[Congressional Record (Bound Edition), Volume 149 (2003), Part 9]
[Senate]
[Pages 11477-11575]
[From the U.S. Government Publishing Office, www.gpo.gov]




         JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003

  The PRESIDING OFFICER. Under the previous order, the Senate will 
proceed to the consideration of Calendar No. 97, S. 1054. The clerk 
will state the bill by title.

[[Page 11478]]

  The legislative clerk read as follows:

       A bill (S. 1054) to provide for reconciliation pursuant to 
     section 201 of the concurrent resolution on the budget for 
     fiscal year 2004.

  The PRESIDING OFFICER. Under the previous order, there are 14 hours 
of debate on the measure to be equally divided.
  The Senator from Iowa is recognized.
  Mr. GRASSLEY. Mr. President, I yield to our majority leader whatever 
time he might consume.
  The PRESIDING OFFICER. The majority leader is recognized.
  Mr. FRIST. Mr. President, we are now on the jobs and economic growth 
package. By statute, the clock is running and we will have a very 
healthy and productive debate in the next 14 hours, as the assistant 
minority leader said.
  It is critically important that we do this in a disciplined and 
organized way. The rules are different than on the usual debate. They 
are very clear. What it means is that we need to have participation as 
early as possible with the two leaders who will be managing this bill. 
I want to reiterate what the assistant leader said.
  The legislation that we will be discussing--and, ultimately, I 
believe will pass--will clearly lower tax burdens, increase jobs, and 
expand and grow the economy in the short term, midterm, and in the long 
term. That is an objective I think both sides of the aisle share--
expansion of the economy. With that, you have job creation and an 
increase in savings and investment.
  The House has done its work on the bill, and now it is time for the 
Senate to do the same, to send a very clear message to the American 
people that we are serious as a body, as an institution, as a 
Government, as the Congress, about creating jobs. When you say creating 
jobs, you are really saying to give job security to the people who have 
jobs, and also to those people across America who don't have jobs but 
who want jobs and are willing to work, to have that opportunity.
  Growing the economy is sort of a surrogate of what we say because if 
you look at the economy and you make that pie larger and larger, in 
truth, you are creating jobs and growing our gross domestic product in 
a way that is consistent with the increased productivity of individuals 
that has occurred over the last 15, 20 years.
  A lot of people ask how much. It is hard to give an exact number. We 
all look for those exact numbers. How much will the Senate Finance 
Committee jobs and tax package grow the economy? We make references to 
other proposals, and the other side of the aisle put a package on the 
table and quantified it. The President's proposal has been quantified, 
and those numbers have been used. People are asking: What about the 
package that passed out of the Finance Committee last night? How many 
jobs will it create?
  The Heritage Foundation's Center for Data Analysis specifically 
studied the Senate Finance bill, and the results paint a very clear 
picture of growth--growing the economy. The study shows that the 
Finance Committee package will raise the economy's growth rate in 2004 
from 3.3 to 3.6 percent. That six-tenths of 1 percent may not seem to 
be much, but what it does do is translate into an additional 437,000 
jobs in 1 year, in 2004 alone, and an increase in gross domestic 
product that year of more than $42 billion.
  I want to remind my colleagues that outside of the White House, the 
Senate is perhaps the only place in Washington where one person 
literally can make the difference. We have seen that play out in many 
of the votes thus far this year in our very closely divided Senate. One 
vote makes a difference.
  So I say to each of my colleagues, please remember that the people 
back you, and how you participate in this debate and in growing the 
economy is important to our constituents--constituents in your State 
but indeed people all across the country. We will, through this bill, 
make a difference in the lives of each and every one of our 
constituents. Our constituents want to feel good again about the 
economy. They want to be able to find a job or get a better job. They 
want to be able to grow their businesses, most of which are small 
businesses, as we all know. They want a fighting chance to grab a piece 
of that American dream.
  In closing, I urge my colleagues to move this jobs and growth package 
through the Senate quickly over the course of today. We can complete 
our job in this body in preparation for a final vote in the conference 
committee before we leave for the Memorial Day recess. In the form that 
is created over the next really 24 to 36 hours, building upon the very 
solid package put forth by the Finance Committee, we will be able to 
create jobs and we will be able to put Americans to work.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I yield myself such time as I might 
consume.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. GRASSLEY. Mr. President, we are in a position where there is a 
lot of anxiety about the economy. That anxiety probably started back in 
March of 2000, when we first saw a downturn in the manufacturing index, 
and the manufacturing index has been in a downturn for 33 months, at 
least as far as it relates to employment.
  There is anxiety that the economy might go back to mid-2000 and later 
in 2000 when Nasdaq lost half its value. Then September 11 happened. 
There is anxiety about the war on terrorism, reinforced by the murder 
of Americans in Saudi Arabia yesterday. There is anxiety about the 
economy because of the war in Iraq and the war in Afghanistan. As far 
as war and foreign relations are concerned, there is not a lot we in 
Congress can do about it because people expect us to fight a war 
against terrorists. They expect us to make sure that bases for 
terrorism training against American citizens are not maintained by 
protection of foreign countries, such as Afghanistan.
  Americans expect us to not allow a nation such as Iraq, where there 
has been a great deal of evidence of the existence of weapons of mass 
destruction that could be used against American citizens, to continue 
to exist, or a nation such as Iraq that supports terrorist 
organizations such as Hezbollah or Hamas, to create greater turmoil in 
the Middle East, threatening the oil supply coming to the United States 
which will affect our economy. There is not much we can do about that, 
but the American people expect us to do what we can.
  Also, there are some actions we can take domestically that deal with 
the anxiety about the economy, whether it is related to the downturn of 
the domestic economy or whether that downturn is related to our 
international relations, our international responsibilities, or the 
protection of American citizens.
  What we are doing today is responding, as best we can, through the 
tax policy of our country, to the anxiety about the economy. We have 
had the good fortune of a President with vision, with ideas to 
stimulate the recovery and, in the process of this legislation, as 
economists will tell us, create more than 1 million new jobs through 
changes in tax policy.
  We are responding to the issues that are on the minds of Americans, 
and those issues are the need to create jobs and bringing robust growth 
to the economy.
  I have the good fortune of serving in the Senate at the same time we 
have a President who has a tax policy that tries to accomplish what I 
have been working for in the Senate as a member of the Finance 
Committee for a much longer period of time than President Bush has been 
President of the United States.
  As chairman of the Senate Finance Committee, that good fortune gives 
me the opportunity to work for my goals simultaneously with the goals 
the President seeks. Many times being a member of the Senate Finance 
Committee--I was not chairman at that particular time--I found myself 
trying to fight what I thought were bad ideas put forth by Presidents 
of the United States on tax policy. Today I have the good fortune of 
trying to accomplish for President Bush good things for our economy 
along the lines that I have

[[Page 11479]]

tried to accomplish over a long period of time. Not often do Senators 
have that opportunity.
  On the other hand, we faced a challenge in meeting the President's 
goals. As many of my colleagues know, several weeks ago the Senate 
agreed upon the size of the reconciled tax relief cuts for jobs and for 
growth. I join many of my colleagues in wishing the reconciliation 
amount had been larger, and I believe we have put together a good 
proposal, given the limitation we face of the realities of compromising 
on the budget which we adopted 1 month ago.
  I am pleased that the Finance Committee was able to report out 
legislation that received bipartisan support, although not as broadly 
bipartisan as I had hoped. While I wish the number of supporters from 
the other side of the aisle had been greater for final passage, I think 
the vote reflects broad bipartisan support for a significant majority 
of the provisions in this bill.
  The vote also reflects a common goal: to see our economy strengthened 
by tax relief policies. At least three-fourths of this bill enjoys 
bipartisan support, for instance, with major parts of the income tax 
policy that is in this legislation, meaning personal income tax policy.
  I believe the bill before us today is a balanced package of 
consumption and investment incentives that will provide short-term 
stimulus and provide the building blocks for meaningful future economic 
growth.
  There is wide support for the provisions that accelerate the child 
tax credit, the marriage penalty relief, expansion of the 10-percent 
bracket, almost all of the marginal rates expanding small business 
expensing, and providing much needed alternative minimum tax relief.
  These six provisions make up approximately $300 billion of the total 
package of economic growth proposals before the Senate and represent 
the three-fourths of the bill that I described that had broad 
bipartisan support. Unfortunately, from the statements by a few of my 
colleagues, one would never know about these items having broad 
bipartisan support.
  I believe the American people sent us here to get the people's 
business done. Sadly, despite a bill that provides so much benefit to 
working families and will create over 1 million new jobs, there are 
many who put partisanship first and turn the other song on its head: 
accentuate the negative and eliminate the positive.
  Let me try to counter the efforts to eliminate the positive by 
briefly taking Members through key provisions of the bill. I will 
emphasize first those that I can say categorically would have 
overwhelming support, meaning overwhelming bipartisan support, if they 
were voted upon separately.
  With regard to the child tax credit, we immediately bring the child 
tax credit to $1,000 per year instead of waiting for that to be phased 
in over the rest of this decade. In addition, we also accelerate the 
refundable portion of the child credit.
  In other words, we are going to speed up the giving of money to 
people who have not even paid income tax so that they benefit from our 
emphasis upon helping families with children.
  Finally, we simplify the definition of a child for several different 
tax programs. I know it is not imaginable to the average taxpayer that 
somehow we would complicate the Tax Code by having half a dozen 
different definitions of the world ``child,'' but we do have. We 
simplified this by expanding who is eligible and making more families 
eligible for certain tax benefits. This is what that means: Over $75 
billion that hard-working families will get to keep in their pockets. 
Thus, by far and away the biggest part of this bill is direct benefits 
that help middle and lower income families.
  There is one more thing. Not only are hard-working families getting 
the biggest benefits, they are first in line to get the benefits of 
this bill because we include the President's proposal that would send 
checks--rebate checks, if you want to call them that--to those who 
receive the child credit in their 2002 tax year. The Treasury 
Department states that these checks will be sent out within 6 weeks of 
Congress approving this bill. So in just a few weeks, eligible families 
will receive a check from the Treasury of up to $400 per child.
  Why $400 per child? Because presently the child credit is $600 and it 
would not reach $1,000 until later in this decade, gradually phased in. 
We make that $1,000 credit effective right now for the year 2004.
  Now, there is another very popular change in this bill that a vast 
majority of this body believes should have been done a long time ago 
and was done in the year 2001 tax bill but phased in over this decade. 
What we do is provide marriage penalty relief of $51 billion in this 
package to de-emphasize the penalty for people being married, meaning 
they pay a higher tax bill than people who would have the same incomes 
not being married. So these people will not be penalized for being 
married and having both husband and wife working.
  It also enhances tax relief for those families where one spouse 
decides to stay home and spend their time, rather than outside the 
family and the workforce, doing that work in the family, raising kids. 
As my wife reminds me, raising the family is one of the hardest and 
most important jobs, and that has been emphasized very effectively by 
the President of the United States.
  So the marriage penalty would have been phased in over this decade, 
and now, retroactive to January 1, 2004, we are going to have the 
marriage penalty fully brought in under the 2001 tax bill policy.
  There is another problem particularly for middle-income taxpayers, 
and that is how the alternative minimum tax is hitting an increasing 
number of American taxpayers. The bill before us actually ensures that 
fewer Americans will be subject to the alternative minimum tax through 
the year 2005, and we devote $49 billion in this bill to addressing the 
alternative minimum tax.
  I want to be candid with the taxpayers of America and tell them that 
we are not doing in this bill, because of costs now, what we did in 
1999 when, during the Clinton administration, the Senate and House sent 
to the President a bill abolishing the alternative minimum tax. That 
was vetoed by President Clinton. I am sure I am going to have Members 
on the other side of the aisle saying we are not doing enough for the 
alternative minimum tax. I hope they remember that when it was not as 
far down the road as it is now on covering more Americans being hit by 
the alternative minimum tax, this Congress had the foresight to do away 
with the alternative minimum tax and President Clinton vetoed it.
  In this regard of how we handle the alternative minimum tax, we 
eliminate more people from being hit by the alternative minimum tax 
than we would have under the 2001 tax law.
  In another area where we want to increase investment to create jobs, 
the bill provides for increasing expensing of depreciable investment by 
small business. We increase that from a $25,000 a year write-off to a 
$75,000 a year write-off, to encourage expansion and investment by 
small business today and the new jobs that will result from that small 
business investment.
  The acceleration of the expansion of the tax brackets at the 10 
percent bracket benefits all taxpayers and will mean thousands of 
taxpayers no longer even owe Federal income tax. That 10 percent 
bracket relief reports $44 billion of revenue loss in this bill, 
meaning that people hit by the 10 percent bracket will pay $44 billion 
less in taxes. This is another one of the provisions in the 2001 tax 
bill that would have been phased in over the next decade that we are 
bringing back effective January 1, 2004, fully implemented.
  The reduction of tax rates at all other levels--and this does reduce 
marginal tax rates back to January 1, 2004, rates that would have 
otherwise been reduced gradually over the rest of this decade, making 
those marginal tax rates fully effective this year. The reduction of 
the top rate amounts to less than 7 percent of the total cost of this 
package, although I fear that many speakers will have us think it is 93 
percent from all the words spent on this matter.
  The reduction of all tax rates will help the husband and wife who, 
after

[[Page 11480]]

years of hard work, have finally achieved good paying jobs and now face 
the triple threat. That triple threat is the cost of paying for their 
children going to college, saving for their own retirement and, oddly 
enough, probably helping their own parents in retirement.
  The reductions of rates as well as expensing will help small business 
owners, as in my own city of Dubuque, IA, and small business owners 
across the country. These small business folks are key to job creation. 
If they hire more workers, if they expand their businesses, we are all 
better off.
  That brings me to the point of who most benefits from the reductions 
of rates as well as small business expensing: The people who are hired 
by the small business owner. What this bill is all about is the 
creation of jobs. Of all the people benefiting, it is going to be those 
who want to work and will have an opportunity to work because of the 1 
million-plus jobs that will be created by this legislation. These new 
jobs and the people who will be in them do not show up on any of the 
charts that we will see. They do not show up on the benefit table. But 
it is those people and their families who benefit greatly from this 
bill.
  This is jobs creation legislation. This is based on the presumption 
that if money is in the taxpayers' pockets and 110 million taxpayers in 
America decide how that money is going to be spent or invested, it will 
do more economic good, turn over the economy many more times, than if 
it comes through the Federal Treasury and 535 Members of Congress 
decide how it will be divided.
  Do not buy into the argument: How can we afford a tax cut when the 
budget deficit is what it is. A lot of the same Members who are going 
to be bringing that issue forward are some of the same Members who 
offered amendments on the Budget Act or offered amendments on the 
appropriations bill in January to spend more money. A lot of the votes 
on the budget took money away from tax relief in the budget and spent 
it somewhere else. Anyone who is concerned about the budget deficit 
ought to have reduced taxes and put it against the bottom line, not 
spend it someplace else.
  The conclusion can be drawn that a lot of Members expressing concern 
over the budget deficit are not really concerned about the budget 
deficit but want more tax money coming through the Federal budget, 
through the Federal Treasury, so 535 Members of Congress can spend the 
money rather than 110 million American taxpayers having it in their 
pockets.
  I happen to believe how 535 Members of Congress spend the money is 
not going to respond to the dynamics of our free market system, 
compared to 110 million taxpayers making the decision of how that money 
is spent.
  Much of the discussion I have spoken about, worry of the budget 
deficit, is going to be related to discussion regarding the top rate 
and whether or not we should reduce the top rate from 38.6 to 35. 
Remember, that was already legislated in 2001 but not going to be fully 
effective until the year 2006. We made a judgment that putting money 
into the pockets of people who will invest it and create jobs, 
particularly small business owners, is better to do now, starting 
January 1, 2004, rather than waiting until 2006.
  For those listening, do not look exclusively at the number of 
taxpayers impacted by those rates. Such an analysis fails to tell a 
complete story about the efficacy and efficiency of lowering top rates 
and seems to focus instead on who gets what in a distributional sense, 
not the economic good that comes from the policy decisions.
  In my opinion, the better way to think about it is to focus on: One, 
what most efficiently changes behavior of taxpayers; two, what provides 
incentives for the creation of jobs; and, three, what has the largest 
multiplier effect on the economy. And by ``multiplier effect,'' I mean 
what is going to be done with the money by the 110 million taxpayers 
who create jobs. That has to be one of two ways. Either they spend it 
and it enhances two-thirds of the economy related to consumer spending 
or it will be invested and, with investment, the creation of jobs.
  We will hear a lot about distributional analysis of how this tax bill 
might affect certain classes of taxpayers. It also ignores the fact 
that successful businesses--in other words, profitable businesses that 
pay proportionately higher taxes and the highest marginal tax rates--
are the ones who will disproportionately add the most labor and 
capital. This is an important point to keep in mind.
  Everyone knows most of my livelihood outside of Congress or even 
while I have been in Congress has been from farming. But throughout my 
lifetime I have had jobs with small business people in the Waterloo-
Cedar Falls area of Iowa. I have had those jobs because I started out 
as a small farmer. If you are farming 80 acres, you cannot make a 
living so you moonlight someplace else to provide income to support 
your family. I had an opportunity to work at a little business called 
Universal Hoist. We made grain-moving equipment for farmers and grain 
elevators to buy. That business is still operating in Cedar Falls. I 
worked 10 years, from 1961 to 1971, as an assembly line worker at a 
company called Waterloo Register Company. We made furnace registers. I 
had the beautiful job of putting screw holes in those registers. Do 
that for 10 years and you have a lot of time to think about public 
policy, too, I guess. Regardless, that is what I did. That factory 
closed down in 1971. It no longer exists.
  The point I make about higher income people, they provide jobs for 
people in my State. They probably provide a lot more jobs than the John 
Deeres and Maytags. These are outstanding businesses in my State and I 
do not denigrate their contribution to the economy. I had jobs because 
of small entrepreneurs investing and creating a job for me that I could 
not create for myself on an 80-acre farm. I created a part-time job on 
an 80-acre farm. Someone else invested money. These were middle-income 
taxpayers, as I knew them at that time. It takes people with money to 
create jobs.
  Also, people who have money have not always been rich. And they are 
not always going to be rich. We have economic mobility studies that 
show that. One might get the opinion from debate on this bill--and I 
hope I am accurately anticipating because I have heard these debates 
before. One gets the idea from the debates on class warfare that 
somehow people who are poor in America are poor throughout their 
lifetime, and people who are rich are rich throughout their lifetime. 
People at the top levels have problems and they come down, and there is 
great mobility upwards in our society. I want people who discuss we are 
not doing enough for the poor or we are doing too much for the rich in 
America, I want these Members to understand the studies show as we 
divide our working people into quintiles of income, these studies show 
the people in the lowest quintile after 10 years have moved to the 
second, third, and fourth quintile, maybe some even up to the fifth 
quintile. But there is only 10 percent of the original 20 percent in 
the lower quintile after 10 years. That is 2 percent of our workforce.
  There is great upward mobility. Those studies also show a lot of 
people in the top quintile after 10 years are not in the top quintile. 
There is mobility downward.
  What we are talking about in this legislation to create jobs, to give 
tax relief to American workers, is to give small business, and even 
large business, an incentive to create jobs in one of two ways: Either 
take the money and invest it and create jobs rather than spending it 
for you or for consumers to take their extra money and buy things and 
create consumer demand, in turn creating jobs.
  It also has something to do with enhancing the capital-to-labor 
ratio. That is because when capital is more available, when there is a 
surplus of capital, that is when labor in America does its best because 
labor is going to be much more in demand when there is a surplus of 
capital. That is where labor is going to make its progress, with higher 
wages and more jobs being created. This bill will enhance the capital-
to-labor ratio.
  To further be definitive on what I have said as a philosophical 
statement

[[Page 11481]]

with statements that are backed up by studies that have been made, we 
have, as far as cutting the marginal tax rate is concerned, studies 
suggesting that a 5 percentage point reduction in the top marginal tax 
rate would increase small business investment by as much as 10 percent. 
The Treasury has indicated that 80 percent of the benefits from the top 
rate acceleration go to small business.
  I will digress for a minute to talk about something that troubles me 
about the debate on bringing down the top rate to 35 percent. Some 
folks, especially those who have acquired their wealth through 
professions, big business, or inheritance, are the ones most violently 
opposed to reducing the top rate. It makes you wonder why these people 
so oppose bringing down the tax burden on businesses that they probably 
do not even know about--small business.
  I gave this some thought while I was out in the field helping to 
plant corn the other day. I asked myself, Could it be that they are 
envious? No, that doesn't make sense because these folks generally have 
more money than successful small business people.
  I asked myself another question: Could it be they do not want others, 
maybe those looking to make the transition from modest success to very 
successful status, to make that transition that is possible given the 
economic mobility of our society? Could it be that they see high taxes 
as a way to bar others from moving up? Could it be that they believe 
high taxes are the necessary tool to block successful small business 
people? Could it be that these elitists want to block a class of people 
who move up because of hard work rather than by pedigree? Could it be 
that high taxes on small businesses is a way to sustain the status quo?
  I hope that is not true, but it makes you wonder. I know in the 
heartland of America people do not resent or try to block success of 
those who acquire it through developing small businesses. In my State 
of Iowa, the opinion of a successful small business person is very 
important, if not more important, than that of a corporate CEO.
  I was amused to read some press reports about how K Street lobbyists 
and the Fortune 500 have reservations about this Finance Committee bill 
before us. There were too many revenue raisers, too many loophole 
closers, too much to ask from big business.
  I would like to ask a different question. Are we doing enough for 
small business and the people who want to hire them? I want to focus on 
that question. Small businesses, as I have indicated, are engines of 
growth for our economy. In the recent past, they have been the source 
of most newly created jobs. I also continue to believe it is important 
to ensure that small businesses do not operate at a competitive 
disadvantage vis-a-vis large corporations because they are forced to 
pay higher marginal income tax rates. Currently, successful small 
businesses incur a 10-percent rate penalty when compared to their big 
business counterparts. In other words, if you are not incorporated, you 
pay the higher marginal tax rate of 38 percent. There is a bias in 
favor of corporations away from small business, individual 
entrepreneurs, because of the 38-percent bracket on personal income 
versus the 35-percent bracket for the corporate tax rate.
  Even common sense would tell you that does not make good economic 
sense. Why should you have a bias in the Tax Code against people who do 
not want to incorporate?
  I want to leave that issue now and turn to the last major part of the 
bill, and that is the part of the bill that provides for a partial 
exclusion of dividend income from taxes. As my colleagues know, the 
President called for a complete end to this double taxation of 
dividends. He would even go further, as I would, and say that double 
taxation of anything is wrong, dividends or otherwise. I have to admit 
that our bill is not a bill that is an absolute victory against double 
taxation because the proposal as reported covers only 86 percent of 
dividend-receiving taxpayers and is a good step in the effort to 
eliminate economic distortion resulting from that tax policy framework. 
When in full effect, this policy would ensure that dividends would be 
subject to the top rate of 28 percent. All other ordinary income would 
be subject to a top rate of 35 percent. This means that dividend income 
would enjoy a significant preference over other forms of periodic 
investment income such as interest.
  Let me note to my colleagues that we provide State fiscal relief in 
this bill. A lot of Senators, over a 2-year period of time, have talked 
to me about the necessity of doing this, both members of the Senate 
Finance Committee as well as people even in my own Republican caucus, 
and people who are not on the Senate committee. They have been 
indicating to me that they view State fiscal relief as a key component 
to an overall agreement on taxes and on growth.
  To be perfectly candid, we have Members of this body, right or wrong, 
who are telling us if we don't have something in here for fiscal 
relief, this bill is not going to get 51 votes to pass. Like it or not, 
they have a great deal of leverage. So we are dealing with that and 
hopefully dealing with it in a responsible way, through programs where 
there has been a Federal/State partnership, such as Medicaid. There are 
some areas where there has not necessarily been a State/Federal 
partnership. These funds, under our agreement--and there will be an 
amendment that fleshes this out to a greater extent--could be used for 
education, health care, law enforcement, and essential Government 
services. I look forward to continuing to work with my colleagues on 
this important issue as we start filling in the details of that that 
will be part of an amendment offered later on.
  I conclude by commenting briefly about the offsets that are in this 
bill.
  Let me first note that there has been some surprise in the media 
about the fact that these are offsets. I respond by saying that if the 
media is somehow shocked that we would have offsets, they haven't been 
paying attention to a lot of tax bills which have been going through 
here. The fact is you are not going to get a tax bill through this body 
under what you call regular order unless there is unanimous consent to 
do it without a point of order. If there is a point of order, you have 
to have 60 votes, or you have to avoid a point of order, which is hard 
to do, by having offsets, meaning it would be revenue neutral.
  As the President's own spokesperson stated, the President in his 
budget provided several billions of dollars in offsets--not necessarily 
the same ones we are using in this bill. In addition, my counterpart in 
the House has stated that he will look to offsets to pay for 
improvements in the international tax arena. Offsets are not new.
  I will not discuss all the offsets at this point. But my colleagues 
should know that many of these offsets deal with the scandals we have 
seen recently at Enron and many other bad actors in corporate America.
  That is not denigrating corporate America because the bad actors are 
a few compared to tens of thousands of legitimate, ethical, honest 
corporations in America.
  It is my view that while we are trying to help shareholders with 
reductions in dividends, we should also be closing down the loopholes, 
the games and the gimmicks that executives have been playing. The 
shareholders and the workers--and many of the workers who also own 
shares--have been greatly harmed by the actions of corrupt executives. 
This bill takes great strides in ending these loopholes.
  Thus, shareholders benefit greatly from the dividend deductions as 
well as our efforts to end the fast and loose games being played in 
some corporate suites.
  I haven't thanked Senator Baucus yet for his continued efforts to 
work with me despite our inability to find common ground on all the 
elements of this economic recovery package. Senator Baucus, ranking 
Democrat and former chairman of the committee, has worked very hard to 
help me move this bill along even though he could not vote for it in 
committee. That is particularly in the tradition of our committee. 
Rarely does a bill come to this

[[Page 11482]]

floor where he and I are not on the same side of the fence. Yet there 
are going to be a lot more bills coming to the floor this year, as 
before, on which we are on the same side of the fence.
  I look forward to continuing to work through our differences to 
produce legislation that will be helpful and getting things moving 
again as quickly and effectively as possible.


                           Amendment No. 555

  Mr. GRASSLEY. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER (Mr. Graham of South Carolina). The clerk will 
report.
  The assistant legislative clerk read as follows:

       The Senator from Iowa [Mr. Grassley] proposes an amendment 
     numbered 555.

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To increase the criminal monetary penalty limitation for the 
            underpayment or overpayment of tax due to fraud)

       At the end of part I of subtitle C of title III add the 
     following:

     SEC. 335. INCREASE IN CRIMINAL MONETARY PENALTY LIMITATION 
                   FOR THE UNDERPAYMENT OR OVERPAYMENT OF TAX DUE 
                   TO FRAUD.

       (a) In General.--Section 7206 (relating to fraud and false 
     statements) is amended--
       (1) by striking ``Any person who--'' and inserting ``(a) In 
     General.--Any person who--'', and
       (2) by adding at the end the following new subsection:
       ``(b) Increase in Monetary Limitation for Underpayment or 
     Overpayment of Tax Due To Fraud.--If any portion of any 
     underpayment (as defined in section 6664(a)) or overpayment 
     (as defined in section 6401(a)) of tax required to be shown 
     on a return is attributable to fraudulent action described in 
     subsection (a), the applicable dollar amount under subsection 
     (a) shall in no event be less than an amount equal to such 
     portion. A rule similar to the rule under section 6663(b) 
     shall apply for purposes of determining the portion so 
     attributable.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to underpayments and overpayments attributable to 
     actions occurring after the date of the enactment of this 
     Act.

  Mr. GRASSLEY. Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I very much thank my friend and colleague, 
Senator Grassley, chairman of our committee. He has done an excellent 
job working on this bill. As he said, I do not support the bill but I 
do support the process and the will of the Senate to proceed; let 
Senators vote as they wish. That is, frankly, why we are standing 
here--to get things done, although we may not always agree.
  I now yield to the Senator from Illinois 15 minutes from the time on 
our side.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. I thank the Senator from Montana.
  I would like to acknowledge my friendship and respect for the Senator 
from Iowa. We have been working together, as we will in the future. We 
come from neighboring States and have a lot of neighboring concerns. I 
think we will find common ground in the future to work on many issues. 
I look forward to that opportunity.
  Let me tell you that today we couldn't be further apart. There is 
such a chasm and such a divide between those who support this bill and 
those who oppose it. It really comes down to a very fundamental issue. 
It is not a question of who is good and who is evil or who is right and 
who is wrong. It comes down to the way you look at the world. The way 
Senator Grassley looks at the world as he describes it in his opening 
remarks and the way he puts the reasoning forward for this legislation 
describes a vision of the world. I have a different view of the world.
  It comes down to this: From Senator Grassley's point of view, when it 
comes to taxes in America, our Government should find ways to provide 
more comfort, more help, and more financial assistance to the elite in 
America, the investors who have made a lot of money, successful 
businesspeople--those who have done well in America, some by their own 
hard work, some by virtue of being born into a family with a lot of 
money. But the belief of the Senator from Iowa and those who support 
the President's tax package is that those are the people who really are 
the future and hope of America; if we can just make life more 
comfortable for them, if we can give them more of our national 
resources, then the economy will move forward and all boats will rise. 
That is their view of the world--help the elite and America will be 
better off.
  On this side of the aisle, we see it a little differently. We kind of 
view the world in terms of the people who get up every morning and go 
to work and struggle--teachers, policemen, firefighters, people who own 
small businesses, those who get up and work every day for a paycheck 
and pay more in payroll taxes than they do in income taxes--and some 
who are struggling under difficult family circumstances. From our point 
of view, if we focus on these God-fearing, middle-income, hard-working 
Americans and give them a helping hand, give them an additional small 
slice of the pie so they can enrich their lives, we on this side of the 
aisle believe that America will be stronger; these people will have 
stronger families, stronger neighborhoods, stronger churches, stronger 
schools, and they will spend their money building a stronger economy in 
each community.
  We have two very different views of the world.
  Senator Grassley, a Republican, sees the Bush tax plan as a way of 
helping the elite. We on the Democratic side believe it is far more 
important to make certain that what we do is fair and balanced, 
particularly when it comes to working families who are struggling to 
get by.
  Senator Grassley said in his opening remarks that ``it takes people 
with money to create jobs.'' I quote him. That is his point of view. 
That is his philosophy. It takes people with money to create jobs. What 
he overlooks is the fact that people who may not be rich, when given a 
tax break, will spend it. They will buy washers, dryers, refrigerators, 
and stoves in addition to a house, paying their bills, and making 
certain their kids are taken care of and the school tuition is paid.
  I suggest to the Senator from Iowa and those of his point of view 
that it not only takes people with money to create jobs, but to create 
jobs you ought to give people who are struggling every single day with 
the burdens of family life a helping hand. In so doing, they will help 
us create jobs.
  The Senator from Iowa said, incidentally, that this is about class 
warfare; the speech I am giving is about class warfare.
  A month ago, we had a visit from a man named Warren Buffett. He is 
one of my favorites. You may have heard of him. He is one of the most 
successful businessmen in the world. He lives in Omaha, NE. He owns a 
company called Berkshire Hathaway. He is extremely successful. Warren 
Buffett came to talk to us, as he does once in a while, about his view 
of the world. I always enjoy it. I think his annual report should be 
must-reading for anybody interested in American business because he has 
such a refreshing and honest point of view.
  We asked Warren Buffett, the second wealthiest man in America, about 
this claim of class warfare and this tax bill. He said: You bet there's 
class warfare going on, and my class is winning. He said: My class is 
winning. And he is right.
  This bill is designed so Warren Buffett and the wealthiest people in 
America will get the tax breaks. Warren Buffett knows that is unfair. 
He said that publicly. I think most Americans know it is unfair.
  Take a look at this morning's New York Times. Consider this for a 
moment: Despite all of the hectoring by rightwing television, despite 
all of the best efforts of the President of the United States visiting 
America from one corner to the next, despite all the speeches by 
Republicans in Congress, this is what the American people think about 
the debate in which we are engaged.
  Question to the American people, across the board: Which is a better 
way

[[Page 11483]]

to improve the national economy: cutting taxes or reducing the Federal 
budget deficit? Simple choice. Well, 31 percent said: cut taxes, which 
is what Senator Grassley, President Bush, and the Republicans propose. 
But 58 percent said: reduce the deficit--almost 2 to 1.
  The American people get it. They understand this cutting taxes is not 
the answer to every problem, and yet that is all we hear from this 
White House.
  Then they asked the American people: Have the reductions in Federal 
taxes enacted since 2001 under President Bush been good for the 
economy, bad for the economy, or have they made much difference? So 
think about this, for a tax cut which most people usually applaud, they 
asked the American people: Take a look at the President's last tax cut. 
Did it help the economy or did it not? Those who said it was good for 
the economy, 19 percent; those who said it was bad for the economy, 12 
percent--not much difference: 63 percent.
  We took $1 trillion out of the Federal Treasury, gave it to the 
wealthiest people in America, ran our deficit to record levels, and by 
a margin of 63 percent to 19 percent the American people said it did 
not make much difference to those who said: Good idea. Do it again.
  Then they asked the American people: If adopted, do you think 
President Bush's latest tax cut will or will not make a significant 
difference in the amount of money you have after taxes? Will: 33 
percent; will not: 58 percent.
  The American people understand. The winners in the Bush tax bill are 
the elite in America. It isn't the working families and small 
businesses that will come out ahead. They are going to be saddled with 
this deficit created by a tax cut when the country is in recession, a 
tax cut when we are still trying to find out how much we are going to 
pay for the war in Iraq and the war in Afghanistan and the war against 
terrorism.
  Then, the final question: Would a new tax cut be good for the 
economy, bad for the economy, or won't have much effect? Good: 41 
percent--not bad, huh?--and then those who said bad or won't have much 
effect: 52 percent. So a majority of the American people think it is 
either not going to have any impact or it is going to be bad.
  They get it. They understand it.
  I listen to my fiscally conservative Republicans come to this floor 
and say: For goodness' sake, don't mention the ``D'' word. Don't 
mention deficits. Deficits don't count anymore. Deficits aren't 
important. Why are you Democrats tied in knots over deficits?
  Well, the reason they do not want to talk about it is because the 
record is so miserable. Look where we are ``Stuck in the Bushes'': 
Federal deficits, surpluses, and then deficits again. Here we have a 
runup, from the first President Bush, a bad deficit situation; then the 
beginning years of the Clinton administration, deficits, still red ink; 
finally, at the end of the Clinton years, we break out of it, and for 
the first time in over 30 years we start generating surpluses in 
America; and then comes President George W. Bush, and here we go again, 
red ink for as far as the eye can see. My fiscally conservative 
Republican friends say: It doesn't count.
  Mr. REID. Will the Senator yield for a question?
  Mr. DURBIN. I am happy to yield.
  Mr. REID. Is the Senator aware of some statements made by some of our 
friends on the other side of the aisle?
  For example, I quote Senator Santorum. And this is from the 
Pittsburgh Post Gazette on November 15, 1995:

       The American people are sick and tired of excuses for 
     inaction to balance the budget. The public wants us to stay 
     the course towards a balanced budget, and we take that 
     obligation quite seriously.

  I quote the majority leader at the time, Senator Trent Lott:

       I think the most important thing really does involve the 
     budget, keeping a balanced budget, not dipping into Social 
     Security, and continuing to reduce the national debt.

  I quote Senator Hagel, from the Omaha World Herald, on February 6, 
1997:

       The real threat to Social Security is the national debt. If 
     we don't act to balance the budget and stop adding to the 
     debt, then we are truly placing the future of Social Security 
     in jeopardy.

  Final quote--there are others--but the final quote I will give you is 
from Senator Judd Gregg. This is from the New Hampshire Sunday News, 
February 1, 1998:

       As long as we have a Republican Congress, we're going to 
     have a balanced budget, and if we can get a Republican 
     President, we can start paying down the debt on the Federal 
     government.

  I give you these quotes.
  Also, very soon, in the next few days, we are going to take up the 
issue of increasing the national debt by almost $1 trillion. So will 
the Senator comment on these direct quotes from Republican leaders and 
the fact we are being asked by the President of the United States to 
increase the national debt by almost $1 trillion in the next few days?
  Mr. DURBIN. I say to the Senator from Nevada, it is totally unfair to 
call out the quotes of our Republican colleagues about deficits because 
he has failed to take into account this new era of compassionate 
conservatism. Things have changed. The Senator from Nevada, in all 
fairness, should understand when Republicans stood on the floor of the 
Senate and the House and railed against deficits, it was before we came 
into this new era where deficits don't count. We are now in a new era 
where the debt we are leaving our children is not important. What is 
important is giving tax breaks to the elite in America.
  The Senator, once he comes to grips with this, once he comes to 
understand this, will really understand the Bush economic policy. But I 
say to the Senator, he is in good company because I struggle with this 
concept, and the majority of the American people do. This just does not 
compute and it does not work.
  For the President and his supporters to stand before us and say this 
Bush tax plan is going to increase jobs--take a look at the job growth 
we have seen in the last few years. Take a look, starting with 
President Truman, at all the job growth, and then take a look at what 
has happened when we get to President George W. Bush.
  The President told us, 2 years ago: If you will just let me cut taxes 
on the wealthy, America is going to have more jobs.
  Well, we have lost 2 million jobs. Sorry, Mr. President, you missed 
it by a mile.
  Now he says, this time around, the best thing for us to do is more of 
the same. I can tell you that more of the same is not good for America. 
Take a look at those who are facing long-term unemployment: 6 percent. 
It is back to the highest rate--President Bush has not matched his 
father's 7.5-percent unemployment rate, but he is creeping up there. It 
is higher and higher each year. That does not say much for his economic 
plan.
  I think America gets it. The President, as Commander in Chief, is 
sounding retreat when it comes to the economy of America. He is walking 
away from the greatest challenge our families face today. It is not 
just the threat of terrorism; it is the threat of economic insecurity.
  Let me be specific. The Republican plan does not address, does not 
spend one dollar, does not even concern itself with an overwhelming 
issue I find from businesses across Illinois: the cost of health 
insurance. Go to any business--large or small--and ask them what they 
are facing. Ask them what the premiums are. They are going to tell you 
that the health premiums are killing them, killing their 
competitiveness, killing their ability to offer health insurance 
protection to their employees. Many of them are facing absolutely awful 
choices they have to make.
  Not one penny, not one word, not one provision in the Bush plan for 
businesses deals with health insurance, but the Democratic plan does. 
The Democratic plan provides that we are going to increase the tax 
credit, a small business tax credit for those offering insurance for 
their employees.
  I will tell you, I will take that to any chamber of commerce, any 
meeting of the National Federation of Independent

[[Page 11484]]

Businesses--you pick it--and let them decide which is better for the 
future of their business, a tax credit for health insurance or reducing 
the tax rate on the wealthiest people in America. I will take that 
referendum and I will go to the bank on that one. I know what the 
outcome is going to be.
  What we believe is that there should be a tax cut, if there is going 
to be one, for every American taxpayer, particularly for those in lower 
income categories. We should accelerate the child tax credit to $800, 
even higher than the Republicans have proposed. We should eliminate the 
marriage penalty. We should have a small business health tax credit. We 
should triple the amount that small businesses can expense. We should 
encourage business investment. We should make certain that we limit the 
amount of this tax cut to what we can afford; otherwise, we are digging 
ourselves deeper and deeper and deeper in this deficit hole.
  The Republicans who push this tax plan have to face stubborn facts, 
and facts can be stubborn. The last time they got a tax cut through, 
the American economy fell backward. We did not make progress. We lost 
jobs. We lost opportunity. We lost a lot of hope in this country.
  We need to move forward. We can do it with a sensible tax plan, one 
that does not reward the elite but rewards working Americans across the 
board.
  I yield the floor.
  Mr. BAUCUS. Mr. Chairman, I yield 5 more minutes to the Senator from 
Illinois.
  Mr. REID. If the Senator would allow me to ask him a question.
  Mr. DURBIN. I would be happy.
  The PRESIDING OFFICER. Does the Senator from Montana yield?
  Mr. BAUCUS. I yield 5 minutes off the amendment to the Senator from 
Illinois.
  Mr. REID. Is the Senator from Illinois aware that the Congressional 
Budget Office, the White House Council of Economic Advisors, and the 
private sector economists who helped the President analyze this 
proposal have stated that the President's tax break plan will weaken 
the long-term health of our economy? This is from the Congressional 
Budget Office, the first part of April of this year. Is the Senator 
aware that these institutions and individuals have so stated?
  Mr. DURBIN. I say to the Senator from Nevada, the interesting thing 
about that is--I was aware of it--this is the new Congressional Budget 
Office that brought us the new economic concept of dynamic growth. The 
Republican conservatives have been screaming for years that the 
Democrats and those following their point of view were too 
conservative: We don't take into account what a tax cut will do, that 
it will just mushroom growth. Here comes the new Congressional Budget 
Office. They are now believers in this new dynamic growth economic 
religion, and they still don't buy it. As the Senator from Nevada said, 
they believe as we do, that this Bush tax plan for the elite investors 
is not going to create jobs or create the kind of growth that we want 
to see. I think the Senator from Nevada has pinpointed one of the 
weaknesses in their argument.
  Mr. REID. Is the Senator aware that in the State of Illinois the 
number of jobs lost since the beginning of the Bush administration is 
nearly 200,000, and last month alone it was almost 20,000 jobs?
  Mr. DURBIN. I am aware of it. Virtually every State has lost jobs. We 
have lost over 20,000 manufacturing jobs in the last 12 months with the 
last Bush tax cut. Adding insult to injury is the fact that this 
administration resists providing additional unemployment compensation 
for people who are out of work. When his father faced recession, five 
different times we increased unemployment compensation, three times 
under President Bush, and twice under President Clinton. We have only 
done it twice in this situation.
  To me, it is heartless to ignore what is happening to unemployed 
people. They have lost good jobs. Some of them have been victims of 
corporate scandals. They are in trouble, trying to find some way to get 
by. Every single day is a challenge. We find over a fourth of them have 
had to leave their homes and move in with family and friends. We find 
over half of them struggling to pay utility bills. More and more of 
them are paying less for food and clothing for their family and 
ultimately many of them are losing health insurance--words Republicans 
don't want to talk about, the cost of health insurance. That is an 
indication of what we should be focusing on in terms of our priorities. 
Instead, what we are doing is increasing the deficit at the expense of 
Social Security and Medicare. That is not fair.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the pending 
amendment be temporarily laid aside and that the amendment to be 
offered by the Senator from North Dakota be in order.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from North Dakota.


                           Amendment No. 556

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

       The Senator from North Dakota [Mr. Dorgan], for himself and 
     Mr. Baucus, proposes an amendment numbered 556.

  Mr. DORGAN. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

  (Purpose: To repeal the 1993 income tax increase on Social Security 
                benefits and to offset the revenue loss)

       Strike section 102.
       Strike title II.
       At the end of subtitle C of title V, add the following:

     SEC. __. REPEAL OF 1993 INCOME TAX INCREASE ON SOCIAL 
                   SECURITY BENEFITS.

       (a) Restoration of Prior Law Formula.--Subsection (a) of 
     section 86 is amended to read as follows:
       ``(a) In General.--Gross income for the taxable year of any 
     taxpayer described in subsection (b) (notwithstanding section 
     207 of the Social Security Act) includes social security 
     benefits in an amount equal to the lesser of--
       ``(1) one-half of the social security benefits received 
     during the taxable year, or
       ``(2) one-half of the excess described in subsection 
     (b)(1).''
       (b) Repeal of Adjusted Base Amount.--Subsection (c) of 
     section 86 is amended to read as follows:
       ``(c) Base Amount.--For purposes of this section, the term 
     `base amount' means--
       ``(1) except as otherwise provided in this subsection, 
     $25,000,
       ``(2) $32,000 in the case of a joint return, and
       ``(3) zero in the case of a taxpayer who--
       ``(A) is married as of the close of the taxable year 
     (within the meaning of section 7703) but does not file a 
     joint return for such year, and
       ``(B) does not live apart from his spouse at all times 
     during the taxable year.''
       (c) Conforming Amendments.--
       (1) Subparagraph (A) of section 871(a)(3) is amended by 
     striking ``85 percent'' and inserting ``50 percent''.
       (2)(A) Subparagraph (A) of section 121(e)(1) of the Social 
     Security Amendments of 1983 (Public Law 98-21) is amended--
       (i) by striking ``(A) There'' and inserting ``There'';
       (ii) by striking ``(i)'' immediately following ``amounts 
     equivalent to''; and
       (iii) by striking ``, less (ii)'' and all that follows and 
     inserting a period.
       (B) Paragraph (1) of section 121(e) of such Act is amended 
     by striking subparagraph (B).
       (C) Paragraph (3) of section 121(e) of such Act is amended 
     by striking subparagraph (B) and by redesignating 
     subparagraph (C) as subparagraph (B).
       (D) Paragraph (2) of section 121(e) of such Act is amended 
     in the first sentence by striking ``paragraph (1)(A)'' and 
     inserting ``paragraph (1)''.
       (d) Maintenance of Transfers to Hospital Insurance Trust 
     Fund.--There are hereby appropriated to the Hospital 
     Insurance Trust Fund established under section 1817 of the 
     Social Security Act amounts equal to the reduction in 
     revenues to the Treasury by reason of the enactment of this 
     section. Amounts appropriated by the preceding sentence shall 
     be transferred from the general fund at such times and in 
     such manner as to replicate to the extent possible the 
     transfers which would have occurred to such Trust Fund had 
     this section not been enacted.

[[Page 11485]]

       (e) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to taxable years beginning after December 31, 2003.
       (2) Subsection (c)(1).--The amendment made by subsection 
     (c)(1) shall apply to benefits paid after December 31, 2003.
       (3) Subsection (c)(2).--The amendments made by subsection 
     (c)(2) shall apply to tax liabilities for taxable years 
     beginning after December 31, 2003.

  Mr. BAUCUS. Mr. President, I ask unanimous consent that the following 
staff of the Joint Committee on Taxation be granted the privilege of 
the floor, and I send the list to the desk. We worked out an 
arrangement so they rotate.
  The PRESIDING OFFICER. Without objection, it is so orderd.
  The list is as follows:

       Thomas A. Barthold.
       Ray Beeman.
       John H. Bloyer.
       Nikole Flax.
       Roger Colinvaux.
       Harold Hirsch.
       Deirdre James.
       Lauralee A. Matthews.
       Patricia (Tricia) McDermott.
       Brian Meighan.
       John F. Navratil.
       Joseph W. Nega.
       David Noren.
       Cecily W. Rock.
       Carol Sayegh.
       Gretchen Sierra.
       Ron Schultz.
       Mary M. Schmitt.
       Carolyn E. Smith.
       Allison Wielobob.
       Barry L. Wold.
       Tara Zimmerman.

  Mr. DORGAN. Mr. President, let me briefly describe the amendment I 
offer on behalf of myself and Senator Baucus. This amendment deals with 
repealing the 1993 provision that would increase the amount of Social 
Security income received by a senior citizen to be reported for tax 
purposes. Let me describe the history of this a bit and then talk about 
why I believe we ought to do it.
  For a good many years after Social Security was created, the Social 
Security receipts that a senior citizen would receive would not be 
required to be reported for tax purposes on their income tax return. It 
was exempt income. Then at one point the Congress decided that one-half 
of the payments for Social Security that go to a recipient should be 
described as income on their income tax return. So we went for a long 
while with 50 percent of the Social Security payments to senior 
citizens being required to be reported for tax purposes.
  In 1993, in a rather large piece of legislation that moved this 
country towards a different fiscal policy in a very significant way--
the results of which throughout the 1990s expanded the economy, created 
jobs, did a number of things--one of the provisions was to increase 
from 50 percent to 85 percent the amount of income that would be 
required to be subject to income tax and reported on the tax return for 
single beneficiaries with incomes over $34,000, married couples income 
over $44,000. So moving that 50 percent to 85 percent now means that 
roughly 8 million senior citizens pay an average increased income tax 
of about $1,500 a piece per year. I propose that we repeal that 
provision, go back to previous law which is a 50-percent reporting 
requirement.
  Let me talk for a moment about the Social Security issue and senior 
citizens. There is discussion on the Senate floor--and there will be 
much more, I expect--that this tax proposal that comes to the Senate 
will use all of the trust funds that are to be set aside for Social 
Security to pay for tax cuts. I don't think that is going to be 
disputed. I don't think that is subject to contest. There will not be 
Social Security trust funds if we pass this tax cut.
  This is a circumstance where upper income Americans will receive very 
generous tax cuts and senior citizens will see their Social Security 
trust funds depleted in order to finance it.
  I mentioned yesterday that on page 4 of the Budget Act, which brings 
us to the floor under reconciliation, the description of what is 
happening to the debt is it goes from $6.7 trillion to $12 trillion in 
a decade.
  Some say: That is not much to worry about. Don't worry about debt.
  I don't understand that. The debt, of course, is going to be 
inherited by our children because they will inherit this economy and 
this country. We are saying to them: We have a new plan. Our fiscal 
policy plan will double the Federal debt to $12 trillion in 10 years.
  I have never heard of a plan doubling the debt described as a 
success. But that is what I am hearing in the Senate. This is a plan 
that is gearing this country towards long-term economic solvency, 
economic opportunity, growth, hope, and most especially jobs by 
doubling the Federal debt to $12 trillion--a rather curious argument.
  I managed to teach economics for a couple of years. I don't think 
there is anything in any book anywhere that would have you teach this 
lesson. This is apparently a new form of economic theory.
  I recall the book written by Tom Brokaw called ``The Greatest 
Generation.'' I have visited with many of the folks described in that 
book, the folks who lie on their belly on the sands of Normandy, 
risking their lives for their country, seeing their comrades die in 
foxholes beside them, those who were asked to go halfway around the 
world to fight for liberty and did so without complaint, never asked 
for much, but were told by this country a couple things: When you get 
back from serving your country, we will provide free health care for 
life for you in the veterans health care system.
  That turned out to be a promise this Congress is unwilling to keep, 
regrettably. They also were told: When you come back, there will be a 
Social Security system you can count on; you can rely on. Of course, 
what is happening now is we have people who don't support that system, 
don't believe we ought to keep the promise, don't believe trust funds 
ought to include the word ``trust.''
  If I can digress for a moment, I recall one day going to a veterans 
hospital in Fargo, ND, about which I have told my Senate colleagues 
before.
  When we talk about the greatest generation and senior citizens, I 
went to a veterans hospital on a Sunday morning to provide the medals 
that had been earned by a Native American veteran. His name was Edmond 
Young Eagle. He was dying of lung cancer. I learned later that he died 
a week after I had been there. His sisters asked if we could get his 
medals, and so I did. I presented them to him at the VA hospital that 
Sunday morning. The doctors and nurses gathered, and his sisters were 
there. We cranked up his bed so that he was in a seated position, and I 
pinned the medals he had earned during the Second World War on his 
pajama top.
  Edmond Young Eagle never had much in life. He fought in Africa and in 
Europe, and he went where this country asked him to go. He risked his 
life and served America with great distinction. He came back to live on 
the reservation, and he never had very much, never had a very good 
life. He had it pretty tough. That day, on a Sunday morning, having the 
medals that he earned 50 years previously pinned on his pajama tops, 
Edmond Young Eagle, 7 days from dying of lung cancer, said: ``This is 
one of the proudest days of my life.'' He didn't have much, but he 
deeply valued the service he had given his country. I told him how much 
this country valued the service he had provided and how proud we were 
of him.
  Edmond Young Eagle and millions of others have answered the call to 
serve this country in so many ways. I talk about the greatest 
generation. Yes, it was the soldiers and it was ``Rosie the Riveter'' 
back then. Moving forward, so many people have served this country, and 
this country made a bargain with them and a promise to them. We said to 
them: If you will pay from your paycheck, every time you receive a 
paycheck, a tax that goes into a trust fund to fund something called 
Social Security, when you reach retirement age, that Social Security 
payment will be there for you. Yes, we want you to save and invest 
yourself, but at least this will be a basic insurance retirement 
payment for you.
  We have always made that promise. In fact, we changed that promise in 
1983 and said: You know what? Because the largest baby crop in the 
history of

[[Page 11486]]

this country will retire after the turn of the century--and that is 
called the war babies, the group of babies who came after the soldiers 
came home after the Second World War and the largest outpouring of 
affection in the history of the country occurred, and we had so many 
babies born, the largest baby crop in the history of America. They will 
begin to retire now. When they retire and hit the retirement rolls, 
then we have maximum strain on the Social Security system.
  So in 1983, we put in place a little different approach. The approach 
was to say we are actually going to collect more money than we spend on 
a current basis in order to have a trust fund balance that begins to 
save so that the resources are there when the baby boomers retire. That 
is what the trust fund is about. I mentioned that if we decide to 
increase the Federal debt--as is the case in the bill brought to the 
floor of the Senate, and as was the case with respect to the Budget 
Act--from $6 trillion roughly to $12 trillion, there won't be a Social 
Security trust fund. It is to say that that which is to be put away in 
a trust fund for Social Security will be used as an offset to provide 
tax cuts for Donald Trump. I know I should not use his name, but he 
likes to have his name used. I think he is an interesting guy, a good 
businessman and investor. He does very well. He puts his name on his 
buildings, so he certainly won't mind my using his name.
  The question is, Should we decide that the trust funds we are trying 
to save for the future, which we need when the baby boomers retire, 
will be used as offsets so that we can give Donald Trump, or others in 
the upper income bracket in the country, large tax cuts?
  Is that what you would sit around a table and decide as an American 
family that represents the priorities, values, and needs? Is that what 
you would decide we ought to do now? Is that the urgency for our 
country in public policy? I don't think so.
  In addition to trying to save money in a trust fund, in 1993 we 
changed the mechanisms by which we assessed taxes, and especially with 
respect to senior citizens. We said: We will require you to report more 
of our Social Security payments as income on your tax returns--from 50 
percent to 85 percent. That means about 8 million senior citizens now 
pay $1,500 a year in additional taxes.
  I wish we had not done that in 1993. I voted for a bill that included 
it because it had a lot of things in it that put this country back on 
track, but I wasn't pleased that was in it. Twice since then, I have 
voted to try to repeal it. Now if we are going to have a substantial 
change in tax laws and evaluate who ought to get a tax break and who 
should not, and where should we cut taxes or where should we not, 
perhaps we ought to consider this at the top of the list. Why not make 
this change now? Why not go back to the 50 percent? That is where it 
was. Why not say that senior citizens--those who reached their 
declining income years--are those who ought to get the tax breaks?
  That is what my amendment does. It is fairly simple. Senior citizens 
are living longer and better lives. Really, people say we have all 
these problems with Social Security and Medicare. Do you know what they 
are? They are problems of success. Just go back to the old life 
expectancy. People are living longer and better lives. I know a woman 
who is 89 years old. She bought a car a while back, and she used 5-year 
financing. God bless her. I have an uncle who is 81 years old. He runs 
in the Senior Olympic events. He has 43 gold medals. He runs the 400 
and the 800. Thirty years ago when one reached 80 years of age, they 
had to find a La-Z-Boy. You were then at that age where it was time to 
find an easy chair because you were not going to run races or buy a car 
and finance it for 5 years.
  Now things have changed in a very dramatic way. People are living 
longer and much better lives. But it is true that as they live longer 
lives, they reach a period of time when their income declines. 
Inevitably, they stop working and retire. Their income declines. As 
they reach the declining income years, then the question of what kinds 
of taxes they pay is a very important question. Do they, as some are 
required, go into a grocery store, where the pharmacy is in the back, 
and have to ask themselves: Should I buy groceries first so I can see 
how much I have left for prescription drugs? Of course, they make those 
choices.
  When they reach their declining income years, the question is, What 
should their tax obligation be? How should we construct this tax 
obligation? My amendment is devastatingly simple: Let's relieve them of 
that 30 percent in extra income on Social Security they are required to 
report, which will save 8 million people $1,500 a year. These are not 
the top-income folks. These are folks who have retired and now have 
less income than they had during their working years. In many cases, 
they are folks who saved and are trying to help their kids and 
grandkids. They have less income, and they are now in the last 10 
years, and they are required to pay higher taxes.
  This provision will relieve them of some of that burden. I was 
thinking the other day about this tax debate because it is the case 
that some will benefit and some will not. There is an old saying: When 
you rob from Peter to pay Paul, you can always count on Paul being 
grateful.
  The fact is, this bill is going to make some people in this country 
very grateful--but it is not the senior citizens, unless we pass this 
amendment; it is the folks at the very top of the income ladder. We 
have people come to the floor of the Senate and say the big priority 
here is to exempt dividends from taxation.
  First of all, most dividends are not double taxed. I will make that 
point. Second, if you want to talk about double taxation, why talk 
about double taxation just for the top of the income heap--those who 
clip coupons to get unearned income to the tune of millions of dollars 
a year? Why talk about them being exempt? Why do you have a philosophy 
that says let's exempt investment and tax work? What kind of value 
system is that? Nobody is saying let's exempt work, let's just exempt 
investment. I don't understand that.
  The tax system ought to be about values. But if you are talking about 
double taxation, which I think is the principle by which some brought 
to the floor this issue of dividends, how about double taxation of 
Social Security? That is a good example. Wages. We tax on your wage, 
you put some money away, and then you come back and get a Social 
Security payment, and you have to pay a tax on part of that. It is 85 
percent now. I propose 50 percent. Double taxation on Social Security. 
Is that more or less important? I guess you could talk about almost 
anything, could you not? Go buy a car this afternoon. You pay taxes on 
the wages you earn, and when you buy a car, they are going to charge a 
big old excise tax. Double taxation.
  So the question I have is, When some people apparently got bottled 
water and sat around a big old mahogany table and started thinking, the 
biggest problem in America is double taxation so let's try to get rid 
of that, how did they come up with the notion that dividends 
represented that priority? Were there people smoking Cohibas there who 
were getting a lot of dividends and said: The biggest problem for me is 
that I get $10 million of dividends and, by God, that is double 
taxation? Is that where that came from?
  Or were there perhaps some senior citizens who were supposed to be 
there and their chairs were empty? I assume they would have said: 
Double taxation? Here is an example of double taxation. Help us.
  No, that is not the priority. The priority is not about helping them. 
The priority is helping the folks at the top and then saying: And if we 
do that, we are going to create a massive amount of new jobs in 
America.
  We have heard this argument before--massive new jobs--new jobs. Jobs 
is a four-letter word, but it is a good one, as long as jobs are 
present someplace. We went through this with a very large tax cut 2 
years ago, and now we have 2.3 million fewer jobs. It might be because 
other events happened. They certainly did.

[[Page 11487]]

  One wonders, if the first dose of medicine makes you sick, whether 
you ought to trot out the same bottle and label another batch to an 
unsuspecting public. Is there a time perhaps when we decide maybe the 
way we create new jobs in America is to put the economy back on track 
and say we are not going to double the debt, we are not going to run 
the largest deficits in history, and we are not going to tell the 
working folks who represent, in my judgment, the engine of our economy 
and of our country: By the way, you do not matter much.
  I will finish my remarks. I am going afield. The fact is, in the 
Senate, you speak when you have the opportunity to do so.
  My amendment deals with senior citizens. I am trying to describe some 
of the circumstances that would persuade senior citizens to think they 
have not been treated fairly in this bill, and this is a way to remedy 
that. It seems to me both political parties have something to offer 
this country that is constructive in discussing taxation and economic 
policy. I happen to think those on the Republican side are a little 
better at trying to make sure we tamp down spending. They are a little 
better at that than we are. Sometimes I do not think they have the 
judgment they should have when they tamp down spending, but the fact is 
they are a little better at it than we are.
  It seems to me we are a little better at the notion of how you do 
things that give people confidence in the future that can provide the 
buoyancy, the growth, and the lift to the American economy. Getting the 
best of what both parties have to offer is better than getting the 
worst of either. I think often we get the worst either party can offer 
this country.
  My proposal is just to begin to amend this tax bill. I am not saying 
the bill is worthless. There are some provisions in this bill that have 
great worth, some provisions I support. The child tax credit and 
others, I think, make sense. We should do what is contained in these 
provisions, even as we try to put this economy on track so that the 
numbers add up.
  There is not any way the numbers add up. My colleague, Senator Conrad 
from North Dakota, has spoken on the floor at great length about this 
issue. We also were together yesterday at a presentation. Even as we do 
these things, some of which have great worth and some of which, in my 
judgment, are just waving a flag to the upper income folks in America 
to say our party is still with you--those on the other side of the 
aisle--it seems to me you need to do them in the context of saying to 
the American people that the future of this economy is not going to be 
a future mired in debt and choking on yearly deficits.
  I will make one final point. As we do this, understand that what is 
being proposed now is the largest deficits in history, in fiscal 
policy, on top of the largest trade deficits in history. Those two 
problems together potentially can cause very significant problems for 
the value of this country's currency.
  As Mr. Friedman says in ``The Lexus and the Olive Tree,'' when the 
electronic herd runs and begins to move to other currencies, it has a 
profound impact on your economy, and we should be concerned about that.
  To come back to my amendment, this amendment is about priorities--
what is important and what is not; what should we do and what should we 
not do. It seems to me one of the high priorities for us in dealing 
with reducing taxes ought to be to say to senior citizens, among them 
the greatest generation and others who are struggling and who are 
trying to make sure they get through these difficult times, those who 
have reached their lowest income years: We are going to repeal that 
portion of the law that was passed 10 years ago. We are going to do it 
because we believe the 8 million people who are now required to pay 
$1,500 apiece in additional taxes ought to be relieved of that burden.
  As I indicated, I have on two previous occasions voted to repeal this 
tax. It has never gotten done. I know there is disagreement as to 
whether it should get done. I believe it should get done because, 
frankly, this is double taxation. It is not just dividends. It is this 
as well.
  I am proud to offer this amendment with my colleague, Senator Baucus 
from Montana, and I assume many other colleagues would like to 
cosponsor it before they vote. I hope we have a vote on it.
  I did not mention this will be paid for by offsets. We would not 
accelerate the scheduled rate reductions in the highest rates, and we 
would strike the dividend income relief in the bill. We do not increase 
taxes. If someone stands up and says what you are going to do is 
increase taxes with your offset, that is not the case. There is no 
increase in taxes in this amendment, but we do not accelerate the top 
rates and, at the same time, we decide not to proceed with the dividend 
income tax relief in the bill, the bulk of which goes to upper income 
Americans.
  I hope, perhaps, this amendment will be accepted on a voice vote. If 
that is not the case, we will have some debate and then I am hoping we 
will have a successful record vote. Perhaps I will be inspired to speak 
again after I have heard the debate on this amendment. I yield the 
floor.
  The PRESIDING OFFICER. Who yields time? The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, the Senator from Alaska has asked for 
time to speak as in morning business for whatever time she needs. I 
will be glad to yield time to the Senator from Alaska.
  Mr. REID. Mr. President, it is my understanding the Senator is asking 
that in the form of a unanimous consent agreement she speak in morning 
business.
  Mr. GRASSLEY. Off our time, not extra time.
  Mr. REID. I am not going to object to this request, but I do want 
everyone to understand that the majority leader asked that we expedite 
the tax bill. We are trying to do that, but speaking in morning 
business is not going to expedite consideration of this bill. There is 
limited time. We have 7 hours on our side. We are going to try to spend 
all 7 hours on tax matters. I want everyone to understand this when the 
majority leader is asking why this is not moving more quickly
  Mr. GRASSLEY. Let me explain why the distinguished Senator from 
Nevada is wrong. We are going to take it off the time on the bill, not 
extra time. This will come off the 7 hours we have on the bill.
  I yield whatever time the Senator from Alaska may consume. I 
understand she is only going to take about 5 minutes.
  The PRESIDING OFFICER. The Senator from Iowa has that right. Without 
objection, the Senator from Alaska is recognized.


                       National Police Week 2003

  Ms. MURKOWSKI. I thank the Chair. Mr. President, I do appreciate the 
consideration of my colleagues and the chairman in allowing me a brief 
opportunity to speak. I do recognize that taking this time out of the 
very important consideration of the legislation that is before us is 
significant, but I remind Members that the events that happened last 
evening, at the National Law Enforcement Officers Memorial, are equally 
significant. I will take a few moments this morning to speak to that.
  Last evening, some 10,000 law enforcement officers, representing all 
corners of our Nation and foreign lands, gathered at the National Law 
Enforcement Officers Memorial to pay tribute to 377 of their colleagues 
and comfort their survivors.
  Each of the 377 honorees bears the distinction of having lost his or 
her life in the line of duty. The attendees represented a cross-section 
of many different agencies that make up the law enforcement community, 
including Federal law enforcement officers, State troopers, municipal 
cops, sheriff's deputies, corrections officers, game wardens, and 
National Park Service rangers. Most came in uniform. Many were joined 
by their spouses. Many were joined by their children, not only those 
who are old enough to understand, but also the little ones.

