[Congressional Record Volume 152, Number 17 (Monday, February 13, 2006)]
[Senate]
[Pages S1079-S1121]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            TAX RELIEF EXTENSION RECONCILIATION ACT OF 2005

  The ACTING PRESIDENT pro tempore. Under the previous order, the Chair 
lays before the Senate the House message to accompany H.R. 4297.
  The Acting President pro tempore laid before the Senate a message 
from the House of Representatives disagreeing to the amendment of the 
Senate to the bill (H.R. 4297) entitled ``An Act to provide for 
reconciliation pursuant to section 201(b) of the concurrent resolution 
on the budget for fiscal year 2006,'' and asks a conference with the 
Senate on the disagreeing votes of the two Houses thereon.
  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate insists on its amendment and agrees to the request of the House 
for a conference.
  Who yields time?
  Mr. LOTT. Mr. President, I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. LOTT. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. LOTT. Mr. President, I yield myself such time as I may consume 
off of the time that has been designated on the pending issue.
  The ACTING PRESIDENT pro tempore. The Senator is recognized.
  Mr. LOTT. Mr. President, it is Monday at noon and I think the 
people's business needs to be attended to sooner rather than later, in 
the daylight rather than at night, so I rise to point out my concern 
that the Senate continues to fiddle while Rome burns. I have no idea 
why there is a justification for up to 10 hours of debate and multiple 
motions to instruct on this tax reconciliation. We have been through 
this already multiple times. This convoluted procedure is, in my 
opinion, very unhelpful for the legislative process and for the 
relationship between the two sides of the aisle. There is no need for 
this. The Senate has voted twice already on this and 66 Senators are 
for this bill--or 68, 66 and 68. Go back and look at the Record. So we 
are going to go to conference.
  We can't let these motions to instruct prevail. By the way, they are 
outrageously ridiculous, anyway. Nobody pays any attention to that. I 
hope to be a conferee. Do you think I am going to pay any attention to 
any motions to instruct me? Baloney.
  The Senate leadership that is responsible for the way we do our 
business and the way we appear to the American people needs to get a 
grip on this situation. The very idea that there would be even 3 
motions to instruct, let alone 8, 9, 10--we have to stop this. We have 
had our chance to make our speeches. We don't need to eat up 3, 5, 10 
hours of debate on this bill. What in the heck are we going to say? Are 
we going to talk about the snow event this weekend? Nobody is going to 
be snowed by what is going on here. This is delay and obstruction. We 
need to find a way to get over this. I realize Senators have their 
rights to have motions to instruct. But how can we move this process 
forward?
  That leads me to my next point, in terms of fiddling while there is a 
problem that is getting worse. If you talk to the American people, an 
awful lot of

[[Page S1080]]

people are concerned about the future and their retirements. Will the 
retirement benefits be available to them and to their children? Will 
they be there when they need them? Will they be portable? We need 
pension reform. We need certainty in pensions. People need to know what 
the law is going to be. We need to know it is going to be actuarially 
sound. How are we going to pay for all these benefits people are 
expecting in their pensions when they retire?
  Of course, an important part of this pension bill is what are we 
going to do about aviation pensions? Airlines are having a difficult 
time. They are teetering in the balance. At least a couple of them are 
prepared, if they have to, to enter into bankruptcy and walk away from 
their pensions. But they don't want to. They want to do the right 
thing. They don't want the taxpayers to be saddled with these pensions 
that airlines unfortunately quite often agreed to in the past. They 
want some way to make sure those pensions are protected.
  I urge my colleagues on both sides of the aisle, and the leadership, 
to find a way to move forward, to appoint conferees on the pension 
bill, so we can step up to this issue that worries people. Why should 
it take days or weeks to appoint conferees on a bill that is broadly 
supported, is going to be bipartisan, and is important to the working 
men and women of America?
  I know there is a lot that goes on in making these appointments. You 
have to decide on the numbers and you have a lot of Senators who would 
like to be conferees. But I plead with our leadership to find a way to 
get the conferees appointed--not tomorrow, not Wednesday--today, 
because we are fiddling while people's pensions are burning. It 
concerns me.
  I am glad to be here. I am here. I am perfectly willing to be a pain 
in everybody's neck as the day and the week progresses so we can find a 
way to get to a conclusion on two conference issues. These are issues 
we can get into in conference. These are issues on which we can get a 
result.
  I urge our leadership to find a way to appoint these conferees as 
soon as possible on the pension bill and to get into conference on the 
tax bill.
  I yield the floor.
  Mr. REID. Mr. President, first, I agree we should be moving forward 
on the pension conference. It is very important. We are ready to do 
that.
  I would also suggest that this budget reconciliation could already 
have been finished. We over here didn't choose what the majority leader 
brought to the floor. Instead of bringing to the floor the conference 
report dealing with taxes, he decided to bring asbestos, a bill that 
wasn't ready to come to the floor. We were ready to move on this any 
time last week.
  I say to my friend, the distinguished Senator from Mississippi, whom 
I have so enjoyed working with over the years, if we were truly trying 
to delay this legislation, we could do that. Under the rules, which I 
think should be changed, instead of having the 8 motions to instruct 
which we have, we could have 80 or 800. The rule is not good. We need 
to change this whole budget setup.
  Again, if this legislation had been brought to the floor last week 
rather than the asbestos legislation, we could have finished it.
  Also, I think we have been fairly direct in our amendments which we 
have on the conference report. They are not on subjects that are 
outside of the scope of this bill. We have one, which will be a motion 
to instruct, to not raise the debt ceiling. There will be another one 
regarding the need to replenish the military--which all experts say is 
$50 billion--and replace vehicles and other such things because of the 
war in Iraq; both Guard and Reserve, $50 billion; to take some of the 
tax cuts and give it to our military; and the same with veterans health 
benefits. There is a very important amendment dealing with energy to 
help make us a little more energy independent.
  I am not going to go through all of the motions to instruct other 
than to say they are important, and also, frankly, we haven't been much 
of a participant in the conference, anyway. We might as well give the 
conferees some idea of what we are thinking since they do not invite us 
to the meetings.
  I agree with the Senator from Mississippi; it is important that the 
budget process be changed. I think it is right--if we had wanted to, we 
could stop this thing from ever moving forward. Rather than spending a 
few hours on it, we could spend weeks on it. That would be wrong.
  I hope we can have a bipartisan group of Senators take a look at how 
we can change this whole budget process in the Senate. It is subject to 
a lot of abuse, no matter who is in power.
  I suggest that on our motions to instruct we are willing to move 
forward on those quickly. We complained about the 8 o'clock votes. We 
are willing to finish the votes tomorrow, but it will take a little bit 
of time.
  Further, it is my understanding that maybe the Republicans have some 
amendments they want to offer. We have eight. I don't see our side 
having more. Under the rule we could have more, but I think that would 
be all.
  I look forward to working with my friend from Mississippi to make 
sure we can move forward on this legislation, particularly the pension 
reform, which is so important to the country.
  The ACTING PRESIDENT pro tempore. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that all quorum 
calls which we might have on the pending issue be equally charged to 
both sides.
  The ACTING PRESIDENT pro tempore. Is there objection?
  Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, earlier this month we began and finished 
the second floor debate on the tax relief reconciliation bill. At that 
time, I spoke in recognition of Groundhog Day because it was just 
around the corner. I have next to me that portrait of Punxsutawney 
Phil. Phil is the groundhog.
  In thinking of Phil and his unique form of weather reporting, I 
thought about that popular film entitled ``Groundhog Day'' starring 
Bill Murray in which a man relives the same day, Groundhog Day, over 
and over again. This film has taken on even greater significance for me 
as I seem to be in a similar situation for the third time. More than 
just the sense of deja vu, I feel as though I am reliving a couple of 
past experiences, and before these several votes tonight or tomorrow, I 
think everybody will agree with me.
  I have before you another chart. The chart shows a scene from the 
Bill Murray movie ``Groundhog Day.'' From this movie is a picture of 
Phil, the groundhog, driving the car and Bill Murray is there with him. 
Bill Murray is in this case the copilot. Phil is driving the car. You 
see Phil with his paws on the steering wheel, and you see the copilot 
seated behind him.
  As I said just now, I feel like the Bill Murray character in the 
movie. It seems we are reliving the same events over and over again. We 
are going through the same debates over and over again.
  For those who watch C-SPAN regularly--probably not too many 
Americans--they know what I am talking about because it was 2 weeks ago 
we were debating the tax reconciliation bill, the same tax 
reconciliation bill we were debating back in November, and the same 
debate we had a couple of weeks ago.

  I will summarize the floor process we have been going through on this 
bill.
  At 11:08 a.m. on Wednesday, February 1, 2006, I opened the second 
Senate floor debate on this bill. The rollcall vote on final passage 
occurred at 9:42 p.m. on Thursday, Groundhog Day, 2006. All the time 
permitted for debate under reconciliation--20 hours--was used in the 
second floor debate--again, Groundhog Day.
  Three Senators were not here for the final vote. There was a total of 
eight rollcall votes that day, including the vote on final passage.
  You will recall that, as I said, this was the second time. I hope you 
will recall I said then that we actually had debate earlier in November 
on the very same bill. The very same bill is this bill right here, S. 
2020, the Tax Reconciliation Act.
  We started that debate at 3:35 p.m. on Wednesday, November 16, 2005. 
For 20 hours on Wednesday, Thursday, and into Friday we debated this 
bill, S. 2020. A total of 80 amendments was filed, and 7 of those 
amendments were agreed to. The liveliness of the legislation culminated 
in 18 rollcall votes.

[[Page S1081]]

The final vote on passage came at 12:05 in the morning of Friday, the 
18th of November, 2005. According to the Secretary of the Senate, 97 of 
us were there for that vote. I must not be the only one who is reliving 
this experience of Groundhog Day over and over again.
  There is one Senator whom I can't speak for, so I have to clarify 
that the new Senator, Senator Menendez, was not a Senator during the 
first debate back in November. He has been appointed to the Senate 
since then. He was here for the second debate because he joined the 
Senate after the first bill passed. Maybe the second debate would not 
be old hat to him, but for the other 99 Senators it would be more or 
less old hat.
  Here are the two bills. Technically, right now we are on the House 
bill, H.R. 4297, but between these two publications, I guess it would 
be fair to say they are 95 percent the same.
  This bill, S. 2020, was first debated in November last year and 
passed then as the Tax Relief Act of 2005. The Senate passed the second 
bill, after we amended the provisions of this to it, as H.R. 4297. The 
first bill, S. 2020, is 417 pages long, and the second bill, H.R. 4297, 
as amended, is 363 pages long. The bills are very close to the same 
length. What happened in between was between November and February, the 
Senate removed the Hurricane Katrina provisions and interest suspension 
provision because those proposals became law in a separate piece of 
legislation in November 2005. Removing the Katrina provisions and the 
interest suspension provision accounted for a reduction of 63 pages 
from this bill. The five amendments agreed to during the second floor 
debate added 14 pages to H.R 4297.
  Again, except for those five amendments that were put in, plus the 
Katrina provisions taken out, most all of this bill is pretty much the 
same.
  So why are we debating this for a third time, November of last year, 
3 days, 2 days this year, on February 1 and February 2, and now back 
here again this very day, February 13?
  My point is these two bills are virtually the same. The Senate 
basically debated the same popular, bipartisan bill twice, and we are 
going through another one of these purposeless delays at the insistence 
of the Democratic leadership again today, and it may take much more 
than 1 day.
  As we consider what they are going to offer--we refer to them as 
motions to instruct the conferees--to the bill, we are going to go to 
conference on H.R. 4297 to work out the differences between the House 
and Senate. I have to ask my colleagues: Why are we still doing this? 
Didn't we already go through this exercise? Shouldn't we be finished 
with the Senate debate? For me, the answer to those questions is there 
is no reason to be here. All you have to do is in 5 seconds appoint 
conferees and get to work ironing out the differences between the House 
and the Senate.
  Without a doubt, we have gone through this exercise twice. When is 
debate on the same subject enough for the Senate? In the face of the 
multitude of other important issues this body needs to deal with, does 
the Democratic leadership want to reenact recent debates and 
resuscitate old talking points? The tax reconciliation bill already 
passed with the support of 64 of us the first time. The second time we 
passed this bill, the bill garnered the support of 68 Members. Included 
in the first count were 15 Democrats. I am pleased we picked up two 
more Democrats the second time we debated the bill. Maybe if we keep up 
this exercise enough times, we will have a bill that will get 100 
Senators for it.

  What is the purpose of that? If we do that, we will not be passing 
this bill in the year 2006; we will be passing this bill in the year 
2007. Do not think that the millions of taxpayers expecting us to act 
would be very happy about running the Senate through that many 
Groundhog Days. Even Phil, the groundhog, might even be a bit 
irritated. Phil, wouldn't you be irritated if you had to go through all 
of this?
  This legislation is extremely important. We will debate it as long as 
necessary. I question the necessity of going through a process that 
resulted in bipartisan passage of the same bill almost 3 months ago. We 
often think bipartisanship is when we get to 60. You are lucky to get 
to 60. That is what you have to do in the Senate to get anything done. 
To get to 64 or 68 is almost a landslide in the Senate. Why the 
continued debate? I doubt if the people who are stalling this want to 
continue the debate long enough to convince even more Democrats to vote 
for this bill. I don't think that is their motive.
  That is my first point. This is a very curious exercise. It is an 
exercise with no apparent purpose other than delay. Is the delay on the 
part of the Democratic leadership important? The answer is, yes. Ask 
American tax-paying families and you will get an answer, but you get a 
different answer. The answer is, yes, if you are 1 of 20 million 
families waiting for certainty that you are not caught in the clutches 
of the alternative minimum tax with which this bill deals.
  We hear a lot of talk about the alternative minimum tax. We will hear 
about it in the debate over the next few hours. This bill does 
something about the AMT. It holds harmless 20 million Americans so they 
will not be hit by a tax that they were never supposed to pay in the 
first place.
  I will use some charts that describe different provisions of this 
legislation and how it affects the constituents of each of the 
Senators, on a State-by-State basis. The data is from the Internal 
Revenue Service. It is the latest available in terms of State-by-State 
impact. The data comes from the year 2003, so it understates the tax 
problems of citizens in the various States for taxes in the year 2006. 
I apologize for not having more up-to-date information. I suggest to 
people who are considering the figures on the charts to more than 
double the figures; that will be a rough State-by-State idea.
  We will look at a chart dealing with the alternative minimum tax. 
This tax will hit 20 million Americans if we do not pass this 
legislation. It is not on the taxes they will file for 2005 because we 
are talking about income earned during the year 2006. They will be hit 
by the alternative minimum tax 12 months from now, when people file 
their taxes, if we do not pass this legislation.
  When you start a tax year, you ought to have some idea what the tax 
laws are going to be for the next 12 months and into the future. That 
is why this legislation should have been passed in conference last fall 
to get a permanent law so people earning money on January 2, 2006, 
would know they would not be hit by the alternative minimum tax.
  The basis of the bill the Senate passed and the bill that is once 
again before the Senate is an extension of the AMT hold harmless, so 
that no additional number of people will be hit by the alternative 
minimum tax. Every Member who is participating in this deliberate 
strategy of delaying our entry to conference to work out the difference 
between the House and the Senate is delaying the certainty these 
millions of American families deserve. Again, it affected 8 million in 
2003. That figure now is 20 million in 2006. For my State of Iowa, it 
is 65,000 taxpayers. It is probably tens of thousands more now. In 
Nevada, there are 68,000, with a lot more than 68,000 being hit in 
2006.
  Those are the facts on the alternative minimum tax. Look it up in the 
Internal Revenue Code. The AMT relief provisions expired December 31, 
2005. I ask my friends and the Democratic leadership to look at the 
calendar: 1\1/2\ months have passed, and the alternative minimum tax 
hold harmless has not been extended to prevent 20 million Americans 
from being hit by a tax on income earned in 2006; earning the same 
income in 2005, they would not have had to pay that tax. The AMT hold-
harmless provisions are the cornerstone of this legislation. It is the 
cornerstone of a bill that the Democratic leadership is delaying. I 
don't want to hear people talk about the alternative minimum tax 
problem and at the same time delay real action to help those millions 
of tax-paying families. I suggest we may hear that.
  This bill also includes another provision, broadly popular and 
broadly applicable in its tax benefits. I will talk about them beyond 
the alternative minimum tax.
  This chart shows deductibility of college tuition, first inaugurated 
in the tax bill of 2001. This is a benefit for families who send their 
kids to college. By definition, this benefit goes to middle-income 
families. A lot of these families are not low income so their kids

[[Page S1082]]

possibly do not qualify for Pell grants. They are not high income 
either. All they have to do is have mom and dad write out a check, and 
they go to college. These are families that get the full benefit of the 
deduction if they make up to $65,000 as a single person or up to 
$130,000 as a couple.
  The reason I say it is conservated on the middle income is because 
above those figures the benefit phases out. A lot of these families are 
paying significant Federal, State, and local taxes, and they get no 
help in defraying the high costs of their kids' college tuition. This 
tax deduction provides help for these hard-pressed, middle-income 
families with a benefit and furthers a very important national goal 
that we try to give attention to, the support for higher education. 
This deduction runs out at the end of this year, 2006. These families 
next year will face tax increases if we do not act on this bill. We 
ought to act on it now, although it does not phase out until the end of 
this year. During the spring, people anticipate their capability of 
sending their kids to college. If they cannot count on this, they have 
to dig up money someplace else for their kids to start college in 
September, which carries over into 2007.
  The chart before the Senate shows the number of families, on a State-
by-State basis, that benefit from this deduction. I emphasize that 
these are 2003 figures. I don't know exactly how much more we increase 
them because we are now in 2006, but it would be significant. In Iowa, 
more than 37,000 families are affected by this legislation, 37,000 in 
Iowa who do not know for sure if the tax deduction will be available 
when their kids go to college next year.
  Now I will pick out another State. Nevada has 25,000 families. If we 
do not pass this legislation, 25,000 families will not know whether 
their kids are going to get the advantage of this tax for the next 
school year.
  It seems to me the perpetuation of support for higher education, 
particularly for middle-income families, that their families cannot 
qualify for Pell grants, we ought to be reenacting this legislation now 
so these families can plan on sending their kids to college next 
September.
  Another benefit addressed in this bill is the small savers credit. 
This gets back to the problem we are always talking about, that 
Americans are not saving enough. Lower income people, spending most of 
their disposable income on the necessities of life, do not have money 
left over to save. They may not have an ethic to save. Through the Tax 
Code, we try to give incentive to save and some help to save. This 
happens to be the tax credit for low-income people to save through an 
individual retirement account or a pension plan. Saving money is 
important. We all want all Americans to be part of the effort to save 
for the future.
  This chart shows the number of low-income savers who benefit from 
this bill, on a State-by-State basis, from the small savers tax credit. 
Again, more than 5.5 million people take advantage of this. How many 
more for the 2006 figures, I don't know, but in Iowa 95,000 people take 
advantage of saving money through the small savers tax credit. And I 
will also take Nevada: 36,000, almost 37,000 people 3 years ago were 
saving through this program. That needs to be reenacted or there will 
not be incentive to save.
  The bill before the Senate also extends another needed tax deduction. 
This is for teachers who buy their own supplies for their students. 
This provision was developed by Senators Warner and Collins. It makes 
whole teachers who go that extra mile to pay out of their own pocket 
classroom expenses. Who is going to argue with a devoted teacher whose 
school district does not provide enough supply if she wants to spend 
out of her own salary, his or her own salary, to buy supplies? That 
proves the dedication of our teachers.
  I will point to the number of teachers included on the chart, on a 
State-by-State basis, who take advantage of this deduction. This 
deduction needs to be reenacted for these teachers to have the 
certainty that money they will spend today will be deductible from the 
taxes they file 12 months from now. Again, in my State of Iowa, almost 
34,000 Iowa teachers benefit from this. Another State we could look at 
would be Nevada, where 22,000 families benefit.

  Is there any reason this help to teachers--who are good teachers but 
want to make better use of their talent, to make sure their students 
have adequate supplies--why that should not be reenacted, and why, this 
very day, in classrooms across America, teachers have to be worrying 
about whether they are going to have this benefit to reimburse them for 
going that extra mile?
  Now, there is another item in this bill which is very popular which I 
do not have shown on a chart. But this bill extends what we call small 
business expensing, so that anything which is depreciable, on an 
increased amount of money of up to $100,000, can be expensed in 1 year 
rather than spreading it out over a period of 5 to 10 years. Many small 
businesses use this benefit to buy equipment on an efficient, after-tax 
basis.
  This is very good for small business. Small business creates 70 to 80 
percent of the new jobs in America. So it is a job-creation tax 
incentive. It is good, then, for workers in these small businesses. 
Obviously, if you employ more people, you end up with greater economic 
growth for our entire country.
  The final chart I have deals with the tax deductibility of the State 
and local sales tax deduction. This applies to the States of Alaska, 
Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and 
Wyoming.
  This bill helps 12.3 million taxpayers in your States. Tennessee is 
one of these States. It is the home State of our majority leader. He 
has worked hard to get this bill to the floor. For the third time now, 
our majority leader, Senator Bill Frist, has worked hard to move this 
bill into conference. I want the good people of Tennessee to know that.
  Now, another State that could benefit when we get this passed is 
Nevada, the home State of our Democratic leader. Unfortunately, this 
bill is going through another process of holding it up for another day 
of debate, meaning the people in these States who have deductibility of 
their State taxes do not know whether, come 12 months from now when 
they are filing their income tax on income earned in 2006, it will be 
deductible.
  So I would ask them to focus on the taxpayers of these respective 
States. I still hold out hope that the Democrat leadership will see the 
light. I hope they will work with me to guarantee that the folks in 
their States will be able to deduct their sales taxes this year. This 
is the third time, then, this bill has been delayed.
  This is a bipartisan bill with a bipartisan consensus. This needs to 
pass. Maybe the third time will be a charm. Maybe we will finally get 
this bipartisan bill to conference because you do not get bills to 
conference around here that are not bipartisan because when you only 
have 55 Republicans in the Senate, there is no way, even when all of us 
vote alike--and we do not vote alike--we can move a bill to conference. 
So it has to be bipartisan. You have to have Democratic support. So in 
this particular instance, we have 15, 16, 17, roughly, of the Democrats 
voting for it.
  Every Senator ought to help us pass this bill because of the 
provisions I just went through on these charts which are included in 
the bill. But there are also other reasons for supporting this bill.
  Our bill addresses expiring business and individual provisions that 
are known as extenders. These provisions include items such as the 
research and development tax credit and the work opportunity tax 
credit. This bill also includes many of the charitable incentives 
introduced in what we call by the acronym the CARE Act and which 
provisions have previously passed the Finance Committee and passed the 
entire Senate.
  In this regard, in regard to the CARE Act, in regard to the R&D 
credit, I have to give particular applause to Senators Santorum and 
Baucus in working with me to balance these incentives with several of 
the much-needed reforms that are supported by the charitable sector, 
the Treasury Department, the IRS, and donors and taxpayers to make sure 
charitable giving is not abused.
  Last, but not least, this bill contains loophole closers and tax 
shelter-fighting provisions that raise revenue.
  This bill is bipartisan.

[[Page S1083]]

  I thank my friend and working partner and ranking member, Senator 
Baucus, for his cooperation. He and I were not always partners on this 
bill, at least in the beginning, but we teamed up in the Finance 
Committee. We teamed up in the first Groundhog Day floor debate. We 
teamed up in the second Groundhog Day debate. I look forward to working 
with him today and hope we can team up in the conference working out 
the differences between the House and the Senate. As always, his 
cooperation and, in tense times, his good humor make a big difference 
in this body.
  Let me also thank those Democratic Senators who joined us in this 
bipartisan effort on our first floor journey. Most of them repeated 
through the second time on February 1 and 2 of this year. I ask them to 
help me persuade their leaders to let this bill proceed. I ask them to 
ask their leaders to focus on taking care of tax legislative business, 
bringing certainty to the tax policy of this country for the benefit of 
our taxpayers and the benefit of investment because investment creates 
jobs. I ask that the political games be cut out. I ask that we roll up 
our sleeves and get down to the people's business.
  I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. KENNEDY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.


                      Motion To Instruct Conferees

  Mr. KENNEDY. Mr. President, I send to the desk a motion to instruct 
conferees and ask for its immediate consideration.
  The ACTING PRESIDENT pro tempore. The clerk will report the motion.
  The bill clerk read as follows:

       Mr. Kennedy moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendments to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to reject the extension of the capital 
     gains and dividends rate reduction contained in section 203 
     of the bill as passed by the House of Representatives.

  Mr. KENNEDY. Mr. President, Americans are wondering what has happened 
to their Government. They are working hard to raise strong families and 
to live the American dream. But with each passing day, they find the 
American dream farther and farther out of reach as they juggle just to 
make ends meet. Over the past 5 years, the cost of health insurance has 
jumped 73 percent. Gasoline is up 74 percent; college tuition, 45 
percent; housing, 44 percent. The list goes on and on and up and up.
  Working families do not ask for much. Low- and middle-income families 
are doing their part. But they could use a little fair play from their 
Government as they are facing such hard times.
  But that is not what is going on in Washington today. Again and again 
and again, under this Republican President and this Republican 
Congress, they have seen trillions of their tax dollars given away in 
tax breaks to the wealthy and to corporations while the rest of America 
is asked to sacrifice. And this bill and the budget President Bush sent 
to Congress last week are yet another example.
  The House version of the bill before us provides tax breaks on 
capital gains and dividend income that will take $50 billion over the 
next 10 years and give it to people who are already wealthy. At the 
same time, the President's budget cuts almost $50 billion from Medicare 
and Medicaid for the next 5 years, harming health care for our seniors, 
for the disabled, and for the poor. And it robs key funds from other 
health priorities as well.
  Those are the wrong priorities for America, and the motion I offer 
today gives the Senate a chance to set things right. My motion says it 
is wrong to give away $50 billion in tax breaks for the wealthy while 
cutting $50 billion from Medicare, Medicaid, and other health care 
needs.
  If we are honest about reducing the deficit and strengthening the 
economy, we need to stop lavishing tax breaks on the rich and start 
investing in the health and well-being of all families. Nowhere is the 
crisis facing working families more apparent than in health care.
  Overall costs are soaring. Families have been losing their health 
insurance at the rate of 4,000 people per day--per day--since President 
Bush was elected. Close to 2 million Americans in 2001 were involved in 
medical bankruptcy--an increase of 2,200 percent from 1981. Around 50 
percent of all bankruptcies in America today are caused, at least in 
part, by illness or medical debts, and of those, 60 percent were caused 
by high medical bills. High drug costs were responsible for half. Most 
involved had some health insurance but suffered from coverage gaps. 
Out-of-pocket medical costs averaged $11,854. For cancer patients, out-
of-pocket costs averaged $35,878.
  These are not people trying to game the system. In the 2 years before 
filing for medical bankruptcy, 22 percent of filing families went 
without food, 30 percent had a utility shut off, 50 percent failed to 
fill a doctor's prescription, and 61 percent went without needed 
medical care.
  Let's look especially at what Republicans are doing to Medicaid and 
Medicare. The Medicaid Program is key to promoting a real culture of 
life in America. A third of all mothers giving birth receive their care 
through Medicaid. The Medicaid Program provides the prenatal and 
pediatric care their children need to be healthy. The Medicaid Program 
is our statement that we will do everything we can to help women bring 
their babies to term and give them the health care they need as they 
grow up. That is the way it should be in a true culture of life.
  But rather than stand by women in their time of need, Republicans are 
abandoning this culture-of-life program. Mere hours after the President 
had declared in the State of the Union Address that the Government 
would meet its responsibility to provide health care for the poor and 
the elderly, the House of Representatives sent to the White House a 
bill to impose draconian cuts on the Medicaid Program.
  Did the President stand up for this culture of life program and veto 
the House bill? No. He signed it. According to the Congressional Budget 
Office, under the Republican Medicaid bill, the poor and the disabled, 
those with mental illness, will lose: 45,000 enrollees will lose 
coverage over 5 years; 65,000 enrollees will lose coverage over 10 
years; 60 percent of those losing coverage will be children; 13 million 
of the poorest Americans will have to pay more for prescriptions by 
2010; and 20 million will have to pay more by 2015.
  You may ask where we get these numbers; do they represent what is 
going to happen? All you have to do is look at the examples. It is 
already happening in States across the country. In Maryland, a quarter 
of the families subject to increased premiums disenrolled, and those 
premium increases were extremely modest. In Oregon, higher costs caused 
disenrollment, and 67 percent of those who disenrolled became 
uninsured. The list goes on. In Rhode Island, nearly one in five 
families subject to the new premiums lost coverage. In Vermont, 11 
percent disenrolled for nonpayment 1 month after the premiums 
increased. This is what is happening. This is an attempt to destroy the 
Medicare and Medicaid systems, make no mistake about it.
  Not satisfied with the cuts in Medicaid already enacted, the 
President's budget proposes another $14 billion in reductions in the 
program that meets the health needs of the poorest Americans. Some will 
try to say this does not have any effect on a family's health, but the 
facts say otherwise. When copayments rise for the poorest, health 
declines. This chart reflects a study of the Journal of the American 
Medical Association. It shows that increased copayments for medication 
for poor families caused an 88-percent increase in adverse events. This 
is from a study by the American Medical Association. The reference is 
printed in JAMA, the Journal of the American Medical Association. This 
is what happens with copays: a dramatic increase in serious adverse 
events. You almost have a doubling of adverse events when individuals 
have a nominal copay of $2 to $3.
  Look at what happens in this chart: A 78-percent increase in 
emergency room visits when a copay is required. This represents 
emergency visits with

[[Page S1084]]

no copay, and this is with a nominal copay. With $3 to $4 for the 
copay, we see a significant increase in emergency visits.
  What is the result? It is going to cost the system a great deal more 
money. This is dollar foolish and, from a health point, a disaster for 
individuals adversely impacted. It will fall on the States and local 
communities to pay for this. It is a transfer of obligation. The people 
who will get hurt are going to be those who have the potential for an 
adverse event or who need prescription drugs in order to prevent a 
disease from continuing to disable them.
  This debate isn't about statistics. It is about the real harm these 
severe cutbacks will do to the most vulnerable Americans. A single 
mother with two children who makes $8 an hour currently pays $3 when 
she visits the doctor, and she does not have any cost sharing when her 
children go to the pediatrician. Under the new law, when her child goes 
to the pediatrician with an ear infection, she may be charged $20. When 
she goes to a doctor for treatment and tests for diabetes, she will be 
charged $50, and she will have to pay as much as $832 a year. That is 
what you are going to get as a result of Medicaid cuts, as the chart 
before showed us. A single mother with two children earning $25,000 a 
year now pays no premiums or cost sharing for her children's medical 
care and pays $3 copayments for herself under the existing system. 
Under the new law, she will now be charged monthly premiums for 
Medicaid coverage for herself and her children. Even if she manages to 
pay the premiums, she may now have to pay $40 for a pediatric visit. 
And she will have to pay as much as $1,250 for Medicaid.
  This is the wonderful Republican scenario. We've had no increase in 
the minimum wage; it has been 9 years and no increase in the minimum 
wage. And we are going to put more pressure on that mother, who is 
making $25,000 and has two children, for her family's health care. Why? 
Because we want some $50 billion more in tax breaks for the wealthiest 
individuals. That is what this is all about. Being in the Senate is a 
question of voting on priorities. The Senate will have a chance to say 
whether they want to give $50 billion more to the wealthiest 
individuals, or take that $50 billion and put it right back in the 
Medicare and Medicaid Programs which this President has cut, now and 
into the next several years.
  The President's policies, if enacted, will cause serious hardship for 
the most vulnerable Americans. But the administration's cuts to 
Medicaid are not the only assault on our health plans. The botched 
Medicare drug plan and the President's Medicare cuts further harm 
working families. When it comes to the new prescription drug benefit in 
Medicare, we had a good Medicare bill in the Senate, supported by a 
broad, bipartisan majority. Over 70 votes supported it. But that bill 
was hijacked once the White House entered the negotiations. Ideology 
trumped common sense. Instead of building on the Medicare Program that 
seniors know and trust, the drug bill was turned over to HMOs and 
private insurance plans enticed to participate by massive subsidies, 
funds that should have gone to strengthen benefits. The result has been 
a disaster.
  But that is not how the administration's spin machine sees it. 
According to the budget the President submitted to Congress, the 
Medicare drug program is off to a good start:

       The Medicare prescription drug benefit program is off to a 
     good start.

  I wish those in the administration who thought so had the opportunity 
to visit with seniors in Massachusetts trying to figure their way 
through this. My office is filled with letters of the sadness and grief 
from individuals who are confused and can't find their way through the 
45 different alternative programs. And as they search, they ask: ``Why 
couldn't they just give us the prescription drug benefit under the 
Medicare Program? I know the Medicare Program. It takes care of 
hospitalization. It takes care of doctor's fees. I know it. I trust it. 
I support it. I wonder, in these 45 programs, where the Medicare 
Program is?'' They can search and search and search, and they won't 
find it because this administration is opposed to it. So the seniors in 
my State are going to have to fight their way through those 45 
different programs to find out which one suits them and then, after 
they sign it, they find out that the program can change the formulary 
and raise the premium. That is quite a deal, isn't it? Once you are 
enlisted, the program can change like that. And if the senior doesn't 
get involved in one program or another, they will pay an extraordinary 
penalty for not becoming involved. Some deal.

  This is off to a good start? This is how it has been described: 
``Prescription for Disaster; Medicare Mess Cuts Cash Flow to 
Pharmacists,'' The Washington Times, February 6; ``Medicare Drug 
Mess,'' New York Times, January 22; ``Pharmacists Decry Medicare 
Chaos,'' the Tennessean, January 17; ``New Medicare [Prescription 
Drugs] Causes Numerous Headaches,'' Chicago Sun Times. This is what is 
happening: cuts in Medicare, refusing to build on the solid Medicare 
system which is tried and tested and proven and would give the greatest 
advantage to our seniors. That is what the administration is doing.
  Across the country, seniors and disabled individuals facing the 
challenge of mental illness have been denied the medications they need 
to maintain their health. They have been forced to pay massive fees for 
the drugs they counted on. States, cities, and many pharmacies have 
stepped into the breach and incurred millions of dollars in expenses to 
fill the gaps left by the administration.
  The reality is that 15 million seniors lose under the Republican 
Medicare law. This chart shows what is happening across America today. 
Retirees are being dropped. Low-income seniors are paying more in 
premiums. The dual eligible is also losing. Premiums are costing more 
than the benefits. This represents another 6 million who will lose 
under the Republican Medicare law. You add those together, and you have 
15 million beneficiaries who are somehow going to lose. That is the 
reality.
  Who is going to gain? If all of these seniors and disabled Americans 
are losing, we have to ask: Who wins from the Republican drug plan? 
Someone must win. The answer is clear. The drug companies and the 
insurance industry win. The Republicans turned Medicare into the 
``sugar daddy'' for the insurance industry by dolling out $67 billion 
in subsidies. Here is the latest chart: $67 billion, with a $10 billion 
slush fund built in. You also have the overpayment and the risk 
inflator. We know that any individual that is in an HMO program is 15 
percent healthier than the average Medicare recipient. That is a given. 
CMS knows that. And what did we do? We gave the HMOs the inflator, 
close to 7 percent, representing an advantage of more than more than 15 
percent. I thought the private sector was supposed to be more 
competitive and was supposed to save money. But instead, we have given 
$67 billion to the insurance industry. Those are the sweeteners in the 
Medicare prescription drug benefit.
  People back home in Massachusetts ought to understand why they are 
paying more in their copays--because a sweetener was needed for the 
insurance industry, for the HMOs. Those are the figures.
  Now what about windfall profits for the drug companies? This chart 
represents the difference between the money that is being paid now in 
this particular Medicare program and what would have been paid to drug 
companies if they had negotiated with the administration, similar to 
the VA system. So now we have to pay $67 billion to the HMOs and $139 
billion to the drug companies. That makes over $200 billion, adding the 
$67 billion and the $140 billion, $200 billion, Mr. Senior Citizen. We 
could have lowered your premiums, lowered your copayments, and gone a 
long way toward closing what they call the donut provisions in here.
  Even with all of these sweeteners, we have a disaster. Why? Because 
the bill blocked Medicare from negotiating the same kind of discounts 
for seniors that the VA is able to get for veterans. In order to 
promote competition under this part, and in carrying out this part, the 
Secretary may not interfere with the negotiations between the drug 
manufacturers and the pharmacies and the Prescription Drug Providers. 
There it is. That effectively prohibited the administration from being 
involved. They pay effectively almost what the companies want.
  Does the administration propose to make things right? Does President

[[Page S1085]]

Bush propose to kick the insurance industry and companies out of 
Medicare and provide a real benefit? The answer is ``no.'' Instead of 
strengthening Medicare, the new budget proposes $36 billion in Medicare 
cuts over the next 5 years and $105 billion over the next 10.
  The Medicare cuts will mean higher premiums for seniors and the 
disabled. This will result in reductions in the quality of care at 
hospitals and at home health agencies. In my State of Massachusetts, 
President Bush's Medicare cuts will mean that our hospitals will have 
to cut their budget by $213 million, home health agencies by $50 
million, nursing homes by $150 million.
  Cuts in public health programs mean that our State program to screen 
newborns as early as possible for hearing loss will be eliminated. 
Seventeen rape crisis centers across the State would face significant 
financial hardship. Our programs on violence prevention and suicide 
would effectively be eliminated. Over 35 programs that train health 
care providers who deliver care in underserved areas and that support 
diversity in the health professions will be eliminated. Why should 
patients pay the price while this bill gives away billions in tax 
breaks to people who don't need them?
  But, of course, Republicans have never liked Medicare and Medicaid. 
Even though retirees and the poor were hurting, Republicans fought 
against Medicare and Medicaid tooth and nail when Democrats fought to 
create those two important programs in the 1960s. I was here on the 
Senate floor in 1964 when Medicare was defeated. I was here in 1965 
when the Medicare Program was enacted. Republicans defeated Medicare 
when it was debated in Congress in 1964. When Republicans came under 
fire for their opposition in the 1964 election, enough crossed over to 
join Democrats in passing the Medicare and Medicaid Programs in 1965.
  Republicans never gave up their opposition. When they gained control 
of the White House and Senate in the 1980s, they tried to break 
Medicaid's promise of health care to poor families. They proposed 
converting the program into a block grant, and Democrats in Congress 
stopped them only after a pitched battle.
  Once again, in the 1990s, House Speaker Newt Gingrich and his 
Contract With America wanted to eliminate Medicare. Even though seniors 
and Americans with disabilities relied on the program and Americans 
respected it, Gingrich said Medicare should just ``wither on the 
vine.'' Democrats stopped them again.
  More recently, Glenn Hubbard, who was President Bush's chairman of 
the Council of Economic Advisers in his first term, said Medicare and 
Medicaid should be replaced by so-called health savings accounts, which 
would primarily benefit the healthy and the wealthy. He said:

       There is no reason to have a separate Medicare and Medicaid 
     arrangement if you had these souped-up HSAs.
       That is the architect of President Bush's health savings 
     account, Glenn Hubbard, proposing to abolish Medicare and 
     Medicaid. That is what this is really focused on, Mr. 
     President. We ought to understand that.

