[Congressional Record Volume 154, Number 113 (Thursday, July 10, 2008)]
[Senate]
[Pages S6524-S6533]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    AMERICAN HOUSING RESCUE AND FORECLOSURE PREVENTION ACT OF 2008--
                               CONTINUED

  The PRESIDING OFFICER. The Senator from Louisiana.


                             Road Home Tax

  Ms. LANDRIEU. I thank the Senator from Virginia for his comments on 
the pending nominations.
  But I wanted to take a moment to speak about the housing bill that 
passed. It was a very significant piece of legislation. On behalf of 
the people of Louisiana, I wanted to come to the floor to specifically 
thank Senator Dodd for his extraordinary leadership and tenacity in 
getting this bill through the floor of the Senate. It has been stuck 
for weeks. He got it unstuck this morning and passed it, and it has 
significant relief for homeowners throughout America, to help us stem 
the foreclosure rate, to stem the tide of economic downturn in many 
counties throughout our country. But for Louisiana, it has some very 
special relief. Part of that bill was actually crafted by Senator 
Baucus and Senator Grassley as chair and ranking member of the Finance 
Committee, and there was a big piece of that in this housing bill. In 
that Finance piece was a tax relief provision that is, in my view, 
central, crucial, and vital to the recovery, ongoing recovery of South 
Louisiana and the gulf coast.
  We added this language to the Foreclosure Prevention Act back in 
April, where it passed the Senate on a 74-5 vote and I am pleased to 
see that the combined housing package preserves this critical 
assistance.
  In short, the legislation ensures that hurricane survivors are 
treated both fairly and with dignity as they struggle to rebuild their 
lives.
  As you know, when these storms, Katrina and Rita, hit, now 3 years 
ago, they were unprecedented in the size and scope of the destruction. 
This country has not seen anything like it in well over 100 years, and 
hopefully we will not see anything like it for another 200 or 300 
years. When we went to the Federal toolbox, if you will, to see what 
tools were available to help the 250,000 homeowners who lost their 
homes, many did not have insurance because their homes were paid for, 
or they were not in the flood plain. They lost everything, their homes, 
their business, their place of worship, the schools their children went 
to. So when we went to the toolbox, there were not adequate tools to 
help them. We have been crafting those tools slowly. It has been 
agonizing for people who are waiting for us to give them a hand.
  Many of these taxpaying, hard-working citizens are not asking for 
charity; they are asking for a chance to get their business back, get 
their feet back underneath them.
  As you know, I am sure it is this way in Virginia. Most middle-class 
and upwardly mobile families have most of their net worth tied up in 
their home. So when their home is considered destroyed and the contents 
as well, it impacts the financial stability of that family.
  That is why I have stayed focused on homes, on home rebuilding, and 
on small businesses, because it is the backbone of our recovery. I am 
proud to say that in this bill, we were able to deliver $1 billion of 
relief, literally $1 billion of relief to homeowners who you could 
argue deserve more help than almost any group of homeowners in America.
  Again, these homeowners are suffering kind of a double whammy. Not 
only did they go through Katrina and Rita, but they are also now in an 
atmosphere of a slow real estate market; in some places a market that 
is spiraling downward because of the atmosphere of the country and the 
economy; although actually at home our economy relative to the country 
is doing pretty well.
  This underlying bill provides relief to homeowners along the gulf 
coast who had their homes destroyed after Hurricanes Katrina, Rita, and 
Wilma. In 2005, thousands of people along the gulf coast took casualty 
loss deductions on their tax returns due to damage that their 
properties sustained from the hurricanes.
  In 2007, many of the same people began to receive payments to cover 
uninsured losses to their property under Louisiana's Road Home program, 
Mississippi's Housing Assistance program and similar programs in 
Florida and in Texas.
  The IRS has concluded, however, that individuals who took the 
casualty loss deduction in 2005 and subsequently received a grant 
payment must add the value of the casualty loss deduction their 2007 
income.
  This decision not only increases the amount of taxable income but 
also: increases an individual's tax rate by bumping them into a higher 
tax bracket; subjects certain taxpayers to the Alternative Minimum Tax; 
phases out deductions; subjects an individual's Social Security 
benefits to additional taxation; and makes a taxpayer ineligible for 
Federal student load aid.
  So this relief was absolutely essential. Take the example of two very 
similar families--the Jones and the Smiths. Both earn $75,000 a year 
and both had homes that suffered substantial damage in Hurricane Rita. 
Both of the families received a road home grant of $75,000 in 2007 to 
cover uninsured losses to their homes. So at this point, they are 
exactly the same.
  In 2005, however, the Smiths took a $75,000 casualty loss deduction 
which entitled them to a refund of about $7,000.
  According to the IRS, the Smith family had to add the value of their 
2005 casualty loss deduction, totaling $75,000, to their 2007 income. 
So what is the result of this?
  The Smith family had to pay $25,000 in taxes while the Jones family 
will

[[Page S6525]]

have to pay about $7,000 in taxes. That is over a 350-percent increase 
in taxes. Not only did the Smith's amount of taxable income increase, 
but they were bumped into a higher tax bracket so their rate of taxable 
income increased.
  So what does this bill do? This bill would permit taxpayers to amend 
their 2005 tax returns to reduce or eliminate their casualty loss 
deductions. By eliminating or reducing their casualty loss deduction, 
they will not have to pay taxes on their road home grants. A current 
IRS regulation forbids individuals from amending their returns under 
this circumstance.

  So what effect would the bill have upon the Smith family. At the 
outset, they will not have over a 350 percent increase in their taxes. 
They will, however, have to pay back their refund they got in 2005, 
which would be about $7,000 in addition to their normal taxes.
  So by no means does this bill allow a free ride or any sort of 
``double dipping.'' They still have to undo their casualty loss, but 
they will not be providing the IRS a windfall in taxes.
  Finally, behind the numbers, it is important to remember that these 
are real people who have undergone a traumatic event, having their 
homes destroyed.
  The Smith family, before Senator Grassley and Senator Baucus came to 
their aid, would have had to pay over $24,000 in taxes. These families 
literally are struggling to pay their electric bill, their utility 
bills, trying to pay double mortgages, rent and a mortgage on a house 
trying to keep their house together. They could not have possibly come 
up with $25,000. That is what we have corrected it.
  I thank this Senate for sending special care and attention to a 
group, hundreds of thousands of homeowners. It is not millions, it not 
tens of millions, but it is hundreds of thousands of homeowners along 
the gulf coast who would truly benefit immediately and correctly. This 
money will go into their pocket and hopefully they will be spending it 
on their new home or their new apartment or using it to pay back bills 
they had to charge to their credit cards to literally survive these 
last several years.
  This bill also extends an important provision to spur investment in 
residential and commercial property along the gulf coast. In response 
to Katrina and Rita, Congress enacted legislation that would permit 
bonus depreciation on new buildings.
  In order to take advantage of the bonus depreciation, investors 
needed to start construction on the property by December 31, 2007, and 
have the property placed into service by December 31, 2008, for lesser 
damaged counties and parishes and by December 31, 2010, for the most 
damaged counties and parishes.
  However, replacing the basic infrastructure needed to begin this 
construction has been slow and difficult. New environmental standards, 
building codes, and the high price of insurance and labor have delayed 
new construction. Many projects are planned, but these delays have 
resulted in few actual construction starts.
  This bill would simply remove the commencement date to ensure that 
the gulf coast can sustain and strengthen its recovery in the housing 
and commercial sectors. It does not change the completion date. By 
doing so, we can continue to build new residential and commercial 
properties that are necessary to our recovery.
  I know this overall bill contains many critical parts to address our 
Nation's housing troubles but I thought that it was important to 
personalize how this bill will help thousands of people struggling to 
rebuild on the gulf coast.
  I am very proud of the Senate. I do believe we should give tax relief 
when it makes sense. This most certainly makes sense. And $1 billion is 
a lot of money. I know we are struggling to balance our budget, but I 
think this was a very worthy expenditure. I thank Senator Dodd again, 
thank Senator Grassley and Senator Baucus particularly for remembering 
the families on the gulf coast and for helping them to achieve 
substantial tax savings by the passage of this bill. It will go a long 
way, with the other provisions in this bill, to help our recovery that 
is underway in the Gulf of Mexico.
  Madam President, I yield the floor and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER (Mrs. McCaskill). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mrs. BOXER. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                            California Fires

