cardholder's
performance with another creditor, not the card company.
Regulators and law enforcement officials have accused
companies of deceptive practices. In 2000, the U.S. Office of
the Comptroller of the Currency and the San Francisco
district attorney's office ordered Providian to pay $300
million in restitution after customers complained that the
company didn't credit their payments on time and then imposed
late fees.
A stream of court cases involving credit card companies has
produced public outrage in various parts of the country.
In Cleveland, a municipal court judge tossed out a case
that Discover Bank brought against one of its cardholders
after examining the woman's credit card bill.
According to court papers, Ruth M. Owens, a 53-year-old
disabled woman, paid the company $3,492 over six years on a
$1,963 debt only to find that late fees and finance charges
had more than doubled the size of her remaining balance to
$5,564.
When the firm took her to court to collect, she wrote the
judge a note saying, ``I would like to inform you that I have
no money to make payments. I am on Social Security
Disability. . . . If my situation was different I would pay.
I just don't have it. I'm sorry.''
Judge Robert Triozzi ruled that Owens didn't have to pay,
saying she had ``clearly been the victim of [Discover's]
unreasonable, unconscionable and unjust business practices.''
Efforts to reach Owens were unsuccessful A spokeswoman for
Discover said she could not comment on the case.
Analysts said that lost in the uproar over particular
practices and cases is the fact that the credit card industry
has almost completely remade itself in the years since it
began pushing for passage of the bankruptcy bill--a makeover
that has left some analysts wondering why the industry needs
the changes in bankruptcy law.
``The idea that companies are losing their shirts on
bankruptcies is a lot of bull,'' said Robert B. McKinley,
chief executive of CardWeb.com, a Frederick, Md., consulting
group that tracks the credit card industry. ``With these
rates and fees, the card industry is a gravy train right
now.''
Mills, the bankers association spokeswoman, said
bankruptcies affected all American households in the form of
higher costs and lower returns on investments.
As recently as the late 1980s, credit card companies
offered a one-size-fits-all card with a fixed interest rate
and an annual fee. Virtually all cards went to middle-class
borrowers with good credit histories; issuing cards to poor
or high-risk borrowers was almost unheard of.
But in the early 1990s, companies such as AT&T and General
Motors began issuing cards with variable rates and no fees,
increasing competition. And by the middle of the decade, card
companies were finding their traditional middle-class markets
saturated.
Their response: lend to riskier customers and make up for
the danger of more defaults by charging higher rates and then
new fees.
McKinley, the industry analyst, said the firms were helped
by a 1996 Supreme Court case that gave card companies new
protections against state regulation of fees.
``That really opened the flood gates. It set off a fee
frenzy,'' he said.
Mr. DODD. Taking the Bankruptcy Act goes back to the earliest days of
our Republic. Article I, section 8 of the U.S. Constitution mandates
that Congress pass laws dealing with bankruptcy. I believe our Founders
did so
[[Page S2071]]
because they realized there was inherent, fundamental value to allowing
people who find themselves under difficult circumstances to be able to
get out from underneath those circumstances, to discharge their
responsibilities to the best extent possible, and then to get back on
their feet again. That is a social value from which all Americans
benefit.
Now, will there be people who should have been far more responsible?
Absolutely. But I happen to believe that the overwhelming majority of
people who are forced to file for bankruptcy do so most reluctantly,
only because there are no other avenues available to them which they
can deal with their problems. We have with a responsibility, to
remember what our Founders envisioned in article I, section 8, which
calls upon Congress to pass bankruptcy legislation.
I would like to add at the outset of these remarks, if I can, some
general understanding of what is happening to American consumers and
their indebtedness.
First of all, in terms of household savings, in 1993, the savings
rate was 4.3 percent of the gross domestic product nationally. In 2003,
it was at 1 percent of gross domestic product. In the third quarter of
2004, savings rates were less than one-half of 1 percent of the gross
domestic product. The national savings rate is declining rapidly in
this country. At a time when we ought to be doing everything we can to
encourage consumers to begin to save more, to participate in their own
long-term financial needs, we are going in the exact opposite direction
of where we ought to be heading in this country.
Let me add, simultaneously, that according to the Federal Reserve
Board, the United States has over $2.1 trillion in consumer debt.
Consumer debt is truly skyrocketing. Almost one-half of that $2.1
trillion in consumer debt is revolving credit--to credit cards and home
equity loans--nearly $800 billion of the $2.1 trillion.
Our nation's savings rates are less than one-half of 1 percent of our
gross domestic product--down from over 4 percent just a few years ago.
Our nation's consumer debt has skyrocketed to $2.1 trillion, $800
billion of which is due to credit cards and home equity loans.
We are going in the absolute wrong direction. The questions we ought
to be asking as we debate and discuss this bankruptcy bill is: Does
this legislation contribute in the 21st century to encouraging more
savings? Does it do anything at all to try to reduce consumer debt?
Does this bankruptcy bill do anything to reduce the number of
bankruptcies and effect the underlying causes of bankruptcy.
Certainly, consumers bear responsibility in terms of how they handle
their money and the obligations they incur to those who extend them
credit. However, there is a commensurate responsibility, I believe, on
the part of those who extend credit. Creditors must make sure they are
extending credit in a responsible way, with prudent underwriting
standards. If they extend credit to those who can least afford it,
charging them incredibly high rates and packed with hidden fees and
costs, and with little or no expectation that they will have the
ability to repay the debts incurred, then it seems to me that their
charges of personal responsibility is wholly inappropriate.
If we are going to try to increase savings rates and reduce consumer
debt in this country, then we ought to ask ourselves whether or not
this bill before us contributes to those important goals.
Now, again, proponents of this legislation have wrapped themselves,
if you will, in the flag of personal responsibility. The real purpose
of the legislation, they argue, is to punish those who abuse our
bankruptcy system, who raise costs to all consumers. The creditors are
being forced, they argue, to raise prices on a variety of goods and
services because of so-called bad actors who abuse the Bankruptcy Code.
They would like us to believe that those bad actors are the real
culprits behind why creditors, such as credit card issuers, are
charging these incredibly high rates, using hidden, undisclosed fees
and engaging in deceptive predatory practices.
I would like to dispel, if I can, these myths. Nothing in this bill,
in my view, is going to help consumers. Let me repeat that. Nothing in
this legislation will help consumers. The legislation, I would argue,
will only help creditors recover more money from debtors, most of whom
have been forced to declare bankruptcy because of emergency medical
expenses or due to the loss of a job or as a result of a divorce.
Let me put up the second chart, if I can, to make that point for my
colleagues and others who may be interested in this debate. We are
told, again, that 46 percent--almost half--of the 1.5 million
bankruptcies taken annually are as a result of illness. Mr. President,
46 percent as a result of illness, alone.
I mentioned briefly at the outset the reason I have not been as
engaged in this debate over the last 4 days is because of the arrival
of my new daughter in the wee hours of Tuesday morning. As I went to
the nursery to see my new daughter I looked across the hall of the
hospital, located in Northern Virginia. I saw where the premature
infants were being cared for in incubators, and I saw the families with
their premature infants. Many of the families did not strike me as
people living lavish lifestyles at all, struggling with a new infant
who is in a very fragile condition inside an incubator.
I do not need to tell anyone the costs associated with those type of
medical challenges. I suspect, unfortunately, that a lot of these
people do not have health insurance. As I watched them come in and out
of that nursery to be with their newborn child in an incubator, I
suspected that many of them are going to have costs far beyond anything
they ever imagined. The idea, that somehow, we ought to penalize people
because of a newborn in their life, who are going to have incredible
increased costs, seems to me to be terribly wrongheaded.
As I stated earlier, 46 percent, of the 1.5 million bankruptcies
annually occur because of medical causes. Of the remaining 54 percent,
we know the majority of that 54 percent is due to job loss and divorce
in the country--not the lavish lifestyles of bad actors that the credit
card companies would suggest.
This legislation will injure honest, hard-working Americans, in my
view, who fall on hard times through no fault of their own.
Let's just take a few steps back, if we can. What is the reason we
have bankruptcy laws? The reason we have a Bankruptcy Code is because
life, sometimes, just deals people all across our country, regardless
of who they are or where they come from, a bad hand. People get dealt a
bad hand every now and then. And we happen to believe, as a society, it
is important to give people a fresh start in our Nation, an opportunity
to overcome the financial misfortunes that have struck them, such as
those families I have just described that I watched with premature
infants.
This principle is so fundamental to our Nation that our Constitution
expressly lists the establishment of uniform bankruptcy laws as a
congressional responsibility. It seems that the Framers understood that
society is better off if we can find an orderly way to allow people to
pay off their debts to the best degree possible. It is critical to
helping people to get back on their feet as productive citizens.
Regrettably, that principle seems to suffer, in my view, at the hands
of this legislation.