  Meanwhile, the Bush administration and Republicans in Congress 
continue to chip away at Medicare and Medicaid. Now they are at it 
again.
  In the budget the President just submitted to Congress, no health 
priority is safe. Medicare, Medicaid, cancer research, newborn 
screening, trauma services for children, and many other essential 
programs will be severely reduced or even eliminated.
  Look at this, Mr. President. Here is how these cuts affect the budget 
and undermine medical progress. This is how much they would need to 
have current services, to keep the inflator in the Medicare 
prescription drug benefit. Take the National Cancer Institute. Right 
now, we are in the age of the life sciences--with the human genome 
project, the sequencing of the genome, potential stem cell research, 
and a whole range of different opportunities. Right now, under the 
human genome project, researchers are sequencing genes from cancers, 
which are the greatest danger to families, using computers and other 
kinds of advanced technology. Those who are involved in this research 
believe that it is going to open up such hope and opportunity for the 
families affected and impacted by cancer. Yet we are cutting those 
programs $208 million.
  The National Heart, Lung and Blood Institute: we are cutting that 
$123 million.
  What are the reasons for this? To provide additional tax breaks for 
the wealthiest individuals. This is your choice. Do you think we ought 
to have the investment in cancer research and the Heart, Lung, and 
Blood Institute? At the National Institute of Diabetes and Digestive 
and Kidney Diseases, which funds diabetes research, we are cutting 
back. Yet $1 out of $4 from Medicare is now spent to try to deal with 
diabetes, along with $1 out of $10 Medicaid dollars. That makes a lot 
of sense, doesn't it? Of course it does not make sense.
  Then there are neurological disorders and stroke and mental health, 
and we are cutting back on understanding these challenges, even as so 
many young people in this country are suffering with increased rates of 
youth suicide. We're also cutting back on Child Health and Human 
Development, which is so important.
  All of this money should go into programs at the National Institutes 
of Health, but instead it is coming out and going right into additional 
tax breaks for the wealthiest individuals in this country.
  Under the President's budget, NIH will receive $1 billion less than 
is needed to keep up with inflation. Its budget will be flat for 2 
years running. That has not been allowed to happen in more than half a 
century. Mr. President, 18 of the 19 NIH institutes will lose funding, 
which means that NIH will fall behind in the race for new cures. At the 
time when we are in the life science century, we are cutting back on 
those opportunities for individuals and families who are affected by 
cancer and Parkinson's and Alzheimer's. Is that what we want to do in 
the Senate? Is that the vote we want to cast? Senators will have that 
opportunity later on, but I believe it is the wrong priority for our 
Nation. The amount saved by these dangerous reductions is dwarfed by 
the payouts that the tax bill now under consideration in the Senate 
gives to the wealthy.
  The tax break is particularly unfair because more than 75 percent of 
the tax benefits will go to people with incomes above $200,000 a year. 
Over half of the benefits--53 percent--will go to people with incomes 
over $1 million a year.
  This amounts to a $35,000 gift each year from Uncle Sam to the 
average millionaire, but it is highway robbery for the millions of 
seniors, disabled Americans, and poor families who will see a cut in 
Medicaid and Medicare services.
  The Republicans cynically claim that capital gains and dividend 
income deserve special treatment because they will stimulate 
investment. The facts do not substantiate that claim. The stock market 
grew more rapidly in the early and mid-1990s when investors' income was 
taxed at the same rate as wages. President Bush cut taxes on capital 
gains and dividend income in 2003. More tax cuts that America cannot 
afford will hurt the economy, not help it.
  There are some provisions in the Senate bill that we need to address. 
The alternative minimum tax was never intended to apply to middle-class 
families, and they deserve tax relief. In a truly outrageous move, 
House Republicans took AMT relief for the middle class out of their 
reconciliation bill so they could fit in more tax breaks for the rich. 
The research and development tax credit is important to our 
international competitiveness and should be retained. However, those 
worthwhile tax cuts should be paid for by rolling back some of the 
extravagant tax breaks that this Republican Congress has already given 
to the Nation's wealthiest taxpayers. We simply cannot afford more tax 
breaks at a time when we are facing record deficits.
  If we are honest about reducing the deficit and strengthening the 
economy, we need to stop lavishing tax breaks on the rich and start 
investing in the health and well-being of all families.
  The economic trends are very disturbing for any who are willing to 
look at them objectively. The gap between the rich and the poor in this 
country has been widening in recent years. Thirty seven million 
Americans now live in poverty, up 19 percent during this Bush 
administration. One in five American children lives in poverty; 14 
million children go to bed hungry every night. Wages are stagnant while

[[Page S1086]]

inflation drags more and more families below the poverty line. Mr. 
President, 2.8 million manufacturing jobs have been lost, and long-term 
unemployment is at historic highs.
  The bill before us has the wrong priorities for the Nation. The 
Senate should instruct our conferees to reject any House proposal to 
extend the capital gains and dividend tax cuts. The funds those cuts 
would consume would be much better spent on Medicare and Medicaid and 
the Nation's other health needs. The Senate should instruct our 
conferees to follow the right priority and the right course.
  I know the point will be made at some time during the discussion 
that, while this is a nice instruction, under the Senate rules we 
cannot really instruct, even if we were able to carry the vote. Even 
though it involves $50 billion, we can not reallocate funds in this 
particular way. It is interesting that the $50 billion giveaway for 
capital gains and dividends is exactly the amount of the cuts for 
Medicaid and Medicare--$36 billion cut from Medicare and $14 billion 
cut from Medicaid.
  Effectively, what you are doing is continuing the extension of the 2-
year dividends and capital gains tax cuts over the period of the 
following 5 years, reaching up to 10 years. This is the $50 billion 
that we are talking about here.
  So we know what is really going on, Mr. President. This is an 
opportunity for choice and for making a decision about what priorities 
you want. We know the continued assault on the Medicare Program, which 
is happening by undercutting that program, is going to mean that our 
seniors are at greater risk. Our children and expectant mothers are 
going to be at greater risk with cuts in Medicaid. And by failing to 
deal effectively with the Medicare prescription drug program, our 
seniors are going to be more poorly served.
  In 1965, the Medicare prescription drug program was not included for 
a very simple reason; that is, 97 percent of private plans at that time 
didn't have a prescription drug program. Now they do. I was there when 
President Johnson signed the Medicare Program. He said: Pay your dues 
in Medicare and your health care needs will be attended to. That is 
what the Medicare prescription drug legislation did, right? Wrong. Our 
seniors are not attended to unless they have an effective prescription 
drug program. They are not getting it with this legislation, Mr. 
President.
  To at least give our seniors the same alternatives for prescription 
drugs that they have for medical services in the hospital and for 
doctor's fees under Medicare--to say that we are going to give you 
these same alternatives under the Medicare prescription drug program--
is effectively what over 70 Senators voted for in the Senate in a 
bipartisan way. Then that program was effectively hijacked by the 
industry, as well as by AARP, I might add, which poorly served our 
seniors and now regrets it. We have an opportunity to do something 
about it. But, Mr. President, without an expression by our colleagues 
here in the Senate, we are going to see that the rush will be on to 
continue the kind of expenditures that will increasingly threaten the 
most vulnerable in our society: the elderly, the disabled, those who 
are facing challenges with mental health, and the children of the 
Nation. Those are not the priorities, I know, for my State. I hope that 
at the time we vote later this evening, they won't be the priorities 
for the Senate as a whole.
  I yield the floor.
  Mr. GRASSLEY. Mr. President, on Medicare--and I know the debate here 
is not about Medicare, but Senator Kennedy spoke to one part of the new 
prescription drug program to which I wish to make reference. He 
referred in his remarks to the dual eligibles. He spoke about a problem 
that is real--the problem of signing up people who were dual eligibles 
into the new Medicare Part D prescription drug program.
  I do not find fault with his explanation. I will say, however, that 
our committee which has jurisdiction over this, the Senate Finance 
Committee, has been working with Secretary Leavitt and Administrator 
McClellan of CMS to work through these problems. They pointed out seven 
problems they have identified. They have assumed responsibility for 
those problems, and they are giving us a program to work through those 
problems so they will not be repeated and enrollment will by easier and 
work more smoothly.
  But the Secretary has told us about dual eligibles, that with 50 
different States having 50 different ways of handling dual eligibles, 
frankly, merging the information technology system at the Federal level 
with the information which came out of 50 different States has been 
difficult to do.
  Several of us in the Senate knew this was going to be a problem in 
2003. That is why, in the Senate bill, along with the White House, we 
wanted to leave the dual eligibles just as they were--covered by 
Medicare and Medicaid. It happens that most of the Democrats in the 
Senate, along with Republicans in the House, felt we should end up with 
just 1 national Medicare Program so all of the 50 different States' 
dual eligibles ought to be merged into the national program.
  We had a debate on the Senate floor on that issue, and my point of 
view won on a very narrow margin. Let me see if I can find it exactly--
a very narrow margin of 47 to 51. We defeated an amendment on the 
Senate floor to bring them together.
  What bothers me is Senator Kennedy is bringing up all these problems. 
If he had listened to us 2 years ago, we would not have ended up where 
we have because we would not be integrating dual eligibles into the 
national Medicare Program. But people on his side of the aisle were 
just totally insistent that was the wrong way to go, that we ought to 
have them integrated into the prescription drug Part D Program.
  So, without embarrassing any Senator, I wish to quote a Democratic 
Senator who was in the middle of this debate. I am not going to give 
the name. Comments like this came out about how gung-ho they were to 
have dual eligibles in the Medicare Program. It says:

       It's not a frequent day that Chairman Thomas--

  I assume that refers to Chairman Thomas of the House Ways and Means 
Committee.

     and I are in full agreement. But he does say such a shift 
     ``ensures that all seniors across the country will have 
     access to affordable prescription drugs, while alleviating 
     much of the burden that states now confront.'' I say to my 
     colleagues, as I indicate, I am not always in agreement, but 
     we are going forward directly on this policy, I hope.

  Continuing to quote:

       Fully integrating a key benefit for prescription drugs into 
     Medicare is a critical first step toward improving the 
     current system's flaws. Not only is it unfair to exclude the 
     poorest seniors from part of the Medicare program, it is a 
     raw deal for some of our neediest seniors. For seniors who 
     have worked all their lives, paid into the Medicare system, 
     it is not fair for them to be at the mercy of State coverage 
     decisions. All Medicare beneficiaries deserve to receive 
     Medicare benefits. There should be no exception for drugs. It 
     would be a very bad precedent to make Medicaid pay for items 
     that are clearly the responsibility of Medicare except at the 
     present and in this bill for one particular discrete 
     population.
       I think that--i.e., coverage under Medicaid--puts the dual 
     eligibles, 74 percent or less of poverty, at terrible risk, 
     and that is not something I associate with my understanding 
     of the values of the Senator from Iowa--

  Meaning me, I believe--

     whom I so much respect.

  That was on January 23, 2003.
  On June 26, 2003, this quote was given by the same Senator:

       Never in the history of Medicare have we precluded Medicare 
     beneficiaries from being Medicare beneficiaries. In the 
     underlying bill, for the very first time, we do.

  In that rollcall of 47 to 51, to leave the dual eligibles as they 
were, which presumably we would not have the problem Senator Kennedy is 
complaining about now--that we have a hard time integrating them into 
the program--he was one of those 47 Senators who thought they ought to 
be put into the prescription drug program.
  The reason we left them out is because we wanted to solve a problem 
for people who did not have prescription drugs, people who were dual 
eligibles, already had their prescription drugs through a State/Federal 
program, probably to a better point than maybe their having it through 
our bill where they pay some copay. At least in some States, they 
probably didn't have to pay a copay. We wanted to take care of the 
seniors who didn't have any prescription drug program, and by leaving 
the dual eligibles as they were, it would free up money to take care of 
more seniors.

[[Page S1087]]

  As I said, we lost out in the final analysis. In conference, we 
agreed to include the dual eligibles in this program. Now I hear all 
this complaint about how it is working to the detriment of seniors 
because of the integration of 50 different State programs into 1 
national program. It will be worked out. It will be worked out. The 
Secretary of HHS, Mr. Leavitt, says it will work out. He is working on 
it. He has identified a solution to it, and every day the signup is 
getting better as we sign up 94,000 people each day into the Part D 
prescription drug program.
  The ACTING PRESIDENT pro tempore. The Senator from Montana is 
recognized.
  Mr. BAUCUS. Mr. President, today, we debate this tax reconciliation 
bill for a third time.
  We last debated this bill on February 2, Groundhog Day. My friend 
from Iowa, the chairman of the committee, Senator Grassley, last week 
compared this repeated debate to Groundhog Day. That is true. This 
debate does remind us of the wonderful film ``Groundhog Day,'' where 
Bill Murray is forced to live the same day over and over again. But at 
the risk of giving away some of the plot of the film, let me remind my 
colleagues of the lesson of the film. In the film, providence dooms 
Bill Murray to repeat the same day--Groundhog Day, that is--until he 
learns to live it right. One might say that is where we are. We are 
doomed to debate tax policy over and over again until we get it right.
  In November, when we first debated this bill, the Senate voted 64 to 
33 to pass the bill to support AMT relief to middle-income families. 
Again, last week, the Senate voted 66 to 31 to again pass the bill and 
support the alternative minimum tax, otherwise known as AMT, relief for 
middle-income families. In particular, the Senate last week voted 73 to 
24 to support the Menendez amendment to express the sense of the Senate 
that protecting middle-income families from the alternative minimum tax 
should be a higher priority in 2006 than extending capital gains and 
dividends tax cuts that do not expire until the end of 2008 or the 
beginning of 2009.
  So the same question keeps popping up over and over again and the 
same answer keeps coming back: Let's make sure the relief from the 
onerous and family unfriendly AMT happens now. We must defer on 
extending expensive tax breaks for investors until a later date.
  Yet I keep reading in the papers that Senate leaders have promised 
that capital gains and dividends tax cuts will still be in this 
reconciliation bill. The Senate position, by an overwhelming vote of 73 
Senators, is providing immediate relief to more than 17 million middle-
income families that otherwise would see a tax increase this year. 
Since that is so, it seems to me we should accept that position, accept 
that view, and work toward its enactment.
  Statements that we will provide AMT relief to working families 
separately and later in the year undermine this Senate position. It is 
statements such as those that have led us to this Groundhog Day. It is 
statements such as that that call into question the Senate's votes and 
cause the Senate to have to vote once again to deliver that same 
message. Today, we will debate several motions to instruct, and the 
first one will be Groundhog Day for AMT.
  For 17 million American families, 2006 came with an unwelcome 
surprise--a stealth tax. The temporary protection from alternative 
minimum tax, or AMT, expired December 31. That means that 17 million 
more American families will be subject to it this year. That is an 
increase from 3 million to 20 million taxpayers in one year alone.
  Once again, the Senate will debate whether to support our position, 
where AMT relief is a priority. In contrast, the House position was to 
prefer extending capital gains and dividends cuts, which expire in 
2009; that is, over AMT protection, which expired 6 weeks ago. I think 
the answer to that is clear.
  If the House position prevails in conference, working families will 
lose. If we do not extend the AMT protection, a family with three kids 
earning $63,000 will be hit by the AMT this year. The AMT is family 
unfriendly. The AMT creeps deeper and deeper into working families each 
year. Protection from the AMT should be a priority for both sides of 
the aisle and both sides of the Capitol.
  Instead, the House has passed a separate alternative minimum tax bill 
without the procedural protections of this bill. And while this other 
House bill purports to protect families from the alternative minimum 
tax, there will still be 600,000 additional taxpayers paying higher 
taxes for this year 2006 due to this stealth tax. The House AMT patch, 
or otherwise known as the hold-harmless provision, as some have called 
it, does not really hold anyone harmless. Last year, 2005, there were 
3.6 million American taxpayers paying this AMT stealth tax. Under the 
House bill, there would be 4.2 million taxpayers paying the AMT stealth 
tax in 2006; that is, this year.
  So as we debate this issue once again, let us remember our priority: 
that millions of working families now subject to a tax increase 
courtesy of the AMT are a priority we should address. Once we accept 
that priority, the decision whether to allocate $50 billion to 
extending capital gains tax cuts becomes much more clear. So let us do 
what is urgent first. Let us do what working families expect and need. 
Doing so will be the only way to move on to better days for these 
families.
  I want to expand on that last point. The capital gains and dividends 
tax cuts contained in the House bill, as I mentioned, are among matters 
most in dispute in this legislation, so let me take a couple of moments 
to discuss why Congress does not need to extend them in this bill.
  Under current law, taxpayers who earn money in capital gains and 
dividend income pay taxes on that income at a lower rate than they do 
on their ordinary income; for example, wages. In 2003, we passed 
legislation that set the current law for the taxation of capital gains 
and dividend income. For taxpayers in most income brackets, capital 
gains and dividend income are taxed at 15 percent. Taxpayers in the 
lower two tax brackets do not receive a great deal of capital gains and 
dividend income. But for taxpayers in those two brackets, what capital 
gains and dividend income they receive is taxed at 5 percent now and 
will be tax free in 2008. Prior law, before 2003, taxed long-term 
capital gains at 20 percent or 10 percent. Prior law taxed dividend 
income similar to any other ordinary income, so there is a split in 
capital gains. The House bill would extend the lower tax rates Congress 
enacted in 2003 to the end of 2010.
  The first question before us, therefore, is when does Congress need 
to act on capital gains and dividend income tax rates? Those rates do 
not expire this year. Those rates do not expire next year. Those rates 
do not expire the year after that. Rather, those rates expire on 
January 1, 2009, about 3 years from now, after the next Presidential 
election.
  So the first thing we need to note is that extension of capital gains 
and dividends tax rates is far from an urgent matter.
  The second question we need to ask is: Is it fiscally responsible to 
extend those tax cuts right now?
  According to the Joint Committee on Taxation, the cost of a 2-year 
extension of those tax rates amounts to $50 billion over a 10-year 
budgetary horizon. Some who like lower capital gains and dividends tax 
rates will cite a lower 5-year cost of $20 billion, but that masks the 
full cost over the decade to come.
  Perhaps we should be a little more frank with the American people 
because it is no secret that many who like lower capital gains and 
dividends tax rates would like to make those lower rates permanent. 
This is the position the administration takes. So we ought to look at 
the cost of making those rates permanent. According to the President's 
new budget request, making these tax cuts permanent would cost more 
than $200 billion over 10 years.
  Mr. President, $200 billion is a lot of money. Two hundred billion 
dollars is about what we spend on fighting crime, combating drugs, and 
the entire administration of Justice for 5 years. Two hundred billion 
dollars is about what the Federal Government spends on highways, 
airports, and the entire Transportation budget for 3 years. And $200 
billion is about what we spend on

[[Page S1088]]

veterans' retirement and disability benefits for 6 years. So extending 
capital gains and dividend tax cuts costs real money.
  The third question we need to ask is: Are capital gains and dividends 
tax cuts the best use of the money set aside for tax cuts in the 
budget? For there is a far more pressing need for tax relief before us 
in this bill and that is relief from the onerous alternative minimum 
tax.
  Millions of working families are beginning their annual ritual of 
filling out their tax returns. It takes more time than most of us would 
like, and millions of taxpayers are being forced to fill out their 
returns twice. They have to do so if they owe money under the 
alternative minimum tax. The need for relief from the alternative 
minimum tax is not some faraway possibility, several years down the 
road. Relief from the alternative minimum tax expired for the tax year 
2006. That is the more pressing tax relief need before us.
  Treasury Secretary Snow testified before the Senate Finance Committee 
last Tuesday. He told the committee:

       Tax increases carry an enormous risk of economic damage. 
     And I can tell you today that the President will not accept 
     that risk. He will not accept a tax increase on the American 
     people.

  That is exactly why we need to prevent a tax increase on those 
working American families who would be subject to the alternative 
minimum tax, unless we act. In the same vein, the popular research and 
development tax credit expired at the end of last year. Businesses have 
argued for years that the annual 1-year extension provides no certainty 
for business planning and investment. We need to extend the R&D tax 
credit.
  Some will make breathless arguments that capital gains and dividends 
tax cuts are necessary. Why are they necessary, they say? They say they 
are necessary to prevent dire consequences in the stock market. They 
say that the stock market will plunge if we don't enact this in 2 
years. It doesn't need to be enacted. They want to enact it because the 
current law is in existence until January 1, 2009. But they say the 
stock market is going to fall.
  Let us look at the time period starting in May 2003, when Congress 
reduced the dividend and capital gains tax rates. Since then, the stock 
market has seen a 14-percent growth. Furthermore, let us look at the 
time when Congress first cut the capital gains tax rate in August of 
1997. Between then and the time the further cuts were made in May of 
2003, the market grew by 13 percent. Now let us look at the time before 
either the capital gains or dividends tax cuts. Before the 1997 tax 
cuts, capital gains were taxed at 28 percent, much higher than the 
current law, and dividends were taxed as ordinary income, higher than 
under current law. In those times of higher capital gains and dividend 
tax rates, between the time the Clinton administration took office and 
August 1997, did the market grow by 13 percent or 14 percent? No. The 
market grew by a whopping 236 percent, far more than the 13 percent and 
14 percent when the lower rates were in existence.
  So the evidence is not there that lower capital gains and dividends 
tax cuts will lead to increased stock prices. Indeed, one would make 
the case that other economic factors are much more important to stock 
market returns than are capital gains and dividends tax rates.
  One of those factors is the fiscal responsibility of the mid-1990s. 
After President Clinton took office in 1993, Congress and the President 
enacted meaningful, I mean meaningful deficit reduction. We reduced the 
Government's demand for scarce capital. We freed up savings to finance 
productive business investments. And we put the Nation on a path to 
economic growth. In contrast, financing tax cuts by running greater 
deficits increases the Government's demand for scarce capital. Deficit-
financed tax cuts take away savings that could be available to finance 
productive business investments. Increasing the deficit detracts from 
economic growth.
  To encourage economic growth, we need to get deficits under control, 
and the first step we can take down that road is to stop making the 
deficit worse by enacting more tax cuts than we can afford.
  Capital gains and dividends tax cuts do not expire for 3 years. 
Capital gains and dividends tax cuts cost a lot of money. Capital gains 
and dividends tax cuts are a less-pressing priority than relief from 
the alternative minimum tax. And the evidence is simply not there that 
capital gains and dividends tax cuts contribute to market strength. 
That is not the evidence. It may be somebody's theory, but that is not 
the evidence.
  So that is why we do not need to extend capital gains and dividends 
tax cuts today. We can face this issue later. Rather, let us address 
the more pressing need to extend relief from the alternative minimum 
tax. Let us act responsibly. Let us save capital gains and dividends 
tax cuts for another day.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Sessions). The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, Senator Kennedy repeats the old 
demagogic saw about capital gains and dividends being only tax benefits 
for the wealthy. The facts are very different. I have two charts here 
which will show how wrong he is. One of these charts deals with capital 
gains. The other one deals with dividends.
  Dividends is the first one to which I make reference because, in the 
State of Massachusetts, you can't have all these wealthy people 
benefiting from the 15-percent dividend tax instead of what he would 
prefer, the 20-percent dividend tax. Don't forget, again, as I referred 
in my opening remarks, these are year 2003 figures, so it could be a 
lot more than that right now, but these are the most up-to-date 
Internal Revenue Service figures we have.
  In Massachusetts, we have 589,897 taxpayers who benefit from the 15-
percent capital gains dividend. Don't tell me that all 589,000 of those 
are millionaires. Massachusetts may be a very wealthy State, but it 
doesn't have that many millionaires in it. So somewhere along the line, 
Senator Kennedy ought to wake up to the fact that there are a lot of 
middle-income and common folks in his State who are benefiting from the 
15-percent tax on dividends instead of having a 33-percent increase in 
that tax and having it go back to 20 percent.
  My friend from Montana did make a correct judgment that this is not 
running out right now. But the point is that when you are asking people 
to invest to create jobs in America, they have to have the long-term 
view of that investment. If you want to encourage investment to create 
jobs, people have to know what the tax law is for the long term, not 
for the short term.
  The point is, in order to persecute a few millionaires, Senator 
Kennedy wants to punish the many. And the many are the 589,000 people 
in his State who benefit from the 15-percent tax on dividends.
  Let's go to the number of people in that State who benefit from the 
15-percent capital gains tax. There are 212,000 people in 
Massachusetts--again, I remind you these are 2003 tax year figures 
because that is the most up-to-date we have from the IRS. There are 
more today, probably. But there are 212,000 people in Massachusetts, 
taxpaying families and individuals, benefiting from the 15-percent 
capital gains tax. Those are not wealthy people.
  Again, you get back to the point of whether we ought to persecute the 
few, the few millionaires he is talking about, persecute them and at 
the same time punish 212,000 people in the State of Massachusetts. I 
don't think so. I don't think it is good policy.
  I hope this Congress is able to have a sensible tax policy that not 
only includes sensible levels of taxation, but if you look at all the 
dividends that are being paid out today that wouldn't have otherwise 
been paid out, you think you would come to a conclusion that is a 
sensible policy because we have tens of millions of taxpayers deciding 
how the profits of a corporation are going to be spent instead of a few 
thousand chief executive officers of those same corporations deciding 
how it is going to be spent. When millions of taxpayers are making 
those decisions, it is going to respond to the dynamics of our economic 
system and create more jobs and important prosperity than when a few 
corporation executives keep all those profits internal in a corporation 
making those decisions.
  I don't think we ought to be persecuting a few to punish the many.

[[Page S1089]]

  When it comes to these motions to instruct, we may have some motions 
to instruct on this side of the aisle that will set the record straight 
on what we are trying to accomplish and give people opportunities to 
vote on good economic policy and good tax policy as well as bad 
economic policy and bad tax policy that we are getting from some on the 
other side of the aisle.
  In 2003, a bipartisan Congress lowered the top tax rate on dividends 
and capital gains to 15 percent through December 31, 2008, and for low- 
and middle-income taxpayers to 5 percent through 2007 and zero percent 
through 2008.
  I filed six motions to instruct conferees to report back a conference 
report that includes the extension of these tax rates through 2009 and 
through 2010, the same as the House of Representatives has.
  Critics of this policy claim these are tax cuts for the rich that 
make a budget deficit worse because they want to persecute the few and 
in the process punish the many. But I filed these motions that are 
going to tell the other side of the story; that when you have sound tax 
policy which encourages the economy to grow, we are also going to 
reduce the deficit.
  Besides, let me suggest to you that I don't know how it is in other 
States, but I don't run into very many in my State who are saying I am 
undertaxed, tax me more. But I run into people day after day in almost 
every one of my town meetings where they are complaining about the 
overspending of the Congress of the United States.
  In regard to the other side of the story and the motions to instruct 
that I filed, the lower rates of capital gains and dividends have 
produced several positive effects. They benefited low- and middle-
income families in a meaningful way.
  Can't you see that when you have a very low tax rate for certain low-
income people, as one example? For low- and middle-income taxpayers, it 
will be 5 percent through 2007 and zero percent through 2008. This is 
going to encourage people to save to a greater extent, particularly 
people who have a lower income and don't have the ability to save.
  These lower tax rates have reduced the tax burden on senior citizens 
who rely on their investment incomes during retirement. They have 
contributed to our economic recovery and continue to help the economy 
grow. They have made capital investments in America more competitive 
with the capital investment in other countries. With the globalization 
of the economy, that is something we always have to be cognizant of in 
this Congress, that you can't have a tax policy that makes our 
corporations, particularly in manufacturing, uncompetitive with 
manufacturing overseas.
  Finally, these tax rates have helped impose transparency and 
discipline on corporate managers which is critical to protecting 
investments and workers.
  I may or may not seek a vote on these motions to instruct, but I want 
to go through each one of these points which I made so that when 
Members come over to vote tonight, they will know some of the rationale 
behind Republican motions.
  The lower rates on dividends and capital gains have benefited low- 
and middle-income families in a meaningful way. That is the third time 
I have said that in the last 5 minutes. But we have to get away from 
this attitude of persecuting a few and in the process punishing the 
many.
  I don't know whether they on the other side of the aisle realize it, 
but when they want to persecute a few millionaires, they are punishing 
hundreds of thousands of people--I guess it is millions of people, if 
you take all 50 States, but I was making reference to the State of 
Massachusetts.
  According to the Internal Revenue Service estimates for 2003 tax 
return data, about 10 million low- and middle-income taxpayers have $34 
billion of income taxed at the 5-percent rate and saved at least $1.7 
billion, or about $170 per taxpayer on average.
  I know what I am going to hear from the other side. Well, $170 is 
nothing. Why don't we let the taxpayers of this country decide whether 
they would rather spend that $170 or that we ought to spend it for 
them?
  I can guarantee if they invest it, or if they spend it, it is going 
to do more economic good than if I spend it for them as a Member of 
Congress. That is the way the dynamics are and the way society works. 
Money spent by the Government doesn't turn over as many times in the 
economy as it does if it is spent in the private sector.
  At these 2003 levels, these taxpayers I have referred to save a heck 
of a lot of money. Don't forget, in 2008 that rate drops to zero 
percent.
  My motion would instruct the conferees to ensure that Congress won't 
raise the annual tax bill on low- and middle-income taxpayers at the 
2003 levels. That tax increase would be at least $3.4 billion. That is 
an average of $340 per taxpayer.
  Senior citizens benefit from lower tax rates on dividends and capital 
gains. They have reduced the tax burden for senior citizens who rely 
more than working people do on investment income, and they need this 
particularly during retirement.
  According to IRS estimates for 2003 tax return data, about 57 percent 
of the tax returns for taxpayers age 65 and older had taxable dividends 
income. That is over 6.5 million tax returns. These taxpayers rely on 
investment income, and particularly dividend income in their 
retirement. Low- and middle-income seniors pay tax on this dividend 
income at the 5-percent rate instead of 20 percent or 15 percent. That 
rate for these low-income seniors is going to drop to zero in 2008. 
Other taxpaying citizens, those with higher incomes, paid at the 15-
percent rate, but that was instead of paying at the 35-percent rate.
  We need to instruct the conferees that Congress won't impose a new 
tax on low- and middle-income seniors and more than double the tax on 
other taxpaying seniors in 2009 and 2010. In other words, we need to 
tell the other side to quit persecuting a few because in the process 
you punish the many.
  In this particular case, why would they be crying about what we might 
be doing to senior citizens in one of the recent speeches and then 
stand there and want to increase the tax rates from zero percent to 35 
percent for some of these people who are senior citizens?
  Also these reduced tax rates on dividends and capital gains have 
contributed tremendously to our economic recovery and continue to help 
our economy grow. They reduce the cost of capital for American 
businesses and increase return on investment, enhancing economic 
growth, creating more jobs, and expanding the tax base.
  Companies are responding to shareholder demand created by the lower 
15-percent rate on dividends by paying record levels of dividends.
  According to the Congressional Budget Office, capital gains 
realizations increased significantly in 2003, 2004, and 2005, causing 
capital gains tax revenues to be $62 billion higher over those years 
than were projected before we changed this law.
  Don't tell me that $62 billion more coming in, according to the CBO--
not a partisan like me; they are nonpartisan--$62 billion more didn't 
benefit the Treasury and reduce the deficit by reducing taxes. You know 
what you get out of this--a growing economy. That means more jobs, and 
44.7 million jobs have been created since this tax policy has been in 
effect. The unemployment rate has dropped during the same period of 
time from 6.1 percent to 4.7 percent.
  I feel very strongly, just as the other side wants to persecute the 
few to punish the many by going after what they call millionaires, that 
we ought to state the reality: that is, my motion to instruct the 
reality of keeping these tax rates so the economy continues to grow.
  The progrowth policy will not expire at the end of 2008 or at the end 
of 2009 because investors who need the long-term view of investing know 
what the law is going to be and are going to make decisions.
  The lower rates have done another thing--they have made our 
businesses more competitive with the global economy. And other 
countries around the world, having lower tax rates than we have, have 
jumped ahead of our businesses. Even with the United States at 50.8 
percent, we still have the eighth highest tax rate on corporate income 
among the 30 nations in the OECD. For every dollar an American 
corporation makes on its U.S. investments, more than half of it ends up 
in Federal and State governments. Without the lower

[[Page S1090]]

dividend tax rate, it would have been nearly 63 cents of every dollar, 
ranking second only behind Japan.
  High taxes on capital investment make the United States less 
attractive compared within investment opportunities in other countries. 
That costs us jobs. In today's global economy, we should do everything 
we can to ensure the competitiveness of our businesses.
  In this process of persecuting a few, the few millionaires, punishing 
everybody, you are punishing the people who need jobs, and who lose 
jobs because our businesses can't be competitive because our cost of 
capital is higher than global competition. Also, there is a benefit to 
a motion to instruct for transparency of how a corporation works. The 
lower rates have helped impose transparency and discipline on corporate 
managers. That is very important to protecting investors and, 
particularly, jobs for our workers.

  The high tax on dividends causes corporations to favor debt financing 
over equity financing, leaving more highly leveraged businesses 
vulnerable to economic downturns. High dividend taxes reduce the demand 
to receive and thus the incentive to pay dividends, leading corporate 
managers to invest in wasteful and unprofitable projects and to hide 
the results from their investors and their workers.
  On the other hand, the reduced tax rate on dividends lessens the 
disparity between debt and equity financing, thus heightening demand 
for dividends, thus contributing to more transparency and more 
accountability of corporate managers for their decisions.
  It seems to me in this post-Enron era, we need to instruct the 
conferees to ensure that the transparency and the discipline imposed on 
corporate managers by lower dividend taxes and critical to protecting 
investors and workers is not threatened by this expiration date in 2009 
and 2010.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, we next expect to hear from the Senator 
from Connecticut, Mr. Dodd, to have a motion to instruct on veterans 
and military personnel. We anticipate thereafter we will hear from the 
Senator from Rhode Island. He will have a motion to instruct on defense 
needs.
  I yield the floor so the Senator from Connecticut may send his motion 
to the desk.
  The PRESIDING OFFICER. The Senator from Connecticut.


