[Congressional Record (Bound Edition), Volume 148 (2002), Part 1]
[Senate]
[Pages 274-278]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           THE STIMULUS BILL

  Mr. HOLLINGS. Mr. President, last week we were debating the stimulus 
bill. In that regard, there was some discussion by some of the 
leadership on the other side of the aisle to the effect that they were 
asking for all these tax cuts. However, on Saturday morning I listened 
to the President. I heard him in his weekly radio address.
  He said:

       I urge it to pass a strong stimulus bill, the one that 
     passed the House last year.

  So there is no question that the issue of tax cuts as a stimulus is 
still one of the main issues to this particular Senator, and it really 
hackles this Senator in that we don't have any taxes to cut. We don't 
have any revenues. We don't have any surplus. I have been saying this 
ever since we balanced the budget back under Lyndon Baines Johnson. I 
will never forget at that particular time George Mahon on the House 
side, the distinguished Congressman from Texas, was chairman of the 
Appropriations Committee and we were working in December, after the 
November elections; and in that particular December session it looked 
like in order to balance that budget, pay down the debt, not increase 
it, not have a deficit, that we needed some $5 billion more in cuts. We 
called over to Marvin Watson and said: ``Ask the President will he go 
along with another cut of some $5 billion.'' We did it at that 
particular time, and we balanced the budget for 1968-1969. We were in 
the black as we ended that particular year. It was right at $2.9 
billion.
  Mr. President, I ask unanimous consent to have printed in the Record 
at this particular point the deficits and interest costs over the past 
half century, since President Truman in 1947, including President Bush 
today.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                           HOLLINGS' BUDGET REALITIES
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                        Annual
                                                                Unified       Actual                  increases
        President and year          U.S. budget    Borrowed     deficit      deficit      National   in spending
                                                 trust funds   with trust    without        debt         for
                                                                 funds     trust funds                 interest
----------------------------------------------------------------------------------------------------------------
Truman:
  1947............................         34.5         -9.9          4.0        +13.9        257.1  ...........
  1948............................         29.8          6.7         11.8         +5.1        252.0  ...........
  1949............................         38.8          1.2          0.6         -0.6        252.6  ...........
  1950............................         42.6          1.2         -3.1         -4.3        256.9  ...........
  1951............................         45.5          4.5          6.1         +1.6        255.3  ...........
  1952............................         67.7          2.3         -1.5         -3.8        259.1  ...........
Eisenhower:
  1953............................         76.1          0.4         -6.5         -6.9        266.0  ...........
  1954............................         70.9          3.6         -1.2         -4.8        270.8  ...........
  1955............................         68.4          0.6         -3.0         -3.6        274.4  ...........
  1956............................         70.6          2.2          3.9         +1.7        272.7  ...........
  1957............................         76.6          3.0          3.4         +0.4        272.3  ...........
  1958............................         82.4          4.6         -2.8         -7.4        279.7  ...........
  1959............................         92.1         -5.0        -12.8         -7.8        287.5  ...........
  1960............................         92.2          3.3          0.3         -3.0        290.5  ...........
Kennedy:
  1961............................         97.7         -1.2         -3.3         -2.1        292.6  ...........
  1962............................        106.8          3.2         -7.1        -10.3        302.9          9.1
Johnson:
  1963............................        111.3          2.6         -4.8         -7.4        310.3          9.9

[[Page 275]]

