[Congressional Record (Bound Edition), Volume 148 (2002), Part 3]
[Senate]
[Pages 3343-3350]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. GREGG:
  S. 2020. A bill to establish the Department of National Border 
Security; to the Committee on Governmental Affairs.
  Mr. GREGG. Madam President, I rise today to introduce a piece of 
legislation which tries to address one of the oppressive problems we 
have in confronting the issues of terrorism in our country as we move 
forward; that is, checking our borders and making sure we have control 
over the people who are coming into our country and how they can come 
into our country.
  As a nation, we have traditionally had very open borders, which is 
something in which we take great pride. Unfortunately, people who wish 
to cause us harm, people who wish to kill Americans, people who wish to 
kill Americans by the thousands, and who have stated that their sole 
purpose in life is to kill Americans, have taken advantage of that 
openness. Certainly we saw on September 11 the situation that occurred.

[[Page 3344]]

  We have 100,000 miles of coastline, 2,000 miles of land border with 
Mexico, and 4,000 miles of land border with Canada. Last year, we had 
127 million automobiles come across those borders, 11 million trucks, 2 
million railcars, and 1 million commercial airplanes. More than 500 
million people were admitted to the United States last year. You can 
see that our borders are aggressively used.
  There is great international commerce, which there should be, and we 
want to continue that. But one of the problems we have is that the 
agencies responsible for managing our borders have been disoriented, 
dysfunctional, spread about, and uncoordinated. We have seen some 
really horrendous instances of mismanagement. We have also seen 
instances that have occurred as a result of failure of communication. 
We have seen failures that have occurred as a result of turf fights 
between different agencies. We have seen agencies which have found 
their purpose to be unfocused in their execution of the protection of 
the borders.
  The most recent and startling and almost unbelievable example, of 
course, was the delivery of visas to a Florida flight school just this 
week for two people who committed the atrocities in New York. America 
is outraged. Clearly, the President was shocked. All of us were shocked 
that that would happen. That was a total example of an incredible 
breakdown in the systems which are managing our borders; that is, the 
INS.
  What I propose today is to try to get some coherence into this 
effort, to bring together the agencies which are responsible to protect 
our borders, to put them all under one management structure, and to 
create a new Cabinet-level Department, which would be called the 
``Department of National Border Security.''
  Under this Department, we would take the various agencies which have 
responsibility for managing our borders and protecting our Nation and 
put them into this Department so that they would be communicating with 
each other and have a streamlined management and command process--
something which they do not have today.
  Included in this Department would be, for example, the U.S. Customs 
Service, the U.S. Coast Guard, large elements of the Immigration and 
Naturalization Service, including, of course, Border Patrol, and 
elements of the DEA which have responsibility for border security in 
the area of drugs, and the Agriculture Quarantine Inspection Program, 
which obviously controls food that comes into the country.
  The result of putting all these groups together in one management 
structure will be that there will be, hopefully, a coordinated approach 
to managing our borders. It doesn't guarantee it. But it is very clear 
that the system we have today, because of the lack of coordination, 
because of the overlapping authority, because of the turf issues, and 
because of the lack of centralized directional command is not working.
  I happen to be ranking on a committee which has specific jurisdiction 
over funding for the Justice Department and the State Department and 
which has a large percentage of responsibility for our border 
activities, especially the INS. I can tell you from my own experience 
as the ranking member, and formerly as chairman, of that Subcommittee 
on Commerce, Justice, State, and the Judiciary of the Appropriations 
Committee, that unless we get these parties together functioning under 
one umbrella of leadership, we are simply not going to get our borders 
under control.
  Is this the full answer to the problem--the reorganizing of these 
Departments? Absolutely not. There also has to be the intention on the 
part of the parties who are serving these Departments to accomplish the 
goal. There has to be leadership on the part of the administration to 
accomplish the goal of border security and making it more efficient.
  But as a practical matter, without this first step I personally do 
not think we are ever going to get the type of coordination that is 
required in order for leadership in this area to be effective.
  What we have today in this arena is that these various Departments 
are spread across the Government. On top of it, we have each reporting 
to a separate Department Secretary. On top of that, we have the 
Homeland Security Director, of course. Overseeing all of it, we have 
the President. As a result, even though everybody wants to go in the 
same direction, it is like six or seven horses pulling in opposite 
directions. By bringing them all under the same tent, we will have a 
centralized activity.
  We should not, for example, be housing the Customs Service in one 
building, the Border Patrol in another building, the DEA in another 
building, and have them not generally communicating with each other at 
a border crossing point; or have the resources of one agency be in 
surplus at one border crossing point while the resources of another 
agency are strapped at the same crossing point and not having them be 
able to work together to try to more effectively manage those resources 
so that we get the most efficient use out of the people, the parties, 
and the items involved.
  All of that problem which exists today with tremendous 
dysfunctionalism between these various agencies as they try to relate 
to each other, all of that problem is a function of the fact that they 
all report up separate stovepipes, and the only generally coordinating 
event that occurs comes from the President and the new Homeland 
Security Director. But that person, Governor Ridge, has no legislative 
authority and no budget authority. Therefore, as a practical matter, 
other than having the good will of the President behind him, he does 
not have a whole lot of authority.
  So when you have one Department over here--let's say, Treasury, with 
Customs--and one Department over here--let's say, INS, with the Border 
Patrol, and Justice heading that Department up--you tend to have people 
who are functioning independent of each other, who, although they may 
have the good intentions to communicate with each other, really do not 
and do not work effectively as a result of that. We do not get the best 
responsiveness.
  So it is just logic, it is just good governance, and, for that 
matter, good management--which I recognize maybe is anathema to 
government--that all the people who are responsible for one function of 
the Government, which is protecting our borders, be functioning under 
the same leadership structure and, therefore, reading off of the same 
page. That is what this new Department will create.
  This new Cabinet level Department will set up a structure where 
everybody who is responsible for the border will report to a single 
Cabinet leader and, as a result, will be functioning off the same page 
relative to the way the border is managed. Hopefully, then we will be 
getting the most efficient and effective use of those people who are 
making a genuinely good effort today but a lot of which is involving 
just the spinning of wheels because of the lack of coordination. Then 
we will get coordination into that good effort and, as a result, get 
better border protection.
  This is a thought which is not necessarily original to me. However, 
it is obvious to me. As the ranking member and former chairman of the 
committee which has jurisdiction over a chunk of this area of 
responsibility, it is something I believe we need to do. I believe 
there are other groups who have looked at the border who have agreed 
with this approach.
  The Third Annual Report to the President and the Congress of the 
Advisory Panel to Assess Domestic Response Capabilities for Terrorism 
Involving Weapons of Mass Destruction, which essentially was Governor 
Gilmore's commission, came to the same conclusion: that there had to be 
a better centralization. They did not do it in the terms of forming a 
new Department, but they came to the same substantive conclusion that 
there had to be a better coordination, collection, and organization of 
the information coming into the country and of the tracking of people 
coming into the country.