                      Motion to Instruct Conferees

  Mr. DODD. Mr. President, I send a motion to the desk and ask for its 
immediate consideration.
  The PRESIDING OFFICER. Without objection, the pending motion is laid 
aside.
  The clerk will report the motion.
  The assistant legislative clerk read as follows:

       Mr. Dodd moves that the managers on the part of the Senate 
     at the conference on the disagreeing votes of the 2 Houses on 
     the Senate amendment to the bill H.R. 4297 (to provide for 
     reconciliation pursuant to the concurrent resolution on the 
     budget for fiscal year 2006 (H. Con. Res. 95)) be instructed 
     to insist on the inclusion in the final conference report of 
     the funding to support the health needs of America's veterans 
     and military personnel contained in section 315 of the Senate 
     amendment instead of any extension of the tax breaks for 
     capital gains and dividends for individuals with annual 
     incomes greater than $1,000,000.

  Mr. DODD. I thank the clerk for reading the full motion. Normally, I 
would interrupt the reading by the clerk, but I thought it important 
that those interested in the debate would understand what the motion 
is. This is a motion to instruct the conferees to support an amendment 
this body passed 2 weeks ago.
  That evening, my good friend from Iowa, the chairman of the 
committee, in an awkward moment--it was a rather complicated moment 
involving an amendment--offered a substitute that took the heart of my 
amendment without the offsets that were included in my amendment, which 
this body adopted unanimously on a voice vote.
  I am offering a motion to instruct the conferees to support that 
amendment. I also hope they will reconsider some of the offsets we 
suggested in the amendment I offered when this matter was debated by 
the full Senate. I would like to remind my colleagues that the proposal 
I offered the other evening was strongly endorsed and supported by the 
American Legion, a group that certainly understands the importance of 
providing the support and backing our veterans deserve, particularly 
those who are returning from theaters of conflict today in Afghanistan 
and Iraq.
  I ask unanimous consent this letter from the American Legion be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                          The American Legion,

                                 Washington, DC, February 2, 2006.
     Hon. Christopher J. Dodd,
     Hon. Edward M. Kennedy,
     U.S. Senate,
     Washington, DC.
       Dear Gentlemen: On behalf of the 2.8 million members of The 
     American Legion, I would like to offer our support of the 
     proposed amendment to the Tax Relief Extension Reconciliation 
     Act of 2005 that would provide for the unbudgeted costs of 
     health care for veterans returning from Iraq and Afghanistan.
       The amounts offered by this amendment would be in addition 
     to any other amounts provided for medical care under other 
     statutory provisions and would help to avoid funding 
     shortfalls, such as what took place last year or other 
     problems that arise due to the discretionary funding model 
     currently in place for VA health care. This amendment would 
     also establish a ``Veterans Hospital Improvement Fund'' to 
     provide for improvements in health care facilities treating 
     veterans, including military medical treatment facilities, VA 
     facilities and other facilities (state, local and private) 
     that provide medical care and services to veterans.
       Again, we appreciate your efforts on behalf of our nation's 
     veterans. Your amendment acknowledges the need for adequate 
     funding to ensure our nation's veterans receive the 
     healthcare and other benefits to which they are entitled.
           Sincerely,

                                              Steve Robertson,

                                                         Director,
                                  National Legislative Commission.

  Mr. DODD. I will have additional inclusions for the Record further in 
the debate as I lay out the arguments for this motion.
  This is about priorities and choices. Those involved in public life 
are constantly asked to make choices and establish sets of priorities. 
It is not easy in many cases. Sometimes the choices are very difficult 
to make. In this case, the choice is a rather easy choice, it seems to 
me, given the facts presented by this motion. The amendment we offered 
2 weeks ago and the substitute offered by the chairman of the Committee 
on Finance that this body adopted, provides for $12.9 billion for 
disability payments to veterans, $6.9 billion for veterans medical 
care, and $1 billion for veterans health facilities. I will explain 
those particular items in more detail in a few minutes. Basically, that 
was the amendment to which this body agreed.
  The offset proposed in my amendment would have sunset the capital 
gains and dividends tax breaks for only those people making more than 
$1 million a year--which amounts to two-tenths of 1 percent of all 
taxpayers--99.8 percent of all other taxpayers under our proposal would 
not have been touched, only those making more than $1 million a year.
  We suggested that the money saved by not providing the tax break for 
people in that small group be used to pay for the veterans benefits I 
have described. The House bill proposes to raise to $64.8 billion the 
amount we spend on tax benefits for the income group I have just 
described. We asked instead to reduce that amount in order to 
adequately provide for these veterans benefits.
  I noticed earlier our friend and colleague, the chairman of the 
Committee on Finance, referred to today's proceedings as being akin to 
the movie ``Groundhog Day.'' He stated that this is the third time the 
Senate has debated this bill in one form or another. I appreciated his 
discussion. Certainly, I can understand his frustration as the chairman 
of the committee that deals with such an important matter in this tax 
legislation. He and my colleague from Montana, Senator Baucus, have 
worked very hard on this legislation and would like to see it moved to 
conference. I agree. In fact, his reference to that movie is apt, and I 
endorse it.
  The movie ``Groundhog Day'' reminds us sometimes in life we get 
another chance to get it right. That is what we are going to try to do 
this evening. That is why we are here today, to hopefully get it right 
when it comes to paying for urgent priorities

[[Page S1091]]

such as the health and safety of our troops and our veterans.
  I don't know of another constituency group in America--maybe some of 
my colleagues might argue with what I am about to say, but I don't 
think there is another group of Americans who deserves as much of our 
attention as people who put their lives on the line for the United 
States of America every day. Those young men and women who are 
returning from theaters of conflict, broken individuals, at least in 
body--amputees, scarred, burned, and suffering tragic injuries of war--
deserve every bit of thanks, verbally, we can provide for them. But 
beyond that, they deserve our support and backing when it comes to the 
priorities of this Nation. I don't think it is asking too much, at a 
moment like this, to say to two-tenths of 1 percent of taxpayers: How 
about a break; how about not taking that extra tax break and providing 
for the veterans benefits that are needed for these young men and women 
who are coming back from the theaters of conflict.
  When this bill last came to the Senate 2 weeks ago, I offered an 
amendment that would have provided crucial health funds in a fiscally 
responsible manner to our wounded troops coming home.
  Tax legislation passed in 2003 calls for spending $43 billion over 
the next 5 years on capital gains and dividend tax breaks for 
individuals making more than $1 million a year. The bill proposed by 
the House of Representatives would raise this number much higher--by 
this chart I am showing--to $64.8 billion. Instead of spending this 
money on the wealthiest two-tenths of 1 percent of the population of 
the United States of America, my amendment would have used the 
resources to meet our veterans health needs--estimated by Nobel Prize-
winning economist Joseph Stiglitz to be $18.9 billion over the next 5 
years--establish a $1 billion trust fund for health facilities treating 
wounded and disabled veterans returning home, and reduce the deficit by 
approximately $23 billion. That was the amendment I offered 2 weeks 
ago.
  Regrettably, this Senate did not approve my amendment. We did, 
however, unanimously adopt, as I mentioned earlier, a substitute 
offered by my colleague from Iowa, the chairman of the Committee on 
Finance, that still provides these needed funds--just without paying 
for them, as I and many other colleagues would have preferred. We 
believe you ought to pay for it.
  Once again we are coming back. I regret the need for a ``Groundhog 
Day,'' but because of the procedures we operate under, I am getting a 
second chance. In effect, I am giving my colleagues a second chance to 
get this right. Do you believe it is that difficult a choice to make to 
reduce that $64.8 billion that we are about to provide to two-tenths of 
1 percent of the wealthiest Americans, to provide for the basic needs 
of our veterans returning from the theaters of conflict? That is the 
choice we will make when this vote occurs later today or this evening.
  The House of Representatives has proposed not only keeping in place 
the scheduled dividends and capital gains tax breaks enacted in 2003 
but adding 2 more years of them. My motion makes no statement about 
these tax breaks for the 99.8 percent of Americans who will get them. 
But for the two-tenths of 1 percent of the population that I am talking 
about, I think, frankly, they could do without this. I will tell you 
why.
  Over the last number of years, we have provided $125 billion in 
benefits for this very narrow group of individuals. Between the 2001 
and 2003 tax breaks alone, individuals in this narrow group--the top 
two-tenths of 1 percent of the population of our great country--have 
received more than $125 billion in benefits under the Tax Code. 
Meanwhile, our soldiers and veterans are being told to go without 
essential items such as body armor and the health care they need and 
deserve.
  Again, politics is often about choices. In fact, in most cases it is 
about choices. What I am offering my colleagues tonight is a choice on 
whether we continue to underscore what the House has done or what we 
are doing by not paying for the benefits, or do we do what all of us 
would like to see done; that is, do we properly take care of these men 
and women coming back from the theaters of war.
  The motion does not ask for the return of any of the $125 billion we 
have given between the 2001 and 2003 legislation. It simply 
acknowledges the reality that in a time of record budget deficits we 
need to make some different choices. Do we provide more tax breaks for 
a small group that has already received so much since this 
administration took office, as the House of Representatives proposes to 
do, or do we meet the needs of a nation at war in properly taking care 
of our wounded and disabled veterans as the funding approved by this 
Senate would do?
  Over 2,200 men and women in uniform have died in combat in Iraq. Over 
16,000 have been severely wounded in that conflict. But instead of 
addressing their needs fully and adequately, this administration has 
underfunded veterans medical health care.
  Let me go back and make a point on tax, so everyone knows what I am 
talking about. Under the House bill, this is the choice: If we adopt in 
the conference the House bill and drop this amendment--some suggest it 
would not make it 10 feet down the hall between this Chamber and the 
House--we will be left with the wealthiest benefiting the most by 
extending the capital gains and dividends tax breaks.
  The average tax cut in 2009, if this bill is agreed to, if you make 
$50,000 or less, will be $11. If you make between $50,000 and $100,000, 
your tax break is $77. If you make between $100,000 and $200,000, you 
get a $228 tax break. If you make between $200,000 and $1 million, you 
get a little more than $1,300 in a tax break. If you make $1 million or 
more, you get $32,111 in tax breaks. That is from the Urban-Brookings 
Tax Policy Center, their analysis of what would happen under this bill.
  All we are suggesting is to take care of this by reducing that tax 
break for the people making over $1 million a year. I also want to see 
us beef up what could happen for the other individuals in the tax 
categories. The people making $100,000 and less, to receive $75 or $85 
in a tax break is hardly what I call a windfall for people in this 
category.
  I come back again to the beneficiaries under the motion I am making 
today and how they benefit. In fact, last year the administration 
devised its fiscal year 2006 VA budget that could only handle 23,000 
veterans returning from Iraq. This number was drastically too low and 
the Veterans' Administration had to scramble to meet the needs of over 
103,000 Iraq veterans on top of its already existing patient 
load. Imagine that. They submitted a budget that only provided for 
23,000, and yet over 103,000 actually came back from that theater 
alone, to be added to the already overburdened patient flow.

  Congress was forced, of course, as my colleague may recall, to 
intervene in the middle of the year, and in June of last year we 
approved an emergency spending bill that provided an additional $1.3 
billion to address shortfalls in the VA health budget.
  Now, I must stress that I have the greatest respect and admiration 
for former VA Secretary Tony Principi and the current occupant of that 
post, Jim Nicholson. I do not envy their jobs, particularly when they 
have an administration that does not seem to want to step up to the 
plate and provide the kind of backing at the budget office they 
deserve. They have led their Department with great distinction and have 
continued to do the best they can under the circumstances. But they 
have had a difficult task since the current occupants of the White 
House have repeatedly provided them with very, very limited resources.
  I would like to show as well this article which appeared in the 
Washington Post. I will not read all of it, but I wish to point out a 
particular commendation for a Republican Member of the House, Steve 
Buyer, a Republican from Indiana, because it was from his insistent 
questioning at the time of the VA Under Secretary for Health that they 
were able to determine the $1 billion shortfall existed. Had it not 
been for the efforts of Steve Buyer, we may not have been able to 
correct the shortfall which existed at the time. From the beginning, 
our colleague, Senator Patty Murray, as a member of the Senate 
Appropriations Subcommittee covering veterans and a lead sponsor of 
Democratic efforts to restore this amount, also led the charge, later 
joined by Larry Craig of

[[Page S1092]]

Idaho and others in her efforts. That is how the money got back in. But 
if it had not been for these Members, we might still be arguing about 
the shortfalls that were needed to provide for those people.
  Mr. President, I ask unanimous consent that the Washington Post 
article be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               [From the Washington Post, June 24, 2005]

           Funds for Health Care of Veterans $1 Billion Short

                         (By Thomas B. Edsall)

       The Bush administration, already accused by veterans groups 
     of seeking inadequate funds for health care next year, 
     acknowledged yesterday that it is short $1 billion for 
     covering current needs at the Department of Veterans Affairs 
     this year.
       The disclosure of the shortfall angered Senate Republicans 
     who have been voting down Democratic proposals to boost VA 
     programs at significant political cost. Their votes have 
     brought the wrath of the American Legion, the Paralyzed 
     Veterans of America and other organizations down on the GOP.
       ``I was on the phone this morning with Secretary of 
     Veterans Affairs Jim Nicholson, letting him know that I am 
     not pleased that this has happened,'' said Sen. Larry E. 
     Craig (R-Idaho), chairman of the Senate Veterans Affairs 
     Committee. ``I am certain that he is going to take serious 
     steps to ensure that this type of episode is not repeated.''
       The $1 billion shortfall emerged during an administration 
     midyear budget review and was acknowledged only during 
     lengthy questioning of Jonathan B. Perlin, VA undersecretary 
     for health, by House Veterans Affairs Committee Chairman 
     Steve Buyer (R-Ind.) at a hearing yesterday.
       ``We weren't on the mark from the actuarial model,'' Perlin 
     testified. He said that the department has already had to use 
     more than $300 million from a fund that had been expected to 
     be carried over to the fiscal 2006 budget, and that as much 
     as $600 million for planned capital spending will have to be 
     shifted to pay for health care.
        At a noon news conference yesterday, Sen. Patty Murray (D-
     Wash.), a member of the Senate Appropriations subcommittee 
     covering veterans affairs and the lead sponsor of Senate 
     Democratic efforts to add $1.9 billion to the VA budget, 
     accused the Bush administration of unwillingness ``to make 
     the sacrifices necessary to fulfill the promises we have made 
     to our veterans.''
       In a rare display of bipartisanship on the polarized issue 
     of veterans spending, Craig appeared with Murray at the news 
     conference and said he agreed with many of her comments.
       Murray cited an April 5 letter written by Nicholson to the 
     Senate in a bid to defeat her amendment: ``I can assure you 
     that VA does not need emergency supplemental funds in FY2005 
     to continue to provide timely, quality service that is always 
     our goal,'' he had said.

  Mr. DODD. We cannot and should not address veterans' needs on the 
cheap again. According to some experts, this year, the VA health system 
is likely to face another shortfall of $2.6 billion due to the 
administration's drastically low veterans budget. And for all of the 
President's rhetoric about supporting our troops--and I do not in any 
way doubt he means it when he says it, but I remain concerned that the 
administration fails to back up the rhetoric with the kind of actions 
needed to see to it that these troops are going to get the support they 
deserve.
  On the whole, I commend the President for finally proposing an 
increase of $1.9 billion in the VA budget for 2007. But as in previous 
years, the administration's priorities are wholly misplaced. In spite 
of the proposed increase, the President's 2007 request cuts the VA 
hospital construction budget by $576 million. To make matters worse, 
the administration's proposed budget would impose a doubling of 
veterans' prescription drug copays and assess a new $250 enrollment fee 
for thousands of veterans across our country.
  As I mentioned on the floor before, the situation has gotten so dire 
that now our military personnel and veterans are having to rely on the 
charity of private citizens to build critical health facilities to meet 
their needs. According to the Departments of Defense and Veterans 
Affairs, our military personnel are suffering inordinate numbers of 
injuries resulting in brain damage, spinal injuries, and amputations. 
About 20 percent of those injured have suffered major head or spinal 
injuries and an additional 6 percent are amputees. Without financial 
support, our veterans are actually having to depend on the charity of 
private citizens to finance the construction of major rehabilitation 
centers for the most seriously wounded.
  The Bush administration is simply not meeting its obligations to 
those wounded in Iraq--a war that has returned home amputees at twice 
the rate of Vietnam. And so, instead, the Intrepid Fallen Heroes Fund 
is raising $37 million to build the Intrepid Center at Fort Sam Houston 
next year. It will be manned and operated by VA and Army personnel, but 
it is currently not expected to receive a dime from the U.S. Treasury 
for its construction because the White House would rather dole out 
scarce resources to the wealthiest of our fellow citizens who have 
already received so much. What kind of a choice are we making when we 
do that?
  I remind my colleagues that the funding approved by this body--which 
without the support of this motion I fear will be wiped out in 
conference--will allow critical facilities such as this one to receive 
the investments they deserve from our Nation's Government.
  Moreover, it will create a trust fund to allow private and State 
facilities that provide medical treatment to veterans to receive 
Federal funds as they meet our veterans critical health care needs. In 
addition to facilities such as the Intrepid Center, it will allow vital 
hospitals and veterans residences, such as the Connecticut State 
veterans home at Rocky Hill, the opportunity to tap into vital Federal 
resources as they strain to meet the increasing demands of caring for 
our veterans--young as well as old.
  I cannot stress the importance of these programs enough. Our veterans 
need the critical care provided at our State veterans nursing homes 
and, regrettably, this administration is choosing to put scarce 
resources into more high-income tax breaks rather than address our 
veterans' essential living needs.
  As a matter of fact, last year, the President actually proposed 
cutting off States' access to Federal funds to build and maintain State 
veterans homes. I did not make that up. That is what they proposed. It 
took an act of the Congress to reverse the President's budget proposal.
  This year, although the Department has a list of 129--I am going to 
put these in the Record, Mr. President; I want my colleagues to see 
them--although the Department has a list of 129 State veterans projects 
approved for receiving Federal grants for new construction and 
improvements, 2006 allocations only provided enough for 13 of these 129 
State projects around our country.
  I will guarantee my colleagues, every one of your States is included 
in projects that will not be funded. These are your State veterans 
facilities, and these are good people out there doing a Herculean job 
of trying to provide for veterans from your States. Here they are, with 
129 requests for projects they need, and only 13 of them will be funded 
because we are going to provide a huge tax break for people who have 
received $125 billion in tax breaks and are now about to get almost $70 
billion more.
  I would hope my colleagues would just, on this alone, be willing to 
support this motion. The proposed 2007 budget would flat-line this 
program of State construction at $85 million, providing funding, as I 
said, for 10 to 13 projects--it may not even be 13--and still leaving 
over 100 State veterans facilities looking for additional resources.
  The funding approved by this body and supported by this motion I am 
offering this afternoon would address these shortfalls.
  Mr. President, I ask unanimous consent that this Priority List of 
Pending State Home Construction Grant Applications--it lists the State, 
the facility in your State; and only the top 13 will be approved; maybe 
13, maybe 10 next year--I ask unanimous consent that this list be 
printed in the Record so my colleagues can determine whether their 
State facility is on the list.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

[[Page S1093]]



                 PRIORITY LIST OF PENDING STATE HOME CONSTRUCTION GRANT APPLICATIONS FOR FY 2006
----------------------------------------------------------------------------------------------------------------
                                                                                          Priority     Est. VA
         FY 2006 list rank            FAI No.         State            Description       group (PG)   grant cost
                                                    (locality)                            ranking       (000)
----------------------------------------------------------------------------------------------------------------
                                Applications Suject to 38 CFR 59 Priority Group 1
----------------------------------------------------------------------------------------------------------------
1.................................       31-014  NE (Bellevue)*.  L/S 120-Bed NHC/DOM       1, 1, 2       13,658
                                                                   (Repl.).
2.................................       13-008  GA               Life Safety/HVAC and      1, 1, 2          991
                                                  (Milledgeville   Upgrades at the
                                                  ).               Russell Bldg..
3.................................       50-008  VT (Bennington)  L/S Geothermal HVAC,      1, 1, 4        1,716
                                                                   Phase 1.
4.................................       13-010  GA               Life Safety/HVAC at       1, 1, 4          955
                                                  (Milledgeville   the Vinson Bldg..
                                                  ).
5.................................       44-010  RI (Bristol)...  L/S Fire Safety           1, 1, 4          625
                                                                   Improvements.
6.................................       36-009  NY (Oxford)**..  L/S 242-Bed NHC           1, 1, 5       39,215
                                                                   (Replacement).
7.................................       26-014  MI               L/S Replace               1, 1, 5          801
                                                  (Marquette)**.   Emergency Gen. And
                                                                   Fire Safety.
8.................................       09-012  CT (Rocky        L/S General               1, 1, 7        2,990
                                                  Hill)**.         Renovations--DOM.
9.................................       26-013  MI (Grand        L/S Code                  1, 1, 7          913
                                                  Rapids).         Renovations, etc.
10................................       47-008  TN               L/S Renovations.....      1, 1, 7          748
                                                  (Murfreesboro).
11................................       33-006  NH (Tilton)....  L/S Facility              1, 1, 7        1,822
                                                                   Upgrades--Backup
                                                                   Generator, Fire
                                                                   Alarm.
12................................       09-011  CT (Rocky        125-Bed NHC (New)...         1, 2       20,300
                                                  Hill)**.
13................................       06-044  CA (Greater LA   520-Bed NHC/DOM              1, 3      125,883
                                                  Complex).        (New).
14................................       06-052  CA (Redding)...  150-Bed NHC/DOM              1, 3       17,572
                                                                   (New).
15................................       06-053  CA (Fresno)....  300-Bed NHC/DOM              1, 3       25,864
                                                                   (New).
16................................       55-025  WI (Union        Adult Day Healthcare      1, 4, 1          586
                                                  Grove).          (Renov).
17................................       27-018  MN               Adult Day Healthcare      1, 4, 1        1,914
                                                  (Minneapolis).   Renovation--35
                                                                   Participants.
18................................       27-019  MN (Luverne)...  Dementia Unit.......      1, 4, 2          568
19................................       08-014  CO (Homelake)..  Upgrade Resident          1, 4, 2        3,394
                                                                   Support and
                                                                   Activity Areas.
20................................       44-009  RI (Bristol)**.  Nursing Unit              1, 4, 2        2,287
                                                                   Renovation.
21................................       12-013  FL (Daytona      Renovation, Phase 1.      1, 4, 2          650
                                                  Beach)**.
22................................       13-009  GA               Renov. & Upgrade          1, 4, 2          269
                                                  (Milledgeville   Wheeler Bdg.
                                                  ).
23................................       04-004  AZ (Phoenix)...  Renovation, Phase 2.      1, 4, 2        1,040
24................................       21-008  KY (Wilmore)...  Renov. 3 Nursing          1, 4, 2          794
                                                                   Units.
25................................       23-011  ME               Renov. Alzheimer's        1, 4, 2          404
                                                  (Scarborough).   Unit.
26................................       01-006  AL (Alexander    Moisture                  1, 4, 2        1,363
                                                  City).           Remediation, Phase
                                                                   2.
27................................       37-007  NC               Building Code Renov.      1, 4, 3          784
                                                  (Salisbury)**.   And Parking Lot.
28................................       08-013  CO (Rifle).....  Upgrade Fire/Safety       1, 4, 4        1,652
                                                                   Renovations.
29................................       06-051  CA (Yountville)  Steam Dist. System        1, 4, 4        1,729
                                                                   Renovations.
30................................       13-006  GA               Elevator Renovations      1, 4, 4          805
                                                  (Milledgeville/  (5 Buildings).
                                                  Augusta)*.
31................................       13-007  GA               HVAC Renov.--Wheeler      1, 4, 4          521
                                                  (Milledgeville   Bldg..
                                                  ).
32................................       55-033  WI (King)**....  Replace Steam Lines.      1, 4, 4          473
33................................       06-054  CA (Yountville)  Telecommunications &      1, 4, 4        1,950
                                                                   Network.
34................................       36-011  NY (Stony        Building Sys./            1, 4, 4          737
                                                  Brook).          Utilities Renov..
35................................       27-023  MN               Sewer Pipe                1, 4, 4          463
                                                  (Minneapolis)*.  Replacement--Buildi
                                                                   ng 17.
36................................       27-026  MN (Silver       Roof Replacement....      1, 4, 4        1,835
                                                  Bay)**.
37................................       27-027  MN (Hastings)**  Renovation, Phase 2.      1, 4, 4        4,922
38................................       27-028  MN (Hastings)**  Renovation, Phase 3.      1, 4, 4        5,266
39................................       25-060  MA (Holyoke)...  Masonry Restoration.      1, 4, 4          478
40................................       39-020  OH (Sandusky)..  Roof Replacement--        1, 4, 4          552
                                                                   Secrest Hall.
41................................       39-021  OH (Sandusky)..  Corridor Renovation.      1, 4, 4          325
42................................       39-022  OH (Sandusky)..  Mechanical Sys.           1, 4, 4        1,560
                                                                   Upgrade.
43................................       01-004  AL (Alexander    General Renovations.      1, 4, 4          355
                                                  City)*.
44................................       21-007  KY (Wilmore)*..  General Renovation,       1, 4, 4          839
                                                                   Phase 2.
45................................       06-055  CA               General Renovations.      1, 4, 4          807
                                                  (Yountville)**.
46................................       55-038  WI (King)*.....  Domestic Water Pipe       1, 4, 4          724
                                                                   Replacement.
47................................       29-015  MO (St. Louis).  Sprinkler Pipe            1, 4, 4          775
                                                                   Replacement.
48................................       55-039  WI (King)......  Replace Windows--         1, 4, 4          267
                                                                   Olson Hall.
49................................       55-041  WI (King)......  2nd Water Supply          1, 4, 4          860
                                                                   Well.
50................................       04-005  AZ (Phoenix)...  Renovation, Phase 3.      1, 4, 4          780
51................................       29-016  MO (Cape         Replace Roof........      1, 4, 4          635
                                                  Girardeau).
52................................       36-012  NY (Stony        Renovate Building         1, 4, 4          725
                                                  Brook).          Systems & Utilities.
53................................       06-047  CA (Yountville)  Chapel Renovation...      1, 4, 5        1,013
54................................       06-049  CA (Yountville)  Recreation Building       1, 4, 5        4,485
                                                                   Renovation.
55................................       13-005  GA               Dietary Facility....      1, 4, 5          715
                                                  (Milledgeville
                                                  ).
56................................       39-023  OH (Sandusky)..  Kitchen Upgrade--         1, 4, 5          260
                                                                   Secrest Hall.
57................................       32-002  NV (Boulder      Dietary Facility          1, 4, 5        1,429
                                                  City).           Addition.
58................................       23-013  ME (Caribou)...  Multipurpose Room         1, 4, 5          354
                                                                   Addition.
59................................       46-011  SD (Hot          General Renovations.      1, 4, 6          802
                                                  Springs).
60................................       17-027  IL (LaSalle)...  Bus and Ambulance         1, 4, 6          566
                                                                   Garage.
61................................       34-025  NJ (Paramus)...  Multipurpose Room...      1, 4, 6        1,415
62................................       36-010  NY (St. Albans)  General Renovations.      1, 4, 6        4,470
63................................       55-035  WI (Union        Aboveground Building      1, 4, 6        2,217
                                                  Grove).          Connectors.
64................................       17-030  IL (Manteno)...  Construct Storage         1, 4, 6        1,610
                                                                   Building.
65................................       17-033  IL (Manteno)...  Convert/Upgrade           1, 4, 6        2,320
                                                                   Courtyards.
66................................       04-003  AZ (Phoenix)...  Renovation, Phase 1.      1, 4, 6          364
67................................       46-012  SD (Hot          Construct Chapel....      1, 4, 6          520
                                                  Springs).
68................................       19-030  IA               Renovate Medical          1, 4, 6          520
                                                  (Marshalltown).  Clinic Space.
69................................       08-015  CO (Walsenburg)  General Renovations.      1, 4, 6        1,763
70................................       23-012  ME (South        Replace Flooring....      1, 4, 6          353
                                                  Paris).
71................................       48-008  TX (Pending)...  160-Bed NHC (New)...         1, 5       11,144
72................................       48-009  TX (Pending)...  160-Bed NHC (New)...         1, 5       11,144
73................................       55-032  WI (Union        24-Bed DOM Addition          1, 6        1,625
                                                  Grove).          (New).
74................................       02-001  AK (Palmer)*...  General Renovations          1, 6        2,275
                                                                   to Establish SVH
                                                                   (79-Beds).
75................................       49-002  UT (Ogden).....  120-Bed NHC (New)...         1, 6        8,008
76................................       04-002  AZ (Tucson)....  180-Bed NHC (New)            1, 6       18,671
                                                                   and 35 Participant
                                                                   ADHC.
77................................       55-036  WI (Chippewa     120-Bed NHC/40-Bed           1, 6       15,925
                                                  Falls).          DOM (New).
78................................       51-005  VA (Richmond)..  80-Bed DOM (New)....         1, 6        5,200
79................................       48-010  TX (Pending)**   169-Bed NHC (New)...         1, 5       11,144
                                                  \1\.
80................................       48-011  TX (Pending)**   160-Bed NHC (New)...         1, 5       11,144
                                                  \1\.
----------------------------------------------------------------------------------------------------------------
    Subtotal All Priority Group 1   ...........  ...............  ....................  ...........      419,597
     Applications (Has State
     Matching Funds):
================================================================================================================
                              Applications Subject to 38 CFR 59 Priority Groups 2-7
----------------------------------------------------------------------------------------------------------------
81................................       20-004  KS (Ft. Dodge).  L/S Back-Up                  2, 2          401
                                                                   Generators.
82................................       20-005  KS (Winfield)..  L/S Back-Up                  2, 2          940
                                                                   Generator, Sprikle
                                                                   DOM, etc..
83................................       50-009  VT (Bennington)  L/S Geothermal HVAC,         2, 4        2,306
                                                                   Phase 2.
84................................       50-010  VT (Bennington)  L/S Geothermal HVAC,         2, 4        2,200
                                                                   Phase 3.
85................................       34-028  NJ (Paramus)...  L/S Replace Fire             2, 5          307
                                                                   Alarm System.
86................................       34-027  NJ (Vineland)..  L/S Install                  2, 7          341
                                                                   Emergency Generator.
87................................       39-024  OH (Georgetown)  L/S Security                 2, 7          330
                                                                   Upgrades, Phase 1.
88................................       39-025  OH (Georgetown)  L/S Security                 2, 7          331
                                                                   Upgrades, Phase 2.
89................................       12-007  FL (Pending)...  120-Bed NHC (New)...            4        9,286
90................................       12-008  FL (Pending)...  120-Bed NHC (New)...            4        9,418
91................................       12-009  FL (Pending)...  240-Bed NHC (New)...            4       16,980
92................................       12-010  FL (Pending)...  120-Bed NHC (New)...            4        9,857
93................................       12-011  FL (Pending)...  240-Bed NHC (New)...            4       17,780
94................................       19-028  IA               General Renovations          5, 2        2,731
                                                  (Marshalltown).  NHC.
95................................       40-024  OK (Sulphur)...  General Renovations.         5, 2        7,800
96................................       12-014  FL (Lake City).  Renovation, Phase 2.         5, 2        1,950
97................................       26-015  MI (Marquette).  Renov. Nursing Unit/         5, 2          557
                                                                   Roof Repl.
98................................       39-027  OH (Sandusky)..  Renov. Griffin Hall--        5, 2          418
                                                                   First Floor.
99................................       25-062  MA (Holyoke)...  Renov. Resident              5, 3          439
                                                                   Toilet/Baths.
100...............................       27-029  MN               Renovation, Phase 2.         5, 4        8,366
                                                  (Minneapolis).
101...............................       17-032  IL (LaSalle)...  Replace Roof and             5, 4          273
                                                                   Water System.
102...............................       25-061  MA (Holyoke)...  Window replacement,          5, 4          398
                                                                   Phase 1.

[[Page S1094]]

 
103...............................       06-056  CA (Yountville)  Central Power Plant          5, 4          740
                                                                   Renovation.
104...............................       34-026  NJ (Paramus)...  HVAC Replacement....         5, 4          356
105...............................       55-040  WI (King)......  Replace Lock and Key         5, 4        2,098
                                                                   System.
106...............................       55-O42  WI (King)......  Renovate Burns               5, 4        5,574
                                                                   Clemons Hall.
107...............................       39-026  OH (Sandusky)..  Vets Hall HVAC               5, 4          997
                                                                   Upgrades.
108...............................       39-028  OH (Sandusky)..  Mech. Sys Upgrades,          5, 4          275
                                                                   Phase 2.
109...............................       39-029  OH (Sandusky)..  Replace Exterior             5, 4          368
                                                                   Lighting, Phase 2.
110...............................       27-020  MN               Kitchen/Dining Room          5, 5        2,844
                                                  (Minneapolis).   Renov..
111...............................       27-021  MN (Silver Bay)  Nursing Care Space..         5, 5          499
112...............................       06-058  CA (Chula        Expand Dining Room..         5, 5          585
                                                  Vista).
113...............................       27-030  MN (Hastings)..  Water Supply                 5, 6          325
                                                                   Replacement.
114...............................       72-003  PR (Juana Diaz)  General Renovations.         5, 6          970
115...............................       06-057  CA (Yountville)  Administration               5, 6        2,946
                                                                   Building Renov..
116...............................       39-017  OH (Pending)...  168-Bed NHC (New)...            6        7,800
117...............................       39-018  OH (Pending)...  168-Bed NHC (New)...            6        7,800
118...............................       37-004  NC (Pending--    120-Bed NHC (New)...            6        5,358
                                                  Eastern).
119...............................       55-021  WI (King)......  45-Bed Dom (New)....            7        2,294
120...............................       24-005  MD ( Pending--   120-Bed NHC (New)...            7        7,684
                                                  Western).
121...............................       53-030  WA (Orting)....  120-Bed NHC (97                 7        8,316
                                                                   Repl, 23 new).
122...............................       27-022  MN (Fergus       Dementia--Special               7        4,799
                                                  Falls).          Care Unit.
123...............................       37-005  NC (Pending--    120-Bed NHC (New)...            7        5,358
                                                  Western).
124...............................       17-028  IL (Pending)...  200-Bed NHC (New)...            7       18,200
125...............................       17-031  IL (LaSalle)...  80-Bed NHC Addition.            7        4,881
126...............................       47-009  TN (Montgomery   120-Bed NHC +20-Bed             7       11,105
                                                  County).         Alzheimer's Unit
                                                                   (New).
127...............................       47-010  TN (Memphis)...  120-Bed NHC +20-Bed             7       11,533
                                                                   Alzheimer's Unit
                                                                   (New).
128...............................       51-006  VA (Hampton)...  260-Bed NHC/DOM                 7       23,400
                                                                   (New).
129...............................       21-009  KY (Hanson)....  90-Bed NHC                      7        6,000
                                                                   (Addition).
----------------------------------------------------------------------------------------------------------------
    Subtotal All Priority Groups 2- ...........  ...............  ....................  ...........      236,514
     7 Applications ( No State
     Matching Funds):
================================================================================================================
    Total All Pending               ...........  ...............  ....................  ...........      656,111
     Applications:.
----------------------------------------------------------------------------------------------------------------
* These projects were awarded after August 15, 2005.
** These projects were conditionally approved after August 15, 2005. This provides a 180 day time extension
  authorized in 38 UCS 8135.
**\1\ The State of Texas requested FY 2006 funding consideration for two bed-producing projects (FAI 48-008 and
  FAI 48-009). Projects FAI 48-010 and FAI 48-011 have PG-1 certification of 35% State matching funds.
These applications will be funded in FY 2006 in the order which they appear on this list, subject to the
  availability of Federal funds and compliance with all Federal requirements. Conditionally approved projects
  have been ranked and will be awarded grants subject to meeting the remaining Federal requirements.