  Mrs. BOXER. Madam President, I rise today to express my deep 
gratitude to the men and women who are fighting the wildfires now 
raging in my magnificent State of California. Over the last month, a 
swarm of dry lightning storms sparked more than 1,800 fires across 
drought-ridden land in California.
  Governor Schwarzenegger and President Bush have declared a state of 
emergency in 11 counties and crews are still working to bring under 
control over 300 fires burning across more than 600,000 acres of public 
and private land. Three hundred fires, and it is early July, and we do 
not get rain usually until November.
  In the fight against these fires, support has come from all quarters, 
including the National Guards of 11 States. I say to my colleagues all: 
Thank you for your contribution. Help has come from the U.S. Marine 
Corps, the Navy, even from NASA.
  I give special thanks to the more than 18,000--18,000--local, State, 
and Federal firefighters who have put their lives on the line over the 
last several weeks and continue to do so to fight these fires and 
protect our communities.
  The people of California owe a tremendous debt of gratitude to the 
brave men and women of CalFire and the U.S. Forest Service as well as 
the California National Guard and all of the local fire departments who 
have gone above and beyond the call of duty in fighting these fires.
  Your courage and swift action during this recent series of firestorms 
have truly been heroic. You have risked your health and your well-being 
for the benefit of our people, of our communities, and we are all 
grateful. You are the heroes.
  Some 233 firefighter injuries have been reported in the past few 
weeks--233 firefighter injuries--and that is a testament to the great 
personal risk these men and women undertake every day. These fires are 
unpredictable. The winds are unpredictable, and the danger shifts at a 
moment's notice.
  I am sad to report that these fires have claimed the life of one of 
our firefighters. Robert Roland, who had been with the Anderson Valley 
Volunteer Fire Department in Mendocino County for only 3 months, passed 
away on July 3, 2008, battling wildfires near the town of Philo. He was 
63 years old--a volunteer firefighter.
  One of America's greatest strengths is its spirit of voluntarism, and 
nowhere is that spirit more evident than in the tradition of volunteer 
firefighting.
  We mourn his loss, and we remember and give thanks for his selfless 
efforts and those of all the firefighters--volunteer and professional--
who put their lives on the line throughout California.
  The scale of these fires so early in the year is a stark reminder 
that we cannot afford to shortchange our fire preparedness. Being 
prepared means making sure adequate resources are available to fight 
and prevent fires. That is why I have consistently fought against the 
proposed cuts to the Assistance to Firefighters Program. This program 
provides Federal grants for equipment and training to local fire 
departments and emergency medical services organizations. I do not 
think you need to look farther than the efforts being undertaken to 
save lives and protect communities right now in California to 
understand that those proposed cuts are wrongheaded.
  Preparedness is about more than funding. It also means making sure we 
have a fully staffed firefighting force on our public lands.
  I am concerned about the reports of inadequate staffing in our 
national forests in California. Earlier this year, I called on the U.S. 
Forest Service to resolve the pay disparities and retention issues that 
have prevented them from recruiting and keeping qualified Federal 
firefighters in California.
  We also need to support the State and local efforts in order to 
manage

[[Page S6526]]

the risk posed by wildfires. One of the keys to preparedness is 
hazardous fuel reduction. Local communities and State agencies that do 
their part to remove hazardous fuel on local and State lands should not 
be left at risk for fires because inadequate funds limit hazardous fuel 
reduction on Federal lands.
  The Federal Government must be a good partner in not only fighting 
the wildfires but in preventing them. That is why I have urged that we 
include $910 million for U.S. Forest Service and Interior Department 
firefighting and fire prevention efforts--including efforts such as 
hazardous fuel reduction--in the legislation that Congress is expected 
to take up this session to address critical domestic priorities.
  The unprecedented onset of the fire season in California is an 
important reminder that we cannot afford to continue reducing the 
resources available for disaster preparedness and expect emergency 
responders to still be able to effectively protect our communities.
  They are exhausted. They are working overtime and more. I want to 
read from a letter I am sending today to President Bush. I wrote this 
letter after speaking at length with my Governor, Governor 
Schwarzenegger:

       With over 300 fires still actively burning in California, I 
     am writing to request that you immediately allocate 
     additional resources to assist with ongoing firefighting 
     efforts throughout my state. Governor Schwarzenegger has 
     informed me that an additional 41 helicopters, 302 hand 
     crews, 616 fire engines, and 773 support personnel are 
     urgently needed to help the thousands of Federal, State, 
     local, and volunteer fire fighters who are working so hard to 
     protect our communities from these dangerous fires.
       Governor Schwarzenegger also informed me he plans to call 
     up as many as 2,000 more members of the National Guard in 
     addition to the over one thousand members that are currently 
     supporting fire fighting activities. In order to ensure that 
     our National Guard is ready for this mission, I request that 
     the Administration make available out-of-State Federal 
     firefighters to help train National Guard members for fire 
     fighting duties. Active fire crews are currently being taken 
     away from the front lines of fires to train National Guard 
     members, but if Federal personnel were on scene to help train 
     new arrivals, our crews could continue to fight active fires.

  I might say what is happening is we are taking firefighters off the 
line to train the National Guard because they need to be extensively 
trained in firefighting, and we need to get those firefighters back on 
the line. So if we could have some Federal firefighters sent in, we 
would be able to keep these firefighters on the line.

       The Governor has also informed me that he requested the 
     U.S. Forest Service's Maximum Efficiency Level be increased 
     to 100 percent for the current fire season in California. 
     This will allow Federal incident commanders to make tactical 
     firefighting decisions as needed to protect lives and homes 
     without having to receive prior approval from the Office of 
     Management and Budget. I strongly support his request and 
     urge you to grant it immediately.
       This unprecedented start to the fire season in California 
     has put incredible stress on the State's resources and on the 
     brave men and women fighting these fires. While the support 
     provided by the Administration has been very helpful thus 
     far, the severity of the ongoing fires and the strong 
     potential for more fires indicates an urgent need for 
     additional resources and support.
       The residents of California need the Administration's 
     continued assistance and cooperation in protecting their 
     lives and property.

  Madam President, this is one Nation under God, and we know that, and 
we say it when we pledge allegiance every day here.
  The fact is, we need to come to the aid of our citizens, whether it 
is in the devastating floods in Iowa or it is Hurricane Katrina or it 
is the fire that I well remember in North Dakota or what is happening 
today in California.
  We must work together. I want to say right now that I will be making 
a call to the head of Homeland Security, Mr. Chertoff. I hope he has 
heard my words. I hope he has received a copy of my letter. We are 
going to need this help quickly. We expect--and this is right from my 
Governor--about a 5-month problem here. This is not going to be a 
momentary problem. We need a long-term commitment from everyone in 
order to save lives and save property and allow our firefighters a 
little bit of rest, because when they are exhausted, their lives are 
put in danger, and we cannot have that.
  I thank you very much for the time, Madam President, and I yield the 
floor.
  The PRESIDING OFFICER. The Senator from Michigan.
  Ms. STABENOW. Madam President, I ask unanimous consent to speak as in 
morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. STABENOW. Thank you, Madam President.