[[Page 11488]]

  At dusk, thousands of candles were lit, and the names of each of the 
377 departed officers was read.
  The purpose of this annual event is not to reflect on the events that 
prematurely ended the lives of these brave officers, but those who 
created this memorial remind us that ``It is not how these officers 
died that made them heroes, but how they lived.''
  This year, the names of three Alaskans were added to the memorial. 
Two of the three died in the line of duty in 2002, while the third died 
in the line of duty in 1917, in the days when Alaska was still a 
territory. This third individual was added to the memorial as a result 
of diligent research by the City of Seward, AK and its police 
department. I would like to introduce these exemplary Alaskans to the 
Senate.
  Correctional Officer James C. Hesterberg, was known as ``Jamie.'' At 
age 48, he was killed in the line of duty. A 19 year veteran of the 
Alaska Department of Corrections, he was contemplating retirement in 
September 2003. On November 19, 2002, Officer Hesterberg, and his 
partner, Officer Dennis Nilsen, were transporting seven prisoners to 
the Spring Creek Correctional Center by van on a snow and slush covered 
highway. Their van was struck by a large semi truck, killing Officer 
Hesterberg and four prisoners.
  Officer Hesterberg was the first employee of the Alaska Department of 
Corrections ever to die in the line of duty. He leaves behind his wife, 
Debra, his three children, Scott, Catherine and Mark, his mother and 
father, and many good friends and fellow officers. The people of Alaska 
mourn his loss. Jamie's commitment to protecting Alaska's citizens and 
to fulfilling the mission of the Department of Corrections will not be 
forgotten.
  Thomas Patrick O'Hara, at age 41, was a protection ranger and pilot 
for the National Park Service at Katmai National Park and Preserve in 
the Bristol Bay region of Alaska. On December 19, 2002, Tom and his 
passenger, a Fish and Wildlife Service employee, were on a mission in 
the Alaska Peninsula National Wildlife Refuge. Their plane went down on 
the tundra. When the plane was reported overdue, a rescue effort 
consisting of 14 single engine aircraft, an Alaska Air National Guard 
plane, and a Coast Guard helicopter quickly mobilized. Many of the 
single engine aircraft were piloted by Tom's friends. The wreckage was 
located late in the afternoon of December 20. The passenger survived 
the crash, but Ranger O'Hara did not.
  Tom O'Hara was an experienced pilot with 11,000 hours as a pilot-in-
command. He was active in the communities of Naknek and King Salmon 
where he grew up, flying children to Bible camp and coaching young 
wrestlers. Tom provided a strong link between the residents of Bristol 
Bay and the National Park Service.
  Tom leaves behind his parents, Dan and Sharon O'Hara, who are in 
Washington, DC, today and who are distinguished leaders in the Bristol 
Bay region, his wife Lucy, and three children, Jonathon, Nicole and 
Heidi. I also had an opportunity to meet with his brother this morning. 
The deputy director of the National Park Service characterized Tom as 
one of its finest and he will be missed deeply by all of us.
  The third Alaskan, Charles H. Wiley, came to Seward from California 
to work on the construction of the Alaska Railroad. He was appointed to 
the post of night marshal in April 1917. On the evening of October 2, 
1917, Marshal Wiley went to the Overland Hotel in Seward to investigate 
an incident. Marshal Wiley knocked first, but entered the hotel room 
when nobody answered. He was met by a round of gunfire. Marshal Wiley 
died two days later.
  I thank the Chair for allowing me to share a bit of the lives of 
these brave Alaskans. I want to thank the organization Concerns of 
Police Survivors and the staff of the National Law Enforcement 
Officers' Memorial for their hard work in organizing the candlelight 
memorial last evening.
  To the children of Jamie Hesterberg and Tom O'Hara, I to say, your 
fathers lost their lives doing something important for Alaska and the 
Nation. Public service is an honorable profession and I hope that each 
of you will consider making it a part of your lives. In valor, there is 
hope.
  I yield the floor.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Minnesota.
  Mr. COLEMAN. Mr. President, I ask unanimous consent that I be 
permitted to speak as in morning business for up to 5 minutes and that 
the time be charged against the majority's control of time on S. 1054.
  Mr. DORGAN. Mr. President, reserving the right to object, I shall not 
object, but I want to clarify with the Chair, do I control the time on 
the amendment on this side?
  The PRESIDING OFFICER. The Senator does, and the Chair recognizes the 
Senator from Minnesota as the first person seeking recognition.
  Mr. DORGAN. Mr. President, following the presentation, then, it would 
be my opportunity to yield time; is that correct?
  The PRESIDING OFFICER. That is correct.
  Mr. REID. Mr. President, reserving the right to object.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. My dear friend from Iowa was wrong in saying that the time 
would be used up anyway, and here is the point I am making: We have 
been asked to move the tax bill. That is what we should be doing. We 
have turned down a number of requests on this side of people wanting to 
speak, no matter how important it might be, on issues other than those 
relating to the tax bill. The time used on the bill talking about 
morning business, no matter how important it might be, does not deal 
with the tax issues of this country. The majority leader has asked us 
to cooperate in trying to move this bill along. It is obvious as the 
day is clear that we are not moving this along when we are talking 
about extraneous matters. That is the point I am making. I have no 
objection.
  The PRESIDING OFFICER. The Senator from Minnesota.


                    bring your daughter to work day

  Mr. COLEMAN. Mr. President, today I am engaging in my own version of 
``Bring Your Daughter to Work Day.'' As we all know, this day does not 
fall on May 14, nor does it involve the daughter bringing along 40 of 
her friends, but this was the unique situation I faced today when my 
daughter Sarah stopped by my office with some of her schoolmates from 
the Twin Cities Academy in St. Paul, MN.
  Like many other students from across the Nation, seventh and eighth 
graders from the Twin Cities Academy are in Washington this week for a 
school trip. Their plans include visiting the countless museums and 
monuments throughout the city, a Capitol tour, and also the chance to 
be with us today in the Senate Chamber.
  I want to again welcome Sarah and her schoolmates to the Senate, and 
I am glad they have the opportunity to observe the activities of this 
body.
  In honor of their visit, I want to talk a while on the importance of 
young people understanding how Government works. So that they can 
better follow along, and since I trust the students are familiar with 
it, I am going to use parts of the Twin Cities Academy mission 
statement as an example.
  The Twin Cities Academy mission stresses collaboration between the 
school, parents, and the community to develop each child's talent, 
potential, and character. When this process succeeds, the mission 
statement says that the end result is a group of productive citizens 
who will contribute to sustaining American democracy.
  Thomas Jefferson, one of the great leaders and legislators of this 
Nation, had a vision for public schools and the role they were to play 
in America, to create a public of informed and engaged citizens capable 
of sustaining the Republic he and his colleagues had formed. Twin 
Cities Academy had modeled its vision after these ideals, and they are 
committed to fostering productive citizens, as stated in its mission.
  Having a strong history program at school is a good thing for young 
people like my daughter Sarah. Students need

[[Page 11489]]

to understand how the three branches of Government work together. Also 
import is having the opportunity to come to Washington and witness 
first hand the rights and duties of citizens. It helps them realize 
what it means to celebrate freedom, to celebrate opportunity, and to be 
an optimist and have a hopeful spirit.
  My good friend and colleague Senator Alexander understands the 
importance of sharing these values with the next generation, which is 
why he introduced The American History and Civics Education Act, an act 
which will help us ensure young people grow up learning what it means 
to be an American. I was pleased to have the opportunity to cosponsor 
this legislation.
  When their school trip comes to an end, I hope that my daughter Sarah 
and her schoolmates have thoroughly enjoyed all that they experienced 
in Washington, particularly my version of ``Bring Your Daughter to Work 
Day.''
  I mentioned earlier in this statement how I hoped to give them an 
understanding of how Government works. If these Twin Cities Academy 
students were to look up the word ``understand'' in a thesaurus, they 
would see as a synonym the word ``appreciate.'' I hope at the end of 
the day, these students have even a greater appreciation, not just 
understanding, of this great institution and our process of Government 
that makes us the greatest Nation in the world.
  I yield the floor.
  Mr. DORGAN. I yield 5 minutes to the Senator from Montana.
  The PRESIDING OFFICER. The Chair advises the managers of the bill and 
those controlling time that there is no requirement that the Senator 
speak on this legislation when yielded time.
  Mr. BAUCUS. I thank the Senator.
  The amendment the Senator from North Dakota is offering, that I 
cosponsor, is a tax cut amendment. Most Members of this body like to 
cut taxes. That is what this amendment is all about. It is cutting 
taxes.
  Second, which group is getting the benefit of the tax cut under this 
amendment? Under the amendment offered by the Senator from North 
Dakota, cosponsored by myself, it is senior citizens who get the 
benefit of the tax cut.
  I join the Senator in offering this amendment. It repeals the 1993 
tax of Social Security benefits, the tax this body imposed on certain 
senior citizens in 1993.
  We are currently debating a $350 billion tax cut reconciliation bill. 
This bill is about priorities, about values. That is what budgets are 
about. Part of the budget is $350 billion in tax cuts. The budget we 
are working under that was adopted by the Congress set those numbers. I 
am pleased there was a commitment to limit that reconciliation bill 
through conference to $350 billion. That was the commitment made by 
certain key Senators on this side.
  It is within this tax reconciliation bill we debate and decide how 
the changes in revenues and outlays affect our constituents. The debate 
is about who the $350 billion benefits: do we give more money to some 
taxpayers or others? The choices are real. We are here to make 
decisions. We are here to decide.
  We need to make sure our Nation's seniors receive a significant 
benefit. If this bill before the Senate will allocate benefits to 
certain groups, certainly senior citizens in our country should be a 
main beneficiary of a tax reduction. This amendment offered by the 
Senator from North Dakota is just that, a tax reduction for senior 
citizens. It repeals the 1993 provision which imposed taxes on certain 
senior citizens.
  The bill reported by the Finance Committee provides a tax break for 
taxpayers with dividend income. That proposal costs $81 billion over 10 
years out of the $350 billion. That proposal provides a few seniors, 
not very many, a few with a small amount of tax relief; 77 percent of 
seniors in our country will receive no relief, no tax reductions, under 
the Finance Committee bill on dividends; 77 percent of Americans do not 
receive any of the $81 billion that will go to very few Americans, the 
most wealthy, the least in our country.
  In contrast, our amendment will provide 8 million seniors with a 
significant tax cut. All the cost of this goes back to America's 
seniors. That means $150 billion over 10 years is put back into the 
pockets of our senior citizens.
  The current law enacted in 1993 has two significant flaws. First, in 
1993 we changed the rules in the middle of the game for people 
receiving Social Security benefits. I will never forget. Suddenly that 
was enacted. It came out of the blue, an additional tax on our senior 
citizens and their benefits. We began to tax Social Security benefits 
at a higher rate for individuals at certain income levels.
  The second flaw in 1993, we failed to adjust the income levels for 
inflation. For the past 10 years, there has been no adjustment. This 
means more and more seniors will be subjected to this tax as each year 
passes. We need to correct those flaws.
  Again, this debate is about choices. We make choices here. Life is 
making choices. We think the choice here is clear. If we have $150 
billion to spend, spend it on seniors. As such, we offset the cost of 
our amendment to repeal the tax to Social Security benefits. That is 
the purpose of the underlying amendment by striking the dividend 
proposal in the bill and also striking reductions in the top rates.
  Again, this is a tax cut amendment. Those seniors I mention are 
currently paying that tax. We are proposing that tax be repealed. That 
is a tax cut amendment. It is being paid for by a promise to the 
future. Those provisions of the Finance Committee dealing with 
dividends are not currently in effect. They are future promises, we 
suggest, to be repealed so our seniors get the benefit of the repeal of 
the taxes imposed upon them in 1993.
  A couple of numbers: Repealing the 1993 tax of Social Security 
benefits gets an average of $1,500 into the hands of 8 million seniors. 
Contrast that with the dividend proposal in the Finance Committee bill. 
The dividend proposal in the bill gets an average of $19,000 to fewer 
than 5,000 seniors. Again, what is better: $1,500 in the hands of 8 
million seniors or $19,000 in the hands of the most wealthy, only 5,000 
seniors? And fewer than 1 million taxpayers, regardless of whether they 
are 65 or 25, would benefit from the top rate reductions. Remember, 
there are 130 million filers in America. Fewer than 1 million taxpayers 
who are not seniors, who are between 65 and 25 get reductions from the 
top rate reductions.
  Members on the other side of the aisle have supported this in the 
past. Repealing the 1993 Social Security tax is a better choice for our 
constituents than enacting dividend proposals in the top rate 
reductions contained in the underlying bill.
  Mr. REID. Will the Senator yield?
  Mr. DORGAN. Mr. President, I yield 2 minutes to the Senator from 
Nevada.
  Mr. REID. Mr. President, the amendment offered by the Senator from 
North Dakota will be voted on as it stands. If there is any suggestion 
that there will be an offer or attempt to second-degree the amendment 
or somehow not give us a straight up-or-down vote, we will continue to 
offer this second-degree amendment on other things. There will be a 
vote on this amendment.
  It would be to everyone's best interest to get that out of the way as 
quickly as possible and vote on this very important amendment offered 
by the Senator from North Dakota.
  Mr. DORGAN. I yield 10 minutes to the Senator from North Dakota, Mr. 
Conrad.
  Mr. CONRAD. Mr. President, I ask unanimous consent I be named as a 
cosponsor of the amendment of my colleague.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CONRAD. Mr. President, I wish my colleague a happy birthday. This 
is his birthday, and I hope it is a happy one for him. I hope what 
helps make it a happy birthday is this amendment passing.
  This is a good amendment. This is reversing a tax increase previously 
imposed on recipients of Social Security. That was part of a deficit 
reduction plan back in the 1990s that helped get

[[Page 11490]]

us back on track. We did that. Now in the context of this bill, since 
there will clearly be tax reductions, we ought to do it in a way that 
is fair and balanced and that recognizes a tax increase previously 
imposed that could be reversed at this moment.
  My colleague mentioned what is happening to the Federal debt under 
the President's budget plan. This chart shows it in graphic form. The 
debt of the United States is absolutely skyrocketing. It is over $6 
trillion now, and it will be over $12 trillion in 10 years if the 
President's plan is adopted, including the overall tax bill before the 
Senate.
  All of this is at the worst possible time. Right now, the trust funds 
of Social Security and Medicare are running surpluses. The blue bar is 
the Medicare trust fund; the green bar is the Social Security trust 
fund; the red bars are the tax cuts, both those enacted already and 
those proposed. You can see that when the trust funds that are now 
running big surpluses turn cash negative within the next decade, at 
that very time the cost of the tax cuts proposed by the President 
explode, driving us deep into deficit and deep into debt. That is right 
as the baby boom generation retires, right as we are least able to have 
deficits. You don't have to take my word for it or the word of the 
Congressional Budget Office; this is the President's own analysis of 
the long-term effects of his plan.
  Some have said these deficits are small. The deficits currently are 
at record levels. We are going to have the biggest deficit this year we 
have ever had in our history. That is right here.
  But look where we are headed, according to the President's own 
analysis. This is from his budget document. It shows deficits now are 
small compared to what they will be, even though they are at record 
levels now. These are the biggest deficits we have ever had, and they 
are tiny compared to what is to come if we adopt the President's plan, 
because the costs of the retirement of the baby boom generation explode 
at the very time the costs of the President's tax bill explode.
  Some on the other side are saying if you cut taxes you are going to 
get more revenue. Let's do a reality test. They said that 2 years ago. 
This was the range of possible outcomes, looking forward, that was 
given to us 2 years ago by the Congressional Budget Office. They 
adopted the midpoint of this range. That was what told them we were 
going to have nearly $6 trillion of surpluses over the next decade.
  Republicans said, Oh, wait a minute, that is too conservative. If you 
cut taxes, as we did 2 years ago, you will get much more revenue. They 
are making the same claim now: If we cut taxes again, we will get more 
revenue.
  Let's look back at history. Let's look at the record. What it shows 
us is here is what actually happened. This is what the projections 
were; this is the midpoint of those projections that said there would 
be nearly $6 trillion of surpluses. This red line is what has actually 
happened. We didn't get more revenue. We didn't get more surpluses. We 
got less revenue and no surpluses. Instead, we got deficits, massive 
deficits, record deficits. Now we get the same old song: Let's just do 
another big round of tax cuts; we will get more revenue.
  It didn't work last time. It didn't come close to working. In fact, 
we just got the latest numbers from the Treasury Department. Revenue 
this year is running $100 billion below the forecast made just 7 months 
ago. They said, based on the tax cuts of 2 years ago, we would get more 
revenue. We are not getting more revenue. In fact, if this trend 
continues this year, we will have the lowest revenue as a percentage of 
our gross domestic product since 1959.
  All those who claimed we were going to get more revenue were wrong. 
The President was wrong. Our Republican colleagues who told us we were 
going to get more revenue with the big tax cut enacted 2 years ago were 
wrong. They were not wrong just by a little bit; they were wrong by a 
lot.
  That is why some of the most distinguished economists in the country 
are telling us that this tax cut plan is not going to do the job. These 
are the names of the economists who signed this statement. Ten of them 
are Nobel laureates in economics, the most distinguished economists 
America has produced. This is what they say:

       The tax cut plan proposed by President Bush is not the 
     answer to these problems--of weak economic growth.
       Regardless of how one views the specifics, there is wide 
     agreement that its purpose is a permanent change in the tax 
     structure and not the creation of jobs and growth in the near 
     term. The permanent dividend tax cut, in particular, is not 
     credible as a short-term stimulus. As tax reform, the 
     dividend tax cut is misdirected in that it targets 
     individuals rather than corporations, is overly complex, and 
     could be, but is not, part of a revenue-neutral tax reform 
     effort.
       Passing these tax cuts will worsen the long-term budget 
     outlook, adding to the nation's projected chronic deficits.

  They conclude:

       To be effective, a stimulus plan should rely on immediate 
     but temporary spending and tax measures to expand demand, and 
     it should also rely on immediate but temporary incentives for 
     investment.

  It is not just 10 Nobel laureates. This morning a distinguished 
Republican economist was quoted in the Washington Post reacting to a 
plan to phase-in and later sunset the President's dividend proposal. 
Here is what he wrote in a website editorial:

       Administration sources admit that dividends will likely 
     decline relative to today under this plan between now and 
     2005.

  Dividends are going to decline.

       How can that be a harmless event, given that increases in 
     dividend payments are viewed to be so wonderful?

  This Republican economist, distinguished Republican economist whom 
they have called to testify before committees of Congress repeatedly 
concluded:

       Clearly, this proposal is one of the most patently absurd 
     tax policies ever proposed.

  This is from a Republican economist whom they have called repeatedly 
before committees to testify on economic proposals.
  It is not just 10 Nobel laureates. It is not just a distinguished 
Republican economist. It is even the people they have hired to do the 
analysis of their plan, Macroeconomic Advisers, hired by the White 
House, hired by the Congressional Budget Office to do macroeconomic 
forecasting. Do you know what they say? The President's plan will give 
you a little boost, less than half of 1 percent of additional GDP, 
until 2004. Then look: straight down. That is what this policy 
provides. It hurts economic growth. In fact, past 2004 it is worse than 
doing nothing. That is a great economic growth plan. That is a great 
jobs plan. It is worse than doing nothing, according to the people they 
have hired to give them advice on what the results will be.
  It is not just those Nobel laureates, it is not just a distinguished 
Republican economist, it is not even the firm the Congressional Budget 
Office and the White House have hired to do macroeconomic analysis. 
This is the chairman of the Federal Reserve: ``Greenspan Says Tax Cut 
Without Spending Reductions Could Be Damaging.''
  He is saying:

       With a large deficit . . . you will be significantly 
     undercutting the benefits that would be achieved from the tax 
     cuts.

  The President of the United States is not proposing cutting spending. 
He is proposing increasing spending and he is proposing massive tax 
cuts when we already have record deficits. There can only be one 
result: massive deficits, massive debt, that will hurt economic growth, 
that will hurt the economic security of the country, and finally, on an 
amendment that involves Social Security, that will take virtually every 
penny of Social Security surplus over the next decade to pay for these 
tax cuts. What a profoundly mistaken policy.
  The PRESIDING OFFICER. The time of the Senator has expired. Who 
yields time?
  Mr. BAUCUS. Mr. President, how much time is remaining on both sides?
  The PRESIDING OFFICER. The Senator from North Dakota has 20 minutes 
on the amendment. The Senator from Iowa has 1 hour.
  Mr. DORGAN. Mr. President, I was unable to hear.
  The PRESIDING OFFICER. The Senator from North Dakota has 20 minutes. 
The Senator from Iowa has an hour.

[[Page 11491]]


  Mr. DORGAN. I ask if the Senator from Iowa wishes to use some of his 
time at this point.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I yield myself such time as I consume.
  I have enjoyed listening to this debate. It is just like being in 
another world. The reason I say that is, why do you think that we tax 
85 percent of Social Security income for certain Americans in the 
higher income tax brackets--I would say even in the middle-income tax 
brackets--at 85 percent? That was done in 1993. Do the people who have 
just spoken forget that every one of them voted that increase, to have 
the Social Security income be taxed at 85 percent of that income that 
has to be reported? Every one of the people who have spoken are 
responsible for that level of income reporting of 85 percent being on 
the tax books. Why do they want to repeal what they are responsible for 
passing? During the debate on the tax bill, every one of the Democratic 
Senators now serving in the Senate, except for Senator Bingaman from 
New Mexico, voted to have this money taxed. Now they are trying to take 
it out.
  On June 24, 1993, there was an amendment offered by Senator Lott to 
change the amendment which was in the Democrat tax increase bill at 
that time to not report 85 percent of Social Security income for 
taxation. The rollcall shows that the motion to table was agreed to 51 
to 46. The 51 Members who voted at that particular time were the ones 
who were voting to keep the level of Social Security income that was 
taxed at 85 percent and which needed to be reported. Every Democrat 
still serving in the Senate voted to table Senator Lott's amendment. 
Every Republican voted not to table the Lott amendment, which meant 
that every Republican was voting against that. We had the support of 
Senator Bingaman--the only Democrat from whom we had support.
  They wonder why I am amused? If they think it is so bad today, why 
didn't they think it was bad 10 years ago? And we wouldn't even be 
debating this issue. It looks to me as if they want to maybe detract 
from the mistakes of the past. I don't know.
  But also, earlier this year, on an amendment by Senator Bunning to 
the Budget Act, the very same Members opposing this amendment voted 
against the very same amendment when Senator Bunning offered it. What 
has happened in the last month? Do they realize that maybe the vote at 
that time was wrong and they have to have cover? I don't know. But 
every one of the Members who are proposing this amendment or speaking 
for it voted just the opposite way on Senator Bunning's amendment. That 
amendment was defeated 48 to 51.
  But there are bigger things to worry about than how people voted in 
the past. I want the public to understand that there is some game 
playing going on here. We are talking about serious business as well. 
We are talking about a jobs bill before the Senate to give tax relief 
to American working men and women so they can have more money in their 
pockets.
  To get the cover that some people need for previous votes, they are 
going to take tax decreases away from middle-class Americans to pay for 
that. I will be a little more specific on that in just a minute.
  I have to repeat something I said in my opening remarks. We just 
heard a speech on the debt situation which might be forthcoming if we 
grow the economy. Reducing taxes is one way to grow the economy and 
will not have the debt situation we found with the growth we had in the 
1990s. We paid down the national debt $550 billion.
  We hear about this debt situation. My friends on the other side of 
the aisle are worried about the debt. They said if we adopt the 
President's plan, we are going to have greater debt. If they are so 
concerned about the debt, why didn't they offer all of their amendments 
on the budget bill about a month ago? They wanted to take money away 
from the tax reduction aspect of the budget. It begins at the bottom 
line. They took money away from tax decreases and spent it someplace 
else. If they are concerned about the national debt, it seems to me--
and they believe that one more dollar coming into the Federal Treasury 
is going to reduce the national debt--they shouldn't have been offering 
amendments to spend it someplace else. But they are very consistent in 
doing that. Amendment after amendment after amendment took money away 
from the tax reduction figure in the budget, which this bill is a 
result of, and spent it someplace else.
  Do you know why? I think there is a difference in philosophy between 
my party and the other party. That difference in philosophy is very 
basic to this debate going on today. I just think people ought to 
realize that this is not a Republican-Democrat fight, or some little 
cat fight over some little bill in the Senate.
  There is the difference between one party that believes money in the 
pockets of 110 million taxpayers is going to do more economic good if 
the 110 million taxpayers spend it or invest it than if I, Senator 
Grassley, and 534 others here in DC are going to make that decision. We 
have to believe that if the money is in the pockets of 110 million 
taxpayers and they spend it or invest it, it is going to do more 
economic good. It is going to turn over more times in the economy. It 
will respond to the dynamics of our free market economy rather than a 
political decision being made about what to do with it.
  Obviously, I believe people on the other side of the aisle have the 
attitude that we in Congress know better than they do how to spend the 
taxpayers' money. If we are going to have a tax reduction, that will 
mean less money for us to spend. But it ignores the economic good that 
comes from private sector investment and private sector spending as 
opposed to public sector spending.
  I think there is very much an inconsistency here. What we are talking 
about is a $430 billion tax reduction package--net $350 billion. As we 
have been told, we have been led to believe that this is responsible 
for doubling the national debt. This tax package is only one-half of 1 
percent of all the dollars that are going to be collected by the 
Federal Government under existing tax law over the next decade. That is 
going to be $24.7 trillion. Tell me things are so tight here in 
Washington, DC, that somehow one-half of 1 cent on the dollar left in 
the taxpayers' pockets is going to be responsible for doubling the 
national debt. No. What is going to be responsible for doubling the 
national debt--if it were to happen; I don't think it is going to 
happen--is not because the people of this country are undertaxed; it is 
because this Congress overspends.
  There again I would remind the Senator from North Dakota, the 
distinguished ranking member of the Budget Committee, the President's 
plan does not follow the pattern of the last few years, where back to 
back we had 9-percent increases in domestic discretionary spending each 
of those years. But the President's program, plus the budget of this 
Congress, has domestic discretionary expenditures not at 9 percent but 
at 4 percent. Now, yes, that is an increase. That is an increase, but 
that is an increase that is sustainable over the long haul. Nine-
percent budget increases are not sustainable.
  We are in a situation where nothing around here surprises me anymore. 
The very people offering this amendment are the same ones who created 
this tax increase back in 1993. As I indicated, they even voted against 
repealing the tax just 2 months ago on the budget resolution.
  I think this is an amendment that is trying to fool the American 
people. Just about every Member on the Republican side has vehemently 
opposed the Democrats' 1993 tax increase on Social Security. Except for 
Senator Bingaman, every Democrat in the Senate today voted for that 
back in 1993. Now they want to try to cover up their votes supporting 
this tax, and they want to do it by destroying the underlying jobs and 
growth bill.
  This is how they destroy it: The Dorgan amendment strikes our efforts 
to reduce all marginal tax rates above 10

[[Page 11492]]

percent. The efforts to reduce marginal tax rates for the middle class 
are eliminated by this amendment. As a result, a single mom making 
$40,000 in taxable income will see no reduction in the tax on her small 
pay increase. A family with taxable income of $70,000 will see no 
reduction in their marginal tax rate.
  The Dorgan amendment takes away our bill's tax cuts for middle-income 
Americans. The Senator from North Dakota says this isn't a tax 
increase. I would like to have you tell that to the single mom, who is 
one of the targets of this amendment, who, on her pay raise, will not 
see a reduction in her tax. A vote for this amendment is, in fact, a 
tax increase, no matter how the authors want to try to dress it up.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. DORGAN. Mr. President, I yield myself such time as I may consume.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, this was an interesting and clever 
argument to listen to. I have great respect for my colleague who chairs 
the Finance Committee. We have worked on many issues together. But I 
listened to his argument, which was more about motives with respect to 
this amendment than it was about merits.
  It is, I guess, perfectly plausible to talk about the motives of 
others. I won't do that at this moment, but he was describing the 
motives of people dealing with this amendment. Let me talk a bit about 
the merits and correct some of the misstatements, if I might, and then 
describe why this is an important amendment.
  Let me take the last point first. My colleague says this is going to 
take away the tax cuts for middle Americans. Nonsense; simply untrue. 
Is this going to take away the tax cuts for the child credit, which is 
going to be very significant to that single mom? Does this take that 
away? The answer is no.
  So if someone says this takes away the tax cuts for middle Americans, 
they are wrong, just wrong. It is not supported by the facts. I will go 
through a whole list of others that this does not take away.
  This does take away the tax cut that accelerates the rate reductions 
going down to the 28 percent. It is not all those above 10 percent, as 
my colleague suggested. But let me go back to the top and take his 
arguments one by one.
  The Senator from Iowa is right, this was put in place 10 years ago as 
part of a large plan. I was not happy it was there 10 years ago, but it 
was part of a plan we passed.
  Twice, since that time, I have supported efforts to get rid of this 
tax on Social Security--the 50 percent to 85 percent--but we have been 
unsuccessful. The question now is, Are we willing to cut taxes now by 
abolishing the 85 percent back down to 50 percent? That is the question 
for us now.
  As a result of the 1993 new economic proposal, which included this 
piece, we had unprecedented economic growth that turned this country 
around, turned the biggest budget deficits then into the biggest budget 
surpluses we have ever had. Now, we have people who are still huffing 
and puffing that it really was not the result of that economic plan, 
but, notwithstanding that, the fact is, that put this country back on 
track. This piece was a part of it. I am not pleased it was, but it 
was. As I said, I voted previously to try to get rid of this piece. Now 
we have the opportunity.
  If the prospect of the majority is to come to the floor of the Senate 
and say, let's have very large tax cuts, the question is, it seems to 
me, Where do you start? Who benefits most? Wouldn't it be a good thing 
to cut these taxes so 8 million senior citizens who are paying $1,500 a 
year more in taxes as a result of that change 10 years ago would be 
able to begin to pay less as a result of our repeal of that provision?
  My colleague said: Gee, there was just an amendment offered by 
Senator Bunning on the floor of the Senate that dealt with this very 
issue. Total nonsense. It was offered during the budget debate, and the 
budget debate did not have anything to do with what we were going to do 
on specific tax cuts. That can only be done with respect to the Finance 
Committee and on the floor of the Senate.
  The Bunning amendment was a proposal to increase the overall tax cut 
by $146 billion. But the Bunning amendment--if I just ask you to go 
read it--says nothing about this issue that I have as a matter of the 
amendment today. I assume my colleague will say: Everybody knew what he 
was doing. No, you can't do that during a budget debate. There is no 
vote during the budget debate that is going to affect what the Finance 
Committee does to cut taxes at some point later. So the Bunning issue 
is a specious issue.
  We are told this is a jobs bill, and we are also told by my colleague 
as to this ``debt situation,'' don't worry so much about that because 
we are going to grow the economy and the debt isn't going to happen. 
This reminds me of that old joke in the movies: Who are you going to 
believe, me or your own eyes? Well, let's take a look with our own eyes 
here.
  When somebody says, this doubling of the Federal debt, from $6 to $12 
trillion, is probably not going to happen, let me refer you to the 
budget that was passed by this Senate, embraced by the previous speaker 
and all on his side of the aisle, I believe--or almost all--except two. 
On page 4 of that conference report, they say, if they get all they 
want--they grow the economy, they create the jobs, they get all they 
want in budget and appropriations and tax cuts and so on--they say they 
will have a $12 trillion debt in the year 2013. This isn't a case of, 
well, if we grow the economy, the debt situation will not happen. No. 
This is what they predict will happen if they get all they want.
  So I would refer you to page 4 of the conference report, that you 
voted for--I say to those who voted for it--and ask yourselves: Were 
you creating a plan and supporting a plan that doubles the Federal 
debt? The answer is yes. Case closed. No more discussion about that, I 
am sorry.
  Now, the question was asked: Do we want to repeal this or don't we 
want to repeal this? The reason I have offered the amendment is, yes, I 
think we ought to repeal that provision. I did not like that provision 
when it was put in, but it was. It was part of a larger plan we all 
protected in order to make that plan work. The fact is, I did not like 
it then. I do not like it now. I think we ought to repeal it.
  The question now is not, What did you think about someone doing that 
10 years ago? The question is, In the year 2003, do you support 
repealing this provision or don't you?
  This, in fact, is a tax cut for senior citizens, 8 million of them 
who have reached their declining income years and who have earned the 
opportunity to go back to the provision we used to have where 50 
percent of their Social Security payments are counted as income for tax 
purposes rather than the 85 percent. That is what my proposal does.
  We are told that what this larger tax bill is about is putting money 
in the pockets of American taxpayers. That is true. It will be 
borrowed, of course. We are going to borrow money to provide tax cuts. 
But if we are going to provide tax cuts, it is perfectly appropriate to 
ask the question: What are the priorities? Who ought to be first in 
line? Those at the very top of the income ladder who earn the biggest 
dividends, should they be first in line? Is that who edges up to the 
trough here? Or perhaps should we take a look at the issue of the tax 
burden on senior citizens and especially the income they receive from 
Social Security?
  If this is about putting money in the pockets of the American 
taxpayers, I say without respect to the motives of those who disagree 
with me, if the motive is to put money in the pockets of senior 
citizens who have had to pay a higher tax than they should have to pay, 
this amendment gives you the opportunity to vote yes or no.
  We can have people stand and steam and bluster about other people's 
motives, but in the end, we will vote on this. And the vote is going to 
be, do you believe we ought to relieve senior citizens of this tax 
obligation they

[[Page 11493]]

have had to pay? In my judgment, the answer ought to be yes. My hope is 
that enough colleagues will join me so we can make this kind of 
affirmative change that will be helpful to cut taxes for 8 million 
senior citizens to the tune of $1,500 a year. These are taxes that 
ought to be cut. I hope my colleagues will support this amendment.
  One more time. There are a lot of mirages created in this Chamber, a 
lot of word castles being built: We will grow; we will create jobs; we 
will grow the economy; we will expand all these things that we hear 
about.
  It is not contestable that we have a fiscal plan passed by one vote 
in this Congress that says: Let us borrow a great deal of money, 
provide very large tax cuts mostly to upper income folks, double the 
Federal debt from $6 to $12 trillion, increase funding on defense, 
increase funding for homeland defense and security, and then shrink 
domestic discretionary and at the same time double the Federal debt. 
That is a legacy we will leave to our children if everything goes as is 
predicted.
  I happen to think this fiscal policy makes little sense. If we are 
going to cut taxes, let's make sure we have a priority in terms of the 
value system we want to exhibit as we cut taxes. I say those who have 
reached their declining income years and who are now paying higher 
taxes because of this provision put in 10 years ago deserve the 
opportunity to see this provision repealed, and my amendment does 
exactly that.
  I yield 3 minutes to the Senator from Montana.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, there isn't anybody in this body for whom 
I have higher respect and more affection than the Senator from Iowa. I 
must say when I listened to his arguments against this amendment, 
virtually nothing was said that addressed the merits. In fact, there 
were some statements which were a little bit misleading. Lawyers like 
to call them red herrings. That is when you say something to try to get 
people off track so they don't think about the subject at hand. It is 
called a red herring.
  One of the red herrings we heard was that Democrats voted against 
this amendment in the past, and it was Democrats who voted for this 
increase in Social Security taxes back in 1993. That was 10 years ago. 
That is a different time, a different situation, different 
circumstance. Back then the Congress voted to reduce deficits, and that 
was part of a large deficit reduction package. This is 10 years later, 
2003. We are faced with the question, within a $350 billion tax bill, 
how should the tax cuts be allocated. That is the question before us.
  Many of us believe it is a far wiser policy that seniors receive more 
of the tax benefit as a result of the cuts than is the case under the 
Senate Finance Committee bill. That is why we think the 1993 provision 
should be repealed because then seniors will receive significant 
benefits if it is repealed, and we believe that is a higher priority 
than giving a lot more dollars to very few Americans who are the elite, 
the extremely wealthy Americans.
  Repealing the 1993 tax on Social Security benefits gets an average of 
$1,500 in the hands of 8 million Americans. Eight million seniors will 
receive, on average, a benefit of $1,500 under our amendment. 
Otherwise, if this amendment does not pass, then by contrast, under the 
committee bill, which gives dividends to all Americans tax free, a few 
seniors, 5,000 seniors, will get $19,000.
  We are saying there should be a better priority; that is, the money 
should be given to people who are going to spend it. It should be 
spread out more evenly rather than have the benefits, as in the Finance 
Committee bill, so heavily skewed to the Nation's elite. This should 
not be an elite bill. This should be an American bill. This should be a 
bill for Americans, and American seniors should be included as the rest 
of America.
  There are other provisions of the bill that give tax benefits other 
than to seniors. We believe seniors should get a significant part of 
the benefit. I strongly urge passage of the amendment.
  The Senator from Iowa also said there is a difference in philosophy: 
One party wants to put money in the pockets of people; the other does 
not.
  That, too, is not a valid argument. We are talking about whose 
pockets this money should be put into, if you want to put it in those 
terms. We on our side are suggesting that the people whose pockets 
should receive the money are the seniors, that they should receive the 
benefits, much more than is the case in this bill. In this bill, the 
people who receive the money, whose pockets get the money, are the 
elite, the wealthy elite of America generally. That is not right. That 
doesn't work. It is not fair. It is not American. We believe this 
should be a bill that is more evenly balanced for all Americans.
  For all those reasons, I urge my colleagues to support the amendment. 
It is good for America.
  The PRESIDING OFFICER. Who yields time? The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I ask how much time remains on the 
Dorgan amendment on both sides.
  The PRESIDING OFFICER. The Senator from Iowa has 45 minutes; the 
Senator from North Dakota has 7 minutes.
  Mr. GRASSLEY. Forty-five minutes on my side?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. GRASSLEY. I rise to address a couple of issues that have been 
presented before we go to other people who want to speak. This is on 
the Dorgan amendment. It might be in the form of asking rhetorical 
questions or what have you. But first of all, I want to say to my 
friend from Montana, the distinguished ranking member of this 
committee, that for this farmer to be called a lawyer, if he were not a 
good friend of mine, I would take offense.
  Regardless, before us is this amendment that reduces the amount of 
Social Security income that must be reported for taxation. One of the 
issues I didn't mention in my debate against the amendment is the fact 
that all the money raised from this tax goes into the Medicare health 
insurance trust fund. We all know the Medicare Program is in much more 
serious condition than the Social Security Program.
  The Medicare trust fund has a drop dead date of 2026. The Social 
Security trust fund has a drop dead date of 2042. None of those dates 
are anything that I am making light of, that they are so far off that 
we should not be concerned. We have to be very concerned. But people 
ought to understand that to the extent this amendment is adopted, it 
would take money out of the Medicare health insurance trust fund. And I 
don't think we ought to be doing anything to weaken the Medicare trust 
fund. I would rather refer to a point made by the two Senators from 
North Dakota, most often made by the sponsor of this amendment. I 
cannot help but ask both of these Senators who are trying to make an 
issue about this bill by saying that this bill will increase the debt. 
Somehow that just doesn't add up, when you consider the thrust of their 
amendment.
  How does this amendment they have before us reduce the debt? The 
bottom line of the bill is exactly the same with or without the Dorgan 
amendment. In other words, it costs the same as the underlying bill. 
So, again, we have people speaking on three sides of a two-sided coin. 
Senator Dorgan's amendment will increase the debt, so I don't hear any 
more about increasing the debt on the part of the underlying bill, 
because with their amendment, we end up exactly in the same place.
  The PRESIDING OFFICER (Ms. MURKOWSKI). The Senator from North Dakota 
is recognized.
  Mr. DORGAN. Madam President, my colleague from Iowa just won a debate 
we were not having. That is an interesting thing to do. I wasn't 
proposing this amendment as one that would dramatically reduce the 
Federal debt. I never suggested that or proposed it.
  My point is, we lost on that issue when my colleague and his party 
passed in the Senate this budget which, on page 4, says they want to 
double the Federal debt from $6 trillion to $12 trillion. They passed 
that without my

[[Page 11494]]

vote. I didn't support it. But I didn't propose this amendment saying 
it will reduce the Federal debt. I am saying this: Since they won, and 
since they are going to cut taxes, the question is of choice and 
priority: Which of the taxes ought to be cut? Which ought to be cut 
first?
  My amendment simply says I think it is more important to cut these 
taxes for senior citizens--8 million of them who pay $1,500 a year, at 
this point, more than I think they should pay. I think the priority 
ought to be to cut taxes for them at this point. Is it more important 
to do that than to, as I said earlier, cut dividend taxation? I think 
it is. I think those individuals are in the highest income levels.
  Again, I hope Donald Trump won't mind, but since he names everything 
after himself, and he is a very successful businessman, he probably 
doesn't mind my using his name. He is at the top of the income ladder, 
and God bless him. But it is a reasonable thing to ask: what is the 
priority? Is it providing tax exemptions that will provide large tax 
cuts to those at the top or to provide tax exemptions for senior 
citizens who have reached the lower part of their income in their lives 
and are struggling to make it?
  What I propose has nothing to do with the debt. This doesn't reduce 
the debt. I am not saying it does. If we are going to cut taxes, the 
question ought to be one of choice and priority. That is what this 
amendment is. I am going back to the question of debt because it is the 
very reason I voted against the budget in the first place. We cannot 
come to the floor and say this debt situation ``isn't real'' because it 
may not happen because we have this policy or plan that will grow the 
economy, and if and when we do these debts won't appear.
  I am sorry, that just doesn't wash. This plan is a plan that says if 
we get all we want, if we get this economic growth, if we create these 
jobs, if our plan is approved, we will then double the Federal debt. 
Are we concerned about that? You bet your life we are. Are some others 
around here concerned about it? No. There is a lot of thumbing of 
suspenders and saying, ``Aw shucks, this doesn't matter.'' Well, it 
matters. Our kids and their kids will inherit this debt. It will be 
their burden to pay this.
  We just came through a war, and God bless the soldiers we called on 
to ask to fight that war. This country is enormously blessed that it 
lasted only a very short time. But I think it is very unusual that 
America sends her sons and daughters to war but says we don't choose to 
pay for it at this point. It is a very costly enterprise. Nobody is 
saying we ought to pay for this. What we said was: When you come back 
from the war, you can come back to the welcome arms of your family and 
then inherit the burden of paying the costs. That is my point about the 
debt and deficit.
  Have I used my 7 minutes?
  The PRESIDING OFFICER. Yes.
  Mr. DORGAN. I yield the floor.
  Mr. BAUCUS. Madam President, I yield myself 5 minutes off the bill. 
For the record, I want to make a correction. I know it was an oversight 
by the Senator from Iowa when he mentioned that the Medicare trust fund 
will be somewhat in jeopardy in future years. That is true, but I know 
it was an oversight when he failed to state that, under the terms of 
our amendment, the trust fund will be made whole through transfers from 
the general fund over to the Medicare trust fund, so it will be made 
whole or kept whole and held harmless under this amendment.
  I know that was an oversight, but I wanted to say that for the 
record.
  Mr. REID. Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DORGAN. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  Madam President, my understanding is that when I asked whether I had 
used the 7 minutes, the response was not accurate and that there are, 
in fact, 3 minutes left.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. DORGAN. I knew I talked fast, but I didn't think I finished all 7 
minutes then. I thank the Presiding Officer and the Parliamentarian as 
well.
  I wanted to make a point in response to something said earlier that, 
well, if this amendment passes, the tax cuts for American families will 
be gone. That is simply not the case. I will describe that I don't, 
with this amendment, change the child tax credit. That moves to $1,000. 
It has nothing to do with that. That stays in place. I don't propose 
changing expensing to $75,000. That stays in place. The increase in the 
AMT, the alternative minimum tax, exemption stays in place. 
Acceleration to the 10 percent bracket stays in place. Acceleration to 
the 15 percent bracket stays in place.
  My point is that a lot of things are said on the floor of the Senate, 
and they are often said by someone who might mean them, but they might 
be mistaken. It is a mistake to say that this amendment somehow, in 
some way, jeopardizes tax cuts to most American families. It doesn't. 
It simply does not.
  The only question the Senate will be voting on with respect to this 
amendment is the following: Do we, at long last, repeal the provision 
put in place 10 years ago? And, yes, many voted 10 years ago for that 
large package and put the country on track, and that led to awfully 
good economic times. But do we repeal that provision? I felt 10 years 
ago it would be better not to have that provision in the package. I 
have on two occasions voted to repeal it. Let's try again.
  If we are on the floor saying there will be very large tax cuts, 
let's ask the question: Should this tax cut be one of them, a tax cut 
for senior citizens that says to them the $1,500 in additional taxes 
that 8 million of you are now paying, because we changed the rules on 
what percent of the Social Security receipts you get should be reported 
for tax purposes, should that be cut? The answer is yes.
  While we are talking about double taxation, yes, some dividends--
fewer than 50 percent--are subject to double taxation in this country, 
but all of this is double taxation--all of this. Senior citizens pay a 
tax on their wage when they are working. When they retire, they get a 
Social Security benefit and pay a tax on now 85 percent of that. That 
is double taxation.
  If, in fact, the culprit we are chasing is double taxation, why do we 
start with dividends first? What about double taxation that results in 
Social Security recipients being taxed while they work on the same 
income we will now tax when they retire? It does not make any sense to 
me. The only question is not one of motives of someone who might be 
supporting this or offering it, as my colleagues suggested a moment 
ago, the question is when the roll is called, do you believe we ought 
to repeal this tax increase that senior citizens face? My answer is 
yes, let's repeal this tax increase. That ought to have a priority over 
other provisions in the bill.
  One last point. The Senator from Montana clarified the point with 
respect to Medicare. I appreciate he did that. I failed to do it. This 
bill does not jeopardize the Medicare trust funds at all. They are 
restored in the bill.
  I yield the floor.
  Mr. LEVIN. Mr. President, I support the amendment offered by Senator 
Dorgan that would cut taxes for 8 million of our seniors that pay 
Social Security taxes.
  This boils down to a question of priorities. If we are going to pass 
a huge tax cut as the majority insists, who would we rather provide the 
tax cuts to? This amendment would provide tax relief to senior citizens 
who pay taxes on their Social Security benefits. Those who oppose this 
amendment apparently would rather provide tax breaks that mostly go to 
the wealthiest among us. They apparently would rather cut taxes on 
dividends that studies show will disproportionately benefit upper 
income folks. They apparently would rather accelerate tax cuts for 
taxpayers in the top bracket making over $300,000 a year. I would 
rather cut taxes for seniors than do these things.

[[Page 11495]]

  I will support the Dorgan amendment as a major improvement to the 
underlying bill reported by the Finance Committee.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Madam President, I ask unanimous consent that the pending 
amendments be temporarily laid aside so the Senator from Nevada may 
offer an amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from Nevada.


                           Amendment No. 560

  Mr. REID. Madam President, I ask that amendment No. 560 be reported.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Nevada [Mr. Reid] proposes an amendment 
     numbered 560.

  Mr. REID. Madam President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To ensure that Social Security surpluses are not raided in 
             order to fund tax cuts on corporate dividends)

       At the appropriate place, insert the following:

     SEC. __. MECHANISM TO PROTECT SOCIAL SECURITY

       (a) Certification.--
       (1) In general.--Each year, beginning in 2003, when the 
     Final Monthly Treasury Statement for the most recently 
     completed fiscal year is issued, the Secretary of the 
     Treasury shall--
       (A) certify whether there was a on-budget balance or 
     surplus in that fiscal year; and
       (B) estimate whether there would be an on-budget deficit in 
     any of the succeeding 10 fiscal years if section 201 of this 
     Act takes effect January 1 of the following year.
       (2) Estimate.--The calculations for the estimate under 
     paragraph (1)(B) shall be consistent with the baseline rules 
     specified in section 257 of the Balanced Budget and Emergency 
     Deficit Control Act of 1995, except for the assumption that 
     these provisions take effect and remain in effect 
     permanently.
       (b) Delay in Dividend Tax Cut.--Notwithstanding any other 
     provision of law or this Act, section 201 of this Act shall 
     not take effect until January 1 of the year following--
       (1) a certification by the Secretary of the Treasury 
     pursuant to paragraph (a)(1)(A) that no on-budget deficit 
     existed in the preceding fiscal year; and
       (2) an estimate by the Secretary of the Treasury pursuant 
     to paragraph (a)(1)(B) that no on-budget deficits will occur 
     in any of the 10 succeeding fiscal years even if section 201 
     takes effect.

  Mr. REID. Madam President, I can remember as a little boy my 
grandmother getting what she referred to as her old-age pension check. 
That is what she called it. We have refined the name. That is not 
politically correct anymore. We now refer to someone receiving a Social 
Security check.
  The Social Security check my grandmother received gave her dignity. 
She had eight children. The children helped her, but my grandmother, a 
proud widow, did not want to feel dependent on people, even her own 
children. I repeat, that old-age pension check gave her dignity. It 
gave her independence. She had money of her own that she could spend. 
She was unable to work. My grandmother, for all the time I remember 
her, could not walk very well. She was very heavy and did not move 
around very well. But that check still gave her the ability to feel 
free to do things on her own.
  Social Security is the most important, the most successful social 
program in the history of the world. There has never been a program 
that has worked as well as Social Security. In addition to helping my 
grandmother as it did, Social Security has other important effects. It 
helps those who are widows.
  I have said on this floor before and I will repeat it, I was in my 
Senate office in the Hart Building, and a woman was there representing 
an agency from Nevada. It was obvious she was very anxious to make her 
flight. I asked: You can make your plane easily; why are you so 
nervous? She had to get home to her children. She proceeded to tell me 
she was a widow. She was a young woman. I asked her what happened to 
her husband. He was murdered. Social Security steps in in situations 
such as that to help widows and orphans. Social Security also helps the 
disabled.
  Social Security is more than a check for my grandmother. It is a 
check for the widow whose husband was murdered. It is a check for 
someone who has a debilitating disease and cannot work. Social Security 
is an important program. Our Social Security program is the envy of the 
rest of the world. It is a program that came about during the Great 
Depression, the brainchild of Franklin Delano Roosevelt, and the 
program has been remarkable.
  Not every Member of this body is committed to protecting Social 
Security. That is a fact. The former majority leader of the Senate, my 
friend, the distinguished Senator from Kansas, Mr. Dole, is proud of 
the fact he voted against Medicare. He acknowledges, as do a number of 
other distinguished Republican leaders, that Social Security and 
Medicare are bad programs.
  I carry in my wallet--I still have them here; I have read them so 
many times and I am not going to do it again--quotes from Republican 
leaders--Gingrich, Armey, Dole, and there are others who are not as 
nearly forthright as these three men who acknowledge their dislike for 
these programs, but we know there are people in the other body who do 
not like these programs. We know there are people in this body, 
Senators who do not like these programs.
  As has already been stated on this floor by the distinguished Senator 
from North Dakota, the former chairman of the Budget Committee, Senator 
Conrad, part of this tax program of the majority is simply to do away 
with programs they cannot defeat head up. They cannot get rid of 
Medicare and Social Security with votes on the Senate floor. So these 
tax programs will starve domestic discretionary spending and cause us 
to cut back and maybe even eliminate, if they get what they want, these 
important programs.
  I repeat, not every Member of this body is committed to protecting 
Social Security. The amendment I have offered will give Members an 
opportunity to show not only seniors, but others, that Social Security 
is a program believed to be important to this country.
  Young people believe in Social Security, and there has been this myth 
propounded by the majority that Social Security is about to go broke. 
Social Security is not about to go broke. We need to do things in the 
outyears, probably around 2040, to make Social Security a better 
program than it would be without our help, but even if we did nothing, 
Social Security recipients would be able to draw 75 to 80 percent of 
their benefits. We need to do something.
  What is being done is exactly the wrong approach. The Republican tax 
bill that is before this Senate--call it growth and opportunity, call 
it whatever you want--is a tax bill that is devastating to the security 
of this country. It is devastating to the Social Security program.
  My amendment is very simple. It says Congress cannot raid Social 
Security surpluses to fund tax cuts on corporate dividends. It is as 
simple as that. The Social Security trust fund is being raided as we 
speak.
  During the Clinton years, we came to the conclusion that it was not 
appropriate to mask the yearly deficit with Social Security surpluses. 
So we had an accurate accounting system. When we talked about there 
being a surplus, there was a real surplus. What we have here is a 
report in the newspapers by the administration of what the deficit is, 
but that deficit is masked because of Social Security surpluses.
  As we speak, there are huge amounts of money coming in to the Social 
Security trust fund, and these moneys are not being spent. There is a 
surplus.
  As the late Senator Moynihan and I, in a dialog in the Senate one 
afternoon, talked about, it should be a Social Security trust fund, not 
a Social Security slush fund.
  It is being used as a slush fund to cover deficits. The deficit this 
year will approach $600 billion. So I believe that we should protect 
Social Security. We used to have debates going on about lockboxes. What 
was a lockbox? A lockbox was a box that the Social Security surpluses 
were in and it could not be raided. We said: You cannot

[[Page 11496]]

have the key to unlock that lockbox for Social Security surpluses. That 
debate is gone. Nobody talks about it anymore because everyone knows 
this administration has not only given the key away to the lockbox but 
thrown away the lockbox. Social Security surpluses are raided every day 
in this country.
  The last 3 years of the Clinton administration there were huge 
surpluses, retiring hundreds of billions of dollars of debt. Now we 
have the direct opposite. We are creating hundreds of billions of 
dollars of debt, and in the next few days we are going to be asked to 
vote upon increasing the national debt ceiling by a trillion dollars, 
approximately, some 980-odd-billion dollars. Round it off to a trillion 
dollars.
  My amendment is about priorities. Are we going to protect Social 
Security or are we going to take the money raised with payroll taxes 
and use it for a tax cut for the elite of this country?
  Every worker pays payroll taxes. Yet every worker will not benefit 
from a corporate dividend tax cut. So it hardly seems right that we 
would support using payroll tax money to fund a tax cut that will 
benefit a select few of the elite of this country.
  A short time ago the county assessor from Washoe County, NV, Reno, 
NV, came to my office. He came for one reason, to tell me: Please, 
Senator, do not do anything to allow this dividend tax cut to go 
through. It will devastate Washoe County. How we build roads, bridges, 
and schools is through floating bonds. That is how we do our assessment 
districts, to put in water systems, curbs and gutters. If the dividend 
tax cut goes through, State and local governments are going to be 
devastated. They will not be able to raise money as they did before.
  So as far as I am concerned, this dividend tax cut is not good for 
our country. In just 6 years, the baby boom generation will begin to 
retire and our senior population will double--almost double from 44 
million to 77 million. We need to make sure that we are prepared to 
meet the obligations we have made to our parents, our grandparents, as 
well as our children and our grandchildren.
  When the Bush administration came into office, there was a projected 
$5.6 trillion 10-year surplus. Some say it was over $7 trillion. Now, 
the Government will have a record of a $1.8 trillion deficit, and maybe 
a $2 trillion deficit, and spend every dollar of the $2.2 trillion 
Social Security surplus over the next 10 years.
  Before Social Security, 1 in 3 older Americans lived in poverty. 
Social Security has reduced that number to 1 in 10. Over the past few 
decades, millions of older Americans have been lifted out of poverty by 
Social Security.
  I believe Social Security is one of the greatest success stories in 
the history of our country. I have already stated that.
  As I said, Social Security is something everyone in this country 
wants to believe is going to continue to be as successful as it has 
been. Yet it is a success story that will be rewritten with a tragic 
ending if we decide to plow ahead with the corporate dividend tax cut 
before we meet our commitment to future generations. If we are going to 
build on the success of the Social Security Program, we cannot allow 
Congress to raid the Social Security surplus in order to fund corporate 
dividend tax cuts. New tax cuts will run up debt, make it harder for 
Social Security to meet its future obligations, and further threaten 
its long-term solvency. Simply, this means future generations of 
seniors can look forward to uncertain retirements. For many, this will 
mean retirements into poverty.
  Social Security is a guarantee of some measure of security in 
retirement. It is not everything, but it is a guarantee of some 
security in retirement. The collapse of corporations like Enron and 
WorldCom underscore the importance of maintaining this guarantee and 
not forcing workers to depend entirely on pensions for their retirement 
savings.
  We have just started to see what is happening to the retirements of 
people who have worked all their lives. For example, in the airline 
industry we have real concern about the future. Are they going to be 
able to maintain their programs so people can draw their benefits? The 
airline industry is only one. We have battled with the steel industry, 
coal miners. We have had all kinds of problems and that is only a small 
portion of what is probably going to happen in the future.
  Not everyone agrees on how to approach Social Security reform. But 
one thing is certain, nearly every single Social Security reform plan 
that has been proposed requires additional resources, not less 
resources. In fact, the plan recommended by the President's own 
commission to strengthen Social Security required over a trillion 
dollars. What has happened to that? The true question is, Where does 
Social Security rank on the page of important issues voted on? Will 
this Senate say that protecting Social Security is more important than 
giving a dividend tax cut to the elite of this country? I hope the 
answer is yes. I hope people vote to put Social Security first. I hope 
every Member in this body agrees we should not raid Social Security 
trust fund dollars so we can offer tax cuts for the elite of this 
country.
  Let's show our seniors and future generations we are serious about 
fulfilling our obligations to them. It is time, and this amendment is 
the time to demonstrate that Social Security is a top priority for this 
Congress and for the Nation.
  A constituent said it best in a recent e-mail that he wrote to me. I 
do not know if that is a proper term for e-mail, but I received it. He 
said:

       Tax cuts are nice . . . but if we can't depend on what the 
     Federal Government promises, then what is left for us to 
     believe in?

  Of course, that was referenced directly to Social Security.
  I hope we will join to do the right thing for the millions of people 
who are on Social Security, the millions of people who will go on 
Social Security, and for those people who recognize that this program 
is the most successful social program in the history of the world.
  The PRESIDING OFFICER. Who yields time?
  Mr. REID. I ask for the yeas and nays on my amendment.
  The PRESIDING OFFICER. Is there a sufficient second? There is not a 
sufficient second.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Madam President, the arguments we hear for various 
amendments are very interesting. It is kind of like the other side is 
going in a circle. In regard to the amendment of the distinguished 
Senate minority whip, the Senator argues against the jobs bill because 
Social Security funds are used.
  Well, let's compare that argument to the arguments Senator Dorgan was 
using. How does the Senator from Nevada think the Dorgan amendment he 
supports is paid for? As the Senator from Montana pointed out, general 
revenues will be used to cover the costs of the Dorgan amendment.
  We are in a deficit situation. Everybody acknowledges that. So where 
does the Senator think these revenues will come from? They will raid 
the Social Security trust fund to pay for the Dorgan amendment.
  Once again, it seems to me the other side is trying to be on three 
sides of a two-sided coin. Maybe if we keep this up long enough with 
their circular arguments they will be supporting the jobs bill when we 
finally get to final passage.
  I yield the floor.
  Mr. REID. Madam President, I personally think we should have a real 
jobs bill. For example, there has been a lot of talk about how many 
jobs this tax bill will create. Let's analyze this.
  There is no dispute that for every $1 billion we spend on public 
works projects--for example, building highways, roads, bridges, dams, 
water systems, sewer systems--for every $1 billion we spend, we create 
47,000 jobs.

[[Page 11497]]

The math is simple. By spending just a few billion dollars compared to 
the multitrillion-dollar tax program that has been recommended, we 
could create many more jobs. Those are direct, high-paying jobs. Every 
$1 billion, 47,000 jobs. Multiply that and it comes out to lots of 
jobs, especially those that would be created indirectly.
  I hope some day we have a real jobs bill, instead of what we are 
talking about, jobs and growth; call a pig a horse all you want, but it 
is still a pig. You can talk all you want about this tax bill and how 
much growth it will create; the fact is it is a program for the elite 
of this country.
  Simple and direct to the point, it is what it is. It is an effort to 
devastate the ability for domestic discretionary spending and cause 
tremendous harm to programs such as Social Security and Medicare.
  I hope when we vote on this measure there will be a resounding yes 
vote. I understand there will be a technicality raised because, under 
this rule, germaneness is a very tight rule and it will require 60 
votes. That is not such a high burden.
  We should be able to have 60 Senators vote to put Social Security 
before giving tax cuts to the elite. My amendment goes only to the 
dividend tax cut. I hope we have support on that. If 60 Senators do not 
agree to support Social Security over a dividend tax cut, I feel very 
sorry for the remainder of the session and what it will do to the 
American people.
  Mr. GRASSLEY. Madam President, I yield such time as he might consume 
to the Senator from Utah to either speak on the pending amendment or to 
speak on the bill.
  Mr. REID. Will the Senator withhold for a brief minute?
  Madam President, there are Senators wondering what will happen this 
afternoon. It is my understanding that the distinguished Senator from 
Iowa will propound a unanimous consent request that we will have a vote 
around 2 p.m.; is that right?
  Mr. GRASSLEY. I am prepared to do that. The answer is, yes, we will 
have a vote at 2 o'clock, but I don't want to propound the unanimous 
consent right now.
  Mr. REID. It is my understanding, though, that we will have a vote, 
try to have a unanimous consent agreement and vote on the Dorgan 
amendment and the Reid amendment, and the Senator from Iowa may raise 
points of order against those.
  Mr. GRASSLEY. I could make the unanimous consent request and then 
raise a point of order later.
  Mr. REID. That is right.
  Mr. GRASSLEY. Madam President, I ask unanimous consent, 
notwithstanding the remaining debate time, it be in order for me to 
raise a point of order against the pending Reid amendment No. 560; 
provided further that Senator Reid then be recognized and ordered to 
move to waive. Finally, I ask consent that the vote in relationship to 
the amendment occur at 2 p.m.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Madam President, I yield such time as the Senator from 
Utah might consume.
  Mr. BENNETT. Madam President, I thank the chairman of the Finance 
Committee for his support.
  We continue to hear about jobs in this debate and the question of 
what creates job. We heard the assistant Democratic leader say for 
every $1 billion we put into the economy, we get 47,000 jobs. I am not 
sure what study produced that number, but if it were absolutely true, 
any time we wanted we could say, let's appropriate another $1 billion 
and get another 47,000 jobs. If we need to put 470,000 people to work, 
appropriate $10 billion and go buy the jobs--as if jobs are used cars 
sitting in a car lot which can be purchased if you have enough money.
  Unfortunately, the economy is not that simple and does not work that 
way. Jobs are created by two things. No. 1, entrepreneurism, risk 
taking, somebody does something. A human activity is required. No. 2, 
accumulated capital. Jobs come because somebody accumulates enough 
capital to fund the risk taking. In many instances the risk that is 
being taken is that the capital will be lost.
  If we look at the creation of jobs through this prism, that it 
requires risk taking and it requires accumulated capital, we see things 
a little differently. It is not a matter of the Federal Government 
spending $1 billion to purchase 47,000 jobs. It is a matter of the 
Federal Government creating an atmosphere in which those who are 
willing to risk their accumulated capital--or in the case of borrowing, 
somebody else's capital--and produce the jobs that come out of that 
activity.
  If I may be personal, I will outline my own experience as an 
entrepreneur in risking some accumulated capital and creating some 
jobs. I was given the award as Entrepreneur of the Year by Inc Magazine 
in 1989 for the Rocky Mountain area. Frankly, I had not thought of 
myself as an entrepreneur prior to that time when I received the award. 
I sat down and said to myself, Self, let's draw up a little tally of 
whether or not I have, indeed, been involved in entrepreneurial 
activities in my life. Because I had not kept track before, I did that 
inventory. I was a little surprised at what I found. I had been 
involved in 11 different startup or turnaround activities. That is, 11 
different attempts to create new economic activity where none had been 
before. Then I tallied up the record of success.
  Four of these efforts failed outright. The money represented by the 
accumulated capital being risked in our attempt to create new jobs did 
not work. The money was all lost. Four of these efforts were sold 
without having succeeded or failed. In other words, we started it, we 
got it going, we decided to bail out before we found out whether or not 
we were going to make it, and someone else took us out. We neither made 
money nor lost money. We lost money in the sense of our opportunities 
in the period of time we were working on these efforts was gone, but at 
least we did not lose the accumulated capital with which we went into 
the venture.
  That left only 3 out of the 11 that had been successful. 
Interestingly enough, enough money was made out of those three to cover 
all of the expense of the other eight. Enough jobs were created out of 
those three to compensate for everything that went down the drain with 
the other eight. I decided, having done this 11 times in my life, I 
guess I did deserve to be called an entrepreneur, a risk taker.
  Now, I will focus on one of those companies with which I was 
involved, to make the point that cannot be stressed too often or too 
strongly in this debate. I was recruited to be the chief executive 
officer of a company that at the time had four full-time employees. It 
was doing somewhere between $250,000 and $300,000 per year. Frankly, 
its long-term prospects were not all that bright, if you looked solely 
at where it was. It was not making any money. It was just barely able 
to support those four full-time employees, and it probably couldn't 
have afforded me.
  Indeed, when I became the CEO, I was part-time and I was paid a 
consulting fee rather than a CEO's salary because the company couldn't 
handle that.
  That was in 1984. The reason I point out that year is because that is 
the year many of our friends who are discussing this bill in 
apocalyptic terms would describe as part of the Decade of Greed. The 
Decade of Greed, as that phrase is used--usually in the Democratic 
Party and on the editorial page of the New York Times--refers to that 
period of time when Ronald Reagan was President of the United States 
and the top marginal tax rate was ultimately brought down to 28 
percent.
  Think of it, how greedy rich Americans were that they demanded, and 
Ronald Reagan and the Republicans responded, a tax rate of 28 percent. 
Why, that is terrible. We should clearly have moved away from that, and 
we have. The tax increase that occurred under President Bush the first, 
and then the tax increase that occurred under President Clinton, has 
brought us up to the rates they now insist are right and proper, an 
effective marginal tax rate--when combined with the Medicare tax--of 42 
percent on the Nation's highest paying taxpayers.