  Mr. DODD. The funding approved by this body and supported by this 
motion would address these shortfalls and allow State homes to tap into 
a trust fund to provide more funding for construction that has already 
been approved by the VA.
  In light of these facts, I urge my colleagues to consider the 
consequences of not acting today. Call it Groundhog Day. Call it what 
you want. But the fact is, we have another chance now to get right what 
we didn't the other night.
  Again, I support and appreciate what my colleague from Iowa did by 
offering an amendment to provide for these priorities. But we did not 
provide any funding for them. And there is not a Member of this Chamber 
who does not know what is going to happen. They did it as basically a 
political cover, to have an amendment which said: Yes, we agree with 
you, we should be paying for these priorities. But then, when I offered 
the amendment to pay for them, of course, I lost.
  Today, you will get a second chance, like in the movie ``Groundhog 
Day,'' to try to get right what we got wrong the other night. You make 
the choice. If you think $64.8 billion in tax breaks for the two-tenths 
of 1 percent of the American population making more than $1 million a 
year is a more important priority than providing for State facilities 
that serve veterans, providing for disability payments and veterans 
medical care, then you explain that to your constituents. But that is 
the choice I am going to offer you this evening. Supporting the Senate 
position on this issue is the very least we can do to show our full 
backing of America's men and women in uniform. We owe these individuals 
at least that much.
  I will end where I began. I do not think there is another 
constituency group in America that deserves as much support from the 
Congress as veterans do. Particularly in this day and age, if you go to 
Baghdad, if you go to Iraq, as many of my colleagues have, as I have--
and I see my colleague, Jack Reed, in the Chamber as well, a graduate 
of West Point and a veteran of the 82nd Airborne. You go there--and I 
have gone with him--and you meet these young men and women. It is a 
tough place to be. It is a tough place to be. It is a tough place to 
come back from, even under the best of circumstances. But if you come 
back physically broken, with arms and legs lost and scarred and burned, 
as 16,000 of them have, you deserve better. If you think millionaires 
deserve better than they do, I could not disagree with you more. And I 
am going to give you a chance tonight to join me in this effort.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, we are next expected to hear from the 
Senator from Rhode Island, who will have a motion to instruct on 
defense needs. Thereafter, we expect to hear from the Senator from New 
York, Mr. Schumer, who will have a motion to instruct on the tuition 
deduction.
  To facilitate the consideration of Senator Reed's motion, I ask 
unanimous consent that the pending motions be temporarily set aside so 
that the Senator from Rhode Island may offer his motion.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Rhode Island.


                      Motion To Instruct Conferees

  Mr. REED. Mr. President, I send a motion to instruct conferees to the 
desk and ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report the motion.
  The bill clerk read as follows:

       Mr. Reed moves that the managers on the part of the Senate 
     at the conference on the disagreeing votes of the 2 Houses on 
     the Senate amendment to the bill H.R. 4297 (to provide for 
     reconciliation pursuant to the concurrent resolution on the 
     budget for fiscal year 2006 (H. Con. Res. 95)) be instructed 
     to insist on the inclusion in the final conference report of 
     the funding to strengthen America's military contained in 
     title VI of the Senate amendment instead of any extension of 
     the tax cuts for capital gains and dividends, which does not 
     expire until 2009, contained in section 203 of the bill as 
     passed by the House of Representatives.

  Mr. REED. Mr. President, I find myself, as I so often do, agreeing 
with my colleague, the Senator from Connecticut, Mr. Dodd. It is 
exactly about priorities. It is about whether the wealthiest, most 
affluent people in this country will enjoy a tax break or whether more 
fundamental needs of our Nation will be served.
  Senator Dodd pointed to the issue of returning veterans. Again, I was 
pleased to travel with Senator Dodd last October to Iraq to visit with 
our soldiers: marines, airmen, sailors--all of our outstanding men and 
women in uniform. When they come home, they need the kind of support 
that the fund Senator Dodd identified would give them. But there is 
even a more immediate concern to our Armed Forces today: $50 billion in 
equipment that has to be rehabilitated, refurbished, brought up to 
operating conditions, so these men and women can continue their 
operations on behalf of America.

[[Page S1095]]

  I can tell you, as someone who had the privilege of commanding a 
company of paratroopers, the most disconcerting concept, the most 
disconcerting and troubling aspect, is when your equipment is poorly 
maintained, will not operate, is inefficient, out of date. That drives 
morale down as rapidly as anything. We have--not unexpectedly because 
of the conflict in which we are engaged--seen our equipment stocks 
become overused, both aviation equipment and ground equipment: trucks, 
vehicles, humvees--all of them have taken a terrible beating in combat 
operations in Afghanistan and Iraq.
  Just 2 weeks ago, this body agreed with my proposal to spend $50 
billion to refurbish this equipment. But as Senator Dodd pointed out, 
they did not agree with the way we would pay for it. In fact, the 
proposal was really just oratory. It says: Let's spend $50 billion 
which we do not have to help the military refurbish their equipment. We 
have to do better than that because, as the Senator pointed out, 
without funding, that is all well-wishes without real results. And we 
need real results for the men and women of our military forces.
  The administration is quick to point out that we are a nation at war. 
That is true, although in some respects we are simply an Army and a 
Marine Corps, the Department of Defense, at war because the American 
people have not been called upon to sacrifice very much, if anything. 
Here we are making the point--I think it is so obvious--that the 
wealthiest Americans, those who enjoy the benefits of this great 
country, I believe would be quite willing to give up their tax break on 
dividends and capital gains if they knew these funds would be directed 
to precisely the programs I am talking about: refurbishing military 
equipment or caring for veterans.
  There are many reasons to oppose the extension of the lower tax rates 
and dividends and capital gains, many macroeconomic reasons, many 
reasons in terms of our fiscal problems and in terms of our growing 
deficit. But one of the reasons is just the way it is distributed. 
Forty-five percent of the tax cut goes to .3 percent of families with 
incomes of $1 million or more. Seventy-two percent of the tax cut goes 
to families with incomes of $200,000 or more.
  Now, in a time when our troops are being sent into the field--at 
times they are complaining or have complained about inadequate 
equipment, insufficient equipment--at a time when they are looking 
around and seeing their equipment stocks being drawn down and being 
overused, I believe it is time to ask: What is our priority, the 
protection of our military forces in the field or providing additional 
benefits to those who have so much in society today?

  I think it is more important to direct these funds to our military 
forces. We have to do it, particularly with respect to the equipment of 
the Army and the Marine Corps. As Senator Dodd indicated, I had the 
privilege of traveling with him last October, but I just came back from 
my seventh trip to Iraq and fourth trip to Afghanistan. Once you are 
there, you understand the professionalism, skill, valor, fidelity to 
duty and country of these marvelous men and women. You also understand 
that the equipment is wearing down. The equipment has to be fixed. 
Because they depend upon this equipment for their lives, we can't 
tolerate equipment that won't operate properly.
  A recent article in USA Today noted that the war in Iraq has taken 
the biggest toll on military equipment since the Vietnam war. Two weeks 
ago, the National Security Advisory Group, chaired by former Secretary 
of Defense William Perry, released a report about the strain and risk 
to our military.
  In their words:

       Given the harsh environment of Iraq and Afghanistan, 
     [resetting the force]--

  that is, rehabilitating this equipment and repairing it--

     is proving more extensive and expensive than in previous 
     operations. Estimates of the costs of rehabilitating Army 
     equipment coming back from operations overseas continues to 
     grow . . . in addition, both the Army and the Marine Corps 
     expect to see increasing costs associated with recapitalizing 
     aging forces and transforming their capabilities for a 
     broader range of 21st century missions.

  Gary Motsek, the Army's deputy director for support operations at the 
U.S. Army Materiel Command, has stated that the Army has to repair 
virtually everything that goes to Iraq.
  Last week, General Schoomacher, the Chief of Staff of the Army, 
appeared before the Armed Services Committee. When I asked him what the 
reset and recap cost for the Army was, he replied: $4 billion per year 
over the next 6 years. What I have since discovered--and this might be 
of some confusion in terms of trying to interpret a difficult and 
complicated budget--is that his reply doesn't cover the whole situation 
and doesn't provide an entire explanation of what is going on.
  First, I believe the Chief of Staff was discussing the repair and 
replacement cost, which is projected to be $24 billion over the next 6 
years. He did not include recapitalization which is an additional $12 
billion over the next 6 years. So the actual projected cost over 6 
years is $36 billion. Second, this projection assumes a significant 
drawdown of troops beginning at the start of fiscal 2007 and ending in 
December 2008, when there are, according to the projections, no troops 
in Iraq. I believe this assumption is rather unrealistic and, 
therefore, we must assume that the reset and recapitalization costs 
will be significantly higher. Again, it is very difficult to parse out 
all of the different assumptions and other notions that are included in 
the budget, but the sense is that they are assuming, at least when it 
comes to maneuver units, that these units will essentially be drawn 
down within 2 years. That is a highly problematic assumption, but one 
that is within the President's budget.
  In addition, General Schoomacher's number assumes that we do not 
leave a single piece of equipment behind for the Iraqis. Yet I have 
been privy to discussions here in Congress and elsewhere in which there 
is a notion that we will leave significant equipment behind in Iraq to 
provide their security forces with the kind of equipment they need to 
operate. If we do leave equipment for them, the replacement costs, 
which are an element of reset and recap costs, will increase.
  A much more accurate picture of this notion of what we must do to 
repair and rehabilitate our equipment, or reset and recap, is the 
actual bill we have for fiscal year 2006, what we are paying for in 
this fiscal year. The Army has determined that the cost of resetting, 
recapping, and replacing equipment lost in battle for fiscal year 2006 
is $13.6 billion. As long as we have approximately the same number of 
troops in Afghanistan and Iraq as we do today, and we have the same 
tempo of operation, then that $13.6 billion cost will be an annual 
occurrence. As troops draw down, that funding level could go down from 
$13.6 billion, but significant costs will continue to accrue until 2 
years after the end of the conflict. So the annual $13.6 billion price 
tag supports the opinion of GEN Paul Kern, who just retired as head of 
the Army Materiel Command. He stated that fixing and replacing Army 
equipment alone could run from $60 to $100 billion.
  If you step back and look at what we are encountering today in terms 
of costs, it is about $13 billion. Every year we are in Iraq at this 
level of operational strength, it will be roughly that. That is a lot 
more money than this budget anticipates. And so we have a huge unmet 
need to fund simple recapitalization and reequipment, rehabilitation, 
whatever term you want to use. But essentially, so that we understand 
it, it is simply going back and fixing all the equipment we have been 
using so aggressively in these different theaters. That doesn't buy you 
a new Army. It doesn't buy you a transformed Army with new, modern 
equipment. It simply gives you back the equipment you brought into 
battle in a condition that you can use it in other hostile 
environments.
  This $13 billion seems to be the kind of level of spending we are 
going to have to face year in and year out, as long as we are deployed, 
as we are, in Iraq and Afghanistan. That is the figure we have to react 
to. As a result, it is only prudent and sensible that for this $50 
billion total we talked about for a 5-year period, that people support 
the concept of spending that kind of money. But, of course, what they 
refuse to do is put real assets, real resources to pay the bills. And 
that is the thrust of my proposal.
  I tried previously, in our debate a few days ago, to say that not 
only must we

[[Page S1096]]

spend this money, we have to set priorities. We have to take those 
funds from the capital gains and dividends taxes and apply them to this 
fundamental need of our men and women in uniform.
  That is the Army I was just talking about. Let's turn to the Marine 
Corps. Last November, the Marine Corps estimated it would cost $11.7 
billion to repair and replace their equipment over the next 5 years. 
These are, again, costs that have already been incurred. These costs 
are not included, as far as we can determine, in the President's budget 
request. We have also discovered that the Air Force is concerned about 
the cost of additional flying hours and the wear and tear on their 
equipment. Again, we could not find explicit recognition of these costs 
in the President's budget.

  Last October, the GAO released a report on military readiness. It 
assessed the state of 30 pieces of equipment, predominantly tanks, 
vehicles, helicopters, and aircraft. It made several disturbing 
observations, stating:

       GAO's analysis showed that the reported readiness rates 
     declined between fiscal years 1999 and 2004 for most of these 
     items. The decline in readiness, which occurred more markedly 
     in fiscal years 2003 and 2004, generally resulted from 1. the 
     continued high use of equipment to support current operations 
     and 2. maintenance issues caused by the advancing ages and 
     complexity of the systems. Key equipment items--such as Army 
     and Marine Corps trucks, combat vehicles, and rotary wing 
     aircraft--have been used well beyond normal peacetime use 
     during deployments in support of operations in Iraq and 
     Afghanistan.

  The report then goes on to say:

       Until the DOD ensures that condition issues for key 
     equipment are addressed, DOD risks a continued decline in 
     readiness trends, which could threaten its ability to 
     continue meeting mission requirements. The military services 
     have not fully identified near and long term program 
     strategies and funding plans to ensure that all of the 30 
     selected equipment items can meet defense requirements.

  I don't think there is anything startling in the sense of their 
conclusion. They are stating what should be obvious. We have committed 
our Army and Marine Corps to battle in a very harsh environment, Iraq 
and Afghanistan. We are operating at robust tempos of operation. This 
equipment is seeing the results. We have to provide for that. What is 
disturbing to me is that this readiness trend portends danger in the 
future. If readiness is declining, if it is not reversed, if we are 
asking the soldiers and marines to operate equipment that is not 100 
percent, that is not fully supported by ample spare parts, that has not 
been rehauled, overhauled, rehabilitated, then we are putting our 
troops in a precarious position which we should not.
  The response, the answer? This one is relatively straightforward. 
Give them the money to do the job and give them sufficient resources to 
do so.
  Another GAO report states that more than 101,000 pieces of National 
Guard equipment, including trucks, radios, and night vision devices, 
have been sent to soldiers in operations overseas. This means the Guard 
does not have the equipment it needs to respond to crises here. This 
problem was exemplified during Katrina when the Guard stated that its 
communications equipment had been abroad and, therefore, it was unable 
to operate effectively in the aftermath of that disaster.
  Another impact that we all hear about is the condition of National 
Guard equipment. Their equipment has been sent overseas and left 
overseas. Their equipment is also being used intensively in these 
operations. We have to restore and rehabilitate the National Guard 
equipment also. They have several missions. One critical mission is not 
only homeland security but preparedness for natural disasters and 
consequent management.
  This week, Wednesday, the other body will release a report on 
Katrina. I am interested to see what it will say in terms of the 
National Guard's ability to respond, their equipment, the fact that 
they have been tasked to go overseas, personnel and equipment. But we 
have to remind ourselves that we can't neglect the Guard also. These 
reports, the GAO reports particularly, should have us thinking 
seriously about what we must do today. Again, it comes down to 
priorities. Secretary Rumsfeld is right about the fact that our troops 
are performing magnificently well. They are superb professionals doing 
a remarkable job. But in order to keep that edge, they have to have the 
equipment and the support to be the best they are.
  Secretary Rumsfeld says that Perry report and another report by Andy 
Krepenevich, which the Pentagon paid for, were looking at all material 
when they found that the military was strained. We are not looking at 
all material. We are looking today at what we believe, based upon 
review of the budget, based upon discussions with military personnel, 
is the condition of this equipment, and the need exists to fix it. We 
do have the finest fighting force in the world, but we have to make 
sure it has the finest equipment in the world.
  Secretary Perry made the following recommendation at the conclusion 
of his report:

       In order to restore the health of U.S. ground forces in the 
     wake of Iraq, the nation must step up and invest substantial 
     resources to reset, recapitalize, and modernize the force . . 
     . Restoring the health of both services is not a matter of 
     simply returning them to the status quo; it is a matter of 
     that they are organized, trained, equipped, and restored to 
     meet the full range of traditional and nontraditional 
     challenges in the future.

  Next year alone the Army needs about $13.6 billion and the Marine 
Corps needs about $7.5 billion for reset and recap, as they call it, of 
their equipment. This was not included in the President's budget 
request. If it is not paid for with supplemental funding, the troops 
will have to go without, which we can all agree is not acceptable. 
Nothing makes our troops more vulnerable or lowers morale more rapidly 
than working with inadequate equipment. If the $20 billion reset and 
recap bill for this year alone is paid for with supplemental funding, 
this will add directly to our deficit. I believe with the growing size 
of this deficit, we should not add to it, that we should do what we can 
to try to prevent increased deficits.
  This is a time for Americans to come forward to share in the 
sacrifice of our men and women overseas. Particularly when it comes to 
a tax proposal that benefits the wealthiest Americans, I think we would 
be more than willing to do so, knowing that these funds could be used 
directly for the welfare of our soldiers in the field and for the 
security of the United States.
  Our men and women have volunteered to risk their lives. I believe we 
have to risk perhaps a little political capital and instead of 
providing these tax cuts to the very wealthiest Americans, provide a 
dividend to our soldiers and marines in the form of better equipment. 
Fifty billion in funding retained from not extending capital gains cuts 
and dividends cuts could pay for this. That is the essence of my 
instruction.
  It is one thing to stand on this floor as a huge majority and say: We 
understand our troops need $50 billion to rehabilitate their equipment. 
It is something else to stand up and make a tough choice, set a 
priority, pay for it. My instruction will do that.
  I yield the floor.
  Mr. BAUCUS. Mr. President, people call Montana the ``big sky'' State. 
Standing on the top of Mount Sentinel--the backdrop of the University 
of Montana--on a clear day, a person can see nearly 50 miles in almost 
every direction. I might say that at the top of Lone Mountain in Big 
Sky, MT, you can see the Tetons in Wyoming. Back at Mount Sentinel, 
which many of us climb from time to time, at the foot of it a professor 
is studying a horizon that stretches much farther than 50 miles. 
Professor Dan Reisenfeld is one of the key astrophysicists working on a 
mission to map and study the edge of the solar system.
  Professor Reisenfeld is busy playing a part in the design of the 
interstellar boundary explorer, or I-BEX, an instrument that uses a 
large-aperture camera to detect high-energy particles coming from the 
edge of the solar system.
  What does this mean? If I-BEX is successful at gathering information 
about the boundaries of the solar system, this will help companies that 
build satellites orbiting the Earth to predict solar storms. Solar 
storms can disrupt a satellite's operation and even cause irreparable 
damage.
  Here on Earth, that means that emergency communications equipment 
would be able to function without the fear of interruption. And global 
communications can be more seamless.

[[Page S1097]]

  Some of the most important scientific research is being done at 
universities across Montana and across the country. This research 
covers the gamut from biotechnology to stem cell research, to cutting-
edge computer science. But institutions across the world are catching 
up.
  In January, I visited India's Institute of Technology in Delhi. 
Eager, young engineering students are plotting for a better tomorrow in 
their country and the world. India, similar to many other developing 
countries, has made significant investments in education over the past 
several years. India produces 12 percent of the total global supply of 
university graduates. This percentage is increasing. China is now 
second only to the United States in the number of researchers in its 
workforce. According to the World Bank's most recent statistics, since 
1985, China has seen an almost 400-percent increase in its per capita 
education spending.
  While China, India, and other developing nations may still have a 
long way to go, they are training workers for a new world.
  That takes me back to Professor Reisenfeld at the University of 
Montana. The University of Montana, similar to most colleges and 
universities across the country, is a tax-exempt organization. Tax-
exempt universities rely in large part on tax deductible charitable 
contributions from alumni, private foundations, and businesses.
  Legislative proposals that encourage more giving to charity help 
provide scholarships, build science centers, and hire new faculty to do 
cutting-edge research. In large part, charitable donations from the 
private sector--business and individuals--help America keep its 
competitive edge. There is no doubt about that, Mr. President. Our 
universities are a very key, integral part in America's R&D and in 
enhancing our country's competitiveness.
  The Senate-passed tax reconciliation before us includes several 
incentives to encourage charitable giving. One of the most important 
incentives for charitable giving included in the Senate-passed bill is 
the IRA rollover provision. According to the American Council on 
Education, the IRA rollover provision is supported by close to 2,000 
colleges and universities across the country. The provision promises to 
be an important tool for planned giving--a staple of university 
fundraising.
  In addition, the IRA rollover represents a significant simplification 
over current law. Let me explain.
  The IRA rollover provision allows older, financially secure donors to 
seamlessly transfer amounts in their IRA to their favorite charity, 
without first recognizing the IRA into income.
  Under current law, taxpayers who want to donate their IRAs to charity 
must first take the amount into income. This can cause a huge 
disincentive to give if the amount of the IRA exceeds the donors' 
adjusted gross income limitation, for example.
  In some cases, donors are forced to incur income for tax purposes for 
amounts the donor has given to charity. This makes no sense. The law 
should encourage taxpayers to give to charity.
  For example, a taxpayer with an adjusted gross income of $40,000 and 
an IRA worth about $100,000, is forced to take that full $100,000 into 
income prior to making a gift to charity.
  As a result, this taxpayer is considered to have $140,000 in income, 
for tax purposes--even though the taxpayer is giving $100,000 away.
  Because taxpayers are subject to adjusted gross income limitations, 
even if the donor gives the entire $100,000 in the IRA away to charity, 
the taxpayer can only deduct up to half of adjusted gross income--in 
this example, $70,000.

  In short, under current law, this taxpayer is forced to recognize 
$30,000 more in taxable income, even though the IRA is going entirely 
to charity. We should not penalize charitable giving.
  The IRA rollover provision corrects this problem by simply 
disregarding from income amounts in a donor's IRA given to charity.
  This proposal will have a fundamental effect on the amount of money 
contributed to charity. Currently, there are more than $2.5 trillion 
held in IRAs. If 1 percent of the assets currently held in IRAs were 
donated to charity, that would mean an additional $25 billion would go 
to benefit the type of research conducted by Professor Reisenfeld at 
the University of Montana. And money would also go to scholarships for 
the students working side by side with Professor Reisenfeld in his 
classroom.
  The House bill does not include these new charitable giving 
incentives. Mr. President, the upcoming conference will highlight the 
priorities of each body. We include this provision; the House does not.
  It is unclear at this point whether there will be enough revenue to 
extend capital gains and dividend tax treatment beyond the current law, 
which we all know doesn't expire until January 1, 2009, and also 
include the important charitable incentives included in the Senate-
passed bill.
  I hope that the conference committee makes charities and our future 
scientists its priority.
  Mr. President, I want to discuss the importance of extending the R&D 
development tax credit for 2 years.
  This is one of the key issues for conference. The Senate passed a 2-
year extension of the revised and improved R&D credit, but the House 
only passed 1 year.
  I am hopeful that 2 years will be retained in conference, as this tax 
incentive is essential for U.S. businesses in our global economy. 
Businesses depend on it. They need to know it is there. Predictability 
is important.
  I have consistently discussed the need for America to maintain its 
competitive edge. To do that, we must cater to our strength: 
innovation.
  Let me state that during the almost 2 weeks I was in Asia, China, and 
India in January meeting with business leaders and public officials, 
one thing became clear; that is, sure, there is a rising Chinese and 
Indian challenge, just as other countries challenge the United States, 
but they constantly told us that in the private sector the one 
advantage America still has is innovation, creativity. Over and over 
again I heard that. I hope that lasts. I hope it lasts a long time. We 
know people in other countries are working very hard; they are 
aggressive and hungry and they are going to do all they can to be as 
creative--if not more so--as we are in the United States. But that is 
the one edge we have currently, and we must do our utmost to make sure 
that lasts.
  Foreign direct investment, including research and development, is 
shifting heavily toward China and India. The competition for qualified 
researchers has increased markedly.
  On my recent trips to China and India, people constantly told me, as 
I have said, that the one thing they admire most about America is our 
innovation. We must foster R&D, and extending this vital credit for 2 
years would help maintain that focus.
  Every morning we hear news of some new product or discovery that 
promises to make our jobs easier and our lives better. For example, 
between 2002 and 2003, the annual number of cancer deaths decreased for 
the first time in 70 years. Unfortunately, for women, it rose slightly, 
but the annual number of cancer deaths has decreased. One reason for 
that was better detection and treatment. That is a direct result of 
American technological innovations, and those result from R&D.
  Since 1981, when the research and development credit was first 
enacted, the Federal Government has been a partner in R&D. And we 
contribute to this effort as a society because of the benefits to 
society from additional research spending. It is a societal effort to 
get a societal benefit.
  Congress clearly believes that the R&D credit is an effective policy 
instrument. One of the major limitations of the credit, however, is its 
temporary nature.
  As the Electronic Industries Association wrote:

       An extension of the credit that goes beyond the end of this 
     year will also help diminish the uncertainty for companies 
     regarding the availability of the credit.

  The organization goes on to say:

       The yearly fight to ensure that the credit is available for 
     costly and high-risk research done in the United States can 
     cause companies to discount the credit's long-term value and 
     reduce its benefit to the economy.

  An analysis by the Joint Committee on Taxation found:

       A credit of longer duration may more successfully induce 
     additional research that would a temporary credit, even if 
     the temporary credit is periodically renewed.


[[Page S1098]]


  U.S. workers who engage in R&D activities benefit from some of the 
most intellectually stimulating, high-paying, high-skilled jobs in the 
economy. My own State of Montana is an excellent example of this 
economic activity.
  During the 1990s, about 400 establishments provided high technology 
services, at an average private wage of about $35,000 a year. These 
jobs paid nearly 80 percent more than the average private-sector wage 
of less than $20,000 per year during the same time. Many of these jobs 
would never have been created without the assistance of the R&D credit.
  The R&D tax credit is vital to the economic development of our 
country. It is very important to American businesses. It is very 
important to American workers. It is important to help America maintain 
our competitive edge.
  I urge my colleagues to support a 2-year extension of the R&D credit. 
I hope you will join me in pressing our House colleagues to accept this 
Senate provision.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BAUCUS. 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. BAUCUS. Mr. President, what a difference 5 years makes. On March 
21, 2001, the Finance Committee conducted a hearing entitled ``Budget 
Surpluses and Debt Reduction.'' When we held that hearing, the Office 
of Management and Budget projected a surplus of about $5.6 trillion 
over the next 10 years. A lot has changed since then.

  At the end of this past December, Treasury Secretary Snow sent us 
letters asking us to raise the debt ceiling for the fourth time in the 
last 4 years. The Government is now seeking to raise the debt ceiling 
by $781 billion. This is on top of a $450 billion increase in 2002, a 
record $984 billion increase in 2003, and an $800 billion increase in 
2004. With the latest debt limit increase, the Government will have 
raised the debt ceiling by $3 trillion in just 4 years. Remember, 5 
years ago, OMB projected a surplus of about $5.6 trillion for the 
following 10 years.
  Something needs to change. We have a serious problem with our Federal 
budget. For the current year, the administration's budget projects a 
deficit of $423 billion. That would be the highest deficit in the 
history of the country. That deficit would equal 3.2 percent of the 
entire economy. While that percentage is not a record, it is far too 
high, with the baby boom generation about to retire just around the 
corner. The retirement of this large generation will dramatically raise 
the costs of Social Security, Medicare, and Medicaid. Their retirement 
will put enormous pressures on the budget.
  We should rather be entering this stressful period with a balanced 
budget. We should be paying down the debt. We should be getting ready. 
We should not be running record budget deficits. We need to change 
course. We need to return to the policies and procedures that helped 
reduce that $5.6 trillion surplus.
  One of those procedures was the pay-as-you-go rule. That rule made it 
difficult for Congress to enact new spending or tax cuts without paying 
for them. That simple rule had a powerful effect, but that rule ended a 
few years ago. Congress replaced it with a newer, toothless version, 
and we have paid the price in higher deficits and debt. Congress must 
reinstate the original pay-go rule.
  Beginning in 1990, we also enacted policies to reduce deficits and 
debt. First, following a budget summit, Congress enacted the deficit 
reduction package of 1990. Then, in 1993, in the first year of the 
Clinton administration, we narrowly enacted a $500 billion deficit 
reduction package. What happened? Long-term interest rates dropped. 
Economic growth ensued. The deficit came down.
  Finally, both parties worked together again in 1997 and enacted 
another deficit reduction package. That package was intended to balance 
the budget by 2002.
  But economic growth was strong. These years were a part of the 
longest peacetime economic expansion in American history. The 
Government balanced its budget in 1998, earlier than expected, and then 
the Government balanced the budget even without using Social Security 
surpluses. It is incredible, if you stop and think about it.
  That set the stage for the projections of 2001, with a $5.6 trillion 
surplus for 10 years. But now we are projecting huge deficits and debt 
for both the long term and the near term. The time has come for leaders 
of both parties to work together to achieve another agreement to reduce 
our deficits. But in order to be successful, we need to put everything 
on the table, and I mean everything. We need to put all spending, not 
just entitlement spending, on the table. We need to put all corporate 
tax loopholes and tax breaks for special interests on the table, and we 
need to put the $350 billion yearly tax gap between revenues owed and 
revenues collected on the table.
  I don't know the answers, but I do know we cannot keep on going as we 
are. Something has to change. We need to come together to reduce 
Federal deficits. The task is clear, and I can only hope and pray all 
our leaders will take up the task.
  Mr. President, in Proverbs, King Solomon begins by offering words of 
encouragement to the Israelites to embrace learning:

       Let the wise hear and gain in learning, and the discerning 
     acquire skill.

  A little later in the passage Solomon admonishes:

       Fools despise learning and wisdom.

  I hope the upcoming conference committee will take this proverb to 
heart. It is past time for this country to start taking education 
seriously again, and be ready to make investments in our children's 
future now. Delay would be foolish.
  The Senate-passed bill takes a step in the right direction by 
including a provision to eliminate the barriers in the Tax Code to the 
charitable giving of books to schools, libraries, universities, and 
literacy programs. Educational institutions and literacy programs are 
beset by budget cuts and continued challenges to our Nation's 
commitment to literacy. Two-thirds of American classrooms have fewer 
than 50 children's books, and almost 60 percent of childcare centers 
buy less than 1 book per child a year.
  This is not just an issue in the classroom. Almost 12 million 
children living below the poverty level in the United States today are 
growing up with minimal access to books. According to First Book, a 
nonprofit that focuses on child literacy, more than 60 percent of low-
income families have no children's books in their home, and more than 
80 percent of programs serving children in need have no age-appropriate 
books or other printed materials.
  In my home State, as in many other States, there is a real need. In 
2003, according to the Montana State Library Association, the Montana 
State library system was a victim of a 26-percent budget cut. These 
reductions mean less money for local libraries, and these reductions 
mean cuts in State subsidies that funded book purchases.

  Large-scale book donations are crucial to these libraries, and these 
donations also greatly assist adult literacy efforts. Programs such as 
the Montana Adult Basic and Literacy Education, or ABLE, serve adults 
who lack sufficient mastery of basic skills to function in society, a 
high school diploma, or basic English skills. ABLE is meeting real 
needs. According to the State agency in charge of adult literacy in 
Montana, nearly 75,000 adults in Montana do not have a high school 
diploma or GED.
  Because of the tremendous need for books in Montana and across the 
country, I filed an amendment in the Finance Committee with Senator 
Hatch to include incentives for book donations in the Senate-passed 
bill. Here is how it works.
  Current law provides special tax incentives for gifts of property 
including books to certain organizations. Current law, however, 
requires the donor to make the gift targeted solely to the ill, the 
needy, or infants, categorized as children under the age of 18.
  Unfortunately, books donated directly to educational programs at 
public libraries and universities are not eligible for that tax 
deduction. Why? Because they don't exclusively serve the ill, the 
needy, or infants.
  In addition to the exclusion of those institutions, donations are 
sometimes

[[Page S1099]]

discouraged when the differences in educational and commercial market 
elude the IRS when valuing the donation. If book donations do not 
qualify for the enhanced deduction, the value of the deduction for 
charitable giving is no more than what they would give if they merely 
threw them away. As a result, it is often more economical for 
publishers to truck these books to a dump than it is to distribute them 
to needy schools and libraries, especially given the manpower and 
postage costs of determining worthy donees and shipping books.
  In the Senate-passed bill, we have provided legislative language to 
ensure that public libraries, universities, and literacy programs are 
eligible with enhanced deductions that already exist in the Tax Code 
for other kinds of charitable donations.
  To protect against publishers making unwanted donations of dated 
materials, the provision includes a requirement that organizations 
certify the materials are suitable and appropriate for their 
educational programs.
  In addition to organizations in Montana such as ABLE, many gulf area 
government agencies that are in desperate need after Hurricanes Katrina 
and Rita have written us petitioning for this change. We have heard 
from the Mississippi Department of Education, Louisiana-Mississippi 
school and library systems and library associations, as well as the 
Texas Library Association and Mississippi's Barksdale Reading 
Institute. Numerous national educational organizations have written us, 
including the American Library Association, the Education Industry 
Association, and the Association of Educational Publishers.
  The lack of access to books poses the greatest barrier to literacy. 
We shouldn't allow books to be taken to the landfill because of an 
unintended obstacle in the Tax Code, particularly when one considers 
the massive loss of books along the gulf coast.
  I might add, I was down at the gulf coast. I was standing next to a 
library that was obliterated on the gulf. There were books strewn open, 
and you could see where a cake of mud was left after the water receded 
and we were standing on ruined books. You won't believe this, but I 
reached down to pick up a book and look at it to see what it was, and 
out of all of the books, guess what its title was. ``A Perfect Storm.'' 
I couldn't believe it. It was pure happenstance, pure coincidence, but 
I can tell you that having visited the gulf, they need books.
  As students and families make the slow return to the gulf and an 
incredible effort to rebuild their communities, it is necessary to 
remember that equally important to the rebuilding of these important 
institutions is the need to restock them with sufficient numbers of 
books and quality education materials.
  As First Lady Laura Bush said on September 24 last year, it is our 
duty to ``rebuild these schools on the Mississippi coast and in New 
Orleans and make sure the libraries are built better and stocked even 
better than they were before.''
  The book provision in the Senate-passed bill would help restock 
schools from the gulf to Montana and across the country. As the First 
Lady admonished, this is our duty. I hope the conference committee 
agrees.
  Mr. President, continuing in a series of statements prefacing the 
conference and other measures that might be coming up later this year, 
I wish to spend a moment on health savings accounts.
  High-deductible health plans and health savings accounts, otherwise 
known as HSAs, have become the centerpiece of the administration's 
effort to reform the health care system. In fact, the proposed budget 
would spend an additional $156 billion over 10 years to encourage more 
Americans to choose these plans and accounts.
  I am concerned that high-deductible plans will do more harm than 
good, and the billions of dollars the President wants to spend on 
beefing up the limits on HSAs, health savings accounts, will not 
benefit those who need coverage the most and can least afford it. That 
is because HSAs favor the healthy and they favor the wealthy. As 
healthy insureds join these arrangements, the average cost for those 
remaining in comprehensive plans will increase, and that will make 
comprehensive plans less affordable for those who need coverage.
  Do HSAs favor those who are healthy and can afford something? Let me 
quote from the High-Deductible Health Plans and Health Savings Accounts 
Worksheet, found on the Federal Government's Office of Personnel 
Management Web site. This worksheet is designed to help Federal 
employees decide whether to use plans such as these which are now part 
of the Federal employees health benefit plan. Step three of this 
worksheet reminds us that preventive care is not subject to the high 
deductible. Then it goes on to say:

       Absent other health care needs, if you contribute a higher 
     amount to your HSA, you will get a higher tax deduction plus 
     a higher balance in your HSA to use for future expenses. 
     Since your out-of-pocket costs before plan benefits begin 
     also defines the maximum amount of personal, tax-deductible 
     contributions you can make, contributing a larger amount 
     isn't necessarily bad. If you use a relatively low amount of 
     health care and you can afford to make the maximum 
     contribution, you may be attracted to these aspects of HDHPs 
     with HSAs.

  That is high-deductible health plans and the health savings account. 
This is what it says in the Federal brochure for Federal employees: If 
you use a relatively low amount of health care and you can afford to 
make the maximum contribution, you may be attracted to it.
  If we enacted the higher HSA contribution limit proposed by the 
President's budget, the attraction of HSAs for those who are healthy 
and can afford to contribute the maximum would only grow stronger. Why? 
Because that statement was written before the proposal that the 
administration has before us, to dramatically increase the deductibles 
and eligibilities of those plans which I think are basically investment 
vehicles, not health vehicles.

  Billie Holiday sang, ``Them that's got shall get, them that's not 
shall lose''. That's a pretty good description of the effect of 
expanding HSAs on our health care system.
  Some may argue that this preference of healthy, well-to-do taxpayers 
for HSAs would not be a problem if we just put everyone into a high-
deductible plan and eliminated more comprehensive arrangements. 
Eliminating choice takes care of adverse selection. If there were no 
choice, and therefore no adverse selection, would expanding HSAs be a 
cost-effective solution? Would tax dollars spent on expanding HSAs go 
to increase coverage and control costs?
  Let us say, for the sake of discussion, that we force everyone, 
healthy or not, into a high-deductible health plan with a $1,500 
deductible. And let's go further, and put $1,500 into an HSA for 
everyone, so ability to contribute is not a factor. Wouldn't that 
address my concern that the President wants to spend money on the 
healthy and wealthy instead of focusing on those who need help most?
  The answer is, no, not as HSAs currently operate. And certainly not 
with the President's proposed increase in the contribution limit.
  To illustrate my concerns, let's consider two taxpayers--Jane and 
John, both 30 years old. Jane is healthy. John has a chronic condition 
that requires him to take medications every day and occasionally pay a 
midnight visit to the emergency room.
  Every year, $1,500 is deposited to Jane and to John's HSA accounts. 
Each year, John must withdraw his $1,500 contribution to pay out-of-
pocket medical expenses. Jane only has to withdraw about $500 a year, 
leaving the other $1,000 to accumulate for retirement.