                              The Economy

  Madam President, I come to the floor after reading something I find 
very shocking. This is evidently in an interview with the Washington 
Times, referred to today by Jonathan Weisman. It has this quote. Former 
Senator Phil Gramm, a top policy adviser of Senator John McCain's, said 
the Nation is in a ``mental recession,'' not an actual one, and 
suggested the United States has ``become a nation of whiners.''
  Senator McCain is in my State of Michigan at this moment today. I 
certainly want to go on record here on the floor of the Senate to say 
that the people of Michigan are not whiners. The people of this 
country, who have seen their jobs slip away--over 325,000 jobs since 
January, good-paying American jobs--are not whiners. People have seen 
gas prices going up and up and oil prices doubling over the last 10 
months. This is not a nation of whiners. We are seeing food costs go 
up, health care costs go up, gas prices go up, everything in people's 
lives going up. Every middle-class family, every family in America is 
struggling while they see their wages go down, if they have a job at 
all. This is not a nation of whiners; this is a nation of tough people 
trying to survive, Americans who believe in this country, who believe 
in the American dream, who are fighting to keep their way of life in 
this country today.
  Mrs. BOXER. Madam President, will my friend yield for a question?
  Ms. STABENOW. I will be happy to.
  Mrs. BOXER. I am just stunned that Phil Gramm, who is a top adviser 
to Senator McCain--would you repeat exactly what he said?
  Ms. STABENOW. Yes. I would be happy to. He said the Nation is in a 
mental recession, not an actual one, and suggested that the United 
States has become a nation of whiners.
  Mrs. BOXER. Let me get this straight. Senator McCain's top adviser--
one of his top advisers on the economy--says we are in a mental 
recession, there is no actual recession, and we are whining about it.
  Ms. STABENOW. Right, absolutely.
  Mrs. BOXER. Let me ask my friend, what does she hear in her State 
about gas prices from her constituents?
  Ms. STABENOW. Madam President, I thank my friend from California, who 
comes to the floor and fights every day on behalf of middle-class 
Americans and people struggling to make it. We in Michigan have the 
highest unemployment rate in the country--8.5 percent as of the last 
numbers. So people are losing their jobs.
  Mrs. BOXER. Is that mental? Do they just think they are unemployed 
but they are really employed? What is he talking about?
  Ms. STABENOW. The Senator from California is absolutely right. The 
fact is that folks who are losing their jobs or who are seeing their 
wages cut in half are seeing gas prices go up and up and up.
  We have had two oilmen in the White House for 8 years, and we have 
had now the highest gas prices we have ever had to pay while they 
protect oil profits, oil company profits over and over again. This is 
not an accident, what has happened here. I think it is almost too 
obvious. We have two oilmen in the White House, and we are in the 
situation we are today, with families struggling to get to work, to get 
the children to childcare, maybe to go on a vacation, who can't hold 
things together, and they are looking around, saying: What in the world 
is happening? Now, we are hearing from a top adviser of someone who 
wants to be the next President that this is a mental recession and that 
we are whiners.
  Mrs. BOXER. Will my friend continue to yield?
  Ms. STABENOW. I am happy to.
  Mrs. BOXER. I didn't expect to stay here and engage my friend, the 
Senator from Michigan, but when she read this--I know what her State is 
going through, and I have to say that California is suffering as well. 
If it were not for the fact that we have seen companies invest in 
alternative energy, and that is taking some of the jobs--

[[Page S6527]]

and thank goodness--away from a crumbling housing industry, we would be 
in worse shape. We are not in good shape in California. We have real 
problems.
  My friend from Michigan makes a good point. Two men in the White 
House--and I remember when George Bush was running in the beginning and 
saying: Well, put two oilmen in the White House, and we will see how we 
will deal with gas prices. Well, we have seen.
  Is my friend aware that since George Bush and Dick Cheney--two 
oilmen--took over the White House, we have seen about a 255-percent 
increase in the cost of gas per gallon? Is my friend aware of that?
  Ms. STABENOW. I am aware of that. It is outrageous. It is so stunning 
that this would be happening and be so obvious in terms of allegiance.
  Mrs. BOXER. Let me ask one more question, and then I will leave her 
to the rest of her remarks. I know she has some thoughts she needs to 
share. As Phil Gramm, the economic adviser to John McCain, says that 
Americans are whining, we all know that the middle class is suffering, 
as the Senator from Michigan said, not just from gas prices but as a 
result of food prices, health care prices, credit card rates. There is 
a middle-class squeeze going on that is hitting our people very hard, 
and they are falling behind by thousands of dollars a year because of 
increased prices. Now, Phil Gramm, he doesn't feel the pain. He 
probably is in the top one-tenth of 1 percent of income earners, let me 
say.
  I wish to ask my friend, and then I will leave her to her speech, 
does she know how much the head of ExxonMobil made this year?
  Ms. STABENOW. Well, I know this: I know ExxonMobil has made the 
highest profits of any company ever in the entire world. I don't know 
the exact number, but my guess is that it is a lot more than people in 
Michigan are making.
  Mrs. BOXER. Well, the CEO, the chief executive officer of ExxonMobil, 
according to my information, including his last paycheck and bonuses 
and the rest, made $400 million in 1 year. So no, he is not whining, 
and Phil Gramm is not whining. That is obvious. They are the winners in 
this economy with two oilmen in the White House.
  I wish to thank my friend.
  Ms. STABENOW. Madam President, I so much appreciate my friend from 
California and her advocacy on a daily basis on this floor for people 
who are feeling the squeeze on all sides.

  We are seeing a situation in this country where, frankly, most 
middle-class families, as well as small businesses and large businesses 
and those who want to do business in this country, just can't take any 
more. We are at the limit right now of what we can absorb in terms of 
higher and higher costs on people every day, with lower and lower 
wages, maybe losing a pension, maybe losing your health care.
  What we have seen over the last 8 years is the creation of a race to 
the bottom in a global economy, a race to the bottom where the average 
American is told: If you only work for less, pay more in health care, 
and lose your pension, maybe we can be competitive. As Democrats, we 
believe in a race to the top. As Democrats, we believe it is critical 
that we address the squeeze middle-class families are feeling if we are 
going to have an economy.
  What has made us strong among nations around the world is a strong, 
vibrant middle class, folks who can have the American dream, who know 
they can have that job. In Michigan, it is to have a home and maybe a 
little cottage up north or a boat to go around the beautiful Great 
Lakes and enjoy fishing and hunting and know they can send the kids to 
college--all of those things that have meant the great American dream 
for families in America. It is slipping away because of the policies of 
the last 8 years, not paying attention to what is happening to our 
global economy and making it worse by, in fact, protecting those whose 
profits are getting higher and higher at the expense of middle-class 
Americans.
  So I would just say that to hear we are a nation of whiners from 
someone who is advising someone who wants to be the President of the 
United States--alarm bells should be going off to every single person 
who drives up to a pump today and has to pay somewhere between $4 and 
$5 a gallon for gasoline or goes to the store and sees the price of 
milk going up and bread and everything else they need to feed their 
family or sees their costs of health care going up, if they are 
fortunate enough to have health care alone.
  So I certainly invite Senator McCain to come to my State of Michigan 
as many times as he would like, and I hope he listens very, very hard. 
I hope he doesn't hear it as whining. I hope he hears it as a sign of 
proud, patriotic, America-loving people who just expect decisions here 
in this Government to be made in their best interests, not in the best 
interests of oil companies or credit card companies or insurance 
companies that aren't willing to cover their health problems. People 
want to know that, in fact, their families will be put first for a 
change. That has not happened in the last 8 years. We certainly don't 
need more of that.
  Frankly, when I look at the gas price situation alone, I must say, if 
I remember correctly--and I will check this for sure--if I remember 
right, the gentleman who now calls us a ``nation of whiners'' actually 
authored language that began to deregulate the energy markets back in 
2000, which has actually created much of the situation we are in today, 
with lack of accountability and transparency and gas prices, oil 
prices, going up and up and up.
  The people of this country have had enough, and they expect us to 
work together in their interests. They expect that we will put them and 
their families first, that we will do everything possible to create a 
climate where they can get a good-paying job and work hard every day 
and know that if they play by the rules in America, they are going to 
be able to have a better life for their children than they have had for 
themselves. That is all on the line right now in America because of 
what has been happening in the last 8 years.
  We are not a nation of whiners. America is going through tough times. 
Even though times are tough, so are we. We are tough, resilient, hard-
working people. I am proud of the people of my State who are working 
hard to keep their heads above water, to keep their families and their 
houses, to be able to keep some kind of an income coming in in the 
midst of all of this. I am proud to fight for them every day, along 
with a caucus that understands what is happening and which is going to 
do everything we can to turn this around.
  I ask unanimous consent that following my remarks, Senator Grassley 
be recognized to speak, to be followed by Senator Pryor.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. STABENOW. Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The first assistant bill clerk [William Walsh] proceeded to call the 
roll.
  Mr. GRASSLEY. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                       Changes in the Tax System