[[Page 11498]]

  They say 42 percent is about right; 42 percent shows the rich are 
paying their fair share. They say 28 percent is giving in to the 
demands of the greedy and isn't life much better when the effective 
rate is 42 percent.
  Now they say President Bush the second is trying to bring us back 
down into the area of the Decade of Greed. He is not going as far as 28 
percent, but he is going to bring us down to 35 or 32, depending on the 
brackets. He is going to bring us down away from the 42 and back toward 
the attitudes of the Decade of Greed.
  So, as I say, back to my own experience. We were building that 
business in the Decade of Greed. I can assure you, no one in our 
company was earning a six-figure salary. We couldn't afford to pay that 
on the amount of revenue we got. But we had high hopes. We were taking 
big risks. I signed a guarantee on the bank loan that would have cost 
me my house if we had not been able to pay it, and every other 
shareholder in the business did the same thing. We were on the line. At 
that point, that was the only real asset I owned. But I signed it 
because I believed we could make it go.
  We were on the line then, for losing our houses--talk about taking a 
risk--in order to get the accumulated capital that we needed to build 
that business in the form of a business loan. It was $75,000.
  Madam President, $75,000 doesn't sound like a lot of money, but when 
you are going to lose your house, $75,000 is a huge amount of money. It 
was added to $75,000 that had been there before I showed up, so the 
total debt of the company was $150,000, and they were going to take 
after me to take $150,000 out of my house and I didn't have $150,000 in 
equity in the house. We had to add it all up with everybody else's 
houses to get to the $150,000, and then the amount on top that the bank 
wanted.
  We were successful. I will not bore the Senate with the details of 
what happened, but we were successful. Madam President, 6\1/2\ years 
later, when I stepped down as the CEO of that company, prior to my 
decision to run for the Senate, we were doing $80 million a year.
  The debt had grown from the original $75,000 to $7.5 million, but we 
didn't care about the debt because we had more than enough money to 
cover it. As a percentage of our sales, as a percentage of our profits, 
the debt was now de minimis. I make that point because the argument has 
been made on the floor today that the debt of the United States is 
going to go from $6 trillion to $12 trillion and isn't that awful?
  The answer is, yes; that is awful if the U.S. economy is not going to 
grow. Then the debt is going to double. But if the U.S. economy is 
going to double in size in the period that the debt doubles in size, 
the debt will be no more of a problem in 10 years than it is now. And 
now the debt as a percentage of the economy is lower in the United 
States than it is in any other industrialized nation. The other 
countries of the world would kill to get the kind of debt-to-GDP 
relationship we have already. So I am not alarmed by the statistic that 
has been quoted on the other side because I have lived with it 
personally.
  I have seen the debt of the company over which I presided go from 
$75,000 to $7.5 million, and I recognize that the $7.5 million was a 
benign figure whereas the $75,000 was threatening to shut us down 
because the sales of the company had gone from $300,000 to $80 million. 
The margins had gone from zero--at $300,000 we weren't making any 
money--to 20 percent before taxes, so we had an aftertax margin of 
about 10 percent. Twenty percent of $80 million is $16 million. We had 
a $16 million pretax profit, which makes it very easy to service a $7.5 
million debt. So let's not talk about the debt figures in the aggregate 
and scare everybody with relationships that make no sense.
  However, back to the point of the marginal tax rates. As we built 
that business from $300,000 a year to $80 million, we did it during the 
Decade of Greed when the top marginal tax rate was 28 percent. That 
meant of every pretax dollar we earned, we got to keep 72 cents of it 
to finance the growth of the business. We went from 4 full-time 
employees to over 700 in that period. We created 700 new jobs, and we 
did it without a dime of Federal money. Nobody walked out and said: 
Here is your portion of the $1 billion we are going to use to purchase 
47,000 jobs.
  The way the Federal Government helped us was they said to us, for 
every pretax dollar you earn, you get to keep 72 cents. We funded the 
growth of that company, from 4 employees to 700 employees, out of the 
earnings of the company.
  Just for a moment, look at what would happen if we had founded that 
in 1994 instead of 1984. The Federal Government would have said to us, 
in 1994: For every pretax dollar you earn, you get to keep 58 cents 
because we are going to take 42 cents. The difference between 58 cents 
and 72 cents would have made, for that company, the difference between 
rapid growth and stagnation. I am not saying we couldn't have made it 
under the effective tax rate of 1994, but I am saying, with great 
certainty, that it would have been much more difficult and the growth, 
even if it had come, would have been much slower. In other words, the 
number of jobs created would have been substantially less with a 
marginal tax rate of 42 percent than it was with a marginal tax rate of 
28 percent.
  In the spirit of full disclosure I should point out that once I left 
the company, it then grew from 700 jobs to 4,000, and I have to say 
there is a direct cause and effect relationship. Getting me out of 
there made it grow substantially faster.
  The point of focusing so firmly on a single firm and the experience 
is this: We were an S corporation. That is a tax designation which 
means that the profits of the company flowed through the company to the 
personal tax returns of the investors. I would show at some point in 
that situation a private tax return--a 1040--of over $1 million of 
personal income.
  You can say: Good Heavens, he is the richest man around. He is 
earning $1 million a year. No. I was earning my salary, which was 
$140,000. Then I was reporting my share of the company's income so that 
the income didn't get taxed twice. If the company had paid taxes at the 
company level, and then had given me my share of the income, the 
company would have paid taxes and I would have paid taxes.
  Does this sound familiar? That is what this debate is about with 
respect to the taxation of dividends. We could have avoided taxation of 
dividends because we had a small enough number of shareholders to 
qualify as an S corporation as opposed to the C, referring to the 
chapters in the Tax Code that describe all of this. But I was not 
taking home $1 million a year. I was not taking home after tax $1 
million a year. All the company gave me of the million dollars that the 
company put on my personal tax return was 28 percent; in other words, 
enough to pay the taxes that were being reported on my form. But the 
company kept the other 72 cents to grow the business.
  That was true of every other shareholder in the company. We had five 
shareholders, every one of whom was reporting over $1 million a year in 
personal income but who were in fact receiving only their salaries and 
giving back to the company 72 cents out of every dollar they were 
reportedly receiving. That is how we were able to grow the company.
  That same pattern still exists even though it was badly damaged when 
we went to a 42-percent marginal tax rate in 1993. There are still S 
corporations and sole proprietorships and partnerships where the owners 
of the company receive a tax form saying they have $1 million or 
whatever their share of the profit of the enterprise might be, but they 
give back everything except that which is necessary to pay the taxes.
  That means there are small businessmen who have tax returns that very 
quickly get into the top marginal rate. They are small businessmen who 
are struggling, and increasingly small business women who are 
struggling to make the business grow, only being

[[Page 11499]]

able to keep 58 cents out of every dollar they earn. They may report 
tax returns that put them in the top 1 percent of taxpayers, but they 
are not Michael Jordan or Donald Trump. They are doing their best to 
get along with a little business that employs 5 or 6 people and the 
business is earning $200,000 plus the salary they pay themselves. They 
need that $200,000 desperately back in the business to keep it growing. 
But Uncle Sam comes along and says: The business may be earning 
$200,000--that shows up on your personal tax return--we are going to 
take $84,000 of that $200,000 in taxes. Good luck making the business 
grow.
  If there are entrepreneurs good enough and working hard enough, they 
can make the business grow, but they have to delay hiring that extra 
person because they are paying $84,000 out of the $200,000 instead of 
paying at the 28 percent that we paid when we were making our business 
grow.
  When we talk about, the rich don't need this tax cut, the rich don't 
need to have their effective rate rolled back from 42 percent to, say, 
35 percent, and Donald Trump doesn't need that, let's make him pay his 
fair share, or Michael Jordan doesn't need that, let's make him pay his 
fair share, we are ignoring the fact that it is the small businessman 
and the small businesswoman hiring the extra employee, be it in Alaska, 
Utah, or Colorado, or wherever it is, who will drive the opportunity 
for new jobs to be created all over the country.
  Most of the new job creation in this country comes from small 
business. That is a truth that has been repeated over and over on this 
floor. Everybody says they are in favor of small business. Everybody, 
regardless of where they sit on the floor, says small business is the 
backbone of the American economy. They are right.
  One of the reasons other industrialized countries, such as Germany, 
France, Japan, and others, have been unable to see their economies grow 
at the rate ours does is that they have been unable to see their job 
growth come anywhere close to the rate of ours because they don't have 
small business. They don't have anything like the network of small 
business and entrepreneurial activity that is the hallmark of the 
American economy.
  It is right and proper for us to come to the floor regardless of 
party and tell everybody how much we love small business. But it is 
deceptive to say that this is a tax cut for the Michael Jordans of the 
world when we realize that the primary economic activity of rolling 
back the top marginal rates will be for the small business men and 
women of this country, if they could ever get back to the level of 
effective tax rates during the decade of greed, who could create the 
kind of jobs that were created in that period, could create the kind of 
momentum that was created in that period.
  Back to my company, it was founded in 1984. They say when I stepped 
down as the CEO in 1991, we had gone from 4 employees to 700, and we 
had created the momentum that produced that growth in that period where 
the top marginal rate was 28 percent. That momentum carried forward 
into the 1990s. That carried forward to the point where they eventually 
got to 4,000 jobs instead of 700.
  We hear in this Congress that some of us in this Congress took credit 
for that. Some in this Congress looked at that and said: The Clinton 
increase to an effective rate of 42 percent has created jobs. This 
company went from 700 to 4,000; that was created by President Clinton; 
that was created in the Clinton administration. I submit to you it was 
created in the Decade of Greed. It was created when Ronald Reagan 
helped the Congress get the effective rate down to 28 percent when we 
laid the groundwork and sowed the seeds for the kind of explosive 
growth for which the harvest took place in the 1990s.
  I submit that by establishing a top marginal rate of 42 percent in 
the 1990s, when that momentum of growth was going on coming out of the 
1980s, we are now harvesting an opposite kind of situation. Small 
business faced with an effective tax rate of 42 percent, where they can 
only keep 58 cents out of every pretax dollar to help grow the 
business, is growing more slowly than they were. Just as the excitement 
of the 1990s was harvest of the low tax period of the 1980s, now some 
of the problem in 2000-plus is the harvest of the high tax rates of the 
1990s.
  What we have to learn around here is that there is a lag in fiscal 
policy. People ask me, What is the difference between fiscal policy and 
monetary policy? Very simply, monetary policy is what the Federal 
Reserve does about the monetary supply, and fiscal policy is what the 
Congress does about taxes.
  We can pass a tax bill and say, We handled this problem. But the 
reality is what we have done in a tax bill either for good or ill is 
sow some seed that will be harvested later on.
  As we look back over what was done in 2001, we begin to understand 
some of the things about the sowing of seeds. In 2001, we had a 
balanced tax cut--balanced politically, not economically. The political 
balance said: We have to put some money in people's hands immediately 
because there are those who insist that is the thing that will cause 
the economy to grow. So let's put money in customers' hands right away. 
That was the genesis of the $300-per-person rebate.
  Then there are those who said: No, we have to bring down the top 
marginal tax rate, for all of the reasons I have been discussing. For 
small business to create new jobs, for all those S corporations that 
are reporting on their personal tax returns the corporate income that 
is placed there, we have to see to it those people get back down into 
the level where they can create jobs at the same energy and same rate 
in which they were creating jobs in the late 1980s.
  All right. What have we learned in the 3 years since we passed the 
2001 tax cut? We learned that amount of money that went out in the 
rebate had little or no impact on creating jobs. All of us took credit 
for it. We stood out in front of the Capitol, we waved the $300 check, 
and we had our pictures taken. We had people come up to us in airports 
and shopping malls and say: Thank you, Senator. I got my $300. That is 
terrific. But the economic impact of that, looking back on it, was 
negligible. Why?
  Didn't you want all those people to go out and spend that money? Yes. 
And a very large percentage of them did not. What do you mean? Did they 
put it in their mattress? No. They paid down their Visa card. They paid 
down their MasterCard. They lowered their own personal amount of debt, 
which was a prudent thing for them to do. But that did not produce very 
much economic activity.
  Also, if you take the total amount of money involved in that rebate, 
and then compare it to an economy of $11 trillion, you realize we were 
talking about a tiny percentage. There was no leverage in that amount 
of money. And while it was a good thing to do, and it helped a lot of 
people--and I am glad they got their credit card debt down by an extra 
$300--it did not produce any jobs. And that is what we are talking 
about.
  However, simply the promise that the top marginal tax rate would come 
down did, in fact, cause some small businesspeople to say: All right, 
the effect is not immediate, the relief is not here right now, but I 
can see it coming, and I can plan on it.
  The most important quality a small business man or woman has to have 
in order to succeed in business is the ability to somehow, some way 
correctly see the future because every business enterprise is involved 
in selling in the future. No business enterprise survives on the basis 
of what it did in the past. It is all tied to what it can see in the 
future.
  So as these small business men and women looked out into the future, 
they said: This 42-percent effective rate that came in with President 
Clinton is going to start to come down. And as I make my plans for what 
I will do, as I try to invest and I try to create jobs in the future, I 
can plan on that coming down. And the mere anticipation and sense of 
certainty that came out of being able to plan for a reduction in the 
amount of money that Uncle Sam

[[Page 11500]]

would take out of their businesses caused some beginning stirrings in 
the small business community toward the creation of new jobs. But those 
stirrings were not enough.
  We are in recovery, but the recovery is far from robust. Chairman 
Greenspan calls it a ``soft patch.'' And the soft patch, unfortunately, 
has gone on longer than he or any of the rest of us would like.
  So how do we get out of this soft patch? The most important thing we 
could do is say to these small business men and women: Guess what. You 
were planning on this reduction in the amount of money Uncle Sam takes 
out of your entrepreneurial activity in a few years. We are going to 
make that reduction effective right now. As a matter of fact, we are 
going to make it effective January 1, 2003.
  All right. Now, as I make my plans as a small businessman, I can say: 
I am going to be able to keep more than 58 cents. I will be able to 
keep 60 cents, 62 cents, maybe even 65 cents. Now I can plan on having 
that much more money coming out of my enterprise. I can go hire that 
extra person. I can go buy that extra piece of machinery, which means 
that the manufacturer of the machinery can hire an extra person. Now 
that I see that marginal rate coming down, and coming down more rapidly 
than was promised in 2001, I can react accordingly. And now we can 
start to see the small business job machine get cranked up.
  We all need to understand this about economics: Economics turns on 
incentives. No one will invest in an enterprise where the Government 
would take 100 percent of the profits because there is no incentive. 
You say, all right, the Government will take only 99 percent of the 
profits, and there is still no incentive. So the Government says, all 
right, we will take 80 percent of the profits. Well, maybe you begin to 
get my interest now. The Government will only take 50 percent of the 
profits. All right, now there is an incentive for me to invest.
  In the 1980s, the Government said to small business, we will only 
take 28 percent of the profits, and you saw a period of job growth, job 
creation, and economic expansion unparalleled in our history. And, 
based on my own experience, I believe it was an impetus and an inertia 
of job creation that carried over into the 1990s, for which the 
Congresses and the President in the 1990s took credit.
  But the inertia, as I say, has changed because the incentive got a 
little less in 1991 when President Bush went to Andrews Air Force Base 
and said: Let's tell the small business man and woman we are going to 
take more of their pretax money away from them. And there was a sense: 
Well, we better not buy that new piece of machinery. We better not hire 
that new person. We are going to have a problem.
  And then President Clinton said: Let's tell the small business man 
and woman we are going to take even more in 1993, and bring the top 
marginal tax rate up to the level that I have described.
  You sow the seeds of incentive, you reap the fruits. If the incentive 
is to invest, if the incentive is to hire, if the incentive is to take 
risk, you get the benefits of higher economic activity and higher job 
creation. If you sow the seeds of negative incentive that says the 
Federal Government will take more of your money than it has been, you 
reap the rewards of higher unemployment and slower economic activity.
  It always takes time. It never happens, in fiscal policy, overnight. 
But I submit we are now in a position where we need to move clearly and 
firmly back toward the time when the incentive was to invest, when the 
incentive was to take risk, when the incentive was to build a small 
business.
  I think it disingenuous, therefore, to attack all of the reduction in 
the marginal tax rate as if every single tax return that shows income 
being taxed at the top marginal tax rate is coming from a Michael 
Jordan or a Bill Gates or a Donald Trump.
  It ignores the fact that the majority--I don't have the exact 
statistic; I have heard it as high as two-thirds, but it varies from 
time to time--of the tax returns filed in the top marginal tax rate are 
tax returns with small business income on them, tax returns such as the 
one I described for myself when I had my salary on there and then I had 
an extra million dollars as my share of the company's profits 
transferred on to my tax return, none of which money I saw, none of 
which money I got because all of which had to go back to the company to 
help it grow and help it create jobs.
  Let us understand that this is not a debate about whether Bill Gates 
should get a tax cut. This is a debate about whether small businessmen 
and small businesswomen all across this country should get an incentive 
to hire, an incentive to invest, an incentive to build for the future, 
whether to plant seeds of growth which will yield a significant harvest 
for us later on. I believe the sooner we can plant those seeds, the 
better off we will be.
  I believe the lesson of the tax cut of 2001 tells us that what we did 
there, however salutory, was not good enough and not strong enough, 
that it has not gotten us through the soft patch that it was supposed 
to help with, and we need to get on with this.
  For that reason, I will support a cut in the top marginal tax rate, 
and I will rejoice in the years to come as new jobs are created, new 
economic activity occurs, and, yes, new tax revenues start to roll in 
to the Federal Government. At that time whoever is in the Senate will 
take credit for those tax revenues, whoever is in the Senate will take 
credit for the good economy that we have. And whoever is managing 
Presidential campaigns will say it was President this or President that 
who was personally responsible for it.
  We should understand that the economy is much more sophisticated than 
that. We should do what we can to let the economy do its work by 
creating the incentives that will produce the two things that produce 
jobs: risk taking and accumulated capital. This bill moves in the 
direction of rewarding both.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Hagel). The Senator from Nevada.
  Mr. REID. Mr. President, I have the deepest affection for my friend 
from Utah. He lives in a different political world than I do. He just 
did a stunning job in his debate, but he was debating himself. The 
matter pending before the Senate is whether we should have tax cuts for 
the elite--that is, dividend tax cuts--or whether those moneys should 
be kept for Social Security. That seems pretty simple to me.
  I did mention, and the Senator from Utah responded briefly, that my 
proposal to have public works projects is not in keeping with his idea 
of how to create jobs. The only way to create jobs, he said, is through 
entrepreneurship.
  Well, Frainer Construction of Nevada, Helms Construction of Nevada, 
Granite Construction, Las Vegas Paving--large by Nevada standards--are 
companies that believe in entrepreneurship. Every road they build, 
every water project they work on, every bridge they repair is 
entrepreneurship. What is the difference in these huge tax cuts that go 
to the elite, that create no jobs, as I will shortly show? If past 
experience means anything, I think we are better off directly doing 
something.
  My friend from Utah has acknowledged that there is not going to be 
anything happening in the near future. He is talking about future 
Presidents taking credit, future Congresses. He has acknowledged that 
nothing is going to happen in the near term with this foolish tax cut 
that has been proposed.
  All this talk about growth and jobs, as this bill is intended to do, 
simply will not work. I direct my friend to a few people on this chart. 
These are the economists who support the Bush tax plan. You can see 
them on the left hand side, few in number. The economists opposing the 
Bush tax plan are 450 in number. Those who support the plan are 13 in 
number. Those opposing are 10 people who have won Nobel Prizes for 
their work. We have, in fact, professors from the University of Utah, 
Gail Blattenberger, Samuel Jameson, David Kiefer, Thomas Maloney, James 
M. Rock, Norman Waitzman, all distinguished scholars from Utah who are 
on

[[Page 11501]]

this chart who say this tax plan the President has proposed is not 
good.
  The question before the body--the vote will take place at 2--is 
whether this body will vote to have a tax cut for the elite as it 
relates to dividends or whether Senators will vote to protect Social 
Security. The Social Security debate has left this body since 
Republicans became the party that dwells in the White House. We used to 
talk about a lockbox. Not only the key has been lost but the whole 
lockbox has been thrown someplace we can't find. Social Security is not 
part of the equation anymore. Suddenly deficits don't matter.
  I say to my distinguished friend who was a courageous soldier for the 
United States, somebody who was valiant in battle and who I have the 
greatest respect for as a legislator, I want to bring to his attention 
some of the problems that exist with this new philosophy that deficits 
don't matter.
  I refer the distinguished Presiding Officer to a statement he made on 
the 6th of February 1997, in the Omaha World Herald:

       The real threat to Social Security is the national debt. If 
     we don't act to balance the budget and stop adding to the 
     debt, then we are truly placing the future of Social Security 
     in jeopardy.

  I ask my friend, when he comes down to this table in 40 minutes and 
votes, to remember what he said in 1997. This is clearly an indication 
that we are driving this country into a terribly difficult situation as 
it relates to the deficit.
  Deficits don't matter? I hope they do. But apparently there has been 
a new philosophy from the other side of the aisle.
  We are going to be asked in a few days to increase the national debt 
by almost $1 trillion. I hope people will be more concerned about the 
debt. I agree with the statement made by the Senator from Nebraska.
  I believed the chairman of the Federal Reserve System when he told us 
in the Appropriations Committee that the most important thing we could 
do is get rid of the deficit. We did that. We took him at his word. As 
a result of that, we had years where we paid down the debt to the tune 
of $600 billion.
  When the Bush administration took office, they promised to eliminate 
the national debt and spur the economy with a massive tax cut for the 
elite. I didn't vote for that tax cut because I thought it would do 
exactly what it has done. I have been through the years in the past 
when we were told that the trickle down theory was a great one and 
would help the country economically. It didn't then, and it didn't 
during the Bush 2 program. This plan has failed the vast majority of 
people in America who are worse off than 2 years ago when this man took 
office.
  Since this administration took office, the economy has lost almost 3 
million private sector jobs. The economy has shed 500,000 jobs in the 
past 3 months alone. About 9 million people are looking for work. The 
unemployment rate is 6 percent. The number of unemployed workers has 
increased 47 percent since the President took office. A growing share 
of the unemployed workers are long-term unemployed. In February, nearly 
2 million people had been unemployed for 6 months, which is triple what 
it was before this man became President. The Bush administration is on 
track to post the worst job creation record of any administration in 
almost six decades. This tax cut raids Social Security, and that is 
what this amendment is all about.
  I have been here long enough to know that the majority are not very 
independent. I believe--and I hope my belief is unfounded--that come 2 
o'clock people will march down here and vote against this amendment. 
They will vote that it is not germane. It takes 60 votes. We know the 
rules of germaneness. They will march down here just like lemmings over 
the cliff and throw Social Security to the wind, I am sorry to say, but 
I think that is what is going to happen.
  Even without the new tax break for the elite, this Government will 
spend every dollar of the $2 trillion Social Security surplus over the 
next 10 years--even without this. So with this, it will be done more 
quickly.
  The real reason for the deficit is the tax cut--the tax cut 
previously made, which I voted against. It is not easy to vote against 
tax cuts. People love them. It will be used against me in my campaign. 
That is the way it is.
  The Congressional Budget Office says that only 14 percent of the 
deficit is as a result of homeland security and defense spending. Over 
10 years, Federal spending on interest on the public debt will amount 
to $2.4 trillion. Of course, every dollar directed toward interest is 
diverted from Social Security. It is diverted from Medicare, education, 
defense, and homeland security.
  The additional interest burden on a family of four will be $30,000. 
That is the additional burden. State and local governments are in the 
midst of the worst fiscal crisis since World War II. Last month, the 
cumulative 2004 budget shortfall was about $54 billion. A billion of 
that is in the small State of Nevada. State and local governments, 
which bear primary responsibility for most education, health care, and 
first responder expenditures, will bear the brunt of the consequences 
of this irresponsible tax plan.
  The second phase gets even worse. Sixteen States have cut education 
programs in elementary schools. In Nevada, the Clark County School 
District is considering going to a 4-day week for kids because it is 
having trouble paying for a 5-day week. Twenty States have cut health 
care programs, even though we are living in a heightened risk of 
bioterrorism and SARS. It makes no sense to just chop to pieces our 
State public health budgets. But that is a consequence of what is 
happening in this administration.
  What is wrong with this plan we are being asked to approve? It fails 
to help working people, for one thing. Our top priority is to create 
jobs. I will say it again, Mr. President--creating jobs. The moneys 
that would be given in these public works projects, which are not new 
jobs--I bet in the States of Utah and Nebraska there are many projects 
on the drawing board that simply cannot be completed because there is 
no money to do it--roads, water and sewer projects, bridges, dams, all 
those activities. They are on the drawing boards now and would go 
forward tomorrow if there were money to do it.
  As I indicated before, for every billion dollars spent, 40,000 jobs 
are created. Those are direct jobs, all high-paying jobs. These people 
would buy refrigerators, carpets, cars, all kinds of consumer items. 
There are a lot of indirect jobs as a result. The Republican plan fails 
to help working people. It fails to preserve Social Security. It offers 
no relief to the 9 million Americans who want to work but cannot find a 
job.
  People on the other side refer to this as a ``jobs and growth 
package.'' As I said earlier today, you can call a pig a horse, but it 
doesn't matter how many times you call a pig a horse, it is still a 
pig. Or you can call a horse a pig; it doesn't matter; that animal is 
still a horse. You can call this program jobs and growth all you want, 
but it doesn't make it a jobs and growth program. Calling this a jobs 
and growth program--there could not be anything further from the truth.
  The CBO, the White House Counsel of Economic Advisers, and the 
private sector economists who helped the President analyze this 
proposal have stated that his tax break plan won't create jobs and will 
weaken the long-term health of this country. In fact, some economists 
have forecast that the plan will cause an annual .25 percent drop in 
GDP and will result in a loss of almost a million jobs in the next 10 
years. That is in addition to the jobs that have already been lost. 
There are the 400 economists there on the chart. And I am sure there 
would be more if we spent a little extra time. So 400 economists, 
including 10 Nobel laureate prizewinners, signed a statement warning 
that the President's plan would do long-term harm to the economy, 
adding to the Nation's projected deficits.
  Mr. President, you were not standing there alone saying deficits 
matter. Some of your colleagues also felt the same. A number of very 
distinguished colleagues felt the same. For example, somebody for whom 
I have the greatest

[[Page 11502]]

respect, Trent Lott--we worked together on the floor very closely for 4 
years--said on the 27th day of January, 2002:

       I think the most important thing really does involve the 
     budget--keeping a balanced budget, not dipping into Social 
     Security, and continuing to reduce the national debt.

  He gave that quote to the Chattanooga Free Press. What has changed? 
Nothing has changed in a little over a year. Senator Judd Gregg--here 
is a man who has wide-ranging experience. He served in the House of 
Representatives, he was a Governor, and now he is a Senator. He said to 
the New Hampshire Sun News on the first day of February 1998:

       As long as we have a Republican Congress, we are going to 
     have a balanced budget. And if we can get a Republican 
     President, we can start paying down the debt on the Federal 
     Government.

  What has happened to that? Do deficits not matter anymore? Obviously, 
they don't. We are going to be asked to increase the national debt a 
trillion dollars in a few days.
  Mr. DURBIN. Will the Senator yield for a question?
  Mr. REID. I am happy to yield to the Senator from Illinois for a 
question.
  Mr. DURBIN. I ask the Senator from Nevada, it is not just a question 
of the national debt--which is bad enough--that has to be repaid, and 
interest has to be paid on it, not just by us but by our children and 
grandchildren, but is it not a fact that the money we are putting into 
the President's program for tax breaks for elite investors in America 
is coming out of the Social Security trust fund, out of the Medicare 
trust fund? These are trust funds that are going to struggle with more 
and more elderly Americans needing their help, and we are going to give 
a tax break to wealthy people at the expense of Social Security and 
Medicare. Is that not a part of the problem as well?
  Mr. REID. Mr. President, I say to my friend in answer to his 
question, the Senator is absolutely right. What is happening boggles my 
mind. I am certainly not a genius, but I did OK in school, and I can 
understand some basic facts. How can people, for whom I have the 
highest respect, say one thing about deficits mattering and Social 
Security mattering and vote for this awful program?
  I say to my friend, the distinguished Senator from Illinois, what I 
said earlier today. I believe this is all part of a program to do away 
with some of these programs in which we really believe. I repeated in 
different words what the Senator said today in responding to a 
statement made by the distinguished chairman of the Finance Committee. 
I said the same thing to the distinguished junior Senator from Utah. 
They live in a different world than I live in. It is as simple as that. 
They live in a different world. They care about the trickle down 
theory. I do not. I do not think it has worked. Over the years I have 
seen it trying to work where you give money to the elite of this 
country. It does not trickle down.
  We have significant problems in the State of Nevada. We are battling 
budget problems in the little State of Nevada, and the Republican 
Governor in the State of Nevada--I am sure it was very difficult for 
him--because there is no alternative because of the unfunded mandates 
the Federal Government passed on to the State of Nevada, is trying to 
find ways to create new revenues. I say the word, the Republican 
Governor of the State of Nevada has asked for new taxes.
  Mr. DURBIN. Mr. President, if I may ask the Senator from Nevada, if 
the argument has been made by the Republicans that if we give the 
President another tax cut for elite investors and wealthy people that 
this will somehow create jobs, is it not fair for us to look back and 
see how successful the President was the last time he made this 
promise?
  If I recall correctly, we gave this President a $1 trillion--some say 
$2 trillion--tax cut just 2 years ago. If I am not mistaken, we have 
lost jobs. Under this Bush administration, we have lost somewhere in 
the range of 2 million jobs. In my State of Illinois, under the Bush 
administration, we have lost 191,000 jobs, 20,000 manufacturing jobs in 
the last 12 months.
  If the President's plan of tax cuts for wealthy people is exactly the 
medicine to cure our problems, how do we explain the fact that the 
economy is still so sick 2 years after the President tried this tax cut 
the first time?
  Mr. REID. I respond to my friend, I voted against the first tax cut. 
It was not an easy vote. Just on general principle you want to vote for 
tax cuts. I believe the payroll taxes are something most people pay 
much more than they do in income taxes. I would like to figure out some 
way to give them a break from payroll taxes. I think there are ways we 
can reduce taxes.
  At first glance, you do not want to vote against a tax cut, but I had 
an inkling, I had a belief, I had a conviction that doing what was done 
with the first big tax cut would throw this country into an economic 
downturn, and that is what it has done.
  When the Bush administration took office, they promised to eliminate 
the national debt and spur the economy with a massive tax cut for the 
wealthy. They failed to deliver. Most people are not better off; they 
are worse off than they were 2 years ago, I say to my friend.
  Mr. BENNETT. Will the Senator yield for a question?
  Mr. REID. I will be happy to yield for a question from my friend from 
Utah without losing my right to the floor.
  Mr. BENNETT. I ask the Senator, if he is interested, if I gave him 
the names of another 400 economists who were in favor of the Bush tax 
cut if he would put them on his chart? Such names are available.
  Mr. REID. I respond to my friend from Utah, I borrowed this chart 
from somebody else. I am not much on this chart business, but I know 
that if there are that many who favor the tax cut, you should do your 
own chart.
  Mr. BENNETT. I further ask, Mr. President, a question of the Senator 
from Nevada.
  Mr. REID. I yield for a question. I will do that.
  Mr. BENNETT. Reference has been made by the Senator from Illinois to 
the effect of a $2 trillion tax cut. Is it not true that what we are 
asking for in this bill is that the effect of that tax cut be made now 
because the effects of that tax cut, as you get up to the number of $2 
trillion, was stretched out over a number of years and, in fact, the 
marginal tax rate cut that has actually occurred now, to which the 
Senator from Illinois referred, has been minimal and we are trying to 
accelerate the effect?
  It does not seem to me fair to say it failed and, by the way, we have 
not had any effect from it. The reason we have not had the effect is 
because they have not been put into effect.
  Mr. REID. I will be happy to respond to the question. First, it seems 
a little unusual to me, the huge tax cuts written by the Republicans 
and passed virtually by Republican votes, with very few Democratic 
votes, now they are saying the tax cut was not big enough and not quick 
enough. So now what we are going to do is come back with a bigger tax 
cut and I guess they say it is not quick enough.
  The majority has written both tax bills. I voted against the first 
tax cut, and I will vote against the second tax cut because I believe 
the tax cut certainly is not going to help Social Security. Remember, 
the issue before the Senate today, and we are going to vote on it at 2 
o'clock, is whether this body should give tax cuts to the elite of this 
country in the form of reducing the tax on corporate dividends or 
whether that money should be put back in Social Security. That is the 
issue before the Senate. It is a very simple issue.
  I have talked about what I think is wrong with the plan in general. 
Remember, my statement has been directed toward what I feel is a very 
pertinent question: Does this body, the Senate, want to preserve Social 
Security or destroy Social Security? The vote at 2 o'clock will take 
that into consideration.
  I believe when we had discussions on the Senate floor dealing with 
lockboxes and keys to lockboxes that it was a good discussion because I 
felt very strongly that we should do something to preserve Social 
Security.

[[Page 11503]]

  It is interesting to me that there was a constitutional amendment 
offered on the Senate floor to balance the budget. It was offered by 
Republicans. I offered a counter amendment. I said that is a great 
idea, let's do it, but we are going to do it without using the Social 
Security surpluses. That was not enough for my friends on the other 
side of the aisle. My amendment received 44 votes. I was six votes 
short. I wanted a constitutional amendment to balance the budget but 
not use the surpluses of Social Security. The majority disagreed. They 
wanted to use Social Security surpluses to balance the budget. That is 
unfair. I have no regret having done that.
  Mr. DURBIN. Will the Senator yield?
  Mr. REID. I yield to my friend for a question.
  Mr. DURBIN. I would like to speak for a moment to this. Is it not a 
fact that we are only a few years away from the baby boom generation 
showing up for Social Security? Isn't it the height of irresponsibility 
for us to be dragging this Nation deeper in deficit at the expense of 
the Social Security trust fund when we know that parents and 
grandparents are going to be asking for the Social Security benefits 
which they paid for a lifetime? Isn't the same true when it comes to 
Medicare, that these same senior citizens will need Medicare to make 
sure they are healthy, independent, and lead strong lives as long as 
possible, and what we are doing is jeopardizing Social Security and 
Medicare to provide tax breaks for the elite investors in America?
  How in the world can you rationalize that once we have a promise to a 
generation that has paid for over 40 years into Social Security? I 
wonder if the Senator from Nevada can remember when President George W. 
Bush came to us with his first tax cut, he said: This should be easy. 
We are going to have a surplus over the next 10 years of $5.6 trillion. 
For goodness' sake, you do not need the money in Washington to waste on 
programs. Send it back home to the families so they do not have to pay 
taxes.
  A lot of people were enthralled by this message. I was not. Neither 
was the Senator from Nevada. Today, is it not a fact, I ask the Senator 
from Nevada, that same projection over 10 years has gone from the 
President's $5.6 trillion surplus to a $1.8 trillion deficit and that 
this bill will make the deficit even worse over the next 10 years?
  Mr. REID. The Senator is absolutely right. The baby boom generation 
is upon us.
  Our senior population will nearly double from 44 million to 77 
million in just 6 years. That is what it is all about. I am just 
stunned by--I believe in intellectual consistency, and I try to be 
consistent on what I do in my legislative voting on the Senate floor. I 
try to remember statements I have made, so I do not want to be 
inconsistent, to say something today that is inconsistent with 
something I said previously.
  What has happened to our friends on the other side of the aisle who 
cared so much about deficits and balancing the budget, who offered a 
constitutional amendment on the Senate floor to balance the budget? Of 
course, they wanted to use Social Security surpluses, but still they 
were concerned about balancing the budget.
  Senator Rick Santorum, the junior Senator from Pennsylvania, who is 
one of the leaders on the other side of the aisle, is quoted in the 
Pittsburgh Post Gazette:

       The American people are sick and tired of excuses for 
     inaction to balance the budget. The public wants us to stay 
     the course towards a balanced budget, and we take that 
     obligation quite seriously.

  Take it quite seriously, when we are going to be asked to increase 
the national debt in a few days by a trillion dollars--by a trillion 
dollars; not a billion, not a million but a trillion? Where are all of 
these statements? What happened to them? What happened to the 
consistency? Why all of a sudden do deficits not matter, the national 
debt does not matter, Social Security does not matter, Medicare does 
not matter, education does not matter, just give tax cuts to the elite 
and it will all be fine?
  It is going to take care of all the environmental problems we have in 
America today. We do not have to worry about Superfund, endangered 
species, clean air, clean water. Just cut taxes. That takes care of it 
all.
  Mr. DURBIN. I ask the Senator from Nevada, if we have now reached a 
point in our history where deficits do not count, can you not also 
conclude from that statement that it does not count that our children 
and grandchildren will have to pay off that debt; that it does not 
count that the money coming out of Social Security is going to be at 
the expense of our parents and grandparents--and some of us will be 
knocking on those doors in just a few years? If deficits do not count, 
then, frankly, we are counting out millions of Americans who count on 
us to be financially responsible, fiscally responsible.
  This bill is fiscally irresponsible. It was irresponsible 2 years 
ago. It devastated the economy. It added to our deficit. It has created 
more problems economically than this country has seen in many years.
  I ask the Senator from Nevada this: Do we have a Democratic 
alternative we are going to offer on the floor of the Senate that is 
smaller in scope but more focused on the issues we are hearing about, 
for example, that addresses the costs of health insurance for 
businesses? Has the Senator met any business leader in America today 
who has not told him that the cost of health insurance is breaking the 
bank?
  I say to the Senator from Nevada, if we are going to have a tax cut 
to invigorate the economy, tell us what the Democratic alternative 
would do and the scope of it and whether or not it reaches the level 
suggested by the Republicans.
  Mr. REID. The Senator from Illinois has raised a question, and I am 
sure the people watching this have the same question, which is: Okay, 
you do not like the Republican plan. What is your idea?
  Well, we do have an idea. It costs much less money and has a direct 
impact. We would want a new wage credit, which would provide $300 for 
each adult in a family; $300 for the first two children. We want to 
accelerate the child tax credit to $800 from the current $600. It 
eliminates the marriage tax penalty. It provides marriage penalty 
relief for recipients of the earned-income tax credit, which by the 
way, Ronald Reagan said was the most important tax policy this country 
has ever had, the earned-income tax rate. What is that? It creates a 
desire for people to work rather than try to go on, say, welfare, 
because they can actually make money by working with their hands.
  Ronald Reagan loved this program, the earned-income tax credit, and 
we want to make it even more important.
  We want to have a 50-percent tax credit to help small businesses pay 
for health insurance premiums. These estimates are not exact, but there 
are from 21 million to 25 million Americans with no health insurance. 
There are millions more who are underinsured. Now, this is not going to 
answer all the problems, but it sure is a step in the right direction. 
It will help small businesses pay for health insurance premiums.
  Mr. DURBIN. Just so it is clear, I ask the Senator if the Democratic 
plan provides a tax credit for small businesses to pay for health 
insurance? The Republican plan provides no benefit for the health 
insurance cost to small business. That is as clear as can be. Has the 
Senator from Nevada found in that Republican approach any help for 
small businesses to pay for health insurance?
  Mr. REID. As I mentioned, the answer to all of the problems--
environmental problems, better schools, homeland security--is cut taxes 
for the elite of this country. That will handle everything. I am sure 
that is their reasoning for this no-tax policy on health insurance.
  In answer to the Senator's question, we would allow small business 
expensing that I think is very important. That is in the Republican 
plan. I think it is important we have that in ours. We want a bonus 
deduction for businesses on depreciation rules. We want a 20-percent 
tax credit for businesses

[[Page 11504]]

that invest in the broadband high-speed Internet infrastructure. We 
want $40 billion direct relief to States and local governments. It is 
so important we do that.
  As I mentioned to the Senator earlier in responding to one of the 
questions, the State of Nevada is devastated because of unfunded 
mandates. Leave No Child Behind, as I said, according to the State 
legislature, is leaving lots of kids behind because they have no money 
to implement all the testing requirements and things that our school 
districts are being forced to do. They do not have the money to do it.
  Homeland security, we have all kinds of burdens upon us as a result 
of 9/11, and I think we should be helping with that.
  With our tax plan, which we are going to have a chance to vote on and 
which I think is going to be offered by the Senator from Louisiana, we 
are going to have an opportunity to do something about unemployment 
benefits. Our plan calls for unemployment benefits. I think that is 
extremely important.
  Our plan is so much better. It creates over a million jobs right 
away. It is a program that has something the working men and women in 
this country will benefit from. We had a meeting with one of the most 
successful businesspeople in the country, Warren Buffett, a man who is 
a study in how entrepreneurship should work. We have heard a lot about 
entrepreneurs in speeches on the other side.
  He is what the free market system is all about. When asked a direct 
question about what he thinks of the Bush tax cut plan, after he wiped 
the smile off his face, he said: You know, if this tax cut plan passes, 
next year I will receive--and this figure might not be exact but real 
close--an extra $390 million for me, Warren Buffett.
  He said: I do not need that. I do not want that. It is not going to 
create jobs. What we should do, if there is $390 million to go around, 
is give 390,000 people a thousand dollars.
  He said: They will spend that. That will help the economy.
  That is the difference between our plan and their plan. The Warren 
Buffett understanding of what our economy is all about is about people 
spending money.
  Mr. DURBIN. I ask the Senator from Nevada, does this not reflect the 
basic difference in outlook and vision from the Republican side of the 
aisle to the Democratic side of the aisle, that Warren Buffett--who 
happens to be the second wealthiest man in America and happens to be a 
Democrat, by his own professed political faith--understands that 
helping elite investors in America is not the key to a strong economy, 
yet that is what the Republicans return to time and time again?
  We believe, as Warren Buffett believes, if we want to strengthen 
America's economy, have faith in America's working families, give them 
the helping hand they need to cope with the reality of life, the 
demands of life, and provide a helping hand to the unemployed who, 
through no fault of their own, are out of work. There are three times 
as many long-term unemployed in America today--that is, those out of 
work for over 6 months--than when President George W. Bush took office. 
His economic plan has failed, and what we are hearing again is this 
vision that the way to help the unemployed, the way to help the working 
families is to give to Warren Buffett a $390 million tax break. It is a 
wide chasm of thought between the two sides of the aisle.
  I would argue, for those who want to make up their mind, take a look 
at what happened to the President's last tax cut. It did not work. It 
provided some assistance for the wealthy, but it did not create jobs. 
It did not revive the economy. And this time the President says we need 
to rerun that play, we need to try it again and again at the expense of 
Social Security and Medicare.
  I ask the Senator from Nevada, as we listen to people such as Warren 
Buffett talk about this issue, how would the Senator respond to our 
Republican critics who say: There you go again, class warfare; that is 
all you Democrats want to do, set the wealthy off against the people 
who are not so wealthy?
  I ask the Senator from Nevada, in this coalition of the willing that 
we would put together in this class warfare, wouldn't we include an 
awful lot of people today who are struggling to make ends meet, a lot 
of seniors who face cuts in Social Security for their own benefits, a 
lot of people who do not have health insurance because their businesses 
cannot afford it? I suggest the coalition on our side of class warfare 
is a pretty broad one across America. I ask the Senator to respond.
  Mr. REID. I say to my friend, in parroting something the Senator said 
earlier today, those people on the other side of the aisle who are 
pushing this tax plan are not evil people; they are not bad people. 
They are good people. They just live in a different political world. 
They live in a world where they are willing to change their political 
philosophy according to who is in the White House. People who used to 
say that deficits matter now say they do not matter. People who said we 
had to balance the budget no longer say we have to balance the budget. 
They simply are not willing to approach the world the way I think the 
world needs to be approached.
  I think I am right. I believe I am right. Everyone is entitled to 
their opinion. I have a little substantiation. I have 10 Nobel 
laureates who believe I am right, that this tax cut is not good; it 
will not help the economy. However, no one has to accept these Nobel 
laureates. Ask the Congressional Budget Office. They, the Republicans, 
picked who runs that, we did not, and the Congressional Budget Office 
says it will not help anything.
  I say to my friend from Illinois, this vote we will take in a few 
minutes is an example of the difference in philosophy between what is 
going on with the majority and we, the Democrats. What we are saying is 
the dividend tax cuts for the elite of this world should not go 
forward. That money should be saved for Social Security. That money 
that will go to elite people is coming out of the Social Security trust 
fund.
  If there was ever an example of how we should vote for constituents, 
it is now. Do you vote for people who want to maintain the strong 
Social Security Program or do you vote for the people who are going to 
give big tax cuts to Warren Buffett? There is a simple answer to the 
question.
  Remember the vote today at 2 p.m.: Dividend tax cuts or saving Social 
Security. It is as simple as that. We recognize that anyone can puff it 
any way they want; anyone can slam it any way they want. That is what 
the vote is about. The first vote we will take on this tax cut bill is 
whether you are going to vote for Social Security or the wealthy of 
this country. It is as simple as that.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. THOMAS. I understand we will vote in 5 minutes.
  The PRESIDING OFFICER. That is correct.
  Mr. THOMAS. Mr. President, this has been an interesting dialog and 
certainly does show a different point of view on that side of the aisle 
as opposed to this side of the aisle.
  The Senator from Nevada summed it up pretty well when he said it is 
all about spending. That is exactly what it is. The question is whether 
you are trying to do something to stimulate the creation of jobs or 
whether you want to throw money out and spend it, such as $40 billion.
  What we are talking about is doing something about the economy. It 
seems as we go through this, we do not ever recognize the situation we 
are in. One of the reasons we have a problem is that sources of revenue 
have been reduced substantially because the economy has weakened. They 
do not talk about that. That is why we are doing some of the things 
that are different than we may have done before. Revenues registered in 
2000 were over $2 trillion, and they fell to the low $2 trillions; and 
in 2002 we are $1.8 trillion because the economy is not working. What 
we are trying to do is to stimulate that economy, of course.
  There is talk about doing everything for Warren Buffett. That talk is 
not

[[Page 11505]]

true, and it has nothing to do with what we are seeking to do. Do you 
think acceleration of the 10 percent regular income tax rate is good 
for Warren Buffett? I don't think so.
  What we are talking about is raising the amount of money that is tax 
free for people in the bottom line. We are talking about the 
acceleration of the regular income tax cuts that were put into place to 
make it happen more quickly.
  What we are trying to do is stimulate the economy. Do you think 
acceleration of the marriage penalty tax is for Warren Buffett? I don't 
believe so. It is for everyone. On the question of fairness in taxation 
for people who are single or married, Warren Buffett has nothing to do 
with it.
  Acceleration of child tax credit--that is Warren Buffett? I don't 
believe so.
  How about small business expensing? This is one of the most important 
things we can possibly do with regard to the economy. It has nothing to 
do with Warren Buffett.
  What we really have is a real declaration of difference in what we 
are seeking to do. We are seeking to recognize the situation we are in, 
recognize that part of the reason for reduced income is the economy, 
and that instead of spending, we are seeking to create jobs.
  It is time for a vote.
  On this bill, Mr. President, this language is not germane to the 
legislation now before the Senate. Therefore, I raise a point of order 
under section 305(b)(2) of the Congressional Budget Act, 1974.
  The PRESIDING OFFICER. The point of order is in order at this time.
  Mr. REID. Pursuant to section 904 of the Congressional Budget Act, I 
move to waive the section of the Budget Act for the pending amendment, 
and I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The question is on agreeing to the motion. The yeas and nays have 
been ordered. The clerk will call the roll.
  The bill clerk called the roll.
  Mr. REID. I announce that the Senator from North Carolina (Mr. 
Edwards), the Senator from Massachusetts (Mr. Kerry) and the Senator 
from Maryland (Mr. Sarbanes) are necessarily absent.
  I further announce that, if present and voting, the Senator from 
Massachusetts (Mr. Kerry) would vote ``Aye''.
  The PRESIDING OFFICER (Mrs. Dole). Are there any other Senators in 
the Chamber desiring to vote?
  The yeas and nays resulted--yeas 44, nays 53, as follows:

                      [Rollcall Vote No. 147 Leg.]

                                YEAS--44

     Akaka
     Bayh
     Biden
     Bingaman
     Boxer
     Byrd
     Cantwell
     Carper
     Chafee
     Clinton
     Conrad
     Corzine
     Daschle
     Dayton
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Graham (FL)
     Harkin
     Hollings
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Murray
     Nelson (FL)
     Nelson (NE)
     Pryor
     Reed
     Reid
     Rockefeller
     Schumer
     Stabenow
     Wyden

                                NAYS--53

     Alexander
     Allard
     Allen
     Baucus
     Bennett
     Bond
     Breaux
     Brownback
     Bunning
     Burns
     Campbell
     Chambliss
     Cochran
     Coleman
     Collins
     Cornyn
     Craig
     Crapo
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Fitzgerald
     Frist
     Graham (SC)
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Kyl
     Lott
     Lugar
     McCain
     McConnell
     Miller
     Murkowski
     Nickles
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stevens
     Sununu
     Talent
     Thomas
     Voinovich
     Warner

                             NOT VOTING--3

     Edwards
     Kerry
     Sarbanes 
  The PRESIDING OFFICER. On this vote, the yeas are 44, the nays are 
53. Three-fifths of the Senators duly chosen and sworn not having voted 
in the affirmative, the motion is rejected. The point of order is 
sustained, and the amendment falls.
  Mr. GRASSLEY. I move to reconsider the vote.
  Mr. REID. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. BREAUX addressed the Chair.
  The PRESIDING OFFICER. Who yields time on the pending amendment?
  The Senator from Montana.
  Mr. BAUCUS. Madam President, I yield whatever time the Senator from 
Louisiana would desire to have.
  The PRESIDING OFFICER. The Senator from Louisiana.
  Mr. BREAUX. Madam President, I ask the Chair to notify me if I go for 
10 minutes. I do not want to go more than that.
  The PRESIDING OFFICER. Is the Senator yielding time from the bill?
  The Senator from Montana.
  Mr. BAUCUS. Yes.
  The PRESIDING OFFICER. The Senator from Louisiana.
  Mr. BREAUX. I thank the Chair and I thank my distinguished ranking 
member, the Senator from Montana, for yielding me this time.
  My colleagues, let me just say that the bill the Finance Committee 
has brought to the floor is a tax cut piece of legislation which also 
raises significant amounts of taxes on American citizens. Tax cuts are 
a wonderful thing to do, for those of us who are elected officials. It 
is great to say we have cut taxes by x billions of dollars, to send out 
a press release to our constituents back home saying we cut taxes by x 
billions of dollars.
  It is also important to read the fine print. The fine print in this 
legislation tells the rest of the story. And the rest of the story is 
that, among other provisions in the bill, there is a provision that 
increases taxes by $35 billion on American citizens.
  Tax cuts have to be done in one of two ways. You can cut taxes by 
increasing the size of the deficit and passing it on to the next 
generation. This bill does that. We have the largest deficit 
projections we have ever had in the history of our country. And now we 
are saying, on top of that, we want to make it larger. We are going to 
have a tax cut in order to make the deficit larger in the hopes that it 
may generate some jobs. That is one way to pay for the tax cut.
  The other way is to raise taxes in other areas. This bill does that, 
too. Lo and behold, during the markup of the Senate Finance Committee, 
there was a provision that had not had 1 day of hearings, had not had 1 
hour of hearings--in fact, it had not had 1 minute of hearings because 
it was never brought up in the committee--to discuss a $35 billion tax 
increase on American workers who work overseas, sometimes in very 
difficult parts of the world. That tax break they got was being 
eliminated--totally eliminated--without one word of discussion, one day 
of hearings about whether this was the right thing to do, or about 
whether it should be to this extent, whether it should be less than 
this, or anything.
  In addition to increasing the size of the deficit, we have in just 
this one provision a $35 billion tax increase on American workers. Why 
do American workers get a credit for working overseas? Because, No. 1, 
they are not in this country. They don't enjoy the benefits and the 
security of living in this country, and, therefore, the argument 
correctly says that in order to encourage American workers to have jobs 
overseas instead of hiring foreign citizens, the Tax Code says that we 
are going to give American workers an $80,000 tax exemption on wages 
that they earn overseas. In many cases, they work in very dangerous 
places. In most cases, they don't get the privileges and the security 
of living in the United States.
  The paper just today talks about seven such Americans who lost their 
lives in Saudi Arabia because of a terrorist activity. That is just in 
one country.
  At the appropriate time I will be offering an amendment to strike the 
tax increase of $35 billion in the legislation which is currently 
before this body. We have had expressions of support for my amendment 
to take out the elimination of this tax credit for American citizens 
from the Chamber of Commerce, from the National Association

[[Page 11506]]

of Manufacturers, from the National Foreign Trade Council, from the 
Financial Executives International, from the U.S. Council for 
International Business, from the Association of General Contractors of 
America, from the American Council of Engineering Companies. To show 
that the support is there from companies other than business-oriented 
companies, we have nonprofit organizations such as the Catholic Relief 
Services, with which the Chair is familiar, and the International 
Rescue Commission that have expressed support for retaining section 911 
which the current bill eliminates.
  The point is, we are going to have to find a way to reinstate. We 
will have to find a way to cover $35 billion because tax cuts are not 
for free. We have to pay for them. That is the problem this bill 
presents.
  My amendment would reduce the amount of the dividend tax exclusion 
above $500 to 5 percent instead of the 10 percent that is currently in 
the bill. I think that is a fair tradeoff. It makes no sense to say: We 
are going to give, for example, a dividend tax exemption for the people 
in my State of which only 8 percent would be affected by it in order to 
have a tax increase on over 400,000 other American citizens who work in 
far off places around the world.
  It makes no sense to say: All right, we will help a small number, and 
we will adversely affect a very large number. The type of people we are 
adversely affecting are wage earners who work month to month, many of 
them earning $50,000, $60,000, $75,000 a year to help pay for tax 
benefits for those who are relying on dividends as a part of their 
income, many of which go to the very highest income earners.
  In Louisiana, 92 percent of the citizens are not affected by the so-
called double taxation on dividends. We ought to get rid of it, but we 
ought to find a way to pay for it. Only 8 percent of my citizens are 
affected by the tax on dividends. Quite frankly, most people who earn 
dividends put them in retirement accounts or put them in investment 
portfolios that are already tax exempt.
  Ninety-two percent of my people in Louisiana are not affected by it 
at all. Yet in order to pay for something that only adversely affects 8 
percent of the citizens in Louisiana, we are going to eliminate a 
foreign tax credit that will be adverse to literally hundreds of 
thousands of people, over 400,000 people.
  The type of people we are affecting are really Americans who are 
working overseas for relatively modest salaries in far off places doing 
important work that ultimately creates jobs in this country. We have 
had many statements from organizations that have workers working 
overseas who say, look, if this exemption is gone, we will have to 
terminate those American workers and give the jobs to foreigners 
working in their own country. We will be having foreign citizens hired 
by American companies doing work that is now currently done by American 
citizens. That is not good tax policy.
  We could have argued in the Finance Committee, if we wanted, move in 
that direction. We should have had hearings on it. We never had one 
witness come in and say, look, this section 911 of the Tax Code is bad 
policy; we need to change it.
  It came up overnight because someone said, here is a nice pay-for. 
Let's raise $35 billion. Let's increase taxes by $35 billion in order 
to pay for the dividend tax cut which, in most cases, affects only a 
very few American workers and American citizens.
  As I have said, the groups that support retaining 911 are contracting 
groups, oil and gas company groups, but also some of them are 
organizations and groups that I read, for instance, the Catholic Relief 
Services, the International Rescue Commission, workers who we have to 
depend on for doing humanitarian work on behalf of the United States 
around the world. If this provision is taken out of the current Tax 
Code, you will have foreign citizens replacing American workers to do 
work for American relief agencies around the world. What kind of a 
message does that send to the world when all of the workers for the 
Catholic Relief Services of the United States are foreign workers? We 
need these American workers in these areas.
  My amendment will preserve section 911 and we will offer it at an 
appropriate time. It should receive a majority of the support of our 
colleagues, both Republicans and Democrats. There is a very simple way 
to pay for it--by simply not increasing the dividend tax deduction as 
much as the current bill does. We can accomplish this in a fair manner. 
If someone wants to talk about this later on, about a pay-for, someone 
wants to eliminate this rate for American workers, if someone wants to 
make an argument that it is appropriate to have a $35 billion tax 
increase on American workers, let them make the case in the appropriate 
forum which is the Senate Finance Committee. Don't let it be slipped 
into the bill overnight as a pay-for for something that is questionable 
as far as short-term tax policies.
  At the appropriate time, I will offer an amendment to preserve this 
provision which is very important to American workers.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. Mr. President, an amendment will be offered tomorrow 
which Senator Breaux has already spoken in favor of. I wanted to speak 
in support of the language that is in the bill. I am speaking against 
the amendment which will be offered by Senator Breaux tomorrow.
  The policy issue presented by repeal of section 911 is whether 
taxpayer dollars should be used to underwrite an employer's cost of 
sending employees overseas. Section 911 excludes from tax the first 
$80,000 of foreign wages and additional foreign housing costs that are 
paid for by the employer. Under normal tax rules, these amounts would 
be taxable. According to the latest IRS data, 358,000 taxpayers claim 
this exclusion, yet repeal of the exemption raises $35 billion.
  The reason repeal raises so much is because many U.S. citizens living 
overseas don't pay tax to either the United States or even to the 
foreign country. The section 911 is skewed heavily towards upper-income 
taxpayers. The more a person owns, the more they can exclude free 
foreign housing.
  Section 911 then is a subsidy to an employer for the costs of sending 
employees overseas. Section 911 only applies to private sector 
employees who move overseas of their own free will. It is not available 
to government or military employees stationed overseas who are 
obviously there through somebody's command and not by their own choice.
  Most employers offer their overseas employees ``tax equalization'' 
packages which guarantee the employee will not pay more taxes working 
overseas than they would pay if they were working within the United 
States.
  Section 911 reduces the amount of tax an employer has to reimburse 
under those agreements, making it then a help to the employer as much 
as to the employee.
  Why does this make any sense? Obviously, I feel it makes sense or it 
wouldn't be in this bill that I present to the Senate. If an employer 
sends an employee from Florida, which has no income taxes, to 
Massachusetts, which has very high income taxes, we do not provide such 
a subsidy.
  Why do we subsidize moving employees overseas? I think sending 
employees overseas should be a business decision, not a tax decision. 
Repeal will not cause U.S. citizens to be double taxed. A U.S. citizen 
who earns income that is taxed by a foreign country is allowed to 
reduce their U.S. taxes for any foreign income taxes paid. A foreign 
tax credit is not allowed, however, for foreign property and gas taxes 
and levies for social programs sponsored by the governments of foreign 
countries.
  We do not subsidize those taxes or those policies. Many claim U.S. 
exports are enhanced by sending U.S. personnel overseas. However, there 
is no basis for such a claim. Whether a U.S. company uses U.S. products 
in its foreign operations is a business decision of the U.S. employer. 
It is not determined by the nationality of the foreign manager.
  It has come to our attention that certain nonprofits, charities, and 
religious organizations use section 911 to

[[Page 11507]]

further their overseas activities. We plan to work with these 
organizations to exempt these activities.
  Section 911 is a tax loophole that forces you and me, as well as 
every other taxpayer out there throughout the United States, to 
subsidize high-paid corporate employees and their companies. It is 
unfair, and the Congress needs to fix it, and the legislation before us 
fixes it.
  The Breaux amendment, if agreed to, would take that fix out of this 
legislation. Everyone voting for the Breaux amendment will be voting 
for these tax benefits the rest of us are paying for.
  So obviously, tomorrow, I urge the defeat of the Breaux amendment.
  I yield the floor.
  Madam President, I yield the Senator from Pennsylvania such time as 
he may consume.
  The PRESIDING OFFICER. The Senator from Pennsylvania.


                           Amendment No. 569

  Mr. SPECTER. Madam President, I send an amendment to the desk and ask 
for its immediate consideration.
  Mr. BAUCUS. Madam President, it is my understanding the Senator from 
Pennsylvania wishes to offer an amendment. I ask unanimous consent that 
the pending amendments be set aside so the Senator from Pennsylvania 
may offer his amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report.
  The senior assistant bill clerk read as follows:

       The Senator from Pennsylvania [Mr. Specter], for himself, 
     Mr. Grassley, and Mr. Bennett, proposes an amendment numbered 
     569.

  Mr. SPECTER. Madam President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To urge the Senate Finance Committee and the Joint Economic 
  Committee to hold hearings and consider legislation providing for a 
                               flat tax)

       At the end of subtitle C of title V as the following:

     SEC.  . FLAT TAX.

       (a) Findings.--The Senate finds the following:
       (1) The current Internal Revenue Code, with it myriad 
     deductions, credits and schedules, and over 17,000 pages of 
     rules and regulations, is long overdue for an overhaul.
       (2) The current Internal Revenue Code has over 
     6,900,000,000 words compared to the Bible at 1,773,000 words, 
     the Declaration of Independence at 1,300 words, the 
     Gettysburg Address at 267 words, and the Pledge of Allegiance 
     at only 31 words.
       (3) It is an unacceptable waste of our nation's precious 
     resources when Americans spend more than 5,800,000,000 hours 
     every year compiling information and filling out Internal 
     Revenue Code tax forms. In addition, taxpayers spend 
     $194,000,000,000 each year in tax code compliance. America's 
     resources could be dedicated to far more productive pursuits.
       (4) The primary goal of any tax reform is to promote growth 
     and remove the inefficiencies of the current tax code. The 
     flat tax will expand the economy by an estimated $2 trillion 
     over seven years.
       (5) Another important goal of the flat tax is to achieve 
     fairness, with a single low flat tax rate for all individuals 
     and businesses.
       (6) Simplicity is another critically important goal of the 
     flat tax, and it is in the public interest to have a ten-
     lined tax form that fits on a postcard and takes 10 minutes 
     to fill out.
       (7) A comprehensive analysis of our tax structure has 
     concluded that a flat tax of 19% could be imposed upon 
     individuals and be revenue neutral.
       (8) If the decision is made to include deductibility on 
     items such as interest on home mortgages and charitable 
     contributions, the flat tax would be raised from a 19% to a 
     20% rate to accommodate the deductions and remain revenue 
     neutral.
       (9) The flat tax would tax business at a 20% rate on net 
     profits and be revenue neutral and lead to investment 
     decisions being made on the basis of productivity rather than 
     for tax avoidance.
       (10) The flat tax would lead to the elimination of the 
     capital gains tax. This would become a powerful incentive for 
     savings and investment--which translates into economic growth 
     and expansion, more and better jobs, and raising the standard 
     of living for all Americans.
       (11) The flat tax would lower the cost of capital by 
     allowing businesses to write off the cost of capital purchase 
     in the same year the purchase was made as opposed to 
     complying with complicated depreciation schedules.
       (12) By eliminating the double tax on dividends, the flat 
     tax eliminates the distortions in the tax code favoring debt 
     over equity financing by businesses.
       (13) The flat tax would eliminate the estate and gift tax. 
     With the elimination of the estate and gift tax, family-held 
     businesses will be much more stable under the flat tax 
     system.
       (14) As tax loopholes are eliminated and the tax code is 
     simplified, there will be far less opportunity for tax 
     avoidance and fraud, which now amounts to over $120 billion 
     in uncollected revenue annually.
       (b) Sense of the Senate.--It is the sense of the Senate 
     that--
       (1) the Senate Finance Committee and the Joint Economic 
     Committee should undertake a comprehensive analysis of 
     simplification including flat tax proposals, including 
     appropriate hearings and consider legislation providing for a 
     flat tax.

  Mr. SPECTER. I am offering this amendment on behalf of Senator 
Grassley, Senator Bennett, Senator Thomas, Senator Sununu, and myself. 
This amendment calls for consideration by the Senate Finance Committee 
and the Joint Economic Committee of tax simplification including a flat 
tax.
  The essence is set forth in the brief resolution clause:

       It is the sense of the Senate that the Senate Finance 
     Committee and the Joint Economic Committee should undertake a 
     comprehensive analysis of simplification including flat tax 
     proposals, including appropriate hearings and consider 
     legislation providing for a flat tax.

  Madam President, this is a subject that I have addressed virtually 
every year since introducing a flat tax proposal in the spring of 1995. 
The flat tax proposal was introduced in the House of Representatives by 
Congressman Armey in the fall of 1994. After extensive consideration 
and analyses of these proposals by two distinguished professors from 
Stanford, Professors Hall and Rabushka, it seemed to me that it was 
long overdue that a serious effort be made to simplify the U.S. Tax 
Code.
  At the present time, we have a Tax Code which has grown to 6.9 
million words. That is the count in the year 2000. When the Tax Code 
was counted in the year 1955, there were 744,000 words. There are 325 
forms to be filled out, and the American taxpayers spend more than 5.8 
billion hours each year preparing them. And it is estimated by the Tax 
Foundation that $194 billion is spent each year in complying with the 
tax laws. I have seen other estimates that place the issue of 
compliance as high as some $800 billion.
  But there is no doubt that the Federal Tax Code and the forms are 
burdensome, onerous, and unduly complicated. The vast majority of 
Americans require professional help to fill out a tax return. Some 
people say even a Philadelphia lawyer cannot figure it out. I am 
inclined to agree with that.
  Senator Grassley, may the record show, concurred with my last 
statement. He has never been a devotee of a Philadelphia lawyer. The 
Congressional Record is replete with comments to that effect with 
reference to one of his colleagues who was elected in the same year, 
1980.
  Back to the subject at hand, Albert Einstein said: The hardest thing 
in the world is to understand the income tax. That is quite a statement 
for Albert Einstein to make. I think it shows what the complications 
are.
  We are considering now a tax proposal that will probably end up in 
this body as $350 billion because the distinguished Senator from Iowa, 
Mr. Grassley, has said that is his word on what is going to come back 
out of the conference. The House of Representatives is talking about 
$550 billion. The President's original proposal was $726 billion. I 
support the full proposal offered by the President.
  When we consider that we have a $10 trillion economy, and we are 
talking about $726 billion or $550 billion or $350 billion over a 10-
year period, and looking at a gross economy of $10 trillion a year now, 
and over 10 years it will amount to $140 trillion, it is questionable 
as to what the impact would be of any tax cut. But I think the 
President's proposal is worth a try. I am prepared to vote for that 
figure--the highest figure we can have for this body on a conference 
report.
  What should be done is to take, finally, some bold, innovative action 
and at least consider tax simplification and

[[Page 11508]]

a flat tax. It has never been considered or analyzed, and there are 
some very thorough comprehensive distinguished studies.
  The leading study, by Professors Hall and Rabushka, analyzed the 
revenue picture and concluded that, at 19 percent, the flat tax would 
be revenue neutral. That would be eliminating all deductions.
  In the flat tax legislation that I have introduced, I have retained 
two deductions. I introduced the flat tax again this year in advance of 
April 15, on April 11. We were not in session on April 15. During the 
104th, 105th, and 106th Congresses I introduced the flat tax 
legislative proposal to coincide with income tax day. The proposal I 
have introduced retains the deduction for home interest and charitable 
contributions. So I have taken the two items that are the most popular 
and that cost money. That requires the flat tax to be raised from 19 
percent to 20 percent.
  It may be that the Finance Committee or the Joint Economic Committee, 
in their wisdom, would want to have other deductions, or perhaps no 
deductions, leaving it at the flattest rate of 19 percent.
  This, Madam President, is a tax return form under the flat tax. It is 
genuinely the size of a postcard and could be filled out in some 15 
minutes. Similarly, for the corporate tax, the calculation has been 
made that it would be revenue neutral at 20 percent. Today, there is an 
enormous amount of time with the lawyers, the accountants, the tax 
specialists, figuring out loopholes, figuring out tax avoidance, where 
it is legal, contrasted with tax evasion, where it is illegal.
  If, once and for all, we directed our attention to what is 
economically productive--that is, what makes sense from an economic 
point of view, without regard to the tax consequences--there would be a 
burst of energy and productivity, and it would do wonders for our 
economy. That is the way to stimulate the American economy, instead of 
tinkering at the edges, which is what many of the tax modifications 
have been.
  The flat tax would expense all so-called capital investments by 
deducting them immediately in the first year. If that were to be done, 
there would be a tremendous stimulus for entrepreneurs to invest in new 
capital instead of having to depreciate it over a long period of years 
on complicated depreciation schedules.
  The flat tax eliminates the estate tax, capital gains tax, and the 
double taxation of dividends. For families of modest means and their 
conflicting schedules, they would pay less under a flat tax. The 
various schedules that have been proposed are complicated and sometimes 
conflicting. That is why I would like to see the hearings on a 
comprehensive analysis, to really find out what it would mean at all 
levels.
  Today, when the loopholes are applied, the sky is the limit. The 
wealthiest people, who earn the most money, can avoid paying taxes 
altogether, and that would be eliminated. There is a tremendous amount 
of money lost through fraud. That, too, would be reduced substantially, 
if not virtually eliminated with a flat tax proposal. So, in essence, 
my point is when we have had so much controversy and argument in the 
Congress of the United States about the $726 billion over 10 years, and 
$550 billion over 10 years, and $350 billion over 10 years, the way to 
really give the economy a shot in the arm is to eliminate all of this 
nonproductive time filling out tax returns and the numerous forms 
attendant thereto and allow American ingenuity to focus on what makes 
economic sense, productivity sense, and not what you can do by 
contortions and gyrations to reduce your tax bill.
  It would be a godsend if on April 15 we sat down and filled out a 
postcard. We will all go through it. The flat tax is something which is 
certainly worthy of consideration and study.
  My best judgment is that the flat tax would be very worthwhile, but I 
would want to reserve my best judgment today on a study that I have 
made. I would like to see the Finance Committee and the Joint Economic 
Committee undertake the kinds of hearings and analyses which would give 
appropriate consideration.
  Today the Internal Revenue Code constitutes cruel and unusual 
punishment. A flat tax would be an enormous step forward.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Madam President, besides being willing to accept the 
amendment offered by the Senator from Pennsylvania, I add that there 
are some portions of this bill which further make the Tax Code more 
complex. We often do that as we are trying to, on the one hand, balance 
the budget or fit within certain budget restrictions and, on the other 
hand, help a certain tax policy which, in effect, adds a lot more 
complexity to the code. Regrettably, the code is going to be much more 
complex after this legislation is passed, and it will be passed, than 
is the code today.
  We did, however, include one measure of tax simplification at my 
behest. It is small, but it is important, I think. There are many 
definitions in the code. There is a definition of a child for the 
purpose of the child tax credit or the earned-income tax credit or as 
an exemption as a dependent or for purposes of a head-of-household 
exemption. It depends on how many children the household has in terms 
of what additional credits or exemptions that head of household has. 
There are five definitions in the code, each different for each of the 
conditions I mentioned. We simplified that situation.
  We said, whether it is earned-income tax credit, the child credit, a 
dependent for the purpose of exemption or head-of-household exemption, 
the definition of child is the same. That will make the code a bit 
easier for taxpayers and practitioners.
  I appreciate the amendment offered by the Senator from Pennsylvania. 
It is helpful always to look for ways to simplify the code. I am not 
terribly encouraged we are going to get the code simplified very much 
in the next several years. It would be great if we could. We should 
make those efforts. If history is any guide, regrettably the President 
and the Congress together are making the code more complex every year.
  Some day the straw will break the camel's back. The code, in my 
judgment, is going to collapse. It is going to get so complex and 
finally people are going to get fed up and make significant changes. We 
are not there. I do not think that will occur for several years.
  The amendment offered by the Senator from Pennsylvania is a step in 
the direction toward forcing us in the Congress to grapple with the 
undue complexity of the code, whether the flat tax, consumption tax, 
value-added tax--who knows what is the right approach; that is to be 
decided another day--or just stay with our current code and make a lot 
of simplifications. For example, phasing out so-called Peps and Peases. 
That is the section of the code that says we will give you a tax break 
on the one hand but take them away on the other. We will give a tax 
break, but it phases out in a few years. There are lots of provisions 
in the code like that. One major simplification would be to get rid of 
those provisions.
  I compliment the Senator for advancing the ball and thinking more 
about simplification. I thank him for offering the amendment.
  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. SPECTER. Madam President, I note for the record, in a brief 
colloquy with the Senator from Montana, his thrust at simplification I 
think is a hallmark of what we are looking for. That is one of the 
principal objectives, perhaps the principal objective, although it goes 
alongside trying to increase productivity and growth.
  When I talked to the Senator from Montana briefly in showing him the 
amendment, I added a modification which would call for simplification 
including the flat tax, but in the resolve clause, to call for that 
simplification.
  I appreciate the comment by the Senator from Montana. I hope he will 
join me in this amendment. It advances the ball not anywhere near the 
goal line,

[[Page 11509]]

but I think everyone will agree there has never been a serious study of 
this proposal, and I hope there will be some impetus given by this 
amendment. I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Madam President, I am a cosponsor of the amendment by 
the Senator from Pennsylvania. I very much support this amendment. I do 
not think we have a hard time convincing the people of this country 
about the complicated aspects of the Tax Code and the need for 
something more simple to replace it. There seems to be an overwhelming 
consensus on the part of the American people about that point.
  What we need a national dialog about--and I think this amendment 
encourages that dialog--as well as a study is what is going to take its 
place. Seventy percent of the people think the present Tax Code ought 
to be thrown out, partly because of how complicated it is and because 
it may be viewed as unfair. There does not seem to be that sort of 
consensus as to what takes its place.
  For instance, I have had opportunities to see surveys where 
approximately 20 percent of the people want a national sales tax and 30 
percent of the people want a flat rate income tax. Maybe Congress ought 
to show leadership and follow up on that 20 percent or 30 percent, but 
I do not think that is going to happen until we get some consensus 
among the American people that is in the 40-percent range of what ought 
to take the place of the present income tax mess.
  The amendment before us is very useful from the standpoint of 
encouraging congressional committees to do the proper work, but I 
believe in the final analysis, to get the consensus that it is going to 
take to bring about a simplified tax system, replacing the present 
complicated system, is when it becomes part of the national debate 
between two candidates for President.
  For instance, ideally, we have President Bush seeking reelection next 
year, and he would make an issue out of how complicated the Tax Code is 
and offer an alternative. Ideally, a flat rate income tax along the 
lines of what Mr. Forbes did a few years ago when he was running for 
the Republican nomination and made this type of reform a major plank of 
his campaign. Ideally, we would have a Democratic candidate who says 
the current progressive system, even though it is a mess, is what is 
best for the country. Then we will have a winner out of this that shows 
a clear division of keeping what we have, which I hope does not happen, 
or coming up with something new.
  That mandate from an election will move the people and the people 
then will move the Congress. Being chairman of the Senate Finance 
Committee, I should not have to wait for that to happen, but it seems 
that we have so much work before us dealing with short-term issues that 
we do not spend time on the long-term policies, which this amendment 
encourages.
  I thank the Senator from Pennsylvania for his amendment. I am going 
to obviously vote for it. I hope it is adopted overwhelmingly, but I 
hope it has an impact beyond what we in the Congress will be called 
upon to study. I hope it has an impact on the next Presidential 
election.
  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. SPECTER. Madam President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. Madam President, we do not want this vote now. We want 
to have this vote later.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. BAUCUS. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BAUCUS. Madam President, I ask unanimous consent that the pending 
amendments be temporarily set aside so I might offer an amendment.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.


                           Amendment No. 570

  Mr. BAUCUS. Madam President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Montana [Mr. Baucus] proposes an amendment 
     numbered 570.

  Mr. BAUCUS. Madam President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To ensure that the limit on refundability shall not apply to 
    the additional $400 child credit for 2003, to make the dividend 
    exclusion effective for taxable years beginning in 2003, and to 
eliminate the increase in the dividend exclusion from 10 percent to 20 
                    percent of dividends over $500)

       On page 19, lines 12 and 13, strike ``(20 percent in the 
     case of taxable years beginning after 2007)''.
       On page 26, lines 18 and 19, strike ``(80 percent in the 
     case of taxable years beginning after 2007)''.
       On page 26, lines 21 and 22, strike ``(80 percent in the 
     case of taxable years beginning after 2007)''.
       On page 27, line 19, strike ``2003'' and insert ``2002''.
       At the end of subtitle C of title V, insert:

     SEC.   . GUARANTY OF ADDITIONAL $400 CHILD CREDIT FOR 2003 
                   AND MODIFICATIONS OF DIVIDEND EXCLUSION.

       (a) In General.--Section 24(d) (relating to portion of 
     credit refundable) is amended by adding at the end the 
     following new paragraph:
       ``(4) Special rule for 2003.--
       ``(A) In general.--In applying this subsection--
       ``(i) in the case of any taxable year beginning in 2003, or
       ``(ii) for purposes of determining the amount of the credit 
     allowed under this section for the taxpayer's first taxable 
     year beginning in 2002 in computing the child tax credit 
     refund amount under section 6429, the increase under 
     paragraph (1) for such taxable year shall be determined under 
     subparagraph (B).
       ``(B) Additional increase.--For purposes of subparagraph 
     (A), the amount of the increase under paragraph (1) for a 
     taxable year shall be equal to the sum of--
       ``(i) the amount of such increase determined without regard 
     to this paragraph, plus
       ``(ii) the lesser of--
       ``(I) $400, multiplied by the number of qualifying children 
     of the taxpayer for the taxable year, or
       ``(II) the amount determined under paragraph (1)(A) for the 
     taxable year, reduced by the amount of the credit allowed 
     after the application of section 26 and this subsection 
     (without regard to this paragraph).
       For purposes of applying subclause (II) to the taxable year 
     described in subparagraph (A)(ii), the amount determined 
     under paragraph (1)(A) shall be computed by taking into 
     account the adjustments described in section 6429(b).''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the provisions of section 
     106 of this Act and section 108 of this Act shall apply to 
     such amendment as if it had been so included.