  Over the next 35 years, if Jane can earn 5 percent investment return, 
she will accumulate an HSA account balance of more than $90,000. If the 
President's higher contribution limits were in place and Jane could 
afford to contribute the maximum to her HSA, she could have more than 
$400,000 in her HSA at retirement. Because he had to use his HSA 
contributions to pay medical expenses, John will retire with a zero 
balance in his HSA.
  In other words, the President's health tax proposals may or may not 
expand health coverage and will do little to control costs. But they 
will definitely create retirement savings for the healthy.
  I am all for retirement savings, but using tax dollars to increase 
retirement savings for individuals with low medical expenses is a 
strange and ineffective approach to covering the uninsured, and 
controlling health care costs. Surely we can do better.

[[Page S1100]]

  Mr. President, I am going to stop speaking pretty soon here. I very 
much hope Senators come to the floor with motions to instruct because 
time is passing. Just because I am speaking, it doesn't mean someone 
can't come to the floor. If anybody comes to the floor, I will stop 
speaking.
  Mr. President, Yale Law School professor Michael Graetz once said:

       A tax shelter is a deal done by very smart people, that, 
     absent tax considerations, would be very stupid.

  A GAO study estimated that tax shelters cost the American taxpayer up 
to $18 billion a year in lost revenue.
  There must be a lot of very smart people out there putting together 
some very stupid deals.
  We have all heard about some of these deals.
  We know them as the Enron scandal, the KPMG scandal, the German SILO 
sewer system scandal. The list goes on.
  These deals are like the legendary retail scam used by con artists to 
cheat cashiers out of extra change. It's called the ``short count.'' 
Like a tax shelter, it involves smart cons and stupid deals.
  There are several steps to the cash register scam. First, the con 
artist buys something that costs less than $1, and he gives the cashier 
a $10 bill to pay for it. When the cashier hands back the change, the 
con artist offers to give back ten $1 bills in exchange for the $10 
bill he used to make his original purchase.
  Now, the trick is that the con artist must get the cashier to give 
back the original $10 bill before he gives up his $1s. Quickly, before 
the cashier notices, the con then substitutes the $10 bill the cashier 
just handed him for one of the $1 bills. He hands the cashier nine $1 
bills and one $10 bill, for a total of $19.
  When the cashier notices the con artist gave her too much money, the 
con acts surprised.
  Because he's such a ``nice guy,'' he offers to give the cashier 
another $1 to add to the $19 so the cashier can just give him back a 
$20 bill.
  The con then leaves the store with a tidy $10 profit, while the poor 
cashier is left holding the bag.
  When she tries to reconcile her register at the end of the day, 
she'll have a gap of $10. She will probably end up paying the $10 out 
of her own pocket.
  I don't know if you follow that. It's a little complicated, isn't it? 
The con artist is a pretty smart guy who took advantage of an 
unsuspecting cashier. He took a routine transaction and turned it into 
something complicated and stupid. Yet, all those steps, all that 
shifting of money back and forth, didn't add one iota of substance to 
the transaction.
  We call the guy who duped the cashier a con artist. But, we call 
lawyers, accountants and financial advisors who get involved in tax 
shelters ``tax professionals.''
  We call the victim of the ``short count'' scam the cashier. But, we 
call the victims of tax shelters ``innocent American taxpayers.''
  Individuals who invest in tax shelters to avoid paying their fair 
share of taxes shift their tax burden onto the backs of hard-working 
Americans who do comply with our tax laws.
  The IRS estimates that 85 percent of taxpayers pay the taxes that 
they owe. Investors in tax shelters are part of the other 15 percent.
  Eighty-five percent of American taxpayers are carrying the tax load 
for the noncompliant 15 percent.
  This is not right. This is not fair. We cannot allow this to 
continue.
  We need to finish up the work that we started in the American Jobs 
Creation Act. That bill beefed up laws against tax shelters. It 
increased penalties for wrongdoers.
  We need to pass legislation that will clarify the economic substance 
doctrine. Clarifying the economic substance doctrine will put an end to 
the erratic and inconsistent court decisions that have determined the 
legitimacy of tax shelters.
  The economic substance doctrine is a common-law doctrine that courts 
use to deny tax benefits on transactions that don't provide a 
meaningful change to the taxpayer's economic position other than the 
tax benefit itself.
  In other words, the doctrine requires that a transaction must have 
economic reality and a business purpose apart from the tax 
consequences.
  The proposed change clarifies how the courts should apply this 
doctrine. It doesn't require them to use the doctrine. But if they do 
decide to use the economic substance doctrine, the change would give 
them standardized criteria to use as litmus tests to decide if a 
transaction has any real economic purpose.
  The Senate has passed this proposal several times, most recently in 
the tax reconciliation bill before us today. But it has never passed in 
the House.
  We need to stop batting this proposal around. We need to make it into 
law.
  The economic substance doctrine exposes transactions that use the Tax 
Code in an unintended way to avoid paying taxes.
  Clever accountants, attorneys, and financial advisers deliberately 
manipulate the Tax Code to design and sell abusive transactions. At 
first glance, the deals stand up to scrutiny. At first glance, they 
appear to comply with the literal language of the Tax Code. They are 
very complicated. But when you give the deals the smell test, they give 
off a very bad odor. It is clear this is not what the law basically 
intended.
  You realize that they have no purpose other than to avoid or evade 
taxes. They have no real business purpose and no economic reality. They 
shift money and paper around using complex arrangements that have no 
reason to exist, except to create nonexistent losses or false 
deductions.
  They are smoke and mirrors, a cleverly designed illusion, to fool the 
IRS and to cheat the rest of our Nation's taxpayers, who properly 
report their income and pay what they owe.
  That's where the economic substance doctrine comes in. Its standards 
of economic benefit and business purpose allow the courts to pierce the 
facade of legitimacy to determine if a deal has any real economic 
substance.
  The courts have employed the economic substance doctrine countless 
times. But their decisions have been inconsistent.
  This is due, in large part, because they lack a specific framework of 
guidelines and principles within which to apply the doctrine.
  The courts are divided on what to do.
  Some look only to the form of the transaction. They limit their 
analysis to the four corners of the Tax Code, no matter how crazy the 
result.
  Others look beyond the form to the substance of the transaction and 
consider whether the tax result is consistent with congressional 
intent.
  It is the role of Congress to pass legislation clarifying the 
economic substance doctrine to resolve these inconsistencies and 
uncertainties. The legitimacy of a tax transaction in California should 
be evaluated in the same way as a transaction in Florida.
  Reliance on isolated and diverse judicial decisions does not lead to 
effective tax administration. Litigation is expensive both for 
taxpayers and the IRS. Tax professionals will shop around for the most 
advantageous court case to justify an egregious position. We all know 
that there is forum shopping. They are going to go to the judge who is 
most lenient.
  We need to provide clarity and certainty.
  Congress's failure to enact this legislation sends an implied message 
that we don't take abusive transactions seriously. Tax professionals 
know that we cannot keep all the holes in the dike plugged up by 
dealing with each abusive scheme on a piecemeal basis.

  With our proposed change, we are not reinventing the wheel. We are 
only improving it. The economic substance doctrine has been part of the 
fabric of our tax system since the case of Gregory v. Helvering in 
1935. It has been around. It has to be consistently applied to minimize 
taking advantage of the Tax Code.
  Our proposal merely articulates the way many of the circuits have 
already applied this longstanding judicial doctrine.
  Codification will strengthen this important standard that has been 
eroded by conflicting and confusing case law and by the greed of many 
practitioners who are willing to overlook it in exchange for profit.
  We must give the courts a reliable and consistent standard to use 
when considering the economic substance doctrine. Failure to do so 
protracts the cat-and-mouse game that taxpayers, the IRS and the courts 
have played for years.
  You might ask: If passing a law to clarify the economic substance 
doctrine will stop this kind of abuse to our

[[Page S1101]]

tax system, why hasn't it happened? That's a very good question.
  Unfortunately, there are powerful critics against the proposal, 
including the American Bar Association and the Bush administration.
  Our legislation provides a framework of consistent and standardized 
criteria to apply to the economic substance tests. The courts retain 
complete autonomy and flexibility to decide whether or not to use the 
doctrine in the first place.
  The critics, however, argue that the courts will ``lose flexibility'' 
to evaluate transactions.
  They say that ``an explicit and comprehensive statutory test'' is a 
bad thing.
  In truth, their position would maintain the status quo. Their 
position would keep the law broad and vague. And their position would 
perpetuate the same environment that has fostered tax shelters, tax 
schemes, and other abusive transactions.
  Taxpayers have a right to plan their taxes so that they don't pay 
more than they legitimately owe. This legislation is aimed at those 
deals that cross the line into manipulation and abuse--not smart tax 
planning.
  The critics say, unfairly, that the Senate proposal is ``overbroad'' 
and could cast doubt on ``legitimate tax planning.'' They say that this 
provision will be ``ineffective'' because taxpayers will just find a 
way to work around it by crafting their deals with apparent business 
purpose and economic substance.
  But if the legislation is as ``inflexible'' and ``overbroad'' as they 
say, how can it possibly leave room for taxpayers to work around it?
  The proposal that Chairman Grassley and I included in this tax 
reconciliation package provides standardized principles to use as 
guidelines to clarify when a transaction is abusive.
  It will reduce rogue interpretations of the Tax Code and promote 
consistency and certainty instead of the existing confusion.
  Critics argue that it promotes uncertainty because there is no clear 
line of demarcation between what passes muster and what doesn't. 
Ignoring the provision's standardized guidelines, they suggest that the 
proposal gives the IRS and the courts too much power--that it provides 
opportunities and incentives to find transactions ``abusive at will.''
  In reality, it does just the opposite.
  And that's exactly why some of the opponents of this measure don't 
like it. They want to keep the power and flexibility to design and sell 
tax shelters and other transactions that pillage our tax system.
  There's an old saying that the best defense is a good offense. That 
pretty much sums up the opposition to this proposal. Like the tax 
shelters they peddle, their arguments lack substance.
  We should not stand idly by as a few con artists peddle their scheme 
and take advantage of honest taxpayers. We should plug this loophole in 
the law.
  We should urge the House to agree to the Senate-passed provision.
  I urge my colleagues to work together to get this passed for the 
benefit of the American taxpayers, most of whom are honest and decent, 
and they are paying their fair share and do not like at all these con 
artists making millions and forcing the good, honest, paying taxpayers 
to subsidize those con artists and those companies taking advantage of 
it.
  I yield the floor. 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. KYL. Mr. President, I ask unanimous consent that the order for 
the quorum call be dispensed with.
  The PRESIDING OFFICER (Mr. Burr). Without objection, it is so 
ordered.
  Mr. KYL. Mr. President, let me respond to the kind invitation of the 
ranking member of the Finance Committee, on which I sit, to speak to 
the matter that is before us. I appreciate listening to his remarks 
about various aspects of the reconciliation tax bill and features 
thereof. Let me speak to some of those items as well.
  There will be a lot of debate, I suspect, over the next several 
hours--much of which has very little to do with the Senate bill--but I 
think in anticipation of what is likely to occur in the conference 
committee when the Senate bill joins up with the House bill and we 
decide what provisions to take from each of those bills and bring back 
to our respective bodies.
  Clearly, discussion about the capital gains and dividends extension 
will be part of that discussion. Let me start with that.
  I want to begin by noting that the budget resolution which the 
conference reached in April provides reconciliation protection for $70 
billion in tax reductions over 5 years with the direction that the 
allocations be used to prevent tax-rate increases during the budget 
window, which is 2006 to 2010.
  Let me repeat that. The instruction that we gave for this budget was 
to prevent tax-rate increases during this budget window. If we do not 
take action, there will be tax-rate increases during this budget 
period.
  This, as the President said in his State of the Union speech, would 
be both unanticipated and very unwelcomed by the American people.
  What exactly do we mean by that?
  Talking about capital gains and dividends, what we did back in April 
was send a signal to investors that capital gains and dividend tax 
rates would be extended through 2010. Investment advisers have been 
alerting their clients that in their planning they must consider that 
the tax rates have not yet been extended and may, in fact, expire in 
2008.
  The conference agreement that comes back to our respective bodies 
needs to extend these investment tax rates to give these investors 
certainty and to give businesses certainty about how they raise funds 
to expand their operations.
  When Secretary Snow testified before the Finance Committee a week 
ago, he said it was his opinion that the investors in the country, 
those people who helped create jobs by investing in our businesses, had 
already determined that it was likely these tax rates would be 
extended.
  He said, if we do extend them, which we anticipate doing, that is 
built into the market right now. But he said if we should fail to do 
so, we could anticipate that the market would react very negatively to 
our failure to do so. The reason, of course, is obvious. Investors want 
to know what the return on their investment will be 3 or 4 years out. 
That is when they will likely turn the asset that will provide the 
profit or a deficit for them. They want to know what that return is 
likely to be, which means they want to know what the tax rate is.
  The tax rates that will expire in 2008 do not tell them what they 
need to know.
  We have the opportunity to extend those tax rates through 2010 and 
prevent an increase from occurring, and that is precisely what we ought 
to do.
  It is interesting that these particular taxes are very important to 
the majority of taxpayers in the country. These are not the so-called 
tax cuts for the rich. These are a continuation of existing tax rates 
for a majority of tax filers.
  More than half of all Americans own stocks, either directly or 
through mutual funds. The 2003 marginal rate cut on investment income 
worked by giving investors an incentive to put more of their money to 
work in the markets. At the lower rates, the tax penalty imposed on the 
additional investment earnings, the reward for taking on additional 
risk, is smaller than before, and it makes the risk more attractive.
  When investors get to keep more of their reward, they are encouraged 
to invest more. With more investment, businesses have an easier time 
attracting the capital they need to expand, create new goods and 
services, and also create new jobs.
  It is all part of this additional economic activity that creates this 
economic growth.
  Americans support the extension of these tax rates.
  A recent poll by the Pew Research Center, released on January 24, 
found that ``half of Americans support extending reductions in taxes on 
investment income such as capital gains and profits from stock 
dividends, while 35 percent believe these tax cuts should not be 
extended.''
  I intend, by the way, to support extending the tax cuts by 34 
percent, 35 percent. The reason is very apparent--

[[Page S1102]]

because it benefits millions of taxpayers.
  These lower rates have helped millions more taxpayers than other 
popular tax provisions; for example, the alternative minimum tax relief 
that we want to enact as well.
  Let me do a comparison between the AMT, which both Senator Baucus and 
I would like to see repealed, how many people would benefit from our 
relief from the alternative minimum tax versus how many would gain 
relief from an extension of current rates on capital gains and 
dividends.
  It turns out, of all taxpayers that pay the AMT--these are figures 
from the 2003 tax year, which is the last year--9.7 percent had 
adjusted gross incomes under $100,000. Meanwhile, of all taxpayers 
reporting capital gains in 2003, 67.5 percent had adjusted gross 
incomes under $100,000. Of those reporting dividend income in that 
year, more than 70 percent had adjusted gross incomes under $100,000.
  Nationwide, fewer than 8 million filers would be helped by the AMT 
hold-harmless provisions, while nearly 20 million filers would be 
helped by the dividend relief that we would extend, and just over 7 
million filers would be helped by the relief from capital gains.
  Here is the bottom line: A lot of Americans--over half--are now 
invested in the stock market. A lot of people will receive benefits if 
we continue the current tax rates for dividends and capital gains. Over 
20 million of these filers under $100,000 will have dividend income and 
over 7 million will have capital gains income. That is compared to 
those taxpayers whom we will help under the AMT relief that we provide 
of about 8 million filers.
  The bottom line is, other than the wealthy in our country, we are 
talking about helping people with both kinds of relief, but far more 
will benefit from the capital gains relief, and especially the dividend 
relief, than will benefit from the AMT relief. Some of our colleagues 
understand that and say: We understand in terms of pure numbers there 
are a lot more taxpayers, especially in the lower income categories, 
who will benefit from dividends and capital gains relief than AMT 
relief.

  What about the fact that maybe they do not get as much relief, that 
the dollar amount is not as much? There is a myth floating around that 
it is actually very low. In fact, there is something being quoted as 
IRS statistics--and they are not IRS statistics. They are from a report 
of a group called the Center on Budget and Policy Priorities and also 
the Brookings Institute Tax Policy Center, which claims IRS data shows 
the taxpayers with income of $50,000 or less only receive a benefit of 
$11 per return from the lower rates on dividends and capital gains, and 
the benefit for taxpayers with income under $75,000 would only be $77 
per return.
  That is just plain wrong. First of all, the data is not from IRS. 
What is the data from IRS showing? Mr. President, I ask unanimous 
consent a couple of charts be printed in the Record after these remarks 
to show what I am talking about.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. KYL. The IRS statistics--and this comes specifically from table 
3.6, 2003, of a report called ``Individual Income Tax Returns, Returns 
with Modified Taxable Income: Taxable Income and Tax Classified by Each 
Rate at which Tax Was Computed and by Marital Status.'' If you look 
under that table, what you will find is that based upon actual IRS data 
estimated from 2003, the people who had taxable income of less than 
$50,000 on a per return basis, saved about $171 each. In 2008, the tax 
rate is reduced from 5 percent to zero for these taxpayers. Based upon 
the same data, that allows the rate to expire, which would result in a 
$341 tax increase on each of the almost 10 million taxpayers in these 
two lowest income tax brackets if we do not extend this tax rate at its 
current level.
  What are we saying? If we do not take action and extend this current 
rate, what we are going to have for these lower income tax payers, 
those who make $50,000 or less, is they will see a $341 tax increase on 
each of those almost 10 million taxpayers. That is a far cry from this 
figure of $11, which is simply wrong.
  The bottom line is, not only will more taxpayers receive relief under 
the extension of the capital gains and dividends part of what we hope 
will be the conference report than those who receive AMT relief, it 
will be substantial relief. If we allow these rates to expire, there is 
going to be a substantial tax increase on these people in the lowest 
brackets, those making $50,000 and below. They will see a $341 tax 
increase. I would call that real money. I call that amount of people 
real people.
  I mentioned before the people making $100,000 or less. What about 
those making less than that? If you look at those with adjusted gross 
incomes of $30,000, for example, with regard to dividends, 19.2 percent 
of the people reporting dividends were in that income category. With 
respect to capital gains, likewise, at that lower adjusted gross income 
of $30,000, 18.5 percent of those reporting long-term capital gains 
were in that category.
  The bottom line is, whether you are talking about less than $100,000, 
less than $30,000--I mentioned the amount of money received from those 
making less than $50,000--whatever category you are looking at, you 
better extend the current rates or there will be millions and millions 
of these low-income taxpayers receiving a big hit on their taxes.
  Let me be very plain. We are not talking about additional cuts in 
taxes. What we are talking about is just keeping the existing tax 
rates. If we do not extend them, millions of low-income Americans are 
going to see a huge increase in their tax bill; one that is 
unanticipated, unappreciated. We cannot afford to allow that to happen.
  I hope we could agree, those who agree there should be relief from 
the alternative minimum tax, that we also need to continue to provide 
the relief from the dividends in capital gains taxes as well.
  In addition to talking about this in terms of American families, it 
is important to understand what this has done for our economy. The fact 
is, all taxpayers, all workers in this country, all people who have 
jobs, all benefit from the economic expansion that has occurred largely 
as a result of the tax policies the President has proposed and to which 
Congress has agreed. It would be folly to allow those tax policies to 
expire.
  What kind of impact have these tax policies had on the gross domestic 
product? Whether you embrace these lower rates or not, you have to 
acknowledge they have helped our economy, which grew at a 4.1-percent 
annual rate in the third quarter of last year, the 10th straight 
quarter in which gross domestic production grew at a rate above 3 
percent. It is interesting to compare this with the European economies. 
For 2005, the Euro area gross domestic production grew at only 1.4 
percent. Economists predict for 2006 it will be about 1.9 percent. The 
United States, by contrast, is expected to grow at 3.6 percent for 
2006, according to the CBO.
  What does this mean, or how does the gross domestic production 
actually increase? You have to have business investment, primarily 
small businesses. Interestingly, business investment fell in the nine 
consecutive quarters before the 2003 tax rate bill was passed. For nine 
consecutive quarters, businesses were not investing. Investment was 
declining. So in 2003 we passed these additional tax rates. What 
happened was cutting taxes on capital helped reverse the decline. In 
the 11 consecutive quarters since these tax cuts, business investment 
measured by nonresidential fixed investment has increased each and 
every quarter. In fact, business investment has continued to increase 
even after the expiration of the temporary bonus depreciation for 
business investments expire.
  Interestingly, it has not just been businesses that have seen 
additional revenue as a result of the investment, but there has been 
job creation from these tax cuts. But, ironically, these tax cuts--or 
paradoxically, I could say--have also provided increased revenues to 
the Federal Treasury. According to a recent report by the CBO, capital 
gains revenue is 16 times greater than it was forecast to be. 
Government estimators predicted that the reduction in capital gains 
rates enacted in 2003 would cost the Federal Government $27 billion in 
lost revenues for 2004. CBO's most recent report shows

[[Page S1103]]

that the lower rates actually brought in an additional $26 billion in 
revenue. Instead of costing $27 billion, the lower rates actually made 
$26 billion for the Treasury.

  Why does that happen? It is fairly obvious. You are holding assets, 
and if you sell them, it will cost you 20 percent in taxes, 20 percent 
of the gain. That is a pretty stiff tax. You do not want to do that. 
Congress comes along and says: We will reduce that down to 15 percent. 
Small businesses, in particular, say: Great; in that event, we will pay 
less in taxes, 25 percent less. We will go ahead and sell the asset and 
only pay 15 percent.
  So more people do that than were expected to sell assets so even at a 
lower rate, because of the increase in volume, the Government ends up 
making a lot more money.
  Think of it this way. You are a department store. When you go to the 
department store and there is a big sale over the week, how can the 
department store make any money? It is simple. They reduce the price 
they sell their product for, but there is so much more of the product 
sold that they more than make up for the reduced cost by the volume of 
sales.
  It is the same thing that occurs here. Lower the rate a little bit, 
but that attracts people to sell their assets, to take advantage of 
that lower rate. And that increased volume in sales more than makes up 
for the reduction in the rate. That is why you have to be a little 
careful with the CBO projections about the ``cost'' to the Federal 
Government of lower taxes. Frequently, the cost ends up not to be a 
cost at all but an increase in actual revenues. That is precisely what 
has been occurring here.
  It is interesting that according to the same CBO report, the 
Government took in $60 billion in capital gains taxes in fiscal year 
2004, which is a 20-percent increase from 2003. And it is projected 
that capital gains taxes coming into the Treasury increased another 25 
percent in 2005--up $75 billion. That is real money no matter how you 
calculate it.
  We cannot say for certain that the lower tax rates will always 
continue to make revenue for the Treasury in the future, but looking 
back we can sure conclude that these investment tax rates have thus far 
been nothing but good news for the Treasury. That means good news for 
all of us because instead of the Government going further into a 
deficit situation, this increased revenue is helping us to keep the 
deficit more under control.
  It is interesting that overall revenues are up in 2005. The Treasury 
collected $2.15 trillion in revenues, which is the highest level of 
Federal receipts in history, and it is $274 billion more than collected 
in the previous year. Remember, this is with lower tax rates. Yet we 
still took in $274 billion more than collected the year before. That is 
a 14.6-percent increase overall. CBO has projected individual revenues 
for 2006 will be up 8.2 percent, greater than they were from 2005, and 
that corporate receipts will be 8.6 percent higher. Revenues for 
December 2005, just to take that month, were 12 percent higher than 
they were for December 2004. Corporate receipts were up about 33 
percent, and receipts from individual income tax payments were up about 
5 percent.
  This is the biggest reason we should not in any sense be accepting 
arguments that somehow we need to have what some people around here 
call pay-go, where you take the CBO estimates of how much a tax 
reduction is going to cost the Treasury, and somehow you make that up 
in additional revenue. So that net, you are not reducing taxes on the 
taxpayers at all.
  What is the point of a tax reduction if it is not a real tax 
reduction; if you are just taking money out of one pocket but then you 
have to add it from the other pocket? It makes no sense. In fact, it is 
just reversed. We should not be talking about the cost to the Treasury; 
we should be talking about the cost to the taxpayers. They are the ones 
who have to pay. It is their hard-earned money. We cannot spend a dime 
in Congress that somebody did not work very hard to earn to send back 
to Washington in the form of taxes.
  When we talk about increasing taxes or decreasing taxes or keeping 
the level of the taxes where they are right now, and we calculate the 
cost to the Federal Treasury, I say forget that. I am worried about the 
cost on my constituents. They are the ones who will invest. They are 
the ones who will hire more people if we let them keep more money. And 
that means more people will have jobs. If people have jobs, they will 
pay more in taxes and the Government will continue to collect more 
revenue.
  The statistics I have quoted demonstrate that a sensible tax policy, 
one which doesn't set the rates too high, will actually end up bringing 
more revenue into the Federal Treasury than one which tries to set the 
rates too high. That is why since pay-go does nothing about the 
spending side of the equation, which is what is driving up the 
deficit--because our big entitlement programs: Medicare, Medicaid, and 
Social Security are not affected by that. It does nothing to affect 
them whatsoever. The only thing it does is require if we have a tax 
reduction we have to have a tax increase somewhere else so it comes out 
even. That does not do the economy any good at all.
  The bottom line is the provisions of the bill before the Senate, as 
well as those that are likely to come back to the Senate from 
conference, will be helpful to individual taxpayers in the lower income 
brackets and helpful to families who create small businesses, who have 
small businesses that create jobs. They will be helpful to the economy 
as a whole and even helpful to the Federal Treasury.
  I will refer a little bit to this argument made by some, including my 
good friend from Montana, that we cannot afford to do both the 1-year 
fix for AMT; that is to say, have most people not pay the unanticipated 
taxes under the alternative minimum tax, and also the relief we would 
provide by continuing the existing tax rates for capital gains and 
dividends. The fact of the matter is, we can, and we will, do both. 
Within the next 3 or 4 weeks, we will have done both, and the country 
will be better off for it.

  There is about $30 billion that is required to provide the so-called 
fix for the alternative minimum tax to make sure that at least most 
taxpayers are not going to be stunned by that tax this year. I support 
that. The AMT is a feature of our Tax Code that has gone awry. As I 
said, both Senator Baucus and I have sponsored legislation to do away 
with it. Its intended purpose was to make sure very wealthy people 
could not zero out their tax liability by claiming what are, in fact, 
legitimate deductions and exemptions and credits. But they were being 
used to the point that some people paid virtually no taxes or no taxes. 
Congress decided: Well, everybody has to pay something, everybody 
except people at the low income.
  But because it was not indexed for inflation, and, as it turns out, 
it is almost impossible to target just the ``rich,'' the AMT has gone 
awry. It has crept into the middle class. If we do not stop it, before 
long it is going to affect virtually all taxpayers.
  So what the bill provides is an increased exemption for 2006 so that 
the exemptions do not drop back to pre-2001 levels. It also prevents 
certain credits from being eroded by the AMT. The net result is that 
most people should not have to worry about the AMT tax bill for this 
year.
  But the bottom line is, we can do that and also provide the relief 
for capital gains and dividends, according to the calculation of the 
``costs'' for that relief. In other words, extending for 2 more years 
the existing rates for capital gains and dividends, that is a little 
more than $20 billion.
  So when Congress passed the $70 billion in relief in the budget last 
April, and asked the committees to come back with their reconciliation 
in taxes for that amount, we wanted to make sure no one would pay 
higher taxes during this 5-year budget window. We can do that by 
extending the same rate for capital gains and dividends--that is about 
$20 billion--providing this year of relief from the alternative minimum 
tax--that is about $30 billion--and there is still something like $16 
billion or $20 billion, about $20 billion left over for other 
provisions which we also want to take care of.
  I am also going to discuss some of these other provisions because I 
think it is very important for anybody who might think about voting 
against this bill to appreciate what they would be voting against.
  First, they would be voting against the savers' credit. The savers' 
credit is

[[Page S1104]]

a nonrefundable tax credit that encourages low-income taxpayers to make 
contributions to an employer-provided retirement savings plan or an 
IRA. This tax reconciliation bill extends that credit through 2009. It 
is currently scheduled to expire at the end of this year. Nationwide, 
almost 5.5 million filers take advantage of this tax credit. By the 
way, almost 100,000 of those filers are in my State of Arizona.
  How about small business expensing? Under current law, small 
businesses can deduct the cost of qualified investments in the first 
year they are made, up to $100,000, indexed for inflation. After 2007, 
this amount will drop back to $25,000. What our bill does is to extend 
the increased amount through 2009. Keeping the increased amount enables 
small businesses to continue to invest and grow.
  Now, if you vote against this bill, here is something else you will 
be voting against: the above-the-line deduction for college tuition 
expenses. Under current law, the provision that allows a taxpayer to 
take an above-the-line deduction for college tuition costs expired at 
the end of 2005. It is done. The full deduction is available for joint 
filers with income under $130,000 and is phased down for higher income 
filers.
  The tax reconciliation bill, the bill that is before us, would extend 
it through 2009. We have to do that this year because it has expired. 
Above-the-line deductions are important in this case because they are 
available to nonitemizers, while most deductions, below the line, are 
only available to those filers who itemize. Nationwide, over 3.6 
million filers claimed this deduction in 2004. About 74,000 of those 
filers, by the way, were in my State of Arizona.
  There are some other extenders. The President talked about some of 
these in his State of the Union speech. For example, the R&D tax credit 
that is so important to continued research and development in our 
country. And there is the 15-year depreciation recovery period for 
restaurant improvements, the 15-year depreciation recovery period for 
leasehold improvements. This bill also extends the deduction for 
teachers who pay for some expenses out of their own pocket. This is 
something I introduced some years ago. In fact, if my recollection 
serves, the average teacher spends about $500 a year out of her or his 
own pocket to bring supplies to school that are not paid for by the 
schools in order help teach the kids. We provide a deduction for that. 
Nationwide, there are 3.3 million filers who take advantage of that. 
And 62,000 of those are in my State of Arizona.
  Finally, to mention the sales tax deduction. This is very important. 
It is not important in my State in particular, but it sure is important 
in some other States. For 2004 and 2005, taxpayers living in States 
without income taxes could take an itemized deduction for State and 
local sales taxes in lieu of the existing deduction for State and local 
income taxes, from which they get no benefit. The reconciliation bill 
would extend this option for 2006. Nationwide, 12.3 million families 
and individuals will benefit from the sales tax deduction this year, 
2006.
  So the bottom line of all of this is that this bill is not just about 
the AMT and capital gains and dividends; it is about a lot more. My 
colleagues who want to help average taxpayers, people who do not even 
itemize their deductions, teachers, small businesses--all of these 
taxpayers are benefited by the bill we have before us. It is important 
for us to support these taxpayers, by the millions, as I said.
  There is a final point; that is, a point that Senator Baucus has 
raised concerning the so-called Byrd rule. This is a very technical, 
rather arcane point about revenue loss beyond the budget window. The 
two tax-writing committee chairmen in the House and the Senate are well 
aware of this requirement and will make certain the conference 
agreement complies with all rules of the Senate by including any 
necessary offsets, as the Senate-passed reconciliation bill complies 
with all rules of the Senate. So I want to assure my colleagues that 
the problem that has been raised is not going to be a problem by the 
time we conclude voting on this legislation. They can rest assured of 
that.
  So, Mr. President, I urge my colleagues, as they consider any motions 
to instruct conferees this evening, that it is all well and good to 
tell our conferees what we think, but the bottom line is, we need to 
get this bill into conference so the conference committee can issue a 
conference report that we will then deal with and our House colleagues 
will then deal with, that will continue the tax rates that currently 
exist, that will continue the deductions and exemptions we currently 
have for all these taxpayers we talk about, that will not allow taxes 
to increase on our constituents. That is what this bill is all about--
nothing more, nothing less--no tax increases.
  Thank you, Mr. President.

                               Exhibit 1

          TABLE 3.6.--2003, INDIVIDUAL INCOME TAX RETURNS WITH MODIFIED TAXABLE INCOME: TAXABLE INCOME AND TAX CLASSIFIED BY EACH RATE AT WHICH TAX WAS COMPUTED AND BY MARITAL STATUS
                                                     [All figures are estimates based on samples--money amounts are in thousands of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            All returns                       Joint returns and returns of surviving spouses      Returns of married persons filing separately
                                        --------------------------------------------------------------------------------------------------------------------------------------------------------
       Marginal tax rate classes                                              Income tax                                         Income tax                                         Income tax
                                            Number of       Income taxed     generated at      Number of       Income taxed     generated at      Number of       Income taxed     generated at
                                             returns          at rate            rate           returns          at rate            rate           returns          at rate            rate
                                                     (1)              (2)              (3)              (4)              (5)              (6)              (7)              (8)              (9)
                                        --------------------------------------------------------------------------------------------------------------------------------------------------------
All tax rates..........................      101,386,201    4,206,592,861      780,305,566       44,033,987    2,867,802,099      551,093,751        2,027,382       74,697,606       14,992,353
    5 percent..........................        9,833,227       33,552,373        1,677,619        5,735,137       21,989,140        1,099,457          109,279          358,270           17,913
    8 percent..........................        1,058,265        3,780,577          302,446          638,945        2,744,256          219,540           12,762           24,298            1,944
    10 percent.........................      100,367,644      914,053,162       91,405,316       43,667,544      555,949,302       55,594,930        2,017,756       13,037,057        1,303,706
    10 percent (capital gains).........        1,445,014        3,942,692          394,269          837,753        2,774,756          277,476           12,290           22,530            2,253
    10 percent (Form 8814).............           92,871           62,588            6,267           70,255           48,325            4,837               56               67                7
    15 percent.........................       74,461,039    1,583,782,894      237,567,434       35,870,035    1,052,826,848      157,924,027        1,721,892       24,754,136        3,713,120
    15 percent (capital gains).........        9,461,124      205,205,659       30,780,849        6,285,159      152,654,959       22,898,244          144,743        5,995,346          899,302
    20 percent.........................        2,188,286       75,411,601       15,082,320        1,441,471       57,677,194       11,535,439           25,602        2,464,341          492,868
    25 percent.........................       26,738,916      640,244,673      160,061,168       14,119,838      423,664,278      105,916,069          652,367        9,830,617        2,457,654
    25 percent (capital gains).........          349,114        7,250,430        1,812,607          236,994        5,705,659        1,426,415            4,929          185,917           46,479
    28 percent.........................        5,459,365      199,378,501       55,825,980        3,635,902      143,892,642       40,289,940          160,274        2,894,980          810,594
    28 percent (capital gains).........            9,600          805,760          225,613            5,868          609,221          170,582              *12          *14,530           *4,068
    33 percent.........................        2,029,605      170,336,243       56,210,960        1,634,272      140,306,823       46,301,252           59,230        2,399,367          791,791
    35 percent.........................          752,028      367,903,515      128,766,230          641,635      306,958,696      107,435,544           22,824       12,716,151        4,450,653
    Form 8615..........................          100,337          882,194          186,486  ...............  ...............  ...............  ...............  ...............  ...............
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Estimate should be used with caution because of the small number of sample returns on which it is based.
Note: Detail may not add to totals because of rounding.
Source: IRS, Statistics of Income, Individual Complete Report 2003, Publication 1304, October 2005.


 TABLE 3.6.--2003, INDIVIDUAL INCOME TAX RETURNS WITH MODIFIED TAXABLE INCOME: TAXABLE INCOME AND TAX CLASSIFIED BY EACH RATE AT WHICH TAX WAS COMPUTED
                                                            AND BY MARITAL STATUS--continued
                                 [All figures are estimates based on samples--money amounts are in thousands of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Returns of heads of households                       Returns of single persons
                                                   -----------------------------------------------------------------------------------------------------
             Marginal tax rate classes                                                   Income tax                                         Income tax
                                                       Number of     Income taxed at    generated at      Number of     Income taxed at    generated at
                                                        returns            rate             rate           returns            rate             rate
                                                               (10)             (11)             (12)             (13)             (14)             (15)
All tax rates.....................................       13,218,829      258,524,437       39,251,842       42,106,004    1,005,568,719      174,967,619
    5 percent.....................................          403,159          934,890           46,745        3,585,652       10,270,073          513,504
    8 percent.....................................           34,235           80,776            6,462          372,323          931,248           74,500

[[Page S1105]]

 
    10 percent....................................       13,184,715      102,452,847       10,245,285       41,497,629      242,613,955       24,261,396
    10 percent (capital gains)....................           52,205          149,977           14,998          542,765          995,430           99,543
    10 percent (Form 8814)........................           19,653           12,773            1,281           *2,907           *1,421             *143
    15 percent....................................        7,628,714      105,116,730       15,767,510       29,240,398      401,085,180       60,162,777
    15 percent (capital gains)....................          254,126        4,043,136          606,470        2,777,097       42,512,217        6,376,833
    20 percent....................................           48,027        1,325,228          265,046          673,186       13,944,838        2,788,968
    25 percent....................................        1,450,057       28,069,853        7,017,463       10,516,654      178,679,925       44,669,981
    25 percent (capital gains)....................           11,082          188,343           47,086           96,109        1,170,512          292,628
    28 percent....................................          141,741        4,805,859        1,345,641        1,521,448       47,785,019       13,379,805
    28 percent (capital gains)....................               *8           *5,732           *1,605            3,712          176,275           49,357
    33 percent....................................           50,672        4,107,496        1,355,474          285,431       23,522,557        7,762,444
    35 percent....................................           15,740        7,230,795        2,530,778           71,829       40,997,872       14,349,255
    Form 8615.....................................  ...............  ...............  ...............          100,337          882,194          186,486
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Estimate should be used with caution because of the small number of sample returns on which it is based.
Note: Detail may not add to totals because of rounding.
Source: IRS, Statistics of Income, Individual Complete Report 2003, Publication 1304, October 2005.