 
  1964............................        118.5         -0.1         -5.9         -5.8        316.1         10.7
  1965............................        118.2          4.8         -1.4         -6.2        322.3         11.3
  1966............................        134.5          2.5         -3.7         -6.2        328.5         12.0
  1967............................        157.5          3.3         -8.6        -11.9        340.4         13.4
  1968............................        178.1          3.1        -25.2        -28.3        368.7         14.6
Nixon:
  1969............................        183.6          0.3          3.2         +2.9        365.8         16.6
  1970............................        195.6         12.3         -2.8        -15.1        380.9         19.3
  1971............................        210.2          4.3        -23.0        -27.3        408.2         21.0
  1972............................        230.7          4.3        -23.4        -27.7        435.9         21.8
  1973............................        245.7         15.5        -14.9        -30.4        466.3         24.2
  1974............................        269.4         11.5         -6.1        -17.6        483.9         29.3
Ford:
  1975............................        332.3          4.8        -53.2        -58.0        541.9         32.7
  1976............................        371.8         13.4        -73.7        -87.1        629.0         37.1
Carter:
  1977............................        409.2         23.7        -53.7        -77.4        706.4         41.9
  1978............................        458.7         11.0        -59.2        -70.2        776.6         48.7
  1979............................        504.0         12.2        -40.7        -52.9        829.5         59.9
  1980............................        590.9          5.8        -73.8        -79.6        909.1         74.8
Reagan:
  1981............................        678.2          6.7        -79.0        -85.7        994.8         95.5
  1982............................        745.8         14.5       -128.0       -142.5      1,137.3        117.2
  1983............................        808.4         26.6       -207.8       -234.4      1,371.7        128.7
  1984............................        851.9          7.6       -185.4       -193.0      1,564.7        153.9
  1985............................        946.4         40.5       -212.3       -252.8      1,817.5        178.9
  1986............................        990.5         81.9       -221.2       -303.1      2,120.6        190.3
  1987............................      1,004.1         75.7       -149.8       -225.5      2,346.1        195.3
  1988............................      1,064.5        100.0       -155.2       -255.2      2,601.3        214.1
Bush:
  1989............................      1,143.7        114.2       -152.5       -266.7      2,868.3        240.9
  1990............................      1,253.2        117.4       -221.2       -338.6      3,206.6        264.7
  1991............................      1,324.4        122.5       -269.4       -391.9      3,598.5        285.5
  1992............................      1,381.7        113.2       -290.4       -403.6      4,002.1        292.3
Clinton:
  1993............................      1,409.5         94.2       -255.1       -349.3      4,351.4        292.5
  1994............................      1,461.9         89.0       -203.3       -292.3      4,643.7        296.3
  1995............................      1,515.8        113.3       -164.0       -277.3      4,921.0        332.4
  1996............................      1,560.6        153.4       -107.5       -260.9      5,181.9        344.0
  1997............................      1,601.3        165.8        -22.0       -187.8      5,369.7        355.8
  1998............................      1,652.6        178.2         69.2       -109.0      5,478.7        363.8
  1999............................      1,703.0        251.8        124.4       -127.4      5,606.1        353.5
  2000............................      1,789.0        258.9        236.2        -22.7      5,628.8        362.0
Bush:
  2001............................      1,863.9        270.5        127.1       -143.4      5,772.2        359.5
  2002............................      2,003.3        250.7        -20.5       -271.2      6,043.4        331.7
----------------------------------------------------------------------------------------------------------------
*Historical Tables, Budget of the U.S. Government FY 1998; Beginning in 1962, CBO's The Budget and Economic
  Outlook: Fiscal Years 2003-2012 January 23, 2002.

  Mr. HOLLINGS. Mr. President, you will see from this particular chart 
the truthfulness of what I have just stated; namely, we have not had a 
balanced budget since 1968-1969. More specifically, we keep talking 
about surpluses, but we get surpluses by using all kinds of fancy 
terminologies to dance around in order to hide the money and the debt. 
The truth is, though, the net figure as to whether the national debt 
goes up or goes down; whether or not we spend only the money we have, 
or we have to borrow in order to provide for the appropriations that we 
have provided; whether those things occur or not, the actual national 
debt has gone up, up, and away. It has gone up some billions of dollars 
each year for the past 31 years, to the extent that when we talked 
about surpluses all last year, we did not end up with a surplus when 
President Clinton left town.
  In fiscal 2000, there was a deficit of $22.7 billion. For the first 
year of President Bush, we now have a $143.4 billion deficit, and the 
Congressional Budget Office last week attested to the fact that they 
project that the deficit next year, in 2002, is going to be $271.2 
billion. Can you imagine that? Last year at this time we were talking 
about $5.6 trillion in the black and now we are talking about $271.2 
billion in the red.
  I think it was Mark Twain years ago who said: ``The truth is such a 
precious thing, it should be used very sparingly.'' That is exactly the 
way we approach this particular role of ours as budgeteers and 
Congressmen and Senators and everything else of that kind. We actually 
hide the debt. The way we hide the debt is what Alan Greenspan 
euphemistically calls ``intragovernmental transfers.'' That sounds 
pretty, but what you are doing is looting the retirement funds, the 
trust funds.
  I ask unanimous consent that this chart be printed in the Record, 
which reflects ``trust funds looted to balance the budget.''
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                  TRUST FUNDS LOOTED TO BALANCE BUDGET
                [By fiscal year, in billions of dollars]
------------------------------------------------------------------------
                                                 2001     2002     2003
------------------------------------------------------------------------
Social Security..............................    1,170    1,333    1,512
Medicare:
  HI.........................................      197      230      266
  SMI........................................       42       43       42
Military Retirement..........................      157      165      173
Civilian Retirement..........................      543      577      611
Unemployment.................................       89       74       59
Highway......................................       24       20       13
Airport......................................       14       12        9
Railroad Retirement..........................       27       27       28
Other........................................       72       77       81
                                              --------------------------
      Total..................................    2,335    2,558    2,794
------------------------------------------------------------------------