  Mr. GRASSLEY. Madam President, as the upcoming Presidential election 
approaches, we are learning more about changes each of the major 
candidates would make in our tax system.
  Most of the attention in this regard is going to issues such as 
income tax rates, corporate tax rates, and the alternative minimum tax. 
These are very important parts of our Tax Code and do deserve the 
attention they are getting--particularly in a Presidential race--
because then you have an opportunity not only to state your views but 
to educate the public about the complications of the Tax Code. This is 
what the public needs to know more about.
  Now, my purpose for coming to the floor, too, is to discuss some of 
the lesser known parts of the Tax Code that are becoming part of the 
Presidential debate on taxes. Changes made in these areas can still 
make big differences in what citizens pay to the Government every year.
  I am here to discuss what is termed the ``Pease limit,'' the overall 
limitation on itemized deductions. That name comes from a Member of 
Congress probably 20 years ago who thought up the term. Then the word 
``PEP'' is a phaseout of personal exemptions. So we are talking about a

[[Page S6528]]

part of the Tax Code that does things in a stealth way to make people 
pay higher marginal tax rates, even though the law would say that the 
marginal tax rate is only 35 percent--or in the case of Senator Obama's 
proposal, 39.6 percent. But yet when you put limitations in there and a 
phaseout of the personal exemption, you have a higher marginal tax 
rate, but it doesn't look very--it is not transparent.
  So PEP and Pease were originally enacted by a Democratic Congress as 
a way of evading the first President Bush's refusal to raise the top 
statutory tax rate. By phasing out the personal exemption and itemized 
deductions for upper income taxpayers, the Democratic Congress was able 
to enact a kind of backdoor tax increase. However, in 2001, when I 
became chairman of the Senate Finance Committee, Congress reduced PEP 
and Pease in order to reduce taxpayer confusion and minimize 
inequalities based on a taxpayer's understanding of the law. But from 
my point of view, I figured if you are going to have a higher marginal 
tax rate, you should not camouflage them. You ought to simply say, 
instead of a 33 percent marginal tax rate, we are going to have 36 or 
37 percent. Maybe for people who have income from subchapter S, it is 
even higher than that. Why not be honest with the taxpayers and say 
what the marginal tax rate is, instead of hiding it in this camouflaged 
way called PEP and Pease?
  That bipartisan simplification was done at the recommendation of the 
nonpartisan Committee on Taxation to get around a principle that was 
put in place--or that recommendation was carried out by the nonpartisan 
Joint Tax Committee because we ought to be very transparent in our tax 
laws.
  Despite this, those who see more Government spending as the solution 
to all the problems are desperate to seize more money from the American 
taxpayers.
  We are hearing rumors of let's go back to camouflage. The junior 
Senator from Illinois would need more money to fund all the promises he 
is making. Restoring the phaseouts for itemized deductions and personal 
exemptions seems a likely source of some of that money. In discussing 
the tax proposals of the likely Democratic nominee, I am referring to a 
publication titled ``A Preliminary Analysis of the 2008 Presidential 
Candidates' Tax Plans.'' This was prepared by an organization called 
the Tax Policy Center. The Tax Policy Center is a joint venture of the 
Urban Institute and the Brookings Institution, both well-respected 
think tanks.
  According to this publication, my distinguished colleague from 
Illinois would restore PEP and Pease. In other words, he would bring 
less transparency to what is a higher marginal tax rate. That is, he 
would restore the phaseouts and the complexity they would mean for 
millions of tax-paying families. However, it is also noted that he 
would set an increased income threshold of $250,000 for married couples 
filing jointly. This is consistent with the candidate's stated goal of 
targeting tax breaks to low- and middle-income taxpayers while shifting 
more of the tax burden on the higher income taxpayers.
  If your family makes less than $250,000 a year, you might think this 
sounds like a good deal. For singles, the threshold for phaseout of 
personal exemptions would probably be lower, but the phaseout of 
itemized deductions would not vary with the filing status if current 
law is followed.
  As an aside, the proposal of the distinguished junior Senator from 
Illinois would create a new marriage penalty. For those considered by 
the Senator from Illinois to be low- and middle-income taxpayers, the 
idea of raising taxes on other people might sound like a good idea but 
hold on.
  On March 14 of this year, this body approved a budget with 51 votes. 
One of those 51 ``yea'' votes was cast by the Presidential candidate 
from Illinois. That same Senator voted again for the budget on June 4, 
when the Senate voted on that conference report. I am not sure if he is 
not communicating with the rest of the Democratic caucus or was too 
busy campaigning to become completely familiar with the budget. But he 
is making promises that the budget he voted for will not allow.
  The budget passed by Congress earlier this year would protect 
taxpayers in the 10-percent and 15-percent brackets but would subject 
filers in the 25-percent bracket and brackets above to these camouflage 
provisions I have been talking about that we call PEP and Pease. To get 
an idea of what this means, I wish to walk through the 25-percent 
bracket, the 28-percent bracket, and the 33-percent bracket.
  These particular brackets are important because they contain families 
with less than $250,000 in income and singles with less than $125,000 
in annual income. It has been implied that the junior Senator from 
Illinois would protect these filers from tax increases as President. 
But restoring PEP and Pease provisions within the confines of this 
year's budget would subject filers in these brackets to this backdoor 
camouflage, the less transparent tax increase. The Senator from 
Illinois may say he is going to protect families earning less than 
$250,000 a year, but the budget he voted for will not do that.
  According to the Internal Revenue Service, single individuals falling 
within the 25-percent bracket in 2008 start at taxable income of more 
than $32,550. That is not a high-income person. They earn taxable 
income of no more than $78,850--in a lot of places in this country, 
that is not a very high income. It is high for my State of Iowa, but it 
is not high for a lot of States. Singles in the 28-percent bracket will 
earn taxable income of more than $78,850 but less than $164,550. The 
important number is $125,000. If that many filers in the 25-percent and 
28-percent brackets make less than that, based on the Democratic 
budget, these taxpayers would be hit with a PEP and Pease camouflage, 
less transparent rates of taxation.
  Looking at the brackets for married filing jointly for the 2008 tax 
year, according to the IRS, married filers in the 25-percent bracket 
will start at a taxable income of more than $65,100. Taxpayers in this 
bracket will earn taxable income of no more than $131,450 annually. In 
the 28-percent bracket, they will earn taxable income of no more than 
$200,300. For the 33-percent bracket, married filers filing jointly 
will earn no more than $357,700 but more than $200,300. For married 
individuals filing jointly, the important number is $250,000.
  Filers in the tax brackets I have walked through may expect the 
Senator from Illinois to protect them from tax increases if he is 
elected President. But the budget he voted for earlier this year makes 
that impossible.
  As I said, the reinstatement of PEP and Pease amounts to a backdoor 
tax increase. I say backdoor because it increases the effective rate 
for many filers without really increasing the statutory tax rate. That 
is why it is camouflaged. That is why it is less transparent. And if 
you want to increase taxes, you ought to have guts enough to say what 
is the real marginal tax rate and put it in the tax laws, just like the 
25, the 28, the 33, and the 35 are now.
  For a family of four, this backdoor tax increase would be 
significant. If your family falls in the 25-percent tax bracket, 
according to the Finance Committee Republican staff analysis from March 
2001, PEP and Pease could make your actual rate 26 percent. We can see 
the difference between the green line and the red line is when you are 
hit with PEPs and Peases. Your tax increase is going to be at a higher 
rate than what your tax form really says it will be. Again, why 
camouflage it?
  The news is even worse--and I will have charts on this point--for 
filers in the 28-percent bracket and the 33-percent bracket. In the 28-
percent bracket, a family of four could pay a real tax rate of 32 
percent. So if you want people of that tax bracket to actually pay 32 
percent, why don't you have a tax bracket that says it instead of 
camouflaging it? A family in the 33-percent bracket, as we can see in 
the next chart, a family of four could pay a rate of 37 percent. Again, 
the difference between the 33 is what you are told in your tax rate 
chart you are going to pay, but as a practical matter, you are paying 4 
percentage points higher.
  I end by stating that I believe taxes are a necessary part of life. 
We all benefit from the services our Government provides, and that 
Government needs money to function. We collect that money from taxes. 
However, I think our tax system should be transparent

[[Page S6529]]

and honest, not camouflaged. Raising money by limiting personal 
exemptions and itemized deductions is not transparent. As I have said, 
it amounts to a backdoor tax increase. If anyone thinks people should 
hand over a greater percentage of their income to the Government, that 
person should openly advocate increasing statutory rates.
  I am also concerned that many people around the country may be 
relying on the latest campaign position of the junior Senator from 
Illinois. That latest campaign position says he intends to protect low- 
and middle-income tax filers from tax increases. Right now, he is at 
odds with his own party and with a budget for which he voted. I bet 
that being subjected to a backdoor tax increase is not the sort of 
change most Americans believe in, to say nothing of restoring what the 
nonpartisan Joint Committee on Taxation stated was a very serious 
source of complexity for the American taxpayers, a complexity we took 
out in the 2001 tax bill.
  A series of correspondence has gone back and forth between the 
Republican and Democratic leadership regarding the extension of 
expiring tax provisions and energy tax incentives. On July 3, Leader 
McConnell sent a letter to the majority leader urging that he work with 
us to find areas of bipartisan agreement in order to break the current 
impasse over extending time-sensitive provisions that we call 
extenders, both for energy and the other category of extenders, such as 
R&D tax credits, an example of about 40 that have to be extended.
  On that day, the majority leader responded in a fairly sharp manner:

       While I am pleased the Republicans appear to have abandoned 
     their fiscally irresponsible ways when it comes to the 
     extenders bill, it is hard to comprehend why Senators 
     McConnell and Grassley would choose to cut programs to help 
     working families, seniors and veterans in need of health care 
     in Kentucky and Iowa in an effort to protect multinational 
     corporations and hedge fund managers.