  Mr. BAUCUS. Madam President, this amendment is designed to take 
effect earlier rather than later and provide substantially more 
benefits than the tax bill that is presently before us. It is designed 
to help stimulate the economy with more wallop, more punch, earlier 
rather than later.
  How does it do that? Two ways. First, it would speed up the dividend 
tax relief. It would make it take effect earlier rather than later. 
Second, it would simplify the mechanism that will be sending checks out 
to people who qualify for the child tax credit. So, there are two ways 
that this amendment will help provide more income relief, more quickly, 
to more Americans, than what is contained in the bill. It is an 
improvement upon the bill.
  First, with respect to speeding up the dividend relief, the dividend 
proposal in this bill is not effective until the year 2004. Many 
provisions of this bill take effect in 2003, but the dividend 
provisions of the bill do not take effect in 2003; rather, a year 
later, in 2004. I suspect it is to save revenue. There will be no 
dollars injected into the economy, as a consequence of the dividend

[[Page 11510]]

proposal, in the year 2003. It will be later, in 2004, and even then it 
is going to take some time for Americans to change their tax returns to 
take advantage of this change.
  As I stated earlier, we are here today because the economy demands 
that we act quickly to help our anemic economy. Let's see what we can 
do to help create more jobs. To rebuild the economy. To rebuild 
America.
  In my State of Montana, we desperately need jobs. Many of our high 
school and college graduates are leaving Montana. Why? Because they 
cannot find a job in the State. They go elsewhere. There is a better 
chance of finding a job in one of the larger cities. But, even that is 
difficult. Lack of jobs is a national problem, it is not just a problem 
in Montana. I think over 2 million jobs have been lost in the last 
couple of years because of an anemic economy. We want to get moving 
quickly. We want to get moving earlier than we otherwise would. We 
should seek policies to help the economy grow as soon as possible.
  I disagree with the current dividend proposal for several reasons. 
One, it creates a three-tiered regime. It makes the Tax Code even more 
complex. It creates a three-tiered regime for investment income. 
Interest income would be fully taxed, as it is today. Capital gains 
would be taxed at about half the rate of ordinary income, as it is 
today. But we now add a third complexity of taxation of investment 
income, and that is dividend income which would fall to the new regime; 
that is, the first $500 of dividend income would be excluded from one's 
income tax, and then, beginning in later years, in 2004, the next 10 
percent of dividend income would be excluded, and then in the year 
2008, 20 percent of dividend income would be excluded. A new layer, a 
new complexity, certainly with respect to investment income.
  My point is, if we are going to include a dividend proposal in this 
bill, why not make it take effect earlier? Our economy needs the boost 
right now, not when taxpayers file their returns in 2005. The dividend 
provision takes effect in 2004 but, frankly, it does not really take 
effect until 2005 when people file their tax returns. The dividend 
proposal has no stimulative effect in the year 2003. Most people do not 
even get the benefit in 2004. Most individual taxpayers will have to 
wait until they file their tax returns in 2005 to reap the benefit of a 
dividend exclusion in the bill.
  My amendment will advance the effective date of the dividend 
provision in the bill to January 1, 2003--this year. This means 
taxpayers will get relief for dividends they receive this year.
  I have my doubts whether the dividend tax relief has much stimulative 
effect generally, but some will praise the economic virtues of dividend 
tax relief. I ask, if there are virtues, why wait? Make the proposal 
effective for 2003 at least to provide the possibility that the economy 
will see some benefit.
  The second provision in my amendment will get more dollars to 
families by simplifying the distribution of the increased child credit 
that we passed this year. The President has proposed accelerating the 
full $1,000 child credit to 2003. It is currently $600. The President 
has proposed accelerating that, the full $1,000 to take effect this 
year, 2003. Instead of making taxpayers wait until next spring when 
they file their tax returns to get the credit, the President has 
proposed sending the checks out this summer for the $400 increase in 
the credit. That is the same provision which is included in the Finance 
Committee bill. I support the acceleration of this credit for working 
families. It is the right thing to do. I think sending this increase 
out to taxpayers right away also makes good economic sense. Why wait? 
This gets money into the people's hands immediately so they can spend 
it. This will spur consumption and boost the economy, which is exactly 
what we should be doing in this bill.
  My concern, however, deals with the millions of families who will not 
receive the full $400 check due to refundability limits. I might remind 
our colleagues that a couple of years ago, when we sent out the so-
called $300 check for individuals and the $600 check for married 
couples, a lot of people did not get the $300; married couples did not 
get the $600. Why? Because of the tax brackets the taxpayer happened to 
fall into when they did the calculation to find out what portion of the 
$300 an individual might receive. If the taxpayer had a lower income, 
the taxpayer might not receive the full $300. It was a mess. Some got 
the full $300, some did not. It was a mess.
  Under current law, the credit is partially funded. Families can take 
part of the credit if they pay payroll taxes but do not have income tax 
liability. Not the whole credit, but part of it. The amount that a low-
income family can get refunded is to increase in 2005. The President's 
proposal did not accelerate the refundability of the credit. 
Fortunately, during consideration of the bill, the Finance Committee 
adopted an amendment offered by Senator Lincoln. Her amendment was to 
accelerate the refundability of the credit. This will allow many low-
income families to see some benefit from the increased tax credit. 
However, even with the inclusion of the refundability amendment, many 
low-income families will not be eligible to receive the full $400. 
Millions of working families who have incomes between $10,000 and 
$20,000 will not get the full $400 check. They will receive a partial 
check. Again, people are not getting what they are promised.
  We are increasing the child tax credit from $600 to $1,000 to take 
effect in 2003 and telling people they get an additional $400 in 2003 
and many will not get it. We tell them that is the law, but they will 
not get it because their incomes are in certain brackets. Those whose 
incomes are between $10,000 and $20,000 will get less than the full 
$400 and receive only partial checks, and they will not know how much 
unless the IRS tells them how much the following year.
  That does not make sense. The families who are most likely to spend 
the check, those who spend most of their income, will not get the full 
amount.
  My amendment guarantees each and every working family eligible for 
the child credit would get the full $400 check. This fulfills two of 
the goals of the stimulus package, getting more money out of the door 
immediately and getting it to the people who will spend it, lower 
income people. These two changes to the bill will inject an additional 
$15 billion into the economy in 2003 and 2004, more than provided for 
in this bill. That makes sense. The additional dollars in the next 2 
years will help create more jobs, help boost demand, and help rebuild 
the economy.
  To pay for the modifications, my amendment merely eliminates the 
increase of the dividend exclusion from 10 percent to 20 percent in the 
year 2008. To repeat, in the bill, the 10 percent exclusion is 
increased to a 20-percent exclusion, and does not take effect until 
2008. I say that is too far off. Let's repeal the increase that is 
scheduled to take effect in 2008 and take that $15 billion and dedicate 
it to the working families. That will take effect in the early years, 
2003 and 2004. We could make the dividend proposal, therefore, 
effective now, not later.
  The current provisions in the bill provide that the dividend 
exclusion does not take effect until 2004, not 2003. This amendment 
leaves in place the 10-percent exclusion that is still in place but 
takes effect a year earlier; that is, 10 percent above the $500 goes 
in. We are simply saying that the exclusion in 2008 will still be 10 
percent. That is so far off. Why schedule an increase that does not 
take effect until 5 years from now?
  I urge my colleagues to support this amendment. Briefly, it moves 
money upfront. It does not change the total amount of the bill but 
moves it upfront a little more so there is more stimulative effect in 
the short run. Thus, the bill does what it is purported to do, which is 
to create more jobs.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. I yield myself such time as I might consume.
  I find it necessary to explain what our legislation does because a 
lot of times there are explanations about it

[[Page 11511]]

that are not very accurate. One of the impressions is our bill is not 
very well balanced. Our bill does, in fact, attempt to strike a good 
balance between consumption on one hand and investment on the other 
hand. We do this to provide incentives such that we can provide both 
short-term economic stimulus and the building blocks for meaningful 
future economic growth.
  The refundable tax credit outlined in the amendment before the 
Senate, which I oppose, would be paid irrespective of whether a person 
had any income tax liability at all. If the person owes no tax, we are 
to view this proposal as effectively refunding payroll taxes. But we 
already have a provision that refunds payroll taxes. It is called the 
earned-income credit and the child tax credit. This proposal, the 
Baucus amendment, a refundable tax credit proposal, would be 
duplicative of the earned-income tax credit and the refundable child 
tax credit to refund payroll taxes for those with insufficient income 
to have tax liability with the result of encouraging people to work as 
opposed to receiving welfare or unemployment compensation.
  In my estimation, such refundable credits do not provide incentives 
to work. They do not create jobs, and they do not stimulate the 
economy.
  Providing incentives to work, creating actual jobs, and stimulating 
the economy are the purposes of the legislation from the Senate Finance 
Committee that I presented.
  Job creation is a handup, not a handout. It is a handup to help 
people out of poverty. Refundable tax credits are handouts which may 
have just the opposite effect. We should ensure that we are providing 
building blocks for long-term growth and the economic stability that 
comes from that growth.
  I appreciate Senator Baucus's support for our dividend proposal and 
his desire to accelerate into this year. However, acceleration means we 
subject more dividends to double taxation because the exclusion never 
reaches 20 percent. In other words, ours goes from 10 percent through 
the year 2007; 2008 to 2013, it is 20 percent, whereas his proposal 
always stays at 10 percent.
  People invest in stock for long-term gain. We need to provide long-
term tax relief. This bill contains a lot of short-term stimulus 
already.
  I appreciate the points he has raised regarding the child credit. The 
largest item in this bill is the child credit, and that amounts to over 
$95 billion. It includes a simplification of definition that Senator 
Baucus has already mentioned. In addition, I note we expand the 
refundable portion of the child credit that targets help to the low-
income families he seeks to assist with his amendment.
  I appreciate his position. I believe our bill provides proper balance 
in encouraging the economy.
  Finally, I note this amendment violates section 202, page 35 of the 
Budget Act, so I will be raising a point of order later on.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. KENNEDY. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Who yields time?
  Mr. KENNEDY. Madam President, I yield myself an hour on the bill.
  The PRESIDING OFFICER. Is there objection?
  Mr. GRASSLEY. Would the Senator from Massachusetts yield? I do not 
intend to object, but we have always been promised copies of 
amendments. I assume the Senator is going to offer an amendment.


                           Amendment No. 544

    (Purpose: To provide for additional weeks of temporary extended 
   unemployment compensation, to provide for a program of temporary 
  enhanced regular unemployment compensation, and for other purposes)

  Mr. KENNEDY. I intend to do that right at this very moment. I have 
sent an amendment to the desk, and I ask for its immediate 
consideration. It is amendment No. 544.
  The PRESIDING OFFICER. The Chair informs the Senator, it requires 
unanimous consent to set aside the pending amendment.
  Mr. GRASSLEY. I ask Senator Kennedy, would he speak without our 
consenting to the hour so we could look at the amendment for a while?
  Mr. KENNEDY. I am prepared to accommodate the chairman of the Finance 
Committee. We had a general concept of an hour. I will not personally 
take an hour. We have 25 cosponsors.
  The PRESIDING OFFICER. Without objection, the Senator may proceed to 
debate.
  Mr. KENNEDY. I thank the Chair. I was asking them what time they 
need, and I will let the chairman know in just a very few minutes who 
intends to come over here and exactly how much time we need.
  I intend to speak about 20 minutes.
  Mr. GRASSLEY. I thank the Senator.
  Mr. KENNEDY. Madam President, this amendment is of enormous 
importance to the matter we are debating in the Senate, which is 
basically legislation that is targeted on strengthening and improving 
our economy.
  We all know when the Senate of the United States has acted in the 
past to strengthen and improve our economy, on a number of very 
important occasions we have had a very positive impact. Later in the 
discussion and debate, we will have what is called a Democratic 
alternative, which will provide what I consider to be a very compelling 
amendment that will result in stimulating the economy and really 
provide additional jobs.
  It will be fairly balanced in helping hard-working Americans. It will 
assist small businesses with accelerated depreciation and will also 
provide assistance to the States so they can use funds to provide for 
the No Child Left Behind legislation, and perhaps offset some of the 
anticipated cuts in Medicaid and also deal with some of the other State 
priorities.
  One of the most important aspects of economic recovery that this 
underlying proposal that has come out of the Finance Committee is 
missing is a provision to deal with the millions of Americans who are 
currently unemployed as a result of economic policy. We have seen at 
other times in our country when we have taken action here in the 
Senate, going back to the early 1960s. We had economic stimulus 
programs and we had the longest period of economic growth and price 
stability, in the early period of the 1960s, that we had had up to that 
time in this century.
  Then, in 1993, we also took action here on the Senate floor and we 
have had the longest period of economic growth, again with price 
stability, and the creation of some 22 million additional jobs.
  We on our side are strongly committed to taking steps that are going 
to revive our economy, stimulate the economy. We will have an 
opportunity to debate that later in the afternoon.
  This amendment is targeted on those Americans who have lost their 
jobs through no fault of their own but because our economy is in 
stagnation. At other times in American history, we have responded to 
the needs of these families. These are hard-working American families 
who have played by the rules, have paid into the unemployment 
compensation fund, and now are entitled to benefit from it.
  Without this amendment, starting at the end of May there are going to 
be 80,000 workers a week who will lose their unemployment compensation. 
This is an emergency, and it is a matter which I hope we will address 
and will have the strong support of Republicans and Democrats alike.
  Effectively, this amendment extends the temporary unemployment 
compensation program through November. The program is currently 
scheduled to prohibit any new enrollees after May 31, leaving 80,000 
workers a week to run out of their benefits. It provides 26 weeks to 
all eligible workers, with an additional 7 weeks available to the 
States with the highest unemployment. That would be some six States as

[[Page 11512]]

of today. It provides an additional 13 weeks to unemployed workers who 
have exhausted their initial 13 weeks of extended benefits prior to the 
enactment, and it does provide help and assistance to low-wage workers.
  It provides temporary funding for States to implement alternative 
base periods. What we mean is, in a number of instances workers should 
be entitled to unemployment compensation. But if they seek part-time 
work, they lose all eligibility for unemployment compensation in almost 
every state. Yet they want to go back to work to provide for their 
families, and all this does is permit the States to make these 
adjustments so they can go back to work, maybe part-time, and not lose 
their unemployment compensation. The amendment also provides some 
technical provisions to add just for the railroad workers to permit 
greater parity.
  Historically, unemployment insurance has been a bipartisan issue. In 
the recessions of the late 1950s, President Eisenhower proposed a 
temporary program of extended unemployment assistance. In the recession 
of the early 1970s, President Nixon signed into law two extensions of 
unemployment compensation. In the mid-1970s, President Ford proposed a 
temporary Federal extension of benefits. In the early 1980s, President 
Reagan signed into law four unemployment extensions. And in the early 
1990s, President Bush, after twice vetoing unemployment extensions, 
ultimately saw the importance of this policy and signed into law three 
extensions. Each of these 1990 extensions, some for 26 weeks of 
benefits, received overwhelming bipartisan support.
  In November of 1991, we passed an extension by a vote of 91 to 2. In 
February of 1992, we passed, by a vote of 94 to 2, a bill to provide 26 
weeks of benefits to most States, 33 weeks in high unemployment States. 
Many of the Senators currently in this body voted for that extension, 
which today they are calling unprecedented. We have seen, over the 
years, Republicans and Democrats alike have supported this legislation.
  In July of 1992, the vote was 93 to 3; in November of 1993, 79 to 20; 
and in the last 2 years we have had a number of bipartisan votes. The 
Temporary Federal Unemployment Benefit Program passed, 85 to 9, in 
March of 2002. This is not a partisan issue. Layoffs do not 
discriminate by party. This is a matter of fairness.
  I urge our colleagues to put aside partisanship and to support this 
particular proposal.
  There are those who raise these kinds of questions in opposition to 
this program. They say people want handouts. They do not want handouts. 
They want jobs. People want jobs, but there are not any jobs in the 
economy. There is only one job available for every three unemployed 
workers. The Democrats have a plan to create the jobs. But today we 
have to help the millions of people without jobs because of the bad 
economy. They need help paying the mortgage and putting food on the 
table.
  Some say the unemployment rate isn't high by historic standards, and 
only a few States have reached the trigger for extended benefits. But 
we know that we have now 2.5 million fewer jobs than we had some 2 
years ago. Look at this. We had 2.8 million additional unemployed over 
the period of these last 2 years; 6 million unemployed in January of 
2001; and we have 8.8 million as of April this year.
  We have seen over this period of time the fact that the total number 
of private sector jobs has decreased by 2.7 million--2.7 million jobs 
lost. We had 111.7 million in January 2001, and 109 million now.
  We are seeing a significant increase in the total number of the 
unemployed, and we have also seen a reduction in the total number of 
jobs that are out there. These are hard-working Americans. We are 
trying to get the economy into an expansion. But at this particular 
time they are hurting. That is why we need to have an extension of the 
unemployment compensation.
  Let me mention who these people are and what the state of our economy 
is at the present time.
  All Americans understand the economy has been deteriorating for more 
than 2 years. President Bush claims the tax cut for the rich will 
create jobs. We tried that his way in 2001. We lost 2.5 million jobs. 
Alan Greenspan and Warren Buffett and the Nation's leading economists, 
including 10 Nobel laureates, all agree that the President's plan is 
the wrong prescription for the sick economy. Average Americans are 
hurting. It is time for a change. We need an economic plan that helps 
our fellow citizens and which creates new jobs. Yet, there is not a 
penny in this bill to provide the unemployment compensation for the 
Americans laid off prior to the time the new jobs are created. 
Unemployment benefits expire in just 2 weeks for many of these workers.
  This amendment is cosponsored by 13 of my colleagues. I ask unanimous 
consent that they be listed as cosponsors on this amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KENNEDY. Madam President, this amendment provides for allocating 
$12.7 billion from the acceleration of the upper tax bracket reduction. 
This effectively does not change the law. The President's 2003 bill 
asks for an acceleration of the reduction of the tax brackets for 2001 
and 2002, and this defers that. In fact, it collects some $35 billion. 
We use $12.7 billion of that to pay for this extension.
  Our workers take pride in doing a good job and providing for their 
families, putting their children through school, and saving for a 
secure retirement. But for millions of Americans that dream is gone. 
Years of saving and sacrifice have disappeared with a single pink slip. 
Instead of looking to a bright future, now they must look in their 
children's eyes, and say, I am sorry; you can't go to college; you 
can't buy new shoes. We can no longer afford to stay in this house. In 
fact, since losing their jobs, one in every four have moved to less 
expensive housing or moved in with their friends or their families.
  These are the figures about the impact on the family because of 
unemployment. We are talking about Americans who have worked, want to 
work, and are being laid off because of economic conditions. They have 
collected unemployment compensation for a period of time, which is 
about a third of their pay. Now they are in danger of losing that at 
the rate of 80,000 Americans per week at the end of this month.
  It is interesting that we now have 18,000 American servicemen who 
have returned from Iraq and are now on the unemployment line. Now they 
are receiving unemployment compensation because the jobs were not there 
when they came back. That number is growing every single week because 
their jobs have effectively been eliminated.
  The unemployment impact on the family is that more than 3 in 4--77 
percent--of the unemployed Americans say the level of stress in their 
family has increased. Two-thirds--65 percent--of those with children 
have cut back in spending for all of their children; 26 percent say 
another family member has to start a job or increase the work hours; 
and 23 percent have had to interrupt their education or that of a 
family member--one-quarter of all the unemployed now. That is happening 
in America. We have an opportunity to do something about it with this 
bill by just deferring the upper tax rates--not cancelling them out but 
deferring those. Now we have the financial hardship on the unemployed. 
More than one-half of the unemployed adults have had to postpone 
medical treatment--57 percent--or cut back on spending for food--56 
percent. One in four--26 percent--had to move to other housing or move 
in with their friends or relatives. Thirty-eight percent have lost 
their telephone service. These are hard-working Americans who have lost 
their telephone service.
  Without this amendment, 80,000 per week will lose all kinds of help 
and assistance from unemployment compensation.
  This is what is happening to them already.
  Thirty-eight percent have lost their telephone service. Twenty-two 
percent are worried about losing their phone service. More than a third 
have had trouble paying gas or electric bills.

[[Page 11513]]

  That is just the beginning. If you look at the number of workers who 
have lost their health insurance, one-half of them have already lost 
their health insurance when they were laid off, and the others who have 
been able to retain their health insurance are in danger of losing 
that. One-third of the unemployed covered by health insurance have lost 
their benefits as a result of just being unemployed. The rest of them 
are going to lose that when they lose their unemployment compensation.
  In fact, since losing their jobs, one in every four have moved into 
less expensive housing or moved in with friends or families, more than 
a third can't pay their electric and gas bills, and more than one-half 
cut back on their food.
  One-half million men and women have joined the unemployment lines in 
the past 3 months. That is 500,000 fellow Americans who have joined the 
unemployment lines in the last 3 months. No end is in sight.
  In Massachusetts, the jobless rate has jumped to a 9-year high--5.7 
percent. Nationally the unemployment rate has reached 6 percent, with 9 
million Americans out of work and 2 million of those out of work for 
more than 6 months.
  These Americans are not the first priority--they are not even a 
priority--in this administration's tax reduction program because there 
is not a nickel in extended unemployment compensation for any of these 
workers who have lost out.
  In fact, in this economy with no jobs, they have learned a lot about 
being second-class citizens with second mortgages and secondhand 
clothes to make ends meet. Our first priority on the economy is to get 
these working Americans back to work--not just to reward the wealthy. A 
major part of that effort must be help for the unemployed.
  The current Federal unemployment benefit program runs out at the end 
of this month. With a continued troubled economy, this extension cannot 
be business as usual. Our amendment extends the current program for 6 
months, but it also helps the 1.1 million Americans who are long-term 
unemployed and the hundreds of thousands who are part-time and low-wage 
workers who would otherwise get no help.
  Our amendment provides 26 weeks of benefits to out-of-work Americans, 
just as we provided during the last recession in the bipartisan bills 
signed by the first President Bush.
  Nearly 1 million more private sector jobs have been lost during this 
recession than over the same period of the early 1990s recession. The 
impact in the 1990s, in terms of workers being able to find jobs, was 
not nearly as bad as it is currently, and yet we did twice as much for 
them.
  It is inconceivable why we are not willing to take the steps to help 
our fellow Americans when they have already paid into the fund. These 
workers have contributed to the fund. The fund is in surplus today. All 
we are asking is, let's use that fund that is in surplus today to 
assist them during this period of transition. This should be a no-
brainer. This ought to be embraced overwhelmingly.
  Where are the votes that we received in the early 1990s--by 90 
votes--with bipartisanship. And still we have the reluctance by our 
friends on the other side to support this program.
  In the last recession, we also made sure that workers who ran out of 
Federal benefits but still could not find work were not left out in the 
cold. Today, one in five unemployed workers has been out of work for 
more than 6 months. In January, we left out 1 million of these long-
term unemployed without jobs and without any safety net. Today, there 
are 100,000 more. Our amendment provides 13 more weeks of benefits for 
these long-suffering Americans.
  Clearly, we owe it to all Americans who have lost their jobs in this 
economy to provide help while they look for new jobs. They paid into 
the unemployment compensation. They have to be out looking for jobs or 
they do not qualify, and they are doing that, and still they are going 
to be left high and dry without this amendment.
  The actions in recent months to extend the benefits have left out too 
many workers, particularly compared to America's response in the past. 
In 1975, 75 percent of unemployed workers were eligible for 
unemployment benefits, compared to only half of such workers last year. 
And that is because unemployment insurance has not been updated to meet 
the changing times; and that is because our good friends on the other 
side have changed the terms of who was going to be eligible. Isn't that 
amazing. You are only going to find half of all unemployed workers who 
are eligible, even though they are certainly similar in terms of their 
working and contributing. Many of the unemployed who fail to receive 
benefits are part-time and low-wage workers. Part-time and low-wage 
workers pay into the system, and they should be able to rely on it 
while searching for new jobs. Our amendment offers the States the 
option--does not require it; it offers the States the option--to 
request Federal assistance to provide benefits for these workers.
  Out-of-work Americans have worked hard all their lives. They have 
paid into the unemployment insurance fund, which has $21 billion. We 
cannot now say to these citizens: Now that you are out of work, 
struggling to pay your bills, we will not let you collect on your 
insurance policy.
  I urge my colleagues to vote for this amendment which will provide a 
lifeline to those hurt the most by the protracted economic downturn. 
The extension runs out in just 2 weeks. We cannot wait. Congress must 
act now to provide the assistance out-of-work Americans deserve.
  We may have some difference on the floor of the Senate about who has 
the best economic stimulus program. And we do have significant 
differences--significant differences--but we ought to be able to agree, 
whether you support the Republican or the Democratic program, that we 
are not going to hold unemployed workers hostage until it kicks in and 
provides job opportunities for workers. We ought to all be able to 
agree to that. We have done that in a bipartisan way historically.
  The trust fund is in surplus. People are hurting. They are our fellow 
workers. We cannot deny them the kind of hand they need and they have 
been working with over the course of their working lives. We should 
accept this amendment.
  The PRESIDING OFFICER. The Democratic whip.
  Mr. REID. Madam President, I have cleared this with the distinguished 
chairman of the committee. I ask unanimous consent that the pending 
amendments be temporarily set aside so the Senator from Massachusetts 
may offer his amendment.
  Will the Senator from Massachusetts call up his amendment?
  Mr. KENNEDY. Madam President, I call up my amendment.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The clerk will report.
  The bill clerk read as follows:

       The Senator from Massachusetts [Mr. Kennedy] for himself, 
     Mr. Daschle, Mr. Bingaman, Mr. Durbin, Mr. Reed, Mrs. 
     Clinton, Ms. Cantwell, Mr. Sarbanes, Mr. Levin, Mrs. Murray, 
     Mr. Rockefeller, Mr. Kerry, Mr. Baucus, Mr. Schumer, and Mr. 
     Dodd, proposes an amendment numbered 544.

  Mr. REID. Madam President, I ask unanimous consent reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. REID. Madam President, I ask unanimous consent that the time used 
by the distinguished Senator from Massachusetts be charged against the 
time on this amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Madam President, how much time does that leave on this 
amendment on the side of the minority?
  The PRESIDING OFFICER. Thirty-six minutes.
  Mr. REID. So the Senators from Washington and Rhode Island will have 
36 minutes, or whatever time they need.

[[Page 11514]]

  I ask Senator Kennedy, will you yield time to the Senator from Rhode 
Island?
  Mr. KENNEDY. I yield such time as he may use.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. REED. Madam President, I rise in strong support of the Kennedy 
amendment. I am amazed that at a time when there are over 1.1 million 
workers who have exhausted all their unemployment benefits--who are 
looking for work, who are not finding work--at a time when our fund to 
pay for these benefits is in surplus by billions of dollars, we are not 
extending this program.
  This is perhaps the last chance we will have. The program expires in 
just a few days. Yet we are here on the floor of the Senate talking 
about many other things: tax benefits for affluent Americans who are 
doing quite well. But we are not responding to the demands, the needs 
of countless numbers of our fellow citizens. I am just amazed this 
would happen.
  This UI, temporary Federal unemployment insurance program, will 
expire at the end of May. What is happening in our economy today is 
that people are desperately looking for jobs, but the economy is 
changing. As I go about Rhode Island, I do not find lots of people who 
say: Well, I don't want to take a job because these benefits are so 
good. These benefits are a fraction of what these people were making 
when they were working. They are hardly sufficient to pay the mortgage, 
to pay for their children's needs, to pay for all the items they have 
to buy each and every day.
  What has happened in the economy, in our case in Rhode Island, is we 
used to be a manufacturing center where there were 20 or 30 or 40 
different manufacturing plants all requiring foremen and supervisors 
and vice presidents for human resources. Those factories have been 
closing. Work has been going overseas.
  In many cases, it is not a question of losing a job nowadays; it is a 
question of the company going away, leaving the small towns of Rhode 
Island and southern New England and the small towns of North Carolina 
and South Carolina, leaving people highly skilled but with no place to 
work.
  These are the true victims of this current economic malaise and 
recession. And we are not responding by simply giving them some more 
time, giving them resources to pay the debts that pile up every day in 
every family in this country? I think it is just appalling.
  Madam President, 1.1 million workers have exhausted their benefits 
and have not found work. That is the current situation. We have to help 
them. The unemployment rate today is 6 percent. That rate is higher 
than when this temporary program was initiated in March of 2002. It is 
higher today than when the program was extended in January 2003. Yet we 
are not extending the program. The situation is worse, but our response 
is not appropriate to that situation.
  Over the last 3 months, 540,000 private sector jobs have been lost 
and the economy has lost, since the beginning of the recession, a total 
of 2.7 million private sector jobs. This is not a question of jobs 
being there and workers being unwilling to take those jobs.
  As a result, we only have one recourse--frankly, they only have one 
recourse: They must have these benefits. And we must provide these 
benefits.
  Private payrolls are 2.4 percent below their level in March 2001 at 
the beginning of this recession. The job losses in this recession now 
exceed those in the recession of 1990.
  One other very compelling point is, on average, if you look at the 
recessions in this century, at least, job losses tend to bottom out 
after 15 months and are erased within 2 years. The persistent job 
losses in this recession are at the 25-month mark--25 months, not 15 
months--and as a result, in that dimension, this is the worst 
recession, most severe recession since the 1930s in terms of the 
duration of long-term unemployment.
  The latest employment report paints a bleak labor market picture for 
the future.
  There are 8.8 million unemployed Americans, but we only count on our 
unemployment rolls those Americans who are actively seeking employment. 
There are millions more who are unable or so frustrated by the lack of 
jobs that they are not actively seeking--4.4 million Americans. They 
want a job. There is no real prospect, and as a result they are not 
even counted.
  Then add to that the number of Americans--4.8 million--who work part 
time. They want to work full time but they work part time because there 
are no full-time jobs.
  Then throughout these numbers, there is this persistent overhanging 
population of long-term unemployed Americans, about 1.9 million jobless 
for more than 26 weeks, about 20 percent of the total unemployed. This 
is a number that is not going down; it is persistent. These are the 
individuals who need our help, and we should help. We must help. Yet 
the bill that comes before us today, the bill that is supposed to 
stimulate the economy, ignores all of these millions of Americans. 
Frankly, I can't think of a more efficient way to stimulate the economy 
than to continue extended unemployment benefits. It puts money in the 
hands of working families. That money is not going to be hoarded. That 
money will not be spent on impressionist art. That money is going to be 
spent immediately at Kmart and Target and Wal-Mart.
  So this is not just about fairness. This is about getting the economy 
moving again, at least in a very direct way. I believe we have to do 
this. We have to do it now. The time literally is running out. As 
Senator Kennedy pointed out, even today's program is less generous than 
programs in the past. Indeed, the fund has over $20 billion of assets 
that were contributed by these people when they worked. They paid into 
these funds. Now they are simply asking in their time of need to be 
supported, to be helped. It is not fair to ignore them.
  There is no good economic argument to say we should not do this. 
First, it is stimulative. It puts money directly in the hands of 
Americans who will spend it. That is the best stimulation we can find. 
Second, the notion that these people are just sitting around because 
they don't want to work is preposterous. These people, many of them our 
contemporaries, in their forties and fifties, would love to work simply 
for the sake of working but, more importantly, because their expenses 
far exceed whatever payment they will receive from this unemployment 
compensation fund. We have to do something and we have to do it now.
  Alan Greenspan, in January of 2002, dispelled this whole myth that 
the administration is trying to foster that this program is not any 
good, it is not worthwhile; they are just sitting around; it 
discourages people from finding jobs.
  He said:

       [C]learly, you cannot argue that somebody who runs past the 
     26-week level is slow for not looking for a job or not 
     actively seeking to get re-employed. There are just no jobs 
     out there.

  This is January 2002. The situation is worse today.

       And consequently, to adhere to the 26-week limit doesn't 
     serve its actual purpose, which is essentially to prevent a 
     misuse of the unemployment insurance system. So I've always 
     been in favor of extending benefits when the job market 
     itself begins to dry up.

  Frankly, this is the Sahara of the job market that we see today. It 
is very dried up.
  That was January 2002. It is worse today. Yet we are not responding 
today. Since January 2002, we have lost over three-quarters of a 
million more jobs. There is no economic argument against this 
amendment. In fact, all of the economic arguments, all the arguments on 
fairness, all the arguments about letting people get access to the 
benefits before they find work again argue strenuously for this 
amendment. I urge my colleagues to support the Kennedy amendment.
  I yield back whatever time I have to the Senator from Massachusetts.
  The PRESIDING OFFICER. Who yields time?
  Mr. KENNEDY. I yield 7 minutes to the Senator from Washington.

[[Page 11515]]


  Ms. CANTWELL. Madam President, I rise today in support of the Kennedy 
amendment, and I hope my colleagues will see that the essence of this 
amendment is about setting priorities in America.
  Yes, we are discussing a tax bill that could end up including $350 
billion in tax cuts directed at the most wealthy people in America. 
While we are doing that, we are doing it in the face of the fact that 
millions of Americans are unemployed and that their unemployment 
benefits are running out.
  So what are we saying by setting this priority, setting a bill in 
motion out of the Senate that some Members believe is going to help 
stimulate the economy, that it will really start us on the right track? 
And instead of paying attention to the very people who have helped 
build this economy, those in the aviation sector who lost their jobs 
because of the downturn in aviation after 9/11, those who lost their 
jobs because of corporate manipulation in the energy crisis, who lost 
their jobs because of those market schemes and manipulations, and those 
people who are simply just out of a job because of 9/11 and the economy 
has not returned, we are saying, we don't have a plan to help you. 
Instead, we want to propose one of the biggest tax cuts in history 
hoping that somehow this will trickle down to help you.
  The point is, when in our history as a country have we proposed a 
dividend tax cut as a way to stimulate the economy? Yet we have had two 
of the last administrations, a Democrat and Republican administration, 
which said one of the best things we can do during times of high 
unemployment is to make sure we extend unemployment benefits. Why is 
that? Well, it is quite simple. For every dollar spent on unemployment, 
it generates $2.15 of stimulus. This is a proven economic plan. For my 
State in Washington, where over 100,000 people would be impacted by 
this amendment and would qualify, we are talking about real numbers. We 
are talking about millions of dollars to our economy over the next 
several months that can help pay mortgage payments, health care costs, 
and as Senator Kennedy said, keep the lights on at home in a region of 
our country that has seen some of the highest energy rates in a long 
time.
  What we are doing in this amendment Senator Kennedy is proposing is 
putting forth an idea of how to help stimulate the economy that has 
been tested and proven successful by two administrations, both 
Republican and Democrat. Instead, we are saying we are not going to 
include this in this package.
  I must remind my colleagues that we came to this brink in December of 
last year. While some of us might think we rectified it when we came in 
in January, there were people in my State, as those unemployment 
benefits were curtailed in December, who did lose their health care 
benefits. They did lose the ability to take care of the health care 
needs of their families. I am sure there were people who probably even 
lost their homes because of that time period, because of the 
uncertainty, because of our lack of commitment for these unemployed 
workers. So here we are at the same point again, 2, 3 weeks away from 
having this unemployment benefit extension evaporate on May 31 and no 
commitment, no commitment to say we will extend unemployment benefits, 
again at a time when we have had administration after administration 
say, in times of tough economic situations and no job growth, the best 
thing we can do is keep the stimulus going by making sure there is 
unemployment.
  So where are we? Well, as we know, the impact over the last 2 years, 
the private sector has lost more than 2 million jobs. Unemployment has 
jumped by 50 percent. As a State that has 7-percent unemployment now 
and as a region, the Pacific Northwest, with Oregon, Washington and 
Alaska, that has the highest unemployment in the country, this is no 
simple matter. This is about priorities. This is about whether we are 
going to take care of the working families who have helped build this 
economy and sustain them until job opportunities increase again.
  We will look for other opportunities to make sure the training 
programs and the educational opportunities are there to retool the 
workforce for the jobs of the future.
  One of the amendments we were successful in getting on the budget 
bill earlier in setting our priorities was to say that we should not 
cut the job training programs. We still have people in Washington State 
who are willing to hire this workforce that has been laid off, but they 
want them to be retooled. They want them to gain expertise. What better 
time to do that than now, as they are working through their 
unemployment, to offer to give them training benefits, make sure they 
are retooled for the economy of the future--whether it is in 
nanosciences, in biotechnology, in new aviation construction, in new IT 
fields, or in nursing where we have over 130,000 openings for nurses in 
this country, and the people who want to have those jobs. Instead, we 
are allowing outside people to come in and take them because we are not 
willing to take care of American workers. This is not a priority. We 
are simply saying instead of giving the largest tax cut in history, and 
passing this out of the Senate, knowing that thousands of workers are 
going to lose their benefits in 3 weeks, we believe we should give them 
that helping hand.
  Make no mistake. Nobody in America wants an unemployment check. They 
would rather have a paycheck. But until we can guarantee to these 
people that we are going to get them that paycheck, we better extend 
that opportunity, from a trust fund that they have paid into, the 
things that they and their employers have paid into, the opportunity to 
sustain them and benefit our economy.
  The PRESIDING OFFICER. The Senator has used 7 minutes.
  Ms. CANTWELL. I yield the floor.
  The PRESIDING OFFICER (Mr. Cornyn). Who yields time?
  Mr. KENNEDY. Mr. President, how much time do I have?
  The PRESIDING OFFICER. The Senator has 18 minutes 7 seconds.
  Mr. KENNEDY. I will yield 4 minutes to the Senator from Montana, 10 
minutes to the Senator from Connecticut, and 4 minutes to the Senator 
from Iowa, Mr. Harkin.
  Mr. BAUCUS. I see Senator Dodd ready to speak. I suggest that he 
speak, and I will speak after him.
  The PRESIDING OFFICER. The Senator from Connecticut is recognized.
  Mr. DODD. Madam President, I thank my colleague from Massachusetts 
for yielding me some time. I have just a few observations.
  First of all, on the amendment being offered by our colleague from 
Massachusetts, it has been said by others, by my colleague from 
Washington, and my colleague from Rhode Island, and certainly the 
Senator from Massachusetts, as well, that this is difficult for many of 
us to understand. I have served in this Chamber for more than two 
decades now. I don't recall another time when we had a downturn in the 
economy, where we had as many as 2 million jobs lost in the last 27 
months, where 80,000 workers a week are losing their benefits. I don't 
recall under any administration--I have served here under Republican 
administrations and Democratic administrations, and I have served when 
this Chamber was controlled by Democrats and also under Republicans, 
and in the House also with both Democrats and Republicans; I know of no 
other time in the more than two decades I have been here where in a 
moment like this we would not provide an extension of unemployment 
benefits.
  It is truly shocking to see a piece of legislation designed to offer 
relief to people, allegedly, through the tax cuts the President is 
suggesting, with no assistance to the unemployed. We literally have 
thousands of people who are facing difficult times, whose ability to 
take care of their families, and to make ends meet have been hindered. 
We are talking about putting people back to work and getting them jobs. 
We are talking about 80,000 people a week running out of benefits. And 
yet we find no space in the legislation to provide assistance to them. 
I am really stunned in many ways that this is not part of this effort.

[[Page 11516]]

  I can only hope our colleagues, regardless of political party, will 
endorse the Kennedy amendment as part of this package. The 
administration says they are still deciding whether an extension of 
unemployment insurance is necessary. What do they need to know? Well, 
80,000 people a week are losing their benefits. They are hard-working 
Americans trying to hold together families, pay mortgages, pay car 
payments, keep their kids in school. What do we need to know when 
80,000 people a week are losing their benefits? Why can we not provide, 
in this legislation, which involves billions of dollars, some relief 
for these people?
  Our unemployment insurance amendment would protect the unemployment 
insurance safety net for 4 million out-of-work Americans. So I 
sincerely hope the managers of this bill, and others, would see fit to 
provide some space here. In my State alone, 58,000 people who are out 
of work would be helped by the Kennedy amendment; in California, 
562,000; in Florida, 161,000.
  I ask unanimous consent that a State by State list, totaling the 4 
million people who would be benefitted by this amendment be printed in 
the Record at this time.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

FOUR MILLION AMERICANS WILL BENEFIT FROM THE ECONOMIC SECURITY AMENDMENT
------------------------------------------------------------------------
                                                       Number of out of
                                                      work Americans who
                        State                         would be helped by
                                                          the Kennedy
                                                           amendment
------------------------------------------------------------------------
Alabama.............................................              43,800
Alaska..............................................              17,500
Arizona.............................................              44,700
Arkansas............................................              33,300
California..........................................             562,900
Colorado............................................              56,300
Connecticut.........................................              58,500
Delaware............................................               9,300
DC..................................................               9,700
Florida.............................................             161,900
Georgia.............................................             100,800
Hawaii..............................................               8,100
Idaho...............................................              16,100
Illinois............................................             187,000
Indiana.............................................              71,000
Iowa................................................              29,100
Kansas..............................................              30,100
Kentucky............................................              38,500
Louisiana...........................................              33,000
Maine...............................................              10,600
Maryland............................................              44,700
Massachusetts.......................................             140,700
Michigan............................................             154,200
Minnesota...........................................              58,700
Mississippi.........................................              28,500
Missouri............................................              67,400
Montana.............................................               8,000
Nebraska............................................              16,900
Nevada..............................................              26,300
New Hampshire.......................................               7,300
New Jersey..........................................             190,300
New Mexico..........................................              13,300
New York............................................             332,300
North Carolina......................................             128,100
North Dakota........................................               4,600
Ohio................................................             116,700
Oklahoma............................................              26,900
Oregon..............................................              77,400
Pennsylvania........................................             258,500
Rhode Island........................................              15,800
South Carolina......................................              52,700
South Dakota........................................               1,800
Tennessee...........................................              69,100
Texas...............................................             242,100
Utah................................................              23,200
Vermont.............................................               6,300
Virginia............................................              62,500
Washington..........................................             102,000
West Virginia.......................................              13,600
Wisconsin...........................................              69,100
Wyoming.............................................               4,600
                                                     -------------------
      Total\1\......................................           3,886,100
------------------------------------------------------------------------
\1\Including the part-time and low-wage workers, the total is 4.4
  million. We do not have state-by-state break-downs for those workers.

  Mr. DODD. Madam President, I really cannot believe that at this 
moment in our history we would pass a bill that would not provide help 
to the many, many Americans who need it. Let me also say, because I 
know we are under time constraints--and I am probably not going to have 
a chance to have any extended time for discussion of this later--that I 
will speak briefly on an amendment that I have filed and intend to 
offer later, to reduce the tax cut package to increase resources for 
programs designed specifically to assist middle- and low-income 
families with the cost of higher education--and those are the Hope and 
Lifetime Learning tax credits and the Pell Grant program. And, I also 
would have an equivalent amount of resources go to deficit reduction.
  If we are serious about having this bill contribute to our economic 
growth, then we ought to dedicate these resources to higher education. 
I don't need to lecture anyone in the Chamber about the value of 
providing higher education opportunities for people. Yet, in spite of 
his rhetoric, the President's fiscal year 2004 budget includes cuts in 
the maximum Pell Grant available to low-income students, and he would 
do nothing to expand the Hope and Lifetime Learning credits, which are 
specifically designed to help middle-income families. Nothing could be 
more devastating to a family than to discover that they cannot afford 
to send their son or daughter to college, regardless of their child's 
talent, determination, or ambition. Or others who want to continue 
learning throughout their lifetime of learning, but cannot, because 
instead of helping them, we decide to provide a tax cut that primarily 
benefits the wealthiest among us. For us to say to middle-income 
families that your opportunity to send a child to college is going to 
have to take a back seat to providing a tax break to the top 1 or 2 
percent of income earners is something I don't think we ought to do.
  So I am going to try, with this amendment, to focus our attention on 
higher education. Of course, last week, we discovered the Government 
has reported that the unemployment rate jumped to 6 percent. There are 
economists in the country who believe the unemployment rate, by the 
first quarter of next year, will hover near 8 percent. It is beginning 
to become clear to this Senator that this possibility, as farfetched as 
it may have seemed a few months ago, is not so farfetched at all if we 
don't do something to stem the tide here.
  Nothing in this legislation is designed to do that. Now we are going 
to have, according to the Congressional Budget Office, the largest 
single deficit ever accumulated in the history of the United States of 
America. What a record that is. This is, of course, just 27 months 
after we came off of a period of economic growth, of accumulating 
surpluses, and putting our country on sound fiscal footing. Yet in 27 
short months, we have gone from surpluses to the record high deficits 
ever accumulated in this country's history. That is an incredibly 
stunning record, not to mention the more than 2 million jobs that have 
been lost.
  In the midst of this massive tax break which will go mostly to the 
few elite in the country, we are also going to be raising the national 
debt to a point where it is almost a trillion dollars more than the 
present national debt. If you are out there paying mortgage payments, 
car payments, and student loans, you don't need to have a Ph.D. in 
economics to know that as you accumulate these deficits and debts 
eventually interest rates are going to start to go up.
  When interest rates go up, that is a tax increase on average 
Americans. When you start paying more for that house payment, that car 
payment, that student loan that your child may need in order to receive 
a higher education, that is a tax increase for middle Americans. If we 
do not stem this tide and become more fiscally responsible, then those 
interest rates are going to have a huge impact on literally millions of 
Americans.
  Again, you do not need to have me lecture about that point. I think 
most Americans understand it. We have seen periods in our recent past 
when that has happened. We are going to see it again, in my view, if 
this proposal is adopted as presented.
  Two years ago when we were debating the tax cuts of 2001, we were 
told we could expect almost $6 trillion in surpluses over the next 
decade. Instead, we are now getting record high deficits. Two years ago 
we were told that if we enacted the President's tax cut plan, we would 
virtually pay off the publicly held debt by 2008. We are headed in 
exactly the opposite direction.
  How many more signals do we need to get this Chamber to understand 
that as we are digging this hole deeper and deeper, we need to pull out 
of the hole. Instead, we are just as determined to dig that hole deeper 
to the point where we will be spending years trying to recover from 
this mistake.
  After this Chamber passes part of the President's so-called growth 
plan, and

[[Page 11517]]

after we vote to increase the debt by almost $1 trillion, how many more 
trillions of dollars are we going to have to increase the debt limit to 
in order to make room for this irresponsible tax cut affecting such a 
small percentage of taxpayers?
  Let's consider what breaks people get. Again, I do not have to 
present all of the charts here, but so people understand what I am 
talking about, according to the Urban Institute Tax Policy Center, 
those who have incomes above $1 million will receive, on average, a tax 
cut of $64,400. For those in the middle-income spectrum, their tax cut 
will be $233. That is what we are about to adopt at a time when we are 
driving the deficit hole even deeper; and at a time when we are denying 
an extension of unemployment benefits to the 80,000 people a week who 
have and will be exhausting their benefits.
  It seems to me that we are headed in the wrong direction on both 
fronts. The Kennedy amendment would extend unemployment benefits. The 
very least we ought to do in this Chamber is to say to hard-working 
people: When you are caught up in an economic downturn, Republicans and 
Democrats alike in recent history have extended a hand to these 
families and said: Through no fault of your own, you have ended up in 
that situation. This Congress is not going to ignore you. This Congress 
is not going to pretend you do not exist.
  We are saying nothing about those people.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. DODD. This tax cut is way too excessive, in my view, and will 
benefit a small percentage of income earners, creating deficits from 
which we will spend years recovering as it squeezes our ability to 
provide help to working families and for education. I urge the adoption 
of the Kennedy amendment. I ask for an additional 30 seconds.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DODD. We have 20 hours for debate on a reconciliation bill, which 
may be the most significant debate we are going to have in this 
Congress. Twenty hours--that is all we get to talk about the importance 
of what we are about to do. I am deeply disappointed. We are 
constrained in the Senate of the United States to have a more 
meaningful debate about something as important as this.
  I, again, urge adoption of the Kennedy amendment to at least provide 
relief for those who have lost their jobs and ought to have some help 
to provide for their families.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I ask all Senators to heed the words of 
the Senator from Connecticut. I think he is accurate. I think he is on 
target.
  The amendment before us, of which I am a cosponsor, is very simple. 
The answer of whether it should be adopted is also very easy.
  Getting to the point, the question is, Should we extend unemployment 
benefits to those millions of Americans who do not have jobs and whose 
unemployment insurance is about to expire?
  The provisions in Federal law that give unemployment insurance 
benefits will expire in a few weeks. The number of unemployed people is 
rising. These are people who have lost their jobs not because of their 
fault but because they have been laid off, because the economy is 
anemic. They lost jobs because their employers are laying them off.
  The question is, Should the Congress extend unemployment benefits? 
Should they extend unemployment benefits to these hard-working men and 
women who are not making a lot of money? They are basic wage earners. 
Should we extend unemployment benefits? To ask the question is to 
answer it: Of course, we should.
  I hear from the other side that maybe they will not look for jobs 
because they are getting additional benefits. They are not getting more 
dollars in benefits, they are just getting more weeks during which they 
can receive about $200 a week while they are looking for a job. The 
obvious answer to that charge is these are not good times. Two hundred 
dollars a week is not a lot of money. I daresay no Member of this body 
can live on $200 a week. We are so used to living on more than $200 a 
week. I see the Presiding Officer smiling, knowing there is probably a 
little truth in that. I am suggesting we should do the obvious and 
extend unemployment benefits.
  Another argument I hear against this proposal is that it is not a 
stimulus to extend the period during which people get unemployment 
benefits. Of course it is a stimulus. Those people are going to spend 
that $200-a-week check. Of course, they are going to spend it. 
Economists will tell us that for every $1 of unemployment benefits, 
there is a multiplier effect of $2.15 to the economy; that is, for 
every $1, an additional $2.15 is spent in the economy. It is pretty 
simple.
  I also think it is pretty simple because we are paying for this by 
repealing the top bracket, repealing the acceleration of the reduction 
of the top tier. Some people say: That is a small business bracket. 
Those people are all small business people. We should do this to 
stimulate the economy.
  That is totally wrong. It is totally incorrect. Less than 5 percent--
probably 2 or 3 percent--of the people who receive benefits in the top 
bracket are small businesses. Let me put it differently; 2 to 3 percent 
of small businesses in America are in that top bracket. Just 2 to 3 
percent. Most of the people in the top bracket are not small business. 
They are other people. They are very wealthy people. I have nothing 
against wealthy people getting a tax break. Everybody should get a tax 
break. It would be wonderful if we all could get a tax break.
  We are elected to make choices and set priorities. The economy today 
is not in great shape. This bill before us is designed and intended to 
stimulate the economy by reducing taxes. I suggest the right course 
would be, instead of giving the elite a tax break right now--a lot of 
them tell me they do not want it; they do not need it--take some of 
that money and extend unemployment benefits.
  The PRESIDING OFFICER. The Senator has used 4 minutes.
  Who yields time? The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, we will extend unemployment 
compensation. We will support an extension, though, of current law. We 
will do it before its expiration at the end of May. But this amendment 
goes beyond extending unemployment compensation as it is written in 
current law.
  This is unprecedented for sure, and I also think it is an unjustified 
expansion. There might be legitimate debate on that point, but there is 
no legitimate opposition to a statement that this is unprecedented.
  Also, this extension and this change in law comes at a time when 
unemployment is not as high as it has been in previous recessions. The 
current unemployment rate is 6 percent. That is compared to 7 percent 
at times during the 1990s and more than 8 percent during the 1980s.
  It was in the 1990s at 7 percent, in the 1980s at 8 percent. Those 
happen to be the last two times that Congress provided extended 
benefits.
  I also point out the unemployment rate right now in 23 States is 
lower than it was 1 year ago. When it comes to people who have 
exhausted benefits, this amendment would provide 26 weeks of Federal 
benefits even without regard to the duration of State benefits. So this 
violates an insurance principle that we followed for a long time 
inherent in the unemployment program, and it violates it by breaking 
the link between the time someone has worked and the time that person 
can collect unemployment benefits.
  This amendment additionally would also allow someone who worked as 
few as 20 weeks to collect as much as 26 weeks of federally-funded 
benefits.
  This amendment also deals with part-time workers. In offering this 
amendment, what they forget at the Federal level is that we already 
give States the option of covering part-time workers. So why a national 
policy of covering part-time workers when this has been historically a 
State program that has been financed through some Federal taxation? 
There are a lot of details left to individual States to decide. It is 
not possible for us to legislate at

[[Page 11518]]

the Federal level the conditions that exist in various States for 
deciding whether part-time workers should be included.
  This provision would allow those seeking only part-time work to 
collect unemployment benefits. What this basically means is a worker 
could turn down a full-time job and continue collecting unemployment 
benefits.
  There is a provision of this amendment that changes policy in regard 
to low-wage workers. This is another provision under Federal law where 
States already are given the option of doing this. This provision would 
require States to use what is referred to as an alternative base 
period. That means using the most recent quarter to calculate benefits.
  In 1997, this was offered to the Senate and we voted 85 to 15 to 
overturn a Federal court decision that would have required the States 
to use the most recent quarter. In other words, Congress decided in 
1997 against a court decision doing what this amendment does. We 
decided 85 to 15 to leave it to the respective States, as has 
historically been the case, to make this decision of using an 
alternative base period.
  So as I mentioned, I will support, and I believe the Senate will 
pass, an extension of current law for unemployment benefits before it 
runs out.
  This amendment is paid for in a way that discourages job creation. 
Remember, the fundamental purpose underlying this legislation is to 
give incentive for investment for the creation of jobs. So how is this 
amendment paid for? By attacking small businesses, by delaying the tax 
relief that is in this bill for 80 percent of those who are taxed at 
the 39 percent rate. Remember, we reduce the highest marginal tax rate 
down to the same as the highest corporate tax rate. Why? Because there 
should not be a bias in our tax law against small entrepreneurs, 
unincorporated entrepreneurs.
  As we have been told so often by Joint Tax and by the White House, 80 
percent of the benefits go to small business. Now, that does not mean 
all small business is taxed at the 39 percent level, but by reducing 
this we are taking away a bias against small business. There should not 
be an 11 percent penalty for being an unincorporated small business. It 
is unfair. When we had a lower marginal tax rate for small business at 
28 percent for the top individual rate, as we did after 1986 until it 
was raised, we had a 5 percent differential between the corporate rate 
of 33 percent and the highest individual rate of 28 percent. During 
that period of time, we had an explosion of small business, setting the 
stage for the massive growth we had in the economy in the 1990s.
  What does this amendment do? It will kill the opportunity for job 
expansion that we have prepared in lowering the marginal tax rate for 
self-employed people, doing away with the bias in favor of corporations 
so that where 80 percent of the jobs are created in small business, 
there will be an incentive to create new jobs.
  The National Bureau of Economic Research shows that the surest way of 
expanding small business is from their own equity, by reducing the 
marginal tax rates, which is going to encourage the sort of investment 
that creates jobs.
  The Senators who have offered this amendment are complaining about 
lost jobs, but then this amendment undermines the very provisions of 
the basic bill that will create the jobs we need.
  Obviously, I urge the defeat of this job-killing amendment.
  I yield the floor.
  Mr. LEVIN. Mr. President, I rise to support the amendment being 
offered by Senator Kennedy to extend and authorize additional 
unemployment benefits.
  This is a tumultuous time for millions of Americans. Our economy is 
struggling right now and millions of Americans are down on their luck. 
Businesses and manufacturing plants are closing, the stock market is 
down and most importantly, jobs are being lost. It is critical that we 
in Congress, at a minimum, do what we can to help every day Americans 
hurt by this downturn, especially the increasing number of people who 
are unemployed and having trouble getting back into the workforce.
  There are currently over 8.7 million unemployed Americans--the 
highest number in a decade. Since January 2001, the national 
unemployment rate has risen from 4.2 percent to over 6.0 percent. Since 
President Bush took office, the United States has lost over 2.7 million 
private sector jobs--the most of any President in modern history. The 
downturn has especially hit my home State of Michigan hard. Michigan 
has an unemployment rate of 6.7 percent--among the highest in the 
Nation. According to the Bureau of Labor Statistics, Michigan lost 
17,700 jobs just last month--the most of any State in the country. That 
brings the total number of Michigan jobs lost since the Bush 
Administration took office to over 178,000.
  Earlier this year, Congress extended Federal unemployment benefits 
for an additional five months to June 1, 2003. However, Congress did 
not authorize additional Federal benefits. Therefore, over 1 million 
workers who already had exhausted their 13 weeks of federal 
unemployment benefits and received no benefit from what Congress did 
earlier this year. Now is the time to assist those workers and all 
other Americans who are on the verge of exhausting either their state 
or federal unemployment benefits and in some cases, both.
  It is ironic that during the week the Senate is taking up the 
President's ``Jobs and Growth'' package--the majority is not addressing 
the immediate need for job assistance for millions of Americans. 
Instead of pressing Congress for a ``robust'' tax cut to help the 
wealthiest Americans, the President should be fighting for additional 
unemployment benefits for working families who need them and will spend 
them, stimulating the economy. That is why I support Senator Kennedy's 
amendment to authorize an additional 13 weeks of Federal unemployment 
benefits, including coverage for those one million workers who have 
already exhausted their benefits. Senator Kennedy's amendment also 
expands unemployment coverage to low-wage and part-time workers. 
Finally, the amendment extends the Federal unemployment benefit program 
through November 2003 to accommodate new enrollees.
  This is not just about doing what is right. It is also about doing 
what is helpful to our economy. It is elementary economics that 
providing additional unemployment benefits is a great way to jump start 
our stagnant economy. The money we are talking about here is money that 
will be spent. According to a 1999 Department of Labor study, every $1 
dollar invested in unemployment insurance generates $2.15 in gross 
domestic product. So we are going to be putting money into the hands of 
people who need it, people who will spend it, people who will help the 
economy.
  Over 47,000 Michigan residents have exhausted their Federal 
unemployment benefits as of February of this year. If we fail to act, 
in 2 weeks, over 1.1 million Americans, including nearly 54,000 
Michigan residents, will be without unemployment insurance benefits. 
This is unacceptable, especially given the fact that the Federal 
unemployment insurance trust fund currently has a surplus of more than 
$21 billion. The contrast couldn't be more evident than in this debate. 
Instead of pushing for a huge tax cut sharply slanted to upper income 
folks, I would hope that the Senate will show real leadership and 
support unemployment insurance that benefits working families.
  The President accuses us of engaging in ``class warfare.'' Well, what 
he calls class warfare, I call reality. Under the President's tax cut 
plan, the wealthiest 1 percent of Americans are expected to receive an 
annual tax cut of about $90,000 a year, or a little more than $1700 a 
week. Under the Kennedy amendment, unemployed workers in my home state 
of Michigan would receive a maximum benefit of $362 a week. This bill 
will put money into the hands of people who need it and people who will 
spend it. That's good for our economy and it helps sustain the jobs 
that other people do have. The Senate should unanimously adopt this 
amendment.
  The PRESIDING OFFICER. Who yields time?

[[Page 11519]]

  The Senator from Montana.
  Mr. BAUCUS. Mr. President, I have the highest regard for my friend 
from Iowa, but for him to characterize this as a job-killing amendment 
is just beyond the pale. The fact of the matter is that less than 5 
percent of small businesses are in the top bracket that will be 
repealed under the amendment. That is a very conservative estimate.
  Second, when we are talking small businesses under terms of this 
amendment, we are talking about law firms, we are talking about 
partnerships of all kinds. We are talking about dental partnerships and 
doctor partnerships. When people use the word ``small business,'' it 
conjures up a 15 or 20-person operation that is working hard to make 
ends meet. When we talk about small business, however, we must be clear 
as to which small businesses are in that top rate. Less than 5 percent 
of all small businesses pay that top rate, so we are not hurting small 
business with this amendment, by any stretch of the imagination.
  Second, this roughly 5 percent of small businesses includes the mom-
and-pop small businesses we have all talked about, but also the 
partnerships like law firms and dental partnerships. I do not think the 
latter really conjures up what we are talking about when we talk about 
helping a small business. Maybe we are, but I think most Americans are 
not. That is a fact I want to get in the record, that really so few 
small businesses are in that top rate.
  I ask unanimous consent that the pending amendments be temporarily 
set aside so that the Senator from Arkansas may offer her amendment.
  Mr. DODD. Reserving the right to object, Mr. President, and I will be 
very brief.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. I want to follow up. I know the chairman of the committee 
is here, and I missed a little of the discussion because I had to step 
outside the Chamber with some police officers from my State. I will 
take a minute or so and obviously then move to the amendment of the 
Senator from Arkansas.
  I understand the chairman made a statement about this issue of 
unemployment insurance at some point. I wonder if the distinguished 
chairman of the committee might share with Members when that might 
happen and why we cannot do it now. We know this is a growing problem, 
and we always delay these things. When 80,000 people a week are running 
out of benefits, we have had more than 2 million people lose work since 
the President came into office, why not extend unemployment insurance 
on this bill? It would be a great gesture to the American public. My 
question is, simply, to ask if the chairman of the committee might 
respond.
  The PRESIDING OFFICER. The time on the amendment has expired.
  Mr. GRASSLEY. I ask unanimous consent that immediately following 
action on S. 1054, the Senate turn to consideration of legislation 
introduced by the majority leader or his designee to extend emergency 
unemployment benefits until November 30, 2003; that the bill be 
considered as read three times and passed; further, that the motion to 
reconsider be laid upon the table, with all this to occur without 
intervening action or debate.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. This is the first I have heard this. I don't know what 
this is all about. Pending a better understanding of the request, I 
respectfully object.
  The PRESIDING OFFICER. The objection is heard.
  Is there objection to setting aside the pending amendment?
  Mr. DODD. Further reserving the right to object, I ask unanimous 
consent that I be allowed to proceed for 1 minute.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DODD. I want to know why this could not be adopted as part of 
this passage. We have an amendment here right now to do it. This is the 
time to do it. We all care about this and have people in every State 
adversely affected. Why wait another series of weeks? Why not do it 
right now and adopt the Kennedy amendment and move this issue beyond us 
and deal with the rest of the bill? That is my question to my 
distinguished chairman.
  Mr. GRASSLEY. Mr. President, I will answer his question, if I am 
permitted.
  Two reasons: One, this amendment is not germane to this bill; two, it 
goes to the expansion of unemployment benefits as opposed to extension 
of existing benefits.
  Mr. DODD. I further understand that the bill the chairman is talking 
about would not expand this at all but really just extend it; is that 
correct? So we will have a debate about that, obviously.
  Mr. GRASSLEY. Yes.
  Mr. DODD. I thank the chairman for responding.
  I am sad in a way, and maybe the amendment will be adopted by 
majority if that is the case and we can move beyond this.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BAUCUS. I ask unanimous consent that the pending amendment be set 
aside and the Senator from Arkansas be recognized to offer her 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 578

  Mrs. LINCOLN. Mr. President, with the amendment set aside, I call up 
my amendment.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Arkansas [Mrs. Lincoln], for herself and 
     Mr. Rockefeller, Mr. Bingaman, Mr. Breaux, Mr. Daschle, Mr. 
     Levin, Ms. Cantwell, Mr. Pryor, Mr. Kerry, Mr. Kennedy, and 
     Mr. Dodd, proposes an amendment numbered 578.

  Mrs. LINCOLN. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

     (Purpose: To expand the refundability of the child tax credit)

       At the end of subtitle C of title V, insert the following:

     SEC. __. FURTHER EXPANSION OF CHILD TAX CREDIT REFUNDABILITY.

       (a) Expansion of Child Tax Credits.--
       (1) In general.--Clause (i) of section 24(d)(1)(B) 
     (relating to portion of credit refundable), as amended by 
     section 106(b) of this Act, is amended to read as follows:
       ``(i) the sum of--

       ``(I) 5 percent of so much of the taxpayer's earned income 
     (within the meaning of section 32) as is taken into account 
     in computing taxable income for the taxable year which 
     exceeds $5,000 and is less than $13,250, and
       ``(II) 15 percent of so much of the taxpayer's earned 
     income (within the meaning of section 32) as is taken into 
     account in computing taxable income for the taxable year 
     which is more than $13,250, or''.

       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years beginning after December 31, 
     2002.
       (3) Application of EGTRRA.--The amendment made by this 
     subsection shall be subject to title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 to the same 
     extent and in the same manner as the provision of such Act to 
     which such amendment relates.
       (b) Delay of Dividend Exclusion.--Subparagraph (B) of 
     section 116(a)(2) (relating to partial exclusion of dividends 
     by individuals), as amended by section 201 of this Act, is 
     amended by striking ``2007'' and inserting ``2010''.

  Mrs. LINCOLN. I thank all of my colleagues for their attention today 
because I believe I brought something to the floor that is of the 
utmost importance to American families.
  I compliment the chairman of the Finance Committee. Having worked 
with limits on a multitude of issues, he is always reaching out and 
working hard with all the members of the Finance Committee. I applaud 
him for his efforts in working with me early in the committee to 
accelerate the child credit we have in this stimulus package. The 
acceleration of the child credit is very important in terms of reaching 
out to families and providing them the utmost resources to be able to 
care for their families, to be able to do what they need to do not only 
in taking care

[[Page 11520]]

of their families but playing a role in stimulating this economy.
  We certainly know that with our businesses and industries operating 
at roughly 70 percent, it is critical, if these industries are going to 
create the jobs we want created for the sustainability of growing this 
economy, that they have a demand. They are going to need people 
demanding their products and services, and that will be critical. The 
way to do that is to provide families the resources and the means with 
which to provide for their families.
  That acceleration we provided in the committee went a long way in 
doing that. My hope is we will continue to move in that fashion, in the 
right direction of providing families the resources they need, the 
hard-working American families who are out there today working hard to 
provide for their families.
  This amendment does that through the expansion of the child credit. 
Basically, what we do is expand the child credit refundability by 
lowering the earnings threshold to $5,000. This is a reasonable request 
in light of what we are talking about--again, assistance to families in 
order to raise their children and provide for their needs, as well as 
stimulating the economy.
  I point out to my colleagues, there are 8 million children from 
working families in this great country at the very bottom of the income 
scale who get no benefit from the current child care tax credit, 8 
million children in this country we are trying to raise in working 
families who get no benefit from this child tax credit; 4.4 million of 
those 8 million children would benefit from the child credit under the 
amendment I have offered today.
  By providing tax relief to those who need it the most, our amendment 
will have a direct and meaningful stimulative effect on the economy.
  I am joined in this amendment by several other cosponsors: Senators 
Rockefeller, Bingaman, Breaux, Daschle, Levin, Cantwell, Pryor, 
Kennedy, Dodd, and I think many others, when they realize what we are 
trying to do and the effect we can have on their States and, more 
importantly, the working families who are out there every day trying to 
make ends meet. The families of these kids play by the rules. These are 
individuals who are working. They go to work every day at extremely low 
wage jobs. They pay significant payroll, State, and local taxes, excise 
taxes, and property taxes. Oftentimes they struggle to make ends meet, 
yet they get no benefit from the child tax credit.
  Now, I hope my colleagues will indulge me for just a moment. One of 
the things many reflect on is that raising children is probably one of 
the most important and expensive undertakings that anyone has. We do it 
for good reason. We talk about what a great nation we live in. We talk 
about how wonderful it is to be a part of the greatest country on the 
face of this Earth. Then we think about the face of our country 
tomorrow. Who will be the face of this country tomorrow? What will it 
look like?
  The face of this country, tomorrow and in the future, will be shaped 
by how well we raise our children today. That is what I am asking my 
colleagues to focus on. It is not just our children. I don't just worry 
about my children and their well-being. I worry about the other 
parents' children who are out there, who will be the coworkers with my 
children, who will be the leaders of tomorrow. They will be the face of 
this country when we are working in a global economy with multitudes of 
nations across the globe. These are the children we are raising today.
  My colleagues, we have an opportunity today to give a hand to these 
parents in raising these children with a simple child credit, a 
refundable child credit. These are people who are hard-working. To be 
eligible, they have to be in a job. They have to meet an earnings 
limit. They have to have children. We are not just giving a freebie; we 
are reaching out to these hard-working parents and saying let us help 
you shape the face of this country tomorrow.
  Just one more indulgence. As I talk about raising children and the 
importance of that face of tomorrow, I reflect on the time I have spent 
in my State visiting with and shadowing some of our low-income workers, 
particularly some single moms who have been out there working. They are 
working parents with children in childcare, struggling with challenges 
of childcare and transportation. There are multitudes of challenges 
they face.
  I look at what I spent my time doing during the Easter break, during 
the 2 weeks we are off from Congress, home in our States. I spent a lot 
of time on the road, visiting with children, parents, chambers of 
commerce, Rotary groups, development groups, planning districts--all of 
those different groups. But I also switched my hat around for a few 
days and spent some time myself out there as a mother, as a parent.
  I went to the store after looking at the fliers and seeing where the 
sales were, and I thought about what I did with my time and my 
resources. I thought that with two growing boys, age almost 7, I had to 
replace wornout blue jeans, wornout tennis shoes, that I wrote a check 
to my school for their lunchroom tab, the fact I wrote a check to make 
sure they would be on the Little League team and made sure they had 
their uniforms. I looked at the other things, the county summer 
programs I wanted to include them in so they would have good 
activities, exercise, and grow just like any 7-year-old little boy 
ought to be growing.
  I looked at what we did. We didn't go to Disney World. We didn't do 
anything expensive. They went fishing with their grandfather and spent 
some time with their cousins and grandmothers. But I looked back at the 
time and the resources I spent in molding and shaping those two little 
boys. Let me tell you, it was no different than any other working mom.
  If we want to stimulate this economy, if we want to develop a nation 
with the kind of leadership and future I think everyone in this body 
wants us to have, then it is absolutely critical that we look at 
expanding that child credit to these working families.
  Under the current law, the President's proposal, and the Finance 
Committee bill, a working family with earned income of $10,000 gets no 
benefit from the child credit. Our amendment today would give such a 
family with two children a total benefit of $500. This does not seem to 
be much money to many of us perhaps, but it amounts to a significant 
increase in the amount of money available to these families to provide 
for the most fundamental needs for their children. Again, we are 
talking about basic needs that also will drive the economy. These 
people are not going to be able to participate in stimulating the 
economy if they don't have the extra resources they need. These are 
working individuals.
  Children have a variety of needs at a variety of ages, the most 
fundamental of them being shelter, food, clothes, education, and health 
care, and $500 can make a substantial difference to a family with an 
earned income of $10,000 or less. This sort of benefit can go a long 
way in helping these families raise their children, encouraging them to 
excel in their jobs and to set a good example.
  It is the least we can do for these struggling and impoverished 
families who, again, are working hard every day earning money and at 
the same time trying to care for their children. They have the same 
kind of love and compassion, the same kind of ability to give them the 
basic needs that every one of us tries to have every day.
  I just implore my colleagues, please look at this opportunity we have 
before us today, an opportunity to reach out to working American 
families who are struggling day in and day out to do what is right. 
They are struggling to do what is right by their children, perhaps 
simply out of their own compassion and love for their children, not 
knowing that we as a nation are depending on those children to be the 
leaders and the providers, the employees of tomorrow.
  I ask my colleagues to take a look at this amendment. Recognize all 
we are doing is postponing the 20 percent exclusion on dividends--only 
postponing it for 3 years, postponing that exclusion in order to mold 
and shape the future of this country.