  Mr. HOLLINGS. Mr. President, that shows in 2001 we took $1.170 
trillion from Social Security. We took from Medicare some $240 billion. 
From military retirement--the retirees who we say we want to look 
after--we looted their retirement moneys, some $157 billion; from 
civilian retirement, $543 billion--that is the civil service; from 
unemployment compensation fund, $89 billion. Now they say we might have 
to start paying into that.
  In 2001, we looted the highway trust funds by $24 billion; airports 
by $14 billion; railroad retirement by some $27 billion: and another 
$72 billion from other entities like the Federal Finance Bank. The 
savings and loan debacle is when we started that fever about 
deregulating. We deregulated the savings and loan industry and that up-
ended. We deregulated the airlines and they have gone broke. We 
deregulated the trucking companies and they have gone out of business. 
Now we are on course to deregulating energy, which is before us now. 
Our experience is that when we have deregulated, it has been a 
disaster. The point is, we have hidden $2.335 trillion. We have hidden 
$2.335 trillion.
  Let me refer to the January 28th edition of Business Week. This says: 
Accounting in crisis, what needs to be done. I refer to page 36 and the 
article, ``Who Else is Hiding Debt?''
  I ask unanimous consent that this article be printed in the Record.

[[Page 276]]

  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                        Who Else Is Hiding Debt

     Moving financial obligations into off-book vehicles is now a 
         common ploy

                        (By David Henry, et al.)