  On a preliminary point, in all the back and forth on this issue, I 
have not criticized the majority leader by name. In the tensions that 
come in Senate debate and the political environment, I think it is best 
to stick to that course. So I am disappointed that the majority leader 
did not keep the discussion on that level.
  With all due respect to him, he seems to have misread the letter, so 
I will set the record straight on a couple of important points.
  First, a simple extension of expiring tax relief, including extension 
of the AMT patch, should not be offset with accompanying tax increases. 
This does not mean we are opposed to offsetting the revenue loss from 
new tax relief policy with spending reductions or revenue raised from 
tax proposals that are grounded in good tax policy.
  Then my second point. The distinguished majority leader accused 
Leader McConnell and me of protecting hedge fund managers. This is 
simply not the case, which I will demonstrate. In fact, the House 
extenders bill contains an offshore deferred compensation proposal.
  This proposal that the Democrats actually support allows these same 
hedge fund managers a very generous tax break that is not available to 
the average taxpayer. The House-passed hedge fund proposal allows these 
hedge fund managers to avoid paying taxes on their offshore deferred 
compensation if they make a cash donation to a charity equal to 100 
percent of the amount of the offshore deferred compensation. Meanwhile, 
the average taxpayer is limited in how much they can deduct even for 
contributions to charity. They can only deduct charitable contributions 
if those contributions do not exceed 50 percent of their adjusted gross 
income. So if a teacher donated his or her entire salary to charity, he 
or she would only be able to claim about half of that as a deduction. 
But a hedge fund manager who sheltered income in the Grand Caymans 
would be allowed to claim a deduction for the entire amount of his or 
her sheltered income.

  I want to make it clear, not only do I support the policy of changing 
the tax treatment of offshore deferred compensation for hedge fund 
managers, but I would make sure that we corrected the giant loophole 
that came over here from the House of Representatives benefiting hedge 
fund managers. We should make sure that if we are going to tax the 
deferred income, we do not leave an escape hatch in the future.
  With respect to the spending cut allegation, the majority leader's 
comments again, with all due respect, implied that he has not read the 
Republican leader's letter correctly. The Republican leader's offer to 
break the stalemate does not pit spending cuts for benefits for working 
families, for seniors, for veterans against expired tax relief 
provisions. The spending described in the letter is for unspecified and 
unwritten appropriations bills as far as 10 years in the future. The 
general spending account identified represents the excess of new future 
spending levels over the current levels for nondefense discretionary 
spending plus inflation. None of the current-law levels of these 
categories of spending would be cut. What is more, the Republican 
leader's offer would leave intact nearly all of the $350 billion in new 
extra spending. On its face, it is an extremely modest revision of this 
extra spending.
  I ask unanimous consent to have printed in the Record a copy of the 
letter from the Republican leader and the majority leader's response.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 McConnell Proposes Compromise To Extend Tax Relief, Energy Incentives

       Washington, DC.--U.S. Senate Republican Leader Mitch 
     McConnell sent the following letter to Speaker Nancy Pelosi 
     and Majority Leader Harry Reid on Thursday calling on 
     Democrats to forge a compromise with Republicans to extend 
     expiring tax relief in a deficit-neutral manner, without 
     permanently raising taxes.
                                                     July 3, 2008.
       Dear Madam Speaker and Mr. Leader: This letter is in 
     response to a letter from the House Democratic Leadership, 
     dated June 12, 2008 and a letter from the Senate Leadership, 
     dated June 13, 2008. Both letters deal with the legislation, 
     H.R. 6049, which is designed to extend certain expiring tax 
     relief provisions and energy tax incentives.
       We object to some of the assertions in both letters about 
     the position, record, and intentions of the Senate Republican 
     Conference regarding tax increase proposals and the 
     tax relief extensions. However, rather than respond to 
     overtly coordinated election-year letters in a partisan 
     fashion, we would like to focus on areas of bipartisan 
     agreement in order to break the impasse on these time-
     sensitive tax matters.
       The Senate Republican Conference places the highest 
     priority on fiscal responsibility. We believe that deficit 
     reduction should be considered with respect to all tax and 
     spending proposals. However, the first step toward mitigating 
     current adverse fiscal patterns is to do no more harm to the 
     fiscal situation.
       New spending increases the deficit, whether it be the 
     expansion of discretionary spending or the expansions of 
     entitlement spending. New tax relief is scored as increasing 
     the deficit, even in instances where the resulting economic 
     growth raises far more revenue than is estimated to be 
     ``lost.'' Under Congressional budget accounting, however, the 
     extension of expiring tax relief looks like it increases the 
     deficit, while the extension of expiring entitlement spending 
     does not. This does not make sense.
       Legislation to extend expiring tax relief, including an 
     extension of the alternative minimum tax (AMT) patch, and 
     legislation to extend expiring energy tax incentives all 
     enjoy overwhelming bipartisan support. Few would dispute the 
     merits of continuing these tax relief provisions. Indeed, 
     with these bipartisan tax relief provisions in place, 
     aggregate Federal tax collections have yielded revenue above 
     the post World War II average of 18.2 percent of gross 
     domestic product. Since these tax policies have yielded 
     revenue above the historic average, we see no reason to 
     condition their extension on new tax increases.
       The conference report on the 2009 budget resolution 
     increases non-defense discretionary spending by $25 billion 
     above the President's request in 2009. When these amounts are 
     enacted, they will be perpetuated in the baseline and will 
     result in $350 billion in higher deficits over the next ten 
     years. The deficit effect of this new spending cannot be 
     ignored. It is surely as much of a fiscal burden as $350 
     billion in tax policy extensions.
       As a compromise, we suggest the following. The Senate 
     Republican Conference will agree to offset the revenue lost 
     from new tax relief policy with spending reductions or 
     revenue raised from appropriate tax policy proposals. In 
     exchange, the House and Senate Democratic Leadership would 
     revise the desired new non-defense discretionary spending in 
     the 2009 Congressional budget downward to a level sufficient 
     to offset the cost (relative to the Congressional Budget 
     Office baseline) of extending expiring tax relief. If agreed 
     to, extension of expiring tax relief, including extension of 
     the AMT patch and expiring energy tax incentives, could be 
     accomplished in a way that achieves your stated goal of being 
     deficit neutral, but without the unstated and unwarranted 
     result of increasing the size of the federal government.
       The Senate Republican Conference is committed to, as the 
     letter from the House

[[Page S6530]]

     Democratic Leadership states, ``enacting legislation 
     extending tax relief to businesses and families in a fiscally 
     responsible manner.'' We look forward to working with our 
     friends in the House and Senate Democratic Leadership on this 
     time-sensitive legislation.
           Sincerely,
                                                  Mitch McConnell,
     U.S. Senate Republican Leader.
                                  ____