Recent evidence supports the idea the vast majority of people who
file for bankruptcy do so because of some financial crisis beyond their
control that has plunged them into debt they cannot avoid.
A recent study, conducted in early 2005 by a team of researchers at
Harvard University, confirmed that nearly half of all people who file
for bankruptcy protection do so because of medical or health reasons.
The evidence shows that abusive filings are the exception, not the
rule. The median income of the average American family filing for
chapter 7 bankruptcy--what do my colleagues think it might be? What is
the median income of the average family filing for bankruptcy, these
lavish-lifestyle people out there? It is $20,000 a year. That is the
average annual income of a person filing for bankruptcy--hardly people
living lavish lifestyles. That is according to the General Accounting
Office.
The majority of the people who file for bankruptcy are single women
who
[[Page S2072]]
are heads of households, elderly people trying to cope with medical
costs, and people who have lost their jobs or families whose finances
have been complicated by divorce. For the most part we are talking
about working people or elderly Americans on fixed incomes who have
fallen on hard times and who need the protection of the Bankruptcy Act
to help put them and their lives back together.
It is also worth noting that based on the first three quarters of
2004, the personal bankruptcy rate actually decreased by 2.6 percent.
According to the American Bankruptcy Institute, there were actually
50,000 fewer cases from September 2003 to September 2004 than there
were in the previous 12-month period, which, of course, begs the
question: If bankruptcy rates are falling, why is this legislation
necessary?
There is no smoke and there is certainly no fire except for maybe the
millions of consumers who are being burned by abusive creditor
practices.
The impact this legislation would have on single-parent households is
of particular concern to me. Single parents have one of the hardest
jobs in America. Most work all day, prepare meals, keep house, help
children with their homework, schedule doctor appointments, parent-
teacher meetings, and extracurricular activities. Life is very hard for
working single parents, and often financial assistance they receive in
the form of alimony or child support is critical to keeping their
families from falling into poverty. I believe sincerely that this
legislation, if enacted, is going to frustrate the efforts of single-
parent families to collect child support payments.
I understand that the proponents of this bill believe they have
treated single-parent families fairly. But what I worry about is the
unintended but perfectly foreseeable consequence of allowing more debts
to survive bankruptcy. Let me explain why and what is in this bill
today.
For more than 100 years, the Bankruptcy Code has given women and
children an absolute preference over all others who have claims on a
debtor's estate. Under the well-established rule, if a divorced person
files for bankruptcy, the court doesn't require the person's ex-spouse
or children to compete with creditors for the funds needed to pay child
support and alimony. Instead, for 100 years, alimony and child support
have been taken out of the debtor's monthly income first, and if there
is anything left over, it is made available to commercial creditors. If
there is nothing left over, the commercial or consumer debts are
discharged, and the debtor's only remaining obligation is to the ex-
spouse and his or her children.
This legislation changes those rules for the first time in 100 years.
For the first time we are going to make credit card and other consumer
debts essentially nondischargeable so that while a divorced spouse
would still be obligated to pay alimony and child support, his or her
other unsecured debts remain intact. The proponents of the bill will
say this does no harm to the divorced spouses or children because the
ex-spouses are still at the front of the collection process. But there
is, in my view, a huge practical difference between being first in line
and being the only one in line.
Under current law, nonsupport debts are often discharged and debtors
can focus entirely on meeting their obligations to their children and
current spouses. If this legislation becomes law, that will change for
the first time in 100 years. Debtors will not be able to focus on their
children; they will, as a matter of law, have to divert limited
financial resources to pay back consumer creditors. I believe this
change will inevitably lead to conflicts between commercial creditors
and single parents who are owed support and alimony payments. Sure,
they are going to be first in line, but single parents will be
competing with large creditors, creditors who have teams of lawyers who
are hired to use every imaginable tactic to see to it that they get
their money first. That is what they are going to do. I promise, it is
going to happen.
I believe it is a mistake to make single parents compete with teams
of lawyers from very well-heeled creditors for the money they need to
clothe and feed and educate their children. That is a mistake, and we
will regret it.
I understand the perspective that says that all debts incurred should
be paid. I don't fundamentally disagree with that. But when debtors
simply cannot pay all of their debts, I believe that our laws should
protect the interests of children and families first. Under this
legislation, child support payments could very well be reduced in order
to satisfy an unsecured commercial creditor. In my view, that change
will place the well-being of children at a disadvantage and elevate the
status of the unsecured creditor. Low-income children and families will
be put at a practical disadvantage by this bill and will ultimately
suffer greater economic deprivation because they cannot afford to
compete with sophisticated creditors.
I have talked a bit about who will be hurt by this legislation. Let
me take a few minutes to focus on the big winners, if the legislation
passes. The big winner, of course, is the credit card industry. Let me
describe the current state of the credit card industry. In a time when
access to credit is the easiest and cheapest, credit card companies are
making more money than ever, bilking millions of American families
by charging what would have been only a few years ago usurious rates
and fees, engaging in a series of abusive and deceptive practices which
will have drastic long-term consequences. At the same time they are
getting more and more Americans deeper and deeper into debt.
I have cited these statistics previously: $2.1 trillion, almost half
of that coming from credit cards and home equity loans--the same
creditors pushing bankruptcy legislation in Congress to make their
debts nondischargeable in the event of a bankruptcy. In effect, we are
becoming the collection agency for these companies. The old expression
never had a more apt example: the credit card industry wants to have
its cake and eat it, too.
Credit card companies are charging consumers higher fees than ever
before.
In 1980, credit card fees alone raised $2.6 billion. In the year
2004, credit card fees alone raised over $24.4 billion--$2.6 billion 24
years ago to $24.4 billion. Fees alone. Proponents of this legislation
argue that because of increasing default rates, the supposed work of
those bad actors, the ones making $20,000 a year on average, credit
card companies are being forced to charge more fees.
In fact, the exact opposite is the truth. Consumer bankruptcies
actually went down last year by nearly 3 percent, and default rates
actually decreased.
A recent American Banker article cites industry expert Robert Hammer,
chairman of R.K. Hammer Investment Bankers, who said that the biggest
factor in industrywide credit card industry improvement was the 20-
basis-point drop in chargeoffs from the year 2003. So I ask again: If
default rates are decreasing, why is this legislation necessary?
The truth is, this is the best time in history to be in the credit
card business. Last year over 5 billion solicitations were offered to
consumers, which is nearly twice as many as only 8 years ago. Despite
the assertions that the credit card industry is struggling because of
bad consumer behavior, credit card companies have more money than they
know what to do with. They are pumping out solicitations in search of
new people who will only acquire more and more debt.
Credit card companies are making record profits. Credit Card
Management reported in May 2003 that it was the most profitable year
ever for credit cards. At a time when interests rates are at historic
lows, credit card rates have not followed suit. The industry is engaged
in a series of deceptive and abusive practices to take advantage of
consumers.
Let me take a few moment to describe a few of these practices. I am
not making this up. Credit card companies are finding more ways to
effectively increase their income from rates and fees. Abusive
practices such as misleading teaser rates which employ bait-and-switch
tactics, hidden fees and penalties, and the universal default
provisions buried in the fine print are standard operating procedures
in the credit card industry today.
One of these abuses, the so-called ``universal default'', which could
more accurately be described as a predatory
[[Page S2073]]
retroactive interest rate hike. This practice forces a credit card
consumer in good standing--one who is paying his or her credit card
bills on time--to have his interest rates retroactively jacked up 25 to
30 percent because of an unknown, irrelevant change in his or her
spending patterns.
The idea that credit card companies can charge an initial interest
rate that would have in the past been outlawed as usurious, and then
double or triple that rate for any reason it so chooses is plain wrong,
in my view. If a phone bill is inadvertently mailed to the wrong
address or you are disputing an amount of a bill and it is not paid on
time, does the mortgage rate on your house go up? Of course not. But it
does with the credit card industry.
We should stop this practice. At a minimum--and I will offer an
amendment shortly--we should make any increase in the rates
prospective, not retroactive.
Let me explain why. If you enter into a agreement with a credit card
company, and the established rate is set at 15 percent. Despite the
fact that you continue to make your monthly payments on time, without
exception, you can have your interest rate unexplainably raised. This
inexplicable rate hike can occur for whatever reason the creditor sees
fit. You have an argument with your automobile company and you decide
to withhold a car payment, or you are having a debate with the utility
company, so you hold back on your utility bill--under the law today,
the credit card company can automatically increase your rates. And to
add insult to injury, this new rate retroactively applies for the goods
you have already purchased.
I think this practice is completely uncalled for. But if you are
going to allow for rates to go up, at a minimum they ought to be
prospective, on future purchases,
I would, frankly, like to eliminate it altogether, but I don't think
enough people here would support that. At the very least, if you
entered into a contract at 15 percent and if you are suddenly forced to
pay a higher interest rate, it ought to be on prospective purchases,
not to things that you may have bought 1 or 2 years ago. That is
patently wrong, and I will offer an amendment to implement this policy.
