[Congressional Record Volume 155, Number 10 (Friday, January 16, 2009)]
[Senate]
[Pages S652-S655]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      Mrs. FEINSTEIN (for herself and Mr. Cornyn):
  S. 276. A bill to establish a National Commission on Entitlement 
Solvency; to the Committee on Finance.
  Mrs. FEINSTEIN. Mr. President, I rise today on behalf of myself and 
Senator Cornyn to introduce legislation that will address one of the 
most serious problems facing our Nation--the long-term health of Social 
Security and Medicare.
  Today we propose a bipartisan, independent and permanent commission 
to return these essential programs to solid financial footing for 
generations to come.
  Our legislation mandates the periodic, comprehensive review of Social 
Security and Medicare to ensure their present and future solvency.
  By a year from the date of enactment, it requires the Commission to 
devise and recommend to Congress and the President a benefit and 
revenue structure that allows Social Security and Medicare to become, 
once again, stable and effective over the long-term.
  The problem we face is astronomical. President-elect Barack Obama is 
well aware of this, and said so on the front page of today's Washington 
Post.
  He recognizes the growing threat this problem represents to the long-
term health of our economy, and to the American people. So I look 
forward to working with him to find ways to ensure the long-term health 
of these great American institutions.
  He recognizes, as Senator Cornyn and I do, that inaction is 
dangerous.
  The Congressional Budget Office announced last week that the fiscal 
year 2009 deficit is projected to reach $1.2 trillion, a new record.
  The three largest entitlement programs, Social Security, Medicare, 
and

[[Page S653]]