                                                  U.S. Senate,

                                     Washington, DC, July 8, 2008.
     The Hon. Mitch McConnell,
     Minority Leader, U.S. Senate,
     Washington, DC.
       Dear Leader McConnell: Thanks for your recent response to 
     the letter I sent you June 13 regarding extension of the 
     expiring tax provisions and energy tax incentives.
       Let me begin by saying I strongly share your hope that the 
     Senate can work out a bipartisan solution to extend these 
     important tax incentives before the August recess. Such 
     action is as important as it is long overdue.
       Although you have voted twice against just such a package, 
     I did note that your July 3rd response contains one 
     potentially positive thought that may make such a solution 
     more likely. As you know, under this Republican President and 
     a Republican-controlled Congress, the nation's debt and 
     deficits reached historic levels. Record budget surpluses 
     were transformed into record deficits and the nation's debt 
     grew by more than $3 trillion. Much of this was caused by the 
     fiscally irresponsible decision to cut taxes and increase 
     spending without corresponding offsets. Your July 3rd letter 
     appears to indicate you are now ready to set aside your 
     fiscally irresponsible ways when it comes to extenders and 
     adhere to pay-as-you-go budget rules Democrats enacted at the 
     beginning of the 110th Congress.
       Unfortunately, rather than accept the noncontroversial 
     offsets contained in the bipartisan legislation passed by the 
     House and the substitute put together by Senator Baucus, your 
     letter indicates Senate Republicans believe we should instead 
     jeopardize important investments in our nation's health, 
     energy, and infrastructure sectors. Both the House-passed and 
     Baucus substitute bills rely on the same two offsets--one 
     ends the use by hedge fund managers of offshore accounts to 
     avoid paying taxes and the other merely extends an existing 
     delay in the implementation of interest allocation rules for 
     multinational corporations. Neither provision has generated 
     opposition from the affected industries and both are far 
     preferable to cuts in health care, energy, and infrastructure 
     programs that would harm Kentucky and many other states.
       Despite your apparent decision to protect hedge fund 
     operators over critical national priorities, I remain 
     committed to taking up and passing bipartisan legislation to 
     extend important tax incentives before the August recess. The 
     fate of this legislation rests in your hands. I hope you and 
     those in your caucus who have blocked the Senate from passing 
     this legislation twice earlier this year will reconsider your 
     opposition and join Democrats to extend this much-needed tax 
     relief.
       Sincerely.
                                                       Harry Reid,
                                                     U.S. Senator.

  Mr. GRASSLEY. Madam President, to put the matter in some perspective, 
I ask unanimous consent to have printed in the Record an article 
containing a summary of an analysis by noted economist Kevin Hassett, a 
senior fellow and director of economic policy at the American 
Enterprise Institute.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 [From American Enterprise Institute for Public Policy Research, Feb. 
                               11, 2008]

            How George Bush, Big Spender, Destroyed Nirvana

                         (By Kevin A. Hassett)

       If you could go back in time to President George W. Bush's 
     inaugural address and add one economic statement, what would 
     it be? For me, there is an obvious answer.
       If Bush had promised in January 2001 that the baseline of 
     government spending that he inherited when he took office 
     would be the cap during his term, then we would have a big 
     budget surplus today. It would have been easy to do. He just 
     had to say: ``I will not spend one penny more than President 
     Bill Clinton planned to. I will veto any bill that tries 
     to.''
       I have written before in this space that Bush has outspent 
     Clinton by a mile. With government spending still out of 
     control, the gap between where we are and where a disciplined 
     nation could have been is getting bigger and bigger.
       With a recession looming, the policy implications of the 
     spending explosion are serious. If a deep recession occurs, 
     we will have less wiggle room.
       To see how different the world could have been, I gathered 
     data from a number of sources and ran an alternative history. 
     In that wishful place, government spending was set equal to 
     the spending envisioned by the Congressional Budget Office in 
     the January 2001 long-run forecast, plus the spending for the 
     war in Iraq and to fight terrorism. This simulation assumes 
     that the war would have happened in spite of Bush's spending 
     promise, and wouldn't have induced him to seek cuts 
     elsewhere.
       The difference between that spending path and the one we 
     are on is huge. Today, we expect federal spending in 2008 
     will be $2.9 trillion. According to the alternative history, 
     spending would be $2.5 trillion.


                            Surplus Fantasy

       With spending at the lower level, we would have a surplus 
     of $152 billion if revenue were equal to what it is currently 
     projected to be.
       Running the simulation forward, the gap between revenue 
     gets wider and wider. By 2017, we are scheduled to spend 
     almost $1 trillion more than we would have if we had stuck to 
     the Clinton baseline. With the low spending baseline we would 
     have a surplus in 2017 of $1.1 trillion, instead of the $151 
     billion surplus that's currently forecast.
       Think of it this way. If we now had the lower spending 
     levels that Bush inherited, we could extend his tax cuts, 
     repeal the alternative minimum tax, enact the current 
     stimulus package, and still have a 10-year budget surplus of 
     $1.9 trillion. And, remember, that allows spending to be 
     adjusted up for the Iraq war and the war against terrorists.
       Many observers might say this scenario is unrealistic. The 
     2001 long-run forecast covered both discretionary and 
     mandatory spending. No administration, the argument might go, 
     could have held the line on the growth of Medicare and Social 
     Security spending.


                             Hold the Line

       There are two responses to that.
       First, a president could always demand that spending be 
     capped and that discretionary spending be reduced to offset 
     unexpected increases in mandatory outlays. Social Security 
     might be the third rail of American politics, but it might 
     not be.
       It has been changed before. Why couldn't it be changed 
     again? Families do that all the time. If Johnny needs braces, 
     then you take fewer trips to the restaurant.
       The second response is perhaps more powerful. Let's see 
     what happens when we allow mandatory spending to go up as it 
     did. This lets Bush have his prescription-drug benefit, which 
     is now part of mandatory spending.
       If we had held the line on everything else that is 
     discretionary, we could have had the prescription-drug plan, 
     the Iraq war and the war against terrorists. We could have 
     kept all the Bush tax cuts, made them permanent, repealed the 
     AMT and added the stimulus package and still ended up with a 
     balanced budget from 2008 to 2017.


                             Bloated Uncle

       It makes you sick to think about it. All that money wasted 
     on ethanol and bridges to nowhere has accumulated into a pile 
     that massive. Uncle Sam ate a whopping helping of apple pie 
     every day for seven years, and now he is obese.
       This is important to bear in mind as we move forward to the 
     general election. We don't have a deficit because of Iraq, or 
     the tax cuts, or the drug benefit. We have a deficit because 
     the government grew fat. We can't fix that with tax 
     increases. Uncle Sam must go on a diet.
       A simple way to start would be this: Whoever is elected 
     president this November should pledge that he or she won't 
     spend $1 more than we currently plan to. If Bush had done 
     that seven years ago, we would be in a different world.

  Mr. GRASSLEY. According to the analysis, if the last Clinton 
administration budget were the baseline, Federal spending would be $400 
billion less than it is this fiscal year. Dr. Hassett's analysis 
accounts for spending increases for the global war on terror and 
related matters that were anticipated at the end of the Clinton 
administration. The analysis shows that other Government spending is 
trending $400 billion above where it otherwise would be.
  In essence, the Republican leader's offered offset categories are 
future undefined spending budget room that did not materialize until 
the conference report on the budget was adopted a few weeks ago. Keep 
in mind that this new undefined future spending sits on top of a 
baseline that is, as Dr. Hassett's analysis shows, $400 billion higher 
than the trendline from the Clinton administration.
  If the majority leader does not engage us on this deficit-neutral 
offer, then he is putting taxpayers in his State at risk for the loss 
of several deductions they used on tax returns for last year. Included 
are the sales tax deduction, college tuition deduction, and teachers' 
classroom expense deduction.
  The latest IRS statistics of income data on the number of families 
and individuals claiming these benefits for the States of Nevada, 
Kentucky, and Iowa will appear in the Record after my discussion.
  The tradeoff is clear. Deal with these tax benefits which affect 
taxpayers now. Offset them with undefined extra spending accounts for 
appropriations bills that will not be written until several years down 
the road under the present budget. All that can be accomplished without 
adding a penny to the Federal deficit.

[[Page S6531]]

  I ask unanimous consent to have printed in the Record the IRS 
statistics of income data to which I earlier referred.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 TABLE OF EXAMPLES OF NUMBERS OF TAX FILERS AFFECTED BY INACTION ON TAX
                                EXTENDERS
------------------------------------------------------------------------
                                           Nevada    Kentucky     Iowa
------------------------------------------------------------------------
Sales Tax Deduction                        327,532     54,602     50,163
College Tuition Deduction                   32,800     45,713     48,895
Teachers Classroom Expense Deduction        22,789     39,735     35,238
------------------------------------------------------------------------
Source: IRS Statistics of Income (2004 tax year).