There is a second practice: credit card companies are focusing on
customers who pay their bills on time. Credit card issuers are now
providing incentives or rewards to customers for not paying their
bills. They get a reward for not paying their bills. They offer up to 3
percent cash back on all credit card purchases, but only during the
month when the credit card holder doesn't pay off his or her monthly
balance. We have this consumer debt mounting by the hour, and we have
credit card companies offering rewards to those who don't pay on time
and they are cutting off the card for those who do. It is absolutely
incredible.
That underscores how important it is to the credit card industry that
consumers get in debt and stay in debt. There are 51 million households
that carry balances on the credit cards at an average balance of
$11,944. That is the average amount of debt families carry on their
credit cards. The current average interest rate is running at about 13
percent. This is at a time when we have the lowest interest rates at 3,
4 percent and we have 13 percent credit card charges. Each of those
families is paying credit card interest, on average, of 15 percent a
year. Some are having their credit cards cancelled because they simply
pay all of their outstanding debt every month. Imagine that. You are
paying your bills on time and the credit card company triples your
interest rate or cancels your card.
In fact, the credit card industry calls you a ``deadbeat'' if you pay
off your entire balance every month. Why do they call you a deadbeat?
The credit card industry has a vested interest to keep you in debt.
Failure to do so affects their bottom line. They don't like people to
pay off their monthly balances. You could lose your credit card for
doing that.
As I have said earlier, the real purpose of this legislation is to
help credit card companies make more money. I am not opposed to them
making their money, but I think we have a higher obligation here to see
that these companies are prevented from engaging in abusive and
predatory practices that run contrary directly to stated national goals
of increasing savings rates and reducing consumer debt.
I have given you some brief insight into some of the abusive
practices of the credit card industry. I would now like to focus on
what I believe to be the most egregious trend in the industry, which is
targeting our Nation's most vulnerable customers. One of the most
troubling developments is the hotly contested battle between credit
card issuers to sign up new customers, and the aggressive way they have
targeted people under the age of 21, particularly college students.
Solicitations going to this age group have become incredibly intense.
First, it is one of the few market segments in which every year 25 to
30 percent of the undergraduates are fresh faces entering their first
year of college. Second, it is an age group in which brand loyalty can
be readily established. Most people hold on to their first credit card
for up to 15 years, which, by the way, is probably the amount of time
it takes to dig out of the amount of debt they have incurred while in
their teens.
Let me share this with my colleagues. It is somewhat amusing, but it
is also rather sad. This is a letter that was sent to a 7-year-old
child of one of the people in my office. I have crossed out the family
name. He has a 7-year-old son. He was amazed to find a brand new
American Express card being issued to his son. The card came as a
result--according to the offer--of this young elementary schooler's
``excellent credit history.'' It says: You should know about this
milestone that you have achieved. With your excellent financial record,
our decision was very simple. We want you as a card member. Imagine, a
7-year-old. It reads: ``You have the flexibility of a no preset
spending limit''--a 7-year-old. There are no limits on how much you can
spend on this credit card. He has amply demonstrated his financial
responsibility, according to this letter. He has earned this
recognition to receive an American Express card at age 7. This type of
solicitation happens more and more every single day and yet we need to
focus on personal responsibility and not corporate responsibility.
There are 5 million solicitations that go out every year, many going
to young children in our society. Obviously, we are talking not just
about 7-year-olds here but also to college-age persons. They are
vulnerable, these younger people in our society. To extend them large
amounts of credit, with no limits, is an act of incredible
irresponsibility. Again, I agree that consumers have a duty to be
responsible. I will take a back seat to no one in arguing that ought to
be the case. However, there needs to be a sense of balance about this.
If you are expecting the consumer to be responsible, the issuer of the
credit card also has to be responsible. They lack total responsibility
when it comes to these solicitations.
I have an amendment that I will offer shortly that places new
requirements on credit card companies who solicit to persons under the
age of 21. It requires if you are under the age of 21, either
demonstrate that you can pay--a lot of people under 21 can pay because
they hold jobs, they have made money, and they have saved. Or have
somebody cosign--a parent, guardian or other responsible party--the
application to get the credit card, Or lastly, the completion of
certified credit counseling course. Any one of those three, not all
three. It is a very simple and prudent requirement to ask for before
issuing credit cards. This ought to be plain common sense, in my view.
We have an obligation to protect and educate our young people. The
next generation of American leaders deserves no less than reining in
the irresponsible practices of the credit card industry that just
pushes these cards out. In fact--and I will touch on this later--
universities actually get money into their coffers if they will promote
students signing up for credit cards. There are actually fees that come
to the universities as a result of the indebtedness of their students.
It seems to me we ought to be thinking twice and thinking hard about
those practices. Credit card companies are running roughshod over
millions of Americans and their families. We should be passing
legislation that prevents these types of practices, not padding the
credit card industry's pockets, in my view.
[[Page S2074]]
The credit card issuers seem to have forgotten the correlation
between high interest rates and unsecured debt. Traditionally,
unsecured credit issued without collateral and relying only on the
integrity of the borrower has a higher default rate. As a result,
credit issuers are allowed to charge a higher interest rate in order to
make up for expected losses from those higher default rates.
However, this legislation begins to change this deal, changing the
Bankruptcy Code to make unsecured debt nondischargeable in the event of
a bankruptcy. Record fees, record abuses, record profits, and a record
number of Americans are being taken advantage of. I urge my colleagues
to reject this legislation.
Amendment No. 52
Mr. DODD. Mr. President, I wish to call up two amendments. I believe
the first, amendment No. 52, is at the desk. I ask that it be called
up.
The PRESIDING OFFICER. Without objection, the pending amendment is
laid aside. The clerk will report the amendment.
The legislative clerk read as follows:
The Senator from Connecticut [Mr. Dodd] proposes an
amendment numbered 52.
The amendment is as follows:
(Purpose: To prohibit extensions of credit to underage consumers)
At the appropriate place, insert the following:
SEC. __. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS.
Section 127(c) of the Truth in Lending Act (15 U.S.C.
1637(c)) is amended by inserting after paragraph (5), the
following:
``(6) Applications from underage consumers.--
``(A) Prohibition on issuance.--No credit card may be
issued to, or open end credit plan established on behalf of,
a consumer who has not attained the age of 21, unless the
consumer has submitted a written application to the card
issuer that meets the requirements of subparagraph (B).
``(B) Application requirements.--An application to open a
credit card account by an individual who has not attained the
age of 21 as of the date of submission of the application
shall require--
``(i) the signature of the parent, legal guardian, or
spouse of the consumer, or any other individual having a
means to repay debts incurred by the consumer in connection
with the account, indicating joint liability for debts
incurred by the consumer in connection with the account
before the consumer has attained the age of 21;
``(ii) submission by the consumer of financial information
indicating an independent means of repaying any obligation
arising from the proposed extension of credit in connection
with the account; or
``(iii) proof by the consumer that the consumer has
completed a credit counseling course of instruction by a
nonprofit budget and credit counseling agency approved by the
Board for such purpose.
``(C) Minimum requirements for counseling agencies.--To be
approved by the Board under subparagraph (B)(iii), a credit
counseling agency shall, at a minimum--
``(i) be a nonprofit budget and credit counseling agency,
the majority of the board of directors of which--
``(I) is not employed by the agency; and
``(II) will not directly or indirectly benefit financially
from the outcome of a credit counseling session;
``(ii) if a fee is charged for counseling services, charge
a reasonable fee, and provide services without regard to
ability to pay the fee; and
``(iii) provide trained counselors who receive no
commissions or bonuses based on referrals, and demonstrate
adequate experience and background in providing credit
counseling.''.
Amendment No. 53
Mr. DODD. Mr. President, I ask that amendment No. 52 be laid aside,
and I call up amendment No. 53.
The PRESIDING OFFICER. Without objection, it is so ordered. The clerk
will report the amendment.
The legislative clerk read as follows:
The Senator from Connecticut [Mr. Dodd] proposes an
amendment numbered 53.
Mr. DODD. Mr. President, I ask unanimous consent that the reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To require prior notice of rate increases)
At the appropriate place, insert the following:
SEC. __. PRIOR NOTICE OF RATE INCREASES REQUIRED.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is
amended by adding at the end the following:
``(h) Advance Notice of Increase in Interest Rate
Required.--
``(1) In general.--In the case of any credit card account
under an open end consumer credit plan, no increase in any
annual percentage rate of interest (other than an increase
due to the expiration of any introductory percentage rate of
interest, or due solely to a change in another rate of
interest to which such rate is indexed)--
``(A) may take effect before the beginning of the billing
cycle which begins not less than 15 days after the obligor
receives notice of such increase; or
``(B) may apply to any outstanding balance of credit under
such plan as of the date of the notice of the increase
required under paragraph (1).