Medicaid, are expected to grow by at least 8 percent this year.
  Meanwhile, the Social Security funding shortfall has ballooned to 
roughly $4.3 trillion--the amount necessary to continue full benefits 
being paid past 2083.
  Medicare is in far worse shape, needing $12.4 trillion over the next 
75 years to close the gap and remain in balance.
  The numbers tell the story: growing cash flow deficits will exhaust 
the Medicare trust fund in 2019, and Social Security reserves will be 
overcome in 2041, according to the most recent Trustees report.
  Our legislation takes a new approach and is bipartisan to the core.
  Fifteen experts, some of whom are Members of Congress from the 
committees of jurisdiction, are appointed. They take a full year to 
conduct town hall meetings nationwide, assess these trillion dollar 
programs from top to bottom, and rationalize their cost structure 
through intensive evaluation.
  We advocate an open and transparent process, where all American 
voices can be heard.
  Too often during my time in the Senate I have seen approaches that 
rely strictly on elected officials meeting privately and out of the 
public view fail. A workable solution to these problems must be 
transparent.
  In the 110th Congress alone, there were no less than six proposals to 
reform Social Security. The Commission we propose would not be offering 
one-time solutions that get tossed aside and collect dust.
  Far from it: the Commission's detailed analysis, nonpartisan 
recommendations and findings are provided in writing and take the form 
of legislation that Congress formally considers.
  The Senate and House, in turn, through expedited legislative 
procedures, will hopefully be poised to amend if need be and then enact 
the changes into law. To be clear, this legislation will not prevent 
our colleagues from the opportunity to improve the Commission's 
proposals.
  We do not hold out, today, certain ideas that we believe the members 
of the commission ought to consider.
  We rely on their independent expertise and motivation to derive what 
is best for the Nation. Then we let the chips fall where they may from 
there.
  President-elect Obama's choice to lead the Office of Management and 
Budget, Peter Orszag, agrees that Social Security is one of America's 
most successful Government programs.
  But failure to act on real reform, in his words, ``merely exacerbates 
the painful choices that will ultimately be necessary.''
  While such reforms will be difficult, he ultimately argues that, 
``Social Security can be mended in a safe, realistic way, while 
protecting the most vulnerable beneficiaries.''
  I believe Mr. Orszag is correct. It will be only a matter of time 
before we must implement real Social Security reform.
  That's because 51 million people, or 1 out of every 6 Americans, 
depend on it.
  And by 2034, an astounding 74 million Americans will receive this 
guaranteed benefit. At that time there will be only 2.1 workers for 
every one beneficiary.
  For more than 20 percent of retirees, Social Security is it: their 
only source of income.
  For half of those 51 million, Social Security keeps them out of 
poverty. And for almost two-thirds, Social Security makes up more than 
half of their total income.
  Six and one half million widows and widowers rely on Social Security, 
as do 7.5 million disabled workers and their 1.6 million children.
  The long-term challenges are significant. It's not a crisis; we have 
time to implement gradual reform over time, but we need to get started.
  However, the current economic crisis leads me to believe that nothing 
is for certain.
  While the projected shortfall for Social Security amounts to about 
$4.3 trillion, the fact of the matter is that 100 percent of benefits 
can be paid until 2041 by some estimates, Social Security 
Administration, or 2049 by others, CBO. Beyond that time horizon, 78 
percent of benefits can be paid.
  So the bottom line is that there is the time, the know-how, and the 
resources to, be able to maintain the current system, with phased 
adjustments occurring over many years to the Social Security Trust 
Fund.