[[Page 11521]]

  I would like to share with my colleagues in just a few of my 
neighboring States what they would see. Arkansas would see the number 
of added kids, when we move to that $5,000 threshold, an increase in 
Arkansas of 60,000 children we could cover. I look around at my 
neighbors: Mississippi would see 100,000 children additionally covered. 
In Tennessee, you would see 108,000 children eligible who would not be 
eligible otherwise. In the State of Texas, my neighbor to the south, 
you would see 467,000 children added with a benefit if we passed this 
amendment.
  I implore my colleagues to really take a look at what our purpose is 
today, what we have been striving to do. Let's not just try to 
stimulate the economy but use the opportunity we have in growing this 
economy to grow this great country. I daresay there will not be anyone 
in this Chamber who could argue with me that the future of this country 
lies in the future of our children.
  Once again, we have a tremendous opportunity. I hope my colleagues 
will realize that 4.4 million of the 8 million kids who are left out 
under the current bill would begin to benefit from a child credit under 
this amendment. By providing this tax relief to those, again, who need 
it the most, we will have a direct and meaningful stimulative effect on 
the economy. Let me tell you, just as I did as I turned my hat around 
and became a mother during my break time, these families will spend 
those dollars. They will spend them on our greatest asset this country 
could possibly have, and that is our children.
  I thank you for the time. I yield the floor and encourage my 
colleagues to support my amendment.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, we all owe the Senator from Arkansas a 
debt of gratitude for a lot of leadership she has shown in this area, 
not only on the present bill that is before us, because she did get 
some amendments adopted in committee. She voted for our bill on final 
passage. I appreciate very much that being the case because it made it 
a bipartisan piece of legislation. But also, she has expressed the same 
concern because she was a member of the committee, 2 years ago, when we 
passed the existing tax law that we are adjusting now to bring it up to 
date and fully implement it in 2003, rather than as we decided 2 years 
ago, to implement it over a 10-year period of time. She was very active 
in these areas in that basic legislation.
  So she is very consistent in expressing concerns about families of 
low income, and particularly low-income families with children. I wish 
I could do all the things she asked us to do, but we have to craft 
legislation that is pretty well balanced. One of the largest parts of 
our bill is the $95 billion that is provided for families with 
children.
  Obviously the Senator from Arkansas would like to make this more 
generous. I wish we could. But I don't feel we can. The provisions that 
are in this $95 billion have been, to a great extent, because of the 
work of the Senator from Arkansas. It includes expanding benefits for 
low-income families, a provision that is included in great part because 
of the hard work of the Senator from Arkansas. Moreover, this 
legislation creates a new benefit.
  But I think that the exception I take to her amendment is just 
basically because it hurts the balance of this bill between investment 
and spending.
  I appreciate the Senator's work on these matters. It would be subject 
to a budget point of order. I will raise that at the appropriate time. 
I will not do it taking exception to policy but taking exception to 
what can be accomplished at one time, and the fact that we are trying 
to have a balanced package between investment and spending. I think it 
would put us over the balance on the spending side.
  For that reason, I will raise that point of order but do it without 
prejudice.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I am going to yield to the Senator from 
Oklahoma what time he might consume either on amendments or on the 
bill.
  Mr. NICKLES. Mr. President, I thank my friend and colleague, the 
manager of the bill, chairman of the Finance Committee. I want to make 
a few comments concerning unemployment compensation.
  It is my understanding that the chairman said he would not object to 
and he is trying to facilitate a clean extension of the current 
unemployment compensation program. That is what the Senator from New 
York, Senator Clinton, and I did twice on this floor. We did it last 
December and early this year. The first piece of legislation we passed 
this year was the clean extension of the unemployment compensation 
program. That is a 13-week Federal program.
  Senator Kennedy is being consistent. He is trying to make a 13-week 
program into a 26-week program. That costs $12.7 billion. A clean 
extension costs $5.6 billion. We will agree with a clean extension. We 
will not agree with doubling the program.
  Keep in mind this is a 13-week program. Current law is a 13-week 
Federal program on top of up to 26 weeks of State benefits. That is a 
total of up to 39 weeks. That is a total of 9 months. If we adopted 
Senator Kennedy's amendment, that would be a 26-week State program, and 
a 26-week Federal program, the second part of it paid 100 percent by 
the Federal Government. That is a year. In addition to that, there are 
additional weeks for high unemployment States.
  This is not going to pass. It was tried several times on the floor of 
the Senate last year and it never passed. It is not going to pass this 
year. We are not going to double the program. We will be happy to work 
with our colleagues to extend the current law. We will not double or 
triple this program.
  I appreciate the work of the chairman of the Finance Committee and 
other Members who want to truly give assistance to people who are 
unemployed and who need temporary assistance. But we don't want to turn 
it into a year-long program. If we did that, frankly, the trust fund 
would be running out of money if another extension was passed. That 
would be very foolhardy.
  I also tell my colleagues that a budget point of order lies against 
Senator Kennedy's amendment. A germaneness point of order lies against 
Senator Kennedy's amendment. We should be trying to work to create 
jobs. That is really the essence of what the President's proposal is--
and the chairman of the Finance Committee--to help create jobs and not 
just write checks for the unemployed but create an environment that 
will be more conducive towards investment, more conducive to encourage 
people to make investments to create jobs. That is what we are trying 
to do.
  We do that several different ways. One is to reduce tax rates. 
Somebody says that is a tax cut for the wealthy. I disagree. By the 
time we are finished, the maximum rate is 35 percent. I believe that is 
still more than a third--still a lot more than 31 percent--which was 
the maximum rate when President Clinton was elected.
  In 2001 they cut taxes for the wealthy and reduced the maximum rate 
from 39.6 to 38.6, 1 percentage point. President Clinton raised it, and 
many in this Congress raised it from 31 percent to 39 in 1 year 
retroactive. By the time we are done, the rate is going to be 35 
percent, which is still almost 20 percent higher than it was when 
President Clinton was elected.
  I just want to make a few additional points. Also in the chairman's 
mark we have expensing for small business. They will be able to expense 
items up to $75,000. We are looking to maybe even accelerate that 
similar to a provision in the House. That will create an

[[Page 11522]]

incentive for small business so people can write off that investment in 
the year that investment is made instead of amortizing over years. That 
will create jobs because more people will make that investment.
  We are also talking about eliminating this very unfair double 
taxation on dividends. Why should we tax distribution of corporate 
profits at the second highest rate in the world? That makes no sense 
whatsoever.
  The President has proposed that we eliminate double taxation. 
President Carter said in the past we should eliminate the double 
taxation of corporate dividends. I hope we will be able to do that, and 
I expect we will be presenting an amendment to enhance or strengthen 
the dividend proposal that is before us today which would actually 
eliminate the double taxation of dividends. We tax dividends now at the 
second highest rate in the world, higher than France, Belgium, and 
Italy. We don't need to do that. We can fix that in this bill today. By 
doing so, we will be encouraging a much better environment for 
investment, and encourage, I think, a much greater prospect for the 
stock market. I think the stock market would improve substantially and 
as a result, therefore, there would be more equity, more equity 
investments, more private sector jobs. That ultimately should be our 
goal.
  I urge our colleagues not to be mislead by Senator Kennedy's 
amendment. Let's pass a clean extension of the unemployment 
compensation program. We can do that by unanimous consent. We passed 
the previous one by unanimous consent, or we can have a recorded vote. 
We can do that outside the reconciliation bill. We can do that and have 
it on the President's desk, and extend the present law.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, I yield myself 2 minutes off of the 
bill.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SARBANES. Mr. President, I want to respond to the Senator from 
Oklahoma, and urge my colleagues to support the Kennedy amendment.
  What are workers to do in terms of supporting their family if they 
exhaust the 39 weeks of unemployment insurance benefits that they are 
eligible to receive? Senator Kennedy's answer is that under the current 
circumstances we provide an additional 13 weeks of benefits.
  The labor market is not improving. It is worsening. The unemployment 
rate is rising, not falling. This notion that there are jobs to be had 
does not square with the facts. The economy is continuing to lose jobs. 
We lost 48,000 jobs last month. We have lost over half a million jobs 
already this year. The unemployment report stated that almost 9 million 
workers were unemployed in April. Just under 2 million workers have 
been unemployed for 27 weeks or more. The number of long-term 
unemployed is as high as its been since January 1993.
  The average duration of unemployed has risen to 19.6 weeks. This is 
the longest average duration reported during this recession, and it is 
the highest level in almost 20 years. What are these people to do?
  The Kennedy amendment is very simple. It says that providing some 
continued support for those who have lost their jobs through no fault 
of their own is more important than providing some of these tax cuts 
that are proposed in this legislation.
  It makes sense for the individuals, and it makes sense for the 
economy. We are talking about trying to stimulate the economy. Extended 
unemployment insurance benefits are scheduled to stop and that will 
withdraw that much purchasing power out of the economy.
  So I urge my colleagues to be supportive of this amendment. We face a 
worsening economic situation. Unemployment is rising. The opportunities 
in the job market are shrinking. We need to provide help to our workers 
and to their families to help them through this very difficult period. 
The Kennedy amendment seeks to do that.
  The unemployment insurance trust funds have surpluses of almost $20 
billion.
  The PRESIDING OFFICER (Ms. Collins). The Senator's time has expired.
  Mr. SARBANES. Madam President, I yield myself 30 more seconds.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. SARBANES. The unemployment insurance trust funds have surpluses 
of approximately $20 billion. These moneys were paid into the trust 
fund for the announced purpose of paying unemployment insurance 
benefits in an economic downturn. Now we have an economic downturn. We 
have people out of work. We have the job market worsening, not 
improving. These surpluses ought to be used for the purpose for which 
they were intended; and that is, to provide extended unemployment 
insurance benefits. And those benefits ought to come ahead of any of 
the tax cuts.
  I urge my colleagues to support the Kennedy amendment.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Montana.
  Mr. BAUCUS. Madam President, I ask unanimous consent that the pending 
amendments be temporarily set aside so the Senator from Washington can 
offer an amendment.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The Senator from Washington.


                           Amendment No. 577

  Ms. CANTWELL. Madam President, I call up amendment No. 577.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Washington [Ms. Cantwell], for herself, 
     Mr. Nelson of Florida, and Mr. Baucus, proposes an amendment 
     numbered 577.

  Ms. CANTWELL. Madam President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The amendment is as follows:
  Ms. CANTWELL. Madam President, I rise today, along with my 
colleagues, Senator Nelson of Florida and Senator Baucus, to offer an 
amendment to revise and extend the research and development tax credit.
  I know my colleagues will be familiar with this amendment, but I want 
to clarify three things this amendment does. First, it will extend the 
research credit through June 30, 2014, which is the end of this 
reconciliation period. Second, it will increase the rates of the 
alternative incremental credit; and third, it will create a new 
alternative simplified credit for qualified research expenses.
  This language is identical to the language that was originally 
included in S. 664, introduced by Senator Hatch from Utah and 
cosponsored by 27 bipartisan Senators. The amendment pays for this tax 
credit by eliminating the underlying legislation's section reducing the 
dividend tax credit.
  Since its increment in 1981, the research tax credit, I believe, has 
demonstrated that it is a powerful incentive for companies to increase 
research spending. The tax credit lowers the cost of doing research in 
the United States, so it encourages companies to continue to make 
investments in critical R&D. The bottom-line benefit is that research 
and development creates new jobs in the United States.
  The current R&D tax credit is expected to expire on June 30, 2004. 
Many of my colleagues know we play this annual game of continuing to 
say the R&D tax credit is important, but not renewing it on a permanent 
basis, thereby saying to companies and organizations: You don't know 
whether you will actually get this research credit or not. It is 
important for companies to have access to this information because the 
kind of planning it takes to do research and development, to increase 
productivity in America, is not necessarily done in 1 year or 2 years. 
The major investments in nanotechnology and biotechnology, in software, 
and in the computer sciences

[[Page 11523]]

take several years of investments. So what we are talking about is 
giving businesses the predictability they want to see in research and 
development so they can move ahead.
  The long-term nature of these research projects, I believe, is 
something Congress should recognize today and make part of a priority 
package for reinvigorating America. This is a tried and true program, 
again, for creating jobs in America.
  In this tax cut bill--we are trying something that is new, 
effectively saying, let's cut taxes on dividends for individuals, and 
hope it trickles down to create jobs in America. We know the R&D tax 
credit works--it works, and it works effectively.
  The point I want to make to my colleagues is, what we need to 
understand, is the changing nature of businesses today in an 
information economy. So many of the businesses that have been the great 
engines of growth in the 1990s are companies that now spend 27 percent 
of their overall dollars on research and development. So research and 
development has become a bigger percentage of a company's overall 
plans, and predictability about that research and development has 
become more important.
  That is why two years ago Federal Reserve Board Chairman Alan 
Greenspan told a Senate Budget Committee:

       Had the innovations of recent decades, especially in 
     information technologies, not come to fruition, productivity 
     growth during the past five to seven years, arguably, would 
     have continued to languish at the rate of the preceding 
     twenty years.

  So here was someone in charge of advising us on Federal investment 
and tax policy basically saying these companies have been able to 
invest in R&D, and have gotten us to that productivity rate we are so 
interested in. So why aren't we including that in this package--
something we know is tried and true, something we know many 
organizations have come before us to argue for, asking, why not make 
this permanent? So in my amendment, we expand that tax credit through 
June 2014--which will help the economy turn around.
  I would like to enter into the Record comments--I have no idea where 
my colleague will be on this particular amendment, but I would like to 
enter into the Record, or reenter into the Record, I guess--comments 
from my colleague from Utah, who I think spoke eloquently on this 
particular issue. As my colleague from Utah said:

       As it stands, companies have to take account of the fact 
     that Congress could allow the credit lapse for a few months, 
     as it did a number of years ago. So companies hedge their 
     bets, they spend a little less on R&D, and our economy 
     suffers as a result. By contrast, permanence helps planning. 
     The sooner we make this permanent, the sooner companies can 
     begin to enlarge and expand their research and development 
     units, and the sooner their innovations will strengthen 
     economic growth.

  He quoted a variety of studies that I think are very important. He 
went on to say:

       A permanent extension of this credit may seem costly in 
     terms of lost revenue. However, when you consider the value 
     this investment will create for our economy, it is a bargain. 
     In fact, one study estimates a permanent research credit 
     would result in our gross domestic product increasing by $10 
     billion after 5 years and by $31 billion after 20 years.

  The Senator is quoting a study and analysis of various economists who 
are saying this is really how we get to productivity in our economy. I 
am quoting the Senator because I believe in what he said.
  I understand my colleagues may not think that now is the time for 
this particular amendment. I argue that it is exactly the time for this 
amendment because let's think about it. Who has created jobs in the 
last decade? Who has stimulated our economy to move forward? It is a 
lot of companies that have invested in R&D. It is the Microsofts. It is 
the Amazons. It is the variety of companies from my State and others 
that have made the investments which increase the productivity of their 
workforce, where they can then hire new people as new products and 
services are delivered.
  That is something with which we have had good experience. I want to 
get back to 3.5-percent economic growth. I know the economic engine 
that will take us there will be these companies and corporations that 
know about producing product and services in an information age 
economy. What they tell us is important to them, is making permanent 
the R&D tax credit. They say this because there is currently no 
certainty--they come to us every few years to try to understand whether 
we are going to give them these tax credits.
  I ask unanimous consent to print in the Record a statement from the 
R&D Credit Coalition.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

            Research Equals Jobs Growth and Economic Growth


  now is the time to strengthen and make permanent the r&d tax credit

       Productivity growth in recent years has been driven by the 
     combination of accelerated technical progress and the 
     resultant investment in tangible capital assets, research and 
     development, human capital, and public infrastructure.
       Technological innovations have accounted for more than one 
     third of our nation's economic growth during the last decade 
     and are critical to sustained growth in the future.
       With government support, private investment in R&D would 
     fall short of the socially optimal amount. (Congressional 
     Research Service, ``Small Business Tax Relief: Selected 
     Economic Policy Issues for the 107th Congress'' (RL31052))
       The research credit creates jobs. More than 90 percent of 
     the costs eligible for the credit are salaries and wages paid 
     to researchers. The only way for a company to increase its 
     credit is to increase its R&D payroll in the U.S.
       First authorized in 1982, the credit has been reauthorized 
     8 times (with a gap from June 1995 to June 1996). The current 
     credit expires in June 2004. However, its effectiveness is 
     limited because businesses cannot rely on it in their long-
     term planning, and most R&D projects are long-term.
       In order to provide stability and broaden the reach of this 
     proven incentive, Congress should make the credit permanent, 
     increase the rate for the alternative incremental credit 
     (AIRC), and provide an alternative simplified credit 
     calculation to induce even more research-intensive businesses 
     to undertake additional research spending.
       A bolstered and permanent R&D tax credit is essential to US 
     competitiveness. In a global economy, many companies can 
     choose where to conduct their R&D. A 2000 study based on OECD 
     data that measures the impact of government fiscal support 
     for R&D shows that Spain, Portugal, the Netherlands, Canada, 
     Australia, and Japan each provide more generous--and 
     permanent--fiscal incentives for R&D investment than those 
     provided for by the United States.
       Private investment in R&D results in new medicines, medical 
     technologies, cleaner manufacturing technologies, advanced 
     weapon systems and other tools in the war on terror.

  Ms. CANTWELL. They write:

       Growth in our high tech economy depends on solid R&D, and 
     there is no good reason to delay making the credit permanent. 
     A permanent tax credit will go a long way to providing the 
     planners and investors the certainty that they need.

  Another document by that same coalition states that research jobs 
that are created by this R&D are quite significant; that more than 90 
percent of the costs eligible for credits from the R&D tax credit go 
directly into salary and wages of researchers. So the only way for the 
company to go ahead and increase the credit is to get an R&D payroll. 
That is what we are talking about, getting the R&D payroll.
  We are sitting here discussing how we are going to move forward. I 
know my colleagues have a variety of ideas. We all probably have ideas 
that we think are an avenue or path within this tax proposal that will 
be effective. I know as somebody who has been in the private sector, 
has seen a company grow from 10 people to 1,000 people in a short time, 
the major focus of that company was in research and development.
  Let's turn our attention to those very companies that we think are 
the basis for our future. We still see great growth and opportunity in 
medical devices and research. We see great opportunities in 
biomedicines, as I mentioned, in nanosciences, in computing sciences, 
in supercomputing. We see great opportunity in energy technology, in 
the new energy economy we think will be so important. We certainly see 
from the State of Washington how the great investment in

[[Page 11524]]

software and communications technologies can move our country forward.
  Let's take this amendment that I believe is a bipartisan amendment 
supported by many of my colleagues and say that this is a priority. 
Let's not make these organizations, which have been the engine of job 
creation, continue to come back to us as we pass the largest tax cut 
without including something that the very job creators have told us 
they need to move forward.
  I urge my colleagues to support this amendment. Let's make the 
research and development tax credit permanent.
  I retain the remainder of my time.
  The PRESIDING OFFICER. Who yields time?
  Mr. BAUCUS. Will the Senator from Washington yield me 10 minutes?
  Ms. CANTWELL. I yield the Senator from Montana as much time as he 
needs.
  Mr. BAUCUS. Madam President, the R&D tax credit has been an issue 
before us for quite some time, almost as long as I can remember since I 
have been in the Senate. The basic questions are, Should we extend the 
R&D tax credit and, second, should we make it permanent? Much too often 
the Congress has decided, yes, to extend the credit, which I agree 
with, but not to make it permanent. For the life of me, I cannot 
understand why we have not made this credit permanent.
  I have introduced legislation, bipartisan legislation, which Senator 
Hatch and myself introduced, to make the R&D tax credit permanent. 
Similar legislation has also been introduced in the other body by 
Congresswoman Nancy Johnson and Congressman Robert Matsui, along with 
other members of each of their parties. This is bicameral. It is 
bipartisan. We believe very strongly that the research and development 
tax credit should be made permanent. In fact, there are about 28 
sponsors of our legislation in the Senate. It is about evenly divided 
between both sides.
  I would like to make a couple of points. The very bottom line is, 
this amendment will very much help the American economy. Making the R&D 
tax credit permanent will give U.S. businesses, particularly in the 
technology sector, the confidence that those companies can invest in 
research and development and not have to keep guessing whether Congress 
is going to extend or not extend this tax credit.
  I can remember years past, sometimes we would extend it and other 
times the Congress would not extend the R&D tax credit. There would be 
a hiatus. I have forgotten how long those gaps were, but, as I recall, 
they were in the nature of 8 months, 10 months, something like that. 
Technology companies were wondering, is Congress going to extend the 
credit? They have in the past. Maybe they will in the future--but will 
they? This causes great uncertainty in the business world.
  The R&D tax credit has a proven track record. It lays the foundation 
for technological innovation which in turn is an extremely important 
driving force in the American economy.
  Most economists look to productivity gains. When there are 
productivity gains in the economy, the economy grows. When we have had 
high productivity gains, our economy has done quite well. In fact, it 
is important to recall the words of Chairman Alan Greenspan of the 
Federal Reserve who said, the reason why our economy has continued to 
grow so well is because of advances in technology that occurred in 
America and also in the world, which dramatically increased 
productivity in our country. This is one of the main reasons the 
economy grew at such a rapid rate in the 1990s.
  Granted, some of that was, as the Chairman would say, irrational 
exuberance. There was a bubble in effect at the time. There were too 
many people investing because the idea sounded good, without looking 
closely and directly at the bottom line, whether it was a good 
investment or not. Nevertheless, it is very clear that technology was a 
driving force in the 1990s.
  There is extensive research showing that tax credits are a very cost-
effective way to promote research and development. The General 
Accounting Office, the Bureau of Labor Statistics, the Congressional 
Research Service, the National Bureau of Economic Research, and many 
others have found significant evidence that the R&D credit stimulates 
additional domestic R&D spending by U.S. companies. Perhaps more 
importantly, the R&D investment tax credit benefits American companies 
and American workers.
  A full 75 percent of the R&D credit dollars are used for salaries of 
employees associated with R&D activities. These are good paying jobs. 
These are not service industry jobs at the local fast food store. These 
are very high paying jobs.
  Seventy-five percent of the R&D tax credit dollars are used for 
salaried employees associated with R&D activities. R&D activity creates 
some of the most intellectual, stimulating, high-paying, high-skilled 
jobs in the country, encouraging individuals to pursue advanced science 
and math degrees in order to obtain these job opportunities. That 
clearly is a big plus for our economy. They create more disposable 
income for employees which provides additional indirect returns to the 
economy.
  There are ripple effects. Innovations achieved through R&D make a 
company much more productive, enhances its competitiveness. Downstream 
companies are also helped. Once a company develops a new product 
because of research, in most cases, downstream companies get benefits 
as well--to say nothing of the national security benefits. The more our 
technology companies engage in research and development, the more 
likely it is that we are going to have technological advances and 
developments that help our national security. That, too, is a given.
  There is no doubt that if R&D is going to decrease generally, 
national security is also going to decline. Did you know that the 
United States lags far behind other countries in giving incentives to 
businesses to invest within its own borders? Most of our trading 
partners offer very generous tax and nontax incentives to encourage 
companies in their countries to invest in R&D. These incentives lower 
the cost of investing in R&D outside of the United States and give 
companies receiving these benefits outside the United States a 
competitive advantage over U.S. companies that don't benefit from 
similar incentives.
  In 2000, the United States ranked ninth behind other nations, in 
terms of the amount of tax credit allowances for business R&D spending 
at large manufacturing firms. Countries that provide more generous R&D 
tax benefits than the United States include Spain, Canada, Portugal, 
Austria, Australia, the Netherlands, France, and Korea.
  This disparity encourages U.S. companies to locate more R&D 
activities offshore, resulting in a permanent loss of technology 
advancements, loss of jobs, and a loss of industrial innovation in the 
United States. Once R&D moves offshore because of other countries 
giving a tax comparative advantage, then what happens? Then companies 
tend to manufacture in those same locations and often use available 
labor in those markets, rather than American workers. Once you are in a 
location for a period of time, you are more likely to stay. You learn 
the procedures and the ropes and you feel comfortable. The country 
starts to be comfortable with you and they start giving you more 
incentives to stay there. It starts to cascade and go downhill.
  I remember years ago, in Saudi Arabia, I was talking to officials 
there, and the big question was, Who is going to provide the technical 
advice in setting up a phone system in Saudi Arabia? Is there going to 
be a big German company, such as Siemens, or an American firm? Which 
firm will provide the technological specifications for a telephone 
system in Saudi Arabia? Well, guess what happened. A U.S. company lost; 
the big German company won. What is even more important about that? 
Guess who built the telephone system? You got it, the German company.
  In this case, I am talking generally about R&D going offshore. Once 
your foot is in the door offshore, there is a strong likelihood that 
there are going to be other benefits that will accrue to

[[Page 11525]]

those other countries, not to the United States.
  The timing of this proposal is very important. There is new data 
compiled for R&D Magazine that projects that U.S. companies spending on 
R&D will be mostly flat this year, 2003. This makes for flat growth for 
the second year in a row. This compares with 2001, when R&D spending 
grew by 5 percent over the previous year. Investment in R&D is not a 
function of simply economic uncertainty. Businesses often invest less 
in R&D because of the expense and the long-term planning requirements 
and the difficulty of capturing all or some of the returns from the 
investments.
  Many economists generally agree that without government support, 
private sector investment in R&D often falls short of the optimal level 
of spending necessary to provide maximum benefits to the U.S. economy. 
There has to be some government assistance. I might add that other 
countries certainly provide a lot more government assistance to their 
companies than we Americans do for our own U.S.-based companies--at 
least in the area of R&D.
  One can debate the degree to which there should be any government 
support to the private sector. I believe there should be support in 
some cases. In this case, when it comes to R&D, it is clear that we 
want to maintain productivity advantages, technological advantages, and 
good jobs for American workers. We want to be as competitive as we can 
be in the world because that benefits the United States not only in the 
short term, but very much in the longer term.
  Investments by U.S. businesses in research and development can prove 
very costly over time. Leading edge competitors in Europe and Japan 
continue to gain ground.
  To sum up, we are presented with a great opportunity. What is it? 
That opportunity is to make our current R&D tax credit permanent--at 
least as much as we can under the constraints of the bill; second, we 
also have an opportunity to modify the tax credit to include the 
additions suggested by the Senator from Washington that will make the 
credit even more meaningful, including the incremental changes in the 
credit rates and the addition of a third credit option that is in this 
legislation.
  Madam President, this is a no-brainer. I cannot, for the life of me, 
understand why this amendment won't pass. That is not just a glib 
statement that rolls easily off my tongue into the Senate Chamber. I 
just think that if the tradeoff is between research and development on 
the one hand, and helping American companies with more incentives to do 
more R&D on the other hand, compared with the accelerating reduction of 
the top rate or, in the alternative, of the dividends proposal, we have 
to make choices as to which is more likely to help this country get 
more jobs in the short term and in the long term.
  I think the answer to that question is pretty easy and clear, and 
that answer is by making the R&D tax credit permanent. So I argue very 
strongly in favor of this legislation and this amendment offered by the 
Senator from Washington. She is on the right track. I think we should 
pay attention to what she says. She is from Washington. The State of 
Washington is the home to a lot of high-tech companies.
  The PRESIDING OFFICER. The time of the Senator has expired.
  Mr. BAUCUS. I thank the Chair and I thank my good friend from 
Washington.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. GRASSLEY. Madam President, first of all, I think it is pretty 
unanimous in this body about the need for the R&D tax credit, and I 
think it enjoys pretty broad support. I suppose it is not a case of 
``if'' we will do it; it is a case of ``when'' and exactly how. I would 
say there is probably not much disagreement within this body yet. I 
have visited with my colleagues so much during this debate about the 
purposes of the legislation and the balance that we brought to this 
between investment and enhancing consumer spending, and between those 
things that are tax reductions versus tax expenditures, it is this 
balance that I want to preserve in this legislation.
  Every attempt we have had, as well intended as it is, obviously, 
takes away from the job creation aspects of our tax reduction. It is to 
do something special and, in many cases, is worthy, but it detracts 
from the overall approach to our legislation. So this is another 
example where I must rise in opposition to an amendment, but not 
because of the good intent or because I have a disagreement with the 
amendment, but because of how it is accomplished. And most of that is 
on the side of where they take the money to pay for the proposal in 
this amendment, or any other amendment that we have had before us.
  I am very confident that we will extend the R&D credit this year. I 
call the attention of my colleagues to the fact that the President has 
proposed extending it in his budget. I note that the extension is paid 
for in this amendment by eliminating partial exclusion of dividends, 
and this exclusion of dividends is meant to encourage the investment we 
are talking about here.
  Obviously, the amendment on R&D is a tax incentive to encourage R&D, 
and it takes a lot of R&D to get jobs, but it is a very indirect way of 
creating jobs, whereas we believe the dividend exclusion, at least if 
it were fully implemented the way the President proposed, and I know 
our underlying legislation does not do that, but at least the way the 
President proposed, according to economists, would create 400,000 new 
jobs, besides making our capital costs for our industry much more 
competitive with those of our competition internationally because our 
cost of capital is as high as that of any nation with which we compete.
  If we were to adopt the President's program, it would put us in the 
middle of the advanced nations for cost of capital and make us much 
more competitive.
  This detracts from the investment efforts in our legislation which is 
where the money is being taken to pay for the R&D amendment.
  I say to the Senator from Washington that I look forward to working 
with her at another time--not this time--to extend the R&D credit down 
the road.
  There is another point that should be made about the R&D credit, and 
that is that it does not benefit all businesses and taxpayers equally 
or apply as broadly as do the provisions of this underlying growth bill 
that I have been trying to demonstrate is a well-balanced bill to 
create jobs. It is well balanced between larger businesses and smaller 
businesses, particularly where it brings equity between a corporation 
form of business and individual proprietorship form of business. It 
does that by eliminating the bias in favor of corporations that is in 
our present tax system.
  I look at R&D credit as not benefiting all businesses equally as our 
underlying bill does. The R&D credit provides a benefit to a limited 
number of large corporations in certain industrial sectors. While the 
purpose of the R&D credit is very important, as it encourages higher 
levels of technology development and innovation which brings about 
greater productivity, it does not help small businesses that will 
provide so many new jobs for the economy under our underlying 
legislation.
  I ask the Senator from Washington to think about whether or not she 
has checked with organizations or their tax representatives that 
support R&D credits. I think the last thing they would want to happen 
is for the extension to lose at this time. If they want their 
extension--and I am sure they do, and I have indicated a willingness to 
work on this--they should be working with the Finance Committee and not 
against it as we try to accomplish this goal.
  Right now, I have to consider this amendment counterproductive in 
that it slashes job-creating provisions to give generous tax breaks to 
large corporations to do research and development. Many may ask: Why do 
rich corporations need a tax break to do something that is essential to 
their business anyway?

[[Page 11526]]

  As I indicated, I do support the R&D tax credit, but I also support, 
more importantly and more eminently, the provisions of this bill which 
are more broad based in helping to create jobs and doing it in a 
balanced way, not in the targeted way of this amendment.
  There is nothing wrong with the amendment. It is just the wrong time 
and wrong place. I ask my colleagues to vote against it.
  The PRESIDING OFFICER. The Senator from Washington.
  Ms. CANTWELL. I thank the Chair.
  Madam President, I have the utmost respect for the Senator from Iowa 
and his comments about the R&D tax credit amendment and his great work 
on trying to put together a package to bring before the Senate. It is 
clear that my colleague from Iowa has had a tough challenge working 
with a variety of people, and I am sure he will face an even tougher 
challenge working in conference with the House of Representatives and 
the White House on their priorities.
  I respect his commitment to working on the R&D tax credit expansion 
or permanency and I take him at his word that he is very earnest and 
will work towards this.
  I guess the reason we are bringing this up today is that we do have a 
fundamental difference about how to move forward with the economy and 
where the White House is on this proposal. What I am trying to say is 
not extension of R&D, but permanent R&D tax credits are a better 
economic stimulus than what the current underlying proposal gives to 
the American public.
  Let's think about it: A dividend tax cut that would give some money 
back to investors who may or may not reinvest that versus companies 
that have proven they have taken the R&D tax credit and turned that 
into new products and services, and have hired people to, in fact, do 
the R&D which we are talking about. I think we can easily look at 
history and say corporations have done a better job of that because 
they know what products and services can be created in the marketplace 
and have used this incentive to do that.
  The second point I wish to make is that small businesses can take 
advantage of this credit. In fact, in the past decade we saw a lot of 
increases in productivity by large corporations because they were able 
to take advantage of research and development and new technologies, and 
they were able to deploy that, while small businesses that had less 
flexibility, not as much revenue, and had smaller operations had a much 
harder time making those productivity improvements.
  I have heard from small businesses throughout our State that said: I 
am a subcontractor, or I do business with some of the larger companies 
in the State, but our computer systems and our software do not 
communicate. The way I now have to talk to my customers and providers 
of service I work with throughout the State is being challenged by new 
systems and operations, and I need to upgrade and move forward. So 
small businesses, to maintain their competitive edge, also need help in 
the research and development area.
  Oftentimes it is the small business that is created prior to becoming 
a large organization. As I said, the companies that grow from 10 jobs 
and take advantage of R&D tax credits and then grow to 1,000 jobs are 
the very companies about which we are talking. So both small and large 
companies will benefit.
  The third point is that this is about priorities. In an information 
economy, it is very important for us to keep our deficits down and to 
get access to capital.
  Think about it. In the industrial age, when we were making 
automobiles, Mr. Ford said: Just give me the hands. I do not even need 
the brain that goes with it.
  Why? Because it was about a manufacturing process, that was not 
necessarily about the worker, and the increase in productivity. The 
process and system had been set in place.
  Well, the information age is just the opposite of that. It is all 
about new ideas in a global economy where information flows quickly and 
competition is created quickly, and whether we are going to maintain 
our competitive edge by making the right levels of R&D investment.
  Actually, the U.S. economy is so strong in biotechnology, in 
pharmaceuticals, and in software. Why? Because we make the investment 
in R&D that keeps that technological advantage in an information age.
  So while some of my colleagues, argue that a dividend tax break is an 
issue of fairness, I say there are lots of things about our Tax Code 
that I do not think are particularly fair. But given the 7 percent 
unemployment rate in my State of Washington, with over 2 million jobs 
lost and no sight of what we are going to do to stimulate the economy 
that will create jobs, it is imperative to make this tax credit 
permanent now.
  My colleague has offered to look at this at another time. But the 
issue is, are we going to make it permanent at another time? In an 
information age this is the best thing we could do for companies that 
are spending almost 30 percent of their company's overall expenses in 
R&D. An information economy means so many new products and services are 
going to come into creativity by thousands of ideas floating around, 
things that we never even imagined before--who thought 20 years ago we 
were going to be buying our books online or communicating with global 
media through the Internet? But those are the products and services 
that have been created. The good news is we are at the infancy of this 
information age. So let's take advantage of that. Let's harness that 
information age economy with one of the best tools we have to encourage 
them, and that is make permanent the R&D tax credits so those products, 
those services, those job-creating activities, will take place in our 
economy.
  If we asked economists, or asked businesspeople, sure, they would 
like both. I am sure there are people who would say: Give us the 
dividend and give us the R&D tax credit. But ask them to prioritize, 
and I have no doubt they would say the R&D tax credit is more important 
because they know it will give them certainty and predictability in a 
time and age where research and development is going to be the way for 
us to continue the productivity.
  Make no mistake, that opportunity for productivity is great. We had 
great increases during the industrial age--a constant 3\1/2\, 4, 5 
percent economic growth in the last decade. If we harness the ability 
for new products and services by making the right level of investment 
in research and development, we can have that kind of productivity 
increase and we can have that kind of GDP.
  For all of us here, we want to get back to that. We want to get back 
to having families who have jobs and communities that are healthy and a 
government that can own up to its responsibilities in the future for 
Social Security and Medicare. So let's make the investment now.
  This is about making a priority statement today. It is about saying 
that R&D tax credit has a higher priority and ranking over some of the 
proposals that are in this bill, and that it will benefit both small 
and large companies, and ultimately will benefit many Americans by 
getting them employed.
  I yield the floor.
  The PRESIDING OFFICER. The Democratic whip is recognized.
  Mr. REID. I ask unanimous consent that the pending amendment be 
temporarily set aside and ask that the Senator from Vermont be 
recognized to offer an amendment.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  The Senator from Vermont is recognized.


                           Amendment No. 587

  Mr. JEFFORDS. I send an amendment to the desk and ask for its 
immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Vermont [Mr. Jeffords] proposes an 
     amendment numbered 587.


[[Page 11527]]

  Mr. JEFFORDS. Madam President, I ask unanimous consent that the 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To accelerate the elimination of the marriage penalty in the 
                         earned income credit)

       After section 107, insert the following:

     SEC. 107A. ACCELERATION OF MARRIAGE PENALTY RELIEF FOR EARNED 
                   INCOME CREDIT.

       (a) In General.--Section 32(b)(2)(B) (relating to joint 
     returns) is amended by striking ```increased by--'' and all 
     that follows and inserting ``increased by $3,000.''.
       (b) Inflation Adjustment.--Clause (ii) of section 
     32(j)(1)(B) (relating to inflation adjustments) is amended to 
     read as follows:
       ``(ii) in the case of the $3,000 amount in subsection 
     (b)(2)(B), by substituting `calendar year 2003' for `calendar 
     year 1992' in subparagraph (B) of such section 1.''.
       (c) Conforming Amendment.--Section 303(i)(2) of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001 is 
     amended by striking ``2004'' and inserting ``2003''.
       (d) Adjustment of Highest Individual Income Tax Rate.--In 
     lieu of the rate specified for taxable years beginning during 
     calendar year 2003 and thereafter in the last column of the 
     table contained in section 1(i)(2) of the Internal Revenue 
     Code of 1986, as amended by section 102(a), the Secretary of 
     the Treasury shall adjust such rate for 1 or more of such 
     taxable years to provide such revenues as are necessary to 
     equal the loss in revenues which would result in the 
     enactment of the amendments made by subsections (a), (b), and 
     (c) of this section.
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2002.
       (2) Conforming amendment.--The amendment made by subsection 
     (c) shall take effect on January 1, 2003.

  Mr. JEFFORDS. Madam President, when we passed the last big tax 
package in 2001, we included in the bill a title called ``Marriage 
Penalty Relief.''
  That title had three sections aimed at easing the burden faced by 
taxpayers, who find themselves paying higher tax bills after they get 
married than what they would have paid if they had stayed single.
  One of these provisions increased the standard deduction for married 
taxpayers, so that it would equal twice the amount of the standard 
deduction allowed single taxpayers, making marriage an advantage.
  The second provision increased the size of the 15 percent income tax 
rate bracket for a married couple to twice the size of the 
corresponding bracket for a single taxpayer.
  The third provision addressed the marriage penalty in earned income 
tax credit, and provided for a larger credit for married couples. All 
three of these provisions were phased in gradually, not becoming fully 
effective until 2008 or 2009.
  The bill under consideration today accelerates the scheduled phase-in 
of two of the three marriage penalty relief provisions we adopted in 
2001.
  The standard deduction marriage penalty relief is accelerated to 
2003. And the expansion of the 15 percent rate bracket for married 
couples is similarly accelerated to 2003.
  There is no acceleration, however, of the marriage penalty relief for 
taxpayers who claim the earned income tax credit. The earned income tax 
credit, the EITC, provides an income supplement for low-income workers.
  It is one of the Nation's most effective anti-poverty programs. It 
was the brainchild of the late Senator Russell Long, whose death we 
sadly recognized yesterday, who characterized it as a ``work bonus'' 
and Senator Long called it one of his proudest accomplishments.
  However, the way the EITC is presently structured can result in high 
marriage penalties. Two single, low-income workers may be entitled to a 
much smaller EITC from their combined incomes when they get married 
than what they would have gotten separately had they stayed single.
  Take, for example, a man and a woman, each with an income of $15,000, 
and each with one child. If they are single, each can claim an EITC 
benefit of roughly $2,750, a total of $5,500.
  However, if they get married and combine their incomes, the EITC that 
they can claim is only $1,200. This is a marriage penalty of $4,300, 14 
percent of their combined income.
  Think of a young couple who finds they have an unexpected pregnancy. 
If they get married, they have to pay an additional $4,300 in taxes. 
That is not a very good situation.
  The 2001 tax bill addresses this problem by increasing the EITC 
allowed to married low-income taxpayers. But this provision is 
gradually phased-in and does not become fully effective until 2008. So 
we have a gap.
  My amendment calls for acceleration of the phase-in of the EITC 
marriage penalty relief. It will benefit working families with incomes 
between $15,000 and $37,000.
  I propose to pay for this amendment by paring back the reduction in 
the top rate in an amount sufficient to pay for this amendment. This 
would mean a relatively modest decrease in the reduction in that top 
rate. We believe it is less than one-quarter of 1 percent.
  I have been involved in trying to fix the problems of the marriage 
penalty since the 1970s, when I co-sponsored the first bill with 
Congresswomen Millicent Fenwick, who was a pioneer in fighting this 
problem. I would like to remember her.
  If we are going to accelerate marriage penalty relief, we should do 
it for the poorest of the poor. These people really feel the effects of 
the marriage penalty.
  In testimony before the Senate Finance Committee two years ago, a 
representative from H. and R. Block, which prepares returns for many 
low-income taxpayers, expressed the opinion that the EITC marriage 
penalty had a real detrimental effect on the choices of low-income 
taxpayers.
  In other words, it deters marriage and adversely affects family life.
  The EITC marriage penalty relief is also the most effective economic 
stimulus of any of the marriage penalty relief provisions. It is 
targeted at low- and middle-income workers, who are most likely to 
spend any additional funds.
  A considerable amount of this bill is targeted to help the very 
richest taxpayers. Roughly $35 billion goes towards reduction of the 
top income tax bracket, which doesn't kick in until a couple's income 
is over $300,000.
  Another $80 billion goes toward the exclusion for dividends, which 
will not affect most taxpayers. In my state of Vermont, about seventy 
percent of the taxpayers have no dividend income.
  My amendment is modest. It costs about $4 billion over several years. 
We can make room for this amendment in this bill. We should not 
overlook those who need help the most.
  I urge my fellow senators to support this amendment, and I ask for 
the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is not a sufficient second.
  Mr. BAUCUS. I ask for the yeas and nays on the amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  At the moment, there is not a sufficient second.
  Mr. BAUCUS. Madam President, I ask for the yeas and nays on the 
amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The Democratic whip is recognized.
  Mr. REID. It is my understanding the Senator has completed debate on 
this amendment.
  I recognize the Senator from Kentucky, who, as the gentleman he is, 
very graciously allowed the Senator from Vermont to go first. The 
Senator from Vermont had been waiting for a long time. We appreciate 
the courtesy of the Senator from Kentucky.
  The PRESIDING OFFICER. Is there objection to setting aside the 
pending amendment?
  Hearing no objection, the Senator from Kentucky is recognized.
  Mr. BUNNING. Madam President, I will shortly offer an amendment to 
the pending bill. We need to have just a little time for consideration 
of this amendment. It is not complicated. It is very straightforward 
and to the point. We have a need to have our majority leader show up on 
the floor to make a

[[Page 11528]]

statement before I offer the amendment. Therefore, I suggest the 
absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. FRIST. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Alexander). Without objection, it is so 
ordered.


                      Unanimous Consent Agreement

  Mr. FRIST. Mr. President, I ask unanimous consent that following my 
remarks, Senator Bunning be recognized to offer an amendment for 
himself, Senator McConnell, and others, regarding taxation of Social 
Security benefits; provided further that there be 1 hour equally 
divided in the usual form. I further ask consent that following the 
conclusion of time, the amendments be set aside and the Senate proceed 
to vote in relation to the Bunning amendment, to be followed by a vote 
in relation to the Dorgan amendment, No. 556, at a time determined by 
the majority leader, after consultation with the Democratic leader; 
further, that no amendments be in order to the amendments prior to the 
votes.
  The PRESIDING OFFICER. Is there objection?
  Mr. REID. No objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. FRIST. I ask unanimous consent when the Senate resumes 
consideration at 9:15 of S. 1054, on Thursday, May 15, that all time 
under the statutory limit be expired; I further ask consent that the 
Senate then proceed to a series of stacked votes on or in relation to 
the pending amendments in the order offered, beginning with the Bunning 
amendment, provided that there be 2 minutes equally divided for closing 
remarks prior to vote in relation to any of the amendments pending from 
Wednesday's session.
  I further ask consent that following the disposition of the pending 
amendments and any other offered amendments, the bill then be read a 
third time, the Senate then proceed to the consideration of H.R. 2, all 
after the enacting clause be stricken and the text of S. 1054, as 
amended, if amended, be inserted in lieu thereof, the bill then be read 
a third time and the Senate then proceed to a vote on passage of the 
bill, with no intervening action or debate. I further ask consent that 
following that vote, the Senate insist on its amendment, request a 
conference with the House, and the Chair be authorized to appoint 
conferees on the part of the Senate with a ratio of 3 to 2. Finally, I 
ask consent no points of order be waived by this agreement.
  Mr. REID. Reserving the right to object, Mr. President.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. As I said earlier this morning, we have two of the most 
experienced Senators that we have in the Senate managing this bill. We 
would not be at the point we are today but for the good work of the two 
Senators, the Senator from Iowa and the Senator from Montana. It 
doesn't matter how you feel about the underlying bill, the work that 
has been done on the floor by these two men here today has been 
outstanding, and that is why we are able to enter into this agreement. 
There is no objection on this side.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. FRIST. Mr. President, I ask unanimous consent that immediately 
following passage of H.R. 2, the Senate proceed to Calendar No. 86, 
H.R. 1298, the Global AIDS bill. I further ask unanimous consent that 
only relevant first-degree amendments be in order; further, that only 
second-degree amendments which are relevant to the first-degree 
amendment to which they are offered, when offered, be in order; that 
upon disposition of all amendments the bill, as amended, if amended, be 
read a third time and the Senate then vote on passage of the bill 
without further intervening action or debate.
  The PRESIDING OFFICER. Is there objection?
  Mr. REID. No objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. FRIST. Mr. President, just to summarize very quickly, let me 
restate what the assistant Democratic leader said. A lot of discipline 
and organization has taken us very successfully to this point. We 
encourage people who are going to be offering amendments either tonight 
or tomorrow to report that and discuss that with the two managers of 
the bill.
  At 9:15 tomorrow morning, all time will have been exhausted and we 
will start at 9:15 with our voting on whatever pending amendments there 
are based on what has been carried out so far today and tonight. We 
will be looking at those amendments starting at 9:15 in the morning. If 
additional amendments arise, they will be considered after the 
disposition of all of the pending amendments. We will have final 
consideration and passage of this bill tomorrow at the conclusion of 
that sequence of votes.
  Immediately following passage, we will go to the global HIV-AIDS 
bill, and I intend to complete that bill this week as well.
  Thus, tonight we expect no further rollcall votes and our voting will 
begin at 9:15 sharp tomorrow morning.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. One area of clarification: I am confident there is no 
problem. We want to make sure motions to waive would also be in order 
on these amendments that are pending.
  Mr. FRIST. Mr. President, we understand that. That is correct.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
Kentucky is recognized.


                           Amendment No. 589

  Mr. BUNNING. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:
  The Senator from Kentucky [Mr. Bunning], for himself and Mr. 
McConnell, proposes an amendment numbered 589.
  Mr. BUNNING. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To amend the Internal Revenue Code of 1986 to repeal the 1993 
            income tax increase on Social Security benefits)

       At the appropriate place, insert the following:


 sense of the senate on repealing the 1993 tax hike on social security 
                          benefits section   .

     SECTION   .

       (a) Findings.--
       The 1993 tax on Social Security benefits was imposed as 
     part of President Clinton's agenda to raise taxes;
       The original 1993 tax hike on Social Security benefits was 
     to raise income taxes on Social Security retirees with as 
     little as $25,000 of income;
       Repeated efforts to repeal the 1993 tax hike on Social 
     Security benefits have failed; and
       Seniors rely on Social Security benefits as well as 
     dividend income to fund their retirement and they should have 
     taxes reduced on both sources of income:
       (b) Sense of the Senate--
       It is the Sense of the Senate that the Senate Finance 
     Committee should report out the Social Security Benefits Tax 
     Relief Act of 2003, S. 514, to repeal the tax on seniors not 
     later than July 31, 2003, and the Senate shall consider such 
     bill not later than September 30, 2003 in a manner consistent 
     with the preservation of the Medicare Trust Fund.
  Mr. BUNNING. Mr. President, I am offering an amendment as a sense of 
the Senate on the Social Security tax; that the 85-percent tax repeal 
be set at a certain time during the year 2003 and final consideration 
of the bill be no later than September 30, 2003. I want to bring the 
Senate up to date on this specific tax.
  Prior to 1993, seniors were taxed on 50 percent of their Social 
Security benefits if their incomes were above a certain level. This 
money went back into the Social Security System. In 1993, Congress 
passed a provision requiring that 85 percent of a senior's Social 
Security benefits be taxed if certain income levels were met. This 
additional money went back into the Medicare system. This tax was 
unfair to seniors

[[Page 11529]]

back in 1993, and it certainly is unfair today.
  The amendment I am offering as a sense of the Senate allows the 
Finance Committee to pass legislation by July 31, 2003, which repeals 
this unfair tax to our seniors and requires the Senate to act on this 
legislation no later than September 30, 2003.
  I am offering this amendment to counter an amendment that would 
destroy the very bill that is before us. An unwise amendment by the 
Senator from North Dakota would repeal this tax and thus reduce the 
amount of tax reduction for our country and for our citizens.
  I want to try to put this in a little perspective for the American 
people, for my fellow Senators, and you, Mr. President.
  In the overall aspects of the budget bill, the total amount as far as 
this bill is concerned is a reduction of $350 billion in tax 
reductions. Our economy is a $10 trillion-per-year economy. How 
minuscule is the tax reduction? If you look at the overall bill as a 
10-year bill, and the overall economy as a 10-year economy, we are 
looking at about $120 trillion, and we are talking about $350 billion 
in that $120 trillion economy as a tax reduction.
  If the amendment of the Senator from North Dakota is agreed to, we 
will have no tax reduction, not even a dividend tax reduction, as 
minuscule as it is, and not any of the advanced tax reductions we 
passed in the year 2001.
  If we want to take action to create jobs, and if we want to do it as 
quickly as we can, my amendment allows us to vote on the reduction in 
the Social Security tax from 85 percent to 50 percent later on--after 
we get this job-creating incentive bill into conference, out of the 
Senate, and back to the floor of the Senate for a final vote.
  I want you to know that seniors age 65 and older depend on taxable 
dividends. These are real Americans who need this money because they 
are on fixed incomes. They have to scramble and scrimp to have enough 
dollars to live on fixed incomes. This will allow just a portion of 
that dividend income to be tax free. Seventy-one percent of all taxable 
dividends go to Americans who are over age 55. With the rising cost of 
prescription drugs, seniors depend on this income from dividends. If we 
can make just a little bit of it tax free, that will be a big help for 
those senior citizens--15 percent of seniors' total income, but 50 
percent of dividend income in this country comes to those senior 
citizens.
  Under the President's package, 99.8 million seniors would have saved 
$936 a year. That was the President's proposal. We cut that more than 
in half.
  I just think it is a wrongheaded way to approach the reduction of 
this ominous tax on senior citizens, particularly those who definitely 
have no other income except Social Security.
  I hope the Senate will consider this as a sense of the Senate to make 
sure we get to this bill before the end of this legislative calendar.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Kentucky.
  Mr. McCONNELL. Mr. President, I commend my friend and colleague from 
Kentucky, Senator Bunning, for his excellent amendment.
  What we are hearing from the other side of the aisle is that they do 
not want the dividend exclusion, and they want to finally address an 
issue they created 10 years ago, which is this additional tax on Social 
Security recipients. But they are saying, you can't have both. And, as 
the Senator from Kentucky, Mr. Bunning, has pointed out, most seniors 
can benefit from both. Obviously, they all benefit from Social 
Security, and they would like to not have this Clinton tax on Social 
Security continued any longer; second, seniors account for only 15 
percent of the total income in America, but they get 50 percent of the 
dividend income.
  So I gather what Senator Dorgan is saying is, we are going to take 
away the dividend exclusion from seniors in order to finally reduce the 
Social Security tax which we put on 10 years ago.
  What the Senator from Kentucky is saying is: We want to do both. And 
we ought to do both. We should never have levied this Social Security 
tax in the first place, 10 years ago, for which neither of us voted. 
And we ought to now do the dividend exclusion as close to the 
President's suggested manner of doing that as possible.
  June could be a pretty good month for seniors around here. If we 
could get the dividend exclusion through, get rid of the Social 
Security tax, and begin to address prescription drugs, which is on the 
agenda of the majority leader for June, I say to my friend and 
colleague from Kentucky, we would have a pretty good month around here 
for seniors, pretty soon, wouldn't we?
  Mr. BUNNING. Yes, sir.
  Mr. McCONNELL. So this Bunning amendment makes it clear that we would 
like to act on the repeal of the Social Security tax hike of 1993, and 
we will do that in the very near future.
  Mr. BUNNING. Will the Senator yield?
  Mr. McCONNELL. I yield to my friend from Kentucky.
  Mr. BUNNING. As the Senator knows, I offered this very same amendment 
on the budget bill to repeal the Social Security tax from 85 percent to 
50 percent, and the very same people who would support that today voted 
unanimously against it on the budget bill.
  So the inconsistency that the Senator from North Dakota shows today 
is something I have a very big problem understanding. If you are for it 
today, and you want to take these away from seniors, and you also want 
to take tax away from seniors, you ought to have been consistent and 
voted to take it away during the budget resolution debate we had on the 
floor.
  I know this Senator voted with me on the budget resolution when we 
tried to repeal it. And I hope we are able to get this amendment 
accepted.
  Mr. McCONNELL. I know the Senator from Kentucky agrees with me that 
we ought to do all three. We ought to get rid of this Clinton Social 
Security tax. We ought to do a significant dividend exclusion that is, 
to the maximum extent possible, permitted under our overall ceiling in 
the growth package. And we ought to begin to address prescription 
drugs, which the leader has indicated we are going to do in June. If we 
do those three things, I would say we are well on the way to providing 
the kinds of relief for seniors--both on the tax side and on the 
prescription drug side--that they richly deserve, that we have talked 
about for entirely too long around here and have never done anything 
about.
  So let me conclude by commending my friend and colleague from 
Kentucky for an excellent amendment. I hope it will be approved 
overwhelmingly. I thank him for his continuing contribution to this 
whole Social Security debate. The Senator from Kentucky, Mr. Bunning, 
was the chairman of the Social Security Subcommittee of the House Ways 
and Means Committee and is now on the Senate Finance Committee, and is 
one of the real experts on Social Security in America.
  When Senator Bunning talks about Social Security, we all listen, and 
once again he has proposed an excellent idea which I fully support. I 
thank him and commend him for his outstanding work.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I think the Democrats have the next 
opportunity.
  The PRESIDING OFFICER. The Senator from Iowa has the floor.
  Mr. GRASSLEY. I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, what is the parliamentary situation?
  The PRESIDING OFFICER. The Bunning amendment is pending. There is 1 
hour evenly divided.
  Mr. BAUCUS. I thank the Chair.
  Mr. President, I understand Senator Bunning yields back his time.
  Mr. BUNNING. Yes.
  Mr. BAUCUS. Mr. President, I yield 10 minutes on the amendment to 
Senator Rockefeller.
  The PRESIDING OFFICER. The Senator from West Virginia.
  Mr. ROCKEFELLER. Thank you, Mr. President, and I thank my friend and 
leader from Montana.

[[Page 11530]]




                           Amendment No. 578

  Mr. President, I rise to speak about an amendment which was offered 
earlier. I am particularly proud to be cosponsoring, with Senator 
Blanche Lincoln of Arkansas, and others, improvements to the child tax 
credit. I will speak on it very briefly.
  I think it is one of the most valuable provisions. I thank the 
chairman of the Finance Committee--while I see he is still in the 
Chamber--for accepting one of Senator Lincoln's amendments on the child 
tax credit. It is a particularly welcome addition.
  I think common sense tells us that if we put money in the hands of 
people who will indeed spend it, and will spend it on clothes and 
kitchen utensils, and all kinds of other items, there is a stimulative 
effect.
  But quite apart from that, almost half of the benefits of this child 
tax credit go to families who make less than $50,000. In the State that 
I represent--this Senator represents the State of West Virginia--only 
20 percent of the people make more than $50,000 a year. So this is very 
welcome.
  The bill we are looking at, what is in the package, makes very 
important improvements to the child tax credit. Basically, it increases 
the value of the credit from $600 to $1,000, which is real money, as 
they say, for real people, who need it and deserve it.
  I was happy that we did this. I was grateful that it was accepted by 
the Finance Committee chairman. It is going to have a big effect.
  I will say this: Refundability will go from 10 percent to 15 percent 
of earnings above $10,500. That means families can benefit from this 
bill more than otherwise would have been the case. On the other hand, 
the bill still does not do anything--and I have to say this in 
fairness--for 72,000 kids who do not qualify for any child tax credit 
in West Virginia because their parents do not have enough income to 
qualify on a low-income basis.
  But all things being equal, as they rarely are in this life, one has 
to take what one can work out in the democratic process. And the 
Finance chairman was extremely fair and helpful. Obviously, the Senator 
from Arkansas was outstanding in her leadership on these matters.
  I am proud to a be a cosponsor of the amendment that Senator Lincoln 
offered today that will expand the reach of the child tax credit to 
more of our nation's poorest families. In my own state, 27,000 more 
kids would qualify for the child tax credit. This amendment would 
increase the amount of the child tax credit that can be refunded to low 
income parents. Specifically a parent would qualify for a child tax 
credit equal to 5% of earnings between $5,000 and $13,250.
  These folks whom we are helping are at risk. That is important. And I 
am very proud this is happening. I ask my colleagues to support this 
amendment when it comes up for a vote on tomorrow.
  I thank the Presiding Officer and yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I yield to the Senator from Montana 
whatever time he might consume.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BURNS. Mr. President, I ask unanimous consent that the amendment 
offered by Senator Bunning be laid aside.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.


                           Amendment No. 593

   (Purpose: To amend the Internal Revenue Code of 1986 to allow the 
  expensing of broadband Internet access expenditures, and for other 
                               purposes)

  Mr. BURNS. Mr. President, I rise today to offer an amendment to this 
bill, and I ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Montana [Mr. Burns], for himself, Mr. 
     Rockefeller, Mr. Baucus, Mrs. Clinton, and Mr. Johnson, 
     proposes an amendment numbered 593.

  Mr. BURNS. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. BURNS. Mr. President, I come to the floor today with an amendment 
that is offered by Senator Rockefeller and myself that provides some 
incentives to accelerate the deployment of broadband high-speed 
Internet access across the country. There are other cosponsors of the 
amendment. My colleague from Montana, Senator Baucus, is a cosponsor. 
Senators Clinton, Kennedy, and Johnson of South Dakota also are 
cosponsors.
  Broadband has always been of interest to both Senator Rockefeller and 
myself. Both of us serve on the Commerce Committee. We have worked on 
this a lot. We both represent States that have quite a lot of rural 
outdoors. What this amendment does is affords tax incentives for the 
buildout of broadband. Although many urban and suburban areas now have 
access to broadband connections, many rural areas across the country 
and, of course, in Montana do not. That places rural areas at a 
disadvantage in a number of ways.
  Just for economics, why should folks in rural areas be denied access 
to the Internet, or the Internet economy as some would say, just 
because they live where they do to merchandise and to exchange ideas in 
this economy and find some way to supplement their primary income? We 
have people who market their grain and livestock every day through the 
commodity markets around the world. In terms of educational 
opportunities in rural areas, why should a young person, just because 
he is born in Garfield County, MT, be denied the same educational 
opportunities as those who were born and raised in the more urban areas 
where their curriculum is broadly taught. These young folks deserve the 
same opportunity. Distance learning is an important part of the 
education system in rural areas. Broadband is the technology that takes 
them those distances.
  In the area of health care, I have 14 counties in Montana that do not 
have a doctor. People receive their health care from physician 
assistants and in other ways. We know from rural demographics that the 
folks are getting older, so our health care for the elderly is very 
important, and part of that is supplied by broadband technologies.
  Our amendment would create a temporary tax incentive for providers in 
the form of expensing, allowing an immediate deduction of a capital 
expenditure in the first year of service rather than depreciating that 
investment over time. In the case of the current generation broadband 
investments in rural and underserved areas, the bill would allow a 50 
percent expensing on the investment, with the rest to be depreciated 
according to the normal depreciation schedules. And where the providers 
build out next generation broadband networks, which are typically more 
expensive, the bill would provide for 100 percent expensing in that 
year.
  Our amendment would have a tremendous impact on the economy. In fact, 
we know it would. For instance, Robert Crandall, an economist at the 
Brookings Institute, has estimated that accelerated deployment of 
broadband would generate $500 billion in economic growth annually. I 
think we would all be delighted to have that happen. I believe we 
should take the steps to allow it to do so. This amendment is a very 
important step in that direction.
  This is an opportune time to take advantage of such a provision. 
Currently South Korea and Japan are ahead of the United States in 
broadband deployment. I believe it is extremely important that the 
United States avoid falling behind in telecom and Internet technology, 
and the financial incentive of the type provided by this legislation 
will help us ensure that we will not.
  As we take a look at this issue, this means new technologies on the 
wired system but also on the wireless system. It says technology 
neutral, which


[[Page 11531]]

means it allows the new technologies that are being offered and the R&D 
work going on with new technologies, it allows those technologies to be 
deployed and taken advantage of. Just remember, 50 percent expensing 
for investments in rural and underserved areas of current generation 
broadband technologies. It provides 100 percent expensing for the 
investments in the next generation of broadband technologies in rural 
areas.
  It is technology neutral. It makes no difference if you are using a 
medium copper wire, coaxial cable, optical fiber terrestrial wireless, 
satellite or something else. If you deliver the threshold speeds, you 
are eligible for the benefit. And it sunsets after 1 year. The intent 
is not to provide a permanent benefit to the telecom sector but, 
rather, an incentive to build out new infrastructure within a short 
period of time.
  Think of the generation of business and our economic setup and the 
jobs and the job climate in that area in the first year of deployment. 
It is a very important amendment. Not only do we deliver better and 
quicker services to rural America, but we put a lot of people to work.
  I hope more of our colleagues will join with Senator Rockefeller and 
me in supporting it, and I hope we can work with Senator Grassley to 
include this in the jobs and growth package.
  Mr. President, I ask unanimous consent to add as cosponsors of the 
amendment Senators Baucus, Clinton, Kennedy, and Johnson.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from West Virginia.
  Mr. ROCKEFELLER. Mr. President, I thank the Chair.
  I rise in support of the amendment offered by Senator Burns and a 
number of others. This is an amendment I have been working on for many 
years. At times it has had 75 cosponsors. It is one of those amendments 
that always comes up. Everybody knows it should get done and it never 
seems to. The answer to that is you keep trying. You just keep trying.
  For individuals, businesses, schools, libraries, hospitals, there is 
no end to the need for this amendment. We did the E-rate. The E-rate is 
still being done. But we all know we have moved past that. We need much 
faster telecommunications now.
  What the Burns-Rockefeller broadband amendment does is it says to 
broadband providers, if you will extend your networks to hard-to-reach, 
underserved and/or rural areas, you will get a break on your taxes. As 
the distinguished Senator from Montana indicated, it also encourages a 
leapfrog to the next generation. It has two different categories of tax 
breaks depending upon what generation of broadband you are dealing 
with. In any event, it is going to be faster than the DSL and cable 
modem services most typical today.
  The best thing is to say that you don't obviously get a tax credit 
unless you make a whole lot of things happen in this amendment. There 
is nothing automatic about it. You have to make an investment. You have 
to buy new equipment. You have to pay people to install that new 
equipment.
  I am very pleased to join with my friend from Montana in what I think 
can very well be described as the future competitiveness of America. He 
mentioned South Korea and Japan. He is absolutely right. We all 
remember what happened with the VCR. We had it all, then all of a 
sudden we had none of it. We do not want this to happen in the most 
important form of telecommunications. I hope my colleagues will support 
the Burns amendment.
  I yield the floor.
  Mr. KENNEDY. Mr. President, I urge the Senate to support this 
amendment to accelerate broadband high-speed Internet access across the 
country. The widespread availability of broadband technology is 
essential to maintaining our technology leadership in the world.
  The spread of the information revolution to rural communities and 
underserved areas in our cities depends on affordable access to the 
Internet. For too long, these regions have been unable to enter the 
information age because of their location and the high cost of making 
service available. One of our greatest challenges is to close this 
growing economic gap in access to computers and the Internet. If we do 
not act to close it now, the ``digital divide'' will soon become an 
unacceptable opportunity gap.
  The broadband tax incentive is an important step in developing a 
national broadband policy. The incentive has widespread support in 
Congress because it goes to those who bring broadband to places beyond 
the current reach of the private sector.
  Many of us joined our colleague, Senator Moynihan, when he first 
introduced legislation along these lines 3 years ago. Last year, the 
bill had 65 cosponsors from both sides of the aisle, and a companion 
bill in the House had 227 cosponsors. Our colleagues clearly support 
this idea, and we hope that it will be enacted.
  In Massachusetts, I have seen how broadband has transformed the 
economy of the entire Berkshire County region in the western part of 
the State. Like many rural areas across the Nation, the Berkshires were 
not an area that could easily attract private investments in Internet 
access. But business and government leaders worked out an initiative 
called Berkshire Connect, a partnership with Internet providers to 
build a multimillion-dollar network of microwave towers and fiberoptic 
lines linking the county's villages and small cities with fast Internet 
access.
  That project put the Berkshires on a more equal footing with the rest 
of the global marketplace because the Internet helps to level the 
playing field between large and small businesses and rural and urban 
areas. I am confident that passage of the broadband tax incentive will 
bring similar success stories across the Nation for residents and 
businesses.
  Another prime broadband application is telemedicine. A fascinating 
moment occurred in medicine 2 years ago when a surgeon in New York 
operated by remote control on a patient in France using robot arms at 
the patient's location, and the operation was successful. Broadband 
technology can enhance the medical miracles, but it needs a very high 
bandwidth connection for those kinds of applications. You can't perform 
remote-control surgery over a narrowband connection.
  Broadband's potential is immense, and I commend my colleagues from 
Montana and West Virginia for their leadership. This is the kind of tax 
incentive we need, and I urge my colleagues to support it.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I yield to the Senator from Oklahoma 
such time as he may consume.
  The PRESIDING OFFICER. The Senator from Oklahoma.
  Mr. NICKLES. I thank my friend and colleague from Iowa for his 
leadership and chairmanship of the committee. I am going to briefly 
describe an amendment that Senator Kyl and myself, Senator Grassley, 
Senator Lott, and several others will be offering tomorrow to enhance 
the dividend portion of this bill. The dividend portion that we now 
have in the bill is for 10 years; $500 per person would be excluded 
from taxation, plus for the first 5 years, an additional 10 percent; in 
the second 5 years, an additional 20 percent on top of 500.
  I stated publicly that I think that leaves a lot to be desired. So 
the amendment we will be offering tomorrow will enhance that, improve 
that. It would say for all taxpayers, for dividend exclusion, our 
effort is to eliminate double taxation of dividends. Unfortunately, we 
find ourselves presently where we tax dividends more than almost any 
other country in the world. Now we are, as a free enterprise, as 
capitalistic as anybody in the world, but we tax the distribution of 
profits, i.e., dividends from corporations, higher than almost anybody, 
i.e., dividends, higher than Great Britain, France, and Italy. Japan is 
basically tied with us.
  We tax dividends at 35 percent of the corporate level and whatever 
the individual taxpayer's rate is. So if the taxpayer is at 38.6, it is 
that amount plus 35. So their tax is 73 percent; almost

[[Page 11532]]

three-fourths of the distribution of profits is taxed. That makes no 
sense.
  Many people, including President Jimmy Carter, said that is wrong and 
it needs to be changed. I believe several people--Democrats and 
Republicans--have said that is unfair and is too high of a tax and it 
needs to be fixed. Now we have a President who said we should fix it. 
There are different ways of doing it. He is proposing that we exclude 
it from income for individuals.
  Unfortunately, the bill that came out of the Finance Committee didn't 
do that. It said let's exclude the first $500 for individuals plus 10 
percent, then 20 percent. I think we can do a lot more. I think we can 
do a lot better. If we do a lot better, we will have a much more 
positive impact on the stock market and on the economy. When I say the 
stock market, certainly I believe what we are proposing will have a 
significant increase on the stock market--maybe 10, 15, 20 percent. 
That is positive and real. Why would that be? If somebody is investing 
in stock under present law and they own a company and they get a 
distribution and it is taxed on top of being taxed at the corporate 
level, they may realize it is not a very good investment. A lot of 
people buy growth stocks that pay very little, if any, in dividends 
because they don't want to go through this scenario. They don't want to 
pay capital gains.
  The House at least said let's tax capital gains and stock dividends 
equally. They reported out a bill and said let's tax capital gains and 
stocks at 15 percent; and for some lower incomes, maybe lower than 
that, at 5 percent. That is a significant step in the right direction. 
The President said let's eliminate double taxation of dividends.
  The proposal we are going to be offering tomorrow says let's do that. 
In year 2003, let's exclude 50 percent. In year 2004, 2005, and 2006--
for the next 3 years--let's make it 100 percent. We can do that. Then 
we sunset it. This is sunset after 4 years. If I am wrong and the stock 
market doesn't react positively--if it is not a positive thing, we will 
know it after 4 years. It makes sense to try it. The President has a 
proposal and many economists have said you should eliminate double 
taxation of dividends, and this is a way of doing it. We can do it.
  We will have a provision, also as part of this amendment, to adopt 
the House provision dealing with expensing items. You might say, what 
does that mean? The present law is that a small business that invests 
basically $200,000 or less per year can expense $25,000. The Finance 
Committee said let's raise that to $75,000 and allow people with a much 
greater income to qualify as a small business. They said let's triple 
that, up to $75,000, and we will do that for 10 years.
  The House said let's try this, make it $100,000, and do it for 5 
years. In other words, if a business wanted to write off 100 percent of 
their investments, up to $100,000, they could do so if it is done in 
the first 5 years. It doesn't cost much over 10 years because it 
sunsets after 5 years. Somebody might say we did that when we did the 
bonus depreciation and it generated positive economic investment. This 
is another way of encouraging small business, and we increase the level 
up to $400,000 for this 5-year period. That is what the House has done. 
The House passed it. I think there is wisdom there. Every once in a 
while, we can say they did something right and we can emulate it. I 
think they have a good provision.
  I used to be a small businessperson. I owned a janitorial service, 
and I used to have a manufacturing company. I believe these provisions 
will create jobs. So we are proposing in our amendment that we adopt 
the House expensing provision, the so-called section 179. And they also 
have created a new dividend proposal that will have a 50-percent 
exclusion in 2003 and 100 percent in the years 2004, 2005, and 2006.
  I thank my friend and colleague, Senator Kyl, and several other 
members, Democrats and Republicans, who have had significant input. I 
believe it will help make a significant economic impact.
  When you step back and say, what are we doing in the bill that will 
help the economy, shake it up, improve it, and create jobs, I believe 
the two things I mentioned, in addition to the acceleration of rates, 
are the three things that will positively create jobs, have a positive 
impact on the stock market, on wealth, investment, and will encourage 
people to make investments, get money out of banks or CDs that are not 
paying any interest to speak of and put it to work, help it create 
jobs. I believe all three of these provisions will do so.
  I am speaking tonight before it is introduced because it looks as if 
all debate should be transpired on the amendments tonight because we 
are going to have significant votes tomorrow. I thank my colleague 
again, the chairman of the committee, for his work and cooperation, for 
his leadership on this bill, and for his support in helping us to try 
to come up with a more robust package that would create more jobs in 
the process. That is what we are trying to do--have a jobs creation 
bill. I think by adopting this amendment tomorrow we will help improve 
it dramatically.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent to set the 
pending amendment aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 594

 (Purpose: To amend title XVIII of the Social Security Act to enhance 
beneficiary access to quality health care services in rural areas under 
                         the medicare program)

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

       The Senator from Iowa [Mr. Grassley] proposes an amendment 
     numbered 594.