       When energy trader Enron Corp. admitted to hiding billions 
     of dollars of liabilities in mysterious off-book entities, it 
     trotted out the lame excuse of scoundrels: Everyone does it. 
     And this time, it was the gospel truth.
       Hundreds of respected U.S. companies are ferreting away 
     trillions of dollars in debt in off-balance-sheet 
     subsidiaries, partnerships, and assorted obligations, 
     including leases, pension plans, and take-or-pay contracts 
     with suppliers. Potentially bankrupting contracts are 
     mentioned vaguely in footnotes to company accounts, at best. 
     The goal is to skirt the rules of consolidation, the bedrock 
     of the American financial reporting system and the source of 
     much of its credibility. These rules, set clear in 1959, aim 
     to make public companies give a full and fair picture of 
     their business--including all the assets and liabilities of 
     any subsidiaries. But accountants, lawyers, and bankers have 
     learned to drive a coach and horses through them.
       Because of a gaping loophole in accounting practice, 
     companies create arcane legal structures, often called 
     special-purpose entities (SPEs). Then, the parent can 
     bankroll up to 97% of the initial investment in an SPE 
     without having to consolidate it into its own accounts. 
     Normally, once a company owns 50% or more of another, it must 
     consolidate it under the 1959 rules. The controversial 
     exception that outsiders need invest only 3% of an SPE's 
     capital for it to be independent and off the balance sheet 
     came about through fumbles by the Securities & Exchange 
     Commission and the Financial Accounting Standards Board. In 
     1990, accounting firms asked the SEC to endorse the 3% rule 
     that had become a common, though unofficial practice in the 
     '80s. The SEC didn't like the idea, but it didn't stomp on 
     it, either. It asked the FASB to set tighter rules to force 
     consolidation of entities that were effectively controlled by 
     companies. FASB drafted two overhauls of the rules but never 
     finished the job, and the SEC is still waiting.
       It's not just the energy industry that exploits the 
     loophole and stashes major liabilities in the never-never 
     land of SPEs. Increasingly, companies of all stripes 
     routinely use them to offload potential balance-sheet 
     bombshells such as loan guarantees or the financing of sales 
     of their own products. For example, the accounts of data 
     processor Electronic Data Systems Corp. don't show $500 
     million--half of last year's earnings--that it would owe if 
     its customers were to cancel their contracts and leave it 
     holding the bag for loans on their computer equipment. The 
     arrangement is acknowledged only in a footnote. An EDS 
     spokesman says the tactic is common in the industry and does 
     not put the company at undue risk.
       Airlines keep appearances aloft by shunting billions worth 
     of airplane financing into off-balance-sheet vehicles, says 
     credit analyst Philip Baggaley of Standard & Poor's Corp. 
     United Airlines Inc. parent UAL Corp.'s published balanced 
     sheet for 2000 shows $5 billion of long-term debt. But only a 
     footnote describes the bulk of its lease payments, which 
     Baggaley estimates have a present value of $12.7 billion, due 
     over 26 years on 233 airplanes. AMR Corp., parent of American 
     Airlines Inc., is on the hook for $7.9 billion in lease 
     payments not on its balance sheet. ``Everyone who's involved 
     in the industry knows that the true leverage is higher'' than 
     what's shown on the balance sheet, says Baggaley. UAL and AMR 
     declined to comment.
       Banks arrange many of the devices and are big users 
     themselves. J.P. Morgan Chase & Co., for example, has 
     revealed in the Enron bankruptcy that it has nearly $1 
     billion in potential liabilities stemming from a single 49%-
     owned Channel Islands entity called Mahonia that traded with 
     Enron. The liabilities bring the bank's total Enron exposure 
     to $2.6 billion. And J.P. Morgan is not alone. A suit filed 
     earlier this month shows that many U.S. finance companies are 
     among 52 partners in LJM2, an Enron off-balance-sheet entity 