[[Page 3345]]

  The Hart-Rudman Commission, Roadmap to National Security, Imperative 
for Change, which reported on February 15, came to the exact conclusion 
that I am proposing in the bill:

       Steps must be taken to strengthen the three individual 
     organizations themselves.

  They were talking here about Customs, Border Patrol, and the Coast 
Guard.

       We recommend the creation of an independent Homeland 
     Security Agency with responsibility for planning, 
     coordinating, and integrating various U.S. Government 
     activities involving homeland security.

  This does not go completely to that point, but it goes a long way in 
the area of border activity in that it creates a Centralized Border 
Center. They also suggested that that group, which they called the 
Homeland Security Agency, should include the Coast Guard, the Customs, 
the Border Patrol, and it should have Cabinet level operational effect.
  Even the White House has acknowledged there is a lack of coordination 
in this area. It was interesting, in relation to that, Governor Ridge 
made the statement: If you asked me today who is responsible for the 
border, I would say to you, in response, what part of the border? The 
borders remain disturbingly vulnerable to terrorism. There is no direct 
line of accountability for agencies charged with protecting them.
  So I think Governor Ridge clearly sees the problem as I see it, which 
is that we do not have a coordinated central management point for all 
border crossing activity. It makes no sense to have Customs in 
Treasury, INS in Justice and DEA in Justice, and the Coast Guard over 
in Transportation with no coordinated central management point for all 
border crossing activity. When these agencies serve to protect the 
border as their primary responsibility, and with the threat of 
terrorism that we confront today, they should clearly be together 
managing the issue of protecting our border as a coordinated unit under 
a Cabinet level Secretary.
  That is what the legislation which I am introducing today does.
                                 ______
                                 
      By Mr. ENZI:
  S. 2021. A bill to amend the Packers and Stockyards Act, 1921, to 
prohibit the use of certain anti-competitive forward contracts; to the 
Committee on Agriculture, Nutrition, and Forestry.
  Mr. ENZI. Mr. President, I appreciate this opportunity to speak this 
morning. I will speak on a favorite topic of our area of the country, 
the packer concentration. It is a huge problem for our ranchers in 
keeping them from getting what they should be getting for raising the 
livestock for this country. So I rise to introduce a bill that amends 
the Packers and Stockyards Act to reform livestock formula price 
contracts. This bill aims to rid the livestock industry of pricing 
schemes which take advantage of hard-working ranchers. It requires 
contracts to contain a fixed base price and to be traded in open public 
markets.
  Currently, there are four packers that slaughter 80 percent of the 
cattle in the United States. They hold the supply of livestock captive 
in a number of ways.
  Captive supply is when packers either own livestock or contract to 
purchase livestock more than 2 weeks before slaughter. Packers use 
captive supply to ensure their slaughter lines have consistent 
inventory. I will not argue with that original goal, for that goal. 
Captive supply makes good business sense. All businesses want to 
maintain a steady supply of inputs to ensure their production and 
control costs.
  But packers go beyond good organization and business performance to 
market manipulation. I have been working on this problem for 5 years 
and, so far, all we have been able to do is prove that there is a 
packer concentration.
  With captive supply, packers can purposefully drive down the market 
price by refusing to buy in the open market. This deflates all 
livestock prices and limits the market access of producers who have not 
aligned with specific packers.
  Most of us have not signed a formula price contract to sell a load of 
livestock, but many of us have sold a house. To illustrate the 
seriousness of this problem, and make it a little easier to understand, 
let's explore how you would sell a house with a formula price contract 
in a market structured like the current livestock market.
  It is March, and you know you will be selling your home in July. As a 
wise seller, you want to have a buyer for your home before that time. 
Now, what if it turns out that the other people do not really buy homes 
from each other anymore, and what if, in fact, you found out there were 
only four main companies that handled over 80 percent of all of the 
real estate transactions? You would have no choice but to deal with one 
of those companies.
  Now, one of them would offer you a contract stating that you will 
receive $10,000 over the average price of what other similar homes are 
selling for in your area in July. Sounds like a good deal, doesn't it?
  To manage your risk and ensure a buyer, you have been practically 
forced to sign a contract that does not specify how much you will 
receive. It says you will receive $10,000 over the average price at 
that time. There should be a tingle of fear in the pit of your stomach 
and it will mature to full-fledged panic when you close the deal in 
July. This is why. The four real estate companies have been planning. 
They decide to pull away from the market so all the home selling in 
July that is not contracted to these four companies floods the market 
and the price for homes in your area drops $12,000.
  What have you done? By trying to manage your risk in a limited 
market, you sold your home for $2,000 less than what the average price 
should have been, if there would have been a normal open market such as 
we have in the housing market.
  Livestock producers face that same problem. Yesterday there were 
91,906 head of cattle arriving at packing plants for slaughter. Forty-
four percent of those were bought by a formula price marketing 
arrangement. Now you know what that means.
  Just like the housing example, the money that producers lose in 
formula price contracts adds up over a year. When totaled, captive 
supply costs producers an estimated average of $1 billion per year, 
according to a study done by an Oregon State University professor.
  I am sure you didn't notice when you went to the grocery store to buy 
your beef that the price was lower because it is not. The packer 
concentration controls the price at that end, too.
  Another Senator from Wyoming faced the same concentration of market 
power in the packing industry 80 years ago. A predecessor to the Senate 
that held the seat I hold now, Senator John B. Kendrick, said:

       [The packing industry] has been brought to such a high 
     degree of concentration that it is dominated by a few men. 
     The packers, so-called, stand between hundreds of thousands 
     of producers on one hand and millions of consumers on the 
     other. They have their fingers on the pulse of both the 
     producing and consuming markets and are in such a position of 
     strategic advantage they have unrestrained power to 
     manipulate both markets to their own advantage and to the 
     disadvantage of over 99 percent of the people of this 
     country. Such power is too great, Mr. President, to repose in 
     the hands of any men.