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. GRASSLEY. Mr. President, I put before you not a tax amendment, 
but I am addressing a funding crisis that affects rural America. I am 
talking about the issue of Medicare.
  We have heard a lot about relief to States and about Medicaid during 
this debate, and legitimately so. But there has been no discussion of 
the role Medicare plays in keeping our health care infrastructure 
strong in rural States like mine.
  Today, our rural health infrastructure is falling apart. Hospitals 
and home health agencies in rural areas lose money on every Medicare 
patient they see. Services are being slashed and staff are being cut, 
all to make ends meet and keep the facility open--but not to keep it 
open with the quality of care that ought to be there, or to meet 
necessarily all the needs of the community.
  Medicare formulas penalize rural physicians in 30 States by reducing 
their payments below those of their urban counterparts for the very 
same service. Small physician clinics, and especially solo 
practitioners, who are facing rising malpractice premiums on top of the 
Medicare formula inequities are on the verge of closing up shop. My 
amendment takes important steps toward correcting geographic 
disparities that penalize rural health care providers.
  I will summarize some of the key provisions of the amendment. On 
hospitals, we eliminate the disparity between large urban hospitals and 
small urban and rural hospitals by equalizing inpatient-based payment. 
The hospitals in my State and in other rural areas are paid 1.6 percent 
less on every discharge. That is a $14 million loss every year in my 
State.
  We received bipartisan support to temporarily end this inequity in 
the fiscal year 2003 omnibus appropriations bill, but it is time to end 
this inequity in a permanent way.
  We also revise the labor share of the wage index for inpatient 
hospitals. The wage index calculation is killing our hospitals in rural 
areas. They have to

[[Page 11533]]

compete with larger hospitals in the big cities for the same small pool 
of nurses and physicians. But because of the inequity in the wage 
index, these hospitals are not able to offer the kinds of salaries and 
benefits that attract health care workers. This amendment would reduce 
the labor share of the wage index from 71 percent to 62 percent.
  We strengthen and improve the Critical Access Hospital Program which 
has been so successful in keeping open the doors of some of our most 
remote hospitals. We also create a low volume adjustment for those 
small rural hospitals that are not able to benefit from the Critical 
Access Hospital Program. These hospital corrections are not partisan 
rhetoric. They are supported by the nonpartisan Medicare Payment 
Advisory Committee, by the CMS administrator in a recent letter to the 
House Ways and Means Committee, and by 31 bipartisan Members of the 
Senate rural health caucus.
  For doctors, my amendment ends once and for all the penalty Medicare 
imposes on doctors who choose to practice in rural areas of our 
country. Medicare adjusts payments to doctors downward based on where 
they live, but, in fact, the value of a physician's service is the same 
in Brooklyn, IA, as it is in Brooklyn, NY, but the Medicare formula 
does not think so. My amendment changes that and sets a floor for all 
physician payments that will end the negative adjustment doctors in 
Iowa and 30 other States currently face.
  My bill also provides assistance to other rural health care 
providers, such as ambulance services and home health agencies which 
millions of seniors in rural areas rely on every day.
  Providers in rural States, such as Iowa, practice some of the lowest 
cost, highest quality medicine in the country. This is widely 
understood by researchers, academics, and citizens of those States, but 
it is not recognized by the impersonal formulas of Medicare. Medicare 
instead rewards providers in high-cost, inefficient States with bigger 
payments that have the perverse effect of incentivizing overutilization 
of services and also poor quality.
  My legislation is paid for not by taking resources away from our 
growth and jobs package, nor by taking money away from those high-cost 
States that I mentioned, but by other modifications to the Medicare 
Program that make good policy sense.
  I want to emphasize that because every other amendment we have had 
before the Senate today has taken money out of the tax package to spend 
someplace else. My amendment does not affect the tax provisions of this 
legislation.
  This amendment represents a fair and balanced approach to improving 
equity in rural America. I urge my colleagues to support its adoption 
today. For those of us from rural States, our doctors, hospitals, and 
whole communities are counting on us.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. I yield such time as the Senator from Maine may 
consume.
  Ms. COLLINS. Mr. President, I believe we are about to have an 
agreement on the order for proceeding, but I need to consult with my 
colleagues, so I suggest the absence of a quorum.
  The PRESIDING OFFICER. Who yields time for that purpose?
  Mr. GRASSLEY. The Senator from Maine suggested the absence of a 
quorum.
  Ms. COLLINS. Mr. President, I ask that time be taken equally from 
both sides.
  The PRESIDING OFFICER. Is there objection?
  Mr. BAUCUS. Mr. President, under the rules, as I understand them, the 
author of the amendment has control of her time, which is 1 hour.
  I ask unanimous consent that the pending amendments be laid aside so 
that the Senator from Iowa, Mr. Harkin, may offer an amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Iowa.
  Mr. HARKIN. Mr. President, I ask if the Senator can yield me 15 
minutes.
  Mr. BAUCUS. Mr. President, I inform the Senator from Iowa that he has 
1 hour.
  Mr. HARKIN. I appreciate that. I will not take an hour.
  Parliamentary inquiry: The Senator asked that the amendments be set 
aside; right?
  Mr. BAUCUS. Yes.


                           Amendment No. 595

  Mr. HARKIN. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Iowa [Mr. Harkin] proposes an amendment 
     numbered 595.

  Mr. HARKIN. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To help rural health care providers and hospitals receive a 
  fair reimbursement for services under Medicare by reducing tax cuts 
                          regarding dividends)

       On page 281, between lines 2 and 3, insert the following:

     SEC. . FAIR REIMBURSEMENT FOR RURAL HEALTH CARE PROVIDERS 
                   UNDER MEDICARE.

       (a) Reduction of Geographic Disparity Under Medicare.--
       (1) In general.--Subject to paragraph (3), the Secretary of 
     Health and Human Services shall promulgate the regulations 
     described in paragraph (2) by December 31, 2004 (unless 
     legislation has been enacted having the effect of such 
     regulations before the conclusion of the first session of the 
     108th Congress).
       (2) Regulations described.--The regulations described in 
     this paragraph are regulations that reduce the geographic 
     disparity in payments under the medicare program under title 
     XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) to 
     health care providers by--
       (A) equalizing urban and rural standardized payment amounts 
     under the medicare inpatient hospital prospective payment 
     system under section 1886(d)(3) of such Act (42 U.S.C. 
     1395ww(d)(3));
       (B) improving the medicare incentive payment program under 
     section 1833(m) of such Act (42 U.S.C. 1395l(m)) to ensure 
     that bonus payments under such section are made on behalf of 
     all eligible physicians;
       (C) providing fairness in the medicare disproportionate 
     share hospitals adjustment for rural hospitals under section 
     1886(d)(5)(F) of such Act (42 U.S.C. 1395ww(d)(5)(F));
       (D) establishing a medicare inpatient hospital bonus 
     payment for low-volume hospitals under section 1886(d) of 
     such Act (42 U.S.C. 1395ww(d));
       (E) adjusting the medicare inpatient hospital prospective 
     payment system wage index to revise the labor-related share 
     of such index to account for 62 percent of such index under 
     section 1886(d)(3)(E) of such Act (42 U.S.C. 
     1395ww(d)(3)(E));
       (F) revising the physician fee schedule wage index under 
     section 1848(e)(1) of such Act (42 U.S.C. 1395w-4(e)(1)) to 
     establish a minimum geographic cost-of-practice index value 
     of not less than 1 for physicians' services furnished under 
     the medicare program;
       (G) extending the temporary increase under section 508(a) 
     of the Medicare, Medicaid, and SCHIP Benefits Improvement and 
     Protection Act of 2000 (114 Stat. 2763A-533), as enacted into 
     law by section 1(a)(6) of Public Law 106-554, for home health 
     services furnished in a rural area; and
       (H) making any other change to a payment system under the 
     medicare program that the Secretary determines is 
     appropriate.
       (3) Hold-Harmless.--The regulations promulgated under 
     paragraph (1) may not result in a lower level of 
     reimbursement for a health care provider under the medicare 
     program under title XVIII of the Social Security Act than 
     such provider would have received but for the enactment of 
     this section.
       (b) Funding.--
       (1) Appropriation.--There are appropriated, out of moneys 
     in the Treasury not otherwise appropriated, $50,000,000,000 
     for the purpose of implementing the regulations described in 
     subsection (a)(2).
       (2) Reversion of excess funds.--Any funds appropriated 
     under this subsection that are not used to implement such 
     regulations shall revert to the Treasury and shall be used to 
     reduce the Federal deficit.
       (c) Funding offset.--Paragraph (2) of section 116(a) 
     (relating to partial exclusion of dividends received by 
     individuals), as added by section 201(a), is amended to read 
     as follows:
       ``(2) Limitation.--Paragraph (1) shall apply to qualified 
     dividend income of a taxpayer only to the extent such income 
     does not exceed the sum of $500 ($250 in the case of a 
     married individual filing a separate return).''.

  Mr. HARKIN. Mr. President, I will speak to my amendment in a moment. 
Before I do, I wish to make preliminary comments about the tax bill 
before us

[[Page 11534]]

which the President and the Republicans have called a jobs and growth 
package and they say it is to grow the economy. I certainly agree that 
the economy is in dire straits and we are in desperate need of taking 
action. That is true.
  Since President Bush took office, the United States has lost 2.6 
million jobs, more than 36,000 of those in my State of Iowa. 
Unemployment rates, including long-term unemployment rates, continue to 
rise. That is a fact. The economy is in a shambles. Unemployment 
continues to go up. This is not just some academic process. It is 
causing real hardship for millions of Americans and families who are 
without a job and without health care coverage.
  Senator Specter and I had a hearing in our appropriations 
subcommittee talking about the lack of access and affordability of 
health care. You can read the story of the man who testified, Mr. 
Kurilko. He was referred to in the Wall Street Journal. He is 57 years 
old, worked 37 years on a job. He now has a heart problem, diabetes. He 
is out of a job. He and his wife now face the prospect of losing their 
life savings because his health care costs, just for insurance, are 
over $2,000 a month. This is a man who worked in a blue-collar job, a 
steel mill, all of his life.
  That is what is happening in America today. Families without work, 
and the high cost of health care, go without coverage, and they see 
their life savings vanishing before their eyes.
  We see it affecting other areas of our economy, our families, and our 
States. The tuition fees in Iowa have increased sharply at our public 
universities. However, the tuition does not make up for the shortfall 
in the loss of State funding. We are seeing cuts to critical public 
health initiatives, including those that help indigent dialysis 
patients, and a program that helps immunize low-income kids.
  Public schools in Iowa have cut 350 teachers statewide. Schools are 
forced to share nurses and counselors and eliminate programs such as 
music and art and enrichment classes entirely from their schools.
  In our hearing this morning, we had a teacher from a small school in 
Iowa testify. The cost just in her school district for health care 
coverage went up 61.5 percent over the last year.
  As he said, they are now approaching the point where their health 
care costs are going to equal the salary of a first-year teacher. So 
this is the real America that is happening in my State, in every State, 
to people who have worked all their lives and now do not have any 
health care coverage. Our schools are being cut. Our infrastructure is 
deteriorating in this country, as well as our bridges, roads, sewer, 
and water systems.
  What is the answer before us for growth and jobs in our economy? An 
enormous tax cut, in large part for the wealthy in our country. That is 
the answer. If I believed this tax bill before us would help the 
economy, create the jobs we need, and help provide health care 
coverage, I would be all for it. But the fact is, we have tried this 
before.
  In 1981, under President Reagan, we had a supposedly big supply side 
cut in taxes. We lost 1.3 million jobs in the two years after the 
passage of that bill. Then OMB Director David Stockman called it a 
riverboat gamble. Guess what. Working Americans all over this country 
lost that gamble. In 1982, part of that measure was reversed and the 
Federal Reserve sharply dropped interest rates allowing for things to 
start to get better.
  After much hard work in the 1990s, we passed a bill in 1993 that put 
us on the path towards a balanced budget, restored confidence and 
creating 22 million jobs. Productivity went up. It was a bill with a 
policy totally out of line with the supply side philosophy of the 1981 
bill. Almost every Republican senator predicted that the economy would 
be severely hurt. The economy grew, and 6.5 million jobs were created 
in just the first two years after that bill passed. The United States 
enjoyed 40 consecutive months of unemployment below 5 percent.
  Twenty years after 1981, we had another supply side riverboat gamble 
in front of us. President Bush assured the country in 2001 that

       We can proceed with tax relief without fear of budget 
     deficits, even if the economy softens.

  And on another occasion, he said

       A tax cut now will stimulate the economy and create jobs.

  Yet what we are now facing, almost two years after the passage of 
that measure is a loss of another 1.8 million jobs to our economy.
  The President, and the Republicans, passed a $1.3 billion tax cut 
like the one we are considering today. It was targeted to the 
wealthiest. Unfortunately, the President's predictions were dead wrong. 
I want to get this chart back up. Two years after the 1981 bill, we 
lost 1.3 million jobs. Since the 2001 tax bill was passed 20 years 
later, we have lost 1.8 million jobs in almost 2 years.
  Now, 22 years after the first try, we are going to try it again. It 
is not enough that the riverboat gamble failed in 1981. It is not 
enough that it failed in 2001. By gosh, we are going to try it again, 
folks--another riverboat gamble. One would think history would teach us 
something.
  If history does not, then how about some of the economists and what 
they are saying. Federal Reserve Chairman Alan Greenspan said:

       There is no question that as deficits go up, contrary to 
     what some have said, it does affect long-term interest rates. 
     It does have a negative impact on the economy . . .

  He twice testified before Congress in opposition to the tax cut plan, 
warning that these deficits would stunt long-term growth. Ten Nobel 
laureates and 400 other economists disagree with the President's 
approach. In a statement made February 10 of this year, they wrote:

       Regardless of how one views the specifics of the Bush plan, 
     there is wide agreement that its purpose is a permanent 
     change in the tax structure and not the creation of jobs and 
     growth in the near term.

  The economists also said that:

       Passing these tax cuts will worsen the long-term budget 
     outlook, adding to the nation's projected chronic deficits. 
     This fiscal deterioration will reduce the capacity of the 
     government to finance Social Security and Medicare benefits, 
     as well as investments in schools, health, infrastructure, 
     and basic research. Moreover, the proposed tax cuts will 
     generate further inequities in after-tax income.

  That is what these 400 economists said.
  What we are talking about is fairness. We want fairness in the Tax 
Code. We want fairness to the working families of America in how they 
are taxed and who pays the burden in this country.
  Every time we talk about fairness, President Bush says, class 
warfare. Why is fairness class warfare? Why is it in President Bush's 
head that if we try to have fairness in the Tax Code, he thinks it is 
class warfare?
  That is what this is about. It is about basic fairness. We have tried 
it before. It failed horribly, and yet I guess we are going to do it 
again.
  Why should we do this? Why should we go against the advice of some of 
the most renowned economists and why should we go against what we know 
from history? Why take a risky gamble when people's lives are at stake? 
Why take a risky gamble when 9 million Americans cannot find jobs?
  If I were out of work, I would want my representatives in Washington 
to do what has been proven to grow the economy, proven to create jobs, 
not what has twice proven to fail.
  In fact, the more I think about this tax bill before us, I think of 
Bill Bennett. It is like a gambling addiction, putting $500 in the slot 
machine and pulling the handle. That is what this tax bill is like. It 
is like putting $500 in and pulling the handle and hoping he hits it. 
Now we know that Mr. Bennett did not hit it. He lost millions of 
dollars over several years of gambling.
  That is what this bill is like. It is a riverboat gamble, like David 
Stockman called it in the 1980s.
  I am getting to my amendment now, and there is an interesting 
comparison I wanted to make on Medicare. How much does the plan before 
us cost? Well, when we throw out figures of billions of dollars, eyes 
sort of glaze over. No one can understand exactly how much money that 
is. So I thought I might compare it.

[[Page 11535]]

  The President's plan if made permanent costs more than the entire 75-
year shortfall in both Social Security and Medicare, about 1.8 percent 
of GDP. The Bush tax cuts made permanent over a 75-year period will 
amount to 2.3 percent to 2.7 percent of GDP.
  We hear all the talk about the shortfall we are going to have in 
Social Security and Medicare when the baby-boomers retire, and that we 
have to do something about it. Here is your answer: The Bush plan will 
cost more than the shortfall in Social Security and Medicare. Think 
about it. Are we going to have this riverboat gamble, a tax cut that 
basically benefits the wealthiest in our society, when we could be 
using this to secure Social Security and Medicare for 75 years? But 
maybe that is what this is all about.
  It was Newt Gingrich, after all, who said that they--the 
Republicans--wanted to have Medicare ``wither on the vine.'' Maybe that 
is what this is all about. Pass this tax cut, reward the wealthiest in 
our society, and when it comes time to do something about Social 
Security and Medicare, we will not have enough money. Maybe that is 
what it is all about.
  That is not what we should be about. We should be about a jobs and 
growth bill that helps the working families of America. We ought to be 
about a bill to help secure Medicare and Social Security for the baby 
boomers. One of the ways we can do this is by making sure we have 
equity in the Medicare system. The amendment I sent to the desk will 
help do that by making sure we have better equity in the Social 
Security system and Medicare system.
  I tried to listen as my colleague from Iowa offered his amendment. I 
did not receive a copy of it earlier, so I did not have a chance to 
look at it. I heard some of the things that my colleague from Iowa was 
talking about in terms of helping right some of the wrongs in Medicare 
to provide for less disparity under Medicare.
  Most of what I heard I agree with. I think a number of the provisions 
in Senator Grassley's Medicare amendment are similar to provisions in 
my amendment. I commend him for that.
  However, his amendment uses a different offset. I don't know exactly 
what that is. I plan to analyze it overnight. It may have some merit, I 
don't know. Both are trying to help rural hospitals and providers. I 
hope we can work together to get that done sometime this year.
  Basically, what my amendment would do is, say, if the Congress does 
not pass legislation by December 31, 2003 then the Secretary of Health 
and Human Services would promulgate regulations by December 31, 2004. 
We would have to enact additional legislation. If none passed, the 
Secretary would have to act by the end of 2004. Those regulation 
changes would have to have the following parts:
  One, to equalize urban and rural base payment rate. This increases 
the rate for all hospitals in cities below one million people.
  Two, improve the Medicare incentive payment program to ensure that 
bonus payments are made on behalf of all eligible physicians; three, my 
amendment would eliminate the Medicare DSH cap. The current cap 
disproportionately hurts rural states; four, it would establish a 
Medicare inpatient hospital bonus payment for hospitals with low 
Medicare patient volumes; five, it would adjust the Medicare inpatient 
hospital prospective wage index to revise the labor-related share of 
such index to account for 62 percent of such index. Currently, payments 
are 71 percent based on labor costs. I heard Senator Grassley's 
amendment did the same thing; next, reinstate a bonus payment to home 
health care providers in rural areas. A 10 percent bonus has expired 
and this would reinstate it. Next adjust the work GPCI to no less than 
1 for physicians; lastly, this amendment I am offering would say we 
would have a hold harmless clause that whatever we do could not result 
in the lower level of reimbursement for a health care provider under 
title XVIII, that such provider would have received but for the 
enactment or these of this amendment or these regulations.
  The offset I used would be to limit, to put a cap on any tax 
deductions for dividend income not to exceed $500. In other words, you 
could get an exclusion of up to $500 on dividends in terms of a tax 
benefit, but no more than that. That offset would fully pay to make 
sure our hospitals in Iowa or Washington State--I know Washington is 
very low on the payment schedule--Montana, other States, make sure that 
we have an equalization so the Medicare payments in those States are 
not so skewed as they are right now.
  We can get this done simply by capping at $500 the tax benefits under 
the present bill before the Senate on dividends. It seems to me that 
would be a small price for the wealthiest in our country to pay to make 
sure we had a working Medicare system that was fair to all.
  In closing, regarding the tax bill, do we take a risky gamble as we 
have before, sort of a Bill Bennett gamble, as I have said, pull the 
handle on the slot machine and hope something comes up? Or do we go 
with proven methods to grow the economy and create jobs? Do we break 
the bank on tax cuts for the wealthy or do we invest in education? Do 
we break the bank on dividend tax breaks or do we cap them and use that 
offset as a way of helping equalize Medicare payments in our States? Do 
we break the bank on tax cuts for the rich or help families afford 
college tuition? Do we break the bank on tax cuts for the rich or do we 
help families afford health care coverage? Do we break the bank on tax 
cuts for the rich or do we keep Social Security secure? Do we break the 
bank on tax cuts for the rich or do we keep Medicare benefits intact? 
Do we break the bank on tax cuts for the rich or do we start to work on 
having smaller deficits?
  These are our choices. The choice is clear. This bill needs some 
serious amendments. There will be a number of amendments offered and, 
quite frankly, if some of the amendments are accepted, maybe the bill 
would be worthy of support. As the bill sits right now, the bill must 
be opposed, unless we can adopt some of these amendments that I think 
would make it, A, more fair and equitable, and B, to make sure we 
invest in the long-term security of Social Security and Medicare.
  How much time do I have remaining?
  The PRESIDING OFFICER (Ms. Murkowski). The Senator has 39 minutes 
remaining.
  Mr. HARKIN. Parliamentary inquiry, Madam President: In terms of the 
time, can this time be reserved?
  The PRESIDING OFFICER. It can be reserved for use today.
  Mr. HARKIN. I reserve the remainder of my time.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Madam President, before we move on with the next 
amendment, I think it would be accurate for me to say that the speech 
by my good colleague from the State of Iowa emphasizes the difference 
of philosophy I have tried to emphasize that our bill tries versus 
other approaches. These are honest, faithfully held ideas about the 
role of the Government in our society.
  The alternatives my colleague from Iowa has given--tax cuts on the 
one hand, or spending money on the other hand--is exactly the point I 
have been trying to make of whether or not the resources of this 
country should go through the Federal Treasury and have 535 Members of 
Congress divide them up, keep taxes high in the process, or whether it 
is better to reduce taxes to create jobs and create the jobs by leaving 
the money in the hands of 110 million taxpayers making their own 
individual decisions; the dynamics of our free market system respond 
very well to that. Money that is spent by individuals or invested by 
individuals turns over in the economy many more times than it does if I 
make a decision on how that is spent.
  Some believe, as evidenced by the recent speech, it is better to have 
higher levels of taxation, bring the money through the Federal Treasury 
and decide how to spend it. The other approach is that we will, as we 
do through this bill, give tax reduction with the taxpayers of this 
country deciding on investing and spending, or

[[Page 11536]]

both, and enhancing the economy that way and creating jobs.
  Another goal of this bill is to bring taxation of the people of this 
country within the band that it has been for about 50 or 60 years, of 
about 17 percent or 19 percent of the resources of this Nation coming 
to the Federal Government for us to finance programs and to make 
decisions on how that will be spent. About 17 to 19 percent of the 
gross domestic product has generally, over 40 years, been taxed. In 
recent years that has gotten as high as 21 percent, as high as it was 
in World War II, so the highest in peacetime history.
  This tax bill, besides the motive of creating jobs, is to bring the 
level of taxation down so it falls within that historic band, based on 
two propositions. One is it is a level of taxation that has not been so 
high to be harmful to our economy and to our people, because our 
country has advanced tremendously well with the Federal Government 
operating within that band of deciding how to allocate 17 percent to 19 
percent of our resources. The other is it is a level of taxation that 
has been accepted by the people of the United States.
  Some of them would say it is still too high, but I guess I would have 
to say over the long haul I have not heard too much complaint about the 
level of taxation that has existed over that long period of time of 17 
percent to 19 percent.
  So I do not find fault with anything my colleague from Iowa said. He 
is expressing one very legitimate philosophy of government and the 
financing of that government and the distribution of resources and 
having that done by political decision. I am expressing another 
philosophy of government shared by some Democrats and hopefully by a 
lot of Republicans, that a level of taxation can get so high it hurts 
the economy, and the way to enhance the economy and grow the economy is 
to let people have a lower level of taxation.
  Another way to say it is if we have any budget problems and any 
deficit problems, they are not related to the undertaxation of the 
American people. They are related to the overspending by the Congress.
  Now we move on to another issue. But before I yield whatever time she 
might consume to the Senator from Maine, we are adopting policy with 
her amendment, in a bipartisan way, that is unrelated to the policy 
that is in the bill. That is because as chairman of the committee, 
responding to the people in my committee, both Republicans and 
Democrats, as well as responding to people outside the committee as 
represented by Senator Collins and Senator Nelson of Nebraska, there 
was a desire to have more people involved with the policy of how to 
meet the needs of the States through some State aid. So we have 
deliberately left kind of a vacuum in this legislation that is now 
going to be filled by the good work of Senator Collins and Senator 
Nelson of the committee, and by Senator Rockefeller and others on my 
committee. I commend them for their hard work.
  There is an awful lot of compromise that has gone into this product 
and I am proud to be affiliated with this product. But the product is 
not mine, because it was my determined effort to leave it to people who 
have worked on this issue for about 2 years now. For about 2 years 
people have been promoting this concept. I compliment them for their 
stick-to-it-iveness. Tonight proves that hard work pays off.
  The PRESIDING OFFICER. The Senator from Maine.
  Ms. COLLINS. Madam President, let me begin by thanking the 
distinguished chairman of the Senate Finance Committee for his hard 
work.
  Mr. BAUCUS. Madam President, if I might ask the Senator to yield just 
for the sake of orderly process here in the Senate, as I understand it, 
the Senator means to offer her amendment. Is that correct?
  Ms. COLLINS. That is correct.
  Mr. BAUCUS. Technically, as I understand it, we should put aside 
pending amendments.
  Ms. COLLINS. I was about to ask.
  Mr. BAUCUS. I ask unanimous consent the Harkin amendment and the 
amendment by Senator Grassley be temporarily set aside, as well as the 
other amendments, so the Senator from Maine can offer her amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 596

     (Purpose: To provide temporary State and local fiscal relief)

  Ms. COLLINS. Madam President, I ask unanimous consent that the Senate 
proceed to amendment No. 596, which is a Collins-Rockefeller-Nelson, et 
al, amendment, regarding State aid, which is at the desk.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Maine [Ms. Collins] for herself, Mr. 
     Rockefeller, Mr. Nelson of Nebraska, Mr. Smith, Mr. Schumer, 
     Mr. Coleman, Mrs. Clinton, Mrs. Murray, and Mr. Wyden, 
     proposes an amendment numbered 596.

  Ms. COLLINS. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under ``Text 
Of Amendments.'')
  Ms. COLLINS. Madam President, I was beginning with my thank-yous to 
the distinguished chairman of the Finance Committee, who has worked so 
hard to produce not only the bill on the floor but also has worked very 
closely with the sponsors of this amendment to come up with a proposal 
for fiscal aid to the States that I believe is carefully drafted and is 
going to make a real difference to the 49 States that are struggling to 
close budget shortfalls.
  I am pleased to have a number of cosponsors, including Senators 
Rockefeller, Ben Nelson, Smith, Schumer, Coleman, Clinton, Murray, and 
Wyden. But I particularly want to pay tribute to Senator Ben Nelson and 
Senator Rockefeller, who have worked night and day with not only 
Senator Grassley and myself but others interested in this issue to 
forge a compromise that I think will result, at the end of the day, in 
the conference report with $20 billion in much needed fiscal relief for 
our States.
  Half of this funding would be through a temporary increase in the 
Federal Medicaid share, to ensure that States can continue to protect 
millions of vulnerable Americans who rely on the Medicaid program as 
part of the health care safety net.
  The attacks of September 11, coupled with the subsequent recession 
and resulting unemployment, have placed tremendous and unanticipated 
strains on State budgets. The States are, after all, our partners in 
providing health care, education, and other essential services to the 
citizens of this Nation. They are, however, facing a dramatic and 
unexpected decline in government revenues at precisely the time when 
the demand for government services has never been higher because of a 
lagging economy.
  States from Maine to Nebraska to West Virginia to Alaska are facing 
their most serious budget shortfalls in 50 years. States face deficits 
of between $70 and $85 billion for the next fiscal year, which begins 
in most States on July 1. They also face deficits of $26 billion trying 
to close the books on the current fiscal year.
  Moreover, while the President's proposal for excluding dividends from 
taxation would spur needed investment in American businesses, it would 
cost the States nearly a billion dollars over the next 3 years. That 
strengthens, to me, the case for providing aid to the States.
  Let me tell you what the State of Maine, my home State, is facing. 
The State of Maine faces a budget shortfall for this year and the next 
of approximately $1.2 billion. Let me put that in perspective.
  The entire budget for the State of Maine is only $5.3 billion, which 
means it faces a shortfall of approximately 20 percent. Imagine if the 
Federal Government were struggling with a budget shortfall of 20 
percent. It would have to close a $440 billion budget gap, and it would 
have to do so without borrowing a single dime. That summarizes the 
dilemma facing our State.

[[Page 11537]]

  Forty-nine States have balanced budget requirements. They have to 
balance their budgets. They cannot print more money. They can't run 
temporary deficits. They can't borrow the money to close the deficit. 
As a consequence, States have been cutting spending, increasing taxes, 
using rainy day funds, and delaying capital projects. They are doing 
whatever they can because they must balance their budgets.
  All of the States have cut programs--even programs that provide 
lifelines to our most vulnerable citizens. At a time when the number of 
people without health insurance is climbing, 49 States have either 
already cut their Medicaid Programs or are planning to do so.
  Medicaid provides a critical health care safety net for 44 million of 
our most vulnerable low-income citizens, including 218,000 in my State 
of Maine. States, as a result of trying to balance their budgets, are 
slashing Medicaid Programs. As a consequence, approximately 1.7 million 
Americans are at risk of losing their health insurance. That means they 
are going to be added to the growing number of 41 million Americans 
lacking health insurance.
  Moreover, not only is our proposal compassionate, not only will it 
help the most vulnerable Americans keep their health care services, but 
our proposal makes sound economic sense. Putting money into the hands 
of States is a great way to stimulate economic growth in conjunction 
with the tax provisions of this package. As States cut spending and 
raise taxes to balance their budgets, they weaken the overall economy.
  A recent Goldman Sachs analysis underscores the stimulative effect of 
State fiscal relief. The report notes that ``State governments could 
provide significant support to the economy without large long-term 
budget cuts, reducing the need for these jurisdictions to raise taxes, 
and cut spending.''
  After all, if we cut taxes here in Washington only to have taxes 
increase in State capitals across the country, we will wipe out some of 
the good we are trying to do by cutting Federal taxes.
  I am not saying Congress should bail out the States. I am not saying 
States should not have to make hard choices. I am not saying States 
should not balance their budgets. The States are going to have to make 
hard, painful choices, even with the $20 billion we are proposing to 
assist them. The nature and the severity of the fiscal crisis facing 
our States has convinced me that we simply have to help them. The 
consequences are too dire otherwise, and too many vulnerable low-income 
American families will suffer if we do not step in and lend a helping 
hand.
  I am encouraged that the economic stimulus package approved by the 
Senate Finance Committee authorizes temporary fiscal relief to the 
States. As the distinguished chairman has indicated, tonight we are 
deciding how to fill in the blanks and how that help should be 
allocated. We focus particularly on Medicaid because of our concern 
about the impact of State budget cuts on low-income families in 
America.
  But there is another reason it makes sense to target one-half of the 
assistance to the Medicaid Program. That is that Medicaid is the 
fastest growing component of State budgets. While State revenues are 
stagnant, or declining in most States, Medicaid cuts are increasing at 
a rate of more than 13 percent a year. That is why States have no 
choice but to look to the Medicaid Program.
  If you look at home State budgets, the vast majority of State 
spending is for education and Medicaid. If we want to help protect low-
income Americans, the best thing we can do is to approve an increase in 
the Federal match for the Medicaid Program.
  As to the State of Maine, our amendment would mean $116 million over 
the next 2 years for health care and other services that will help our 
most vulnerable Americans.
  There is another advantage to using the current Medicaid structure--
what is known as the Federal Medicaid matching rate, or FMAP. That is, 
the States don't have to take any new legislative action or establish 
any new administrative structures in order to use these additional 
Federal matching funds. They can go straight into the Medicaid Program.
  The remaining $10 billion could be used by States and local 
governments to fund education or job training, health care or other 
social services, transportation or other infrastructure needs, and law 
enforcement or public safety. In other words, we provided a great deal 
of flexibility for that remaining $10 billion.
  Our amendment would allocate $4 billion of those funds directly to 
counties and local governments.
  Our amendment is strongly supported by a wide range of health care 
groups, which I will submit as part of my formal statement in the 
interest of time.
  The support for our proposal--the Collins-Rockefeller-Nelson-Smith, 
et al, amendment--underscores the critical importance of providing 
assistance to States right now. Now is when they need it. Now is when 
we must act.
  Congress is most effective when it stands arm in arm and not toe to 
toe with our partners, the States. Our States face a fiscal crisis of 
expanding dimension. We need to help, and this bipartisan, carefully 
crafted amendment is the critical step forward in doing just that.
  I hope we will have a strong bipartisan vote for this important 
amendment. It is similar to proposals that my colleagues and I advanced 
last year and this year which garnered the overwhelming support of the 
Senate. Now we can make sure that it happens.
  I would like to yield at this time to the Senator from West Virginia 
who has been stalwart in arguing for fiscal relief for the States. It 
has been a great pleasure to work with him. I yield to him as much time 
as he needs out of my time.
  The PRESIDING OFFICER. The Senator from West Virginia.
  Mr. ROCKEFELLER. I thank my dear friend, the very distinguished 
Senator from Maine. I thank the Presiding Officer for allowing me to 
talk briefly about this amendment of Senator Collins, myself, Senators 
Nelson and Smith, and Senators, et al, as the Senator from Maine kept 
saying, including Senator Clinton and many others. It is something we 
have been working on for 2 years. It is something we have been working 
very hard on for 2 years. It is something the National Governors 
Association has worked hard for, for obvious reasons, which I will get 
into in a moment, although my remarks will not be long.
  The Senator from Maine really did cover the logic and the need in 
very clear terms. If those who are listening heard her, they heard the 
best possible argument. I just want to add a few comments.
  I also thank the chairman of the Finance Committee, Senator Grassley 
from Iowa, for his generosity and good judgment in accepting this $20 
billion package as part of the chairman's mark. Is it everything in 
amount and scope that the Senator from West Virginia would wish? No. 
Because the Senator is from West Virginia and the needs on a 
proportional basis across the country are greater in West Virginia than 
many other places. I would support $30 billion. I support $40 billion 
provided that one-half is used for Medicaid, and then others could be 
negotiated out.
  So I do not think the $20 billion is enough, but $20 billion is what 
we have, and $20 billion is more than we started out with last year. We 
will hope people forget that, even though 75 of them on this floor 
voted for it then, and then, for a $30 billion bill, 80 on this floor 
voted for it this year. That does not happen a lot around here.
  That was not a free vote. That was not a trivial vote. That was a 
vote people made after thinking about it. So we will prevail, and we 
will rejoice in that. And we will not do that just because we win an 
amendment; we do that because we know we are helping real people.
  We have almost 300,000 people in West Virginia who are on Medicaid. 
One of the things that always strikes me: We always talk about health 
care in statistics, and somehow that separates us from being able to 
get down to what

[[Page 11538]]

the Senator from Iowa, Mr. Harkin, calls ``real people.'' And I am of 
that school, the so-called real people school.
  I picked up the paper this morning. I read that 60 million Americans, 
at some point during the year, do not have health care. That is not a 
Medicaid statement. That is a health care statement. That means some of 
them never have it, and others of them only have it on a part-time 
basis. But that means that all of them--60 million Americans out of 260 
million, how ever many we are--worry all the time about health care.
  But here comes a Medicaid amendment in which we can do some good for 
people. The Senator from Maine mentioned 1,700,000 people are at risk 
if we do not. I am not sure the $10 billion will take care of all those 
1,700,000 people, but it will take care of a lot of people, and it is 
going to take care of them with very good health care. People need to 
understand that Medicaid, unlike Medicare, does provide a prescription 
drug benefit. And Medicaid, probably known to most of my colleagues, 
provides 6 million elderly, poor Americans--who do not have health care 
otherwise and prescription drugs otherwise--it provides this to them. 
So it has an enormous capacity and reach. It is superb health care. It 
does EPSDT for children. That is early screening. It does all kinds of 
things that Medicare, obviously being a different area, does not do. So 
it is a superb program.
  The Senator from Maine pointed out it is very good in terms of being 
a stimulus to the economy. She is quite correct about that. And it is 
about a 3 to 1 relationship. For every $1 you spend in the State, about 
$3 is actually churned beyond that. So it is a stimulus program. Yes, 
it is actually a stimulus program. I think that is one of the reasons 
the chairman of the Finance Committee put it in the mark.
  But there is another aspect here. The Senator from Maine used the 
words ``safety net.'' I will use the word ``underpinning.'' Either one 
is the same. This is a sacred concept. This is a country, because of 
our original history under the British crown, in which we wanted to 
protect the minority, not protect the majority. The majority, we 
figured, were able to do that.
  There are protections and checks and balances in all these things, 
but people sometimes say: Well, if somebody is on Medicaid, that means 
they are not working or they don't deserve it. That is so untrue.
  When I go back to the way I was introduced to West Virginia--and what 
caused me to stay in West Virginia--when I became a Vista volunteer for 
2 years, and I dealt with people, none of whom had health care, they 
fed me every meal I had, because I ate in some home or some mobile home 
or whatever it was. I depended upon them. My life was them. If it was a 
good day for them; it was a good day for me. If it was a bad day for 
them; it was a bad day for me. It changed me in every single way.
  But these are people who need this. There is nothing that hurts so 
much as to know a child cannot get screened for autism when they should 
be, or that a child has no dental care whatsoever. I had to deal with 
that. I would have to load kids from this little community into my 
jeep, and we would go down to the one place in Charleston, WV, which 
offered free dental care. And, obviously, you can't do that for 38 
years. So it is a tragic situation.
  These are good people. These are people sometimes who cannot find 
work simply because they live too far out in the country, as was the 
case in this community, or they did not have automobiles to be able to 
get to work. Or if they got to work, they didn't know how to take a job 
exam or have a job interview, or they had never been up in an elevator 
and they were scared by that, or they were asked to lower a Venetian 
blind because the Sun was in their eyes, and they had never seen a 
Venetian blind before, so they would just sort of shut up and hunker 
down and be defeatist.
  Don't tell me those people are not worth keeping healthy because 
things did not break their way. Things broke well in my life. Things 
have not broken well in some people's lives in Maine and Alaska and 
West Virginia, and we cannot pretend that somehow these are not people 
and that they don't deserve help. The spirit of America is one in which 
you try to protect those who cannot protect themselves, as much as 
possible, within reason.
  Incidentally, this also happens to do an enormous amount for our 
hospitals and nursing homes. And that was the one thing that was not 
said by the Senator from Maine. Eighty-five percent of any hospital in 
West Virginia depends on Medicare and Medicaid--all of them.
  So by doing this--and by pouring millions of dollars into West 
Virginia, and $10 billion across America--for a temporary period of 18 
months, we strengthen our entire health care system as well as 
stimulating the economy. So it helps the economy and it helps the 
people--and people who really do need it.
  The Senator pointed out that the other $10 billion--which I was less 
involved with because I was focused on the Medicaid relief--is spent 
wisely: in education, job training, transportation. She talked about 
it. And it is a good expenditure. Governors and local groups can decide 
how to spend that.
  I was worried it would be kind of a revenue-sharing thing. I remember 
back when I was Governor in 1982, we had revenuesharing, and, all of a 
sudden, county courthouses all over the State of West Virginia got new 
roofs and got refurbished, which is not exactly what I think the 
revenuesharing was meant to be for.
  So it is a serious business when you give Medicaid help to people who 
need it.
  I will conclude with this. And this really gets my goat. I have heard 
a lot around here the argument that you cannot give money to States. 
What are we, two nations? Are we 50 States, on the one hand? Is that 
called America? Or are we a Federal Government? Is that America? Or are 
we somehow bound up that we work together and that we help each other?
  I was not elected by a country. I was elected by a State. I am a 
Senator from West Virginia. That means we work together.
  To say the States have been irresponsible is so wrong because if you 
go back to the end of the Second World War or if you go back just 10 
years, you will find the States have been far more discrete and 
responsible in their spending than has the Federal Government.
  Now, you can say: Well, the Federal Government has very broad 
responsibilities, the Department of Defense, and other endeavors. And I 
understand that. But the fact is, the States have been responsible.
  When we took in less money in 1982 than we did in 1981, I had to fire 
10,000 Department of Highway workers. I had to fire them. I had to fire 
those people--good people who worked. So don't tell me that States 
don't sacrifice.
  West Virginia has just raised its cigarette tax to 55 cents, and all 
of the money is being spent by the Governor on Medicaid. And, at the 
same time, the State is having to cut services.
  This morning, I talked to the president of our very largest 
university, with 31,000 students, West Virginia University. His budget, 
and every other State public education budget at the college/university 
level, has been cut by 13 percent. And it will happen again next year. 
It is a devastating cut. Why? Because, as the Senator from Maine said, 
you have to balance the budget.
  So we are dealing with real States here, but, most importantly, we 
are dealing with real people who need the help in an America which was 
created to protect those who needed that help.
  I ask my colleagues to join the Senator from Maine, the Senator from 
Nebraska, and others who have sponsored this bill, and been working on 
it for a long time. I am thrilled that, at last, it has a very good 
chance of passing.
  I thank the Presiding Officer and I yield the floor.
  The PRESIDING OFFICER. Who yields time? The Senator from Iowa.
  Mr. GRASSLEY. Madam President, I yield myself off the bill such time 
as I may consume.
  The PRESIDING OFFICER. The Senator has that right.
  Mr. GRASSLEY. I am in support of this amendment. I am very glad that

[[Page 11539]]

such a compromise has been worked out. I am very happy with the team of 
people both on and off the committee who have put it together. I would 
like to emphasize one thing about the amendment. I am sure it has been 
stated very well by other sponsors, but this is meant to bring 
temporary--and I want to stress ``temporary''--fiscal relief to the 
States. I have heard from my State and many others about the difficult 
budget situations they are currently experiencing. This amendment will 
help to bring temporary relief to all States during this difficult 
fiscal time.
  It is important for the Senate to successfully pass a strong growth 
bill, and this amendment helps to achieve that goal. Numerous Senators 
have indicated that State fiscal relief is a key component of this 
growth package. Some of my colleagues believe strongly that we should 
direct some State fiscal relief through the Federal Medical Assistance 
Percentage Program or something we call around here by the acronym 
FMAP. This is the funding structure for Medicaid. This amendment uses a 
temporary adjustment in the FMAP formula.
  Some of my colleagues feel strongly about giving flexible grants to 
the States and localities. This amendment also uses flexible grants to 
those States and localities. Many Members both on and off the Finance 
Committee have worked hard to reach this agreement. As I stated in the 
Finance Committee markup, I believe all Senators should have an 
opportunity to weigh in. The amendment before us reflects the hard work 
of many Senators who care deeply about State fiscal relief. It is a 
good compromise. For these reasons, I am going to vote for this 
amendment, and I urge my colleagues to do the same.
  I want to state a couple more times, just so it is not forgotten, to 
any State and local people listening or who will read about it or for 
sure will be reminded about it a year or so from now: This is meant to 
be temporary.
  The PRESIDING OFFICER. The Senator from Maine.
  Ms. COLLINS. Madam President, I thank the distinguished chairman of 
the committee for his remarks. I thank the Senator from West Virginia 
for his eloquent statement, and I now yield time to the other great 
leader on this issue, my colleague and friend, Senator Ben Nelson of 
Nebraska.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. NELSON of Nebraska. Madam President, I come to the floor today to 
support and urge my colleagues to join in support of the amendment 
before the Senate for State fiscal relief. I begin by thanking my 
friend and colleague from Maine, Senator Collins, who has been stalwart 
in pushing for State fiscal relief for 2-plus years. We have worked 
very carefully, very closely to bring about this amendment that is 
before us today.
  On two other occasions, we have had overwhelming support. We believe 
this amendment will potentially have that same level of support. I 
thank her for all of the work and leadership she has provided in making 
this possible.
  I thank also the distinguished chairman of the Finance Committee, my 
friend to the east of Nebraska in Iowa, Senator Grassley. He has been a 
man of his word. We have worked very carefully, very closely on this 
issue and others. I thank him for contributing significantly to our 
effort to bring this amendment to the body.
  Most of what needs to be said has been said already. I do want to 
emphasize, as Senator Grassley has, that this is temporary. It is for a 
2-year period. And why is it temporary? Because one would expect that 
if we are going to grant stimulus programs to grow the economy, that 
after a reasonably short period of time, the economy will respond. That 
is the hope, that is the expectation, and that clearly is the goal, not 
only of this amendment but of the entire growth package before the 
Senate.
  Our goal is to make sure that we grow the economy faster than we grow 
the deficit. It doesn't make a lot of sense to cut taxes in Washington 
and ignore what is happening in the State capitals. ether it is in 
Juneau or Lincoln or wherever it may be, what happens in State capitals 
with the State legislatures does matter.
  Over the weekend, I was home in Nebraska and the local news media was 
covering in great detail the travail of the Nebraska Legislature in 
trying to take care of a growing budget deficit caused by declining 
revenues and increasing costs. Therefore, the news was replete on the 
subject day in and day out. So if we are going to try to change the 
attitude and improve the economy with active results in Washington, DC, 
it does not make sense to ignore what is happening in the State 
capitals.
  We only have one tax pocket. The Federal Government is trying to put 
in some money. States have their hand in taking more out. That 
certainly is counterproductive to the goal we have if we ignore what is 
happening at the State level.
  I have said that it is the equivalent of trying to drive a car with 
one foot on the accelerator and the other on the brake. We don't want 
what we are attempting to do here negated by what is going on in State 
capitals. This will permit us to do as much as we can to help avoid 
that.
  There is the human side. Quite honestly, in Nebraska, for example, 
with this projected budget shortfall, the University of Nebraska, the 
State colleges are all taking significant cuts. Nebraska teachers are 
out of work because of lower State aid to education. In fact, when it 
comes to health care coverage and child care options, more than 15,000 
children have already been cut from Medicaid benefits and another 2,000 
families have lost their child care. More harsh cuts are on the way 
unless we do something to help fill the revenue gap. This amendment 
does that.
  Some have suggested that this is bailing out the States or somehow it 
is a gift that we are doing out of the generosity of Washington. I have 
encountered the generosity of Washington, generally, as a former 
Governor when things were given to us. They were called underfunded and 
unfunded Federal mandates. This is not what we are about today. We 
recognize that one of the best ways to help the States with their 
problems today is to take care of these needs and make sure that we 
don't have what we are doing here negated by action at the State level, 
which is to respond by supporting additional FMAP funding for a period 
of 2 years, as well as recognizing that the State and local governments 
are also feeling the pinch with the fast growing requirements due to 
hometown security under homeland security requirements. They do not 
have the luxury to run deficits, nor should they.
  Therefore, what we propose is $10 billion to be split between the 
States and local governments on a block grant basis. This will help 
provide some relief from property taxes that would otherwise most 
assuredly rise as the cost of local governments are passed on to 
taxpayers.
  As we look at this package, as we look at State fiscal relief, I hope 
we will continue to have the bipartisan support we have had in the 
past. Whether it is 75 or 80 votes is secondary. I certainly hope it 
would be overwhelming support for this effort.
  For those who would say what kind of stimulus will come from this 
effort, there are studies that show that 1.24 will be returned in one 
year. From my perspective, a 24-percent return on this sort of 
investment to take back to the States is a good return, and it is 
certainly a stimulus to the economy. Therefore, it is a stimulus to the 
future of this great country.
  I appreciate the opportunity. I thank my colleague, the Senator from 
Maine, for her support, for her constant counseling on how we should go 
about this effort. I thank her for the time to speak on this very 
important amendment.
  I yield the floor to the Senator from Maine.
  Ms. COLLINS. I would like to ask my friend from Nebraska how he would 
respond to a valid question that has been raised about our amendment: 
Will the increase in the FMAP, Federal share of Medicaid, be a 
temporary one?
  Mr. NELSON of Nebraska. I am glad my friend from Maine has asked that

[[Page 11540]]

question so that I can provide some assurances to our colleagues. On 
behalf of our group of Senators offering this amendment, let me be 
clear: We have drafted this provision in such a way that the increase 
in the FMAP will end June 30, 2004. My colleagues will be glad to know 
that there is precedent for Congress passing short-term Medicaid 
matching rate increases that have not become permanent.
  In 1981, the Omnibus Budget Reconciliation Act reduced Medicaid 
matching rates for 3 years, while also creating exemptions for States 
that had high unemployment rates, special hospital review programs, or 
strong fraud and abuse recovery systems. At the time when this was 
enacted, some in Congress worried that these changes would be 
permanent, but these provisions expired on schedule without any 
particular controversy or efforts to extend them.
  There is even a more recent example: The Omnibus Consolidated 
Rescissions and Appropriations Act of 1996 granted a temporary increase 
in the FMAP to Louisiana. The State's matching rate rose from the 
normal rate of 72.08 percent to a special enhanced rate of 84.28 
percent in State fiscal year 1995-96 and from the normal rate of 71.49 
percent to an enhanced rate of 81.46 percent in State fiscal year 1996-
97. This temporary State relief was granted because the Omnibus Budget 
Reconciliation Act of 1993 tightened disproportionate share hospital 
payment policies and posed a hardship for Louisiana at a time when the 
State's economy was faring badly. The State was able to use these 
temporary funds to avoid disruptions in essential services. The 
temporary increase in Louisiana's FMAP expired as scheduled.
  These provisions expired as planned after fulfilling their mission of 
temporary relief to help these States transition through a difficult 
period. Congress has been able to maintain discipline in the past. 
There is no evidence that a temporary increase in Medicaid matching 
rates will inevitably become permanent. In fact, because our amendment 
in no way adjusts how future FMAPs are calculated, it does not effect a 
permanent change in FMAPs for States.
  Ms. COLLINS. I thank my colleague for that valuable clarification. 
Let me ask my colleague from West Virginia about another question that 
has come up regarding the impact of our proposal on the baseline for 
future Medicaid calculations. There is some concern that this provision 
might increase FMAP rates in future years. Would you clarify this issue 
for our colleagues?
  Mr. ROCKEFELLER. I am happy to address that issue. The FMAP is 
currently calculated annually under the following formula. The FMAP is 
at least 50 percent and is calculated based on the ratio of a State's 
3-year average of per capita income to the 3-year average of per capita 
income of the Nation. Given the nature of this formula, the previous 
year's FMAP in no way affects the calculation of future FMAPs. 
Basically, if the State's average per capita income is below the 
national per capita average, the State gets a higher FMAP. The FMAP is 
calculated usually 6 months to a year in advance of the start of a 
Federal fiscal year. The amendment would take the FMAP that has already 
been calculated by HHS under this formula for fiscal year 2003 and 
fiscal year 2004 and increase it by 2.95 percentage points for a 
portion of those years. It does not adjust the underlying formula. 
Because the FMAP is calculated annually, and the calculation is still 
based on the current per capita income ratio, our amendment in no way 
increases the baseline for future FMAP calculations.
  I would like to add that I completely concur with the Senator from 
Nebraska's statement on the temporary nature of the FMAP.
  Ms. COLLINS. I would like to add one other point of clarification on 
this provision. By no means do we intend to prohibit States from using 
the revenue sharing portion of this amendment on services or other 
spending that the State cut in its most recent budget. If a State 
wanted to use a portion of these funds to restore all or part of a 
vital service it was forced to eliminate or reduce, it should be 
allowed to do so. We know that the State is the best judge of how to 
prioritize these funds, not the Federal Government.
  Madam President, I thank my colleague and close friend, the Senator 
from Nebraska, for his leadership and for making such an excellent 
case. I know there are others who are waiting, so I will conclude the 
debate on this by making just one final point. Forty-nine States are 
facing severe budget shortfalls. This is not an isolated problem. It is 
a problem that affects all but one State. This isn't a case where 
States have been fiscally irresponsible, spending wildly.
  In fact, the States are coping with the demand for services and a 
decline in revenues at the same time. It is not something they brought 
upon themselves. That is why we should step in temporarily--these are 
not permanent assistance programs--to provide help. It will help ensure 
that 1.7 million Americans will not lose their Medicaid services. It 
will help ensure that they might just have a little bit of help as they 
make the painful, difficult choices that are necessary to close their 
budget gap. It will help ensure that it has a direct stimulative 
effect, which is, after all, the entire purpose of this package. It is 
to get our economy growing again and create good jobs. Fiscal aid to 
States will help to achieve that critical goal.
  I want to take this opportunity to ask for the yeas and nays on my 
amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Ms. COLLINS. I thank the Chair and I yield the floor.
  Mr. SMITH. Mr. President, I rise today in support of this amendment 
to allocate State fiscal relief funds to Medicaid and State and local 
governments.
  I have been supportive of State fiscal relief since the last 
Congress. Last year, I introduced a bill with Senators Rockefeller, 
Nelson, and Collins to provide states with fiscal relief, which 
garnered the support of 75 Senators.
  This year, I reintroduced State fiscal relief legislation with 
Senators Rockefeller, Nelson, and Collins that would provide States 
with $20 billion--half through FMAP.
  And earlier this year, 80 Senators supported a sense of the Senate 
that $30 billion should be spent on State fiscal relief, with half of 
the money going to Medicaid. Eighty votes is a pretty clear signal that 
this is important to a lot of folks in a lot of States.
  And make no mistake, FMAP is good economic stimulus for the States 
which need it badly. By providing State fiscal relief in the form of 
FMAP back to our states, we improve the health of our workforce, 
protect or expand health coverage, create new jobs, and infuse the 
economy with new money.
  By providing a temporary boost to FMAP in the form of $10 billion, 
Oregon would see more than $300 million in new economic activity, more 
than $110 million in new wages would be generated, and more than 3,500 
jobs would be created.
  As you can see, State fiscal relief is one of the most effective 
policies the Congress could and should enact as part of the economic 
stimulus/growth package. There is no question that States will spend 
any additional Federal funds they receive quickly, putting money 
directly into the economy rather than curtailing economic activity.
  As many economists have noted, we need to increase demand in the 
economy--but State budget actions to balance their budgets right now 
are reducing demand significantly. This is precisely the wrong medicine 
at the wrong time for our economy.
  As you know, States are facing budget deficits of approximately $100 
billion that need to be closed over the next few months. States are 
closing these deficits by cutting education, health care, and public 
safety--and sometimes by considering raising taxes.
  Unfortunately, the economic impact of State budget cuts and possible 
tax increases have wide-reaching impacts.

[[Page 11541]]

A dollar cut from Medicaid results in far more than one dollar less in 
health care.
  Fortunately, the opposite is also true: every single dollar spent on 
Medicaid results in over $3 in the State and local economy.
  Some of our colleagues will tell us that the States spent their own 
way into the current fiscal crisis. But most of the spending increases 
in health care were driven by the fact that health care costs grew 
almost twice as quickly as general inflation, and that Medicaid 
enrollment rose among disabled individuals and the elderly--two groups 
with expensive health care needs.
  In addition, States expanded health care coverage among low income 
children and pregnant women.
  Since the economy began to falter, virtually every State has taken 
Medicaid cost-containment action. Additional cuts are expected next 
year as States struggle to fill budget shortfalls of billions of 
dollars.
  Of course, this means that the number of uninsured Americans will 
continue to grow.
  According to the CDC, Medicaid and SCHIP provided coverage for 2 
million children and 1 million adults who lost their health coverage 
last year. I suspect this year, those numbers will be even larger.
  My home State of Oregon has been hit hard by the economic downturn. 
The number of uninsured is up, way up. Children and adults, parents 
have lost their jobs and they are turning to Medicaid. Will Medicaid be 
there for them?
  Without additional resources, 100,000 Oregonians will lose their 
health coverage, and the people who retain their coverage are facing 
drastically reduced benefits. This loss will have a ripple effect in 
the local economy. In some counties, a quarter of the population is 
eligible for Medicaid.
  While we need to strengthen our economy in the long run, it is 
imperative that we address the immediate economic problems by tackling 
the State fiscal crisis.
  This amendment will provide millions of dollars to needy State and 
local governments to provide essential services that benefit all of us.
  I urge my colleagues to support this amendment.
  The PRESIDING OFFICER. Who yields time?
  Mr. BAUCUS. Madam President, I yield such time as the minority leader 
himself may use.
  Mr. DASCHLE. Madam President, I thank the distinguished ranking 
member, the Senator from Montana. I will just take a couple of minutes.
  I think this is a critical amendment. I hope, as we consider what it 
is we need to do to ensure that our country can be put back in economic 
balance, that we recognize the importance in providing meaningful 
assistance to the States.
  Of all the amendments we have before us, this is one of the most 
important. I just spoke to the Governors yesterday. They have an $80 
billion shortfall. So I am very hopeful that, as we consider where it 
is we can do the most good, where we can get the greatest traction, 
where we can do the most to ensure that we have the greatest degree of 
economic recovery, we recognize the importance of helping States deal 
with the crisis they are facing in dealing with medical costs. 
Likewise, we must recognize that we have an obligation to offset the 
costs of the Leave No Child Behind Act and realize that transportation 
infrastructure has to be addressed. Our legislation would do that.
  So I applaud my colleagues for the extraordinary effort they have 
made to bring us to this point. I congratulate our colleagues on both 
sides of the aisle for their effort. I hope our colleagues will see fit 
to pass the amendment when we vote on it tomorrow.
  If I may say briefly, I wish we were not here tonight with the 
legislation that is pending before us. Our country is mired in debt. We 
could exceed $400 billion in debt this year--the single largest 1-year 
level of indebtedness our country has ever faced. I cannot imagine, 
with all of that debt, with the recognition that we have gone from a $5 
trillion surplus to a $2 trillion deficit, that anyone could possibly 
feel comfortable supporting a tax cut of the magnitude we are talking 
about tonight.
  I only wish that somehow we could resolve our differences and 
recognize that fiscal responsibility has to have some important part in 
our calculation as to what makes the most sense as we look to economic 
recovery. An independent analysis by Economy.com found that we could 
actually lose jobs in the outyears. The objective report indicated that 
not only do we not create many jobs in the next year because most of 
this legislation doesn't kick in until 2004, we actually could harm the 
economy in the outyears because of increasing long-term indebtedness as 
a result of higher interest rates.
  So from a jobs point of view, we can do better. From a cost point of 
view, we can certainly do better. From the point of view of fiscal 
responsibility, we must do better. So we will be offering a Democratic 
alternative that will allow us that fiscal responsibility and allow us 
an immediate response to the economic circumstances we are facing right 
now.
  Our bill does what the economic experts told us we must do. They said 
make it temporary, make it immediate, make it broad-based and, above 
all, make it fiscally responsible. That is what the Democratic 
alternative will do tomorrow. It will provide help for the States, as 
this amendment does. It will provide a broad-based wage credit for 
every working family in the country today. It will provide meaningful 
help to small business with the business expensing allowance. It will 
provide unemployment insurance for those who have seen it terminated. 
So it does exactly what the Nobel laureates, the economists, have told 
us must be done if indeed we are cognizant and sensitive to the many 
pressures and challenges and the many real problems we are facing as we 
look to our fiscal responsibilities in the coming years.
  We can do better than this. I am very hopeful that we can persuade 
our colleagues to look carefully at what repercussions there will be if 
the legislation currently pending passes. I hope we can persuade our 
colleagues that indeed working together we can find a better approach. 
Our Democratic alternative is that better approach. I urge my 
colleagues to look at it tonight and support it tomorrow.
  I yield the floor and I thank my colleagues for the opportunity to 
address the alternative, as well as the State amendment.
  The PRESIDING OFFICER. The Senator from Montana is recognized.
  Mr. BAUCUS. Madam President, I, too, am pleased we are going to be 
voting to increase aid to the States. Earlier this year, I offered 
legislation to cut taxes, but its centerpiece was aid to the States. In 
fact, I suggested $75 billion in aid to the States. That sounds like a 
pretty large sum, but I suggested in the introduced legislation to 
provide up to $75 billion because, in my judgment--and I think it is 
the judgment of most economists--dollars that are spent to help States 
to balance their budgets will significantly help the economies in those 
States. Unfunded mandates by the U.S. Federal Government has caused 
some of the problems the States are facing. No Child Left Behind has 
been mentioned, and there are others, such as IDEA and special 
education. There are various unfunded mandates.
  We in the Congress have said that the States must provide these 
services, but the President and the Congress have not provided the 
money to the States so they can provide these services. So the States 
have had to figure out how to pay for these services because that is 
Federal law, they must do so.
  In the meantime, as we all know, States have suffered dramatic 
reductions in revenues because the economy has been down. States all 
across the country have not received near the amount of revenues they 
expected in their last budgets. When you add to that rising health care 
costs in the country, which are averaging 12 to 13 percent higher each 
year, this is a huge increase to the States' Medicaid budgets and other 
health care budgets. So it is very important to give increased aid to 
the States. I am disappointed, frankly, that this bill provides only 
$20 billion when the need is so great.

[[Page 11542]]

  I remind our colleagues also, as the occupant of the chair knows 
well--particularly because her father is Governor of a State--States 
have to balance their budgets. That is not true for the Federal 
Government. When States face all these unfunded mandates and a 
reduction in revenue, they have huge budget deficits, which they have 
to somehow solve, and they can only do so by raising taxes or by 
cutting various State services, such as Medicaid--their share--and 
whatnot.
  So that is why we are here today and why so many Senators have spoken 
out in favor of aid to the States. We are soon to have an amendment 
offered by the Senator from Washington, which I support. She is going 
to suggest even more aid to the States. This $20 billion is merely a 
drop in the bucket. As we all know, the budget deficit in California is 
$35 billion alone. This bill provides just $20 billion. One State alone 
is much more than that. My State of Montana is running a budget deficit 
of about $260 million. We are a small State, but $260 million in 
deficit is a lot for my State with a population of 19,000 people.
  So I join in the chorus, and I particularly thank the Senator from 
Maine and the chairman of the committee. I also thank the other 
Senators who are working to put this together. I must say I will 
support it, but I wish we were a little wiser, frankly, and providing 
more aid to the States. Certainly $20 billion is low, but if that is 
all we can get, that is what we face. I thank all my colleagues who 
have worked on this.
  Madam President, I now yield 3 minutes to the Senator from New York.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Madam President, I thank my colleague from Montana. I 
add my remarks to his. I agree with him completely. I am in full 
support of the Collins-Rockefeller-Nelson amendment. Our localities and 
States desperately need aid. It makes no sense to tell John Q. Citizen 
that he will get a $100 rebate from the Federal Government and then 
have his State and local taxes rise $100. That does not put money in 
his pocket and stimulate the economy.
  Madam President, $20 billion is a decent sum, half going to FMAP and 
half to direct aid. I would like to see a little more going to 
localities. It is 60-40, as I understand it. My original proposal with 
Senator Collins and Senator Snowe was 50-50. That would be a little 
fairer because localities need help in property taxes a lot. But this 
is a good start. I am glad it is in the bill. I hope it will stay in 
the bill because our localities desperately need aid.
  Property taxes are going through the roof, and the best property tax 
circuit breaker is local aid. I wish it was higher as well, and I am 
glad that in a few minutes, my colleague from Washington will be 
offering an amendment that doubles that amount.
  The original legislation that Senator Snowe and I introduced was $40 
billion. I know my friend from Montana originally proposed $75 billion. 
Even that would not be enough to do what we need to do. I hope we can 
raise the amount. Again, States and localities need it.
  Cities and counties throughout my State are raising taxes. That is 
going to put a real damper not only on New York's economy but on 
America's economy. Local aid prevents some of that from happening.
  This is one of the most important provisions in this bill. There are 
a lot of provisions in the bill that Senator Grassley has proposed with 
which I agree. There are some with which I disagree. But there is 
probably none that is more needed, more demanded by the Governors, 
mayors, county officials, town and village officials than the proposal 
the Senator from Maine, the Senator from West Virginia, and the Senator 
from Nebraska have brought before us.
  I am going to support it rather enthusiastically, only tempered by 
the fact that I think it should be more. I hope it can be more. I hope 
it does not get any lower, I say to my good friend from Iowa, in 
conference and in other places. He is shaking his head yes, let the 
record show. I hope he is saying, yes, it should not get lower not, 
yes, it should get lower.
  This is a very important amendment. I will fully support it. I was 
involved in helping to push this local aid issue. I hope we can 
increase the amount with the amendment of the Senator from Washington.
  I yield back the remainder of my time.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Madam President, it is my understanding that all Senators 
who wished to speak on the Collins amendment have spoken.
  I ask unanimous consent that all pending amendments be temporarily 
laid aside so the Senator from Washington can offer her amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from Washington.


                           Amendment No. 564

  Mrs. MURRAY. Madam President, I call up amendment No. 564.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Washington [Mrs. Murray], for herself, Mr. 
     Daschle, Mr. Baucus, Mr. Rockefeller, Mr. Wyden, Mr. Schumer, 
     and Mr. Corzine, proposes an amendment numbered 564.