  Mr. GRASSLEY. I yield the floor.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mr. PRYOR. Madam President, I ask that I be allowed to speak as in 
morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                       HONORING OUR ARMED FORCES

    Sergeant First Class Anthony Lynn Woodham and Justin D. English

  Mr. PRYOR. Madam President, the acclaimed writer H.L. Mencken once 
said:

       In war the heroes always outnumber the soldiers ten to one.

  Today, I come to the floor to honor the lives of two of those heroes: 
SFC Anthony Lynn Woodham of Rogers, AR, and Justin English of 
Springdale, AR. Madam President, we lost Specialist First Class Woodham 
on Saturday when he paid the ultimate sacrifice while serving in Iraq 
on his second tour as a member of the 39th Brigade Combat Team. As a 
vehicle maintenance supervisor at Camp Adder in Talil, he kept American 
troops safe and their equipment and vehicles running. Throughout his 20 
years of National Guard service, he also trained countless mechanics, 
instilling in them a strong work ethic, enthusiasm, and patriotism.

  In 2004, Specialist First Class Woodham explained that a lot of 
solutions for maintaining equipment are not found in the training 
manual. He learned from trial and error and taught others the art of 
adapting and improvising in order to get the job done quickly and to 
get the job done right. For his leadership and his service, we are a 
truly grateful nation.
  MGEN William Wofford of the Arizona National Guard said of Woodham: 
``No words can fill the gap left by such a loss.'' I know those 
sentiments are also true for Specialist First Class Woodham's wife 
Crystal and three children, Patrick, 17, Mitchell, 11, and Courtney, 6.
  Arkansas suffered another loss 11 miles away from Rogers, in 
Springdale, AR. The English family is mourning the loss of 25-year-old 
Justin English. A former Springdale firefighter and EMT, he went to 
Iraq for a larger mission--to protect United States personnel and 
installations in Iraq. A week into his mission--just a week into his 
mission--English's vehicle was struck by a roadside bomb near Baghdad 
on Monday.
  Those who knew Justin describe his friendliness, positive spirit, and 
willingness to lend a helping hand. Janet English, his aunt, said he 
had always wanted to join the military, find adventure, and serve his 
country. Indeed, he gave his country all.
  Arkansas continues to make tremendous sacrifices to defend freedom 
and protect the ones we love. We will never forget the sacrifices made 
by the Woodham family, the English family, and so many other grieving 
families who have lost their loved ones in combat. I urge my colleagues 
in the Senate to honor the service of these brave men and women and 
ensure our troops have the resources they need both while in combat and 
when they return.
  Madam President, I yield the floor, and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The first assistant bill clerk proceeded to call the roll.
  Mrs. MURRAY. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                       Air Force Tanker Decision

  Mrs. MURRAY. Madam President, 3 weeks ago, the Government 
Accountability Office issued a blistering decision about the Air 
Force's handling of one of the most important defense contracts in our 
history. The GAO found that in the competition between Boeing and the 
European company Airbus to replace our military's aerial refueling 
tankers, the contest was unfairly skewed toward Airbus from the very 
beginning. It said that but for the Air Force's prejudice, Boeing would 
have had a substantial chance of winning.
  The GAO was clear and emphatic that the Pentagon should reopen the 
contract, get new proposals, and correct those errors. I rise today, 
because yesterday Defense Secretary Gates announced that he would 
follow the GAO recommendations and rebid that contract. I am very 
pleased that he says he is committed to a swift decision. But I have 
also been a close observer of the Pentagon's decisionmaking process for 
many years now, and I know the devil is always in the detail.
  We do not know yet many of the details of this latest decision, and 
unfortunately I am already skeptical about whether the Pentagon is on 
track to get this right. The Defense Department has a high hurdle to 
clear in order to ensure this competition is fair and is transparent.
  As I said earlier, the GAO raised serious questions about the Air 
Force's previous decision, and it described the competition as 
unreasonable, improper, and misleading. The GAO found that the Air 
Force changed direction midstream about what criteria were more 
important. It didn't give Boeing credit for providing a more capable 
plane, according to the Air Force's description of what it wanted, yet 
it gave Airbus extra credit for offering amenities it didn't ask for. 
It said the Air Force deliberately and unreasonably increased Boeing's 
estimated costs. And when that mistake was corrected, it was discovered 
that the Airbus tanker actually costs tens of millions of dollars more 
than Boeing's.
  The GAO said the Air Force accepted Airbus's proposal even though 
Airbus couldn't meet two key contract requirements. First, Airbus 
refused to commit to providing long-term maintenance, as specified in 
the RFP, even after the Air Force asked for it repeatedly. Second, the 
Air Force could not prove that Airbus could refuel all of the 
military's aircraft according to procedure.
  Those are very serious findings. It is still unclear whether the 
errors were due to incompetence or impropriety, but the result was that 
the military chose a plane that didn't meet the fundamental 
requirements that were set out in their own RFP. That cannot happen 
again. The Defense Department must do everything it can do to ensure 
that this competition is fair and transparent.
  That means the Pentagon must go back to the original request for 
proposals. It must ensure that both of the companies get the same 
information throughout the entire competition. It must prove the tanker 
it selects can actually perform all of the missions that are required 
by the military. It must do a full accounting of all of the life cycle 
costs of flying and operating both planes. And it has to ensure that 
the companies can only earn credit as it was spelled out in the 
original RFP.
  That last point is extremely important. In its decision last month, 
the GAO said the request for proposals was crystal clear about what 
kind of tanker the Air Force needed. Yet I have already heard that the 
Defense Department plans to reevaluate the life cycle costs of both 
tankers using a 25-year lifespan instead of a more accurate 40 years. 
It wants to revise the RFP to give greater benefit to a larger plane, 
even if that means the tanker it buys is not capable of meeting its own 
mission. That fundamentally changes the rules of the procurement and is 
not what is in the original RFP.
  I am very concerned about both of these proposals. Changing the rules 
of the game when we are in overtime is simply going to result in a 
repeat of the last contest--an unfair result, more protests, and more 
delays. I look forward to hearing a thorough explanation from the 
Defense Department about how it is going to carry out this new 
competition and how it is going to ensure that this contract is finally 
fair.
  Finally, I agree with Secretary Gates that it is vitally important 
that we move quickly to finish this contract. Air men and women who fly 
out of Fairchild Air Force Base, in my home State of Washington, fly 
these tankers.

[[Page S6532]]

I know they need these planes. They need them now. But we also have to 
do this the right way. We have to have a competition that is not 
overshadowed by questions of ethics or competence. If we don't, we risk 
another challenge that is going to draw out this procurement process 
even further.
  Even more importantly, we have got to get the right plane. Our aerial 
refueling tankers--the ones we are talking about with this contract--
are the backbone of our global military strength. They are stationed 
today across the world, and they refuel aircraft from every branch of 
our Armed Forces. Before our taxpayers spend $35 billion, they deserve 
to know the planes we are buying can actually refuel our military's 
aircraft. Our service members deserve to know they are getting a plane 
that will enable them to do their jobs and return home swiftly.
  I welcome Secretary Gates' announcement yesterday that this contract 
is going to be rebid, but I remind all of my colleagues--those of us 
who have watched this procurement process for many years now--to follow 
the bouncing ball and see where it leads. We are going to follow this 
carefully. It needs to be rebid with the original RFP, not changed in 
overtime, to make sure this is a fair contract that results quickly in 
making sure our air men and women get the right aircraft as quickly as 
we can possibly bring it to them.
  Madam President, I yield the floor, and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The first assistant bill clerk proceeded to call the roll.
  Mr. BROWN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Salazar). Without objection, it is so 
ordered.
  Mr. BROWN. I ask unanimous consent to speak as in morning business 
for up to 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                            Shutdown of DHL