  The key, of course, is coming to a rational consensus--Democrats and 
Republicans united--in the effort to to make Social Security solvent 
from this day forward.
  Most budget experts agree that the Social Security problem pales in 
comparison to the enormous shortfall facing Medicare Trust Fund, Part 
A--over the next 75 years a total of $12.4 trillion. The various 
technical estimates are that Medicare is projected to become insolvent 
far sooner than Social Security.
  In fact, the most recent Medicare Trustees report confirms that the 
trust fund will be exhausted in 2019.
  Closing the trust fund gap demands action.
  Pressure on Medicare will only grow as the Baby Boom generation ages 
yet the number of beneficiaries skyrockets upwards--from 44 million 
now, a number which will double by 2030--as the Baby Boom generation 
ages.
  Compounding the problem, the Congressional Budget Office projects 
that Medicare spending will rise to 10.8 percent of the gross domestic 
product by 2082, up from 3.2 percent of GDP today.
  Because the program is financed through payroll taxes and general tax 
revenue, the pressure is building now on working Americans given the 
huge demographic changes we expect as Baby Boomers retire.
  The plain truth is that surging health care costs exceed economy 
growth. This health care spending must be controlled or Medicare faces 
a dire situation.
  In closing, I should note that Congress is debating a historic 
stimulus initiative, designed to pull our economy out of this current 
downturn. While these investments are likely necessary, I strongly 
believe that they should be coupled with the framework to return to 
long-term fiscal sanity.
  I know the incoming administration recognizes the gravity of this 
situation.
  I look forward to working with the new President, and my colleagues, 
to advance positive solutions to address the looming entitlement 
crisis.
                                 ______
                                 
      By Mr. HATCH (for himself, Mr. Kennedy, Mr. Gregg, and Mr. 
        Cochran):
  S. 278. A bill to amend the Internal Revenue Code of 1986 to provide 
for a tax credit for qualified donations of employees services; to the 
Committee on Finance.
  Mr. HATCH. Mr. President, I rise today to speak on the reintroduction 
of the Serve America Act. I, along with my good friend, the senior 
Senator from Massachusetts first introduced this legislation in the 
waning days of the 110th Congress, and I am proud to lend my support to 
the bill during this session. We are currently joined by 20 cosponsors, 
both Republican and Democrat.
  I have long been a supporter and advocate for volunteer service. I 
believe that, when private citizens offer their time and talents to 
serve in their communities, they benefit along with those they have 
helped. Furthermore, I believe that, if we can encourage people to 
volunteer their services in their towns and neighborhoods, we can 
better address our Nation's most pressing problems.
  The Serve America Act does many things. Most apparently, it creates 
new national service corps that will enlist the help of our people to 
address specific areas of national need, including education, energy 
efficiency, access to health care, economic opportunity for the 
disadvantaged, and disaster relief. It also encourages individuals and 
non-profit groups to come up with new and innovative ways to encourage 
volunteerism and to use the help of volunteers effectively. In 
addition, it enlists the help of the private sector in addressing 
important needs in our nation and community.
  As in the 110th Congress, Senator Kennedy and I have agreed that, 
when this bill goes through the HELP Committee, we will work together 
to ensure that the spending authorized in the bill will be offset. In 
this way, the bill will be budget-neutral, providing much needed 
assistance to the non-profit sector without adding to the Federal 
deficit. Indeed, the American people have made it clear time and again 
that they desire fiscal responsibility in Congress. Due to this 
agreement, the Serve America Act meets those demands.