  This great power Senator Kendrick talked about resides in the hands 
of the packers once again.
  My bill does two things to change the situation. It requires that 
livestock producers have a fixed base price in their contracts. It also 
puts these contracts up for bid in the open market where they belong. 
Under this bill, livestock contracts must contain a fixed base price on 
the day the contract is signed. This prevents packers from manipulating 
the base price at the point of sale and time of sale.
  You may hear allegations that this bill ends quality driven 
production, but this bill does not prevent adjustments to the base 
price for quality grade or other factors that are outside of the packer 
control. It prevents packers from changing the base price based on 
factors that they do control. You also may hear that this bill ends 
traditional forward contracting. However, contracts that are based on 
the futures

[[Page 3346]]

market are also exempted from the bill's requirements because the 
futures market is not controlled by the packers.
  My bill also limits the size of contracts to the equivalent of a load 
of livestock, meaning 40 cattle or 30 swine. It doesn't limit the 
number of contracts that can be offered by an individual. This key 
portion prevents small and medium-sized livestock producers from being 
shut out of deals that contain thousands of livestock per contract.
  In the past I have tried to get some transparency of reporting. The 
packer concentration has influenced the rules so they didn't have to 
report on the prices they are paying. You go into a market blind. We 
thought we had the problem solved, and they helped to influence a 
little 3/60 rule so if less than three packers or contracts were sold 
in a day, or if more than 60 percent of the market was by one of them, 
they didn't have to report. It virtually wiped out reporting in the 
sheep industry. We have some changes in that, but some changes for 
transparency need to be made.
  There are a number of benefits accompanying this bill. It effectively 
increases buyer competition without resorting to increasing buyer 
numbers through a messy packer breakup. It gives fair access to all 
producers to compete for contracts on a level playing field with big 
producers. This bill encourages public and electronic trading of great 
numbers of livestock, providing greater price transparency. That is 
where we are trying to go on all of this.
  Simply put, this bill makes packers and livestock producers bid 
against each other to win a contract--no more secret deals. We know the 
packers are engaging in secret deals.
  Mr. President, I ask unanimous consent to print in the Record this 
advertisement I have collected.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

           [From Argus Leader, Sioux Falls, SD, Feb. 3, 2002]

Senator Johnson's Farm Bill Amendment Imperils the Job Security of His 
     Own Constituents and Would Destroy the Pork and Beef Industry

       To The Argus Leader Editor and the People of Sioux Falls 
     and South Dakota: We want to call your attention to and 
     correct certain misleading and untrue statements that have 
     been made by or attributed to Senator Tim Johnson and 
     published in the Argus Leader on January 27, 2002 about 
     Smithfield Foods, John Morrell, and our plant in Sioux Falls.


             senator tim johnson false statement number one

       ``The bipartisan Johnson-Grassley Amendment does not 
     negatively affect the John Morrell pork slaughter and 
     processing plant in Sioux Falls.''

       Fact: The Johnson Amendment (S. Amdt. 2534) to the Senate 
     Farm Bill (S. 1731) prohibiting meat packers from owning 
     livestock farms or controlling livestock for more than 14 
     days would have a huge negative impact on the future of the 
     Morrell plant in Sioux Falls and its 3,200 employees. Our 
     company is both a meatpacker and a producer and we have made 
     major investments in our system to provide a healthy product 
     to consumers at the lowest possible price and to assure them 
     of food safety, uniformity, and consistency in those 
     products. The Johnson Amendment, if it becomes law, would 
     have a major negative impact on our company and the red meat 
     industry as it exists today. A clear choice for packers that 
     own livestock or contract for livestock would be to sell or 
     close facilities. The Sioux Falls plant, which is nearly 100 
     years old, and the oldest hog processing plant in our system 
     by far, would head the list of candidates. Critical to this 
     plant's future and continued operation is an assured and 
     stable supply of high-quality hogs grown to our demanding 
     specifications as to care, quality and food safety. Hogs 
     represent the ``fuel'' that drives the plant. Without an 
     assured and stable quality livestock supply, we cannot meet 
     the demands and requirements of our customers.
       Restrictive laws such as the Johnson-Grassley-Wellstone 
     Amendment already have had a major negative impact on the 
     agri-business economy of South Dakota. As a result of the 
     state's restrictive farming practices (Amendment E), the hog 
     supply to our plant now comes 20% from South Dakota, 40% from 
     Minnesota, 20% from Canada, and the remaining 20% from other 
     midwestern states. As a result of unnecessary government 
     regulations such as Amendment E, hog production in South 
     Dakota declined 50% during the period 1995 to 2001.
       Senator Johnson and his staff have offered no study or 
     analysis of the impact that his Amendment would have on the 
     agri-business economy not only of South Dakota but also on 
     the entire country. On the other hand, eight leading agri-
     business economists from the country's leading land-grant 
     universities, led by Wayne Purcell (Alumni Distinguished 
     Professor of Agricultural and Applied Economics, Virginia 
     Tech University) and including Dillon Feuz (Professor of 
     Agricultural Economics, University of Nebraska), Glenn Grimes 
     (Emeritus Professor of Agricultural Economics, University of 
     Missouri), Marvin L. Hayenga (Professor of Economics, Iowa 
     State University), Stephen R. Koontz (Professor of 
     Agriculture and Resource Economics, Colorado State 
     University), John D. Lawrence (Professor of Economics and 
     Director ISU Beef Center, Iowa State University), Ted C. 
     Schroeder (Professor of Agricultural Economics, Kansas State 
     University), and Clement E. Ward (Professor of Agricultural 
     Economics, Oklahoma State University), have recently 
     published an independent study that concludes that the 
     Johnson Amendment would have disastrous effects on major 
     sectors of the agri-business economy.
       Their study says that the amendment would actually lower 
     hog prices because of the great glut of supply that would 
     result from divestiture; that it would give back the 
     advantage and gain that the U.S. industry has made over the 
     last 15 years to foreign countries such as Argentina, Brazil, 
     Canada and Australia; that it would cause companies like ours 
     to essentially forfeit billions of dollars of investments 
     that we have made to move the U.S. to the forefront of the 
     industry; that it would have a major negative impact on 
     credit availability of farmers who would no longer be able to 
     rely on firm contracts with packers to use as security with 
     their bank lenders; and that it would give the efficient, 
     vertically-integrated poultry industry an even greater 
     competitive advantage over the pork and beef industries than 
     it now currently enjoys.
       Had Senator Johnson bothered to conduct any study or 
     analysis, or reviewed any public USDA figures, he would have 
     found that in the last ten years, producers have been 
     profitable in 8 of those years, and the division of the pork 
     dollar shows retailers with the greatest share, producers 
     with the second greatest share, and the packers in a distant 
     third position.