  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, the next motion will be a motion by the 
Senator from Oregon, Mr. Wyden, on energy. I ask unanimous consent that 
the pending motions be temporarily laid aside so the Senator from 
Oregon may offer his motion.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Oregon.


                      Motion To Instruct Conferees

  Mr. WYDEN. Mr. President, I send a motion to the desk and ask for its 
immediate consideration.
  The PRESIDING OFFICER. The clerk will report the motion.
  The assistant legislative clerk read as follows:

       Mr. Wyden moves that the managers on the part of the Senate 
     at the conference on the disagreeing votes of the 2 Houses on 
     the Senate amendment to the bill H.R. 4297 (to provide for 
     reconciliation pursuant to the concurrent resolution on the 
     budget for fiscal year 2006 (H. Con. Res. 95)) be instructed 
     to insist on a provision that repeals accelerated 
     depreciation for geologic and geophysical costs for oil and 
     gas exploration by the 5 major oil companies for the 
     following reasons:
       (1) In April 2005, President Bush stated that ``With $55 
     oil, we don't need incentives for oil and gas companies to 
     explore.''. On February 10, 2006, oil futures trading on the 
     New York Mercantile Exchange closed at $61.84 per barrel.
       (2) At a November 9, 2005, joint hearing of the Committee 
     on Energy and Natural Resources and the Committee on 
     Commerce, Science, and Transportation, the Chief Executives 
     of ExxonMobil, ChevronTexaco, ConocoPhillips, BP, and Shell 
     all testified that the new tax breaks in the Energy Policy 
     Act of 2005 were unnecessary for their companies to explore 
     for oil. Accelerated depreciation for geologic and 
     geophysical costs for oil and gas exploration is one of the 
     new tax breaks provided by the Energy Policy Act of 2005.
       (3) The Joint Committee on Taxation estimates that this 
     special interest tax break for major oil companies costs the 
     taxpayers and the United States Treasury more than 
     $100,000,000 over the next 5 years and almost $300,000,000 
     over 10 years. The United States taxpayers will have to pay 
     higher taxes to provide this tax break for big oil companies.
       (4) In 2005, the 5 major oil companies whose Chief 
     Executives testified before the joint hearing of the 
     Committee on Energy and Natural Resources and the Committee 
     on Commerce, Science, and Transportation reported net profits 
     of more than $111,000,000,000.
       (5) At a time of record high oil company profits and high 
     Federal budget deficits, hardworking American taxpayers 
     should not have to provide record subsidies to major oil 
     companies. Congress should eliminate this special interest 
     tax break for the largest oil companies that even these oil 
     companies say is not needed.

  Mr. WYDEN. Mr. President, I thank, particularly, the distinguished 
Senator from Montana, who is on the floor, Mr. Baucus, and Senator 
Grassley, for working very closely with me on this issue because I 
think this illustrates something the Senate is going to have to tackle 
aggressively in the days ahead. This, at least, makes a modest step in 
the right direction.
  At a time when the oil companies have been making record profits and 
often charging record prices at the pump, it does not seem, to me, they 
ought to be receiving record subsidies from the taxpayers.
  What this amendment does--and this would mean for the first time in, 
as far as I can tell, 20 years--the Congress would actually be rolling 
back a subsidy to the oil industry. This would limit one of the new tax 
breaks that the major oil companies received in last year's Energy 
bill.
  The reason I feel so strongly about this, colleagues, is we had the 
major oil companies before the Energy Committee recently, and I asked 
the CEOs of the five largest oil companies if they agreed with the 
President's statement--and I quote here--``With $55 oil, we don't need 
incentives for oil and gas companies to explore.''
  The CEOs of ExxonMobil, ChevronTexaco, ConocoPhillips, BP, and Shell 
all agreed that the new tax breaks for exploration in the Energy bill 
were unnecessary. In fact, ExxonMobil CEO Lee Raymond said:

       When you add it all up that energy legislation is zero in 
     terms of how it affects ExxonMobil.

  So what we have is the bizarre situation where the Congress sends 
billions of dollars of new subsidies to the oil companies when the oil 
companies actually show up at congressional hearings and say they do 
not even need these subsidies that the Congress is sending them.
  Now, ExxonMobil recently announced it had posted an all-time record 
profit of $36 billion in 2005. That huge amount is not just the highest 
profit ever for an oil company, it is the highest profit ever for any 
company. And ExxonMobil is not the only oil company to post a record-
high profit in 2005. ConocoPhillips reported its profits shot up 66 
percent to $13.5 billion, while ChevronTexaco's profits jumped to more 
than $14 billion. The five largest oil companies in the country had 
combined profits of more than $110 billion.
  So I would only say to the Senate today, it is one thing to talk 
about new tax breaks to the oil companies and to look at them, as we 
are doing today, and to particularly say: Do the oil companies need 
these tax breaks in order to promote exploration and secure the energy 
our country needs? What we now have is the situation where the oil 
companies themselves have come to the Congress and have said, publicly, 
before the Congress, they do not need these kinds of tax breaks.
  At a time when they make record profits and consumers have recently 
paid record-high prices, the Federal Government simply should not 
record record-high subsidies to these companies.
  The Senate tax reconciliation bill includes an amendment I had the 
opportunity to work with Chairman Grassley and Senator Baucus on to 
eliminate one of the new tax breaks for the oil companies to explore. 
This is exactly the type of incentive the major oil company CEOs and 
President Bush have said they do not need.
  The special-interest tax break I was able to see eliminated from the 
Finance Committee bill would cost taxpayers about $300 million over 10 
years. The taxpayers, in effect, would have to pay higher taxes to 
provide this big break for major oil companies, when the price of oil 
is over $60 per barrel. That is $7 per barrel higher than the price at 
which the President said they

[[Page S1106]]

do not need incentives. At these high prices, it is my view we ought to 
take back this unnecessary tax break and save our citizens hard-earned 
tax dollars.
  Now, there are some in the industry who may argue the five major oil 
companies' CEOs do not speak for the entire industry. They may argue 
the small producers still need more incentives to explore.
  I want to emphasize this amendment does not affect the small 
producers. This amendment is about the large oil companies, the people 
who came to the Senate and said they do not need new subsidies.
  This amendment is about making sure these major firms don't get a tax 
break they now have testified they don't need. The fact is, over the 
past 2 years, oil companies have already increased their drilling 
operations as the price of oil has skyrocketed from $45 per barrel to 
over $70 per barrel. The number of rigs in operation and the amount of 
drilling have also been increased by a third since 2003. Most of this 
increased drilling occurred before the new tax break went into effect.
  What it comes down to is Congress should not provide more subsidies 
to major oil companies that make record profits to do what they are 
already doing, especially at a time when our consumers are getting 
hammered at the pump. Unless the Congress accepts this measure that the 
Finance Committee accepted when I offered it through the support of the 
chairman and Senator Baucus, the major oil companies would be getting a 
significant new tax break that other major industries don't get.
  Instead of having to write off some of their capital costs over a 
number of years, major companies would get accelerated writeoffs for 
what is called geological and geophysical exploration costs. According 
to the Joint Committee on Taxation, the IRS and the Federal courts have 
ruled that these costs are capital costs which should properly be 
depreciated over the entire period the oil well is producing, which can 
be a decade or longer.
  The President's budget calls for scaling back this special treatment 
of oil and gas exploration costs by extending the depreciation period 
for what are called G&G costs from 2 to 5 years. The Senate bill takes 
a little different approach by repealing accelerated depreciation of 
these costs for the biggest oil companies.
  I wish to emphasize this, particularly since I see my friend from 
Mississippi who has discussed the energy issue in a very thoughtful way 
in committee. The Senator from Mississippi and others have stressed how 
important these incentives are to the independents and small producers. 
This is something with which I am sympathetic.
  I have indicated to Chairman Grassley and others that I believe we 
ought to be taking a comprehensive look at the Tax Code as it relates 
to the energy field to make sure we can reconfigure these tax breaks so 
that when they are needed by the small companies and the independents, 
they can get them, but we don't keep sending them out the door to the 
big oil companies and then have these big oil companies in effect 
embarrass the Congress by coming to a hearing and saying: Look, we 
don't need these breaks.
  Tax breaks such as the accelerated writeoffs for these costs also 
clutter up the Tax Code and distort capital markets. It is not the 
place to discuss it today, but my Fair Flat Tax Act would give us a 
bipartisan opportunity to remove some of that clutter from the Tax 
Code. At least we can make a start at reform today by eliminating the 
special interest tax break for the oil industry which the companies say 
they don't need.
  Our consumers already pay more at work, they pay more at home, and 
they pay more as they drive everywhere in between. Let's give them a 
break in their personal energy bills. We can give them a break by 
ensuring that those folks who are getting hammered with high energy 
bills at home won't have to subsidize profitable oil companies when 
they pay their taxes.
  I urge my colleagues to support fiscal responsibility by supporting 
my motion to urge the conferees to support the Senate position, 
eliminate this special tax break for the major companies. This does not 
apply to the small companies. It doesn't apply to the independents. I 
have worked closely with Chairman Grassley and Senator Baucus to ensure 
that will be the case.
  I hope we will be back in this Chamber for a more comprehensive 
discussion of the Tax Code and energy policy in the days ahead. My own 
sense is, in the last energy bill, we subsidized an awful lot of people 
to do the wrong thing. Getting a new energy policy is arguably the most 
red, white, and blue issue the Congress could possibly take up. I think 
about our soldiers in Iraq and Afghanistan, these individuals who honor 
us every day with their courage and valor. I want to make sure their 
kids and grandkids are not off in the Middle East fighting a war and 
Congress is still dallying on oil.
  This is a step in the right direction. I suspect other colleagues 
want to discuss this issue. I reserve the remainder of my time.
  In fact, how much additional time do I have on this motion?
  The PRESIDING OFFICER. The Senator has 18\1/2\ minutes.
  Mr. LOTT. Mr. President, will the Senator from Oregon yield for a 
couple questions?
  Mr. WYDEN. Absolutely.
  Mr. LOTT. I wanted to make sure I understood what the Senator was 
advocating.
  Is the Senator proposing a motion to instruct that would basically 
say that the Senate should insist on the position it had in our version 
of this reconciliation tax package in conference?
  Mr. WYDEN. The Senator is correct. I am asking that we insist on what 
we did in the Finance Committee and what Chairman Grassley and Senator 
Baucus have worked closely with me on. It is our feeling that we do 
need to have a broader and more comprehensive discussion about this 
down the road, but we took a modest step in the right direction in the 
Finance Committee. That is what I wish to preserve with this motion.
  Mr. LOTT. And that language was retained in the full Senate?
  Mr. WYDEN. Right.
  Mr. LOTT. Let me just say to the Senator from Oregon that regardless 
of whether Senators agree or disagree, this is an appropriate motion to 
instruct. This relates to the bill at hand. Obviously, it is not going 
to buy any conferees. I hope I will be a conferee. Certainly, it won't 
buy me. But at least it speaks to the substance of the bill before us. 
The Senator has his right to do this, and it certainly is appropriate.
  Most of these other motions to instruct we are going to be dealing 
with don't really deal with the bill; they are purely partisan hit 
amendments or motions to instruct. And what we are going to do on this 
side is respond in kind. It is the kind of partisan political 
``gotcha'' which has caused this institution to deteriorate to the 
nadir where we are. It is unfortunate, and I am sad about it. But if 
that is the way we are going to proceed, I am going to join in the fun 
and games before the day is done.
  At least in the case of the Senator from Oregon, he is dealing with a 
subject in the bill. I commend him for that. He is very thoughtful in 
this, as in most subjects. His motion to instruct is an appropriate 
one.
  Mr. WYDEN. Mr. President, to respond briefly, I thank the Senator 
from Mississippi. I am interested in working with him on the Finance 
Committee. This discussion does need to be part of a longer debate.
  The Senator from Mississippi has drawn an important distinction that 
a number of us have talked about as to the difference between the small 
firms and the independents and the big firms. What we tried to do in 
this bipartisan amendment is to preserve it. Frankly, in a sense, we 
ought to do this just to prevent the embarrassment of the Senate. When 
you have these big oil companies show up in broad daylight and say they 
don't need these tax breaks, and the Congress has just been sending out 
billions of dollars, that ought to be a wake-up call for both sides of 
the aisle, Democrats and Republicans, to work together to rethink this. 
I hope this will be the beginning of such an effort. It is a modest 
step. It will save $300 million over 10 years--clearly, not what we 
need to do to deal with the hemorrhaging of the Federal budget, but at 
least it is a step in the right direction.

[[Page S1107]]

  I thank the distinguished Senator from Mississippi and reserve the 
remainder of my time.
  The PRESIDING OFFICER. The Senator from Mississippi.
  Mr. LOTT. Mr. President, parliamentary inquiry: Are we now on the 
conference report itself so that I could yield myself time off the 
overall report?
  The PRESIDING OFFICER. The time can be yielded from the general 
debate.
  Mr. LOTT. I ask unanimous consent that I be yielded time off of the 
debate which is scheduled on our side of the aisle.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LOTT. Mr. President, I will be brief. In line with what I was 
just saying, I have been informed by the staff that the Parliamentarian 
probably would consider motions to instruct conferees regarding making 
permanent the changes we have provided in the alternative minimum tax 
area. If that would be in order, if we start down this trail of motions 
to instruct, I would be prepared to offer one in this AMT area or defer 
to the chairman, if he would prefer to do so.
  This is an area in which we should act. I remember a few years ago 
when we got into the discussion of the alternative minimum tax, the 
desired goal was to make sure that everybody paid some minimum amount 
of taxes. It was aimed at the wealthy. But as we all have learned, 
because of the way the Tax Code works, more and more middle-income 
Americans have been pulled into this AMT web. It has gotten to be a 
serious problem, so we have proposed to do something in the Senate-
passed bill on a temporary basis on the AMT.
  My proposal would be, if it is the right thing to do, make it 
permanent. This is the kind of thing we are playing around with that is 
inappropriate. Why would we do it for a year or two? If it is the right 
thing to do, let's make it permanent.
  I suspect there are some people in the Senate who will not want to do 
that for whatever reason. My question is: Why not, if it is the right 
thing to do? The same thing is true with some of the other proposals 
which have been considered. If we are going to extend the tax break for 
some of these families with children so they won't get hit with a tax 
increase, shouldn't we do it here? Who now wants to stand up and defend 
the fairness of what is happening with this alternative minimum tax, 
what it is doing to middle-income workers?
  With all the complaints we hear about the AMT on both sides of the 
aisle, why in the world wouldn't we support a motion to instruct to 
make it permanent? I would hope that we would. I think that 
substantively, this is a no-brainer. Yet I understand there is 
resistance to doing that. Maybe there are some people who don't want to 
vote on that motion to instruct.
  There are 20 million American families affected by this pernicious 
provision in the Tax Code which has taken on aspects we never intended. 
If it is the right thing to do, then the budget should reflect that. 
This tax reconciliation should reflect that. We ought to make the 
change in the AMT permanent.
  I would hope that we wouldn't get into a long list of motions to 
instruct. They are irrelevant anyway. But both sides need to know that 
if we are going to start down that trail, there are going to be some 
uncomfortable motions to instruct on both sides, and we are going to 
get a chance to vote on making the changes in the unfairness of the 
alternative minimum tax that affects all these millions of families 
permanent.
  I yield the floor.
  Observing no other Senator wishing to speak, I suggest the absence of 
a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BAUCUS. 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. BAUCUS. Mr. President, I think around 8 we will probably have two 
votes. It is also my understanding that the other side of the aisle 
will be offering various motions to instruct which presumably will be 
voted on, as will motions to instruct on this side of the aisle.
  I must say, though, I have glanced at the proposed motions to 
instruct on the other side, and I find it very curious. Why do I say 
that? I say that because we in the Senate passed a bill. The House has 
passed a bill.
  We are going to go to conference on the two bills now. Presumably, it 
is the Senate conferees who are charged to defend the Senate bill. 
Presumably, the House conferees are charged to defend the House bill. 
After all, that is what a conference is all about. The Senate passes a 
bill and goes to conference; the House passes a bill and goes to 
conference.
  These motions that are going to be offered, however, do not defend 
the Senate bill. Quite to the contrary, they are opposed to the Senate 
bill. They defend the House-passed bill, the capital gains treatment. I 
find that very curious. I, frankly, find it very disconcerting, because 
if this is the case, it will set the precedent basically for a motion 
to instruct, not to defend the body's views. Most of the motions to 
instruct from the other side will be motions not to defend the Senate 
bill, but urge provisions in the House bill. That is nuts.
  Most of the motions to instruct by Members on this side are asking 
the conferees to defend the Senate-passed provisions. I point that out 
because, as I said, it is curious and disconcerting, and I hope all 
Members recognize what is going on here; namely, what I just outlined. 
I hope this is an aberration and that it doesn't continue. Otherwise, 
this is another example of the chaos, the virtual free-for-all around 
here, and disrespect for procedure, for rules, for civility, and for 
both sides working together. I hope maybe that is an oversight by the 
other side of the aisle with all the motions that are going to be 
coming up.
  Nevertheless, I have them before me. That is what they seem to say. I 
point that out for Members; it is an observation before we vote to take 
into consideration. Most of the instructions I see are with respect to 
capital gains treatment. There is no provision for extending current 
law which doesn't expire until January 1, 2009; whereas, there are 
provisions in the House-passed bill to extend it for 2 more years, even 
though current law doesn't expire until January 1, 2009.
  The motions to be offered are to basically take up and encourage the 
conferees to pass the House provisions. That is very curious.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BAUCUS. 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. BAUCUS. Mr. President, I see the Senator from Illinois, and I ask 
unanimous consent that the pending motions be temporarily set aside so 
that the Senator from Illinois may offer a motion.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                      Motion to Instruct Conferees

  Mr. OBAMA. Mr. President, I thank the Senator from Montana for the 
excellent work he has been doing.
  I send a motion to the desk and ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report the motion.
  The bill clerk read as follows:
       Mr. Obama moves that the managers on the part of the Senate 
     at the conference on the disagreeing votes of the 2 Houses on 
     the Senate amendment to the bill H.R. 4297 (to provide for 
     reconciliation pursuant to the concurrent resolution on the 
     budget for fiscal year 2006 (H. Con. Res. 95)) be instructed 
     to insist that any final conference report shall provide tax 
     relief for the most vulnerable members of our society, 
     including the low-income victims of Hurricane Katrina and 
     children in families that are too poor to benefit fully from 
     the refundable child tax credit.

  Mr. OBAMA. Mr. President, 2 weeks ago, in a debate on the Senate 
version of the tax reconciliation bill, I proposed an amendment to 
provide tax relief for victims of Katrina, paid for by restricting the 
extension of capital gains and dividend tax cuts only to people with 
incomes under $100 million. My amendment would have made all children 
of working parents in the disaster area eligible for at least a partial 
credit.

[[Page S1108]]

  For the convenience of my colleagues, I agreed not to demand a vote 
on that amendment. But I rise again to urge my colleagues not to forget 
Katrina and her victims who continue to struggle. In a bill with $70 
billion of tax cuts, surely we can find $274 million to do something 
for the most vulnerable members of our society.
  In the weeks after Katrina made landfall, President Bush vowed to do 
what it takes to help the region recover. We wanted to believe him. We 
had witnessed the devastation caused by the hurricane, and we saw the 
terror of poor families with their lives turned upside down, homes 
destroyed, jobs and businesses lost, families separated, and lives 
permanently changed.
  At the time, the President said:

       We have a duty to confront this poverty with bold action.

  Almost 6 months later, the Government's actions have not matched the 
President's rhetoric. Evacuees are getting kicked out of their hotel 
rooms this week because FEMA stopped paying the bill. Thousands of 
temporary mobile homes ordered by FEMA are sitting empty in nearby 
Southern States. The Federal response continues to be inadequate to get 
the families back on their feet.
  We can do better for these families. At a time when we are debating 
$70 billion of tax cuts, most of which will benefit corporations and 
people who need help the least, why not set aside a small fraction to 
help those who need it most?
  One way to help those who need help the most is to enhance the 
refundable portion of the child tax credit. Under current law, families 
who earn less than $11,000 get no benefit from the refundable child 
credit. That means that a child does not get any benefit from the 
credit even if her parents work full time at the minimum wage. And the 
child doesn't get the full benefit of the $1,000 credit until her 
parents earn close to $18,000, or even more if the child has siblings. 
As a result, almost 17 million children get less than the full credit. 
Wouldn't it make sense to recognize the damage wrought by the hurricane 
and to eliminate the income threshold that excludes the poorest of 
children from getting the credit? Wouldn't it make sense to say to the 
children affected by Katrina that they will no longer be denied at 
least a partial credit so long as their parents are working?
  The cost of this fix is estimated at $274 million over 2 years. To 
get a sense of perspective, that is less than one-half of 1 percent of 
the cost of this entire bill. It is a matter of common sense and 
fairness--the least we can do when we are cutting taxes for wealthy 
Americans. If we do this, hundreds of thousands of this country's most 
disadvantaged children will see an increase in their credit--not as a 
handout but because their parents work.
  I hope we don't forget the images we witnessed in the aftermath of 
the hurricane--the people, their suffering, and the devastation. We 
shouldn't forget the daily struggles families right now are going 
through trying to rebuild their lives. Let us not forget our 
Government's promise to do what it takes for families along the gulf 
coast. Let us not forget our duty, as the President put it, to confront 
poverty with bold action.
  I urge my colleagues to join me in instructing the Senate managers to 
provide tax relief for the most vulnerable members of our society. 
Together, let us urge them to remember the low-income victims of 
Katrina and the children and families too poor to benefit fully from 
the refundable child credit. Obviously, this is a modest piece of 
legislation. It is a motion to instruct. My suspicion is that even if 
it passed, other priorities would move to the fore.
  Let me say in closing that it is shameful, what is happening in the 
gulf coast right now. I think all of us recognize the scope of the 
devastation. All of us were embarrassed at the slow response 
immediately after the hurricane. It has now been 6 months. We have not 
shown the sense of urgency that the American people did privately after 
the hurricane. I would hope that at least we can send some small signal 
that we are concerned about the kids who are languishing, who have been 
uprooted, who aren't in the schools they were attending and in the 
neighborhoods in which they grew up.
  This is one way to send that signal, and I urge my colleagues to 
support my motion.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Montana.
  Mr. BAUCUS. Mr. President, I strongly support extending the deduction 
for tuition costs through December 31, 2009, as provided for in the 
Senate bill.
  To compete successfully in the world today, America must make 
education a priority--not only a priority but a very top priority. Why? 
I think it is pretty obvious. For one thing, our competitors certainly 
are.
  Let's talk about, for example, training engineers. Engineers develop 
new jobs and new industries. Yet Japan and Europe train twice as many 
engineers as we do. China trains three times as many. In fact, I think 
the statistics are even more alarming than that. We are missing the 
boat. We are missing the boat.
  Let's just stop for a minute. If China, Europe, and Japan train many 
more times than we, especially China, and add Indians to the mix--
Indians are training lots of engineers--just think of what that means 
for the next 5 or 10 years based only on the size of those countries. 
If they are training many times more than we--and I think the 
population of India is close to 1 billion, and China is 1.3 billion. In 
about 10 years, it is going to be somewhat more than 1 billion. And our 
population is about 280 million, 290 million, something like that. I 
would say we are way behind the eight ball. We need to spend much more 
time than we are on education.
  Congress has responded with a number of income tax benefits for 
higher education financing. Tax incentives such as the HOPE scholarship 
and lifetime learning credits, the Coverdell education savings account 
and prepaid tuition and college savings plans help American families 
pay for college. The deduction for qualified higher education tuition 
and related expenses, section 222 of the Tax Code, was first added as 
part of the 2001 Economic Growth and Tax Relief Reconciliation Act.

  Let me explain more. We cannot allow America's workforce to be left 
behind. To remain the most competitive and innovative country in the 
world, we need to make education affordable.
  Let me state a small anecdote. I was in Bangalore, India, not too 
long ago, about 3 or 4 weeks ago, and I asked the head of the research 
center there, the Jack Welch Research Center, which, frankly, is one of 
the two or three state-of-the-art research centers General Electric 
has, I asked the manager of it: Why are you here? Why are you here in 
Bangalore? Guess what he said.
  He said: Because this is where the greatest talent pool is.
  I asked: Where is the next greatest talent pool for your top-flight 
scientists and engineers here?
  He said: China.
  I asked: Well, where is the United States in terms of ranking for the 
best talent pool?
  Frankly, he said it was way down on the bottom. Not the very bottom. 
He said: You are down there.
  So I asked him: What can we do in America to be more competitive than 
we are today, to make sure we have the best jobs for our kids, and, 
more importantly, for our kids and grandkids so that we in America can 
pass on to our kids and grandkids the same standard of living we have 
today, which our parents gave to us?
  His answer: You guys have to spend more on education, and you have to 
make it less expensive so more students can get the quality education 
they want and need. Also, you have to lower your education costs. It is 
too costly in America to get a good education. He said: You also have 
to lower your health care costs. Your health care costs are way, way 
too high compared to every other country in the world.
  Sure, we have high-quality health care, he said, but we spend twice 
as much per capita on health care in America as does the next most 
expensive country.
  Are we twice as healthy as the next most expensive country? I doubt 
it.
  But right off the top, the manager of that technology center in 
Bangalore, India, made it very clear to me that we

[[Page S1109]]

Americans have to spend a lot more time boosting our talent pool so we 
have more scientists and engineers than we currently have in the United 
States. We have a lot of them, and they are good, but it is also very 
clear that we are slipping or, to put it differently, other countries 
are catching up and are going to pass us soon if we don't get our act 
together.
  It costs today almost $43,000 a year for tuition, fees, and room and 
board in a 4-year public college. Just think of it: $43,000 a year; 
that is a public college. At a 4-year private college, it costs more 
than $100,000. That is just ridiculous, that it costs that much for a 
college education in America today. It is outrageous, and it puts 
education far out of reach for so many students.
  From 1981 to 1995, tuition at a 4-year public college/university 
increased by 234 percent. That is right. From 1981 to 1995, tuition 
increased by 234 percent. That is three times the growth in median 
household income and more than three times the increase in the cost of 
living over this same period. That is unsustainable, clearly 
unsustainable. That is wrong. I don't know why this country doesn't 
start to address that more directly, more frontally, because the 
earlier we do, the more jobs and the more high-paid jobs we are going 
to have for Americans.
  For tax years 2002 and 2003, taxpayers with adjusted gross incomes of 
less than $65,000--or say $130,000 for married couples filing jointly--
are allowed to deduct $3,000 for qualified higher education tuition and 
related expenses. Three thousand dollars. Remember how costly education 
is, the figures I just gave you a moment earlier.
  For tax years 2004 and 2005, the maximum deduction is $4,000 for 
those same families and $2,000 for Americans with adjusted gross 
incomes of $65,000 to $80,000 for a single person or from $130,000 to 
$160,000 for married couples filing jointly. Unfortunately, this 
important deduction expired at the end of 2005.
  Critics of extending the deduction for tuition costs ask why we have 
both this deduction and the HOPE and lifetime learning tax credits. It 
is true that the current system can be complicated, and it is 
complicated. Families that qualify for tax credits are sometimes better 
off with a deduction. Unfortunately, families don't always know which 
tax choice is best for them. So we are looking at whether the tax 
incentives for education should be combined or should they be 
simplified. But until we do, I wish to put the deduction on the same 
timetable as the tax credits which are in effect until 2010.
  Let us look at the House. The House only extends this deduction for 1 
year--clearly not enough. Senators on both sides of the aisle have 
agreed that this deduction is important to working families trying to 
get their children a good education. We must, therefore, preserve this 
deduction and, as proposed in the Senate bill, extend this important 
deduction for 4 years.
  If America is going to be competitive in the global economy, it must 
make education a top priority. Extending the deduction for tuition 
costs through December 31, 2009, does exactly that by helping provide 
our children with affordable education. Therefore, I will work hard to 
ensure the deduction for tuition costs is extended through December 31, 
2009, as provided for in the Senate bill, and I urge my colleagues to 
support this extension.
  I may sound like a broken record, but every fiber in me, my bones and 
my muscles, my blood and whatever is in me, I just know that we have to 
work a lot harder, a lot more effectively to address American 
competitiveness, and most of that comes down to education. It is making 
sure that our kids and we ourselves are educated as best as we possibly 
can. Education is a lifetime effort; it is not just K through 12. It is 
lifetime. It also begins at very early ages--Prestart, Head Start, K 
through 12, college. It also includes votech training for job skills. 
It is continuing education. It is bringing us more up to date. For 
those of us who graduated a long time ago, it is making sure we are 
continuing to be up to date with what is going on and are able to 
translate new ideas into jobs.

  I have traveled a lot overseas and I have seen a lot of countries, 
especially in Asia. I can tell you, they are on the march. Speaking 
primarily of the Chinese and the Indians--clearly Japan is a very large 
country, with the second largest economy in the world, but it will not 
be long before China is the largest economy in the world. I am guessing 
by the year 2030 China will be the largest economy in the world. That 
is not far away. It is only 24 years from now. I may be off by 10 
years; it may be 10 later or 10 earlier. But 24 years is now, in terms 
of the time it takes to get us up to speed, the time it takes to get 
education programs in place, the time it takes to make sure we are 
graduating more scientists and engineers and have a tax and health care 
policy that makes more sense, and an energy policy that makes more 
sense.
  We are a wonderful, big country. We are extremely lucky. We are the 
luckiest people in the world to be Americans. We don't see people 
heading for the door to live in other countries. Rather, people want to 
live in America. They want to come to America because of our values, et 
cetera.
  It is true in the last couple of years our image overseas has been 
greatly tarnished. The image of America today is not what it was 
several years ago. That is due, I think, primarily to the foreign 
policy of this country. But nevertheless, overall most people would 
rather live in America than some other country. We Americans certainly 
would. We want that to continue as long as it possibly can, not just 
for ourselves but, more importantly, for our children and for our 
grandchildren. That is the legacy we want to pass on to them.
  To do that, you have to have some kind of plan. You can't let these 
go helter-skelter. Other countries have plans. They definitely have 
plans. It is clear, China has a plan. I don't know if they are going to 
be successful, but they have a plan. They know what they want to do. 
They know that they have to boost and are boosting their science and 
engineering education. They know they have to develop the interior 
provinces, not just the eastern coastal provinces. What are they doing 
about it? They are doing something about it. They have a plan. They are 
spending a lot of money and building big superhighways out in western 
China. There is a big, fancy airport in western China. I was in 
Chunking 4 or 5 weeks ago, at a huge, massive, fancy, wonderful airport 
in western China. That is government policy.
  They have plans to deal with unemployment. They have plans, frankly, 
to put on what they think will be the world's best Summer Olympics in 
2008. I bet they have a plan to win more gold medals than any other 
country, too. They have plans. You have to take your hat off to them 
because they are doing what they think they have to do to progress and 
bring themselves out from the lower living standards they have had for 
so many years.
  It is true many Chinese live in poverty. It is true many Indians live 
in poverty. That is also true. But they have plans to address that. I 
remember not too many years ago I was in Shanghai. I was talking to the 
mayor of Shanghai about all these wonderful, fancy buildings in 
Shanghai. I said: You must be proud of all you are doing in Shanghai.
  The mayor turned to me and said: We have problems.
  I said: What do you mean?
  We have high unemployment by China's standards. This is what we are 
doing to retrain people. Some of these jobs are old jobs. As the 
Chinese Government works to downsize these state-owned enterprises, 
Government-owned enterprises that are all subsidized, they know as they 
enter the World Trade Organization they have to get rid of a lot of 
these state trading enterprises. Man, oh, man, they know as that 
happens they are going to have huge unemployment problems. So they have 
details, all they are trying to do, in their plan to address that job 
loss in China.
  Then he pointed to the river there in Shanghai and he said: 
Pollution; this river is polluted. We have a 10-year plan to clean up 
this river so it is no longer polluted.
  I don't know whether it has been successful or not. That was 5 years 
ago. I assume the river is probably polluted. But you could tell, 
talking to him, he had plans to address the problems that we have.
  India certainly is the same. When I was in India a couple or 3 weeks 
ago,

[[Page S1110]]

they have plans how they are going to build up India. I went to the 
subway in Delhi. That is a fancy subway. That makes our subway in 
Washington, DC--it is comparable. But guess what. In the Indian subways 
you can use your cell phone because they make sure when they tunnel 
under they have the radio stations there, the towers, so you can use 
your cell phones. They are building 18 more subways in India, fancy 
ones.

  Other countries are building them. It is not us. When I was there, I 
heard constantly from all over India: Where are the Americans? Where 
are you? Australians are here and Malaysians, other countries are here, 
Germans and French. The subway was 60 percent Japanese financed. Where 
are the Americans? They want us there, but we are not there.
  What I am saying is things are happening in this world. We have to 
get with it. Much of that is education. Much of that is learning what 
is going on. Much of that is forming partnerships where both countries 
do well. We can't stick our heads in the sand. Things are happening and 
I think a large part of this is education.
  Let me say this again, about that same point. When Tom Friedman's 
book came out, ``The World Is Flat,'' I took it on myself to travel 
around the United States by myself and ask CEOs, What do you think of 
this book? Have you read this book? They all read it, of course.
  I said: What do you think? Do you agree? They all agreed. Some said: 
This is scary. Some said: Yes, this is a challenge.
  Then I asked the next set of questions: What do we do about all this? 
Sure, it is true, largely true. Sure, it is a little scary. Sure, it is 
a challenge. What do we do about it?
  That kind of set them back a little bit. They hadn't thought a lot 
about solutions; a little bit. But the solution they all tended to 
gravitate to was education. We Americans have to focus much more on 
quality education, quality teachers. We are doing a good job. I got a 
great education when I grew up in Helena, MT, in Missoula, MT. The 
teachers, I thought, were excellent. They were tough and they were 
good. Current teachers are good. But all I am saying is whoever we are, 
we know we have to keep moving and progressing. You know when you tread 
water you are likely to sink. You can't keep treading water. You have 
to go ahead.
  I am often reminded of the former head of Intel, Andy Grove, who 
wrote a book, ``Only The Paranoid Survive.'' That is probably true in 
the semiconductor industry, but I think it is partly true in life. That 
is not to say we all have to be paranoid. Clearly not. But it is to say 
you have to be vigilant, and really vigilant.
  Frankly, if I were President, what I would do is change this budget 
around massively. I would put a lot more in this budget for education. 
I would put a lot more into making sure we can solve our health care 
cost problems in this country; more coverage. I would make sure we 
tackled and made America energy independent. This thing about 
independent 25 years from now is way too tepid, way too weak. We have 
to get started now. I suggest developing DARPA for energy. DARPA, in 
the Defense Department, developed lots of great technologies, military 
technologies, applicable in the private, civilian sector. We can do the 
same on energy. That will attract bright minds. It will help us be more 
energy independent, make us less hostage to events overseas.
  It is so clear to me. I may be wrong, but I tell you it is clear to 
me, anyway, what we need to do. I think in my gut most Americans sense 
that, this sort of sense we have to get moving here. I think a lot of 
Members of this body would be surprised, if we were to be much more 
bold, as to the gratitude Americans would show to Congress for finally 
taking the lead and doing something.
  We have to get organized somewhat, not seen to be prescriptive, not 
seen to pick winners and losers, but I am saying harness the energy 
that is in America and help focus it a little more on where we should 
be going. After all, that is why many of us sought these jobs. We 
sought these jobs to represent our people in the best way we could. We 
sought these jobs because we thought, many of us--most of us think we 
have pretty good judgment and priorities and common sense. If that is 
the case, I urge us to get out of our little boxes, get out of our 
little cubbyholes, get out of our daily routines, get out of the stuff 
that pulls us apart from our real job here, just a little bit--maybe 
for 30 percent of our time--and work more on long-term strategic 
measures and do what is right and address the core of some major issues 
that face us, rather than getting caught up in the routines around 
here, our series of meetings.
  Meetings are good. Seeing constituents is great. We serve our 
employers back home. But we are also here as a body, 100 of us, and I 
think it is time for us, working with the other body and the executive 
branch, to truly put partisan politics aside and get something done 
that makes some sense.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Utah.