  Mr. BROWN. I share with my colleagues some bad news from my State 
that I hope turns into better news; that is, there is a company in Ohio 
called DHL. It is an airfreight company. They are the second-largest, 
single-site private employer in Ohio next to the Honda Corporation in 
Marysville and other nearby places.
  DHL is in Wilmington, Clinton County, southwest Ohio, where some 
8,000 people work pretty much in one facility in Clinton County. 
Wilmington is the county seat of Clinton County. Wilmington is the home 
of Wilmington College, a Quaker school, a wonderful private 4-year 
institution in southwest Ohio.
  Wilmington has only 13,000 people living there. This company, DHL, 
employs close to 8,000, through a couple subsidiaries, a couple people 
they contract with there, ABX and ASTAR. The announcement to close by 
the owner of DHL, a German company called 
Deutsche Post, which I believe is the largest freight company in the 
world and which used to be the German Post Office but now is a 
privatized company, will have a devastating effect on this region and 
these people.
  Deutsche Post owns many facilities of all kinds around the world; one 
of them is DHL. They made a decision to shut DHL down in Wilmington, a 
loss of up to some 8,000 jobs. I was in Wilmington last week, conducted 
a roundtable, listened to the concerns of pilots and material handlers 
and clerks and computer operators and mechanics and engineers and all 
kinds of people who fly the planes and service the planes and move the 
baggage, often in the middle of the night. There are local farmers who 
work there part time who get health care, there are very skilled 
pilots, there are very skilled machinists and mechanics.
  DHL is everything to a community of 13,000. Those 7,000 to 8,000 
employees live all over southwest Ohio, obviously not all of them in 
Wilmington or in Clinton County. Many of them live in Hillsboro, 
Highland County; some live in Brown County and Adams County and 
Hamilton County and Montgomery County and Clark County and Green 
County, all over southwestern Ohio.
  We are not just accepting this tragedy as is. The mayor, Mayor Raizk, 
Governor Strickland, Lieutenant Governor Fischer, the development 
director, Senator Voinovich, Congressman Turner and I and others are 
banding together to fight this perhaps as an antitrust violation, 
perhaps in some other ways that we are working to try to stop this from 
happening.
  The contract has not yet been signed. We are hopeful that DHL, 
that Deutsche Post, this German company will, in fact, listen to us and 
listen to proposals from ABX and ASTAR to stop the bleeding, if you 
will, to keep these jobs here. They have been productive. They took 
over a company called Airborne Express 4 years ago. The State of Ohio 
and Governor Taft in those days put together a $400 million package for 
them. We thought it was the start of a long friendship, a long 
relationship between Deutsche Post and DHL and the community of 
Wilmington, the County of Clinton, and the State of Ohio. We have been 
disabused of that notion, at least temporarily. We hope something 
better comes of it.
  What I wish to share today is the background. I wish to share for 4 
or 5 minutes some e-mails I received. I asked people in Clinton County, 
in Brown, Adams, Highland, Montgomery, Clark and Green Counties to 
share with me on my Web site what this closing might mean to them and 
what this company means to them and to their prosperity and their 
middle-class lifestyle and all that.
  I told them I would read some of these on the Senate floor. Last week 
when I had a roundtable discussion with about 20 people, we talked 
about many of these issues. I wish to share with you today some of 
these, three or four of these entries, if you will, from statements 
written by people who are affected directly.
  I am not going to share the name. I think I probably could, I think 
they gave us permission, but I will share their hometown. This 
gentleman from Wilmington wrote:

       I am in my 15th year as a pilot with DHL/ASTAR. I was hired 
     by DHL Airways in January 1994 after serving as a C-5 pilot 
     in the United States Air Force. DHL later became ASTAR Air 
     Cargo due to U.S. Airline ownership laws. The airline pilot's 
     career is based on seniority; there are no lateral moves to 
     another airline. Losing my job with ASTAR due to Deutsche 
     Post's forcing DHL to use UPS [that is what actually happened 
     here] will result in the loss of not only my job but the loss 
     of my career. I do not have enough years left, due to 
     mandatory pilot retirement age at 65, to restart a commercial 
     pilot career with another airline and regain the salary I 
     earn now. I also own property in Wilmington based on working 
     for ASTAR Air Cargo. As these jobs go away my property 
     approaches being worthless and makes it likely I will have to 
     turn it back to the bank. The DHL deal will destroy many 
     careers, families, and create a duopoly in the U.S. Express 
     shipping industry, driving down competition, driving up costs 
     for business and for consumers.
  A lady from New Vienna writes:

       I know you are well aware of what is going on in Wilmington 
     with ABX/DHL. But you probably do not have any idea what it 
     is already doing to all of our workers. Our morale is at an 
     all-time low. We already know our time is short, but DHL is 
     cutting the rope shorter and shorter. I really do not know 
     how much more some of the people can take. I have heard of 
     many problems in marriages already. I know of many husband 
     and wives who work out there, my husband and I included.
       The majority of us on days are full-time employees and are 
     scheduled to work 8-hour days. As of today, DHL has dictated 
     that whenever our work is finished we are to leave whether we 
     worked 6 hours, 7 hours or 8 hours.
       My husband and I were planning on taking whatever we could 
     out of our last paychecks and put away because of what awaits 
     us. Now we are not even allowed to stay and get our 8 hours 
     so we only get paid for time worked.

  Generally, at these roundtables I heard this discussion over and 
over. We are not giving up. We are still trying to save these jobs. 
People who work at ASTAR, who work at ABX, who are part of DHL, 
obviously have real fears.
  Another lady from New Vienna writes:

       My husband is one of the many employees being laid off by 
     ABX after putting in 26 years with them. I cannot begin to 
     tell how much this is going to hurt us in many, many ways, 
     along with 6,000 plus other employees here.

  When I said up to 7,000, I was including, you know, some of the 
ancillary supply jobs in the vicinity.

       The reason I am e-mailing you is to see if there is any way 
     you or any government employee can help all of the employees 
     and their families that are being let go. With the economy 
     the way it is, it is hard enough trying to keep food on your 
     table let alone trying to do without a job. Please, Senator

[[Page S6533]]

     Brown, fight for all of us at ABX, ASTAR and DHL. We need all 
     of you in our government to fight hard for us and Ohio.

  Someone from Blanchester, just south of Wilmington, said:

       I am a 19-year pilot for Astar Air Cargo; a 16-year member 
     of the pilot's union. My wife and I became residents of Ohio 
     when DHL consolidated their main sort facility in Wilmington, 
     OH.
       At first we did not want to move, but as a loyal employee I 
     wanted to live close to my employer. So my wife and I built a 
     home in Brown County near town, and I looked forward to 
     finishing my career there. We, unlike DHL, made a long-term 
     commitment to the local area. I am realistic that I realize 
     the last flight of ASTAR is on the horizon. I know in today's 
     business environment there is usually little chance of 
     stopping large corporations from following through with their 
     announced plans. My wish is that you use any influence you 
     might have with the Department of Justice or other agencies 
     that will have to approve DHL's planned partnership with UPS 
     to compel DHL to abide by their commitment to the pilots of 
     ASTAR, the commitment to job security, growth and a long 
     career they promised in the latest collective bargaining 
     agreement.

  DHL and their owner, the Deutsche Post, needs to be held accountable 
for commitments they made to the people, the workers, and the 
communities of southwest Ohio.
  The last note I will share is from someone in Midland.

       I am writing today to ask you to all consider the 
     devastating effect that the loss of these thousands of jobs 
     will do to our families, counties, and State, if DHL does, in 
     fact, pull out of Wilmington, OH. Everyone I know has a 
     family member or friend who works in that facility. I have 
     two daughters who work there as well. They are single 
     parents, and the fear of loss of income, home, and car is in 
     their every thought at this time. I cannot imagine how 
     terrible this will be for them, and they have family to fall 
     back on. What will happen to others who do not have that 
     support system in place?
       We are all fighting to keep this place open. It matters to 
     our economy, it matters to our State, it matters individually 
     to so many people.

  Those were four or five of them. In the communities, you know what 
happens when people lose their jobs, and there are so many of them, 
especially in a small town. You know what it means to the school 
system, what it means to police protection, fire protection, all that 
people in our middle-class society and workers rely on. That is why I 
share these stories. I will share these with the White House, I will 
share those same stories with Deutsche Post. We want them to come to 
the table and talk to us about a different contract that can keep those 
workers there. It will matter for Wilmington, it will matter for 
southwest Ohio, it will matter for our country.
  I yield the floor and 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. LEAHY. I ask unanimous consent that the order for the quorum call 
be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________