            Senator Tim Johnson False Statement Number Two:

       ``Johnson said he has been assured by Morrell and its 
     parent company, Virginia-based Smithfield Foods Inc., that 
     the Sioux Falls plant operates within the restrictions of the 
     amendment.''

       Fact: This is a false statement and we are astonished that 
     Senator Johnson would place his name behind it. Senator 
     Johnson has never extended the courtesy or taken the time to 
     meet with senior officers of Smithfield Foods. In recent 
     years, I personally traveled to Washington, once with Richard 
     Poulson, another senior officer of Smithfield Foods, and on 
     another occasion with Patrick Boyle, president and chief 
     executive officer of the American Meat Institute, to meet 
     with Senator Johnson by prior scheduled appointment to 
     discuss issues in South Dakota. On both occasions, Senator 
     Johnson was ``too busy'' to meet with us and delegated a 
     junior staffer to attend the meeting in his stead.
       Despite the fact that Senator Johnson has had no interest 
     in meeting with Smithfield officials, his staff was fully 
     advised of the precarious nature of the Sioux Falls plant 
     prior to his introducing his Amendment to the Farm Bill. Our 
     Sioux Falls plant manager traveled to Washington on December 
     28, 2001 to meet with Senator Johnson and his aides and told 
     them that the greatest negative impact of his Amendment would 
     be on his own constituents and that the Amendment in the end 
     will benefit no one but the poultry industry. Smithfield 
     Foods wants to make it quite clear to Senator Johnson that he 
     can take full credit for putting 3,200 jobs at peril by 
     causing South Dakota's third-largest employer to reconsider 
     it's prior decision to pursue a major renovation, update, and 
     expansion of the Sioux Falls plant, or to build a new, more 
     modern plant in South Dakota to take advantage of the strong 
     local work force and rural ethic that is so important to our 
     business.
       Smithfield Foods will dedicate its resources and make its 
     future investments in states and countries where we are 
     welcomed by the elected and appointed state, federal or other 
     governmental officials. We consider Senator Johnson's actions 
     in pursuing his Amendment to be hostile to the survival of 
     the pork industry, Smithfield Foods, the Morrell plant, and 
     to our employees in Sioux Falls because he was made fully 
     aware of the consequences of his amendment before he 
     introduced it.
       It is unfortunate that Senator Johnson would sponsor such 
     an ill-conceived piece of legislation even after the Senate 
     Agriculture Committee had voted it down in December by a vote 
     of 12-9. He doesn't seem to understand that his state's anti-
     corporate farming laws have already delivered a near fatal 
     blow to South Dakota's hog growing industry and that his 
     current action is simply another nail in the coffin. One of 
     the more puzzling things about Senator Johnson's Amendment is 
     that he apparently seeks to destroy the

[[Page 3347]]

     red meat industry while leaving the poultry industry 
     untouched. For years the poultry industry has taken major 
     market share away from the red meat industry because of its 
     ability to own and control by contract the quality of its 
     livestock supply.
       Background: Smithfield Foods' involvement with John Morrell 
     and the Sioux Falls Plant.
       After all the other major industry players had for years 
     rejected the opportunity to buy John Morrell and to keep the 
     plants open, Smithfield Foods agreed to purchase the company 
     in 1995. The Sioux Falls plant was losing money at the time 
     Smithfield purchased it and would have closed had we not 
     purchased it. Today, the plant is profitable. It contributes 
     in excess of $1 billion a year to the South Dakota economy. 
     How did this transformation happen? The answer is quite 
     simple: Smithfield has invested over $65 million in the Sioux 
     Falls plant since 1995. Studies have shown that every new job 
     at John Morrell creates several additional new jobs in South 
     Dakota.
       While the plant today is stable and profitable, we are 
     faced with the reality that we need to make improvements to 
     the nearly 100-year-old facility or to build a new plant in 
     Sioux Falls or elsewhere. Prior to Senator Johnson's ill-
     conceived Amendment, our planning was focused on maintaining 
     the plant location in South Dakota. But we will not invest 
     our resources in states where we cannot have a responsible 
     relationship with elected and appointed officials.
       Conclusion: We are not certain whose interests Senator 
     Johnson thinks he represents with his Amendment to the Farm 
     Bill. He certainly does not represent the interests of the 
     3,200 workers at our John Morrell plant. He has taken no 
     steps to acquaint himself with the true facts, nor has he 
     commissioned any studies to determine the true impact and 
     cost of his Amendment, and he has totally ignored the 
     considered decision and vote (12 to 9) of the Senate 
     Agriculture Committee not to approve his Amendment.
       We want Senator Johnson to understand the true impact of 
     his ill-conceived Amendment and it is as follows:
       If the Johnson Amendment becomes law, Smithfield Foods will 
     neither rebuild the Sioux Falls plant, or build a new plant 
     in South Dakota, nor will we make any further investment in 
     South Dakota, or for that matter in any other state whose 
     public officials are hostile to our ongoing operations and 
     our industry.
           Very Truly Yours,

                                          Joseph W. Luter III,

                             Chairman and Chief Executive Officer,
                                            Smithfield Foods, Inc.