     with over $300 million in assets. The partners, including 
     Citigroup, Wachovia, and American International Group, may 
     all have to take losses on it.
       The banks' participation in SPEs is attracting scrutiny of 
     federal regulators. A Federal Reserve spokesman said it is 
     ``concerned about'' off-balance-sheet exposures and hopes new 
     accounting rules will be put in place. How many more Mahonia 
     or LJM2-like entities are there? The Channel Islands tax 
     haven boasts more than 350 SPEs and similar entities, though 
     it is impossible to know how many should really be 
     consolidated on balance sheets of U.S. companies. Assets in 
     the entities total more than $635 billion, according to 
     Fitzrovia International PLC, a London-based research firm. 
     The Cayman Islands, which has been competing for the business 
     since the 1980s, claims another 600 trusts and banks, most of 
     which have SPE expertise.
       With some of the vehicles, it is impossible for investors 
     to know from financial reports who could be responsible for 
     what. For example, Dell Computer Corp. has a joint venture 
     with Tyco International Ltd. called Del Financial Services 
     that last year originated $2.5 billion in customer financing, 
     according to a footnote to Dell's accounts. According to the 
     note, Dell owns 70% of DFS, but does not control it and 
     therefore keeps DFS debts off its own balance sheet. What if 
     DFS has trouble from customers not paying? Dell spokesman 
     T.R. Reid says any obligation of DFS are Tyco's 
     responsibility and Tyco agrees. Jeffrey D. Simon, president 
     of the global vendor financing business at Tyco Capital, says 
     Tyco would look at Dell's customers to pay and not to Dell. 
     Tyco's balance sheet reflects borrowing to finance Dell's 
     customers.
       Companies argue that off-balance sheet vehicles benefit 
     investors because they enable management to tap extra sources 
     of financing and hedge trading risks that could roil 
     earnings. Maybe so, but they sure make the companies, and 
     their executives, look good: Return on capital looks better 
     than it is because balance sheets understate the amount 
     employed. And investors and regulators don't freak out as 
     corporate debt balloons. But critics charge that the 
     widespread use of off-balance-sheet schemes encourages 
     contempt for accounting rules in the executive suite and 
     spreads confusion among investors. ``The nonprofessional has 
     no idea of the extent of the real liabilities,'' says J. 
     Edward Ketz, accounting professor at Pennsylvania State 
     University. ``Professionals can be easily fooled, too.''
       Worse yet, many SPEs have provisions that can throw their 
     users into a full-blown financial crisis. To get assets off 
     its books, a company typically sells them to an SPE, funding 
     the purchase by borrowing cash from institutional investors. 
     As a sweetener to protect investors, many SPEs incorporate 
     triggers that require the parent to repay loans or give them 
     new securities if its stock falls below a certain price or 
     credit-rating agencies downgrade its debt. It was just such 
     triggers in its notorious off-balance-sheet partnerships that 
     sent Enron into a death spiral. And triggers fueled the 
     crises last year at Pacific Gas & Electric, Southern 
     California Edison, and Xerox, according to Moody's Investors 
     Service. ``All of this hidden debt and these triggers could 
     make the next economic downturn a lot worse than it would 
     otherwise be,'' says Lynn Turner, who was chief accountant at 
     the Securities & Exchange Commission until July.
       Despite the risks, SPEs remain very appealing to companies. 
     And any attempt to curb them or abolish the 3% rule will run 
     into furious opposition. Since the early '90s, an army of 
     accountants, lawyers, and bankers built a huge industry to 
     concoct ever more creative ways to evade consolidated 
     reporting. So reform won't come easily. ``It will be a 
     phenomenal flight,'' says Turner.
       Maybe so, but Enron's demise shows how quickly a tiny 
     loophole can tear the country's economic fabric. And there 
     may never be a better time to close it.