``(2) Notice of right to cancel.--The notice referred to in
paragraph (1) with respect to an increase in any annual
percentage rate of interest shall be made in a clear and
conspicuous manner and shall contain a brief statement of the
right of the obligor to cancel the account before the
effective date of the increase.''.
SEC. __. FREEZE ON INTEREST RATE TERMS AND FEES ON CANCELED
CARDS.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637),
is amended by adding at the end the following:
``(i) Freeze on Interest Rate Terms and Fees on Canceled
Cards.--If an obligor referred to in subsection (h) closes or
cancels a credit card account before the beginning of the
billing cycle referred to in subsection (h)(1)--
``(1) an annual percentage rate of interest applicable
after the cancellation with respect to the outstanding
balance on the account as of the date of cancellation may not
exceed any annual percentage rate of interest applicable with
respect to such balance under the terms and conditions in
effect before the date of the notice of any increase referred
to in subsection (h)(1); and
``(2) the repayment of the outstanding balance after the
cancellation shall be subject to all other terms and
conditions applicable with respect to such account before the
date of the notice of the increase referred to in subsection
(h).''.
Mr. DODD. Mr. President, I briefly mentioned this amendment before.
This amendment focuses on a abusive practice that I have to believe all
of my colleagues would want to see done away with, this universal
default practice. Let me explain what this means.
Under a universal default, which almost all these companies now
engage in, it says that credit card companies have the right to raise
fees and rates, whenever they want, for any reason I choose. That
language actually is included in some of the small print. Again, I
believe that consumers have an important responsibility for the debts
they incur. However, I think it is patently unfair, that if you are
paying your minimum monthly balance to the credit card company, and for
whatever reason you are not meeting your obligation to the car payment,
the house payment, or the utility bill that you be subject to a
universal default clause. And while I think the practice should be
banned, if it is part of the credit card agreement, credit card
companies are allowed to raise your rates even though you are meeting
your obligation to them.
This amendment simply restores some basic fairness in this
arrangement. You can raise interest rates--but only prospectively on
new purchases. However, it prohibits retroactively rate hikes, that is,
raising the interest rate on purchases you may have made a week, a
month, a year, or 2 years earlier.
Let me make the point again. I understand why the credit card
companies would like to do this. Obviously, they make more money doing
it. But I think we have an obligation to see to it that there is a
sense of fairness about all of this.
That is what I am trying to do with this amendment. That is all this
amendment does. It just says here you cannot apply these rates
retroactively. On future purchases, fine. Again, I think the practice
of universal default is unfair. If I have a contract with my friend
from Alabama at a certain rate and I am meeting my responsibilities to
him, he is lending money at 15 percent, and for whatever reason I have
a contract with my friend from Georgia, and we have a dispute about my
payment obligations to you, my friend from Alabama then can
automatically raise my rate to 20 percent, 25 percent, or 30 percent
because of my dispute with the Senator from Georgia.
The idea that a credit card company can charge an initial interest
rate that would have in the past been outlawed as usurious and then
double or triple that rate for any reason it chooses is just plain
wrong, in my view.
If a phone bill is inadvertently mailed to the wrong address, you are
disputing the bill that is not paid on time, does the mortgage rate on
your
[[Page S2075]]
home go up? No, but apparently your credit card interest rate can.
Record number credit card companies have built-in universal default
clauses in their agreements. ``Universal default complaints are
definitely on the increase at a disturbing rate,'' says Paul Richard,
director of the nonprofit Institute of Consumer Financial Education.
More than one-third of all major credit card issuers now say they act
on these clauses regularly. A recent survey found that a staggering 39
percent of credit card issuers apply this universal default rate to
consumers even if they have no late payment on their credit cards.
A recent New York Times article entitled ``Plastic Trap, Soaring
Interest Rate Compounds Credit Card Payments for Millions'' illustrates
the point.
Ed Sweibel was whittling down his mound of credit card debt
at an interest rate of 9.2 percent. The MBNA company had a
happy and profitable customer. But this past summer when MBNA
suddenly doubled the rate on his account, Mr. Sweibel joined
the growing number of irate card holders stunned by lenders'
harsh tactics. Mr. Sweibel, 58 years old, a semiretired
software engineer in Gilbert, AZ, was not pleased his minimum
monthly payment jumped from $502 in June to $895 in July. But
what really made him angry, he said, was the sense he was
being punished despite having held up his end of the bargain
with MBNA. ``I paid the bills the minute the envelope hit the
desk. All of a sudden in July they swapped it to 18 percent,
no warning, no reason. It was like I was blindsided.''
Mr. Sweibel had stumbled into the new era of consumer
credit in which thousands of Americans are paying millions of
dollars each month in fees that they did not expect and that
strike them as unreasonable. Invoking clauses tucked into the
fine print, lenders are doubling or tripling interest rates
with little warning or explanation.
What truly astounds me is the fact that credit card companies view
the practice as completely legitimate. In fact, when in fine print they
disclose they engage in this practice, the language they use is
incredibly brazen. One credit card issuer states in its standard
disclosure:
We may change the rates, fees, and terms of your account at
any time for any reason.
Rates, fees, and terms--is there anything left in the credit card
contract that a consumer can count on staying the same? I understand
why they would want to do this, but, again, I do not understand why the
Congress should continue to allow them to continue this practice.
As I pointed out at the outset of these remarks, I carry a copy of
the U.S. Constitution with me. In Article I, section 8 of the Federal
Constitution--the Framers decided--that it is our job to write the
Bankruptcy Code. In the initial draft of the Constitution, the Framers
thought this was a significant enough issue. It is hard to find any
more complicated or difficult issue than bankruptcy, and yet the
Framers said do it.
Why did they do it? Again, the point I tried to make at the outset:
The Framers wanted to give people a chance to get back on their feet.
If we allow these credit card companies to constantly raise the bar--we
will force future generations into never ending indebtedness. In the
article I just read, Mr. Sweibel was trying to get rid of his debt and
meet his obligations. No matter how diligent he was in paying his
bills, his credit card company jacks up his interest rate--almost
doubling it in one month because of a disagreement he had with some
other obligation.
That is wrong. Again, I understand why the credit card companies may
want to get away with it, but we should not let them get away with it.
We have an obligation to people, to make sure that people play fair,
play by the rules, and act responsibly. It is irresponsible for a
credit card company to be able to double and triple the interest rates
on someone when they are meeting their obligations of that creditor. I
think it is wrong and unfair. If we do not put our foot down and say it
is wrong and unfair, they are going to continue to get away with it,
and we are never going to see consumers get beyond the mountain of debt
they are accumulating.
Almost one-half of the $2.1 trillion in debt is consumer credit-card-
related debt. The savings rate is down to less than 1 percent in the
country. Consumer debt is skyrocketing, and we are handing these credit
card companies a gift they could never have imagined when the Framers
of the Constitution were around.
We should not be allowing credit card companies to use farcical
excuses to penalize unaware consumers who pay their bills on time.
If a credit card company wants to change the rules of the game, they
should not be allowed to reach back and set new terms and conditions to
purchases made under previous agreements. This is just plain, basic
fairness.
If for some reason a credit card issuer views a customer as an
increased credit risk, which is the purported justification for the
universal default practice, then it can decide to only lend future
credit at a higher rate or with different terms. Also, consumers must
be given ample notice of this new credit decision so they can fully
understand the changes in the new contract.
This amendment is a necessary addition to the bill. It will not solve
all the problems, but it will solve a major one, the universal default
clauses.
Amendment No. 52
I call up amendment No. 52 at this point, the one that was set aside.
The PRESIDING OFFICER. The amendment is already pending.
Mr. DODD. As I touched on briefly before, this amendment seeks to
protect the most vulnerable of our nation's consumers--persons under
the age of 21. According to Dr. Robert Manning, a professor at
Rochester Institute of Technology, one of the fastest growing groups of
bankruptcy filers are people under the age of 25.
In fact, the number of bankruptcies among those under the age of 25
is more than 6 times that of only 5 years ago, according to the
American Bankruptcy Institute. One of the most troubling developments
in the hotly contested battle of credit card issuers to sign up new
customers has been the aggressive way in which they target people under
the age of 21. Solicitations to this group have become more intense for
a variety of reasons which I have mentioned already.
Obviously, we know about consumer loyalties. It is also an age group
in which brand loyalty can be established. However, some credit card
issuers have gone too far. Again, I am not opposed to people under the
age of 21 having credit cards.
Credit cards, are a great asset to a lot of people. I am not opposed
to them, but they must be issued and used responsibly.
I mentioned the letter earlier of the 7-year-old, which is just plain
ridiculous. What also worries me is what is happening with these
younger people on college campuses around the country.
Credit card issuers are deeply involved in the business of enticing
colleges and universities to help promote their products. Many colleges
receive as much as 1 percent of all student charges from credit card
issuers in return for marketing or affinity agreements. Even those
colleges that do not enter into such agreements are making money.