  Mrs. MURRAY. Madam President, I ask unanimous consent that the 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

          (Purpose: To provide temporary State fiscal relief)

       Strike section 371 and insert the following:

     SEC. 371. GENERAL REVENUE SHARING WITH STATES AND THEIR LOCAL 
                   GOVERNMENTS.

       (a) Appropriation.--There is authorized to be appropriated 
     and is appropriated to carry out this section $20,000,000,000 
     for fiscal year 2003.
       (b) Allotments.--From the amount appropriated under 
     subsection (a) for fiscal year 2003, the Secretary of the 
     Treasury shall, as soon as practicable after the date of the 
     enactment of this Act, allot to each of the States as 
     follows, except that no State shall receive less than \1/2\ 
     of 1 percent of such amount:
       (1) State level.--$16,000,000,000 shall be allotted among 
     such States on the basis of the relative population of each 
     such State, as determined by the Secretary on the basis of 
     the most recent satisfactory data.
       (2) Local government level.--$4,000,000,000 shall be 
     allotted among such States as determined under paragraph (1) 
     for distribution to the various units of general local 
     government within such States on the basis of the relative 
     population of each such unit within each such State, as 
     determined by the Secretary on the basis of the most recent 
     satisfactory data.
       (c) Definitions.--For purposes of this section--
       (1) State.--The term ``State'' means any of the several 
     States, the District of Columbia, and the Commonwealth of 
     Puerto Rico.
       (2) Unit of general local government.--
       (A) In general.--The term ``unit of general local 
     government'' means--
       (i) a county, parish, township, city, or political 
     subdivision of a county, parish, township, or city, that is a 
     unit of general local government as determined by the 
     Secretary of Commerce for general statistical purposes; and
       (ii) the District of Columbia, the Commonwealth of Puerto 
     Rico, and the recognized governing body of an Indian tribe or 
     Alaskan native village that carries out substantial 
     governmental duties and powers.
       (B) Treatment of subsumed areas.--For purposes of 
     determining a unit of general local government under this 
     section, the rules under section 6720(c) of title 31, United 
     States Code, shall apply.

     SEC. 371A. TEMPORARY STATE FMAP RELIEF.

       (a) Permitting Maintenance of Fiscal Year 2002 FMAP for 
     Last 2 Calendar Quarters of Fiscal Year 2003.--
     Notwithstanding any other provision of law, but subject to 
     subsection (e), if the FMAP determined without regard to this 
     subsection for a State for fiscal year 2003 is less than the 
     FMAP as so determined for fiscal year 2002, the FMAP for the 
     State for fiscal year 2002 shall be substituted for the 
     State's FMAP for the third and fourth calendar quarters of 
     fiscal year 2003, before the application of this section.
       (b) Permitting Maintenance of Fiscal Year 2003 FMAP for 
     Each Calendar Quarter of Fiscal Year 2004.--Notwithstanding 
     any other provision of law, but subject to subsection (e), if 
     the FMAP determined without regard to this subsection for a 
     State for fiscal year 2004 is less than the FMAP as so 
     determined for fiscal year 2003, the FMAP for the State for 
     fiscal year 2003 shall be substituted for the State's FMAP 
     for each calendar quarter of fiscal year 2004, before the 
     application of this section.

[[Page 11543]]

       (c) General 4.95 Percentage Points Increase for Last 2 
     Calendar Quarters of Fiscal Year 2003 and Each Calendar 
     Quarter of Fiscal Year 2004.--Notwithstanding any other 
     provision of law, but subject to subsections (e) and (f), for 
     each State for the third and fourth calendar quarters of 
     fiscal year 2003 and each calendar quarter of fiscal year 
     2004, the FMAP (taking into account the application of 
     subsections (a) and (b)) shall be increased by 4.95 
     percentage points.
       (d) Increase in Cap on Medicaid Payments To Territories.--
     Notwithstanding any other provision of law, but subject to 
     subsection (f), with respect to the third and fourth calendar 
     quarters of fiscal year 2003 and each calendar quarter of 
     fiscal year 2004, the amounts otherwise determined for Puerto 
     Rico, the Virgin Islands, Guam, the Northern Mariana Islands, 
     and American Samoa under subsections (f) and (g) of section 
     1108 of the Social Security Act (42 U.S.C. 1308) shall each 
     be increased by an amount equal to 9.90 percent of such 
     amounts.
       (e) Scope of Application.--The increases in the FMAP for a 
     State under this section shall apply only for purposes of 
     title XIX of the Social Security Act and shall not apply with 
     respect to--
       (1) disproportionate share hospital payments described in 
     section 1923 of such Act (42 U.S.C. 1396r-4);
       (2) payments under title IV or XXI of such Act (42 U.S.C. 
     601 et seq. and 1397aa et seq.); or
       (3) the percentage described in the third sentence of 
     section 1905(b) of the Social Security Act (42 U.S.C. 
     1396d(b)) (relating to amounts expended as medical assistance 
     for services received through an Indian Health Service 
     facility whether operated by the Indian Health Service or by 
     an Indian tribe or tribal organization (as defined in section 
     4 of the Indian Health Care Improvement Act)).
       (f) State Eligibility.--
       (1) In general.--Subject to paragraph (2), a State is 
     eligible for an increase in its FMAP under subsection (c) or 
     an increase in a cap amount under subsection (d) only if the 
     eligibility under its State plan under title XIX of the 
     Social Security Act (including any waiver under such title or 
     under section 1115 of such Act (42 U.S.C. 1315)) is no more 
     restrictive than the eligibility under such plan (or waiver) 
     as in effect on July 1, 2003.
       (2) State reinstatement of eligibility permitted.--A State 
     that has restricted eligibility under its State plan under 
     title XIX of the Social Security Act (including any waiver 
     under such title or under section 1115 of such Act (42 U.S.C. 
     1315)) after July 1, 2003, but prior to the date of enactment 
     of this Act is eligible for an increase in its FMAP under 
     subsection (c) or an increase in a cap amount under 
     subsection (d) in the first calendar quarter (and any 
     subsequent calendar quarters) in which the State has 
     reinstated eligibility that is no more restrictive than the 
     eligibility under such plan (or waiver) as in effect on July 
     1, 2003.
       (3) Rule of construction.--Nothing in paragraph (1) or (2) 
     shall be construed as affecting a State's flexibility with 
     respect to benefits offered under the State medicaid program 
     under title XIX of the Social Security Act (42 U.S.C. 1396 et 
     seq.) (including any waiver under such title or under section 
     1115 of such Act (42 U.S.C. 1315)).
       (g) Definitions.--In this section:
       (1) FMAP.--The term ``FMAP'' means the Federal medical 
     assistance percentage, as defined in section 1905(b) of the 
     Social Security Act (42 U.S.C. 1396d(b)).
       (2) State.--The term ``State'' has the meaning given such 
     term for purposes of title XIX of the Social Security Act (42 
     U.S.C. 1396 et seq.).
       (h) Repeal.--Effective as of October 1, 2004, this section 
     is repealed.

     SEC. 371B. ELIMINATION OF 20 PERCENT PARTIAL EXCLUSION OF 
                   DIVIDENDS RECEIVED BY INDIVIDUALS.

       Section 116(a)(2)(B), as added by section 201 of this Act, 
     is amended by striking ``(20 percent in the case of taxable 
     years beginning after 2007)''.

  Mrs. MURRAY. Madam President, I rise to offer an amendment that will 
help address the real needs of families in cities and States all across 
this country. I thank my cosponsors Senators Daschle, Baucus, 
Rockefeller, Wyden, Kohl, Schumer, Edwards, and Corzine.
  As I look at the current tax proposal, I do not see much that will 
provide an immediate stimulus to our economy or help working families 
who are struggling during this recession. In fact, today's Washington 
Post said that even some Republicans consider this plan ``bizarre and 
economically suspect.''
  This tax bill ignores the real needs that families are facing, and it 
dramatically increases the deficit, all to give massive tax cuts to a 
very few. That is an approach that has already failed us. Simply put, 
this tax bill fails America's families. So tonight I am offering an 
amendment to put some stimulus and relief into this no-stimulus bill.
  The Murray amendment provides direct help where it is so badly 
needed--in our States and in our local communities. My amendment 
addresses a crisis in health care that jeopardizes access for all 
Americans.
  Currently, the underlying bill, as we just heard, offers $20 billion 
in aid to the States. By the way, that funding is only there because 
Democrats fought for it. That is a major accomplishment considering the 
President's plan included nothing for our ailing States, and the House 
also failed our States.
  While $20 billion is a victory in our current political environment, 
we all know it is not enough to help our States recover quickly. So my 
amendment offers an additional $20 billion for our struggling States 
and local governments. In total, my amendment provides $40 billion in 
immediate assistance to our ailing States.
  Here is how the money will be divided: $20 billion will go to general 
revenue sharing. Of that, $16 billion is for State governments, 
including Washington, DC, and Puerto Rico; $4 billion is for local 
governments, and each State will receive a minimum of $100 million.
  The other $20 billion goes to States for Medicaid relief. This 
provision would temporarily increase the Federal matching rate for 
Medicaid. If we are going to help our economy recover, we need to help 
our States and local governments get through this crisis.
  All of my colleagues know the plight of our States. My home State of 
Washington continues to suffer real economic problems, and it 
illustrates the importance of adopting the Murray amendment. Washington 
State has the second highest unemployment rate in the Nation at 7 
percent. My colleague from Oregon, Senator Wyden, who is going to be 
speaking in just a few minutes, shares the distinguished record of 
having the highest unemployment in the Nation go back and forth between 
Oregon and Washington in the last 2 years.
  In Washington State, since the spring of 2001, we have lost tens of 
thousands of jobs. In fact, one in nine Washington residents does not 
have health care coverage today, and 150,000 people in my State have 
lost health insurance in the last 2 years. In the last 2 years alone, 
we have faced in my State an earthquake, an energy crisis, declines in 
our technology sector, the downturn of Boeing, and the loss of 
thousands of jobs. And now we face a State budget deficit of $2.7 
billion. That translates to dramatic cuts in education, health care, 
transportation, and social services.
  These programs are more important now than ever because times are so 
tough. Unfortunately, as we all know, many other States are facing very 
similar challenges. In fact, today our States are experiencing the most 
severe economic crisis since World War II. Nationwide, States are 
facing deficits totaling $70 billion to $85 billion.
  Experts are warning us that 1.7 million people nationwide risk losing 
Medicaid coverage as States cut their budgets. In fact, in Washington 
State, according to our insurance commissioner, 60,000 children will 
lose access to health care unless we help. That is 60,000 children in 
Washington State alone. Unlike the Federal Government, States do not 
have the option of deficit spending. Instead, States are forced to cut 
existing programs or raise new revenues to balance their budgets.
  To add to the State's budget crises, the Federal Government has 
created costly new mandates in areas such as education and homeland 
security.
  The ``No Child Left Behind'' law required States to implement new 
accountability measures, but the assistance that was promised has never 
been delivered.
  On homeland security, State and local law enforcement must work 
overtime whenever the threat level is raised. For many States and 
localities, homeland security is on the verge of becoming another 
unfunded mandate. Unfortunately, in response to the crises in our 
States, the President proposed nothing to help them. It is like the 
famous newspaper headline: ``Ford to City: Drop Dead.'' The House of 
Representatives followed the President's lead in leaving States in 
crisis. It took

[[Page 11544]]

Democratic efforts in the Senate to build bipartisan support for our 
States.
  I am proud of the work that Democrats have done to add $20 billion to 
the tax legislation to help our States get through this difficult time. 
I also commend my colleagues on the other side who are working on this 
issue. I applaud their work in the face of strong opposition from the 
President and the Republican party leadership.
  My amendment will help States deal with education, as many State 
universities and community colleges are facing double-digit tuition 
increases. My amendment will also help States address their Medicaid 
shortfalls by temporarily raising the Federal share of Medicaid 
payments.
  Given the fiscal crisis in our States, this additional support is 
critical today. This aid will allow our States to maintain health care 
coverage for our most vulnerable citizens.
  Some of my colleagues may hear the word ``Medicaid'' and think I am 
just talking about helping low-income families. That is true and it is 
critical, but it is much more than that.
  Yes, Medicaid does provide coverage for more than 42 million low-
income, disabled, and elderly Americans, but let's not forget that 
Medicaid plays a major role in America's health care delivery system.
  It pays for about half of all nursing home care. It pays for 17 
percent of prescription drug coverage.
  Hospitals, doctors and clinics in every State rely on Medicaid as a 
significant source of revenue.
  Cuts in Medicaid could close nursing homes. Cuts could make it harder 
for middle class families to pay for long-term care for their aging 
parents or relatives. It could mean lower wages for nurses in long-term 
care facilities. Finally, let me emphasize, it could have a major 
impact on women because 70 percent of Medicaid beneficiaries over age 
15 are women.
  Unless we address the Medicaid shortfall, we will feel the impact 
everywhere.
  When poor kids, families, and moms do not have health care, kids show 
up at school sick, moms cannot care for families, and parents do not go 
to work. That affects everyone. It will add to the 41 million Americans 
who do not have health insurance, and that will add to the costs we all 
pay for health care. This affects families and businesses in the form 
of much higher insurance premiums.
  Finally, when Medicaid is underfunded, it puts more pressure on our 
doctors, hospitals, and clinics that are already struggling. We are 
losing doctors and seeing hospitals close today.
  We cannot afford to let things get worse. We need to improve the 
underlying tax bill so it addresses the real challenges facing families 
in our States and local communities. States are facing a fiscal crisis, 
and my amendment provides $20 billion in aid. States are facing a 
healthcare crisis, and my amendment provides another $20 billion to 
make up the Medicaid shortfall.
  This amendment is a chance to improve what has been called a 
``bizarre and economically suspect'' tax plan.
  Before I close, I want to clarify something that we may hear during 
this debate. I want my colleagues to know that this is not about 
bailing out States that have overspent. We are talking about individual 
Americans and their access to services like vision and dental care, 
asthma medicine, hospice care, and physical therapy. So when my 
colleagues blame the States for this crisis, they are choosing their 
words carefully. They do not dare blame the disabled, the elderly, poor 
children and their parents, but that is who they are really talking 
about, the people who will lose access to health care unless we pass 
the Murray amendment.
  Let's not forget that our States have had to pick up the bills 
because the Federal Government has not done its job in certain areas.
  For example, because we have not reformed health care at the Federal 
level, States have had to deal with more and more residents on 
Medicaid. Because Federal assistance for tuition has been cut, there is 
more pressure on State-funded universities. To those pressures we can 
add the Federal Government's failure to fund the education law and new 
homeland security mandates.
  So this is not about bailing out States that have done something 
wrong. This is about recognizing our responsibility to pay for the 
things we have required at the Federal level. We know there is an 
economic crisis in our States, and this is a chance to provide some 
critical support.
  Unless we provide some real aid to our States, Congress and the 
President will just be passing the tax burden on to the local level. 
Let's do the responsible thing.
  I think that any Senator who votes against the Murray amendment will 
have a hard time explaining to their Governor, their mayors, and all 
their citizens why they left their State hanging in order to provide a 
massive tax cut to the few, which will not result in immediate economic 
growth.
  I urge my colleagues to vote for the Murray amendment, and I thank my 
co-sponsors.
  I yield 15 minutes to my colleague from Oregon, who is a cosponsor of 
this amendment and who knows in his State how much they are struggling 
as they try to meet a crisis, as so many other States are.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Madam President, I thank Senator Murray, the lead sponsor 
for this legislation.
  Oregon and Washington are really ground zero as far as the economic 
hurt in this country, and I thank her for all of her leadership and 
support.
  I will take only a few minutes tonight because I know we have had a 
number of speakers on this topic, but I think it is time to put a human 
face on this issue and try to make sure that people really understand 
what is at stake.
  In Eugene, OR, where I went to school, parents have recently been 
selling their own blood plasma--that's right, their own blood plasma--
to pay for a math teacher's salary for one more year because the school 
district has been unable to come up with the cash to pay for a math 
teacher. I think that really says it all.
  As Senator Murray and other colleagues talked about, we are not 
talking about luxuries. We are not talking about something that would 
be frivolous or on somebody's wish list. We are talking about the most 
essential services in our society, making sure that kids get a good 
start, and decent health care.
  What it has come to in my State, which is in its third year now of 
financial meltdown, is we have parents actually going out and selling 
blood.
  Something is really out of whack in this country when somehow the 
Congress is going to find ways to come up with billions of dollars to 
rebuild Iraq, but the Congress of the United States will not come up 
with the dollars that are needed to rebuild the States. That is what 
this effort on a bipartisan basis is all about.
  In my home State, we now have schools closing a month early. We 
brought an end to the medical-needy program which helped nearly 9,000 
low-income Oregonians with unusually high health costs who do not 
qualify for our innovative health plan. More than 2,500 older adults 
and persons with disabilities have lost adult care, assisted living 
care, nursing home care, and the list really goes on.
  I particularly wanted to highlight the fact that these cuts and the 
hardship that has been engendered as a result of these cuts comes about 
at a time when some of our States have been on the cutting edge of 
innovation.
  I will take a minute to describe our health plan. The State of Oregon 
has been the only State in the country--in fact, the only political 
jurisdiction on the planet--that has been willing to force a discussion 
about tough calls in health care. Many feel, given the demographics 
tsunami that is ahead with millions of baby boomers retiring and the 
technology explosion, it is not on the level if you are not willing to 
make some tough choices in health care. That is what my home State did 
a number of years ago with the Oregon Health Plan; we held the first 
nationwide debate about how to go about

[[Page 11545]]

making choices in health care, making sure you are doing prevention 
first in kids and pregnant mothers. And all the services we know will 
reap great benefits in the years ahead.
  That is the program that has been slashed. It was not a program that 
engendered a lot of fancy services or Cadillac health care or 
profligate spending. It was a program that focused on the basics, on 
the essential health care services, on services that by anyone's 
analysis are just plain vanilla, essential services for our citizens.
  I bring this up by way of saying, as we move tonight to close out the 
discussion of these amendments, I certainly support the Collins 
amendment. It is very helpful. I would like to go further, for all the 
reasons Senator Murray has described tonight, that we think about these 
consequences in human terms: What is going on today in Eugene, OR, what 
is going on with the Oregon Health Plan where people did make tough and 
courageous calls.
  A lot of the States must be wondering now, what was the point of 
trying to be innovative? What was the point of trying to be innovative 
because when there were tough financial circumstances nationally beyond 
their control, the Federal Government said: That is the way it goes, we 
are not going to do anything to help tide you over so innovative 
programs such as the Oregon Health Plan are not decimated.
  These are critical issues. The budget cuts we have seen in health 
care and education are not going to be quickly healed. Regarding the 
national economy, we all hope for a speedy recovery, but it seems to 
me, by any calculation, the States are going to need significant and 
ongoing help to ameliorate the damage that has been done and to start 
pulling together the tatters of the social safety net and begin to help 
our citizens again. We are not going to repair that tattered safety net 
with just a few needles and thread; we will do it with real and 
tangible help, the way the Murray amendment seeks to do.
  I come to the Senate tonight to make it clear, what we seek to do in 
these important amendments is to try to give our States the tools in 
this struggle to provide the most critical of services, to tell them 
they are going to have a little bit more to get by with during 
unprecedented times.
  School finance in Oregon has been cut so drastically they have 
curtailed the school year in some districts. We have been laying off 
teachers left and right. We have no way to attract them. Senator Smith 
and I co-hosted an important economic development summit at the end of 
last year with 1,300 business leaders from all over the State. They are 
worried, as a business community, that with the shortening of the 
school year in the country, it will be very tough to grow existing 
businesses and to attract new ones.
  Suffice it to say, we are not really happy about the Doonesbury 
cartoons either. We have been first so often in my home State--with 
environmental protection, mass transit--but we are not pleased to be 
first in terms of economic hurt and unemployment and the kinds of 
problems we have been outlining on the floor tonight.
  We have to start filling the holes in these devastated budgets. The 
situation is dire. In the face of this unprecedented suffering, many in 
the Senate believe the $20 billion allocated is not enough and the 
Senate must do better.
  Ultimately, budgets are about choices. Budgets are not just about 
charts and graphs and figures and lots of dark ink on paper. Budgets 
are about hopes and aspirations and what kind of country we want. I 
don't want a country and I don't want a State to have to sit by while 
the Government does not respond when people have to sell blood to 
finance a teacher's salary and we end up having the devastation to an 
innovative state-of-the-art health plan, the way the Oregon Health Plan 
was at the outset.
  I don't want to tell the people of my home State, and I don't think 
others in this body want to either, that the U.S. Congress can figure 
out a way to come up with billions and billions of dollars to 
reconstruct Iraq, hundreds of millions of dollars for tax cuts, and 
simply not come up with the critical dollars needed to keep our kids in 
school for a full year, to keep older people in health care systems 
that are a lifeline for them.
  I hope our colleagues will support the Murray amendment. The very 
least the Senate can do is to keep the huge budgetary hole the States 
have found themselves in from getting deeper and wider. The Murray 
amendment ensures that can be done.
  I urge the passage of this critical amendment. I yield the floor.
  Mr. SCHUMER. Madam President, I first thank my colleague, Senator 
Murray, for her sponsorship of this vital amendment. I also want to 
specifically recognize Senator Grassley, the distinguished chairman of 
the Finance Committee, and Senator Baucus, the distinguished ranking 
member, for their leadership in putting State and local fiscal relief 
on the agenda. I should also note the bipartisan effort of Senators 
Collins, Rockefeller, Smith and Nelson which helped establish State aid 
in the budget debate. Finally, Senator Snowe deserves special 
recognition for her early and steadfast support of this legislation.
  The fiscal crisis in our States and cities is a national problem that 
requires bipartisan cooperation in the best spirit of the Senate, and I 
am proud to be working together with my esteemed colleagues.
  I support the Murray amendment.
  This amendment is critical to New York. It will help thousands of New 
Yorkers keep their jobs, maintain the State services they rely on, and 
most importantly avoid the burden of increasing taxes. I cannot state 
that more clearly--without this legislation the tax burden on citizens 
in my State will go up. That threatens to undo the very stimulus we all 
believe is necessary.
  As we all know, New York is not alone. States are facing their worst 
fiscal crisis since World War II. The Governor of New York, George 
Pataki, stated the situation in all of our States and cities clearly, 
``We face a fiscal crisis today of a magnitude that we have not faced 
in our lifetime.''
  According to estimates provided by the National Conference of State 
Legislatures, the total budgetary shortfall for all States in fiscal 
year 2004 was in the range of $80 billion, and an approximate $22 
billion gap still remains from fiscal 2003. Many believe these figures 
remain significantly understated.
  Almost every State is running a significant, multi-hundred million 
dollar deficit. In many States, the figure runs into the multi-billions 
of dollars. In several States, the deficit's percentage of the total 
State budget is estimated to be in the range of 25 percent or more. New 
York State's budget shortfall alone is $12 billion dollars.
  The situation at the local level is just as dire. According to the 
National Association of Counties, nearly 72 percent of counties are 
facing budget shortfalls, 37 percent are reducing services, and 17 
percent are increasing taxes--all at a time when the demand for 
services and the need for tax cuts is rising given the sour economy.
  This is not a regional issue. It is a national crisis.
  Unlike the Federal Government, which has seen its fiscal position 
change from a budgetary surplus in 2000 to a newly estimated deficit of 
over $300 billion in fiscal 2003, almost every state is required by law 
to have a balanced budget. To achieve this the only options are to 
raise taxes and/or cut spending.
  State taxes are increasing in three ways. First, state income tax 
rates are increasing. Second, property tax rates are skyrocketing. In 
New York City, Mayor Bloomberg was forced to raise property taxes over 
18 percent to preserve vital services. Third, States are increasing 
sales taxes, excise taxes, and other fees. As the New York Times 
recently reported ``at least 15 states have raised taxes, five of them 
by 5 percent or more.''
  This increasing tax burden falls heavily and squarely on the backs of 
our working families. It will make it harder for them to make ends meet 
in these already difficult economic times when every dollar counts.
  State spending cuts follow 2 years of a deteriorating economic 
environment and fiscal outlook. During that time,

[[Page 11546]]

States have cut the fat from their budgets and depleted reserves. They 
now are cutting muscle. To balance their budgets for fiscal 2004, 
States are in the process of eliminating thousands of jobs.
  In many States, the jobs that will be lost are vital to our 
communities: policemen, firefighters, teachers, postal workers, and bus 
drivers. In New York these were the jobs of the everyday heroes that we 
celebrated after the tragedies of September 11.
  States also are eliminating many critical programs and reducing funds 
available for those programs that remain.
  Among the most vulnerable targets are those services that working 
families rely on, such as childcare and elementary and secondary 
education. Without funds, school improvements will not be made. 
Libraries will not be upgraded. Staff will be cut. Class sizes will 
dramatically increase.
  All of this is happening today. As one school superintendent stated, 
``It is the worst thing that has happened in my thirty years in public 
education.''
  This comes at a time when, as a nation, we are striving to raise our 
children's test scores and improve overall school performance. In 
addition, in many states the cost of higher education is increasing. 
Tuition at some State colleges and universities has been raised over 20 
percent. Also vulnerable are programs that help those most in need 
during difficult times.
  States now bear the responsibility for numerous programs and services 
that provide the safety net that our citizens rely on. For example, as 
we know well, states fund a large percentage of the cost of Medicaid. 
During the current fiscal crisis, according to the Kaiser Commission on 
Medicaid and the Uninsured, Medicaid programs have been cut 
substantially. This will place an enormous burden on our society. 
States clearly need funding to pay for Medicaid.
  In addition, programs such as job-training, housing subsidies, and 
other services for lower-income citizens are at risk.
  Most importantly, states now face extraordinary demands to provide 
the protection citizens require in the new post-9/11 world. They face 
increased responsibilities to patrol ports, bridges and tunnels, to 
train emergency response personnel, and to put in place the 
infrastructure to protect their citizens.
  In the current world, with threats on our home soil at high levels, 
and on the brink of a war with a nation accused of sponsoring 
international terrorism, we cannot abandon our States and cities. We 
must give them the funds they need to protect our citizens.
  The solution is to provide direct Federal aid to the States and 
localities within the budget. We have had bipartisan agreement to 
provide $20 billion in direct Federal aid to the States and localities 
on a one-time basis. I commend Senator Grassley for his leadership in 
getting this done. It is a very good start, but it is not enough.
  I have heard some argue that state aid is not good economic policy, 
but numerous reports indicate that a very large number of economists 
believe that aid to the States is, in fact, an extremely effective 
means of providing fiscal stimulus, as it quickly puts money in the 
hands of people who need it and will spend it.
  State and local aid also alleviates the need for States to cut more 
jobs, cut more programs, and raise taxes, which acts as an 
``antistimulus'' on the economy. Without any State aid, an individual's 
or family's decrease in Federal taxes could be surpassed by an increase 
in State and local taxes.
  We should not support policies where, ``What one hand giveth the 
other taketh away.'' We should not ``rob Peter to pay Paul.''
  This modest increase in the amount of aid is a one-time shot in the 
arm for the States. It is not an enormous, multi-year change that 
threatens to build more deficits. It is a short-term proposal in 
response to a crisis that threatens to further drag down our economy 
and further increase the tax burden on our citizens.
  Some argue that States and cities have dug their own fiscal graves, 
and should now lie in them. I could not disagree more. Our States and 
cities face the same economic forces as the Federal Government. As the 
economy has forced a dramatic reversal in fiscal health in our Federal 
budget, so has it wreaked havoc on local budgets.
  Why should we hold States and localities to a different standard than 
we hold ourselves?
  If we want to teach States a lesson, why should we force citizens to 
bear the brunt of that discipline through higher taxes on their income, 
bigger class sizes for their children, and less services for those in 
need?
  The money we are discussing is not a bailout. Nowhere close. States 
and locals will still need to make painful cuts and possibly raise 
taxes. But we can help alleviate the pain which will fall not on 
lawmakers, as we all know, but on our citizens.
  As President John Kennedy once said, ``Let us seek not the Democratic 
solution or the Republican solution, but the right solution.''
  This is the right solution. I fully and enthusiastically support 
Senator Murray's amendment.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. Madam President, I spoke earlier in support of the 
Collins amendment which is a $20 billion fiscal relief package. We have 
been told that $20 billion is a drop in the bucket. I don't think $20 
billion is a drop in the bucket. We have been told that maybe $75 
billion is not enough for State aid.
  We have to be fiscally responsible as we approach this. I do not 
fault the good intentions behind people who have higher figures in 
mind, including the amendment by the Senator from Washington. There are 
Members on both sides of the aisle for whom fiscal relief is a key 
component of any larger tax and jobs package. I have worked hard to 
accommodate Members' priorities relative thereto.
  A number of provisions in this amendment have been addressed by the 
State fiscal conservative relief amendment offered by Senator Collins. 
The State fiscal relief amendment offered by Senator Collins represents 
a significant boost to States. It provides $20 billion. To me, that is 
lots of money. This is much more money than some would like to spend at 
all. However, there will be those for whom no amount of spending will 
ever be enough.
  I am not saying Senator Murray is one of those for whom no amount of 
money would ever be enough. All I am saying is that at some point we 
have to determine a final dollar amount for State aid.
  We have an amendment that provides $20 billion for States, and I 
think we should stick with that number. Therefore, Senator Murray's 
amendment at $40 billion is too expensive and must be opposed. I urge 
my colleagues to vote against this amendment. I urge them to support 
the Collins amendment.
  I yield the floor.
  Mr. BAUCUS. I yield whatever time the Senator from Washington 
desires.
  The PRESIDING OFFICER. The Senator from Washington.
  Mrs. MURRAY. Madam President, I know there are many other Senators on 
the floor who wish to speak to their amendments. Let me conclude this 
amendment debate by saying how important it is for our States that are 
struggling today with $75 billion or $80 billion in debt, that we do 
everything we can to get the economy going in a true economic stimulus 
package to provide funds for those States to assure they do not lose 
people off health care, that their education systems are intact, and 
they have the ability to deal with their budget crisis and we don't add 
to it with fiscally irresponsible tax cuts that preclude them from 
being able to provide the services that are so critical today.
  I ask for the yeas and nays on this amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Madam President, I ask unanimous consent all pending

[[Page 11547]]

amendments be temporarily set aside and the Senator from Michigan be 
recognized for the purpose of offering an amendment.
  The PRESIDING OFFICER. Is there an objection? Without objection, it 
is so ordered.
  The Senator from Michigan.


                           Amendment No. 614

  Ms. STABENOW. Madam President, I send an amendment to the desk and 
ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Michigan (Ms. Stabenow) proposes an 
     amendment numbered 614.

  Ms. STABENOW. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

   (Purpose: To ensure the enactment of a medicare prescription drug 
                                benefit)

       At the end of subtitle C of title V, add the following:

     SEC. . ENSURING ENACTMENT OF A MEDICARE PRESCRIPTION DRUG 
                   BENEFIT.

       (a) Trigger.--Notwithstanding any other provision of this 
     Act, the provisions as described in subsection (b) shall not 
     take effect except as provided in subsection (c).
       (b) Provision Described.--A provision described in this 
     subsection is--
       (1) section 102 of this Act to the extent such section 
     accelerates the scheduled phase down of the top tax rate of 
     38.6 percent to 37.6 percent in 2004 and to 35 percent in 
     2006; and
       (2) section 116(a)(2)(B) of the Internal Revenue Code of 
     1986, as added by section 201 of this Act.
       (c) Delay Until Enactment of a Medicare Prescription Drug 
     Benefit.--The provisions described in subsection (b) shall 
     apply to taxable years beginning in or after the calendar 
     year in which a prescription drug benefit under the medicare 
     program under title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.) is enacted that is--
       (1) available to all beneficiaries under such program; and
       (2) actuarially equivalent to the Blue Cross and Blue 
     Shield benefit offered through the Federal employees health 
     benefits program.

  Ms. STABENOW. Madam President, I rise this evening to offer an 
amendment that seeks to set the right priorities for us in the Senate 
and in the Congress as we move forward this year with the budget. My 
amendment is simple. It says before the dividend tax cut and the 
acceleration of the top tax rate go into effect, Congress must pass a 
Medicare prescription drug bill that is actuarially equivalent to the 
value of the Blue Cross standard option under the Federal Employees 
Health Benefits Program, known as FEHBP, for all Medicare 
beneficiaries.
  This is a question of our values and priorities. My amendment is a 
promise to our Nation's seniors. It says you are as important as the 
elite in this country; we are finally going to get something done; and 
that it will be something that is equal to what we receive in the U.S. 
Senate. This is the third consecutive Congress that has considered 
adding an outpatient prescription drug benefit under Medicare. In the 
last two Congresses we were unsuccessful. To be fair, we were 
unsuccessful with a Democratic President, a Republican President, a 
Democratic Congress, a Republican Congress. The reality is we have not 
yet been able to deliver for our seniors the promise of prescription 
drug coverage under Medicare.
  I believe the time is up. Our seniors and those who are disabled, who 
depend on Medicare, are counting on us to get this done this year.
  In order to be able to do that, we need to impose some discipline on 
ourselves. We have to hold our feet to the fire in order to get this 
done. This amendment says to the House and Senate and the 
administration that we must all work together to pass a meaningful 
prescription drug benefit or a major component of the tax cut that is 
supported by the majority will not go into effect.
  I would like to make it clear that my amendment does not eliminate 
the tax cuts on dividends or those for the people who pay the highest 
rates. As long as we pass a meaningful prescription drug benefit, these 
tax cuts would take effect as scheduled.
  Having said that, I want to also indicate that I do not believe, from 
an economic standpoint, that is the best way to stimulate the economy. 
I agree with the over 450 economists who have said this will not create 
jobs; it will not create growth. But if in fact there is support to 
pass the tax breaks geared to the elite in the country, I ask my 
colleagues to at least be willing to hold off. At least be willing to 
hold off until we can fulfill the promise of an outpatient prescription 
drug benefit under Medicare.
  My amendment says this should be available to all seniors, not just 
seniors in private insurance, as has been proposed by the President and 
by others, but all seniors should be able to get the same prescription 
drug coverage.
  In addition, this amendment says the prescription drug benefit we 
pass should be actuarially equivalent to the plan that is most often 
used by Federal employees, including Members of Congress. In other 
words--and I have heard other colleagues say this--the seniors of this 
country should get no less in prescription drug help than we get 
through our insurance plan. That is what my amendment says, simply. The 
tax cuts geared to the most wealthy among us, the elite in the country, 
should wait until we can fulfill the promise of a prescription drug 
benefit that is equal to what we receive as Members of the Senate.
  I have heard many friends on the other side of the aisle extol the 
virtues of our plan, the FEHBP plan. I have also heard the President 
and members of his administration make similar comments. They say a new 
prescription drug benefit should be modeled after the benefit in the 
Federal employee plan. In fact, on May 6 my distinguished colleague 
from Idaho, Senator Craig, held a hearing in the Aging Committee, which 
I am on, that highlighted the Federal employee program, its benefits, 
and so on. While the witnesses disagreed on whether it would be 
appropriate to go to the structure of that plan--and I have great 
concerns about anything outside of Medicare--they all agree that this 
plan that we and other Federal employees have offers excellent 
prescription drug coverage for Federal employees.
  I think most of us agree our seniors deserve the same opportunity to 
have prescription drug coverage equal to what we or other Federal 
employees receive. However, the current budget resolution does not 
allow for that. It does not provide for the resources to do that. So 
despite the comments I have heard on a number of occasions from 
colleagues that, in fact, we ought to be providing similar coverage, 
the budget resolution does not provide the resources. So this, again, 
is a question of priorities. It is a question of values. What should 
come first, fulfilling the promise of a quality prescription drug 
benefit for our seniors under Medicare or proceeding with a tax cut 
geared to the elite in this country?
  I think it is particularly of concern that we focus on this, 
particularly in light of the overwhelming evidence that those 
particular tax cuts will not stimulate the economy in the short run, 
will not create jobs, will not create growth. No matter how many times 
Members say that, with all due respect, we have overwhelming evidence--
450 economists, 10 Nobel laureates, concerns by Chairman Greenspan--and 
only 13 economists on the side, saying it is a good idea.
  Before we go ahead with something we know is not a short-term 
stimulus, doesn't create jobs, doesn't create growth, and, in fact, 
created red ink as far as the eye can see, I ask that we stop.
  Whether Members wish to have a dividend tax cut and a top rate cut or 
wish not to, we should come together and agree we would not proceed 
until we provide prescription drug coverage that is quality and is 
similar to what we have as Members of the Senate.
  This is a trigger. As I indicated, it is not eliminating those parts 
of the tax bill. It is simply a trigger on those.
  If I might take just another moment on the broader issues of 
Medicare, on this question of whether we will have the resources to 
update Medicare to provide a real prescription drug benefit, one that 
we could probably support because it would be similar to

[[Page 11548]]

what we are able to receive as Members of the Senate. The larger issue 
is where we are going in terms of the huge national debt projected for 
the future. The actual question is whether we will be able to meet our 
obligations overall for Medicare and Social Security in the long run 
without going into more and more deficit.
  I refer to the study that was recently done that indicates if we were 
to take the proposals that have been put forward by the President--I 
realize in the Senate there is a modified version of that. We don't 
have exactly this amendment in front of us. But if we are to take what 
the President has suggested in totality over the next 75 years, we 
would see a cost of over $14 trillion.
  At the same time, the projected Medicare and Social Security deficit 
is $10 trillion.
  I go back again to my concern that this an issue of priorities. We 
have one proposal that creates a $14 trillion cost. At the same time 
that we know we have an unfunded liability in Social Security and 
Medicare of $10 trillion, why in the world would we do that? Why in the 
world would anybody? This is what the economists are talking about. 
Over 450 economists have come out against this, saying it will not 
create jobs; it will just create more massive debt; it will create 
instability long term in the economy; it jeopardizes Medicare and 
Social Security.
  These are the numbers they are looking at. Why in the world would 
anybody with common sense looking at this say we ought to go in this 
direction? If we didn't go in this direction, and if we agreed to the 
amendment we are talking about, we would be sending a clear message 
that we are committed to really providing Medicare prescription drug 
coverage and not just talking about it for another session but really 
providing it for our seniors and for the disabled. And we would be 
sending a message that we are making a long-term commitment to Medicare 
and Social Security.
  My fear is, if we proceed down the road as we currently are as a 
Congress, that we are creating a situation which will lend itself to 
the argument of those who say we can't afford Medicare and Social 
Security anymore. We heard that. We heard we can't afford prescription 
drug coverage; we can't afford Medicare as we know it; we can't afford 
Social Security as we know it. We can afford to update it for 
prescription drugs if we do not pass irresponsible tax policy that 
creates trillions and trillions of dollars in debt.
  That is my concern overall. I am hopeful that we will reconsider 
this. I am very hopeful that in the meantime, regardless of the broader 
picture, colleagues will join to be able to send a strong message that 
we are going to put the seniors of the country first and a real 
prescription drug benefit first. As many colleagues have said, our 
seniors deserve the same kind of benefit that we receive in the Senate. 
This amendment would allow that to happen.
  With the passage of these other provisions, it then would allow them 
to take effect after the prescription drug benefit is passed.
  I reserve the remainder of my time. I yield to my colleagues who are 
possibly wishing to speak. I would like the opportunity to respond at 
the appropriate time.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. WARNER. Madam President, I see my distinguished colleague from 
Ohio who arrived a few moments before me. I simply ask of my colleague 
whether I can proceed for 4 or 5 minutes without being disruptive to 
the statement on which he is proceeding.
  Mr. VOINOVICH. I am happy to yield my distinguished colleague 3 or 4 
minutes prior to submitting my amendment.
  The PRESIDING OFFICER. The Senator from Virginia.
  Mr. WARNER. Madam President, I ask unanimous consent to lay the 
pending amendments aside.
  The PRESIDING OFFICER (Mrs. Dole). Without objection, it is so 
ordered.


                     Amendment No. 550, As Modified

  Mr. WARNER. Madam President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The senior assistant bill clerk read as follows:

       The Senator from Virginia [Mr. Warner], for himself and Ms. 
     Collins, Mr. Allen, Mr. Craig, and Ms. Murkowski, proposes an 
     amendment numbered 550, as modified.

  Mr. WARNER. Madam President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To amend the Internal Revenue Code of 1986 to increase the 
 above-the-line deduction for teacher classroom supplies and to expand 
 such deduction to include qualified professional development expenses)

       At the end of subtitle C of title V, insert the following:

     SEC. __. EXPANSION OF ABOVE-THE-LINE DEDUCTION FOR CERTAIN 
                   EXPENSES OF ELEMENTARY AND SECONDARY SCHOOL 
                   TEACHERS.

       (a) In General.--Subparagraph (D) of section 62(a)(2) 
     (relating to certain trade and business deductions of 
     employees) is amended to read as follows:
       ``(D) Certain expenses of elementary and secondary school 
     teachers.--The deductions allowed by section 162 which 
     consist of expenses, not in excess of $400, paid or incurred 
     by an eligible educator--
       ``(i) by reason of the participation of the educator in 
     professional development courses related to the curriculum 
     and academic subjects in which the educator provides 
     instruction or to the students for which the educator 
     provides instruction, and
       ``(ii) in connection with books, supplies (other than 
     nonathletic supplies for courses of instruction in health or 
     physical education), computer equipment (including related 
     software and services) and other equipment, and supplementary 
     materials used by the eligible educator in the classroom.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

  Mr. WARNER. Madam President, I thank the distinguished Presiding 
Officer. I thank the managers of this bill and my colleague from Ohio.
  I will proceed for a few minutes with regard to amendment No. 550, in 
which I am privileged to be joined by Senators Collins, Allen, Craig, 
and Murkowski, the Presiding Officer. It relates to the teachers of 
America.
  I learned, as other colleagues have learned on their trips to 
schools, to my utter astonishment that so many teachers reach into 
their own pockets and take their own dollars, after paying taxes in 
those instances where they pay taxes, and buy school supplies for the 
children. They have to use their own money for further teacher 
education.
  Last year, the Congress of the United States, at the initiative of 
myself and many others, finally passed a law by which they got a $250 
above-the-line deduction. That was a remarkable achievement 
legislatively. Unfortunately, that piece of legislation sunsets at the 
end of this calendar year.
  The purpose of this amendment is, first, to increase $250 to $400 as 
the amount of deduction and, second, to enable that amendment now, by 
virtue of this amendment, to become permanent law so that they can plan 
their futures a little bit better. This deduction will be there for 
those wonderful and courageous teacher expenditures which they take out 
of their own pockets. I find it to be very touching.
  I was talking to my colleague from Ohio while waiting to take the 
floor, and he told me that at the time he was Governor, they put 
similar legislation into State law. This, of course, will be Federal 
law and apply to all 50 States.
  This amendment will make this important tax benefit permanent for our 
teachers. In addition, it will increase the above the line deduction to 
$400 and expand the allowable uses for the deduction to include 
professional development expenses.
  It is important to note that the President's budget calls for this 
tax relief. I also note that the amendment has been endorsed by the 
National Education Association.
  I ask unanimous consent to have printed in the Record a letter from 
the NEA endorsing my amendment.
  There being no objection, the material was ordered to be printed in 
the record, as follows:


[[Page 11549]]




                               National Education Association,

                                     Washington, DC, May 14, 2003.
     U.S. Senate,
     Washington, DC.
       Dear Senator Warner: On behalf of the National Education 
     Association's (NEA) 2.7 million members, we urge your support 
     for the Warner amendment on teacher tax deductions when it is 
     offered during consideration of the tax reduction plan. A 
     similar amendment was approved by the Senate during the last 
     Congress by a vote of 98-2. This year's vote may be included 
     in the NEA Legislative Report Card for the 108th Congress.
       The Warner amendment, which was originally introduced as 
     the Teacher Tax Relief Act (S. 695), would increase to $500 
     and make permanent a tax deduction for educators' out-of-
     pocket classroom supply expenses. The amendment also would 
     help educators access quality training, much of it mandated 
     by the No Child Left Behind Act, by expanding the deduction 
     to include professional development.
       Last year, Congress enacted a $250 tax deduction for 
     educators' out-of-pocket expenses as part of the economic 
     stimulus package. The current deduction expires at the end of 
     the year. The Warner amendment would make a real difference 
     for many educators, who often sacrifice other personal needs 
     in order to pay for classroom supplies and professional 
     development. Two important reasons for supporting this 
     amendment are:
       According to a study by the research firm Quality Education 
     Data, a division of Scholastic, elementary school teachers 
     spend more than $1 billion a year on classroom supplies. The 
     study found that the average elementary educator spends $521 
     annually, with first-year teachers spending over $700 a year 
     for classroom supplies.
       Teacher quality is the single most critical factor in 
     maximizing student achievement. Ongoing professional 
     development is essential to ensure that educators stay up-to-
     date on the skills and knowledge necessary to prepare 
     students for the challenges of the 21st century.
       We urge you to support this important amendment.
           Sincerely,
     Diane Shust,
       Director of Government Relations.
     Randall Moody,
       Manager of Federal Relations.

  Mr. WARNER. Madam President, why do teachers need this kind of 
relief? It is now estimated that the average teacher spends $521 out of 
their own pocket each year on classroom materials--materials such as 
pens, pencils and books. First-year teachers spend even more, averaging 
$701 a year on classroom expenses.
  Why do they do this? Simply because school budgets are not adequate 
to meet the costs of education. Our teachers dip into their own pocket 
to better the education of America's youth.
  Moreover, in addition to spending substantial money on classroom 
supplies, many teachers spend even more money out of their own pocket 
on professional development. Such expenses include tuition, fees, 
books, and supplies associated with courses that help our teachers 
become even better instructors.
  The fact is that these out-of-pocket costs place lasting financial 
burdens on our teachers. This is one reason our teachers are leaving 
the profession. Little wonder that our country is in the midst of a 
teacher shortage.
  Without a doubt the Teacher Tax Relief Act of 2001 took a step 
forward in helping to alleviate the Nation's teaching shortage by 
providing a $250 above-the-line deduction for classroom expenses.
  However, it is clear that our teachers are spending much more than 
$250 a year out of their own pockets to better the education of our 
children.
  This amendment that I have offered today is the same as the 
administration's request. Again, the amendment will increase the above-
the-line deduction for educators from $250 allowed under the current 
law to $400; allow educators to include professional development costs 
within that $400 deduction (under current law, up to $250 is deductible 
but only for classroom expenses); and make the Teacher Tax relief 
provisions in the law permanent. Current law sunsets the teacher tax 
provisions at the end of this year.
  Our teachers have made a personal commitment to educate the next 
generation and to strengthen America. And, in my view, the Federal 
Government should recognize the many sacrifices our teachers make in 
their career.
  This amendment is another step forward in providing our educators 
with the recognition they deserve.
  In my view, America's teachers deserve better.
  I ask unanimous consent that an analysis of the President's budget 
request which depicts exactly the same amendment about which I am 
speaking also be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


Extend, increase and expand the above-the-line deduction for qualified 
                    out-of-pocket classroom expenses

       Under current law, teachers who itemize deductions (do not 
     use the standard deduction) and incur unreimbursed, job-
     related expenses are allowed to deduct those expenses to the 
     extent that when combined with other miscellaneous itemized 
     deductions they exceed two percent of AGI. Current law also 
     allows certain teachers and other elementary and secondary 
     school professionals to treat up to $250 in annual qualified 
     out-of-pocket classroom expenses as a non-itemized deductions 
     (above-the-line deduction), effective for expenses incurred 
     in taxable years beginning after December 31, 2001 and before 
     January 1, 2004. Unreimbursed expenditures for certain books, 
     supplies and equipment related to classroom instruction 
     qualify for the above-the-line deduction. Expenses claimed as 
     an above-the-line deduction cannot be claimed as an itemized 
     deduction. The Administration proposes to extend the above-
     the-line deduction to apply to qualified out-of-pocket 
     expenditures incurred after December 31, 2003, to increase 
     the deduction to $400, and to expand the deduction to apply 
     to unreimbursed expenditures for certain professional 
     training programs.

  Mr. WARNER. Madam President, the amendment is in compliance with the 
President's program. It is the desire of this National Education 
Association just to take existing law, make it permanent, and to 
increase it to $400, given the calculations of the amounts that are 
expended each year by teachers all across America, which is larger than 
existing law, $250.
  I appreciate the indulgence of my colleagues. I hope this amendment 
will receive the support of the Senate tomorrow as we proceed to vote.
  I thank my colleague from Ohio and yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. BAUCUS. Madam President, I ask unanimous consent that the pending 
amendments be temporarily laid aside so the Senator from Ohio may offer 
an amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. VOINOVICH. Thank you, Madam President.


                           Amendment No. 592

  Madam President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The senior assistant bill clerk read as follows:

       The Senator from Ohio [Mr. Voinovich] proposes an amendment 
     numbered 592.

  Mr. VOINOVICH. Madam President, I ask unanimous consent that reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To establish a blue ribbon commission on comprehensive tax 
                                reform)

       At the appropriate place insert the following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Fundamental Tax Reform 
     Commission Act of 2003''.

     SEC. 2. ESTABLISHMENT OF COMMISSION.

       (a) Establishment.--There is established the ``Blue Ribbon 
     Commission on Comprehensive Tax Reform'' (in this Act 
     referred to as the ``Commission'').
       (b) Membership.--
       (1) Composition.--The Commission shall be composed of 12 
     members of whom--
       (A) 1 shall be the Chairman of the Board of Governors of 
     the Federal Reserve System;
       (B) 1 shall be the Vice Chairman of the Board of Governors 
     of the Federal Reserve System;
       (C) 1 shall be the Commissioner of Internal Revenue;
       (D) 2 shall be appointed by the majority leader of the 
     Senate;
       (E) 1 shall be appointed by the minority leader of the 
     Senate;
       (F) 2 shall be appointed by the Speaker of the House of 
     Representatives;
       (G) 1 shall be appointed by the minority leader of the 
     House of Representatives; and
       (H) 3 shall be appointed by the President, of which--
       (i) no more than 2 shall be of the same party as the 
     President; and

[[Page 11550]]

       (ii) 1 may be the Secretary of the Treasury.
       (2) Federal employees.--The members of the Commission may 
     be employees or former employees of the Federal Government.
       (3) Date.--The appointments of the members of the 
     Commission shall be made not later than July 30, 2003.
       (c) Period of Appointment Vacancies.--Members shall be 
     appointed for the life of the Commission. Any vacancy in the 
     Commission shall not affect its powers, but shall be filled 
     in the same manner as the original appointment.
       (d) Initial Meeting.--Not later than 30 days after the date 
     on which all members of the Commission have been appointed, 
     the Commission shall hold its first meeting.
       (e) Meetings.--The Commission shall meet at the call of the 
     Chairman.
       (f) Quorum.--A majority of the members of the Commission 
     shall constitute a quorum, but a lesser number of members may 
     hold hearings.
       (g) Chairman and Vice Chairman.--The President shall select 
     a Chairman and Vice Chairman from among its members.

     SEC. 3. DUTIES OF THE COMMISSION.

       (a) Study.--The Commission shall conduct a thorough study 
     of all matters relating to a comprehensive reform of the 
     Federal tax system, including the reform of the Internal 
     Revenue Code of 1986 and the implementation (if appropriate) 
     of other types of tax systems.
       (b) Recommendations.--The Commission shall develop 
     recommendations on how to comprehensively reform the Federal 
     tax system in a manner that generates appropriate revenue for 
     the Federal Government.
       (c) Report.--Not later than 18 months after the date on 
     which all initial members of the Commission have been 
     appointed pursuant to section 2(b), the Commission shall 
     submit a report to the President and Congress which shall 
     contain a detailed statement of the findings and conclusions 
     of the Commission, together with its recommendations for such 
     legislation and administrative actions as it considers 
     appropriate.

     SEC. 4. POWERS OF THE COMMISSION.

       (a) Hearings.--The Commission may hold such hearings, sit 
     and act at such times and places, take such testimony, and 
     receive such evidence as the Commission considers advisable 
     to carry out this Act.
       (b) Information From Federal Agencies.--The Commission may 
     secure directly from any Federal department or agency such 
     information as the Commission considers necessary to carry 
     out this Act. Upon request of the Chairman of the Commission, 
     the head of such department or agency shall furnish such 
     information to the Commission.
       (c) Postal Services.--The Commission may use the United 
     States mails in the same manner and under the same conditions 
     as other departments and agencies of the Federal Government.
       (d) Gifts.--The Commission may accept, use, and dispose of 
     gifts or donations of services or property.

     SEC. 5. COMMISSION PERSONNEL MATTERS.

       (a) Compensation of Members.--Each member of the Commission 
     who is not an officer or employee of the Federal Government 
     shall be compensated at a rate equal to the daily equivalent 
     of the annual rate of basic pay prescribed for level IV of 
     the Executive Schedule under section 5315 of title 5, United 
     States Code, for each day (including travel time) during 
     which such member is engaged in the performance of the duties 
     of the Commission. All members of the Commission who are 
     officers or employees of the United States shall serve 
     without compensation in addition to that received for their 
     services as officers or employees of the United States.
       (b) Travel Expenses.--The members of the Commission shall 
     be allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Commission.
       (c) Staff.--
       (1) In general.--The Chairman of the Commission may, 
     without regard to the civil service laws and regulations, 
     appoint and terminate an executive director and such other 
     additional personnel as may be necessary to enable the 
     Commission to perform its duties. The employment of an 
     executive director shall be subject to confirmation by the 
     Commission.
       (2) Compensation.--The Chairman of the Commission may fix 
     the compensation of the executive director and other 
     personnel without regard to chapter 51 and subchapter III of 
     chapter 53 of title 5, United States Code, relating to 
     classification of positions and General Schedule pay rates, 
     except that the rate of pay for the executive director and 
     other personnel may not exceed the rate payable for level V 
     of the Executive Schedule under section 5316 of such title.
       (d) Detail of Government Employees.--Any Federal Government 
     employee may be detailed to the Commission without 
     reimbursement, and such detail shall be without interruption 
     or loss of civil service status or privilege.
       (e) Procurement of Temporary and Intermittent Services.--
     The Chairman of the Commission may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code, at rates for individuals which do not 
     exceed the daily equivalent of the annual rate of basic pay 
     prescribed for level V of the Executive Schedule under 
     section 5316 of such title.

     SEC. 6. TERMINATION OF THE COMMISSION.

       The Commission shall terminate 90 days after the date on 
     which the Commission submits its report under section 3.

     SEC. 7. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated such sums as are 
     necessary to the Commission to carry out this Act.

  Mr. VOINOVICH. Madam President, I rise today to commend Chairman 
Grassley for the outstanding job he has done to bring this 
reconciliation bill to the floor and to focus attention on our urgent 
need to address fundamental tax reform.
  When the Senate enacted the budget resolution for fiscal year 2004, 
it presented Chairman Grassley with a very difficult challenge--to 
report to the Senate meaningful, stimulative tax deductions while 
keeping the overall growth in the deficit below $350 billion. Many 
observers, in and out of Congress, considered that task impossible. But 
I believe the Finance Committee has accomplished that goal.
  The reconciliation bill before the Senate today contains $430 billion 
in tax cuts and $80 billion in offsets, for a net cost of $350 billion. 
Equally important, both the tax cuts and the offsets are real. The 
Joint Committee on Taxation, a highly respected, neutral scorekeeper, 
has analyzed this bill and certifies the revenue effects of both the 
tax cuts and the offsets.
  Many people claim this economic growth package is too small and they 
would like to see larger tax relief for small businesses and working 
families. So would I, but only if we can offset the additional cost. 
And some people claim the tax cuts are too large and will limit funds 
available to low-income support programs. I sympathize with their 
concern, but we must recognize that the most effective low-income 
support program is a job. And we can only provide jobs by jump-starting 
the economy.
  Too many of our fellow Americans are out of work, too many of our 
fellow Americans are worried about whether they are going to have a 
job. Small business owners and investors in Ohio have told me this is a 
good plan that will help them create jobs in my State. We accelerate 
the reduction of tax rates, we end the marriage penalty, we accelerate 
small business depreciation, we increase the size of the child tax 
credit, and we begin to eliminate the double taxation of dividends.
  Another area of contention is the nature of the offsets. It is in 
this area, more than any other, that Senator Grassley has been unjustly 
criticized. He was asked to produce offsets that would limit the total 
cost of tax reform to $350 billion, and he has done it.
  Members of Congress who oppose some or all of the offsets because of 
their impact on special interest groups have had ample time to present 
their own alternatives and failed to do so. It is easy to criticize, 
but it is difficult to legislate. Let us acknowledge that regardless of 
our individual opinions regarding the offset package Chairman Grassley 
and a majority of his committee have chosen to legislate.
  However, the current disagreements over the offset package inevitably 
begs the question: Why is the Tax Code so complicated? How did we get 
into this situation? And how can we return to a simple, fair, and 
honest Tax Code? What is stimulative to the economy? What isn't 
stimulative? What tax expenditures came in several years ago which are 
no longer relevant? All these issues need to be discussed. That is why 
I am offering this amendment.
  Many of my colleagues have said: We need fundamental tax reform, but 
now is not the time. I have heard that over and over. I have heard that 
for years: Tax reform but now is not the time.
  I think the debate over offsets demonstrates this is precisely the 
time to abandon piecemeal tinkering and embrace fundamental tax reform. 
This Congress--not the next or the one after that--should seize the 
opportunity to focus national attention on the need for comprehensive 
tax reform in the United States of America.
  I am proposing the establishment of a commission to examine the Tax 
Code

[[Page 11551]]

from top to bottom. And I recommend fundamental restructuring. The goal 
of any Government revenue program should be to raise sufficient funds 
to operate public programs with the minimum disruption of the economy. 
Tax structures should be simple, fair, effective, and honest. Our 
current Tax Code achieves none--none--of these objectives.
  Proof of the complexity of our current Tax Code is demonstrated by a 
few, simple observations:
  The Internal Revenue Code consists of approximately 1,395,000 words.
  There are 693 sections of the Internal Revenue Code that are 
applicable to individual taxpayers; 1,501 sections applicable to 
businesses; 445 sections applicable to tax-exempt organizations, 
employee plans, and governments.
  As of June 2000, the Treasury Department had issued almost 20,000 
pages of regulations containing over 8 million words.
  The current 1040A short form has doubled the number of lines that 
once appeared on the 1945 version of the standard 1040 tax return. It 
has an 85-page instruction booklet which now tops the long form 1040 
instructions published just 7 years ago. This is the short form, 85 
pages; and it is more than the instructions that we had 7 years ago on 
the long form.
  The IRS prints at least 1,101 publications, forms, and instructions, 
containing 16,339 pages, up from 943 documents with 12,933 pages. That 
is 2 years ago.
  Over 56 percent of the taxpayers in this country need professional 
people to help them prepare their tax return.
  Americans toil for about--listen to this--6.4 billion hours on tax 
forms and recordkeeping, accounting for 84 percent of the Federal 
Government's paperwork burden in this country. And that is associated 
with the Internal Revenue Code. This only includes financial 
recordkeeping and tax preparation, and these estimates may be too low 
since they ignore the countless hours spent on tax minimization 
strategies. Everybody is working to figure out a way not to pay taxes.
  Included among the items of needless complexity today are the 
following:
  An alternative minimum tax that treats items such as dependent 
exemptions as tax shelters, thereby threatening to tax millions who 
never were meant to be affected; phaseout after phaseout of such 
allowances as itemized deductions, earned-income tax credits, personal 
exemptions, eligibility for IRAs, eligibility for other savings 
incentives, eligibility for educational tax breaks; and each of these 
is like an additional minimum tax system all of itself, forcing 
taxpayers to file multiple schedules for each form.
  I have a very simple return. I do not have that much. But the 
schedules that are connected with my return are unbelievable. I am sure 
my colleagues who think about it think about all the time they spend on 
preparing their own individual tax returns.
  Also, included among the many items of needless complexity today are:
  Pension and saving incentives that add administrative costs and 
possibly even reduce net savings by providing different rules for 
withdrawals, penalties, Social Security tax treatment, allowable 
amounts of exclusion or deduction, and so on; a tax treatment of 
dependent children that needlessly causes millions of unnecessary tax 
returns to be filed; a capital gains law with at least seven different 
tax rates, and that requires taxpayers to fill out pages of forms even 
when they have only a few dollars of capital gains; complicated rules 
for charitable deductions and charities, including multiple limits on 
giving as a percent of income, and a perverse excise tax on foundations 
that actually discourages charitable giving; child credits and 
dependent exemptions that could easily be folded into one; and 
unnecessarily strict estimated tax rules that pick up very little extra 
revenue for all the complexity they introduce.
  It is unbelievable.
  One of the most disturbing aspects of this current Tax Code is the 
almost continual growth of so-called tax expenditures. Essentially, 
they increase the level of tax rates far beyond what is necessary, and 
then mitigate the impact with incentives to special interest groups. It 
is the Government equivalent of jacking up prices in the grocery store, 
and then accepting coupons at the checkout counter.
  Private sector investment becomes distorted by tax provisions 
encouraging both individuals and corporations to allocate their funds 
to minimize their taxes rather than to maximize their income. 
Ultimately, most people end up paying more than they should for both 
their groceries and their taxes.
  According to a recent article in the Washington Post, many leading 
tax reform advocates believe the only solution for this dilemma is to 
propose new and different tax cuts every year. Although I sympathize 
with their goal, it will not provide the most effective reforms that 
meet the ultimate test the American people demand: a Tax Code that is 
fair, simple, and honest. Tax reform, like surgery, is best done 
quickly. Do you hear that? Tax reform, like surgery, is best done 
quickly and infrequently rather than slowly and often.
  That is why I am proposing a commission to propose comprehensive 
reform that can be enacted at once, implemented quickly, and establish 
a fair, simple, honest, and effective revenue structure for the next 
generation.
  This commission will examine all aspects of the Federal revenues, 
including individual taxes, corporate taxes, capital gains taxes, 
excise taxes, user fees, taxes on dividends, tax deductions, tax 
credits, and tax complexity.
  The commission will recommend fundamental reforms that can be enacted 
in a single reform package and implemented quickly. It will allow 
Congress and the Nation to focus on tax reform, devise a simple, fair, 
honest solution, and move on to other priorities.
  The current debate clearly demonstrates the system is broken and 
now--not next year, or the year after--now is the time to fix the 
problem.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. Who yields time? The Senator from Montana.
  Mr. BAUCUS. Madam President, I think the Senator from Ohio is on 
target. It makes excellent sense for the United States to set up some 
kind of a tax commission to take a good, hard look at our tax 
structure. As I listened to the Senator's amendment being read, one 
thought came to my mind, though. That is, commissions sometimes work 
and sometimes they don't work. And the goal here, clearly, if we do 
this, is to make it work.
  That begs the question, how do you make it work? How do you make it 
worthwhile, not just some outfit drawing conclusions that are put on 
the shelf to gather dust. Most commission recommendations are put on 
the shelf to gather dust.
  The one commission that comes to my mind that really has worked--and 
I can think of many that have not--is the commission on Social Security 
back in the early 1980s, when President Reagan nominated Chairman 
Greenspan to head the commission on Social Security. Various Senators 
were on the commission. Senator Dole was on the commission, and Senator 
Moynihan. They had a job to do, and they did a pretty good job. It was 
not political. The President, both bodies of Congress, both political 
parties, all got together and worked with members on the commission to 
come up with recommendations to save Social Security.
  Two points: One is, the membership is people who really want to do a 
good job. They work together. There is not any political sniping, no 
partisan rhetoric. They work together. And it is very important that 
the composition of the commission be people who do want to work 
together; that is, the commission not be stacked.
  The second point is at that time there was a crisis. Social Security 
was about to go belly up. A crisis generally creates solutions and 
results. The complexity of the U.S. Tax Code and the increasing 
complexity of the Tax Code may have become a crisis in the nature of 
Social Security back in the early 1980s; I don't know.
  I am saying to the Senator from Ohio: It is a good amendment. As most 
things in life, it is the followthrough

[[Page 11552]]

that counts, the followup that counts. It is making sure that if we do 
this, the right people are appointed. I say that in part because when I 
listened to the Senator, he mentioned two members appointed by the 
majority leader, one by the minority leader, three by the President, 
and also the House. It has the possibility of being a stacked deck, 
possibility of being a partisan commission. That is the last thing we 
need around here is a partisan commission on tax reform.
  I would like to work with the Senator, and I know other Senators 
would like to work with him, to do the very best we can to make sure 
this is not a stacked deck, and it is not therefore a commission whose 
recommendations collect dust on some shelf somewhere but rather 
something that makes good sense.
  One other point I might mention while the Senator from Ohio is here. 
I know the Senator is wondering, just as I think most Senators in this 
body are wondering, what is the real effect of dividend exclusion. What 
effect does it really have. There are a lot of people who have lots of 
ideas. A lot of economists have spoken on the effect of excluding 
dividends from income. I think in theory most of us agree there is some 
inequity between the taxation of equity and the taxation of debt with 
respect to companies' decisions as to whether to invest or investor 
decisions as to whether to invest.
  One point that often rises in the debate is the wealth effect. What 
is the wealth effect of a significant reduction in dividend income? Who 
knows, really? There are all kinds of analyses; different people have 
different points of view. We are trying to do our best to try to get 
opinions of people who really don't have an axe to grind, of people who 
really, as far as we can tell, are pretty straight, who have their 
heads screwed on straight and they are trying to give us the right 
recommendation rather than spoon-feed us some political agenda from any 
side.
  I am trying to do the best I can by trying to find people who are 
probably neutral. The three organizations I looked at that have 
analyzed the wealth effect of the President's dividend proposal are 
Brookings Institute, McKinsey & Company, and Goldman Sachs is the 
third. Let me go through first the Brookings analysis briefly. I think 
it is instructive.
  The total value of equities held by households in the United States 
is $10 trillion. That is, the total value of all equities held by 
households is $10 trillion. I will get to institutional investors in 
just a moment.
  The reasonable estimate of the stock price increase due to the 
President's dividend proposal, according to Brookings' analysis, is 5 
percent. The increase in value effect of equities held by households as 
a result of the stock price increase is about $500 billion. The next 
question is what is the wealth effect, how much effect of that 
increase, if it is 5 percent, is going to be translated into spending 
in the economy.
  The Brookings analysis is that the wealth effect--that is, the 
percent of wealth increase that is consumed rather than saved by 
households--will be 3 to 5 percent. So that means the increase in 
consumption as a result of the wealth effect is about $15- to $25-
billion, which is about .14 percent to .23 percent of GDP. We all know 
that usually to have a real stimulus in the economy you need somewhere 
between 1 and 1.5 percent; and .14 and .23 is certainly very small 
compared with 1 percent or 1.5. That is the Brookings analysis.
  The McKinsey Company's analysis is very similar. I want to read a 
quote from the McKinsey analysis. I think it is instructive. It says:

       But the proposed tax cut (eliminate tax on dividends) isn't 
     likely to have a major lasting effect on US share prices, 
     primarily because the key investors who drive them are 
     already exempt from taxes. What little impact the proposal 
     may have was probably reflected in the 2.2 percent gain in 
     the S&P 500 the day before it was announced.

  Continuing on to quote:

       Those who believe otherwise draw on classic finance theory. 
     In a world without taxes, theory suggests, shareholders would 
     be indifferent to whether a corporation paid dividends, since 
     the funds to do so would come at the shareholders' own 
     expense. In a world with taxes, shareholders may face 
     different tax rates on, for example, dividends as opposed to 
     capital gains. They would care whether a company retained its 
     earnings or distributed those earnings as dividends, because 
     this would affect how much they got to keep. If all investors 
     paid taxes on dividends, yes, share prices probably would 
     rise if the tax were eliminated.
       The fact, however, is that tax-paying US individual 
     shareholders own a minority of all US shares--

  That is, about 28 percent. That is, individuals own about 28 percent.

     whereas tax exempt US institutions and individuals who hold 
     shares in tax-exempt accounts own 61 percent. (The remainder 
     was in foreign hands.) For the most part, tax-paying 
     individual shareholders don't drive share prices, whereas 
     nontax-paying institutional investors do: the trading 
     activity of a company's top 40 to 100 investors--again, 
     usually big institutional investors--accounts for 70 percent 
     of its stock price movement.
       Since these investors are indifferent to the issue of taxes 
     on dividends [because they are tax exempt] they are unlikely 
     to set in motion the kinds of changes in their portfolios 
     that would drive up share prices.