  Mr. ENZI. This ad was run on February 3, 2002, in the Sioux Falls, 
SD, newspaper, the Argus Leader, in response to an amendment banning 
packer ownership of livestock that we did on the farm bill recently. It 
was paid for by Smithfield Foods, Inc., a large hog producing and pork 
processing company. The advertisement claims that the company wants 
Senator Johnson to understand the true impact of his ill-conceived 
amendment. I also supported his amendment and was a cosponsor, and I 
voted for it along with 50 of my colleagues. The advertisement, as you 
can see, from the Argus Leader, states:

       If the Johnson amendment becomes law, Smithfield Foods will 
     neither rebuild the Sioux Falls plant, or build a new plant 
     in South Dakota, nor will we make any further investment in 
     South Dakota, or for that matter in any other state whose 
     public officials are hostile to our ongoing operations and 
     our industry.

  If the packers are dealing fairly, why would they resort to scare 
tactics such as this? Does this mean my State will be blacklisted, too? 
Let me tell you what has happened in Wyoming. When we were doing this 
amendment, people who had contracts were being called, saying, you are 
going to lose 3 cents per pound on your beef if this goes through. They 
are buying all the beef. They are paying the prices, and they are 
setting them.
  Packer ownership of livestock is only a small portion of the packer 
captive supply problem. My bill would put an end to the rest of the 
packers' manipulative power. What they are referring to there takes 
care of 5 percent of the problem. It is the best we have been able to 
do against the packers. What I am proposing will only take care of 
another 35 percent of the problem. There is a long way to go. 
Eventually the consumer should get the best prices and the people 
taking the most risk ought to get a fair price.
  It is important to remember why we are doing this. All producers 
should have a fair chance to compete against each other in an honest 
opportunity to get the highest price for their product. Cattle grown on 
family ranches in Wyoming help to feed the entire United States. I 
value the small and medium-sized producers' ability to provide quality 
products for consumers. Big business may be more efficient, but it 
lacks the loyalty to a locale that our small producers have. We can see 
this in the advertisement I have just added to the Record.
  The packers are threatening to leave an area that has been 
economically dependent upon them for over 90 years. That isn't loyalty 
to a community. That is the behavior of a bully. In Wyoming, we must 
encourage our small producers to remain in business and compete. The 
loyalty to small communities that our small and medium-sized businesses 
have ensures they will continue to enrich our main streets.
  Some of my colleagues may be wondering why this bill is needed after 
we passed the amendment banning packer ownership of livestock. The ban 
on packer ownership of livestock would address one small portion of the 
captive supply problem--about 5 years--but it would not address the 
large number of contracts based on the formula prices that I explained 
using the housing market example. Formula contracts provide the packers 
with monopolistic power over the livestock market.
  I ask my colleagues to rid the livestock industry of pricing schemes 
which take advantage of hard-working ranchers and farmers. I mentioned 
that this amendment only affects 5 percent of the market. It is a very 
important 5 percent of the market. It is a very important start. I am 
hoping the people on the conference committee will make sure this 
provision remains in the bill and makes a start toward fairness in the 
livestock industry--fairness for the small producer versus the packing 
concentration.
  We need to end the secret deals and the unfair contracts. I ask my 
colleagues to give your constituents the opportunity to compete on a 
level playing field.
                                 ______
                                 
      By Mr. BOND (for himself and Mr. Grassley):
  S. 2022. A bill to amend the Internal Revenue Code of 1986 to modify 
the unrelated business income limitation on investment in certain debt-
financed properties; to the Committee on Finance.
  Mr. BOND. Mr. President, I rise today to introduce the Small Business 
Investment Company Capital Access Act of 2002, whose purpose is to 
increase the amount of venture capital available to small businesses. I 
am pleased that my good friend from Iowa, Senator Grassley, the ranking 
member on the Senate Finance Committee, has agreed to be the principal 
cosponsor of this important bill.
  During the past 18 months, there has been a significant contraction 
of the private-equity market. During this same period, the Small 
Business Administration's Small Business Investment Company program has 
taken on a significant role in providing venture capital to small 
businesses seeking investments in the range of $500,000 to $3 million.
  Small Business Investment Companies, SBICs are government-licensed, 
government-regulated, privately managed venture capital firms created 
to invest only in original issue debt or equity securities of U.S. 
small businesses that meet size standards set by law. In the current 
economic environment, the SBIC program represents an increasingly 
important source of capital for small enterprises.
  While Debenture SBICs qualify for SBA-guaranteed borrowed capital, 
the government guarantee forces a number of potential investors, namely 
pension funds and university endowment funds, to avoid investing in 
SBICs because they would be subject to tax liability for unrelated 
business taxable income, UBTI. More often than not, tax-exempt 
investors generally opt to invest in venture capital funds that do not 
create UBTI. As a result, 60 percent of the private-capital potentially 
available to these SBICs is effectively ``off limits.''
  The Small Business Investment Company Capital Access Act of 2002 
would correct this problem by excluding government-guaranteed capital 
borrowed by Debenture SBICs from debt for purposes of the UBTI rules. 
This change

[[Page 3348]]