Robert Bugai, the President of the College Marketing Intelligence,
told the American Banker that colleges charge up to $400 per day for
each credit card company that sets up a table on campus. That can run
into tens of thousands of dollars by the end of just one semester.
A ``60 Minutes II'' piece a number of years ago vividly illustrated
the impact that credit card debt is having on college students. A crew
from the show was on a major public university, and with the use of
hidden cameras filmed vendors pushing free T-shirts, hats, and other
enticements for credit applications. The ``60 Minutes'' program
revealed that the university was being paid $13 million over 10 years
by a credit card company for the right to have a presence on campus and
to use the university logo on its cards.
This public university was making money off its students who used
credit cards, the report said. As part of the agreement, the university
receives four-tenths of a percent of each purchase made with the cards.
Unbelievably, this university has a vested interest in getting their
students into as much debt as possible.
Again, we have kids who are going--the anecdotal stories of the debt
they are incurring is just staggering. We have watched it actually
almost double. Debt among this group has gone from around $1,800 a year
to over $3,000 a year.
[[Page S2076]]
Again, this amendment requires one of three things. Firstly, it
requires that one can prove that they have the financial resources to
repay debts incurred. That is simple enough. Or have someone cosign the
application, or just agree to take a short course in credit counseling.
Any one of those three things and a person gets their card.
To push these cards out with no spending limits on them at all,
knowing what is inevitably going to happen--bankruptcy--is
irresponsible. Again, I understand why the credit card companies want
to do it. I do not understand why we want to allow them to do it in
such an unfettered way, knowing what we know now. If they were doing
this for the first time and we did not know the implications or the
effects of their actions, I could understand maybe why some people
would be willing to go along with it. But we now know what is
happening. We are watching consumer debt among young people double over
the last several years.
Why would we not just say, look, prove you can pay your debts, prove
you have some financial means, have someone cosign with you, or be
willing to take a credit counseling course? These are not heavy burdens
to make. It seems to me the very least we could do, again, acting
responsibly. If this bill says consumers must act more responsibly,
should we not commensurately ask the industry to act responsibly as
well?
When universities are collecting $13 million over 10 years in fees to
allow a credit card company to be on their campus, and they are getting
four-tenths of 1 percent on every purchase made by a student on campus,
that is a university encouraging debt among its kids. That is just
wrong, in my view.
So we are requiring a cosigner, proving a person has a source of
income, or take some counseling so the kids have some idea of what they
are getting into.
Again, just some basic statistics, and I will wrap up. Our personal
savings rate is at an all-time low. The last quarter in the year 2004,
less than one-half of 1 percent was the national annual savings rate.
That is down from
4\1/2\ percent 10 years ago. It was at 1 percent last year. We are
going in the wrong direction in terms of encouraging people to save.
Consumer debt is now at $2.1 trillion, and almost half of that, $800
billion, is credit card debt--$2 billion alone in the month of
December. The consumer debt is mounting, and there needs to be a
commensurate sense of responsibility by these credit card companies.
They are making incredible profits with interest rates at 18, 25, 30
percent, when one can borrow money to buy a home for 4\1/2\ or 5
percent. Yet credit card companies are charging these incredibly high
rates, making staggering profits.
The average income of a person taking the bankruptcy act is $20,000 a
year. The reason they are taking the bankruptcy act is because of
medical expenses, job loss, or divorce. These are not people living
lavishly. Default rates are actually dropping. What is the
justification and rationale for a bill that makes it easier for these
credit card companies to collect and prevents consumers from getting
back on their feet again?
Particularly disturbing to me is this change, after 100 years of law,
where we sought to protect single women raising children with child
support and alimony payments by allowing the discharge of these other
obligations and seeing to it that they would focus on meeting their
family obligations. We are now going to have the credit card companies
competing with these children and these families, and I do not even
have to say who is going to win that battle.
A team of lawyers representing very rich credit card companies are
always going to beat that family out there. They are going to get that
father, that husband, or that woman, to pay their unsecured debts to
that credit card company, and that child and that family will lose.
Why, after 100 years, are we changing the law protecting families and
children? I think that is a huge mistake. I think it is going to come
back to cause us a great deal of pain. This bill needs fundamental
change.
I wish people would take time and look at these things. I understand
there is a sentiment to reject all amendments, but we ought to ask
these companies to act more responsibly. We are not going to do it, but
I think, in time, we are going to pay an awful price. When we ought to
be encouraging more personal savings, and when we ought to be reducing
consumer debt, we are getting more consumer debt and less and less
personal savings. We are allowing credit card companies to gouge
consumers and never let average people who get into trouble--and,
again, a lot of them, through no fault of their own--to get back on
their feet again. That is what we ought to be trying to do.
When it is the appropriate time I will ask for votes on these
amendments. I realize it will not be until next week. I have taken a
lot of time, and I express my appreciation to my friend from Alabama
who has been very patient, listening to me going on about this bill,
and I thank the Presiding Officer for his patience as well in listening
to this, and I yield the floor.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. SESSIONS. Mr. President, I want to express my congratulations to
Papa Dodd on his new daughter, born this week to join her sister Grace.
We wish Jackie and the family well. I know how excited he has been over
young Grace. I know how excited he is over this one. He said he lost a
lot of sleep this week, he is a little tired, but he looked pretty
vigorous to me in debate. I wish my sincerest best to you, and my wife
Mary sends her regards, too.
I am disappointed Senator Dodd is not supportive, as I understand it,
of this bill. It is essentially the same bill we passed during the
107th Congress, 83 to 15. It came out of committee with a strong
bipartisan vote again this year. This is the fourth time it has come
up. It passed one time 97 to 1 in the Senate. This is the fourth time
it is up. I believe it will become law this year.
I want to say there are some things here that my good friend has
stated that are just not correct. I hope really he will think about and
reevaluate some of his conclusions on the legislation. I have to say,
there is a small group of leftists who are determined to block this
bill. They seem to believe there is something wrong if a corporation,
even a credit card company, gives money to an American citizen for them
to want to be paid back, and if they don't pay it back, it is the
credit card company's fault. They lose their money and they are an evil
force here. This is really an odd argument, I suggest.
I also argue, flatly state, that I disagree with the statement that
the only purpose of this bill is to help the credit card companies make
money. That is absolutely not correct. It is really offensive to
suggest that to the 83 Members of this Senate who have been working on
this bill for quite a number of years.
Let me say a couple of things that I believe are indisputable. Philip
Strauss, attorney for San Francisco Child Support Services, for 28
years enforcing child support obligations, testified before our
Judiciary Committee, of which I am a member. I want to deal with some
allegations that have been floated by--I think primarily it is the
Elizabeth Warren view of this bankruptcy bill. In an effort to smear
the bill and defeat the bill, they have conjured up this idea, somehow,
that children and spouses are going to be harmed by this bankruptcy
bill. It is absolutely incorrect. It is abysmally wrong. Let me tell
you what this expert said.
It is my opinion and the opinion of every professional
support collector with whom I have discussed the issue that
the support amendments contained as part of the bill,
contained in section 211-219 of S. 256, the bankruptcy bill,
will revolutionize enforcement of support organizations
against debtors in bankruptcy.
Child support obligations will be revolutionized.
This legislation has been endorsed by the National Child Support
Enforcement Association. Maybe some of those who have been saying this
hurts children ought to interview the professionals--the National
Association of Attorneys General, the National District Attorneys
Association, both of which have important roles to play in collecting
enforcement obligations for children--child support.
Mr. Philip Strauss, the attorney who spent 28 years in bankruptcy
court collecting these debts for women and children against spouses and
deadbeat dads
[[Page S2077]]
who bankrupt against their debts, had this to say. The provisions in
the bill are ``a wish list for child support attorneys.'' That is what
he has been looking for.
Under the current law, if we don't change it by passing this bill,
the law that will remain in effect has alimony and child support
payments No. 7 on the list of priorities for paying nonsecurity debt--
No. 7 in the list. We moved it up to the top. Everybody who knows
anything about this bill knows that women and children and their
alimony and child support is going to be secured in a way it never has
been before. It is offensive what Professor Warren is saying about this
bill. This college professor keeps writing things that are not so. I
don't know how--I guess she has tenure.
She also is the one who has gone around this country and promoted the
idea, and had a press conference a few weeks ago, to announce that
medical bills are the cause of everything. She says that all the people
filing, half the people plus, 54 percent of the people who file
bankruptcy are in bankruptcy court because of medical bills.
What do we know about that as a fact? She had a survey that indicated
that. Do you know what we discovered, when you read the fine print of
her survey? It includes gambling debts. It includes alcoholism and drug
problems.
This is what the United States Trustee Program found in a much more
extensive survey. Hers I believe had 1,700 people. This one has 5,203
cases. U.S. trustees are involved in bankruptcy courts in 48 States.