                              out of sight

       Many companies keep debts and other obligations out of 
     investors' view in partnerships and other entities. Often, 
     financial liabilities are secured by physical assets such as 
     planes or computers. A sample:

------------------------------------------------------------------------
                                                               Estimated
               Company                  Item not on balance    exposure
                                               sheet          (billions)
------------------------------------------------------------------------
UAL.................................  Plane leases..........       $12.7
AMR.................................  Plane leases..........         7.9
J.P. Morgan Chase...................  Liability for trading       \1\1.0
                                       units.
Dell Computer.......................  Debt of consumer            \2\N/A
                                       financing venture.
Electronic Data Systems.............  Payments for                   0.5
                                       customers' computers.
------------------------------------------------------------------------
\1\Exposure to Enron through Mahonia.
\2\Joint venture partner Tyco Intl. is responsible for losses.
 
Data: Standard & Poor's, company reports.

  Mr. HOLLINGS. Mr. President, this says, ``Moving financial 
obligations into off-book vehicles is now a common ploy.'' Could it be 
that Kenneth Lay is acting like a Senator, acting like a Congressman, 
acting like a President, or acting like Alan Greenspan? Chairman 
Greenspan testified before our committee and it was like pulling teeth 
to try to get him to admit that the debt went up. He came and we went 
around and around and around, and finally, I said:

       Let me ask you this. Here is the CBO report. Does it 
     project that the debt goes up and the Government will have to 
     borrow over the next 10 years, or not? Mr. Greenspan 
     answered, it does.

  The reason I wanted to fit that into the Record is because Mr. 
Greenspan is no different than the Director of the Congressional Budget 
Office, our good friend Dr. Crippen, when it comes to the budget. Last 
week at our Budget hearing on national TV, he says this is the CBO 
report, and all he has in this thin little document is the revenue, but 
none of the expenditures, so we are left with only surpluses. He kept 
talking about how the surplus has gone down from $5.6 trillion to $1.6 
trillion.

[[Page 277]]