would permit tax-exempt organizations to invest in SBICs without the 
burdens of UBTI record keeping or tax liability.
  In 1958, Congress created the SBIC program to assist small business 
owners in obtaining investment capital. Forty years later, small 
businesses continue to experience difficulty in obtaining investment 
capital from banks and traditional investment sources. Although 
investment capital is readily available to large businesses from 
traditional Wall Street investment firms, small businesses seeking 
investments in the range of $500,000-$3 million have to look elsewhere. 
SBICs are frequently the only sources of investment capital for growing 
small businesses.
  Often we are reminded that the SBIC program has helped some of our 
Nations best known companies. It has provided a financial boost at 
critical points in the early growth period for many companies that are 
familiar to all of us. For example, when Federal Express needed help 
from reluctant credit markets, it received a needed infusion of capital 
from two SBA-licensed SBICs at a critical juncture in its development 
stage. The SBIC program also helped other well-known companies, when 
they were not so well-known, such as Intel, Outback Steakhouse, America 
Online, and Callaway Golf.
  What is not well known is the extraordinary help the SBIC program 
provides to Main Street America small businesses. These are companies 
we know from home towns all over the United States. Main Street 
companies provide both stability and growth in our local business 
communities. A good example of a Main Street company is Steelweld 
Equipment Company, founded in 1932, which designs and manufacturers 
utility truck bodies in St. Clair, Missouri. The truck bodies are 
mounted on chassis made by Chrysler, Ford, and General Motors. 
Steelweld provides truck bodies for Southwestern Bell Telephone Co., 
Texas Utilities, Paragon Cable, GTE, and GE Capital Fleet.
  Steelweld is a privately held, woman-owned corporation. The owner, 
Elaine Hunter, went to work for Steelweld in 1966 as a billing clerk 
right out of high school. She rose through the ranks of the company and 
was selected to serve on the board of directors. In December 1995, 
following the death of Steelweld's founder and owner, Ms. Hunter 
received financing from a Missouri-based SBIC, Capital for Business, 
CFB, Venture Fund II, to help her complete the acquisition of 
Steelweld. CFB provided $500,000 in subordinated debt. Senior bank debt 
and seller debt were also used in the acquisition.
  Since Ms. Hunter acquired Steelweld, its manufacturing process was 
redesigned to make the company run more efficiently. By 1997, 
Steelweld's profitability had doubled, with annual sales of $10 million 
and 115 employees. SBIC program success stories like Ms. Hunter's 
experience at Steelweld occur regularly throughout the United States.
  In 1991, the SBIC program was experiencing major losses, and the 
future of the program was in doubt. Consequently, in 1992 and 1996, the 
Committee on Small Business worked closely with the Small Business 
Administration to correct deficiencies in the law in order to ensure 
the future of the program.
  Today, the SBIC Program is expanding rapidly in an effort to meet the 
growing demands of small business owners for debt and equity investment 
capital. And it is important to focus on the significant role that is 
played by the SBIC program in support of growing small businesses. When 
Fortune Small Business compiled its list of 100 fastest growing small 
companies in 2000, 6 of the top 12 businesses on the list received SBIC 
financing during their critical growth year.
  The Small Business Investment Company Capital Access Act of 2002 is 
important for one simple reason: once enacted it paves the way for more 
investment capital to be available for more small businesses that are 
seeking to grow and hire new employees. According to the National 
Association of Small Business Investment Companies, NASBIC, a 
conservative estimate of the effect of this amendment would be to 
increase investments in Debenture SBICs by $200 million from tax-exempt 
investors in the first year and $400 million in the second year. 
Government-guaranteed SBIC leverage commitments equal to $400 million 
in year one and $800 million in year two would be added to the private 
capital. Thus, total year one capital available for investment would 
equal $600 million and total year two capital would equal $1.2 billion.
  Data developed by Venture Economics for the period 1970-1999 
indicates that one job is created for every $22,600 investment in a 
small company. At that rate, this bill could be responsible for the 
creation or support of as many as 62,000 jobs within the next two 
years, whether within companies receiving investments directly or 
within those firms benefiting indirectly through increased sales of 
goods and services to the former companies.
  And the cost? Industry experts estimate that if the change were 
effective now, there would be less than a $1 million in lost tax 
revenues. About $1.5 billion in private capital is invested in 
Debenture SBICs. A NASBIC poll of Debenture SBICs indicates $30.3 
million of that amount is from tax-exempt investors. For the previous 
10 years, Debenture SBIC returns have averaged 7.78 percent. Applied to 
the $30.3 million, that would result in lost taxable income of $2.36 
million per year. If all of that were taxed at the top 39 percent rate, 
the tax revenue loss would be $922,000 per year.
  The cost is low and the potential for economic gain is great. Passage 
of the bill will make the Government's existing SBIC program more 
effective in providing growth capital for America's small business 
entrepreneurs.
  And most importantly, it will provide sorely needed capital for the 
sector of our economy that provides about 75 percent of the net new 
jobs, small businesses. That is a real stimulus that would cause new 
investments to be made and the creation of critically needed new jobs. 
Our economy is primed for this kind of support, and I urge my 
colleagues to support this important bill.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2022

       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 ``Small Business Investment 
     Company Capital Access Act of 2002''.

     SEC. 2. MODIFICATION OF UNRELATED BUSINESS INCOME LIMITATION 
                   ON INVESTMENT IN CERTAIN DEBT-FINANCED 
                   PROPERTIES.

       (a) In General.--Section 514(c)(6) of the Internal Revenue 
     Code of 1986 (relating to acquisition indebtedness) is 
     amended--
       (1) by striking ``include an obligation'' and inserting 
     ``include--
       ``(A) an obligation'',
       (2) by striking the period at the end and inserting ``, 
     or'', and
       (3) by adding at the end the following:
       ``(B) indebtedness incurred by a small business investment 
     company licensed under the Small Business Investment Act of 
     1958 which is evidenced by a debenture--
       ``(i) issued by such company under section 303(a) of such 
     Act, or
       ``(ii) held or guaranteed by the Small Business 
     Administration.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to acquisitions made on or after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Ms. COLLINS (for herself, Mr. Bond, Mr. Hutchinson, and Mr. 
        Smith of Oregon):
  S. 2023. A bill to amend the Internal Revenue Code of 1986 to provide 
for an increase in expensing under Section 179; to the Committee on 
Finance.
  Ms. COLLINS. Mr. President, I rise today to introduce legislation to 
benefit our Nation's small businesses--the backbone of our economy. I 
am very pleased to be joined by several of my colleagues, including 
Senator Bond, Senator Tim Hutchinson, and Senator Gordon Smith. All of 
these Senators have been steadfast proponents and supporters of small 
businesses throughout their Senate career. Today, we are introducing 
legislation to allow small businesses to expense more of their 
investments in equipment and property.