They deal with these cases. They were asked to survey the filings in
their districts to find out what you list on your filing as your debts,
who you owe. You actually list who it is. So, if it is a doctor bill,
it is on there. If you don't put it on there you don't wipe out that
debt and you remain obligated to pay it, so everybody puts every debt
they have on the list so it can be wiped out when they file bankruptcy.
What they found was, this professional study of 5,000 cases, not
interviewing debtors but looking at what they put on their form, they
found that only slightly more than 5 percent of the total unsecured
debt reported in those cases was medically related. Only 5 percent was
medically related. This is not 50 percent of the cases in bankruptcy
being caused by medical--only 5 percent of them, of the total debt, was
medical.
It also revealed that 54 percent of the debtors, when they list all
their debts, and they have a long list of them, listed no medical debts
whatsoever. And of the people who listed some medical debts, 90 percent
of those who listed a medical debt listed a medical debt of less than
$5,000.
For some people there is no doubt that medical debts are a cause for
bankruptcy. I do not doubt that. But this idea that we ought not reform
bankruptcy, that we ought to assume that there is no fraud and abuse in
bankruptcy and the idea that everybody is in bankruptcy because of
medical debts is just not so.
It is just not; it is a fiction. We need to get it out of our heads.
There is another suggestion that poor people are going to have to pay
back some of their debt. This is ``pressure on poor people,'' they say;
``this is class warfare.'' Poor people now are going to have to pay
back their debt, and they are going to be harmed. We discussed the
problem in bankruptcy.
The most offensive, clearly wrong thing about the current bankruptcy
problem in America is that people making $200,000 a year, if they run
up a couple hundred thousand dollars in debt, those people do not have
to pay a dime. They can wipe out the entire debt. Shouldn't they pay
some of it back? The average American citizen works hard to pay his or
her debts back. They save; they do not take vacations; they do not buy
a new car, they buy an older car so they can pay their debt. Some
doctors, lawyers--we have examples of them--know how the bankruptcy
works. They do not want to pay their debt. They wipe them out when they
could easily have paid them back.
We reached a bipartisan consensus to have a means test which received
83 votes on the floor of the Senate the last time. If you make below
median income your State, then you don't have to pay anything back.
Eighty percent of the people make below median income. Some people who
make above median income have special expenses, and we allowed them to
take an exception. It really looks as though maybe only 10 to 13
percent of the people who file bankruptcy would be impacted by the
means test.
The wealthy, why shouldn't they pay? I ask you, why should somebody
not pay the local hospital when they have plenty of money with which to
pay their debts?
What happens if you make median income and you don't have special
circumstances? What should happen? I think you ought to pay some of it
back. That is what the American people think, and that is what this
Congress thinks.
What would happen is this: They would move into chapter 13, the
bankruptcy chapter, which allows for repayment of a portion of the
debt. The judge would look at the person's income, how much he believes
they can pay back over a period of no more than 5 years, and order them
to pay back some portion of those debts. What is wrong with that?
I hear my colleagues complain about the bill saying: I don't mind
rich people paying back. That is what the bill does. It creates a safe
harbor, an absolute wall for lower income people, people making below
median income in America. Eighty percent of the filers of bankruptcy
don't have to go into chapter 13. They don't have to pay a dime back.
Let's just say this: Chapter 13 is not so bad. It has a lot of
sanctions. You can keep your car and ``cram down'' the value of that
car, hold on to your house better, and other things that sometimes are
an advantage. A lot of States use chapter 13 a lot. In Alabama, almost
half of the filers are chapter 13 filers.
Just because somebody is going into chapter 13 and pays some back
does not mean they are being oppressed.
``Oh, you know.'' Well, we are going to complain about credit cards
today. A couple of days ago, it was about health insurance, we need to
reform health insurance. If we reform health insurance, they argue, we
wouldn't have bankruptcy.
If we don't fix credit cards and interest rates and truth in lending
and banking issues--they are not part of the Judiciary Committee but
part of the Banking Committee's financial lending portfolio of issues--
we have to deal with them. We can't deal with bankruptcy. This is a
bankruptcy bill.
This bill would create a workable process for filing bankruptcy in
Federal court, so fairness occurs based on the debt that people have
incurred. If you want to deal with the debts being incurred and giving
more money, or have a welfare increase, whatever you want to do, let us
propose that somewhere else to give people more money. But once they
choose to file bankruptcy, let us create a system that is fair.
Let us say that people who have higher incomes and can pay
back some of it, why don't they pay it back?
That is what I think we ought to do.
It has been suggested. We have a lot of complaints. Members of this
body like to talk about some minor child getting a credit card.
Let me say that any minor in America who gets a credit card and goes
down and runs up $5,000 worth of bills on that credit card does not
have to pay a dime. The company that wrongly sent them that credit card
eats the $5,000 loss because you can't sue a minor on such a debt. They
can't be made to pay it. Who is the loser, if they sent a credit card
to some young person and they used it, but the credit card company
itself? That is not the issue before us.
Let us fix this bankruptcy bill that allows too much abuse, too much
legal cost for people who go to court. Let us keep the legal fees down.
Let us make the system fairer. Let us make sure the great protections
of a fresh start for Americans is still alive and well. And for those
median income and below, there is no change fundamentally in this bill
whatsoever except they have to have some financial counseling, some
credit counseling, and they can start all over again and wipe out all
of their debt. But if they make above that and can pay some of it back,
let us have them pay some back.
I don't think that is unfair or unusual or upsetting to most people
who
[[Page S2078]]
considered the bill, and that is why we have had such good support for
it.
There was some suggestion that we have seen some reduction in
filings. I hear 50,000--50,000 off a number of 1.6 million. About a
little over 20 years ago, in 1980, there were 287,000 bankruptcy
filings a year. Now they hit 1.6 million, and there is the suggestion
that because it has dropped to 1.5, that somehow we ought not to fix
this system that we know from experience--and we have been watching it
for some time as a problem. Let us fix this problem. Whether it is 1.2
million in bankruptcy, 2 million in bankruptcy, we have a problem with
the system. Let us fix it.
Let us treat people fairly. If you can pay some of it back, you
shouldn't get off scot-free. If you make below median income, you get
to wipe out all of your debts and not pay a dime to the people you owe
unless you intentionally and deliberately inflict harm on that.
It is the same law we have always had. Those debts are not
dischargeable in bankruptcy.
Mr. President, I ask unanimous consent to have printed in the Record
a letter from the Department of Justice on the data they have obtained
from the U.S. Trustees on the issue of medical debts, and I commend to
my colleagues the February 10, 2005, testimony of Philip Strauss before
the Senate Judiciary Committee on the benefits of the bill to women and
children which he states is indisputable and represents a wish list of
items of those who collect child support for women and children.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Department of Justice,
Office of Legislative Affairs,
Washington, DC.
Hon. Charles E. Grassley,
U.S. Senate,
Washington, DC.
Dear Senator Grassley: This responds to your letter, dated
February 5, 2005, requesting information from the Executive
Office for United States Trustees (EOUST) concerning medical
debts of those who file for bankruptcy protection and the
recently published study in the Health Affairs journal
(``Market Watch: Illness and Injury As Contributors to
Bankruptcy'').
It is the practice of the U.S. Trustee Program (USTP) not
to comment on data collected and analyses performed by
outside researchers for reasons that include difficulties in
verifying their data and research methodologies. It is noted
in the cited study of 1,771 filers that very broad
definitions of ``medical bankruptcies'' are used. The authors
considered a ``Major Medical Bankruptcy'' to include cases in
which debtor reported any of the following: illness or injury
as a reason for filing bankruptcy, uncovered medical bills
exceeding $1,000 in the past two years, loss of two weeks of
work-related income due to illness or injury, or mortgage of
home to pay medical bills. The authors considered ``Any
Medical Bankruptcy'' to include cases containing any of the
factors above or birth or death in the debtor's family or
birth or death in the debtor's family or addiction or
uncontrolled gambling.
Enclosed in a description of related USTP data and a
summary of findings from analysis of a similar but larger
sample of bankruptcy cases (5,203) utilizing data from
official records during approximately the same time period as
the study cited above. It should be noted that reported
credit card debt also may reflect medical-related debts, but
are not shown in these findings.
In general, the data describing medical-related expenses
contained in official documents filed by chapter 7 debtors
reveal that slightly more than 5 percent of their general
unsecured debt is medical-related. The conclusion that almost
50 percent of consumer bankruptcies are ``medical related''
requires a broad definition and generally is not
substantiated by the official documents filed by debtors.
We hope this information is responsive to your inquiry. If
we can be of further assistance, please do not hesitate to
contact this office.
Sincerely,
William E. Moschella,
Assistant Attorney General.
Enclosure.
____
Summary of USTP Data and Findings on Medical Debt
USTP Data
The USTP database contains 5,203 no asset chapter 7 cases
that were closed between 2000 and 2002. The database includes
cases filed in 48 States, Washington, DC and Puerto Rico
proportionate to chapter 7 filings in each location. The
database contains no cases from North Carolina and Alabama,
because those States are served by Bankruptcy Administrators.