[[Page S654]]

  Senator Kennedy and I are also reintroducing the Incentive to Serve 
Tax Act as a companion piece to the Serve America Act. This bill would 
provide tax incentives to encourage companies to allow their employees 
to volunteer their services on company time. Specifically, the bill 
would provide companies a tax credit equal to 25 percent of the 
compensation paid to an employee who performs at least 160 hours of a 
specified charitable service.
  As you might know, a handful of large corporations presently have 
programs to provide managerial and educational workers to schools and 
community organizations. This tax incentive would encourage these 
companies to do even more as well as encourage other companies that, up 
to now, may not have been able to afford to provide such service. This 
will allow businesses to utilize their employees with various skills 
and knowledge to target specific areas that need to be addressed in the 
communities where those workers live and work. In the end, everyone 
will benefit.
  Mr. President, these two bills represent a bipartisan effort to 
harness the talents, generosity, and ingenuity of the American people. 
I believe that this is an effort that Members from both parties can and 
should support. I urge all my colleagues--Republicans and Democrats 
alike--to support this important legislation.
  I yield the floor.
                                 ______
                                 
      By Mr. BINGAMAN (for himself, Mr. Crapo, Mr. Kerry, Ms. Snowe, 
        and Mr. Schumer):
  S. 279. A bill to amend the Internal Revenue Code of 1986 to modify 
the limitations on the deduction of interest by financial institutions 
which hold tax-exempt bonds, and for other purposes; to the Committee 
on Finance.
  Mr. BINGAMAN. Mr. President, I rise today to introduce the Municipal 
Bond Market Support Act of 2009. This bill is similar to one that 
Senator Crapo and I introduced in the 110th Congress, and I am grateful 
for Senator Crapo's continued leadership on this issue, as well as the 
cosponsorship of Senators Kerry, Snowe, and Schumer.
  One of the most unfair--but least discussed--impacts of the credit 
crisis is its severe disruption of the municipal bond market. By 
reducing state and local governments' access to financing, increasing 
interest costs, and shrinking the universe of available investors, this 
disruption is threatening critical infrastructure investments that 
generate significant economic activity, just when the need for 
infrastructure enhancements could not be more apparent.
  Municipal bonds have long played an essential role in financing the 
construction, expansion, and repair of schools; highways, roads, and 
bridges; affordable housing; hospitals; public transit; water and 
sewage systems; and community-owned utilities. But currently, the 
municipal bond market is significantly impaired. This situation has 
been caused by reasons completely extrinsic to events in the municipal 
bond market; indeed, municipal bonds remain among the safest securities 
in the world, with extremely low default rates.
  Because of this market impairment, states, municipalities and 
authorities have been and are continuing to face unreasonably high debt 
issuance costs. Due to these high costs, many other state and local 
governments are finding themselves suddenly unable to issue debt. For 
instance, in the fourth quarter of 2008, bond issuance fell 33 percent 
compared to the fourth quarter of 2007, representing a $35 billion 
drop.
  The pain is being felt by States and municipalities across the 
country, which have had to curtail new bond issuances, delay, or 
withhold borrowing altogether from the capital markets. For instance, 
in Connecticut, the state sought to sell $500 million in General 
Obligation bonds, but was only able to sell $99 million. As an 
indication as to how interest rates have increased significantly, 
secondary market trading data indicates that, for instance, through the 
beginning of 2009 a Clayton, New Mexico, revenue bond series saw a 230 
basis point increase. This increase is indicative of the increase in 
costs that the city would incur if they had to issue new bonds today, a 
rate of 7.60 percent, whereas a year ago the same issue would likely 
have been issued at 5.29 percent.
  Infrequent issuers are experiencing an even more difficult time 
accessing the markets. A study by Municipal Market Advisors found that 
for issuers that borrow once a year or less, borrowing costs increased 
by at least 200 basis points during the last half of last year; in many 
cases, the increase exceeded 250 basis points. For a state or locality 
issuing $100 million in 30-year bonds, a 200 basis point increase 
translates to $60 million in additional interest payments over the 30 
years. Ultimately, these higher costs will be the responsibility of 
taxpayers, through higher taxes and/or reductions in other investments 
or services.
  As Congress looks to legislation that will spur a national economic 
recovery, we should enhance demand for municipal bonds by liberalizing 
restrictions on banks' ability to acquire municipal debt.
  Since the enactment of the Federal income tax in 1913, Congress has 
supported the municipal bond market by exempting municipal bond 
interest from taxation. Tax exemption is an effective means of 
conferring Federal assistance on state and local capital investments; 
it also recognizes that decisions about which projects to fund are most 
appropriately made at the State or local level. Historically, banks 
were significant purchasers of tax-exempt debt. But the Tax Reform Act 
of 1986 severely curtailed banks' participation by automatically 
disallowing deductions for interest expense whenever municipal bonds 
are purchased. The Act left an exception only for bonds purchased from 
smaller municipalities, those selling no more than $10 million of bonds 
each year. In contrast, non-bank corporations are permitted to hold up 
to 2 percent of their total assets in tax-exempt bonds, regardless of 
the size of the issuer, without jeopardizing interest expense 
deductibility.
  Given the severe challenges affecting the municipal bond markets, now 
is the time to modify these limitations and thus help channel 
additional capital to critical infrastructure projects.
  First, the Act will extend the 2 percent de minimis rule to banks, 
placing them on the same footing as other corporate investors.
  Second, the Act will raise the $10 million small issuer exception to 
$30 million. Because the $10 million level was not indexed to 
inflation, its purchasing power has eroded significantly since 1986, 
leaving many smaller governments either to defer projects to comply 
with this low limit or find non-bank purchasers.
  Finally, the Act will ensure that the small issuer is made applicable 
at the ultimate borrower level, so that bonds benefiting non-profit 
universities and hospitals will not exceed the limitation merely 
because they issue bonds through statewide authorities.
  Taken together, these steps promise to significantly boost municipal 
bond demand, adding liquidity to the market. For instance, Municipal 
Market Advisors projects that extending the 2 percent de minimis rule 
to banks would increase their municipal debt purchasing power by $56 
billion. Additional demand will enable municipalities across the 
nation, and particularly those in small and rural communities, to 
finance the critical infrastructure projects that play an important 
role in growing our national economy.
  Ten national organizations representing state and local governments 
are supporting the Act. I urge my colleagues to do the same.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
placed in the Record, as follows:

                                 S. 279

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Municipal Bond Market 
     Support Act of 2009''.

     SEC. 2. MODIFICATION OF SMALL ISSUER EXCEPTION TO TAX-EXEMPT 
                   INTEREST EXPENSE ALLOCATION RULES FOR FINANCIAL 
                   INSTITUTIONS.