[[Page 3349]]

In short, we are introducing legislation to help small businesses grow.
  The importance of small businesses to our economy cannot be 
overstated. According to the Small Business Administration, small firms 
account for three-quarters of our Nation's employment growth and almost 
all of the net new jobs. That is certainly true in my home State of 
Maine. These are good jobs, jobs that make our communities strong.
  Mr. President, last Friday the Senate overwhelmingly passed a 
critical piece of legislation designed to boost our economy. The 
legislation extends benefits for an additional 13 weeks to an estimated 
3 million unemployed workers who have exhausted, or will soon exhaust, 
their regular unemployment benefits before being able to find new work. 
This program will help put food on the table for an estimated 23,000 
unemployed workers in Maine by providing money for extended benefits.
  The economic recovery legislation also includes ``bonus 
depreciation'' provisions that will encourage mostly larger firms to 
invest in new property and equipment. Again, that is another provision 
I support. It includes a number of other important proposals, including 
one that is near and dear to me providing tax relief to teachers who 
reach deep into their own pockets to buy supplies and materials for 
their students. Yet my biggest regret about the economic recovery 
package we passed last week is that it does very little for smaller 
businesses. I think that is disappointing and I think that is wrong 
because it is small businesses that tend to lead our economy out of 
recession.
  Often, I think we take smaller businesses for granted. When times are 
good, we expect small businesses to create vast numbers of good, new 
jobs for American workers, and when times are tough, we count on small 
businesses to resuscitate our sluggish economy. Time and time again, 
entrepreneurs lead the Nation down avenues of new economic opportunity, 
and our expectations rise with each remarkable success story. But if we 
expect so much from small businesses, if we count on them to this 
degree, we owe it to them to create a climate that nurtures and rewards 
entrepreneurship.
  That is why we have come together to introduce this straightforward 
legislation. Under section 179 of the Tax Code, a taxpayer with a 
relatively small amount of annual investment may elect to deduct up to 
$24,000 of the cost of qualifying property and equipment placed in 
service in any given year. The deduction is phased out for taxpayers 
who invest over $200,000 per year.
  Our bill would permit small businesses to expense their new equipment 
purchases up to $40,000 per year. In other words, we would be 
increasing the section 179 expensing limit from $24,000 to $40,000. 
That is a fairly significant increase, but it should be; the last time 
Congress increased the small business expensing limit was back in 1996. 
An adjustment is well overdue.
  Section 179 is critically important to small businesses. Direct 
expensing allows a small employer to avoid the complexities of the 
depreciation rules as well as unrealistic recovery periods for many 
assets. For example, under current law, a computer must be depreciated 
over 5 years. Now, all of us know that the useful life of most 
computers is only 2 or 3 years, at best.
  Expensing also addresses a top concern of small businesses that has 
been exacerbated by the recent recession. The concern is access to 
capital.
  I served for a time as the New England Administrator of the Small 
Business Administration, and I know there are so many small companies 
where the owner of the company has a wonderful concept, a workable 
business plan, yet lacks access to capital to get the business underway 
or to grow it to the next level. The concern is access to capital, 
which the Small Business Administration has called the ``greatest 
economic policy challenge'' for rapidly growing businesses.
  One indication of the need for additional financing is the amount of 
venture capital invested into the United States. In the year 2000, a 
record $103 billion was invested. But in 2001, that total fell by 65 
percent, to $36.5 billion. When we see this decrease in access to 
venture capital, inevitably, it seems, women-owned companies and 
minority-owned firms are disproportionately affected and are shut out 
of the capital market.
  By raising the section 179 limit, our bill, in effect, will reduce 
the cost of capital for small businesses nationwide and it will free up 
additional capital for small businesses to purchase more plant and 
equipment.
  I have spoken to small business owners in my home State of Maine, and 
they have told me time and again that an increase in the small business 
expensing limit would make a real difference to them. It would allow 
them to expand their businesses, thus create more good, new jobs.
  Terry Skillins of Skillins Greenhouses is a fourth-generation Maine 
family business founded in 1885. It is a good example of what I am 
talking about. Skillins Greenhouses employs between 70 and 120 
employees, depending on the season, in its landscaping, greenhouse, and 
floral businesses. Terry told me the company is looking to expand but 
that to do so takes money. From tractors, to conveyor belts, to 
specialized machinery, the equipment needed to expand is expensive. 
Terry said raising the small business expensing limit to $40,000 would 
help tip the scales in favor of his proceeding with an expansion, 
particularly if the increase were made permanent. Terry said his 
business plan extends over a number of years and, hence, knowing the 
expensing limit would be increased permanently, he could and would use 
a significant multiyear savings to expand his business.
  We offered a small business expensing amendment to the economic 
recovery bill back in January. The amendment was offered by my 
colleague from Missouri, Senator Bond, and myself. It included exactly 
the same increases as I am proposing in the bill we are introducing 
today. I point out that our amendment passed the Senate by an 
overwhelming vote of 90 to 2. So, clearly, there is an understanding 
among our colleagues that this tax change is long overdue and that it 
would make a real difference to the small businesses in our country.
  Today, I am inviting all of our colleagues to join us in cosponsoring 
this bill, which is strongly supported and has been endorsed by the 
National Federation of Independent Business, our Nation's largest small 
business organization. In that regard, I ask unanimous consent that a 
letter from Dan Danner, senior vice president of the NFIB, be printed 
in Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                            National Federation of


                                         Independent Business,

                                   Washington, DC, March 14, 2002.
     Hon. Susan Collins,
     U.S. Senate,
     Washington, DC.
       Dear Senator Collins: On behalf of the 600,000 members of 
     the National Federation of Independent Business (NFIB), I 
     commend you for introducing The Section 179 Small Business 
     Expensing Bill. The Collins-Bond-Hutchinson-Smith bill will 
     increase the amount of equipment purchases, allow small 
     businesses to expense each year from the current $24,000 to 
     $40,000 and most importantly, make this language permanent.
       Many small businesses are currently struggling to cope with 
     the recession and the events of September 11th. Increasing 
     the expensing limit would provide small and growing firms 
     with the funds to make critical investments and keep their 
     firms running and growing, creating new jobs.
       This legislation will also help small business by 
     eliminating burdensome record keeping involved in 
     depreciating equipment. And it adjusts the investment limit 
     on expensing from 200,000 to $325,000.
       Small business is the major job generator for the economy. 
     Let's give them the tools to grow, hire more employees, and 
     lead this country out of recession.
           Sincerely,
                                                       Dan Danner,
                             Senior Vice President, Public Policy.