                      Motion to Instruct Conferees

  Mr. HATCH. Mr. President, I share some of my dear colleague's 
frustrations about how this body runs and I wish we would work better 
together. I think it would do a lot of good for our country. I would 
like to see that happen.
  I rise today to offer a motion to instruct the conferees to extend 
the research credit permanently. I understand one of the motions to 
instruct filed by one of my colleagues on the other side of the aisle 
says we should extend the research credit.
  Mr. BAUCUS. Mr. President, I don't want to be too picky here, but 
don't we have to ask consent to put these motions aside? If that is 
proper, whatever is the routine here, so we have some consistency.
  The PRESIDING OFFICER. The Senator is correct. The Chair was not 
understanding that the Senator was offering a motion.
  Mr. HATCH. I wasn't offering it, but I will be happy to move to put 
it aside when the time comes.
  I understand one of the motions to instruct, as I was saying, filed 
by one of my colleagues on the other side of the aisle, says we should 
extend the research credit for an additional 2 years. In concept, I 
certainly agree with this idea. The research credit is vital to America 
keeping its lead in world innovation. But if we are instructing the 
conferees as to better tax policy, why should we stop at a 2-year 
extension? If the research credit is worthy of an extension of an 
additional 2 years, why is it not worthy of a permanent extension?
  Along with the distinguished Senator from Montana, Senator Baucus, I 
have been for many years an advocate of making the research credit 
permanent. As the lead Republican sponsor of legislation to provide for 
a permanent research credit, it seems I have come to the floor nearly 
every year for the past dozen years to either introduce a bill to make 
the research credit permanent or to offer an amendment to do the same.
  I might add that Senator Baucus, the distinguished Senator from 
Montana, has been my partner in this matter--or should I say I have 
been his partner in this body. We have worked together to try and do 
this, along with a whole raft of other Senators, usually almost 100 
percent.
  In 2001, the Senate overwhelmingly passed an amendment to the 
Economic Growth and Tax Relief Reconciliation Act to make the research 
credit permanent. Unfortunately, the permanent credit was dropped in 
conference in favor of yet another temporary extension. That amendment 
in 2001, however, was not the only time the Senate voted for a 
permanent extension of the credit. It has happened several times. A 
very large majority of Senators has voted in favor of a permanent tax 
credit.
  My point is that practically every Senator supports the research 
credit being made permanent. Despite this wide support, permanence has 
not yet happened. Instead, we keep extending the credit for a year or 
two at a time.
  Why do we do this? The answer is simple. The artificial budget rules 
under which we operate prevent us from making the credit permanent 
because the cost of the permanent extension is determined to be far in 
excess of the cost of an extension for a year or two.

  Another reason that we extend the research credit for a year or two, 
rather than permanently, is that we all

[[Page S1111]]

seem to be stuck in the mind-set that perpetual temporary extensions 
represent de facto permanence. Why worry about making the credit 
permanent when there is little or no doubt about it getting extended 
again? Doing so represents poor tax policy, but it seems to be the way 
Congress likes to handle this problem.
  I will never forget the gap that once occurred between the expiration 
of the tax credit and our ability in the Congress to get it restarted.
  Let's be realistic. We all know that the cost of these temporary 
extensions is no less than the cost of a permanent extension. If we 
think we are saving revenue to the Treasury by our current practice of 
extending the credit a year or two at a time, we are only fooling 
ourselves.
  However, by not making the credit permanent, we are driving down the 
amount companies are willing to spend on innovative research. Even 
though we all know that the next extension for a year or two is 
practically a sure thing, the private sector does not see it that way. 
They do not, and can not, plan for the credit on a long-term basis if 
we only extend it for a temporary period.
  Thus, we continually engage in a kind of self-defeating behavior--
trying to fool ourselves into thinking we are saving taxpayer money by 
passing these temporary extensions while we tell ourselves it does not 
matter anyway because we are always going to extend the credit again 
for a year or two when it comes due. All the while, though, companies 
are keeping down their R&D spending because of the uncertainty provided 
by this practice.
  Now, we see a Democratic motion to instruct the conferees to insist 
on another two years of the research credit, but to be paid for by not 
extending the lower rate on capital gains and dividends, which is in 
the House bill.
  That seems not only extreme, it knocks out a very important set of 
tax principles that have kept the economy going. I think we ought to 
have all of these.
  Let's face the facts. This motion is nothing more than a weak attempt 
to embarrass Republicans by forcing us to choose between the research 
credit and the capital gains and dividends provisions.
  However, it does not work for all the reasons I have indicated. The 
motion presents us with a false choice. Another temporary extension of 
the research credit in this body, whether for 1 year or for 2 years, is 
practically a foregone conclusion. Virtually all of us are in favor of 
it. It is going to happen regardless of this motion to instruct.
  My point, and the point of my own motion to instruct, is to ask, if 
we really believe the research credit is good policy, why not instruct 
the conferees to push for a permanent credit? It does not cost any more 
than a series of temporary extensions.
  The motion from the other side is not really about the research 
credit, and everyone knows it. It is about the lower rates for 
dividends and capital gains.
  I continue to hear claims that Republicans are interested only in 
giving tax breaks to the rich. This mantra is false and insulting. We 
do not advocate continuing the lower rates on dividends and capital 
gains because we want to do a favor for the rich.
  We believe that people respond to incentives, and that higher net 
benefits of investment leads to more saving. There is ample evidence 
for this, and this concept is not controversial among economists--they 
might argue how sensitive saving is to the returns on saving, but no 
one disputes that higher returns affects saving.
  Higher saving leads to more investment by firms, which increases 
productivity and with it, wages and economic growth. Every worker 
benefits from an increase in saving. Nobel Laureates Robert Lucas and 
Ed Prescott have stated that reducing the tax on investment income is 
the closest we can come to a free lunch.
  Some of my colleagues would have the American people believe that by 
supporting an extension of the lower tax rate on capital gains and 
dividends, Republicans are hurting those with lower incomes. I submit 
that by increasing saving and investment, we are helping lower income 
people more than we could in any other way.
  Besides, if you look at how many people are now invested in the 
market, either through pensions or otherwise, or through mutual funds 
or otherwise, a good 50 percent of all taxpayers in America are now in 
the stock market.
  Frankly, they all benefit from having these lower rates that we have 
been talking about.
  Incentives lead to more saving. More saving leads to more investment. 
More investment leads to higher productivity and higher economic 
growth. Productivity and economic growth lead to more and better jobs 
for everyone. It is time for us to stop playing political games and get 
to work helping Americans realize their highest potential. We can start 
by appointing the conferees to the tax bill.
  That is something that in the past we never had difficulties with, 
but in the last few years we have.
  I send this motion to instruct conferees to the desk and ask for its 
immediate consideration.
  The PRESIDING OFFICER. Without objection, the pending motion is set 
aside.
  The clerk will report the motion.
  The legislative clerk read as follows:

       Mr. Hatch moves that the managers on the part of the Senate 
     at the conference on the disagreeing votes of the 2 Houses on 
     the Senate amendment to the bill H.R. 4297 (to provide for 
     reconciliation pursuant to the concurrent resolution on the 
     budget for fiscal year 2006 (H. Con. Res. 95)) be instructed 
     to insist on the inclusion in the final conference report of 
     a permanent extension of the credit for increasing research 
     activities (based on section 108 of the amendment passed by 
     the Senate), in order to improve American competitiveness.

  Mr. HATCH. Mr. President, I understand that will be placed in the 
proper order and to be considered in the next few days.
  The PRESIDING OFFICER. The Senator should know that it is now 
pending.
  Mr. HATCH. I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. BAUCUS. Mr. President, I first commend my friend and colleague 
from Utah. I agree with him. I think it should be permanent. I urge my 
colleagues to support the motion to instruct making it permanent. We 
will have a little more certainty and help in research and development 
in our country. It helps us be more competitive. I compliment him for 
offering that motion to instruct.
  I also speak in favor of the Stabenow motion to instruct with respect 
to the R&D tax credit which will be coming up shortly, essentially 
because we have to move ever more aggressively to invest more in 
research and development in our country. And the current temporary 
nature of the credit just makes no sense.
  The Senate-passed bill is a credit extension for 2 years. I remind my 
colleagues that the current credit is expired. It expired at the end of 
last year. We are now in February. The Senate bill extends it for 
calendar years 2006 and 2007, and the House bill just has 1 year, 2006.
  I am for more predictability, more certainty, especially with expect 
to the R&D tax credit.
  I also received a letter from the R&D Credit Coalition, a group 
representing 85 trade associations and more than 1,000 small, medium, 
and large companies. In the manufacturing sector alone, which performs 
nearly 60 percent of all private and industrialized R&D in the United 
States, there are 14 million manufacturing employees who get the 
benefit of this credit.
  The coalition in their letter said:

       The Coalition believes the Senate-passed provision will 
     help make the credit a more powerful incentive to undertake 
     long-term, high-risk R&D projects in the United States. 
     Consistent with the provision you and 45 of your Senate 
     colleagues have taken as sponsors of a permanent and 
     strengthened R&D credit, extending this credit for an 
     additional year will better enable the intended incentive 
     effect of the tax credit to be realized.

  I ask unanimous consent that the letter be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


                                         R&D Credit Coalition,

                                Washington, DC, February 13, 2006.
     Hon. Charles Grassley,
     Chairman, Committee on Finance, U.S. Senate, Washington, DC.
     Hon. Max Baucus,
     Ranking Democrat, Committee on Finance, U.S. Senate, 
         Washington, DC.
       Dear Chairman Grassley and Ranking Member Baucus: On behalf 
     of the members

[[Page S1112]]

     of the R&D Credit Coalition, we thank you for your leadership 
     in amending the Tax Relief Act of 2005 to include a two-year 
     extension of a strengthened research tax credit (the ``R&D'' 
     tax credit). It is critical that the credit be extended and 
     strengthened and the additional length of the proposed 
     extension will provide needed certainty to businesses that 
     are making investment and hiring decisions.
       The Coalition believes the Senate-passed provision will 
     help make the credit a more powerful incentive to undertake 
     long-term, high-risk R&D projects in the United States. 
     Consistent with the position you and 45 of your Senate 
     colleagues have taken as sponsors of a permanent and 
     strengthened R&D credit, extending this credit for an 
     additional year will better enable the intended incentive 
     effect of the tax credit to be realized. The best incentive 
     is one on which businesses can rely and one that applies 
     broadly to all research-intensive companies. The members of 
     the R&D Credit Coalition applaud your efforts to strengthen 
     this credit and to lengthen its extension period. We look 
     forward to working with you on this issue.
           Sincerely,
     Bill Sample,
       Microsoft Corporation, Chair, R&D Credit Coalition.
     Donna Siss Gleason,
       The Boeing Company, Vice Chair, R&D Credit Coalition.
     Keith H. Smith,
       United Technologies Corporation, Cochair, R&D Credit 
     Coalition, Government Affairs Committee.
     Karen Myers,
       CA, Cochair, R&D Credit Coalition, Government Affairs 
     Committee.
     Monica M. McGuire,
       National Association of Manufacturers, Executive Secretary, 
     R&D Credit Coalition.

  Mr. BAUCUS. Mr. President, spending for R&D will increase in 2006, 
but America has challenges to face, such as major increases in the 
funding of offshore operations. The total amount of foreign direct 
investment, including R&D, is shifting heavily towards India and China, 
and competition for qualified researchers will increase markedly over a 
short period of time.
  Most important is to keep American jobs. Keep them here, keep them at 
home. R&D has some of the most highly paid and intellectually 
stimulating jobs. With offshore operations and foreign R&D investment 
shifting to India and China, jobs for U.S. workers will decrease in 
this area.
  I strongly urge support of both the motion to instruct by Senator 
Hatch and also the motion to instruct that will be presented later, I 
assume, by the Senator from Michigan, Ms. Stabenow.
  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. BAUCUS. 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. BAUCUS. I yield such time as the Senator from Arkansas may use.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mrs. LINCOLN. I thank my colleague from Montana, Senator Baucus, who, 
as always, does a tremendous job in helping the entire Senate stay 
focused on what is important, helping us to reflect on where our values 
lie as Americans, and certainly for us as leaders of this great Nation.
  I come to the Senate today to once again discuss an issue that is 
near and dear to my heart, an issue that is of great importance to all 
working families across this country. As we look now at what working 
families are going through--astronomically high fuel prices, what it is 
costing them to heat their homes; the cost of health care; the cost of 
educating their children and saving for higher education, which is 
going to increase again this year and years to come; trying to be 
competitive in their jobs and the global economy--in looking at these 
issues, I and many other Senators have recognized how tough it is for 
working families across this country.
  In 2001, and again in 2003, Senator Snowe of Maine and I worked 
together, with the help of our chairman on the Committee on Finance, 
Senator Grassley, and our ranking member, Senator Baucus, to ensure 
that low-income working families with children receive the benefit of 
the child tax credit. It is so important to remind ourselves: we know 
how near and dear our children are to us; other people's children are 
just as near and dear to them, regardless of their income level.
  As the chairman said earlier today, I, too, feel a bit as though I am 
trapped in that movie ``Groundhog Day,'' although for a different 
reason. I feel that I am trapped in ``Groundhog Day'' life. I have been 
in this instance time and time again, and I come to the Senate today to 
again ask my colleagues to help me ensure that low-income working 
families are not forgotten as we discuss tax relief. It is absolutely 
essential we put ourselves in the shoes of other working Americans, the 
working families who are the fabric of this great Nation, and say: We 
believe your children are just as important as our children to the 
future of this country.
  I applaud the action taken in the Senate the week before last. I was 
pleased we affirmed that the permanency of the child tax credit is a 
priority of the Senate and should be addressed during conference on 
this tax reconciliation bill. Even though I applaud that effort, I 
still say it is not enough. It is not enough to not look further and 
see those working Americans who are still not going to be helped. It is 
not enough because the credit in its current form does not work for all 
low-income working families.
  We can and should take one additional step. As some may be aware, to 
be eligible for the refundable child tax credit, working families must 
meet an income threshold. If they do not earn enough, they do not 
qualify for the child credit. The problem is, some of our parents are 
working full time every week of the year. Yet they still do not earn 
enough to meet the income threshold to qualify for the credit, much 
less to receive a meaningful refund.
  Heaven forbid we look at what they are making. Is it enough to safely 
and adequately raise their children? We have an obligation to make sure 
those people, those hard-working Americans who were willing to play by 
the rules to get a job, to work hard, to perform things that are 
important to our quality of life, too, that they have the same 
opportunity to love and nurture their children and work hard to provide 
their children a better opportunity than they may have had.
  I will say this again because it is right and it is important people 
know. I will say it again to make sure the point is not missed. We have 
full-time working parents who do not qualify for the child tax credit 
because their incomes are simply too low. Again, people playing by the 
rules, working hard so our lives might be a little bit better, yet 
under minimum wage, they do not make enough.
  If we are talking about American values, if we are talking about 
family values, if we want to reinforce the aspect of work instead of 
handouts, if we want to reinforce caring for all of America's children 
because we know all of America's children are part of our future, our 
future leaders, if what we want to do is reinforce working, caring for 
our children, taking the responsibility of our families--that does not 
mean just my children or just a few children; it means all children--
are we not then going to step up to the plate and say to those hard-
working Americans that your children are just as important as my 
children?
  In 2003, the income threshold was set at $10,500. The threshold is 
indexed for inflation and thus has increased the last 2 years. It was 
$10,750 in 2004 and $11,000 in 2005. And, yes, it will go up again in 
2006.
  Unfortunately, the low-income worker's wage is not increasing at the 
same pace, or even at all, for that matter, as we look at the low-
income working wages that exist in this country. A single working 
mother or father in the State of Arkansas or across this Nation 
perhaps, who makes minimum wage, is going to get $5.15, working a 40-
hour week, every week of the year. That is not taking a vacation, 
taking their family to the beach, going to Disney World or anything 
else. It is working a 40-hour week, every week of the year, 52 weeks 
out of the year, with an income of only $10,712 a year. That came

[[Page S1113]]

in under the threshold, both in 2004 and 2005; it will, most 
definitely, come in below the threshold this year, in 2006.

  It is wrong--it is absolutely wrong--to provide this credit to some 
hard-working Americans while leaving others behind. The single, working 
parent who is stocking the shelves in your local grocery store is every 
bit as deserving as the teacher or accountant or insurance salesman who 
qualifies for the credit in its current form. And, yes, they love their 
children just as much as you and I love our children and want for them 
all of the great things that are available to young American children 
when they can be nurtured and cared for and encouraged and taken care 
of in their families.
  We must address this inequity, and we must ensure our Tax Code works 
for all Americans, especially those working parents forced to get by on 
minimum wage.
  Senator Snowe and I have proposed a solution to this horrible 
inequity. If we were to simply de-index the income threshold and set it 
at a reasonable level, such as $10,000, all full-time working parents, 
including those making minimum wage, would qualify.
  We talk day in and day out about how important our children are. We 
talk about making them a priority in this country and recognizing how 
they weave the fabric of this great Nation and the future. We 
understand, as parents, it is not easy. It is not easy to raise 
children in this environment, with everything from Internet security to 
making sure education is available, and health care, including simple 
nutritional needs. We have 600,000 Arkansans living with food 
insecurity, the majority of which are children.
  Why is it we cannot take the extra step to make sure that, again, 
those who are playing by the rules, those who are willing to work, to 
work to care for their children and their families--we are not going to 
give them the same benefit of that Tax Code?
  This is a simple, easy solution Senator Snowe and I have offered to a 
very serious problem. I will not rest until we get it done. As we 
prepare to enter conference with the House on this tax reconciliation 
bill, I encourage my colleagues to support Senator Snowe and me in our 
efforts to fix this inequity.
  As many of you may recall, the last time Senator Snowe and I went to 
work to improve the child tax credit, back during the debate of the 
President's tax package in 2003, tax relief for low-income families was 
left behind in the conference. I hope we have changed. I hope we have 
refocused ourselves and our priorities. I hope we do recognize all 
working American families are struggling today with high gas prices, 
the cost of health care, and higher education--education at all--that 
all working families are struggling to heat and cool their homes with 
high energy costs and are struggling to keep the jobs they have in 
their globally competitive companies.
  Please, let's not repeat this mistake again. If the opportunity 
arises to take action on the child tax credit in this conference, we 
must not only extend it, we must ensure that it works for all of 
America's working families.
  We should always remember that budgets reflect priorities, the 
priorities of those who put those budgets together. We know priorities 
create choices. The choices we make in budgets and in decisions on the 
floor of the Senate and in conferences over such critical issues--our 
choices--have real and substantive consequences, not just to those 
working families out there who so desperately want success for their 
child, but it has consequences for our Nation. If we set our priorities 
so low that we leave behind the children of hard-working American 
families, the consequences for our Nation will be great.
  I thank you, Mr. President, and again encourage my colleagues to 
support the efforts not only of a child tax credit but also making sure 
it is fair to all working families of our Nation.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DeWINE. 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. DeWINE. Mr. President, I ask unanimous consent that the pending 
motion be set aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                      Motion to Instruct Conferees

  Mr. DeWINE. Mr. President, I have a motion at the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       Mr. DeWine moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendment to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to accept the veterans' mortgage bonds 
     expansion provisions contained in section 303 of the bill as 
     passed by the House of Representatives with such revisions as 
     are necessary to provide veterans in all 50 States with 
     access to lower-rate mortgages.

  The PRESIDING OFFICER. The Senator from Ohio is recognized.
  Mr. DeWINE. Mr. President, this proposal would instruct the conferees 
to accept the House provision that expands the qualified veterans 
mortgage bond program. The qualified veterans mortgage bond program 
allows States to issue tax-exempt bonds that are used to fund mortgages 
for our veterans. Because the States borrow this money at low, tax-
exempt interest rates, they are able to pass that lower rate on to 
veterans for home mortgages. This means veterans are able to finance a 
home at a lower interest rate than they otherwise would have been able 
to.
  The program in place today is limited to veterans who served before 
1977. Mr. President, this motion will instruct the conferees to accept 
the House provision eliminating that limit. By doing so, we can offer 
to all the brave men and women who have served and are serving our 
Nation the important benefits of this program.
  The current program is also limited to veterans who settle in Alaska, 
California, Oregon, Texas, and Wisconsin. This motion instructs the 
conferees to bring back a provision that would permit veterans of all 
States to have access to these lower rate mortgages.
  This is the right thing to do for our veterans. We owe a great debt 
of gratitude to the men and women who have served our country in the 
armed services. These brave men and women, with their honor and 
courage, have kept our Nation secure and our future bright. They 
deserve the assistance that we can provide with this mortgage bond 
program. It is simple to do and it will have a profound impact on many 
military families. I strongly encourage my colleagues in the Senate to 
support it.
  Mr. President, while Senators cannot cosponsor motions to instruct, 
Senators Santorum, Grassley, Burns, and Chafee have expressed their 
support of this motion.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. DeMint). The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, I ask unanimous consent that the pending 
matter before the Senate be set aside so I can offer a motion on behalf 
of Senator Menendez.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                      Motion to Instruct Conferees

  Mr. REID. Mr. President, on behalf of the junior Senator from New 
Jersey, Mr. Menendez, I offer the following motion to instruct the 
conferees on tax reconciliation.
  The PRESIDING OFFICER. The clerk will report the motion.
  The bill clerk read as follows:

       Mr. Menendez moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the two 
     Houses on the Senate amendment to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to report a conference report that 
     includes the Senate-passed ``hold-harmless'' relief from the 
     individual alternative minimum tax (AMT) in 2006, and does 
     not include the extension of lower tax rates on capital gains 
     and dividends.

  Mr. REID. Mr. President, this motion is to instruct the conferees to 
insist on relief from the alternative minimum

[[Page S1114]]

tax--known as AMT--in the final bill they report back from the 
conference committee.
  It reaffirms the Senate's position that AMT relief should take 
priority over extending tax cuts for capital gains and dividends.
  If the conference agreement fails to include relief from the AMT, 15 
million taxpayers will face higher tax bills this year.
  The Senate has expressed its support for AMT relief two times as this 
legislation has made its way through the legislative process.
  First, the Finance Committee included AMT relief in the bill that it 
reported to the Senate floor.
  Then, during floor consideration the Senate overwhelmingly approved 
the amendment offered by Senators Menendez, Schumer, Kerry, Feinstein 
and others that expressed the Senate's desire that AMT relief take 
priority over tax cuts for capital gains and dividends.
  That amendment was approved by the Senate by a vote of 73 to 24.
  The conferees for the Senate should respect the Senate's instructions 
and include AMT relief in the final bill.
  There are two reasons that the Senate conferees should insist on 
including AMT relief in the final bill and reject tax cuts for capital 
gains and dividends. First, AMT relief is needed to protect taxpayers 
this year. Married couples with children are most affected by the AMT.
  Absent any relief for next year, nearly three-quarters of married 
couples with two or more kids and income between $75,000 and $100,000 
will be subject to the AMT.
  In contrast, almost 50 percent of the benefits of a reduction in the 
tax rates on capital gain and dividend income goes to taxpayers with $1 
million or more, which is .3 percent of all taxpayers. The average tax 
cut for these taxpayers will be about $32,000.
  The higher AMT exemption levels that were enacted in 2003 expired at 
the end of last year. Without this provision, middle-class taxpayers 
will be hit with higher AMT liabilities when they file their 2006 
returns. The lower tax rates for capital gains and dividends do not 
expire until 2009.
  Second, extending lower tax rates on capital gains and dividends 
reflects misplaced priorities. The benefits of lower taxes on capital 
gains and dividends go disproportionately to wealthy taxpayers.
  According to an analysis by the nonpartisan Tax Policy Center, 
jointly run by the Urban Institute and the Brookings Institution, about 
50 percent of the benefits of lowering taxes on capital gains and 
dividend income goes to taxpayers with $1 million or more of income.
  In 2005, the average tax cut for millionaires was nearly $38,000. In 
contrast, 92 percent of taxpayers received a tax cut of less than $100 
as a result of the reduced tax rates on capital gains and dividends.
  At a time when we face record budget deficits, Congress should not 
consider tax cuts whose benefits so clearly go to the most well off in 
our country.
  Mr. KERRY. Mr. President, less than 2 weeks ago we debated the 
importance of addressing the individual alternative minimum tax, AMT. 
Without congressional action, this year 17 million families will be 
impacted by the AMT. And this problem is growing. Without a permanent 
solution to the AMT, as many as 30 million families will be impacted by 
it in 2010.
  We all seem to agree that the alternative minimum tax needs to be 
addressed, but we differ on how big a priority it should be. Very 
recently, 73 Members of this body voted to address the AMT before 
addressing tax cuts that do not expire until the end of 2008. This 
sense of the Senate specifically stated that ``protecting middle class 
families from the alternative minimum tax should be a higher priority 
for Congress in 2006 than extending a tax cut that does not expire 
until the end of 2008.''
  Some of my colleagues believe we can address both the AMT and extend 
the capital gains and dividends tax cut, but I am concerned this will 
be difficult to do within the confines of a $70 billion tax bill. The 
House has made their position clear that they would rather address AMT 
outside the reconciliation tax bill. This is troubling because it would 
likely result in a total of over $100 billion in tax relief that is not 
paid for. We cannot afford another costly debt-financed tax cut. The 
Senate-passed bill does include some revenue offsets, but I do not 
expect the conference report to include any revenue offsets.
  Not less than a week after we debated the alternative minimum tax, 
the administration's budget submitted to Congress for fiscal year 2007 
failed to adequately address the AMT. Once again, the budget makes the 
2001 and 2003 tax cuts permanent but ignores the looming problem of the 
AMT.
  The President only chose to address the AMT for 1 year--2006. He 
chose not to address it for fiscal year 2007. In addition, the relief 
provided in the budget for 2006 is not as generous as the AMT relief in 
the Senate-passed bill. Under the budget proposal, an additional 1.2 
million families would be impacted by the AMT. The Senate-passed bill 
prevents additional taxpayers from being impacted by the AMT. The 
budget deliberately leaves out a more permanent solution for the AMT 
for two reasons. First, the AMT would add additional costs to the 
budget. Second, the AMT masks the true costs of the 2001 and 2003 tax 
cuts.
  Back during the debate on the Economic Growth and Tax Relief 
Reconciliation Act of 2001, I offered an amendment that would have 
exempted taxpayers with incomes of $100,000 or less from the AMT. The 
reason I offered this amendment was that I was concerned about the 
impact of the AMT on families who were never meant to be affected by 
it.
  In 1998, we began to notice that something was happening that was 
unintended--the AMT was beginning to encroach on middle class 
taxpayers. At that time, the AMT was expected to impact over 17 million 
taxpayers in 2010. The AMT problem resulted because the regular tax 
system is indexed for inflation, while the personal exemptions, 
standard, deduction, and AMT are not. Under the AMT, exemption amounts 
and the tax brackets remain constant. This has the perverse consequence 
of punishing taxpayers for the mere fact that their incomes rose due to 
inflation.
  The AMT has another perverse consequence. It punishes families for 
having children. The more children a family has, the lower the income 
necessary to trigger the AMT. For example, if no action is taken in 
2006, a family with four children with an income of $58,500 would be 
subject to the AMT while a family with one child would have to make 
$72,000 to be affected.
  As we debated the Economic Growth and Tax Relief Reconciliation Act 
of 2001, I stressed the fact that the legislation would result in more 
individuals being impacted by the AMT and that not addressing the AMT 
hid the real cost of the tax cuts. This holds true today. Revenue 
estimates show us that it would be cheaper to address the AMT if the 
tax cuts were repealed than if the tax cuts were made permanent.
  A choice was made in 2001 to provide more tax cuts to those with 
incomes of over a million dollars rather than addressing a looming tax 
problem for the middle class. The Economic Growth and Tax Relief 
Reconciliation Act of 2001 did include a small adjustment to the AMT, 
but it was not enough. We knew at the time that the number of taxpayers 
subject to the AMT would continue to rise steadily. The combination of 
lower tax cuts and a minor adjustment to the AMT would cause the AMT to 
explode.
  The amendment that I offered would have simply exempted those with 
incomes of less than $100,000 from the AMT and it was offset by 
decreasing the amount that the top rate would be reduced. It would have 
reduced the top rate to 37 percent instead of 35 percent. This 
amendment was not a panacea to the AMT, but we would not be in the 
situation that we are today because the amendment would have countered 
the interaction between the tax cuts and the AMT by exempting middle 
class taxpayers. The Joint Committee on Taxation estimated that the 
amendment would have prevented 18 million taxpayers from being impacted 
by the AMT.
  Each year that we wait to address the AMT, more taxpayers are 
impacted and the cost of addressing it increases. We missed an 
opportunity in 2001 to address the AMT. Repeatedly, the AMT has been 
pushed aside to give priority to making the tax cuts for the wealthiest 
Americans permanent. So often we

[[Page S1115]]

hear that the bulk of the tax cuts assist the average American family. 
This is ironic because by 2010, the AMT will take back 21.5 percent of 
the promised tax breaks for individuals making between $75,000 and 
$100,000 per year and 47 percent from individuals making between 
$100,000 and $200,000. However, households with annual income over 
$1,000,000 will only lose 9.2 percent of the tax cuts.
  Once again today, we have the opportunity to choose to help hard-
working families or very wealthy investors. We can choose to protect 17 
million middle class families by voting for the motion offered by my 
colleague, Senator Menendez. Not addressing the AMT this year would 
result in tax increases as large as $3,640. The other choice is to 
extend the capital gains and dividends rate cuts that go to households 
with income over $1 million. Over 50 percent of the benefit goes to 
these households that make up only 0.2 percent of all households. These 
tax cuts do not expire until the end of 2008.
  Last week, the Senate Finance Committee heard from Treasury Secretary 
Snow that the capital gains and dividends tax cut helps individuals 
with income of less than $50,000. I believe that he was trying to make 
the argument that more middle class taxpayers would benefit from the 
capital gains tax relief than from AMT relief. I disagree. The 
important statistics to look at are the percentage of income that is 
capital gains and dividends and the amount of the tax cut. In 2009, 
those making over $1 million would receive an average tax cut of 
$32,000 and those with incomes below $50,000 would receive an average 
tax cut of $11. IRS income tax data for 2003, which is the most recent 
data, shows that capital gains and dividends income accounts for nearly 
one-third of all income for millionaires. For those making less than 
$100,000, capital gains and dividends income accounts for 1.4 percent 
of total income and it is even less for those with incomes of $50,000.
  I urge my colleagues to choose hard-working families. We can 
reexamine the issue of capital gains and dividends tax cuts once we 
have our fiscal house in order. The budget that was sent to Congress 
last week projects the largest deficit in history for fiscal year 2006. 
In times of deficits, we have to carefully choose our priorities. It is 
time for Congress to address the AMT which has turned into the family 
tax.
  Mr. BAUCUS. Mr. President, I ask any motions be set aside so the 
Senator from Michigan can offer a motion to instruct.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Michigan.


                      Motion to Instruct Conferees

  Ms. STABENOW. Mr. President, I thank our leader on the Committee on 
Finance, Mr. Baucus, for his leadership on so many different issues.
  I send a motion to the desk and ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       Ms. Stabenow moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendment to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to insist on the inclusion in the final 
     conference report of a permanent extension of the credit for 
     increasing research activities and to reject any extension of 
     the tax rate for capital gains and dividends which does not 
     expire until 2009.

  Ms. STABENOW. Mr. President, I rise this evening to introduce a 
motion to instruct conferees to extend the R&D tax credit permanently 
and offset costs related to that by striking capital gains and 
dividends provisions of the House bill in the conference committee. I 
realize my colleague from Utah has introduced something similar to 
extend the R&D tax credit permanently, which I support, but I believe 
the most responsible approach is to provide as much of an offset as 
possible so we are not extending the national debt which is already the 
largest in our Nation's history.
  This is a very difficult time for Michigan families. Michigan lost 
11,000 manufacturing jobs since 2000. Last week, GM announced more bad 
news. Plant closings and job losses are becoming a common headline in 
our newspaper. There needs to be a sense of urgency in Washington about 
helping to protect and maintain these good-paying jobs and the way of 
life these jobs have offered for Americans. Our middle-class way of 
life is truly at risk. We are still not seeing any action from this 
administration. I was so disappointed to see the President did not 
mention the word ``manufacturing,'' in his State of the Union Address, 
despite all that is happening and all that needs to be done on behalf 
of Michigan families, Michigan businesses, and those across the country 
that are affected.
  People in my State are worried about their jobs, they are worried 
about the fact that they might lose their pension that they worked for, 
for 30 years. Who would have thought, in the United States of America, 
people would have to worry about paying into a pension system and 
possibly not having that when they retire? That is immoral.
  They see their health care premiums continuing to skyrocket every 
year, they are struggling to fill their gas tank and pay their home 
heating bill and are feeling squeezed on all sides. We need to take 
that seriously because there are things we can do to help turn that 
around.
  What does the House bill dealing with taxes propose to do to help 
middle-class families? Absolutely nothing. Instead, it gives more tax 
cuts to the wealthiest few.
  We can do better. We must do better for the people we represent. 
Hard-working families should be able to have a good-paying job, send 
their kids to college, retire with dignity, including health care and a 
pension and Social Security. We need to lower health care costs which 
are hurting American manufacturers and promote new health IT 
technologies that can save billions in health care costs. I was pleased 
to see the President mention that in the State of the Union.
  Senator Snowe and I have legislation, working with colleagues on both 
sides of the aisle. We can get this done and save hundreds of billions 
of dollars that can go back into lowering health care costs and paying 
for access to health care for our families.
  We need to protect people's pensions and uphold the fundamental 
principle that if you work hard and pay into a retirement fund, you get 
every cent you have earned and you deserve.
  We must also investigate and enforce our trade laws. Countries such 
as China and Japan should be required to play by the rules, stop 
manipulating their currency. This is what we should be voting on now. 
How to save and strengthen our middle class, our way of life.
  One answer that would be extremely positive would be to make the R&D 
tax credit permanent, to help continue to spur innovation into the 
future. As we all know, the way to profitability for struggling 
manufacturers is through innovation and education.
  The House bill only budgets a 1-year extension of the R&D tax credit, 
leaving businesses to worry about whether longer term projects will be 
terminated. A 1-year extension undermines our commitment to innovation 
and economic prosperity. Instead, the House bill provides $50 billion 
in tax breaks for the wealthy few who do not have to worry about losing 
their jobs or pensions tomorrow or struggling to pay their bills.
  We need to be investing in our manufacturers and our workers to 
prepare for the future by planting seeds for the next innovative idea. 
I am very proud that in Michigan we have been the heart of so much 
innovation. We create ideas. We build great products, not just 
automobiles but furniture and all kinds of products. And we are on the 
cutting edge today of new innovations.
  But it is time to reinvest in what has led our country to economic 
prosperity and to support these on-going efforts. We have the best 
colleges and the brightest minds in the world. We know American workers 
can compete with any workers from any country if we make it a priority 
to invest in education and innovation--and, by the way, if we enforce 
our trade laws so other countries are not cheating--and change the way 
we fund health care. That is the prescription for success, for 
maintaining our way of life as Americans.
  Countries such as Japan and China have been doubling and tripling 
their investments in R&D over the last decade. Japan, which has always 
invested in R&D, increased their funding by 25

[[Page S1116]]

percent. Korea has doubled their R&D. China has tripled their R&D. In 
China, engineering professors and graduate students even receive 
bonuses every time they are published in an international journal.
  Our Federal Government must be a strong partner with American 
manufacturers, American businesses, and American workers, and support 
innovation in this country for the next generation of workers.
  My home State of Michigan invests over $20 billion in R&D 
expenditures--the second highest of any State, according to the 
National Science Foundation. Although Federal investments in R&D only 
contribute 17 percent of total investments, these Federal funds are 
used to attract even more research dollars from businesses. It is a 
great investment for us.
  It makes perfect sense for us in the Federal Government to help spur 
this innovation by being partners with the private sector. In total, 
about $25 billion is provided by the Federal Government and over $200 
billion by businesses. This partnership in innovation is at the center 
of American companies competing in the global marketplace. Everyone 
knows that to stay ahead, we need to invest in the future. That means 
education. That means innovation.
  I might say, it does not mean accepting the cuts the President has 
proposed--the largest cuts in the 26-year history of the Department of 
Education--over $2 billion in cuts proposed in this budget. That 
certainly is going in the wrong direction. But permanently extending 
the R&D tax credit goes in the right direction, and helping to pay for 
that also goes in the right direction of fiscal responsibility.
  As I indicated before, the distinguished Senator from Utah, Mr. 
Hatch, has offered a motion to instruct on a permanent extension of the 
R&D tax credit without an offset--in other words, without paying for 
that. I would suggest there is a more fiscally responsible approach and 
that we are not providing a long-term incentive for investment by just 
extending the credit for a year at a time or by not paying for it. I 
believe we need to have a permanent extension of the R&D tax credit, 
but we need to do that in a way which is fiscally responsible.
  This debate this evening is really about our values and about our 
priorities and who will benefit from the tax bill. Are we going to give 
another $50 billion in tax cuts to those who are most blessed and 
extend the capital gains tax cut which is not even going to expire for 
2 years or are we going to help people who are trying to create jobs 
and working men and women right now, manufacturers who right now need 
some support as they move into the future to compete internationally 
and businesses that right now need our support, by extending the R&D 
tax credit so they have the partnership they need, the support they 
need for those new ideas which will allow them to compete on into the 
future?
  This is about what is happening to families right now. In Michigan, 
people are asking the President and asking us to look at what is 
happening to families at this moment and to take action now.
  Let's stop China and Japan from cheating by stealing our patents or 
by counterfeiting--counterfeit autoparts, for example, is a $12 billion 
industry which has cost over 200,000 jobs in this country--or by 
manipulating their currency. Let's force them to play by the rules and 
have a level playing field, but turn around and look at what they are 
doing on R&D and education. While they are cheating and stealing our 
ideas, they are educating more engineers and more scientists and those 
who will be competing with our workers. We need to turn that around, 
make them play by the rules, change the way we fund health care in our 
country, protect our pensions, and then aggressively invest in 
education and innovation.