       (a) Increase in Limitation.--Subparagraphs (C)(i), (D)(i), 
     and (D)(iii)(II) of section 265(b)(3) of the Internal Revenue 
     Code of 1986 are each amended by striking ``$10,000,000'' and 
     inserting ``$30,000,000''.
       (b) Repeal of Aggregation Rules Applicable to Small Issuer 
     Determination.--Paragraph (3) of section 265(b) of such Code 
     is amended by striking subparagraphs (E) and (F).
       (c) Election to Apply Limitation at Borrower Level.--
     Paragraph (3) of section

[[Page S655]]

     265(b) of such Code, as amended by subsection (b), is amended 
     by adding at the end the following new subparagraph:
       ``(E) Election to apply limitation on amount of obligations 
     at borrower level.--
       ``(i) In general.--An issuer, the proceeds of the 
     obligations of which are to be used to make or finance 
     eligible loans, may elect to apply subparagraphs (C) and (D) 
     by treating each borrower as the issuer of a separate issue.
       ``(ii) Eligible loan.--For purposes of this subparagraph--

       ``(I) In general.--The term `eligible loan' means one or 
     more loans to a qualified borrower the proceeds of which are 
     used by the borrower and the outstanding balance of which in 
     the aggregate does not exceed $30,000,000.
       ``(II) Qualified borrower.--The term `qualified borrower' 
     means a borrower which is an organization described in 
     section 501(c)(3) and exempt from taxation under section 
     501(a) or a State or political subdivision thereof.

       ``(iii) Manner of election.--The election described in 
     clause (i) may be made by an issuer for any calendar year at 
     any time prior to its first issuance during such year of 
     obligations the proceeds of which will be used to make or 
     finance one or more eligible loans.''.
       (d) Inflation Adjustment.--Paragraph (3) of section 265(b) 
     of such Code, as amended by subsections (b) and (c), is 
     amended by adding at the end the following new subparagraph:
       ``(F) Inflation adjustment.--In the case of any calendar 
     year after 2009, the $30,000,000 amounts contained in 
     subparagraphs (C)(i), (D)(i), (D)(iii)(II), and (E)(ii)(I) 
     shall each be increased by an amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `calendar year 2008' `for calendar year 1992' in 
     subparagraph (B) thereof.
     Any increase determined under the preceding sentence shall be 
     rounded to the nearest multiple of $100,000.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after December 31, 2008.

     SEC. 3. DE MINIMIS SAFE HARBOR EXCEPTION FOR TAX-EXEMPT 
                   INTEREST EXPENSE OF FINANCIAL INSTITUTIONS AND 
                   BROKERS.

       (a) Financial Institutions.--Subsection (b) of section 265 
     of the Internal Revenue Code of 1986 is amended by adding at 
     the end the following new paragraph:
       ``(7) De minimis exception for bonds issued during 2009 or 
     2010.--
       ``(A) In general.--In applying paragraph (2)(A) there shall 
     not be taken into account tax-exempt obligations issued 
     during 2009 or 2010 (and paragraph (3)(A) shall be applied 
     without regard to section 291(e)(1)(b) with respect to such 
     obligations).
       ``(B) Limitation.--The amount of tax-exempt obligations not 
     taken into account by reason of subparagraph (A) shall not 
     exceed 2 percent of the amount determined under paragraph 
     (2)(B).''.
       (b) Brokers.--Subsection (a) of section 265 of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following new paragraph:
       ``(7) De minimis exception for bonds issued during 2009 or 
     2010.--
       ``(A) In general.--In applying paragraph (2) to any broker 
     (as defined in section 6045(c)(1)) there shall not be taken 
     into account tax-exempt obligations issued during 2009 or 
     2010 (and paragraph (3)(A) shall be applied without regard to 
     section 291(e)(1)(b) with respect to such obligations).
       ``(B) Limitation.--The amount of tax-exempt obligations not 
     taken into account by reason of subparagraph (A) shall not 
     exceed 2 percent of the taxpayer's assets.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after December 31, 2008.

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