  Ms. COLLINS. Mr. President, this is a change that makes sense. I hope 
we will adopt it this year. It is long overdue to change our tax policy 
to reflect the modern-day realities of running a small business.
  Mr. BOND. Mr. President, the bill offered by Senator Collins today is 
intended to simplify the tax rules for

[[Page 3350]]

small businesses as they purchase new equipment to sustain and expand 
their businesses. I am pleased to be the lead co-sponsor on this 
important small business legislation.
  The bill parallels the amendment that Senator Collins and I offered 
to the economic-stimulus legislation considered on the floor in January 
and makes the increase in the expensing limits permanent. The Bond-
Collins amendment was approved by the Senate by a vote of 90-2.
  While some may think that small business is not that important, let's 
be clear about the role they play in our economy. Small business: 
represents 99 percent of all employers; employs 51 percent of the 
private-sector workforce; provides about 75 percent of the net new 
jobs; contributes 51 percent of the private-sector output; and 
represents 96 percent of all exporters of goods.
  In short, size is the only ``small'' aspect of small business.
  Our bill would permit small businesses to expense their new equipment 
purchases up to $40,000. The current annual limit is $24,000.
  The bill also increases the limitation on the total amount of 
property that a small business can place in service during a year 
before triggering a phase-out of the annual expensing amount. Under the 
amendment, a business would be able to claim the full $40,000 in 
expensing if it purchased no more than $325,000 of property during the 
year. Under current law, the phase-out limitation is only $200,000. To 
the extent that a business exceeds the phase-out limit, the annual 
expensing amount declines.
  Direct expensing allows small businesses to avoid the complexities of 
the depreciation rules as well as the unrealistic recovery periods for 
most assets. For example, under current law a computer must be 
depreciated over 5 years even though the useful life is most likely 2-3 
years at best.
  These provisions have several important advantages, especially in 
light of the current economic conditions.
  By allowing more equipment purchases to be deducted currently, we can 
provide much needed capital for small businesses.
  With that freed-up capital, a business can invest in equipment, which 
will benefit the small enterprise and, in turn, stimulate other 
industries.
  In addition, that's more money available to keep employees working 
and hopefully hire new employees.
  Moreover, new equipment will contribute to continued productivity 
growth in the business community, which Federal Reserve Chairman Alan 
Greenspan has repeatedly stressed is essential to the long-term 
vitality of our economy.
  Finally, these modifications will simplify the tax law for countless 
small businesses. Greater expensing means less equipment subject to the 
onerous depreciation rules.
  In short, the equipment-expensing change I propose are a win-win for 
small businesses consumers, equipment manufacturers, and our national 
economy as a whole.
  Mr. SMITH of Oregon. Mr. President, I rise today to respond to the 
urgent needs of small businesses in my home State of Oregon. Oregon 
small businesses are in need of help as the state's economy deals with 
poor growth and high unemployment.
  In an effort to boost both small business and the Oregon economy I am 
proud to introduce legislation with Senator Collins that will provide 
tax relief for small firms, the section 179 small business expensing 
bill.
  Economic recovery must include job creation. In Oregon most new jobs 
are created by the State's 270,000 small businesses. Small businesses 
have a broad impact on Oregon's economy and are essential to its well-
being.
  Oregon ranks third in the Nation in small businesses per capita. 
Oregonians are independent and creative and much of this creativity 
goes into the wide diversity of small businesses that exist in my 
State. Therefore it is imperative that we bolster and strengthen the 
small business community in Oregon.
  One critical way in which we can help small firms is by raising the 
threshold for expensing equipment purchases.
  Currently, companies may expense equipment purchases up to $24,000 of 
the cost of equipment and depreciate the remainder.
  This legislation will increase the amount small businesses can 
expense per purchase to $40,000 and increase the total investment from 
the current $200,000 to $325,000 annually.
  This limit of $325,000 on total purchases of equipment in a single 
year applies to the smallest of companies.
  Only the smallest of firms that are struggling to stay afloat and 
seek to grow by buying equipment would be able to take advantage of 
this expensing.
  This would provide a greatly needed boost to small businesses in 
Oregon, allowing them to move forward on job hiring and capital 
investment plans that they have had to put aside during the downturn of 
recent days.
  This legislation is strongly supported by the National Federation of 
Independent Businesses and I would like to enter into the Record a 
letter from Dan Danner expressing the importance of this increase to 
small businesses.
  I believe these changes will ease the record-keeping burden of 
depreciating such equipment and fill free up capital that can be used 
to create and sustain new jobs, expand current small businesses, and 
encourage the creation of new businesses as well.
  All of these economic actions will boost the Oregon economy at a time 
it is still sorely needed. Businesses will use the extra money to 
purchase new equipment, which will help an economic expansion.
  Creating new jobs for Oregonians who were laid off last year lessens 
the burden on the State economy and puts unemployed Oregonians back to 
work.
  In conclusion, I would like you to know that this critical 
legislation that would boost small businesses in Oregon was initially 
part of the economic stimulus legislation that the Senate passed 
overwhelmingly in January. I call on all of my colleagues to support 
this legislation and swiftly give small businesses across the Nation 
and in my State this important boost.
  I ask unanimous consent that the letter to which I referred 
previously be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                            National Federation of


                                         Independent Business,

                                   Washington, DC, March 15, 2002.
     Hon. Gordon Smith,
     U.S. Senate,
     Washington, DC.
       Dear Senator Smith: On behalf of the 600,000 members of the 
     National Federation of Independent Business (NFIB), I commend 
     you for introducing The Section 179 Small Business Expensing 
     bill. Your bill will increase the amount of equipment 
     purchases, allow small businesses to expense each year from 
     the current $24,000 to $40,000 and most importantly, make 
     this language permanent.
       Many small businesses are currently struggling to cope with 
     the recession and the events of September 11th. Increasing 
     the expensing limit would provide small and growing firms 
     with the funds to make critical investments and keep their 
     firms running and growing, creating new jobs.
       This legislation will also help small business by 
     eliminating burdensome record keeping involved in 
     depreciating equipment. And it adjusts the investment limit 
     on expensing from $200,000 to $325,000.
       Small business is the major job generator for the economy. 
     Let's give them the tools to grow, hire more employees, and 
     lead this country out of recession.
           Sincerely,
                                                       Dan Danner,
     Senior Vice President, Public Policy.

                          ____________________