  To see the kind of bold, aggressive investment we need means we need 
to extend the R&D tax credit. We need to send a strong message to 
businesses around this country that this is a permanent tax credit, the 
R&D tax credit. We also need to send a message that we are going to 
choose, when choices have to be made, between those who need the 
support right now to keep jobs here in America and those who down the 
road may be interested in having an additional tax cut on top of those 
they have already received. I believe it is about the future of our 
country, which approach will create opportunity, which approach will 
create jobs for the future.
  My vote is with our manufacturers who are deciding, maybe at this 
very moment, whether to lay off more people in Michigan or around the 
country, who need this tax credit to invest in the future of their 
companies. That is my priority, not a few, most blessed in this country 
who have a capital gains tax cut in place until 2008--it does not even 
expire until 2008--those who are not worried today about whether that 
pension is going to be there or whether they can pay their heating bill 
or whether they can send their kids to college or whether they are 
going to have a job tomorrow. They have a tax cut in place which does 
not even stop until 2008.
  We can do better than the bill that was certainly passed by the House 
of Representatives. I hope the conference committee will do better. I 
urge support for my motion to instruct, with a clear message. This is 
about bold innovation for the future, permanently extending the R&D tax 
credit. It is about fiscal responsibility. And it is about making the 
right choices and values that say we are going to focus on those today, 
we are going to pay for this by focusing on those right now, those 
businesses right now which need our help, and make those families a 
priority for us.
  It is about our way of life in this country. It is a fight we can win 
if we are serious about it. And I believe innovation is an important 
part of our future. I urge the support of my colleagues for this motion 
to instruct.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I rise for the purpose of offering some 
motions to instruct for myself and my colleagues.


                      Motion To Instruct Conferees

  Mr. GRASSLEY. I send the first motion to the desk and ask for its 
consideration.
  The PRESIDING OFFICER. Without objection, the pending motion is set 
aside.
  The clerk will report.
  The legislative clerk read as follows:

       Mr. Grassley moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendment to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to insist on the inclusion in the final 
     conference report of the funding to support the health needs 
     of America's veterans and military personnel contained in 
     section 315 of the Senate amendment and the funding to 
     strengthen America's military contained in title VI of the 
     Senate amendment.

  Mr. GRASSLEY. Mr. President, in explaining the rationale for my 
motion to instruct, I will be referring to other motions to instruct 
that two Senators on the other side have put in place, Senator Dodd of 
Connecticut and Senator Reed of Rhode Island.
  The Dodd motion to instruct is yet another episode in the tale of the 
``groundhogization'' of this tax relief reconciliation bill, a long 
journey. The Senate adopted the alternative to the Dodd amendment, a 
Grassley amendment, that passed, including the following Budget Act 
waiver language:

       Waive all provisions of the Budget Act and budget 
     resolutions necessary for the consideration of the pending 
     amendment to this bill, and for the inclusion of the language 
     of the pending amendment in consideration of an amendment 
     between Houses.

  That is what we added back on February 2 to S. 2020. The Dodd motion 
instructs conferees to proceed by ignoring this waiver language. You 
see, the waiver language only applies for the purposes of our action in 
the Senate. If Senator Dodd were to prevail, the conferees could not 
follow his directive without violating the Budget Act. It is because 
the Dodd motion deals with outlays. We can't do outlays in a budget 
reconciliation package. I might add that the Reed motion that we expect 
to vote on tomorrow suffers from the same defect. The conferees, even 
if they were inclined, can't return from conference with a provision 
that contains outlays.
  We all know this is a political season. If you look at this motion, 
and if you look at the Reed motion, both cannot

[[Page S1117]]

be adopted and followed. You can draw your own conclusion, then, why 
they are adopted, unless the Members don't know that this is a 
parliamentary situation. I can't believe they don't know what that 
parliamentary situation is.
  While we are at it, I am going to offer a motion to clarify what the 
Dodd and Reed motions are all about. Basically, if you support the 
principles of providing more health care for veterans, the supposed 
purpose of the Dodd amendment, and, secondly, assisting our troops with 
body armor, the supposed purpose of the Reed amendment, then vote for 
the Grassley motion. If you support these two principles but don't 
support a tax increase on America's seniors, at a higher cost of 
capital for American business, support the Grassley motion. If you just 
want an increase, then vote for the Dodd motion.
  I will summarize it this way: I appreciate Senator Dodd's attention 
to the issue of our veterans health care needs. This issue is of utmost 
importance to the Members of the Senate, as evidenced by the fact that 
we appropriated a massive amount of extra money last fall for the 
fiscal year we are in now to meet the needs of veterans, particularly 
those who were not recognized, people returning wounded from Iraq. But 
my colleagues suggest that in order to provide this support, we should 
give up the important economic tax policy of reduced capital gains and 
dividends tax, the present tax policy, just continue it for 2 more 
years so that people have a long-term view of what the tax policy is so 
that they know what they are going to invest.
  The Dodd motion claims to be paid for by capital gains, but capital 
gains offsets don't even come into play until the year 2009. I have 
offered a motion that supports military health care facilities, but we 
don't tie it up with an offset that is 3 long years down the road.
  You will remember that the Senate debated this issue on Groundhog Day 
and voted to accept my amendment that provides the same benefits but 
does not raise taxes to pay for it. I urge my colleagues to vote 
against Senator Dodd's motion and to support my motion to instruct the 
conferees on the amendment we have already passed.
  In regard to what Senator Reed is trying to do with his motion to 
instruct, this is the issue of funding for our military. Proper funding 
for those serving our country is not a controversial issue. The method 
of providing this funding for our military is, on the other hand, being 
made into an unnecessarily controversial issue. My colleague suggests 
that in order to provide for this funding, we eliminate a tax benefit 
that doesn't even arise until the year 2009, similar to the same issue 
in the Dodd amendment. I ask how this would provide the funds so badly 
needed this very day to ensure that we meet the operational needs of 
our courageous military service personnel.
  I offered an amendment that supports the operational needs of our 
military without tying it to an offset that is 3 long years down the 
road.
  Again, in an effort not to sound repetitive, you will remember that 
the Senate debated this issue also on Groundhog Day and voted to accept 
my amendment that provides the same benefits but does not raise taxes 
to pay for them. So I urge my colleagues to vote against Senator Reed's 
motion and to support my motion to instruct conferees on the amendment 
we have already passed.
  To sum up, if you are against a tax increase but for veterans health 
care and properly equipping our military, vote for the Grassley motion. 
If you are for a tax increase, then look elsewhere to our colleagues 
who are offering their version of it.


                      Motion To Instruct Conferees

  Mr. GRASSLEY. Mr. President, I am sending several motions to the desk 
now. I ask that these be taken up together. I ask that the clerk would 
read each one at a time because I want to speak to each one. I would 
ask the clerk to read the first one.
  The PRESIDING OFFICER. Without objection, the pending motion is set 
aside.
  The clerk will report.
  The legislative clerk read as follows:
       Mr. Grassley moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendment to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to report a final conference report that 
     includes the ``hold-harmless'' relief from the individual 
     alternative minimum tax in 2006 (sections 106 and 107 of the 
     amendment passed by the Senate) to protect middle class 
     families and includes an extension of lower tax rates on 
     capital gains and dividends (based on section 203 of the bill 
     passed by the House of Representatives) to protect tax cuts 
     for middle class families.

  Mr. GRASSLEY. Mr. President, the motion to instruct that was just 
read is mine. Simply stated, this is a motion that says there are 
sufficient funds to do both alternative minimum tax and capital gains 
and dividends and that we should do both--in other words, as an 
instruction to conferees.


                      Motion to Instruct Conferees

  Mr. GRASSLEY. Mr. President, I ask the clerk to read the motion that 
I am introducing for Senator Lott, listed as No. 3.
  The PRESIDING OFFICER. Without objection, the pending motion is laid 
aside and the clerk will report the motion.
  The legislative clerk read as follows:

       Mr. Lott moves that the managers on the part of the Senate 
     at the conference on the disagreeing votes of the 2 Houses on 
     the Senate amendment to the bill H.R. 4297 (to provide for 
     reconciliation pursuant to the concurrent resolution on the 
     budget for fiscal year 2006 (H. Con. Res. 95)) be instructed 
     to report a final conference report that includes the repeal 
     of the individual alternative minimum tax (based on sections 
     106 and 107 of the amendment passed by the Senate.)

  Mr. GRASSLEY. Mr. President, as I said, I am doing that for Senator 
Lott of Mississippi. I think it is self explanatory. Just to reiterate, 
this motion, on behalf of Senator Lott, calls for full and permanent 
repeal of the alternative minimum tax.


                      Motion to Instruct Conferees

  Mr. GRASSLEY. Mr. President, I now go to motion No. 4, which is for 
Senator Hutchison.
  The PRESIDING OFFICER. Without objection, the pending motion will be 
set aside, and the clerk will report the motion.
  The legislative clerk read as follows:

       Mrs. Hutchison moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendments to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to insist on the inclusion in the final 
     conference report of a permanent extension of the election to 
     deduct State and local general sales taxes (based on section 
     105 of the amendment passed by the Senate).

  Mr. GRASSLEY. Mr. President, this is repetitive, but I will state 
this for Senator Hutchison. This resolution of instruction calls for a 
permanent deduction of State and local general sales tax.


                      Motion to Instruct Conferees

  Mr. GRASSLEY. Mr. President, I offer motion No. 5 for Senator 
Santorum.
  The PRESIDING OFFICER. Without objection, the pending motion is set 
aside.
  The clerk will report.
  The legislative clerk read as follows:

       Mr. Santorum moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendment to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to report a final conference report that 
     includes a permanent extension of the above-the-line 
     deduction for tuition and fees (based on section 103 of the 
     amendment passed by the Senate).

  Mr. GRASSLEY. Mr. President, this motion I offer on behalf of Senator 
Santorum of Pennsylvania would make permanent the above-the-line 
deduction for tuition and fees for college.
  Mr. SANTORUM. Mr. President, I offer this motion to instruct with 
regard to the college tuition deduction. As I have noted on other 
occasions, this bill is really a ``tax increase prevention'' bill. One 
of the many important elements is the college tuition deduction. This 
provision was established in the 2001 tax relief bill and provides an 
above-the-line deduction for higher education expenses, commonly called 
the ``college tuition deduction.'' The eligibility for the deduction is 
limited based on income and is aimed at helping middle-class American 
families that are struggling to meet the rising

[[Page S1118]]

cost of college tuition. It benefits students and their families at all 
types of institutions--from community colleges to 4-year schools, and 
both public and private institutions.
  However, because we have had to slow-walk this bill with some foot-
dragging across the aisle, this deduction expired on December 31, 2005. 
Nonetheless, it is important that we not only extend this provision, 
but make it permanent. The college tuition deduction is an important 
and popular education tax benefit, particularly for the middle class. 
It is not available to taxpayers with income above $80,000--$160,000 in 
the case of joint returns.
  In 2003--the last year for which official data are available--more 
than 3 \1/2\ million Americans benefited from the tuition deduction, 
with nearly $7 billion in college tuition costs covered by the 
deduction--an increase of nearly 9 percent from the previous year. Tax 
incentives for college tuition helped nearly 11 million Americans 
realize the dream of a college degree. This represents more than two-
thirds of all college students. In the Commonwealth of Pennsylvania, 
over 150,000 families and students took advantage of this deduction. 
The tuition deduction is a crucial part of our education tax incentives 
and must be made permanent. We should send the message to parents of 
high school students that this deduction will be there when their 
students begin college.
  I urge my colleagues to support this motion and support these 
families and students striving for a college education.


                      Motion to Instruct Conferees

  Mr. GRASSLEY. Mr. President, I turn to motion No. 6, which is my own. 
I ask for the reading of it.
  The PRESIDING OFFICER. Without objection, the pending motion will be 
laid aside, and the clerk will report.
  The legislative clerk read as follows:

       Mr. Grassley moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the two 
     Houses on the Senate amendment to the bill H.R. 4297 be 
     instructed to report a reconciliation conference report 
     ensuring that in 2009 and 2010, the international 
     competitiveness of the United States in attracting capital 
     investment, and therefore job creation, is not weakened 
     further by a higher combined corporate and individual income 
     tax rate on corporate and capital income as a result of a 
     higher dividend tax rate, based on the following:
       (1) In 2005, the combined maximum corporate tax rate and 
     individual dividend tax rate in the United States was 50.8 
     percent. This rate was the eighth highest rate in the thirty-
     nation Organization for Economic Cooperation and Development, 
     taking into account both national and subnational taxes.
       (2) If the top federal tax rate on dividend income would 
     have been thirty-five percent, instead of fifteen percent, 
     the combined tax rate would have been 62.9 percent, and would 
     have been the second highest combined corporate and 
     individual tax rate on corporate income in the OECD, behind 
     only Japan.

  Mr. GRASSLEY. Mr. President, I offer this motion instructing 
conferees that in the years 2009 and 2010, the international 
competitiveness of the United States in attracting capital investment, 
and therefore job creation, is not weakened further by higher combined 
corporate and individual increased tax rates on corporate and capital 
income as a result of the higher dividend rate.


                      Motion to Instruct Conferees

  Mr. GRASSLEY. Mr. President, I send a motion to the desk that I am 
going to file and not discuss at this point.
  The PRESIDING OFFICER. Without objection, the pending motion is laid 
aside, and the clerk will report.
  The legislative clerk read as follows:

       Mr. Grassley moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendments to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to insist on the inclusion in the final 
     conference report of a permanent extension of the 
     modifications to the child tax credit made by the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 and the Jobs 
     and Growth Tax Relief Reconciliation Act of 2003.

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that at 8 p.m. 
tonight, the Senate proceed to a vote in relation to the Grassley 
motion on veterans, to be followed by a vote in relation to the Dodd 
motion on veterans, with no amendments in order on either motion.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana is recognized.
  Mr. BAUCUS. Mr. President, I ask that the pending motions be set 
aside so the Senator from New Jersey can offer his motion. Obviously, 
under the rules, he has at least a half hour, maybe even longer. 
Senator Schumer from New York is coming over. Under the rules, he would 
have the same length of time. We are going to vote about 8 o'clock, 
but, of course, that can slip a little to accommodate the Senators from 
New Jersey and New York. I counsel my friends from New Jersey and New 
York to not use all of their time unless they really want to. I admire 
the Senator from New Jersey. He is concise and to the point in his 
presentation.


                      Motion to Instruct Conferees

  Mr. LAUTENBERG. Mr. President, I ask unanimous consent that the 
pending motion be set aside, and I send a motion to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. Without objection, the pending motion will be 
set aside. The clerk will report.
  The legislative clerk read as follows:

       Mr. Lautenberg moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendment to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to report a final conference report that 
     does not increase the national debt of the United States.

  Mr. LAUTENBERG. Mr. President, I want to discuss this motion to 
instruct conferees that I bring to this bill. You see here a display of 
a credit card. It is drawn on the ``Bank of our Children's Future.'' My 
amendment is simple. It asks the conferees, please, do not increase our 
national debt.
  A lot of what we do around here is hidden and complicated Federal 
budget rhetoric. But to put matters simply, this bill allows President 
Bush to charge another $50 billion on the credit card of the United 
States of America. But when he leaves office, who is going to pay the 
debt that is left behind? Certainly, it will not be their rich or 
infamous friends. They are guaranteed to be safe from the bill 
collector. The reality is that the President is going to leave 
repayment of this credit card debt to our kids and our grandchildren. I 
don't want to have that burden on my grandchildren or my children. They 
work hard and they pay their debts and they pay their taxes--my 
children, I am talking about; my grandchildren are too young. They are 
willing to pay their taxes and they are proud of this country of ours.
  The Democrats want to pay for these tax cuts by ending giveaways to 
rich special interests. But the Republican side said: No, no, don't 
persecute millionaires.
  I had a very successful business career. It happened because I live 
in America and America responds to ingenuity and hard work. I don't 
mind paying my taxes. I want to pay my taxes to be sure that America is 
strong internally, not just on the weapons front but strong in 
character, strong in mission.
  My colleagues on the other side, all good folks, will not admit they 
are passing this burden on to future generations. They claim they are 
going to cut spending to make up the difference.
  Are they? As President Bush insists, are they willing to cut Medicare 
and make health care more expensive for seniors? Are they, as President 
Bush insists, willing to cut student loans? Isn't tuition expensive 
enough for the average family in America? Are they, our colleagues on 
the other side, as President Bush insists, going to eliminate the Safe 
and Drug-Free Schools Program? Are they willing to cut the Head Start 
Program for children who don't have the benefit of being in a home 
where they can learn, who don't have the benefit of guidance from 
parents often? Those children often get their only nutritional meal in 
a facility that is supported by the Federal Government. We are now only 
serving 800,000 out of 1.6 million children who would qualify.
  Even if we do all these things, we are still going to be in the hole 
with massive deficits because of the President's

[[Page S1119]]

insistence on irresponsible tax cuts, and I use the word advisedly.
  I know something about balancing budgets. I was a senior Democrat on 
the Senate Budget Committee that produced the first balanced budget in 
30 years. We did such a good job that when President Bush took the oath 
of office, he was presented with a rosy financial picture like no 
President in the history of our country has ever seen.
  We had budget surpluses as far as the eye could see. In 2000, we had 
a budget surplus of $236 billion. In 2001, President Bush enjoyed a 
surplus of $128 billion. We were ready to pay off our national debt by 
the end of President Bush's last term. We were in the middle of the 
longest economic expansion in the history of our country. But the 
Republicans plunged into massive tax breaks for the wealthy and the 
special interests, tax breaks that will cost $3.4 trillion to make them 
permanent over the next decade. One-third of that, more than $1 
trillion, will go to the richest 1 percent of our population.
  So here is how the Republican tax cuts translate. If you make $1 
million a year, you get an average tax cut of $136,000, but if you make 
less than $20,000 a year, you get a whopping $19. To what end? Instead 
of paying off our national credit card bill, President Bush and the 
Republican majority are set to double our national debt. If we continue 
on this path, our national debt will be more than $12 trillion by 2011.
  With this bill, we are being asked to approve another $50 billion 
charge on our credit card. The most tragic thing is that there is no 
reason to charge these tax cuts to the national credit card.
  When we were considering this bill a few weeks ago, our senior 
colleague on the Budget Committee, Senator Conrad, offered a way to pay 
for these tax cuts by closing corporate loopholes. Closing these 
loopholes would have shut down abusive foreign tax shelters. I don't 
understand why we should give cover to abusive foreign tax shelters. It 
would have made polluters pay to clean up the damage they cause to our 
environment, it would have required tax withholding on payments to 
Federal contractors, such as Halliburton, just like every American has 
on their paycheck. Every Member on this side of the aisle voted for 
budget discipline, and every Member of the other party voted for budget 
recklessness.
  We still have a chance to put a stop to this. We can adopt my motion. 
It is simple. It says to the conferees: Don't increase our national 
debt. Is that too much to ask, don't increase our national debt?
  Of course, we could go ahead and get a second mortgage on the White 
House or this Capitol Building or the Pentagon. Every day people across 
America will take a second mortgage in a similar situation. ``Similar 
situation'' means when your debt exceeds your ability to pay it down. 
The administration is willing to do that.
  So if my colleagues think we should saddle our children and 
grandchildren with more debt, then I suggest they oppose my motion, but 
if they think it is wrong to run up our Nation's debt so special 
interests, such as Halliburton and polluters, can get off scot-free, 
then vote for my motion.
  Every American's share of the national debt now is $27,529. This bill 
raises that debt another $170 per adult and child in this country. By 
voting for my motion, we say no to debt for our kids.
  I urge my colleagues to support this motion and show that they want 
some fiscal responsibility put into place.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I see several Senators on the floor. I 
believe--and perhaps someone can correct me--the Senator from New York 
was here earlier.


                      Motion to Instruct Conferees

  Mr. SCHUMER. Mr. President, I wish to offer a motion.
  Mr. BAUCUS. Mr. President, I ask that the pending motions be set 
aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report the motion.
  The legislative clerk read as follows:

       Mr. Schumer moves that the managers on the part of the 
     Senate at the conference on the disagreeing votes of the 2 
     Houses on the Senate amendment to the bill H.R. 4297 (to 
     provide for reconciliation pursuant to the concurrent 
     resolution on the budget for fiscal year 2006 (H. Con. Res. 
     95)) be instructed to report a conference report that 
     includes the Senate-passed provision to extend the above-the-
     line deduction for tuition and fees through December 31, 2009 
     (section 103), before it includes the House-passed extension 
     of lower tax rates on capital gains and dividends (section 
     203) given budget constraints, noting that a conference 
     report which maintains the tuition deduction will provide 
     needed tax relief to more than 4,000,000 American families 
     each year that are struggling to keep pace with rising 
     tuition costs.

  Mr. SCHUMER. Mr. President, in the Senate-passed tax reconciliation 
bill, we have recognized the importance of the tax deduction for 
college tuition, and the bill we are sending to conference extends it 
for 4 additional years, through 2009. Unless extended by the 109th 
Congress, the deduction will not be available to taxpayers filing 2006 
returns. It is urgent that the provision be extended in this bill, so 
families can plan for their kids' education.
  The House bill, in sharp contrast with the bill that the Senate 
passed with 66 votes, extends this common-sense, middle-class tax 
relief for only 1 year. Given that we face choices and budget 
limitations, and we can't do it all, this motion instructs the Senate 
conferees to insist that the conference report should include the 
Senate-passed 4-year extension of the tuition deduction, rather than 
extending the tax cuts for dividends and capital gains that will not 
expire for nearly 3 years.
  That is the gist of my motion. We simply do not need to take action 
on dividends and capital gains today, but on issues such as the college 
tuition deduction and the alternative minimum tax, Congress must act 
now. If we can not do it all under the reconciliation limits, then the 
tax cuts for the middle class that have already expired should take 
priority.
  The supply-siders who insist that cutting taxes for millionaires in 
2009 is more important than cutting taxes for middle-class families 
this year argue that low tax rates on investments are central to our 
economic well-being.
  Like many of my colleagues, I agree that lower taxes are generally 
preferable to higher taxes. That is not a controversial position. The 
question is, when we have large budget deficits, what are our highest 
priorities?
  We have to make choices. And in today's information-driven economy, a 
college degree is no longer a luxury, it is a necessity.
  In terms of long-term economic growth and developing this country's 
human capital--which is ultimately the true source of innovation and 
competitive advantage--we could make few better investments than 
ensuring that future generations have access to an affordable college 
education.
  And talk about a tax cut that pays for itself over time. According to 
the Census Bureau, workers 18 and over with a bachelor's degree earn an 
average of $51,206 a year, while those with a high school diploma earn 
$27,915, and the disparity has been growing over time. College 
graduates make more money, and they will pay more in taxes as a result. 
Making college easier to afford is a real investment, and you don't 
need so-called dynamic scoring to make the case.
  The challenge for American families is that the cost of college 
tuition has increased faster than any other major consumer item, 
including health care, over the last 20 years. It has skyrocketed from 
$5,156 in 1981 to $29,026 in 2005, an increase of 462 percent.
  Even in real, inflation-adjusted dollars, the price of a 4-year 
public or private college education has almost doubled over the past 
two decades.
  While many of my colleagues talk about lower taxes on investment, 
when a family spends money on college tuition, they are investing too. 
These families may not have a lot of money in taxable financial 
investments--more than three-quarters of U.S. households earn less than 
$1,000 in taxable income from investments, such as capital gains and 
dividends--but they are investing a lot in their kids' education.
  In today's global, interconnected world, who is to say that these 
investments in human capital are not just as important, if not more so, 
than the buying and selling of stocks?
  I urge each of my colleagues to think about how quickly tuition costs 
are rising in their States and consider whether the majority of 
taxpaying

[[Page S1120]]

families in their States really need an extension of capital gains 
relief or whether they really need relief from the AMT and college 
tuition costs.
  Here are just a few examples from my State:
  At Adelphi University on Long Island, tuition cost $5,114 in 1983 and 
$17,800 in 2003-2004, a more than three-fold increase.
  At SUNY Purchase in Westchester County, tuition increased from $1,005 
in 1980 to $4,079 in 2003-2004, or 4 times as much.
  At Niagara University outside Buffalo, tuition has nearly quadrupled, 
from $3,300 in 1983 to $17,380 in 2003-2004.
  I am sure each of us has similar stories to tell. I urge my 
colleagues to support my motion, and keep the college tuition deduction 
in place for at least 4 more years.
  The skyrocketing rise of college tuition is not the only trap 
ensnaring an unsuspecting, and undeserving, American middle class. The 
individual Alternative Minimum tax is another, and I would like to 
speak for a moment on the motion to be offered by the minority leader.
  Unless we act, the alternative minimum tax's crushing burden will be 
felt by 17 million more middle- and upper-middle income taxpayers this 
year than in 2005, and millions more in the years to come. AMT relief 
is a critical part of the Senate's version of this bill and we all must 
do everything we can to ensure that this tax--which affects middle- and 
upper-middle class taxpayers--is addressed this year.
  It would be nearly impossible to overstate the AMT issue in its 
importance and urgency. By the end of the decade, the AMT will ensnare 
more than 30 million taxpayers, the majority of which will have incomes 
below $100,000, and the National Taxpayer Advocate at the IRS has 
identified the alternative minimum tax as the most serious problem 
facing individual taxpayers.
  Here are a few statistics I want to reinforce for my colleagues, 
which I mentioned on the floor earlier this month:
  The year 2006 is the tipping point for the AMT, as the number of 
taxpayers affected nationally will explode from 3.6 million to more 
than 20 million, if the Congress fails to act;
  A family with two children will become subject to the AMT at about 
$67,500 of income in 2006; and a family with five children will start 
owing AMT at about $54,000 of income this year, if the Congress fails 
to act;
  In 2004, only 6.2 percent of families earning $100,000 to $200,000 a 
year were subject to the AMT, and that number will explode to nearly 50 
percent this year, if the Congress fails to act; and

  Starting in 2008, the average married couple with two children 
earning $75,000 or more will find that more than half of the tax cuts 
they have been expecting from the various laws passed since 2001 will 
be taken back via the AMT, if the Congress fails to act.
  If AMT relief is extended through 2006, about two-thirds of the 
benefits will be realized by families earning under $200,000, with more 
than half of the total benefits going to families with incomes between 
$100,000 and $200,000. In New York and many other States, particularly 
in or near major cities, a combined income of $100,000 or $150,000 does 
not make you rich.
  Contrast this with the tax relief for dividends and capital gains, 
where more than half of the total benefit goes to families with income 
over $1 million. This is more than 50 percent of the benefit going to 
less than one-half of one percent of all taxpayers in the country.
  It was for these reasons that 73 Senators voted earlier this month to 
support a sense-of-the-Senate resolution that AMT relief should be a 
higher priority for this Congress than a dividend and capital gains tax 
cut. The American people now expect us, and our conferees, to follow 
through on that pledge.
  When you consider the statistics I mentioned, about who will become 
subject to the AMT this year if we fail to act, it becomes pretty 
obvious that addressing the AMT problem--or extending the college 
tuition tax cut--should be far more important than extending a tax cut 
on investment income that doesn't expire for nearly 3 more years. That 
is common sense, and it is an entirely separate question from who 
benefits from which tax cut, or what your ideology may be.
  In conclusion, we need a bill back from conference that mirrors the 
previous Senate versions of reconciliation. We passed a bipartisan bill 
that excluded the dividends and capital gains cuts and provided 
generous AMT relief for 2006. That bill passed the Senate with 64 
votes. Two weeks ago, a modified version of the bill received 66 votes. 
I strongly encourage our conferees to bring a similarly bipartisan bill 
back from conference.
  Mr. BAUCUS. Mr. President, even though the hour of 8 is about to 
arrive, I yield whatever time the Senator from Texas requires.
  The PRESIDING OFFICER. The Senator from Texas.
  Mrs. HUTCHISON. Mr. President, when the hour of 8 o'clock arrives, I 
ask to be notified. I wish to speak on the motion made on my behalf by 
Senator Grassley earlier to instruct conferees to make the sales tax 
deduction permanent.
  This is very important to the States that have a sales tax but no 
income tax. There are seven States that have no income tax. Yet the 
citizens of all the other States of our country are able to deduct the 
income taxes they pay at the State level from their Federal income 
taxes. Two years ago, we enacted the law that would bring sales-tax 
States into equity so that every State would be treated the same. We 
are now faced with another 2-year extension, or we will have this 
inequity continue because the sales tax deduction that was enacted by 
Congress lapsed at the end of last year. We have to make this deduction 
permanent.
  I ask that our conferees be instructed to make it permanent so that 
every person in America can deduct their State taxes, whatever kind of 
tax that may be, from their Federal income taxes. This is a matter of 
equity. It is only fair that sales-tax States be treated the same as 
income-tax States.
  I urge my colleagues to vote to make sales tax deductions permanent. 
Give people a choice. That is the right thing to do.
  I yield the floor.


                      Motion to Instruct Conferees

  The PRESIDING OFFICER. Under the previous order, the vote now occurs 
on the motion to instruct conferees offered by the Senator from Iowa, 
Mr. Grassley, relating to veterans.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that 2 minutes be 
allocated to explaining these motions and that 2 minutes be equally 
divided.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Who yields time?
  Mr. BAUCUS. Mr. President, I will yield my time.
  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. GRASSLEY. Mr. President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I rise for the purpose of asking 
unanimous consent to change the names of the sponsors of a motion that 
I filed.
  I ask unanimous consent that the Grassley motion regarding the 
permanence of the child tax credit be identified as Grassley for Talent 
and Snowe.
  The PRESIDING OFFICER. Without objection, it is so ordered. Is there 
further debate?
  Mr. STEVENS. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The question is on agreeing to the motion. The clerk will call the 
roll.
  The legislative clerk called the roll.
  Mr. McCONNELL. The following Senators were necessarily absent: the 
Senator from North Carolina (Mrs. Dole), the Senator from Montana (Mr. 
Burns), and the Senator from Arizona (Mr. McCain).
  Further, if present and voting, the Senator from North Carolina (Mrs. 
Dole) would have voted ``yea.''
  Mr. DURBIN. I announce that the Senator from Indiana (Mr. Bayh), the 
Senator from Delaware (Mr. Biden), the Senator from Vermont (Mr. 
Jeffords), the Senator from New Jersey (Mr. Menendez), and the Senator 
from Maryland (Ms. Mikulski) are necessarily absent.

[[Page S1121]]

  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 92, nays 0, as follows:

                      [Rollcall Vote No. 14 Leg.]

                                YEAS--92

     Akaka
     Alexander
     Allard
     Allen
     Baucus
     Bennett
     Bingaman
     Bond
     Boxer
     Brownback
     Bunning
     Burr
     Byrd
     Cantwell
     Carper
     Chafee
     Chambliss
     Clinton
     Coburn
     Cochran
     Coleman
     Collins
     Conrad
     Cornyn
     Craig
     Crapo
     Dayton
     DeMint
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Ensign
     Enzi
     Feingold
     Feinstein
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hutchison
     Inhofe
     Inouye
     Isakson
     Johnson
     Kennedy
     Kerry
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     Martinez
     McConnell
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Obama
     Pryor
     Reed
     Reid
     Roberts
     Rockefeller
     Salazar
     Santorum
     Sarbanes
     Schumer
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stabenow
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner
     Wyden

                             NOT VOTING--8

     Bayh
     Biden
     Burns
     Dole
     Jeffords
     McCain
     Menendez
     Mikulski
  The motion was agreed to.
  The PRESIDING OFFICER. Under the previous order, there will be 2 
minutes equally divided on the Dodd motion to instruct.
  The Senator from Montana.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the Grassley 
motion for Senators Talent and Snowe be the Grassley amendment for 
Talent, Snowe, and Lincoln.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Connecticut.
  Mr. DODD. Mr. President, parliamentary inquiry: How long did that 
last vote require?
  The PRESIDING OFFICER. Approximately 37 minutes.
  Mr. DODD. I thank the Chair.
  Let me briefly explain to my colleagues the distinction between the 
vote you just took and the motion I offer. Very simply put, it is 
whether we are going to pay for the language we just adopted with the 
motion of the chairman of the Finance Committee to have $19.9 billion 
for veterans and then not provide the resources to achieve that goal. 
Everyone in this Chamber knows what will happen. That amendment will be 
dropped before this bill even gets out the door. If you adopt the 
motion I offer, you will support taking the $19.9 billion out of the 
$64.8 billion that the House of Representatives proposes to spend on 
the two-tenths of 1 percent of American taxpayers who make incomes of 
more than $1 million a year. For that small amount, we can pay the 
veterans who desperately need the kind of services all of us know they 
need. If you want to do something for the Grassley amendment, then 
adopt this motion which will provide the resources we have not adopted 
with the Grassley provision.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, the words ``paid for'' also mean tax 
increase. The difference between these motions is, the Grassley motion 
does not contain the tax increase. The Dodd motion asks the conferees 
to raise taxes.
  Mr. DODD. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be.
  The question is on agreeing to the motion. The clerk will call the 
roll.
  The assistant legislative clerk called the roll.
  Mr. McCONNELL. The following Senators were necessarily absent: the 
Senator from Montana (Mr. Burns) and the Senator from Arizona (Mr. 
McCain).
  Mr. DURBIN. I announce that the Senator from Indiana (Mr. Bayh), the 
Senator from Delaware (Mr. Biden), the Senator from Vermont (Mr. 
Jeffords), the Senator from New Jersey (Mr. Menendez), and the Senator 
from Maryland (Ms. Mikulski) are necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 40, nays 53, as follows:

                      [Rollcall Vote No. 15 Leg.]

                                YEAS--40

     Akaka
     Baucus
     Bingaman
     Boxer
     Byrd
     Cantwell
     Carper
     Chafee
     Clinton
     Conrad
     Dayton
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Harkin
     Inouye
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Murray
     Nelson (FL)
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Stabenow
     Wyden

                                NAYS--53

     Alexander
     Allard
     Allen
     Bennett
     Bond
     Brownback
     Bunning
     Burr
     Chambliss
     Coburn
     Cochran
     Coleman
     Collins
     Cornyn
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Kyl
     Lott
     Lugar
     Martinez
     McConnell
     Murkowski
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner

                             NOT VOTING--7

     Bayh
     Biden
     Burns
     Jeffords
     McCain
     Menendez
     Mikulski
  The motion was rejected.
  Mr. FRIST. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. FRIST. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


            Unanimous-Consent Agreement--Motions to Instruct

  Mr. FRIST. Mr. President, I ask unanimous consent that the only 
motions to instruct be those currently pending and that no other 
motions be in order; I further ask consent that no amendments be in 
order to the motions; provided further that when the Senate adjourns 
this evening, all remaining debate time under the statute be considered 
as having expired; further that when the Senate convenes tomorrow, the 
Senate begin to vote in relation to the motions, with the Republican 
alternatives occurring prior to the votes in relation to the Democratic 
amendments; and I send a list to the desk with the order of votes; 
further that prior to the Kennedy motion and the Grassley motion on 
capital gains/dividends, there be 2 minutes per side for debate prior 
to the votes on each, with debate before all other votes limited to 2 
minutes equally divided and all votes after the first vote in the 
sequence be limited to 10 minutes each.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________