He kept saying the word surplus--surplus, surplus, surplus, surplus.
  That is all we heard. We did not hear about the debt and the deficit.
  I finally got the sheet that shows the gross Federal debt, according 
to CBO, goes from $5.772 trillion to $7.644 trillion; in other words, 
it goes up about $1.9 trillion. That is what we ought to be talking 
about, that is the reality; but we keep talking about intragovernmental 
transfers, as Dr. Greenspan says, or we talk about surpluses, as Dr. 
Crippin testified to. The fact is, we are doing what Kenneth Lay was 
doing: Misleading the public.
  We are trying to get reelected. So if we all go along with this $1.6 
trillion surplus, surplus, surplus, that gives some substance, some 
credibility to a tax cut. I do not believe in letting a surplus sit 
around any more than anybody else, but the truth of the matter is, 
there is no surplus.
  I have the public debt to the penny chart which you can find on the 
internet at: http://www.publicdebt.treas.gov/opd/opdpenny.htm.
  Mr. President, the chart shows we ended up last year with a $143.4 
billion deficit. That was the end of September-October 1 of 2001. 
Already this year, the current amount of public debt, has gone up $122 
billion. We are starting the year in the red and talking about 
stimulating with tax cuts.
  Let's get to the point. How did we get those 8 glowing years of the 
greatest economic boom in America's history? By what? By paying down 
the debt. Somehow we have gotten lost in the politics of all of this. 
They are all talking tax cuts, they are all talking surpluses, they are 
all talking about giving money back that nobody has. The truth is, 
economic growth is not about consumer confidence; it is about market 
confidence. It is the financial community up on Wall Street who know 
the truth. They read this budget the same way I do.
  Wall Street does not look for intragovernmental transfers. They look 
at the long range, whether or not the Government will be crowding into 
the market with its sharp elbows to borrow money to pay its bills. They 
know that instead of surpluses we have deficits; instead of paying down 
the debt, we have the national debt increasing. This is why the long-
range bond rates and interest rates are staying high.
  Yes, Dr. Greenspan and the Federal Reserve had 11 cuts to the short-
term rate, and where is the long-term rate? Still at 5 percent, and it 
could be increasing, according to Dr. Greenspan's statement.
  I have had hearings. We have about a dozen committees and scores of 
hearings about Enron hiding the debt. But according to Business Week, 
who is hiding the debt? None other than the United States Government. 
We owe $2.3 trillion, and if we do not pay down the debt and continue 
to borrow, we will owe these particular trust funds $2.8 trillion at 
this time next year.
  In 1994, this supposedly conscientious Congress passed the Pension 
Reform Act. We said we were not going to have these fast operating 
artists come in, take over a company, pay down the debt with the 
pension fund and take the money that is left and run. We had that going 
on all through the eighties. So at the beginning of the nineties, we 
passed legislation making it a felony to pay off corporate debt with a 
pension fund.
  I refer to Denny McLain, the former pitcher for the Detroit Tigers, 
about whom the distinguished Presiding Officer knows. He took over a 
company when he got out of baseball and paid down the debt with the 
company's pension fund. He was charged with a felony under the law and 
sentenced to 8 years. Now he is out, I take it, by now, and I wish him 
well, but I have to use that example to sear the conscience and 
awareness of this dormant body. Senators still want to keep their eyes 
and ears closed as to the truth about budgeting.
  They all have schemes to save Social Security. All they have to do is 
quit spending, quit looting the Social Security trust fund. I remember 
when Dr. Greenspan came to us in the early eighties, and he projected 
to Congress: If we do not do something about this, Social Security is 
going bottom up. It will go bankrupt.
  What happened? They appointed the Greenspan Commission, and the 
Greenspan Commission recommended, among other things, that we have an 
inordinately high payroll tax graduated upwards. Why did we graduate it 
upwards over the years? They said to take care of the baby boomers. The 
truth is, they knew this 20 years ago, so they put in that inordinately 
high payroll tax which, for most Americans, exceeds their income tax. 
The money was there and section 31 of the Greenspan report said do not 
touch that money. Put it off budget. Get it out of the unified budget, 
as they were talking about in those times.
  This Senator over several years tried to get that into law. Finally, 
George Herbert Walker Bush--Bush senior--on November 5, 1990, signed 
into law section 13301 of the Budget Act: Thou shalt not use Social 
Security in your budget.
  We did not put a penalty in the law. The law is violated every day by 
the Congress and the President. It has long since been law. We all 
voted for it. The vote was 98 to 2 in the Senate. But they spend that 
money willy-nilly, spending Social Security in violation of that law; 
in violation of the spirit of the Pension Reform Act. They all go out 
and say: I am a responsible Senator, reelect me; the Government is too 
big; the Government is not the answer; the Government is the problem; 
the Government is the enemy.
  Let us not act like Kenneth Lay this year. I hope that sears the 
conscience of not only the American people but the Senate body in which 
I serve.
  For years I have been trying to limit campaign spending. I was in the 
discussions during the Campaign Finance Act which we finally enacted in 
1974. At the time, I looked over at the distinguished Senator from New 
York, Mr. Buckley, and said: You are not going to buy it.
  He said: Oh, yes, I am.
  And he sued; Buckley v. Valeo. He sued the Secretary of the Senate, 
and we got the Buckley v. Valeo decision. I could see exactly what 
happened with that Buckley v. Valeo decision. The Supreme Court turned 
around the intent of the Congress. And that particular decision by the 
Court said we are not going to be able to buy the office. But that is 
the only way you can get into office is to buy it. It is a disgrace.
  So I offered a one-line constitutional amendment, and I still propose 
it every Congress. It says the Congress is hereby empowered to regulate 
or control spending in Federal elections.
  But I cannot get a two-thirds vote. I used to get a lot of my 
Republican colleagues on the other side of the aisle to vote for it. I 
would get Bill Cohen, Alan Simpson, Nancy Kassenbaum, and Bill Roth, 
but they are all gone now. The distinguished Senator from Texas, Mr. 
Gramm, said: Now, wait a minute. We have the money. They have the 
unions. Of course, I come from South Carolina and I don't get money and 
I don't get unions, neither one.
  So that being the case, I believe I am going to have to go for public 
campaign financing. I have resisted the idea of public financing 
politics, but it is currently being financed in the most corrupt 
fashion.
  Do not give me McCain-Feingold. That does away with the soft money. 
Instead, contributions are directed into hard money and those 
particular special interest entities. I call McCain-Feingold the Give-
the-money-to-Grover bill; that is, Grover Norquist and all of that 
crowd. So we take all the contributions from soft money and the parties 
have the duty and the responsibility of running elections. Now we are 
giving it to corporate America, and corporate America and the hard 
money will be there. This will end, I say, the Democratic Party down in 
my backyard. It will not even have a chance on that score.
  So I believe we ought to have public financing, where we can get away 
from this corruption that the Enron case has brought to the fore.
  Back to the point, remember, we do not have a surplus. It is a 
deficit and debt. Is there any way better to emphasize how we got this 
way than a Wall