Nearly all of these cases had been filed about 4 months prior
to closing.
On each petition we reviewed Schedule F of the petition to
see if any medical debts were listed. This would include
where the creditor was a doctor, hospital or other treatment
facility, medical collection agency, or if the debt was in
any way identifiable as being medical in origin.
This accounting would not have identified medical debts
charged on credit cards, placed with certain collection
agencies, or paid prior to the bankruptcy filings.
findings
All Debtors (N = 5,203):
54 percent listed no medical debt.
Medical debt accounted for 5.5 percent of the total general
unsecured debt.
90.1 percent reported medical debts less than $5,000.
1 percent of cases accounted for 36.5 percent of medical
debt.
Less than 10 percent of all cases represent 80 percent of
all reported medical debt.
Cases Reporting Medical Debts (N = 2,391):
Among the debtors reporting medical debt, the average
medical debt was $4,978 per case.
78.4 percent reported medical debts below $5,000 (average
of $1,212 for this group).
21.6 percent reported 80.9 percent of the total medical
debt.
Medical debts accounted for 13.0 percent of the total
general unsecured debt for those reporting medical debt.
Mr. SESSIONS. Mr. President, I thank the Chair. I yield the floor.
The PRESIDING OFFICER. The Senator from Texas.
Mr. CORNYN. Thank you, Mr. President.
First, let me say to my friend, the Senator from Alabama, how much I
appreciate his eloquence on this bill and his very successful attempt
to explain to the American people, as well as to us, what is at stake
here, and to knock down some myths that are being used to try to worry
people when, in fact, there is no reason for people to be worried about
this legislation.
Indeed, as has been reflected before, this bill will pass as it has
previously, and will pass by a large bipartisan majority, and for good
reason.
Free Speech
Mr. CORNYN. Mr. President, I want to turn to another subject briefly.
The reason I changed the subject from bankruptcy to this is provoked
by an op-ed piece that I read today, and that others in this body may
have read, published in the Washington Post. This article is called ``
`Nuking' Free Speech,'' certainly an attention-grabbing headline.
As it turns out, reading the op-ed, it is what I can only describe as
a breathless statement made in writing by one of our distinguished
colleagues, claiming there are efforts to reinstate majority rule when
it comes to the procedures that govern our advice and consent function;
that is, the procedures by which we evaluate Federal judges sent to the
Senate for our consideration under our advice and consent function.
Somehow, the opponents of reinstating the 200-and-more year tradition
of majority rule when it comes to confirming Federal judges have been
able to convince the press and others that this represents a nuclear
option. Hence, the title and, hence, the first sentence in this op-ed.
It says:
A ``nuclear option'' is targeting the Senate.
That is unfortunate because it suggests people who want to reinstate
majority rule when it comes to advice and consent on the President's
judicial nominees are somehow doing something radical, something
dangerous, something potentially catastrophic when, in fact, that is
not the case.
As many know, we have seen use of a tactic which has been labeled
obstructionist, it is fair to call it; that is, the use of the
filibuster, to block the President's judicial nominees from getting an
up-or-down vote. Indeed, it is that obstructionist procedure that has
never been used in the history of this country before the last
Congress. If there is a nuclear tactic being used here, I submit it is
the use of that obstruction where a willful minority blocks a
bipartisan majority from voting on the President's judicial nominees.
That radical change from Senate tradition over the 200-plus years this
body has existed is the radical change. For those who believe we ought
to restore that tradition which has been taken down a very dangerous
road these last 2 years with obstruction, I submit we are doing nothing
more than trying to restore that Senate tradition and majority rule;
and those who oppose reestablishing majority rule are the ones who are
taking a radical, a dangerous position.
The senior Senator from West Virginia, the author of this op-ed,
claims
[[Page S2079]]
that 20 men and women have been renominated by the President to the
Federal bench where 7 of those were rejected last year. Plainly, that
is false. How can it be said the Senate has rejected a nominee when we
were prevented from having an up-or-down vote? Clearly, that is not
true.
This op-ed piece goes on to suggest that as a result of those who
believe we ought to reestablish this 200-year-long tradition of
majority rule when it comes to confirming judicial nominees, this op-ed
goes on to say it starts with shutting off debate on judges, but it
will not end there. Ultimately, he says, if Senators are denied their
right to free speech on judicial nominations, an attack on extended
debate on all other matters cannot be far behind.
The distinguished senior Senator from West Virginia has been in the
Senate a long time. Much of his service he is justly proud of. But one
of the dangers of being in the Senate for a long time is that you go on
record making statements which have the potential of contradicting
one's current statements. Indeed, that has been the case when it comes
to the senior Senator from West Virginia.
For example, the very procedure which he now decries as nuking free
speech, he himself championed in 1977, in 1979, in 1980, in 1987.
Hardly can it be true that today trying to reinstate majority rule as
he himself did on those four occasions on the dates of the years
mentioned, hardly can that be nuking free speech. In fairness, he ought
to concede what we are doing is nothing radical. Indeed, it is doing
the same thing he himself did four times earlier.
The other thing that is unfortunate about this claim made in this op-
ed is that it represents the latest in a continuing series of arguments
being made in the Judiciary Committee. I am thinking now of the senior
Senator from New York, Mr. Schumer, who asked the Attorney General,
then nominee, Alberto Gonzales, of his opinion on this ``nuclear
option.'' Later we heard speeches in the Senate from the distinguished
senior Senator from Massachusetts, Mr. Kennedy, and together the three
Senators making speeches, raising fears of alarm about the so-called
nuclear option have raised the concern, at least on my part, that if
left unresponded to, if the record is left uncorrected, people might
indeed begin to believe what we are suggesting by restoring this 200-
year tradition of majority rule is radical when it is not.
One of the dangers of being here a while is you may have been on
record directly and diametrically opposed to what one is saying today.
That is the case with the senior Senator from West Virginia.
In 1979 on this same issue, he said:
This Congress is not obliged to be bound by the dead hand
of the past . . .
He said:
Any Member of this body knows that the next Congress would
not heed that law . . .
He is talking about a hypothetical law where a Congress would pass a
bill that says to change this you need a two-thirds majority
requirement.
He said:
Any Member of this body knows that the next Congress would
not heed that law and would proceed to change it and would
proceed to change it and would vote repeal of it by a
majority vote.
The senior Senator from West Virginia was correct in 1979. He is
plainly incorrect today in claiming now that a 60-vote threshold is
required in order to get an up-or-down vote on the President's judicial
nominees.
The senior Senator from Massachusetts, Mr. Kennedy, spoke on this
same matter in 1975--quite a time ago--when he served in this body as a
much younger man. He said on this same subject:
The simple fact is the two-thirds majority required . . .
under the filibuster, under the cloture rules
is too difficult to obtain. Too much Senate business is too
often obstructed. The will of the majority is too easily
thwarted. And it is not the Senate, but the Nation's people
who suffer the consequences.
I agree with the senior Senator from Massachusetts, speaking in 1975.
I disagree with the senior Senator speaking in 2005 on the same
subject. He made the case very clearly back then. It is the same case
that applies today. He said that the immediate issue is whether a
simple majority of the Senate is entitled to change the Senate rules.
Although the procedural issues are complex, it is clear this question
should be settled by majority vote.
So it is clear from the record that what Senator Kennedy, Senator
Byrd, and Senator Schumer himself back in the year 2000 suggested,
which was the majority should govern, should be the rule today. It
should be the rule when Republicans control the White House and control
the Senate. It should be the case were there a Democrat in the White
House or the Democrats controlled the Senate. In other words, what we
are talking about today is an important principle. And principles
should not change with political convenience, which apparently is the
case today.
For those who took the same position back then as I and others
believe should be applied today, then somehow it is suggested that this
majority rule option--which is what I would prefer to call what they
refer to as the nuclear option or the constitutional option--that is
all we are asking for, a return to that majority rule, which they
championed years ago and which they, unfortunately, are obstructing
today in suggesting that somehow it is a violation of our rules and of
our precedents.
Unfortunately, we learn, those of us who run for office, those of us
who are engaged in the rough and tumble of debate in the political
arena, we know that an unresponded to allegation or attack is often an
attack or an allegation believed. That is why it is so important, to
set the record straight.
One of the concerns Senator Byrd expressed in this op-ed, if I can
sort of get down to the bottom of it, is he thinks what we are
suggesting, the return to majority rule, is somehow going to stifle
debate. Well, the fact is, we have had more than 2 years, going on 3
years, to debate the President's judicial nominees who have been
filibustered. Surely, any reasonable person would agree that 2 or 3
years is enough debate on any nominee, when all we are asking for is
simply an up-or-down vote.
One other distinction I think is noteworthy. What we are talking
about is not restricting debate in any way on legislative business,
which, of course, is exclusively within the purview of the Congress.