[[Page 278]]

Street Journal of August 16 2001, almost a month before 9-11?
  I ask unanimous consent to have the Wall Street Journal article 
printed in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

            Nasdaq Companies' Losses Erase 5 Years of Profit

                           (By Steve Liesman)

       Mounting losses have wiped out all the corporate profits 
     from the technology stock boom of the late 1990s, which could 
     make the road back to the previous level of profitability 
     longer and harder than previously estimated.
       The massive losses reported over the most recent four 
     quarters by companies listed on the Nasdaq Stock Market have 
     erased five years' worth of profits, according to figures 
     from investment-research company Multex.com that were 
     analyzed by The Wall Street Journal.
       Put another way, the companies currently listed on the 
     market that symbolized the New Economy haven't made a 
     collective dime since the fall of 1995, when Intel introduced 
     the 200-megahertz computer chip, Bill Clinton was in his 
     first term in office and the O.J. Simpson trial obsessed the 
     nation. ``What it means is that with the benefit of 
     hindsight, the late '90s never happened,'' says Robert 
     Barbera, chief economist at Hoenig & Co.
       The Wall Street Journal analysis looked at earnings 
     excluding extraordinary items going back to September 1995 
     for about 4,200 companies listed on Nasdaq, which is heavily 
     weighted toward technology stocks but also includes hundreds 
     of financial and other growth companies. For the most 
     recently reported four quarters, those companies tallied 
     $148.3 billion in losses. That roughly equaled the $145.3 
     billion in profit before extraordinary items these companies 
     have reported since September 1995. Because companies have 
     different quarter ending dates, the analysis doesn't entirely 
     correspond to calendar quarters.
       Large charges that aren't considered extraordinary items 
     were responsible for much of the red ink, including 
     restructuring expenses and huge write-downs of inventories 
     and assets acquired at high prices during the technology 
     bubble.
       Analysts, economists and accountants say these losses raise 
     significant doubts about both the quality of past reported 
     earnings and the potential future profit growth for these 
     companies. Ed Yardeni, chief investment strategist at 
     Deutsche Banc Alex. Brown, said the losses raise the question 
     of ``whether the Nasdaq is still too expensive. These 
     companies aren't going to give us the kind of awesome 
     performance they did in the '90s, because a lot of it wasn't 
     really sustainable.''
       The Nasdaq Composite Index stood at around 1043 in 
     September 1995, soared to 5048.62 in March 2000 and now 
     stands at 1918.89. Because companies in the Nasdaq Composite 
     Index now have a cumulative loss, for the first time in 
     memory the Nasdaq's value can't be gauged using the popular 
     price-earnings ratio, which divides the price of stocks by 
     their earnings. That means it is impossible to say whether 
     the market is cheap or expensive in historical terms.
       The extent of the losses surprised a senior Nasdaq 
     official, who asked not to be named. ``I wouldn't have 
     thought they were that high,'' he said.
       Nasdaq spokesman Andrew MacMillan, while not disputing the 
     losses, pointed to the $1.5 trillion in revenue Nasdaq 
     companies generated over the past year, saying that 
     represented ``a huge contribution to the economy, to 
     productivity, and to people's lives . . . regardless of 
     what's happening to the bottom line during a rough business 
     cycle.''
       Staya Pradhuman, director of small-capitalization research 
     at Merrill Lynch, says the recent massive losses tell a story 
     of a market where investors became focused on revenue instead 
     of earnings. With billions of dollars in financing chasing 
     every glimmer of an Internet idea, Mr. Pradhuman says, a lot 
     of companies came to market long before they were ready.
       ``The underwriting was very aggressive, so earlier-stage 
     companies came to market than the kind of companies that came 
     to market five or 10 years ago,'' he adds. He believes there 
     is plenty of potential profitability out there in this crop 
     of young companies. But, he notes, ``only among those that 
     survive.''
       The data show that the very companies whose technology 
     produces were supposed to boost productivity and help smooth 
     out the business cycle by providing better information have 
     been among the hardest-hit in this economic slowdown. 
     ``Management got caught up with how smart they were and 
     completely forgot about the business cycle and competition,'' 
     says Mr. Yardeni. ``They were managed for only ongoing 
     success.''
       to be sure, some of Nasdaq's largest star-powered companies 
     earned substantial sums over the period. Intel led the pack 
     with $37.6 billion in profit before extraordinary items since 
     September 1995, followed closely by Microsoft's $34.6 billion 
     in earnings. Together, the 20 most profitable companies 
     earned $153.3 billion, compared with losses of $140.9 billion 
     for the 20 least profitable. Included in the losses was a 
     $44.8 billion write-down of acquisitions by JDS Uniphase and 
     an $11.2 billion charge by VeriSign, also to reduce the value 
     on its book of companies it had bought with its high-price 
     stock.
       These charges lead some analysts and economists to believe 
     that including these losses overstates the magnitude of the 
     decline. According to generally accepted accounting 
     principles, these write-offs are treated as regular expenses. 
     But corporate executives say they should be treated as one-
     time items. ``It's an accounting entry rather than a true 
     loss,'' maintains Bill Dudley, chief U.S. economist at 
     Goldman Sachs Group.
       Removing these unusual charges, the losses over the most 
     recently reported four quarters shrink to $6.5 billion on a 
     before-tax basis. By writing down the value of assets, 
     companies have used the slowdown to clean up their balance 
     sheets, a move that should allow them to move forward with a 
     smaller expense base and could pump up future earnings.
       ``It sets the table for future dramatic growth,'' says 
     independent accounting analyst Jack Ciesielski. Because of 
     the write-downs, ``when the natural cycle begins again, the 
     returns on assets and returns on equity will look 
     fantastic.'' But Mr. Ciesielski adds that this benefit will 
     be short-lived.
       Cisco Systems in the first quarter took a $2.25 billion 
     pretax inventory charge. This quarter, it partly reversed 
     that write-down, taking a gain of $187 million form the 
     revaluation of the previously written-down inventory. The 
     reversal pushed Cisco into the black.
       But Mr. Barbera warns that investors shouldn't be so quick 
     to ignore the unusual charges. For example, during good times 
     it wasn't unusual for companies to book large gains from 
     investments in other companies. Now that the value of those 
     investments are under water, companies are calling the losses 
     unusual. ``If they are going to exclude the unusual losses, 
     then they should exclude the unusual gains,'' says Mr. 
     Barbera.

  Mr. HOLLINGS. I quote a couple of lines:

       The Wall Street Journal analysis looked at earnings 
     excluding extraordinary items going back to September 1995 
     for about 4,200 companies listed on NASDAQ, which is heavily 
     weighted toward technology stocks but also includes hundreds 
     of financial and other growth companies. For the most 
     recently reported four quarters--that is since January 1 of 
     2000--those companies tallied $148.3 billion in losses. This 
     figure roughly equaled the $145.3 billion in profits before 
     extraordinary items these companies reported since September 
     1995. It was as if the last 5 years never happened, and now 
     they want to tell me it was because of 9-11. Come on.

  It is the same thing with the government. Do you mean to tell me that 
the $143.4 billion deficit for 2001 was incurred from September 11 
until September 30? The Government did not spend $143.4 billion in 20-
some days. No. No. It was going down on account of tax cuts. We did not 
have a surplus. It was a deficit. We were operating in the red, and 
more than anything else we were operating just like Enron. Who is 
hiding debt? We are.
  I yield the floor.

                          ____________________