And if we want to pass a rule that says we are not going to have an up-
or-down vote on legislation unless 60 Senators agree that we should
close off debate, I think that is exclusively within our purview
because it does not speak to the constitutional authority of power of
any other branch of Government.
But when we say--and the President is given the constitutional
responsibility to nominate people to the Federal bench--that our advice
and consent function cannot occur unless 60 Senators agree to close off
debate so we can have an up-or-down vote, that does not merely infringe
on our authority as the Senate, it infringes on the constitutional
power of this President to nominate good and qualified people to the
Federal bench, and then to have a debate, to have a searching inquiry
into their qualifications and background, but ultimately then to have a
vote, if a majority stand ready to confirm these nominees.
Surely, everyone would agree that it would be wrong to say it takes a
51-percent vote to elect a Democrat to office but it somehow should
take a 60-percent vote to elect a Republican to office. In a very odd
sort of way, that is an analogy to what Senator Byrd, Senator Kennedy,
Senator Schumer, and others on their side of the aisle have suggested.
Why in the world, after more than 200 years, when the practice has
been not to filibuster judges but to allow an up-or-down vote when a
bipartisan majority stand ready to vote on them, should the rules
change when this President is elected to the White House and when
Republicans have a majority in the Senate?
Well, of course, that is an unprincipled approach. It is merely a way
of saying we have an argument for why we ought to be able to obstruct
this President from getting the nominees he wants voted on to the
Federal bench. No one is suggesting, of course, that any Senator do
anything other than vote their conscience. If any Senator feels there
is just cause for them to vote against a nominee, then they should do
so. And I trust they will. But no Senator and no group of Senators has
the authority to block a bipartisan
[[Page S2080]]
majority of this Senate from doing its solemn duty under the
Constitution. Yet that is precisely what has happened time and time and
time again by an obstinate minority who last Congress filibustered 10
different judges, preventing that up-or-down vote from occurring.
We have tried to work with our colleagues on the other side. I
remember the Democratic leader, when asked whether his approach to
leadership on this and other issues would change with the change of
Congress and with his ascension to Democratic leader, said: I would
rather dance than fight. What it suggested to me was he was going to be
amenable to working together. I know he is a tough advocate for his
side of any argument, and as leader has a responsibility to his caucus
to represent the views of his caucus. But it suggested to me perhaps we
would have a fresh start and a new attitude when it came to judicial
filibusters.
But, indeed, time and time again we have seen that is not apparently
the case. And while we have not yet had to go to a vote on the floor on
these judges who have been filibustered in the past, we will very soon.
We know also that in addition to these circuit court nominees, we are
likely to have a vacancy to the U.S. Supreme Court before very long,
where, believe me, all this will have been merely a prelude to what
will be a vigorous debate, which will consume virtually everything else
we do, because people understand that those who are unsuccessful in
getting their views enacted into law through the political process know
that having judges who are confirmed who believe that a judge should be
an umpire and enforce political decisions rather than make political
decisions from the bench represents a threat to their agenda.
But none of us have the right to use unconstitutional means, which
these filibusters are, to prevent the people of this body, to prevent
this President, from doing our constitutional duty. For them to suggest
trying to restore 200 years of tradition, trying to restore majority
rule, doing the very things they themselves have advocated and done in
the past, is somehow a nuclear option is blatantly false.
So, unfortunately, it is necessary, for me and others to lay the
record straight. I trust that fairminded people, looking at the record,
looking at the facts, will realize what we are suggesting is not a
nuclear option. What we are suggesting is perhaps a constitutional
option. What we are suggesting is a restoration of the majority rule
option, but it is nothing radical, and it is, indeed, in keeping not
only with the traditions of the Senate but also in keeping with the
Constitution and laws of the United States.
The Constitution is abundantly clear when supermajorities are
required in order to perform a certain function. For example, to amend
the Constitution, it talks explicitly about the requirement of a two-
thirds majority and ratification by three-quarters of the States. It is
also very clear that a supermajority is required to ratify treaties.
But nowhere within that document, that foundation of our laws, the
Constitution, is it suggested that more than a majority rule is
required in order to provide advice and consent when it comes to the
President's judicial nominees.
I appreciate the opportunity and the patience of my friend, the
Senator from Georgia, who I know is going to speak next, allowing me to
correct the record and I hope better inform the American people and our
colleagues about exactly what is going on. What is going on is that we
are required to do what the people of our respective States have sent
us here to do, and that is to vote. We have a tradition of lengthy
debate and opportunity for any Senator to speak their mind on any
subject that they care to speak on, but ultimately we are obligated by
our oath and by the Constitution that governs all Americans to have an
up-or-down vote, especially when a bipartisan majority stands ready to
confirm, which is the case here. No Senator, no person, no collection
of persons has any right to demand anything more.
Unfortunately, this has gone on for too long. Good and distinguished
nominees of this President have not only been denied the opportunity to
have an up-or-down vote but unfortunately have been smeared as part of
the process far too often. I believe what we need is a fresh start. We
need a fair process, one that will apply to Democrats as well as
Republicans, and one that will reflect the kind of honor that should be
reflected on this institution. Unfortunately, that has not been the
case. We have somehow allowed ourselves to veer off the path that the
Constitution lays out for us. But we do have a chance, if necessary, if
the Democratic leadership is going to persist in this unconstitutional
blockade and obstruction of the President's nominees, for us to correct
what has gone on for too long. Indeed, I hope that will not be
necessary. Ultimately the decision is going to be theirs.
We have been patient. We have explained our position. We have
listened carefully to their arguments. We have listened to their
objections. Frankly, we find them to be firmly planted on both sides of
this issue.
I hope those listening and colleagues in the Chamber will now
understand a little bit better about why it is so important for us to
reinstate this more than 200-year tradition, indeed this constitutional
mandate that binds all of us as Americans to majority rule restoration.
I yield the floor.
The PRESIDING OFFICER. The Senator from Georgia.
Mr. ISAKSON. Mr. President, I ask unanimous consent to address the
Senate as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
Tillie Fowler
Mr. ISAKSON. Mr. President, at this precise minute and this precise
hour in Jacksonville, FL, countless friends and admirers are gathering
to pay tribute to Tillie Fowler. It is only fitting and proper that in
this Chamber this Congress do the same.
For me personally, it is more than just the loss of a colleague. I
served with Tillie's dad, Culver Kidd, a State senator in Georgia for
years when I served in the legislature--colorful and distinguished, a
leading citizen. Her brother Rusty is a warm and trusted friend. Her
daughter Tillie worked for me the first 4 years I served in the House
of Representatives. I honor, admire, and respect her loving husband
Buck who, together with Tillie, has meant so much to me personally in
my career.
I know the bible teaches us in the book and chapter of Ecclesiastes
that there is a time for everything, a time to live and a time to die.
But there are some times that it is so difficult to accept, the loss of
one so vibrant and so important, not only to their community but to
their country. Such is the case with Tillie Fowler.
I know that her family, gathered today at this moment in
Jacksonville, FL, would want us in the Senate and in this Congress, in
this building today, to pay tribute to the legacy of Tillie Fowler: an
accomplished attorney, a loving wife, a devoted mother, a committed
servant of the people she represented, an honored Member of the United
States House of representatives, a lady who became the highest elected
woman in leadership in the Congress of the United States at the time
she ascended to the position of vice chairman of the Republican
conference in the majority of the House, respected by both sides of the
aisle as the most formidable and knowledgeable member of the Armed
Services Committee in the House, one who had the temperament and the
ability to calm the waves of partisanship and point to the direction
that we all knew we should go, and one that would also stop to help,
regardless of the need of an individual.
In fact, on Tuesday of this week, just one day after she was
stricken, I was to have had an appointment in my office in the Russell
office building with Tillie Fowler. Obviously, because of her illness,
she could not come. But the person she was going to introduce me to
could. Only a Tillie Fowler would have sent to me the new director of
the largest public and charitable hospital in Georgia and the largest
trauma center in our State because she was spending part of her time
trying to see to it that those that help others got help themselves.
It was an honor for me to serve in the House with Tillie Fowler. It
is a privilege for me to stand here today in the Senate and pay tribute
to our colleague. On behalf of all the Members of
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this Senate, we extend our deepest sympathy and condolences to her
husband Buck, her daughter Elizabeth, her daughter Tillie, and all of
her extended family.
Mr. NELSON of Florida. Mr. President, it was with great sadness that
I learned of the passing of Tillie Fowler, a great friend, dedicated
public servant, and remarkable woman.
It is difficult to think about Florida politics without thinking
about Tillie Fowler. She was a woman with strong values, political
acumen and honor. I was lucky to have known her and, more importantly,
Florida was lucky to have had her represent us in the U.S. House of
Representatives.
She is an inspiration to Floridians and all Americans, and she will
be greatly missed.
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