  I will soon yield to the Senator from Ohio.
  The third reason Goldman Sachs gave in their review is that it would 
generate no more than a 5 percent increase in stock prices. That is the 
Goldman Sachs view.
  The PRESIDING OFFICER. The Senator from Ohio.
  Mr. VOINOVICH. I will soon ask for the yeas and nays on my amendment.
  Second of all, the ranking member of the Finance Committee and I sat 
in on meetings together as part of the centrist coalition. The thing 
that impressed me, when we met with Alan Greenspan, was the fact--and 
he has said this publicly since the time we had our private meeting 
with him--that the most significant thing we could do to aid the 
economy was to eliminate double taxation, eliminate the tax on 
dividends, although it was a short-term benefit, he said, but something 
systemic needs to be done to better the Tax Code.
  You can argue the dividend issue any way you want, but what I usually 
do is ask the people back in Ohio how they feel about it. No. 1, many 
of our businesses that have defined pension plans, because their stock 
is down, are going to be asked for an enormous amount of money to be 
deposited in those fine pension plans, which they don't have. Other 
corporations have told me that if their stock price gets a bump, they 
will issue stock and they will get cash that way so they won't have to 
borrow it the way they are now borrowing the money.
  In addition, there are many people, such as my son George, who have 
retirement accounts, who have seen those retirement accounts go down in 
value. There are millions of Americans in that same position. Other 
Americans, who are in a better position, have seen a vast amount of 
wealth disappear in the stock market. Many of them say to me that 
eliminating the tax on dividends will give a bump to the market. 
Because the market will get a bump up, they are going to feel a little 
better about the future and, as a result of that, will be more likely 
to spend some money.
  So you can argue this any way you want.
  I have other people who say to me, if you do this, it is going to 
impact on municipal bonds, affect real estate trusts, and eliminate or 
have an impact on the low-income housing tax credit.
  So that is the issue we are talking about here. We will talk about 
that today and tomorrow.
  What we really need to do is put all of this on a table and not do it 
as part of this stimulus package, and have tax reform, so we can start 
to look at the wealth factor and look at whether it makes a difference 
in terms of our economy. We have tax loopholes and tax expenditures 
that are really no longer relevant. We can take that money and put it 
into something elsewhere. We can reduce taxes and provide something 
that would be really helpful to the economy. But we don't do that 
around here. We take things from day to day, week to week, year to 
year.
  I say to the ranking member of the Finance Committee, my 
distinguished colleague, if the commission membership is not what it 
ought to be, I am

[[Page 11553]]

glad to rewrite it so that it is entirely impartial, so it will get the 
job done. I want to get the job done. I would like to have a commission 
such as they had in 1983 when we looked at Social Security. They did a 
good job. I think we ought to do that again. I think a lot of people 
agree on that. But unless we get at it now, it will not happen, we will 
let it go, and it will be something else next year.
  Mr. BAUCUS. Madam President, I appreciate what the Senator said, and 
he is correct. We have had all kinds of theories, and it is hard to 
tell what is the most accurate. Maybe we should just not pass this bill 
because we are going to make the Code that much more complex by passing 
this legislation, and so we will at least be giving the commission a 
bit of a break. I appreciate what the Senator has said.
  Mr. VOINOVICH. Madam President, I ask for the yeas and nays on my 
amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. BAUCUS. Madam President, I ask unanimous consent that the pending 
amendment be temporarily laid aside so the Senator from Florida may 
offer an amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 617

  Mr. GRAHAM of Florida. Madam President, I send an amendment to the 
desk.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Florida [Mr. Graham] proposes an amendment 
     numbered 617.

  Mr. GRAHAM of Florida. Madam President, I ask unanimous consent that 
further reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. GRAHAM of Florida. Today, the Senate began consideration of the 
Jobs and Growth Tax Relief Reconciliation Act of 2003. This is an 
appropriately named act because the economy is very much in need of 
assistance.
  The President's mishandling of the economy since January 20, 2001, is 
almost incredible. Two million-plus Americans have lost their jobs 
since that date. We have seen a 50 percent increase in the unemployment 
rate to last month's 6 percent. The stock market has lost a quarter of 
its value. There has been a $7 trillion turn in the Federal 
Government's finances--from a $5 billion projected surplus to today's 
$2 trillion projected addition to the national debt.
  The CBO's most recent estimate is that the deficit this year will top 
$350 billion--the largest annual deficit ever. Economic growth has been 
anemic--on average, 1 percent, and consumer confidence has dropped 34 
percentage points.
  What has been the response to this dismal economic record? The 
President has proposed the same prescription that he proposes for 
nearly all of our mounting domestic problems: tax cuts for the very 
wealthy.
  Madam President, I don't think we have a problem; we have at least 
three interconnecting challenges. The first is to regenerate a moribund 
national economy; the second is to prepare for the next decade, when 
our Government will be faced with enormous additional expenses, 
particularly in Social Security and Medicare; and finally, the 
immediate crisis that is occurring because of our States' financial 
positions and what that is doing to wage loss, benefits loss, and a 
denial of the services that represent the ultimate safety net under 
much of our population.
  The bill the Finance Committee has reported very closely follows the 
President's plan. There are two fundamental aspects of this plan with 
which I take the strongest exception. First, the mix of tax cuts that 
it includes will do little to stimulate the economy, which we 
desperately need. Second, the cost of this program is not offset, so 
Federal deficits and the debts that we will pass on to our children and 
grandchildren will grow even greater.
  Why is a stimulus important--a real stimulus? It is important because 
consumer spending makes up two-thirds of our economy; so as consumers 
go, so goes our economy. The economy is struggling today not because we 
don't produce enough goods and services in the United States but 
because consumers are reluctant to spend what they have to purchase 
those goods and services.
  Madam President, I would like to direct your and my colleagues' 
attention to this picture. This picture was taken on a desert airport 
in Senator Kyl's State of Arizona. It is a picture of a portion of the 
over 300 commercial airliners currently parked on that airfield.
  I submit these airplanes are not parked on the airfield in Arizona 
because Boeing cannot build enough airplanes. They are parked there 
because there are not enough passengers who want to or are able to or 
are willing to fly in those airplanes.
  This administration, in spite of that fundamental truth, has pursued 
a plan that does not emphasize demand-side stimulus. The administration 
believes producing goods and services is more important than selling 
those goods and services.
  This picture of airplanes parked is evidence that producing goods is 
not enough. For the economy to get back on track, more Americans must 
shop at our malls, go out to eat, and buy airline tickets. Putting more 
money quickly into the hands of those who are the most likely to spend 
it is the best formula for jump-starting this economy.
  Rather than spread tax cuts broadly to spur consumer demand, the 
President's plan directs most of the tax cuts to the wealthiest 
taxpayers. President Bush believes we need to reduce the tax burden on 
investment by completely exempting dividend income from the income tax. 
By doing so, President Bush hopes to spur savings and investments. 
Businesses are not going to make such investments when today, on 
average, they are only using 75 percent of their capacity.
  The plan I offer today provides substantial tax relief for all 
working Americans. My plan will give to the typical two-working-member 
family paycheck tax relief of up to $1,530 this year and again $1,530 
next year. Let me recite a couple of recent experiences.
  Last Friday, I taught school at Oyster River High School in Durham, 
NH. I talked to some of the teachers at that school. Very few of them 
are invested in the stock market. Those who are invested in the stock 
market are invested generally through a plan, such as a 401(k) 
retirement plan, where the dividends are already exempt from taxation. 
So they will get zero benefit from this plan.
  On Sunday of this week, I worked at Drake's Diner in Des Moines, IA. 
I talked to the bus boys, the waiters, the cooks, and the dishwashers. 
I tell you, their salary level is not sufficient for them to have a 
significant presence in the stock market. This paycheck relief plan 
will put real money in the pockets of real Americans who will spend it 
to stimulate the demand that is so critical to getting this economy 
jump-started. This paycheck tax relief will inject $200 billion into 
the economy over the next 2 years.
  During the Finance Committee markup, some criticized the wage tax as 
being a threat to the finances of the Social Security trust fund. That 
argument is a red herring and has no basis. My amendment makes 
absolutely no changes to the payroll taxes paid by employers and 
employees and, therefore, does not affect one thin dime of the revenues 
that go in to the Social Security and the Medicare trust funds.
  My amendment provides a refundable income tax credit for workers 
designed to provide the same benefits as would a temporary reduction in 
the payroll tax.
  My plan also includes tax relief for small businesses. It 
substantially increases the amount of machinery and equipment that a 
small business can deduct; therefore, creating an incentive for that 
business to make its investment now when we need it as opposed to 
deferring it to a future date.
  My amendment will provide States with over $40 billion in aid over 
the

[[Page 11554]]

next 12 months. This temporary assistance is provided to the States by 
the Federal Government, increasing its share of Medicaid costs.
  Greater assistance from the Federal Government will help forestall 
drastic cuts in State health programs that will affect those least able 
to absorb them. Directing relief to the Medicaid reimbursement rate is 
the most efficient means by which to get these funds to the States.
  Finally, my plan bolsters unemployment compensation benefits. Many of 
those over 2 million people who have lost their jobs since January 20, 
2001, have lost them for a considerable period of time and, thus, have 
exhausted both their State and now their Federal unemployment benefits. 
My proposal would extend the Federal program, which is currently 
scheduled to expire at the end of this month, through November. It 
would provide 26 weeks of benefits to those who are struggling to find 
work in this stagnant economy. It would also provide 13 weeks of 
benefits to the approximately 1 million workers who had exhausted their 
benefits before the end of last year but who were excluded from the 
extended program which we enacted in January.
  Finally, this proposal gives the States the option of modernizing 
their unemployment compensation programs to better cover part-time and 
low-wage workers.
  In summary, the plan I have submitted will stimulate demand and, 
thus, has the better opportunity to stimulate the economy. It focuses 
all the money in the next 24 months, as Senator Nelson from Nebraska 
commented that one of his objections to several of the proposals was 
they would spread the money out over a 10-year period and, in the case 
of the President's plan, an infinite period because the tax cuts would 
stay in effect assumedly until Congress acted to do otherwise, whereas 
what we need to do is the money that is available to stimulate the 
economy needs to be focused in the period when the economy needs 
stimulation.
  Finally, this plan is fair. It treats all Americans, whether they are 
teaching school in Oyster River or whether they are busing tables at 
Drake's Diner, fairly and gives them an opportunity to be part of the 
recovery of the American economy.
  Maybe even more important, my plan does not ask our children and 
grandchildren to foot our bill. We have had an incredible buildup of 
debt. If I could use as an example my own family. My father was born in 
1885. On the day he was born, he inherited, as his share of the Federal 
national debt, $33. I was born in 1936. On the day I was born, I 
inherited a national debt of $264. My oldest daughter was born in 1963. 
When she was born, she inherited as her portion of the national debt 
$1,634. The last number I am going to give you is stunning, almost 
unbelievable. My youngest granddaughter was born 3 years ago. When she 
was born, her share of the national debt was $20,163.
  In four generations of one American family, we have gone from $33, as 
that citizen's portion of the national debt, to $20,163. This expansion 
of debt is not only immoral, it is also bad economics. By putting the 
cost of their tax plan on the Nation's credit card, the President 
jeopardizes the very economic growth we hope to stimulate.
  Increasing the debt reduces national safety, crowds out private 
sector borrowing, increases the cost of capital for the private sector, 
and ultimately reduces economic potential. Even further, there is a 
commonsense reason to offset the cost of the stimulus bill so that it 
does not increase the national debt. In just 8 years, the first wave of 
the baby boom generation, born after World War II, will become eligible 
for full Social Security and Medicare benefits.
  Today, there are 39\1/2\ million Americans eligible for Social 
Security and Medicare full benefits. In the year 2011, 8 years from 
today, when the first of the baby boomers become eligible, there will 
be 45 million. At the time when the last of the baby boomers turn 65, 
which will be in the year 2030, there will be nearly 72 million 
participants in these two programs.
  Those numbers are hard to comprehend, but what they say is that our 
Federal Government has entered into a contract with our citizens paying 
through this very payroll tax that we discussed earlier, with the 
expectation that upon retirement, they will have purchased some 
benefits, both economic and medical security.
  My plan is fully offset, primarily by suspending some of the tax cuts 
enacted in 2001, tax cuts that have yet to go into effect. My proposal 
suspends the reductions in the top three income tax rates planned to go 
in effect in 2004 and in 2006. My plan freezes the planned cuts in the 
estate tax scheduled beyond 2006. My plan also clamps down on those 
Americans who avoid paying taxes by investing in abusive tax shelters, 
moving their corporate headquarters to a file cabinet in Bermuda or 
hiding assets offshore.
  We need to bring America back to a time when our economy was booming 
and our Federal finances were sound. The President's plan will not do 
that. My plan will.
  I ask for the yeas and nays on this amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER (Mr. Graham of South Carolina). The Senator 
from Arizona.
  Mr. KYL. I ask unanimous consent that the pending business be set 
aside for the purpose of offering an amendment.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.


                           Amendment No. 575

       (Purpose: To further enhance the denial of deduction for 
     certain fines, penalties, and other amounts.)

  Mr. KYL. Mr. President, I send amendment No. 575 to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will read the amendment.
  The legislative clerk read as follows:

       The Senator from Arizona [Mr. Kyl], for himself, Mr. 
     Cornyn, Mr. Alexander, and Mr. Ensign, proposes an amendment 
     numbered 575.

  Mr. KYL. Mr. President, I ask unanimous consent that the reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under ``Text 
of Amendments.'')
  Mr. KYL. I ask unanimous consent that this amendment be designated 
the Kyl-Cornyn amendment and that Senators Alexander and Ensign be 
listed as original cosponsors.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KYL. Mr. President, I will address this amendment for a few 
minutes, and then I am going to speak on the dividends proposal that 
will be offered tomorrow and that hopefully the Senate will approve as 
one of the perfecting amendments of the legislation that passed out of 
the Finance Committee.
  The first thing I would like to do is to describe the amendment that 
I have just laid down. I know Senator Cornyn is coming a little bit 
later, and he will be talking about it, too.
  This amendment is known as the tobacco tax lawyers amendment. The 
technical name is different than that, but the gist of this amendment 
is that about $9 billion could be returned to the States, the clients 
in the tobacco litigation, from the attorneys who overcharged those 
clients. This legislation ensures that overcharging be recognized in 
law so that the States can apply for that refund.
  How does that work? There is an existing IRS Code provision that says 
if one is the trustee of a trust, and they overcharge that trust, they 
take too much in the way of fees out of it, they have to return those 
fees. The IRS will enforce that.
  In fact, the Secretary of the Treasury is involved in that process. 
We simply apply that same existing IRS Code provision to this situation 
where attorney's fees have been charged in excess.
  The common thread is a fiduciary relationship, the legal term which 
applies where a trustee or a lawyer to a

[[Page 11555]]

trust or to a client has a responsibility above and beyond a mere 
contractual responsibility. As the court cases all attest--and I will 
quote a couple in a moment--whereas a contract between two regular 
people is enforceable in law, with respect to a trustee or a lawyer, 
where you have a fiduciary responsibility to the client or to the 
trust, that contract is not the most important thing. The most 
important thing is the fiduciary responsibility, which the law will 
enforce, above the contracted for fee. That is what would apply in this 
particular case.
  As a result of the tobacco litigation we are all familiar with, the 
fees are being paid to these lawyers at the rate of about $500 million 
a year. That exists for 30 years until the year 2028, possibly forever 
if the lawyers win their argument for an inflation adjustment. Some 
attorneys are receiving fees--if we can believe this now--in excess of 
$150,000 an hour.
  Senators make about $150,000 a year, and there are a lot of people 
who think Senators are overpaid. Think about instead of earning 
$150,000 a year, a person earned $150,000 every hour. That is what some 
of the attorneys in this tobacco litigation are earning. It is 
unconscionable, and no contract that provides for that can be 
enforceable in law. It is clearly a breach of the fiduciary 
responsibility.
  Congress enacted this Tax Code provision in 1996 in response to two 
very famous people. I will not mention their names, but they set up a 
trust and then proceeded, basically, to pay themselves as trustee most 
of the money out of the trust. Congress said: That is not right. We do 
not care what the contract says. It is wrong. The IRS can tax you on 
that overage.
  That is the same provision we would use. The Congress can tax you on 
that overage, and I will describe in a minute how we actually describe 
what the overage is.
  I will first assure my colleagues that the money that would be 
returned by the tobacco lawyers is not returned to the tobacco 
companies. They have to pay the money. They either pay it to the 
lawyers or they pay it to the States. The money would be returned to 
the States. As I said, under the original bill that Senator Cornyn and 
I introduced, it is about $9 billion. That is the securitized value of 
this income stream of over half a billion dollars every year for 30 
years, and maybe in perpetuity. So $9 billion is the reduced-to-present 
value of this fee award.
  I have a chart, which I do not think I will bother to put up on the 
easel, which shows what every State would get. My State, for example, 
would receive about $164 million, and it could use that money. Since it 
is based purely on population, if that is what Arizona, with a little 
over 5 million people, received, my colleagues can figure out what 
their State would receive.
  I will go back to describe what the tobacco settlement really did 
because most people are not aware of what happened in the tobacco 
settlement. Attorney's fees were not awarded in the tobacco settlement 
pursuant to contract. So for those people who say we are trying to 
abrogate contracts, as I said, we are not talking about contracts. We 
are talking about a fiduciary responsibility. In any event, in the 
tobacco settlement, there was not a contract. Nor were they awarded by 
a court, which is the other way that ordinarily attorney's fees are 
awarded as a result of successful litigation.
  So it was not awarded by a contract, and it was not awarded by a 
court. Instead, after the tobacco companies' initial offer to settle 
the litigation and that offer failed and Congress rejected a 
legislative settlement, which some of my colleagues will recall, the 
tobacco companies and the lawyers agreed to a $246 billion settlement, 
with a special provision for attorney's fees. So this was not between 
the lawyers and clients. It was between the lawyers and the other 
party, something about which courts always raise a red flag.
  That provision included a very unusual agreement by the tobacco 
companies to pay the fees of these lawyers who represented their 
opponents, the States. The fees were ostensibly set by a panel of three 
arbitrators, and there are some very interesting articles about how 
this would occur that would make your blood boil. Two of the majority 
were effectively chosen by the lawyers.
  In this agreement, the tobacco companies and lawyers agreed to 
immunize all fee awards from judicial review. In other words, it 
stipulates that it cannot be reviewed by a court. And all proceedings 
were concealed from the public. That is what we are talking about--a 
secret deal by which the tobacco companies agreed, as part of how much 
money they had to pay out, that they would pay these substantial fees 
to the lawyers.
  It does not take too much imagination to figure out that it was in 
the best interests of two parties that this arrangement exist--the 
lawyers and the tobacco companies. They got together and they concocted 
a secret deal which was never reviewed by a court, is not pursuant to a 
contract, and which, by the precedence of this Congress, can be 
limited.
  Now, the amendment we have proposed guarantees that none of these 
lawyers receives less than $20,000 an hour for their services. Is that 
generous enough? None of them will get less than $20,000 an hour. How 
much is a plumber charging these days? A hundred dollars an hour? I am 
not sure what it is. How much does a schoolteacher get these days? 
Probably not $100 an hour when you add it all up. These lawyers would 
be guaranteed $20,000 for every hour they put in. Some claim to have 
put in 10,000 hours, 20,000 hours, 30,000 hours. Add it up. They will 
not have to sell their yachts.
  As I said, there are a lot of descriptions of this, and I will put 
some of this in the Record at the appropriate time. I wanted to note, 
if anyone thinks I misspeak, in one of the articles it is noted that in 
the case of Michigan, for example--I will be very specific--the fee 
worked out to $22,500 an hour for this particular firm. These lawyers 
would therefore have to take a little bit of a cut. Instead of getting 
$22,500 an hour, they only get $20,000 an hour.
  Now, The Economist, a respected magazine published in Great Britain, 
notes that tobacco settlement ``arbitration is a mere figleaf. The 
money going to the lawyers was clearly part of the overall amount that 
the tobacco companies were willing to pay to settle the case. Whatever 
the lawyers get, the States do not.''
  That is the bottom line. So the money has to be returned to the 
clients, the States, not the tobacco companies.
  As I said, the proposal is based on the intermediate sanction tax, an 
existing provision of the Tax Code that applies a punitive tax to the 
excessive portion of a fiduciary's fee and effectively forces the 
fiduciary to restore the excessive portion of the fee to the client. 
Our amendment applies the same tax formula to the excessive attorney's 
fees in the mega-lawsuits.
  The suit would have to be $100 million or this provision would not 
apply. We are talking about a very minute number of lawsuits per year; 
probably 15 to 20 litigations a year, at most, according to experts, 
would qualify. You have to exceed $100 million as part of the 
settlement or judgment.
  Let me note, because one of my colleagues said you have to have 
contingent fees in the big complicated cases, that is very true, 
lawyers will take tough cases on a contingent fee. In the early stages 
of this litigation, it was tough litigation, that is true. So sometimes 
lawyers will take a third, sometimes even 40 percent. I have seen fees 
as high as 50 percent of the settlements.
  What have experts and courts said about that? Courts have made clear 
that fee agreements based primarily on the size of the recovery tend to 
become unreasonable when judgments reach the $100 million mark, which 
is the mark we use here. As one court stated:

       In much smaller cases, a fee award of 33 percent does not 
     present the danger of providing the plaintiff counsel with 
     the windfall that would accompany a mega fund settlement of 
     $100 million or upwards, but it is quite different when the 
     figure hits the really big time.

  Whereas the Third Circuit Court notes:

       Courts have generally decreased the percentage awarded for 
     attorney fees as the

[[Page 11556]]

     amount recovered increases and $100 million seems to be the 
     informal marker of a very large settlement.

  It is one of the reasons we chose the $100 million mark.
  The logic of avoiding judgment-based awards in the very largest 
lawsuits is straightforward:

       It is not 150 times more difficult to prepare, try, and 
     settle a $150 million case than it is to try a $1 million 
     case, but the application of a percentage comparable to that 
     in a smaller case may yield an award 150 times greater.

  Another said:

       There is considerable merit to disallowing standard 
     percentage awards as the size of the recovery fund increases. 
     In many cases the increase in the recovery is merely a factor 
     in the size of the class and has no direct relationship to 
     the efforts of counsel.

  That certainly was the case in the tobacco litigation.
  Before the trial lawyers or some of their allies say this is a 
Republican lawyer-bashing amendment, I say two things. First, I am a 
lawyer. I am not trying to bash any lawyers. A guaranteed fee of 
$20,000 an hour would be considered extraordinarily generous by the 
standards of most of my colleagues. Second, the fee formula used in 
this situation allows attorneys to receive up to 500 percent of what 
courts usually determine as reasonable hourly rates but not less than 
$20,000 an hour. So you take what a court determines as a reasonable 
rate, add 500 percent--no one can contend that is unfair--and that is 
the standard used in this typical type of case.
  Before you say this is Republican lawyer bashing, this came from 
probably the most liberal court in the country, the Florida Supreme 
Court, which in a specific case tried to determine what would be a fair 
fee in a situation like this.
  What it said was that the maximum multiplier that it thought was 
appropriate was this multiplier of 5, or 500 percent.
  Here is what the court said:

       We set the maximum multiplier available in this common-fund 
     category of cases at 5. . . . [A] multiplier which increases 
     fees to five times the accepted hourly rate is sufficient to 
     alleviate the contingency risk factor involved and attract 
     high level counsel to common fund cases while producing a fee 
     that remains within the bounds of reasonableness. We 
     emphasize that 5 percent is a maximum multiplier.

  I take this as the most liberal of standards, the reasonable 
attorney's fees, plus 500 percent, and then say, but we will guarantee 
you that you do not get anything less than $20,000 an hour if it turns 
out not to satisfy that. I challenge any of my colleagues, if you vote 
against this amendment, you are going to have to justify paying lawyers 
$20,000 an hour rather than returning that money to the States.
  The original of the bill Senator Cornyn and I filed has this 
provision effectively from June of last year. To avoid any question 
that it is retroactive, we made it effective on the effective day of 
the act, so it is only prospective.
  There is one more thing I want to summarize. This act does not alter 
the considered fee award standards of any jurisdiction in the country. 
Rather, it is intended to enforce those standards and to correct the 
occasional extreme outlier. What we are doing is enforcing the court-
imposed law relating to fiduciary responsibilities.
  Let me quote a couple of these courts. This is from the Illinois 
Supreme Court:

       A fiduciary relationship exists as a matter of law between 
     attorney and client.

  The New Jersey Supreme Court:

       An attorney's freedom to contract with a client is subject 
     to the constraints of ethical considerations.

  The Massachusetts Appeals Court:

       While freedom of contract is the guiding principle 
     underlying contract law, contractual freedom is muted in the 
     lawyer-client and lawyer-lawyer context.
       That comes from a law professor, Joseph Perillo.

  Here is another court:

       [A]n attorney is only entitled to fees which are fair and 
     just and which adequately compensate him for his services. 
     This is true no matter what fee is specified in the contract, 
     because an attorney, as a fiduciary, cannot bind his client 
     to pay a greater compensation for his services than the 
     attorney would have the right to demand if no contract had 
     been made. Therefore, as a matter of public policy, 
     reasonableness is an implied term in every contract for 
     attorney's fees.

  As I noted before, in this case, in the tobacco litigation, you don't 
have a contract between the client and the attorney. The contract is 
between the attorney and the opposing parties, the tobacco companies, 
which make it even more suspect.
  Again, as I said, this does not change the substantive law. It simply 
enforces preexisting fiduciary standards that bind every attorney in 
every State.
  I urge my colleagues when we vote on this amendment tomorrow to just 
consider the alternative. These lawyers are all going to get a ton of 
money, hundreds of millions of dollars, guaranteed $20,000 per hour 
that they work. Most of them worked, they claim, thousands of hours on 
this case. But we are able to return somewhere, depending upon how the 
payment for this amendment is done, between $6.5 billion and $9 billion 
to the States. The States could use this money at this time. The 
tobacco companies have to pay the money one way or the other.
  After compensating lawyers on the basis of a reasonable attorney fee 
plus 500 percent, but at a minimum at least $20,000 an hour, the 
remainder would be returned to the States. I submit this is a 
responsible thing for us to do.
  The final comments I would like to make relate to the amendment that 
will be offered tomorrow relating to the dividend section of this bill. 
The proposal is to join the President in finally bringing to an end the 
pernicious practice of taxing dividends in this country twice, which 
puts us at a competitive disadvantage with our trading partners, which 
is unfair in anybody's book, which drives corporations to fund their 
investment by debt rather than equity investment, which reduces the 
transparency of corporations because they do not have to account to 
shareholders, and which diminishes the value of stock because the 
shareholders are going to have to pay a tax on the dividends even after 
the corporation has already done so.
  Those are the reasons President Bush understood that this double 
taxation of dividends had to be addressed in this tax bill. The beauty 
of his proposal is that when combined with two of the other provisions 
of the act, the acceleration of the write-off for small business and, 
most important, the acceleration of the reductions in the marginal 
income tax rates, we will produce in this country 1.4 million jobs next 
year, and we could produce half a million jobs this year.
  The proposal that is going to be offered tomorrow is ingenious in 
that it puts the bulk of this relief right up front where it will do 
good for the economy right now; and, second, it sends an unmistakable 
message to the stock market that we mean business about reducing the 
tax to zero.
  What the proposal does is, for this current tax year, before we could 
put this all in effect, it gives all of the dividend holders a 50-
percent deduction on their dividends. So for this tax year we are in 
right now they can write off half of what they would otherwise have to 
pay, and starting next year, 2004, and going into 2005 and 2006, in 
other words for 3 straight years, the tax rate for them goes to zero on 
these dividends. It is repealed. It is gone.
  I challenge anybody at the end of that period of time to suggest at 
that point we try to reinstate the double taxation of dividends. It is 
not going to happen.
  So the message to the stock market, when the vote occurs tomorrow and 
you have seen that the Senate is willing to follow the President and 
repeal the double taxation of dividends, the message is that you can 
finally begin to see the light at the end of the tunnel with respect to 
the recovery.
  What do economists tell us? One economist, a very prominent 
economist, told us at a dinner the other night that he could expect to 
see at least a 20-percent increase in the value of stock as a result of 
this. The average of the economists we have talked to is closer to 10 
percent. But take 10 percent. I think we would all like to see a return 
of that much value in our stock portfolio. This exists whether or not 
we

[[Page 11557]]

are holding stock that issues dividends because of the general value of 
the market, or increased value of the market that would result from 
this. Obviously, those taxpayers who receive dividends from their 
corporate holdings would receive a direct benefit in the reduction of 
their liability for taxes, in addition to the increase in the value of 
their stock.
  Obviously, this is going to be very good tax policy. It puts us in a 
better competitive position. Do you know that the United States has the 
second worst tax rate on dividends in the entire world of economically 
developed countries? Only Japan has a slightly higher rate. And every 
other country in the economically developed world has a lower tax rate 
on dividends than we do. No wonder we are having a problem right now.
  But another point I would like to make with regard to this whole 
issue is that dividends obviously work in two good ways. By putting 
money back in taxpayers' pockets, they can do with those dividends 
whatever they like. The distinguished Senator from Florida who was 
speaking a moment ago talked about the need for consumers to have more 
money in their pockets. This is a way for consumers, and specifically 
senior citizens, to get more money in their pockets. There are about 10 
million seniors who would receive relief under this proposal, just 
under $1,000 a year in terms of the average value they would receive. 
This is money in their pocket. This is money with which they can do one 
of two things: They can either spend it or they can invest it. In 
either case they are helping the economy.
  For those who think we need to have people who can spend more, they 
can spend more. For those who think we need more investment, obviously 
some seniors invest some part of their income.
  I would like to make a point in response to the Senator from Florida 
because he referred to my beloved home State of Arizona and showed a 
photograph of some airplanes sitting out on a tarmac, airplanes that 
were mothballed. If you come out to Tucson, AZ, you will see a very 
interesting sight. There are literally hundreds if not thousands of 
these airplanes. Most of them are military, but there are some 
commercial airplanes as well.
  The point he was trying to make was this is a consumer-driven 
recession and therefore we need to put money in the pockets of 
consumers. The two big things we do here is accelerate the marginal 
income tax rate--that puts money in the pockets of consumers--and don't 
double tax dividends so the people who invest in stocks have that money 
to spend. Even for those who believe this is a consumer-driven 
recession, which it is not, what the President has proposed, and what 
we will be voting on tomorrow, helps put money in the pockets of 
consumers.
  But there is a fundamental misunderstanding, if you look at airplanes 
and say, therefore, because people are not flying as much, this is a 
consumer-driven recession. There are two problems: First, regarding 9/
11, the airline industry is almost unique among the businesses in this 
country. The airline industry and associated industries went into a 
nose dive that they still haven't recovered from because the traveling 
public has not traveled as much after 9/11. But the airlines will tell 
you a second factor has contributed to their bad financial situation. 
In addition to the fact that some people do not travel as much as a 
result of 9/11, and we have increased security costs placed upon them, 
the biggest single factor, they will tell you, is they have lost the 
business traveling public.
  The business travelers who buy the first class or business class 
tickets and fly a lot are not flying as much. Why? Because the 
corporations are trying to save money. Why? Because they can't get 
enough money to invest in their businesses. Why? Because there is a 
capital asset deficit. This recession, the first of the 21st century, 
is the first nonconsumer recession. It is a capital asset deficit 
recession. It is a recession that understands that investment income is 
what is lacking.
  Over the last 2 or 3 years, we have seen, by the count of some 
economists, almost $10 trillion sucked out of the stock values of this 
country. Something has to be done to put back that value. The way you 
put it back is by creating more investment opportunities. Most of the 
economists we have talked to said the single best thing you can do to 
add to that investment opportunity is to repeal this double taxation of 
dividends.
  My colleague, Senator Voinovich from Ohio, quoted Alan Greenspan a 
while ago, who said if you are going to do something like this, get rid 
of the double taxation of dividends. That will help spur investment. He 
also said to Congress, stop spending so much money.
  This chart on my left demonstrates the situation here. Last year, 
consumer spending didn't go down. Those of you who have refinanced your 
home or tried to buy a car at 0 percent interest know people are still 
buying. Consumer spending went up 3.4 percent last year, and it was up 
the year before as well. This green line shows consumer spending 
continues to go up. From 1999 to 2002, you can see that consumer 
spending is increasing.
  It hasn't fallen off. What has fallen off? The gross private 
investment is what has fallen off--the investment in our businesses in 
the United States. After reaching the peak just after the year 2000, we 
all know what happened. We read the paper and see what is happening to 
the stock market. You can see investment in the market has plummeted, 
and it hasn't come back very much. It will come back if we give people 
the means to invest and the incentive to invest because they are not 
going to have their profits from their investment in corporations taxed 
after the corporation has already paid the tax.
  This is clearly a capital asset problem and not a consumer spending 
problem, as has been alleged by so many of those on the other side of 
the aisle.
  Finally, I want to say this: My colleague from Florida said, ``The 
President's handling of the economy''--the end of the quote, but the 
gist is the President's handling of the economy is why we are in the 
bad economic situation.
  Under current circumstances, would that the President could handle 
the economy. But as all economists know, fortunately 250-plus million 
people drive the economy in this free market country of ours. They make 
millions of decisions every day. The President doesn't run the economy 
in the United States of America. He has very little that he can do to 
change the economic situation in the country except try to lead by 
persuasion. He is trying very hard to do that.
  The other thing he can do is to propose to the Congress that we try 
to do things he thinks will help the economy and he has done that. But 
my colleague who spoke these words a moment ago wants to deny him the 
ability to put his plan in effect. On the one hand, they complain he is 
not doing anything to handle the economy, and on the other hand, they 
are going to disagree with whatever he proposes to do. Of course, we 
know the truth. He doesn't handle the economy. But he has some 
influence over the direction we go by getting his best advisers 
together and trying to figure out how we can create the most jobs and 
produce economic recovery. He has done that. Most of the Republicans in 
this body have agreed his proposal is the best way for us to create 
jobs.
  Therefore, tomorrow what will be offered is very close to what he 
proposed. With this dividend, this elimination of the double taxation 
of dividends, we will be able to go a long way toward giving the 
President the plan he has asked for--not so that he can handle the 
economy, but so we as leaders can help lead the country toward at least 
some degree of recovery in this year of 2003.
  As I said before, some people say the President's reelection depends 
on whether the economy is strong or not. I don't think he would be 
proposing something which he thinks won't work. He is proposing 
something which he believes will work, and we believe it will work. 
That is why I hope my colleagues will support the proposal that

[[Page 11558]]

will be offered tomorrow in support of the President's program to 
eliminate the double taxation of dividends.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. I yield to the Senator from Texas what time he might 
consume.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. CORNYN. Mr. President, I appreciate the Senator from Iowa 
providing me an opportunity to speak on a matter I know the Senator 
from Arizona has already addressed--something called the Intermediate 
Sanctions Compensatory Review Adjustment Act of 2003.
  This amendment, I believe, is important for a number of reasons. 
First of all, nobody in this body is going to get quite everything they 
may want in this jobs and economic growth package of 2003. But, for 
better or for worse, a deal has been struck in order to obtain 
sufficient votes to get the matter out of committee and hopefully 
enacted into law to provide $20 billion of State aid as part of this 
package.
  If it had been up to me, I would have said that notwithstanding the 
difficult times States find themselves in--and in my State of Texas 
they find themselves with a $10 billion budget shortfall--but 
notwithstanding that fact, I would be reluctant to send $20 billion to 
the States with no strings attached so they could spend however they 
might like when we have no means of establishing accountability for how 
that money might be spent. But the collective wisdom of the Finance 
Committee and perhaps this body is that $20 billion in State aid will 
be sent to the States as part of this overall package.
  That being the case and recognizing that no single Senator gets 
everything he or she wants, the question then has arisen--and the 
Senator from Arizona has raised it--the issue of attorneys' fees 
ostensibly earned by lawyers who represented the various States in the 
tobacco litigation and other contingency fee arrangements whereby 
certain private lawyers have earned, or at least claim to have earned, 
literally billions of dollars in attorneys' fees.
  I don't speak on this issue without a little bit of history, and 
perhaps that would provide some context for why I support this 
amendment.
  On January 1, 1999, I was sworn in as Attorney General of Texas, 
shortly after my predecessor had entered into a settlement with the 
tobacco industry, and really I think what we all recognize is an 
unprecedented lawsuit ultimately resulting in the largest civil 
judgment in the history of the world.
  I know the State of Texas and other States filed this lawsuit to 
recover Medicaid expenditures they had incurred on smoking-related 
illnesses. Certainly, I count myself second to no one in expressing 
concern about the number of people in this country and around the 
world--some 400,000 in this country alone--who lose there lives 
annually as a result of smoking-related illnesses. But that is only 
part of the story.
  The rest of the story is that a small group of entrepreneurial 
lawyers saw an opportunity once they joined league with State attorneys 
general to file litigation against the tobacco industry. If that were 
more or less the end of the story, then I wouldn't have concerns. But 
ultimately, those settlements ended up with the States in a joint 
venture with the tobacco industry to keep the tobacco industry alive, 
and with the settlements, these huge amounts of money, multiple 
billions of dollars being paid out of the profits of the tobacco 
industry for continuing to sell more of their tobacco products in the 
future, not just in this country but across the world.
  So rather than discouraging or limiting tobacco use in this country 
and around the world, the States became joint venturers, so to speak, 
with the tobacco industry because if the tobacco industry was unable to 
sell more of its product, then the States would not get paid under the 
settlements, a truly shrewd and ingenuous arrangement on the part of 
these entrepreneurial lawyers.
  But the real concern I have about this arrangement, particularly in 
my home State of Texas, is while the State receives a historic 
settlement of $17.3 billion--and actually that purports to be the 
present value of the money that is going to be paid in perpetuity--it 
is really probably only a part of what ultimately that judgment is 
worth.
  Once these lawyers settled the case for the client, so to speak, then 
they talked to the tobacco industry, and they said: OK, what about us? 
We have my client's settlement, $17.3 billion, roughly speaking. Now 
what about us? And they engaged in an arrangement which I believe 
violated one of the most basic obligations that a lawyer owes to the 
client and breached their fiduciary duties to the client.
  It simply boils down to this: that the duty of a lawyer who has been 
hired by a client is to maximize the recovery on the part of the 
plaintiff. Here, rather than do that, they struck a deal with the 
tobacco industry for a certain amount of money and then said: Well, on 
top of that, now you have to deal with us--which turns on its head the 
duty of loyalty that a lawyer has to a client to not let his or her 
personal interest conflict with the interests of the client and to 
maximize the recovery by the client.
  So, simply stated, I believe what we saw in the tobacco litigation, 
all across this country, represented an unprecedented breach of 
fiduciary duty that the lawyer owed to the client to maximize the 
client's recovery and enrich the lawyers in the process.
  So the question is, What do we do about it? Well, here again, I 
believe that the needs of the States, and particularly the State of 
Texas--which is currently in session trying to deal with a $10 billion 
shortfall, looking at cutting health care for those who are unable to 
pay for health care on their own, for children under the CHIPS program, 
for public education--that this provides an opportunity for this body 
to correct an injustice, to enforce a fiduciary duty that the lawyer 
owes to the client, and to provide aid to the States in the process in 
a way that will help ameliorate that loss and vindicate a wrong.
  Part of this story, too, involves a tragedy. My predecessor as 
attorney general currently stands indicted by a U.S. grand jury in the 
Western District of Texas for trying to enrich a friend, a colleague, 
to the tune of some $520 million for doing no work.
  For those who have not followed the story, I will just say that about 
the time the tobacco settlement was struck, there arrived on the scene 
another lawyer, whom nobody had ever heard of before, by the name of 
Mark Murr. The lawyers who had been involved in the litigation--at 
least they had done some work on it--wondered what this arrangement 
was. And when push came to shove, ultimately the five main lawyers in 
the Texas tobacco lawsuit got their $3.3 billion. But then there was an 
arrangement made to create a separate mechanism, a collusive 
arbitration arrangement, whereby Mark Murr would receive up to $520 
million out of the recovery of the State of Texas.
  As it turned out, during my investigation as attorney general, we 
determined that the contract upon which Mr. Murr claimed a right to be 
paid had been falsified, backdated, and literally been cut and pasted 
to make it look as if he had done some work on the case and had been 
involved in the case much earlier than he really had. In truth, and in 
fact, I believe he did not do any work to justify that fee.
  During the 4 years that I was attorney general of the State of Texas, 
we conducted an investigation into that matter, were successful in 
preventing Mr. Murr from making the claim for that money against the 
treasury of the State of Texas, and ultimately, I believe, provided the 
factual basis under which the U.S. attorney was able to present that 
case to the grand jury, and ultimately resulting in the indictment of 
the former attorney general of the State of Texas.
  I say that with no pleasure at all. It is a tragedy, a terrible 
tragedy. But it is a story of how a steward of the public trust has 
violated that trust and now must be held accountable for violating that 
trust. But in the process, and what this amendment addresses 
specifically, is the manner in which

[[Page 11559]]

five private lawyers enrich themselves at the expense of the State of 
Texas and how other lawyers across the country, during the course of 
this tobacco litigation, enrich themselves at the expense of their 
State clients in breach of their fiduciary duties.
  The Internal Revenue Code provides a mechanism where those who breach 
fiduciary duties--whether they be a trustee or, in this case, a lawyer 
representing a client--can be taxed. It provides another mechanism, a 
nonlitigation mechanism, to enforce that fiduciary duty that is owed by 
the fiduciary to the client. In this case, I believe it is an 
opportunity for this body to find funds--if, in fact, it is the will of 
the majority of this body--and to see Federal dollars, or money that 
otherwise is paid by Federal taxpayers, go to State taxpayers. It 
provides another opportunity to provide up to $9 billion of additional 
funds by simply enforcing the fiduciary duty owed by these lawyers to 
their clients, the various States.
  So I am pleased to join Senator Kyl and Senator Alexander in 
cosponsoring this amendment that would, if adopted by this body, 
provide an additional $9 billion in State aid, in a way that I believe 
ultimately does justice, by enforcing this fiduciary duty owed by the 
lawyers to the client.
  Let me just say, Mr. President, in closing, that I support the Jobs 
and Economic Growth Act of 2003. Even though I think it will undergo a 
number of amendments and will ultimately not be exactly what any of us 
would like, I believe it provides a necessary prescription for what 
ails the economy and will provide a necessary jump-start to allow 
taxpayers, the ones who earn the money, to keep more of that money and 
spend it as they see fit, and to allow small businesses that earn the 
money to reinvest in their businesses and create new jobs in a way that 
will ultimately help us grow our way out of our current economic 
doldrums.
  So I am happy to support this important legislation and happy to add 
my voice to hopefully putting America back to work.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Montana.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that all pending 
amendments be temporarily set aside so the Senator from Louisiana can 
offer an amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Louisiana.


                           Amendment No. 619

  Ms. LANDRIEU. Mr. President, I send an amendment to the desk on 
behalf of myself, Senator Corzine, and Senator Schumer.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Louisiana [Ms. Landrieu], for herself, Mr. 
     Corzine, and Mr. Schumer, proposes an amendment numbered 619.

  Ms. LANDRIEU. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under ``Text 
of Amendments.'')
  Ms. LANDRIEU. Mr. President, I will take such time as I may need to 
explain the amendment. I estimate it to be around 10 or 15 minutes for 
myself and for Senator Corzine who joins me on the floor. I know there 
are no time constraints, but I know there are other Members with 
amendments and the hour is late. I just want to let them know 
approximately how much time it will take for us to offer the amendment.
  We offer this amendment in good faith because many of us are firmly 
convinced and feel very passionately that the direction the President 
is leading us with his proposal is the wrong direction.
  Times have been much worse in this country over the course of our 
long history. In many ways, things are moving along pretty well. We are 
making a tremendous amount of progress on many fronts. But it is in 
some ways a very crucial time. We are trying to transform our military. 
We are moving into a technological age for which this particular type 
of economy needs some special framework. We are fighting terrorism 
worldwide. We are engaged in conflicts because of the recent attack on 
our Nation. I wouldn't say this is the calmest of times, but yet we are 
not in a depression; some would argue not in a recession. But it is an 
important time to do the right thing.
  For the 4.5 million people I represent in Louisiana, it is very 
important that we get this tax package right. Their livelihoods depend 
on it. Their children's futures depend on it. Their small businesses 
depend on it. The health of their parents depend on it. We can't get it 
wrong, and we are about to.
  This plan the President has laid down will not create jobs. The plan 
the President has laid down will raise taxes. The plan the President 
has laid down will increase deficits. It will disappoint thousands of 
parents, teachers, and students who actually believed him when he said 
he would not leave a child behind. They actually believed him. And they 
voted for him. This plan does not fund Leave No Child Behind.
  This plan says no to so many small businesses that trusted him, that 
came here to Washington and said: Mr. President, if you get a little 
more money, could you please help us with our health care premiums? He 
told them, yes. But this plan doesn't have a deduction for health care 
premiums. It is the No. 1 issue for the small businesses in Louisiana 
and across the Nation. You won't find it in the President's plan. It is 
not in there. He said no to small business.
  I know I can't use profanity on the floor of the Senate, so let me 
just say: It is a darn shame that when he had a chance, when the 
Republican leadership had a chance to do the right thing at an 
important time in our Nation, for some reason, that some of us can't 
figure out, I can't even go where they are going. I don't understand 
it.
  I don't understand a plan, when we need jobs, that doesn't create 
jobs; when we are trying to fix the deficit, it makes the deficit 
worse. For what?
  So Senator Corzine and I have worked, along with Senator Schumer and 
many of our colleagues, to come up with something that would actually 
take the President at his word, which we are continuing to hope we can 
do. I am getting personally unsure of that, but I am trying to take him 
at his word that he really wants to create jobs; he wants to get the 
economy moving again; he wants to have a stimulus package; he wants to 
make it generally fair to everybody, or as many people as possible.
  He wants to honor the military, which he continues to say is one of 
his No. 1 priorities. We have something in here, a tax credit for the 
Guard and Reserve. I don't know if anyone in America could say that 
there is a group of people that deserve a tax credit more than the 
people who have left their spouses, left their children, left their 
jobs, put up a temporary sign ``gone to war'' on the front of their 
building, but we are sitting on this floor tonight giving tax credits 
to everybody in the world--the double taxation to corporations, many of 
which don't pay taxes anyway--but we can't find space in the bill to 
give it to the 400,000 guardsmen and reservists who are being called up 
to protect us.
  That is why I am standing on the floor late at night to try to 
explain it. At least in Louisiana, people don't understand it. They 
just don't understand it. So our amendment has something in here for 
the Guard and Reserve.
  You could argue we are in a recession or we are close to recession. 
It is not booming times out there. I will not stand here and try to 
argue whether we are technically in it or not. People who don't have 
jobs really don't care about that. What they care about is having a 
job. Jobs are hard to come by. We have a record high unemployment rate.
  The people who are unemployed in the country are saying: Mr. 
President, if you have a little extra money, could you please allow us 
to use the money in the compensation fund that we paid into to extend 
our benefits, modest benefits? In Louisiana, it is $196 a

[[Page 11560]]

week. The average benefit is $250 a week. These are people who have 
worked, many of them, since they have been teenagers. They find 
themselves out of work. They are 40 and 50 years old. They came here to 
ask the President: Could you please extend the benefits? The President 
doesn't put them in his package.
  But he puts in the package corporations that don't pay taxes, and he 
won't put in his package unemployed people who paid taxes their whole 
life since they have been teenagers.
  I am offering the amendment because our amendment tries to take some 
things the President put in his package, and the Finance Committee has 
put in their package, that is sort of modeled on what the President had 
originally planned, that does do some of the things that will stimulate 
and that we generally agree on and there seems to be a consensus. And 
there are some good things in it.
  One is the marriage penalty which we recognize is a real penalty. It 
is taken care of in this amendment.
  We accelerate the child tax credit, which is something we all, 
Republicans and Democrats, agree would be a good thing, if you had some 
extra money, to give that thousand dollars to people. But instead of 
the dividend tax, which has been argued by the likes of Alan Greenspan 
and others that it is not the right time to do, instead of that, we 
have placed in our $350 billion package wage tax relief.
  If we want to create jobs in the Nation, I would maintain that 
removing the tax on jobs would be the best way to encourage jobs to be 
created. If you remove the tax from something, people are likely to 
move toward whatever you remove the tax on. So people are paying a lot 
of money on their wages, and our amendment would give an immediate $765 
rebate to every worker. For two parents, it is almost $1,530, for two 
workers in a family.
  And the way we have structured the amendment, every business would 
also be able to take that immediate rebate for every worker up to their 
$10,000 in earnings. So every small business, every corporation would 
be able to take that benefit of thousands and thousands and thousands 
of dollars now.
  As several of the Senators from the other side have said, that money 
will go into their pockets, and they will have flexibility to spend it 
however they want. We are not telling them how to spend it. They could 
give bonuses. They could invest in property. They could invest in 
equipment.
  But it is putting money in their pockets--real money, not pretend 
benefits from a dividend they won't get, or would not get anyway 
because of the system that we have now.
  So we offered this amendment--$350 billion. The centerpiece of it is 
wage tax relief that will benefit every worker, particularly those two-
wage-earner families who make up the majority of our American 
population because this economy demands two wages, basically, to carry 
the burdens and responsibilities of family life.
  It also helps small business in terms of stimulating for plant and 
equipment expensing up to $100,000, small business health care, Guard 
and Reserve, unemployment compensation, and a very important component 
of this is helping the States. People have talked about this as aid to 
undeserving recipients. It is as if there is something wrong because we 
are giving aid to undeserving recipients. I like to think of States--
and I served in the State legislature for 8 years, and as treasurer for 
8 years--as partners, good partners, hard-working partners. My Governor 
is a Republican, and I do not consider him an enemy. I do not consider 
him an undeserving aid recipient. I consider him a partner. Together, 
with the senior Senator, our Governor, and our legislature, every day 
we try to give kids a good education, give our teachers a decent 
salary. We try to keep our hospitals open. When a child is born sick, 
we try to help their family take care of them, to see that the garbage 
gets picked up, that the sanitation is done, that highways are built. 
We do this in partnership. They are not my enemies.
  I have heard comments on the floor, and from the White House, that 
they don't deserve it. Let me tell you something. They work hard, local 
elected officials--mayors, county council members, and school board 
members--trying to balance their budgets. They cannot run up deficits 
like we do. Half of their problem is caused by the fact that we get 
here day after day and put one unfunded mandate on them on top of 
another. When it comes down to balancing their budgets, do you know 
whose backs they balance them on? The schoolchildren get cut, teachers 
get cut, firemen and policemen get cut, so the President can give a 
dividend tax cut to corporations that don't even pay taxes.
  I am not voting for the plan. I would not vote for it if it was the 
last plan offered, because I am not raising taxes on police officers, 
firefighters, teachers, and closing libraries. If you think I am making 
this up, just go to any Nexus search. I went today and looked up 
Maine--a billion-dollar deficit. The Maine Legislature considers itself 
in a crisis mode. This is the State of Senators Snowe and Collins. So 
far, this is what President Bush is asking the residents of Maine to 
do--this is his plan, so the President is asking the residents of Maine 
to cut library services, and one community began to lobby its residents 
to reject a proposed health care center because the State could not 
afford it.
  Now, you can put up a sign at the libraries in Maine saying ``book 
sale'' because the proceeds are going to a dividend cut. I don't want 
to hang that sign on my library in Louisiana, and I don't intend to. If 
this bill passes, fine, it will pass by one vote, maybe a tie vote. It 
will not have Landrieu's vote.
  People say: Senator, are you opposed to tax cuts? No. I voted for the 
last tax cut proposal of $1.3 trillion. But, of course, then people 
came to my State during the election and tried to convince people I 
didn't when I did. Nonetheless, I am a Democrat who has voted for tax 
cuts. I am not opposed to them. But if we are going to do them, let's 
do them right, and fair, and in a way that stimulates the economy and 
actually creates jobs and honors our States as the partners they are, 
and respects those who are unemployed, not as charity cases but as 
people who work and deserve a break, particularly when times are tough.
  So we offer this amendment. Senator Corzine will speak because he 
understands the intricacies of economics in a way that is harder for me 
to explain. I hope he will explain why the plan that has been laid out 
does not create jobs in a country that is desperate for jobs and needs 
a boost so that we can put people back to work and meet the challenges 
that are before us, and standing up for our military and fighting a war 
on terrorism at home--that we might have the strength to do that.
  The amendment will be voted on tomorrow with a list of amendments. It 
is offered as a good-faith effort, an alternative, one that is 
stimulative and will create jobs, is fair, and will hopefully get this 
economy moving again.
  I reserve the right to speak for another few minutes to offer 
additional amendments.
  The PRESIDING OFFICER. The Senator from New Jersey is recognized.
  Mr. CORZINE. Mr. President, I must say I am very proud to join with 
Senator Landrieu in sponsoring this substitute amendment for the 
underlying bill we are debating. She put the passion into what it is 
that we have tried to accomplish with respect to coming up with a 
powerful job-creating initiative, a powerful economic growth 
initiative--one that sticks to the $350 billion budget level that we 
have agreed to in the Senate. The size is the same.
  Some of us might argue we should not be doing that at all, based on 
what we think the economy might need or the nature of it. But if we are 
going to have a $350 billion tax relief program, stimulus program, 
let's make it one that people know has efficacy and will work and is 
not designed to go to the elite few but to all of America's families 
and businesses, to everybody in America regardless of their economic 
position.
  Our proposal is designed to work for the person who makes the very 
least, and also for those who make whatever they are blessed with to 
make in our great country.

[[Page 11561]]

  It also deals with an issue that I heard the Senator from Louisiana 
talk about in what I think were clearly more forceful terms, about 
dealing with the libraries, prisoners, schools, and everything that our 
State and local governments are trying to deal with, by putting $50 
billion into our State and local governments so they can continue to 
service the American people the way they are expected to. We have a 
$100 billion budget deficit cumulative across the States in the 
upcoming year. That is coming on top of about $80 billion this year. We 
are raising taxes and cutting services at the local level faster than 
we are cutting taxes here at the Federal level. That makes no sense.
  So we have put together a package that works to give tax relief to 
every single American, working American, and also to help our State and 
local governments so they are not out there chopping away at children's 
health insurance programs, educational programs, and all the other 
issues that are so important and so positively delivered by our State 
and local governments.
  If you go back and look at CBO looking at the individual pieces of 
what we call the ``multiplier effect'' with regard to initiatives, you 
will find that the package we put together, because of the breadth of 
participation of the population and because of the benefits that are 
offered, will contribute more to growth and jobs than anything on the 
table that has been talked about. This is truly a pro-growth proposal. 
If we are sincere about putting Americans back to work, about getting 
growth going in our economy, then we ought to be doing those things 
that work and where people know they work.
  Mr. President, $350 billion is a lot of money. We ought to be using 
it in absolutely the most effective and efficient way. That is what our 
package is about. I will go through some of the details of it. I think 
it is essential that we try to use our money and our efforts most 
effectively. This substitute, which will stimulate jobs and will create 
growth, will do so without irrevocably undermining the long-term budget 
and fiscal position of the Federal Government.
  It will avoid creating a debt burden for our children and their 
children. By contrast, some of the various proposals that are 
contemplated here force Americans to pay taxes to pay the interest on 
the debt: $2.4 trillion, if you add it up with regard to the two tax 
cuts, the one in 2001 and the one we are talking about which will 
increase the debt burden for every family in America for a family of 
four $30,000.
  That is a debt tax. That is a tax because you are going to be paying 
the interest on that $30,000. One can say we are cutting taxes on one 
hand, but if we are creating interest expense for the Federal 
Government on $2.4 trillion, we are raising taxes, and it is a debt 
tax.
  Deficits do matter, particularly in the long term, and the debt tax 
that is being proposed will burden the financial health of every 
working American for the long term, every bit as great or greater than 
those tax cuts that we are talking about that are embedded in these 
proposals.
  Even the person nominated to be President Bush's top economist has 
agreed that deficits matter. At least he did before joining the 
administration. For example, this is what the nominee for Chairman of 
the President's Council of Economic Advisers, Greg Mankiw, said in his 
recently published textbook, appropriately named ``The Essentials of 
Economics.'' I want to read a phrase:

       The most basic lesson about budget deficits follows 
     directly from their effects on the supply and demand for 
     loanable funds.

  He says specifically:

       When the Government reduces the national savings by running 
     up a budget deficit, the interest rate rises and investment 
     falls.

  That is very clear. It could not be clearer--Economics 101, the most 
popular textbook in America, the President's Chairman of the Council of 
Economic Advisers. When you run up deficits, you reduce the economy's 
growth rate.
  The underlying bill, like the House proposals and most egregiously, 
actually, the $726 billion proposal by the President, grows the 
deficits, will push up interest rates, will reduce investment in the 
long run, and, thereby, reduce growth. I thought this was a jobs and 
growth package.
  That is the reality. It is tied together with some of the best 
thoughts in the White House, and it certainly fits what we hear the 10 
Nobel Prize winning economists talking about, and other folks, but this 
is the President's economist. That is why the package Senator Landrieu, 
Senator Schumer, and I are presenting tonight will provide a real boost 
to the economy without destroying long-term fiscal discipline.
  The heart of our amendment, as was described by Senator Landrieu, is 
the wage tax credit. This is relief that would give each working 
American a tax cut on their earned wages of up to $765. That is the 
equivalent of the payroll taxes an individual paid on the first $10,000 
of their earnings in 2001.
  Under our proposal, a married, working couple--we can all add--would 
receive tax relief up to $1,530 regardless of their income. Regardless 
of whether you make $20,000, where it is a hard-working blue-collar 
job, or $50,000 where you are a technician, computer programmer, or $1 
million if you work on Wall Street, everybody gets this same $765 and 
$1,530.
  We need to remember that four out of five Americans pay more in wage 
taxes, payroll taxes than they pay in income taxes. That is why this 
does provide broad-based tax relief to everyone. People across America, 
regardless of their overall income level, pay payroll taxes, and that 
is why the benefit is so broadly distributed and allows for real growth 
in the economy because you put money in the pockets of people who will 
go out and spend it.
  I remind my colleagues, this is a 1-year tax cut in which all 
payments and tax credits would come out of the General Treasury. We 
made that very clear so we did not get into this hyper conversation 
about raiding Social Security trust funds or Medicare trust funds. This 
is a tax cut coming out of the General Treasury, just as any of the 
other proposals we see.
  Every working American and business owner would benefit from our 
proposal. As I said, the $1,530 cut for a couple would help American 
families make ends meet and generate immediate growth in our economy. 
For low- and moderate-income families, this payroll relief would pay 
for 5 weeks' worth of groceries for a family of four, more than 2 
months of childcare, 3 \1/2\ months of utility bills, and 7 months of 
gasoline. By the way, if you were a millionaire, with this money you 
could buy 50 shares of GE stock or any other $30 stock. You can get 
involved in the marketplace.
  The payroll tax relief has been scored among the most stimulative 
cost-effective tax relief proposals evaluated by the CBO and private 
economists. It has a high-multiplier effect by anybody who looks at it. 
If we are serious about getting our economy moving--and I think people 
are sincere in their belief that we need to put some stimulus in--this 
is the place where we can get the maximum bang for our buck, the 
maximum bang for $350 billion.
  Our proposal is $188 billion of the total $358 billion. In addition 
to helping working Americans, our wage tax credit would provide 
business owners, small and large, a tax credit for up to $765 on each 
of their employees. Our wage credit for business owners would put 
immediate cash into the hands of employers to spur investment, new 
jobs, plant, and equipment. They can do what they need to do to boost 
their business.
  America's businesses, bottom line, by the way, would grow by the 
amount in this tax credit. The last time I looked at stocks, growing 
earnings on America's publicly traded companies gets reflected in stock 
values. That is what price times earnings means. It really will boost 
the value of the stocks as much as the kinds of things we are talking 
about with regard to the dividend.
  By reducing payroll taxes, which many view as a tax on labor, we 
would encourage more employers to hire more people and keep those they 
already have.

[[Page 11562]]

  I point out this is one of the reasons I think the Business 
Roundtable, which represents 150 of the country's largest corporations 
with over 10 million employees, along with many other business groups 
around the country, have endorsed the concept of payroll-based tax 
relief.
  It is pretty simple. It is fair. It is an affordable economic 
stimulus, if we believe $350 billion is affordable. It will put money 
into the hands of consumers and businesses that will get immediately 
reinvested in our economy.
  In the past few years, the concept of payroll tax relief has been 
supported by people on both sides of the aisle. A year ago, Senator 
Domenici and I introduced a similar bill, and in December 2001, the 
distinguished majority leader, Senator Frist, expressed strong support 
for payroll tax relief. As he put it then:

       A payroll tax holiday is truly a stimulative, temporary tax 
     cut that would be welcome news for most Americans. . . . As 
     economic growth stagnates and unemployment numbers increase, 
     putting additional money in consumers' pockets will provide a 
     much needed economic boost.

  Senator Frist was right on the mark then, in my view, about the need, 
and he is right on the mark with respect to the stimulative impact of 
payroll tax relief.
  I hope my colleagues tomorrow will stand behind those words and 
support this proposal to help reinvigorate the economy.
  Beyond the centerpiece of the wage tax credit which I talked about, 
again $188 billion, the Landrieu-Corzine-Schumer amendment includes 
other provisions which are part of the underlying bill, such as 
marriage penalty elimination, and acceleration of an expanded child tax 
credit. We tried to take the best parts, the most powerful pieces of 
the stimulus, and put them in the proposal. We are looking at high-
multiplier, high-return elements with regard to policies that we think 
will get this economy going.
  Maybe most importantly, I will not go into this because Senator 
Landrieu did such a great job of it and we have heard a lot of 
discussion on it, and I compliment the Finance chairman because he has 
recognized the need for us to help out our cash-strapped State and 
local governments in supporting an amendment--I believe it should be 
more, but reasonable folks can differ about the degree. We need to make 
sure we put real dollars into our State and local governments. We have 
talked about it from our point of view, that that should be $52 
billion.
  We have things that take advantage of advanced refunding, of the low 
financing rates, the lowest in 40 years. We put in here about 
refinancing debt, just like the American consumer has with their 
mortgages over the last year, having our State and local governments 
take advantage of that same thing.
  We have worked with Medicaid, where there is truly a lot of hurt. We 
have talked about unfunded mandates with Leave No Child Behind, also 
the issue of child care assistance. We have $3 billion in this program 
for those purposes because if people are going to work, they have to be 
able to take care of their kids. It is a kind of simple concept. Also, 
general block grants for homeland security, education, and other 
priorities.
  Beyond the assistance provided to State and local governments, our 
amendment provides for a variety of tax cuts for business. We believe 
in those. We are supportive of those. We include in this an increase in 
the expense from $25,000 to $100,000 a year for small business. We 
repeatedly hear that 50 percent of the jobs in America come out of 
small business, which 99 percent of businesses are. We are trying to 
recognize that, and we are also trying to help small business with a 
50-percent credit for health care premiums. It is one of those things 
that holds back the economy most forcefully in New Jersey in other 
communities I work with.
  Finally, our $350 billion package includes the nearly $13 billion in 
unemployment benefits that a number of folks have talked about. This is 
a soggy economy, as Secretary Snow describes it. It is so soggy that we 
have lost 2.7 million private sector jobs, including over 500,000 in 
the last 3 months alone. We only have about 75 percent capacity 
utilization in the country. So there are needs.
  While some of us might not agree on size, myself included, we might 
not even agree we need a serious proposal on tax cuts, if we are going 
to do it, as we have decided to do it, we ought to make it as powerful 
as we can possibly make it. I think we should be responsible fiscally 
over a long period of time. I think deficits do matter. But if we are 
going to have a $350 billion tax cut, we ought to design it in a way 
that will create jobs and promote growth, without undermining our long-
term fiscal health. Our amendment does that, and I am proud of this 
amendment which I am offering, along with Senators Landrieu and 
Schumer. I very much appreciate their help and I hope our colleagues 
will give serious consideration to a proposal that I think has real 
meaning concerning job creation and economic activity.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. I yield myself such time as I may consume.
  Ms. LANDRIEU. Mr. President, I think I still control the time.
  The PRESIDING OFFICER. The Senator from Iowa controls time in 
opposition.
  Ms. LANDRIEU. But I reserved as much time as I would consume to 
present the amendment. I said I would speak for 15 minutes and then 
Senator Corzine, and if the Senator from Iowa would allow us to present 
our amendment, then we would be happy to yield to the opposition.
  The PRESIDING OFFICER. The Senator's time is reserved, but the 
Senator from Iowa has the right to seek recognition in opposition.
  The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, a number of misleading and just flat out 
wrong statements have been made by the proponents of this amendment. 
They said this package does not help the military. I wonder where they 
have been the last few months. We have already passed the military tax 
cut bill in the Senate and we are trying to work it out with the House. 
That is the situation. So do not tell me we have not dealt with the 
problems of the people in the military.
  They argue we do not deal with unemployment benefits. I guess they 
were not paying much attention when just a few hours ago we were 
talking about extending unemployment benefits. I offered a unanimous 
consent agreement at that time, but what happened? The other side, 
which is now complaining, rejected my offer to make that the top 
priority just as soon as we are done with this bill.
  We also put together a strong bipartisan State aid package, which the 
other side has cried crocodile tears over. So I hope no one is misled 
by some of the previous rhetoric we have heard. The amendment is 
nongermane and violates the Budget Act. So obviously later on there 
will be a point of order made on it.
  To relieve any concern that the underlying bill is only concerned 
about giving more money to corporations, I want to point out how this 
legislation helps families. I will make a couple of points regarding 
the distribution of tax benefits in our package. As I stated 
repeatedly, the package fairly balances investment and consumption 
incentives within the plan and benefits families at all levels of 
income.
  Now, this is quite contrary to much of the rhetoric we have heard on 
the proposal's distributional benefits. I have heard repeatedly that 
the typical family receives only $217 of benefits under the bill, while 
millionaires receive tens of thousands of dollars of such tax breaks. 
One response to this is to note the progressivity of our system. A 
simple example, however, is an effective way to demonstrate the bill 
does in fact provide benefits to families at all income levels. For 
illustrative purposes, I have analyzed the tax benefits of accelerating 
the $400 increase in the child tax credit combined with the increased 
refundability for single mothers of two children at various income 
levels under the bill.
  The example does not account for additional benefits that are also 
provided

[[Page 11563]]

in this bill with expanding the 10 percent bracket.
  The charts I have with me demonstrate the tax benefits to that single 
mother with $15,000, single mother with $20,000, single mother with 
$30,000 of wage income during the 2003 tax year. As we can see, the 
first chart demonstrates a single mother of two with $15,000 of wage 
income will receive an additional $250 of refundable tax credits under 
this bill. This increased $250 comes from a combination of increasing 
the tax credit amount and reducing the limits on refundability. With 
her refundable earned income credit of $3,823, her total refundable tax 
credits would increase by $250 all the way up to $4,573.
  The second chart is for a family of $20,000 wage income, which 
demonstrates a significant increase in benefit to the same single 
mother. At a slightly higher income level, she receives an additional 
$710 of benefits under the Finance Committee plan for a total 
refundable credit of $4,270.
  Finally, at $30,000, we can see this single mother receives the 
entire benefit of $800 increased child tax credit in the form of 
refundable payments.
  I ask my colleagues to consider these examples as further evidence of 
the impact this bill will make on hard-working families in this country 
at different income levels, and I might say at all income levels. I 
hope the informed judgment will be made based upon fact and not upon 
the statements previously given about this bill.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Mr. President, I first want to thank my colleagues, 
Senator Landrieu and Senator Corzine, for their sponsorship of this 
important amendment.
  I also want to recognize Senator Grassley, the distinguished Chairman 
of the Finance Committee, and Senator Baucus, the distinguished ranking 
member, for their leadership. Democrats and Republicans may disagree on 
our economic priorities, but we all appreciate the contribution 
Senators Grassley and Baucus have made to the debate.
  There is something else we all agree on. By any measure we are in the 
midst of a very tough economy. Our long-term prospects are very bright, 
but right now times are tough. We are all familiar with the 
statistics--rising unemployment, choppy markets, low growth. These are 
real problems that require real solutions.
  But too often we hear economic theory and ideology as the rationale 
for what we should do.
  I believe that equitable tax relief can be very good short-term and 
long-term policy. If we can find the means to afford it, hard-working 
families and successful entrepreneurs should keep more of what they 
earn. And at this time of low economic growth and high economic 
uncertainty, there is an important role for the Federal Government to 
play in reigniting our economy.
  My concern with the legislation before us, and the reasons I support 
a complete replacement of that bill, is quite simply that it does not 
work as advertised. We all recognize that the bill is not a short-term 
response to the economic downturn. It is a back-door attempt to 
fundamentally change the tax code.
  We may need to take up that debate at some point. But our first 
priority should be getting the economy moving.
  We need to unite behind an economic plan that is based on the 
practical needs of our country for jobs and growth, not on an ideology 
of how the world works.
  It is time to replace the centerpiece of the President's plan--the 
dividend tax cut--with something that both Democrats and Republicans 
can rally behind, a one-time reduction in Federal payroll taxes, wage 
taxes, for every working American. That is the heart of this amendment. 
And it is time we put in place real aid to State and local governments 
so that we don't undo the very economic recovery we are trying to 
start.
  Let me briefly review the key elements of wage tax relief.
  Every working American is subject to taxes on his or her wages which 
are used primarily to fund Social Security and Medicare. Under the wage 
tax cut in this amendment, every American worker would receive a rebate 
for the amount of these taxes they have paid on their first $10,000 of 
earnings, about $800 for each working American.
  In addition, every employer would be eligible to receive a tax credit 
for the payroll taxes they have contributed on behalf of their 
employees. This tax relief would take effect as soon as possible in 
2003.
  The cost of a payroll tax reduction would be paid out of the general 
funds of the Treasury, so that there would be no impact on the Social 
Security trust fund.
  The benefits of a payroll tax cut are numerous. First, a payroll tax 
cut gets money in the hands of people who need it and will spend it--
the litmus test for most economists of a good stimulus program.
  While we can have a long debate about the merits of a dividend tax 
cut, in the real world an additional $800, or $1,600 in the case of two 
working parents, would have a big impact on the average family's 
budget.
  Second, it is good economic policy. The problem with our economy 
today is that there is not enough demand for products and services. The 
administration's supply-side approach, in fact, has it backwards. 
Capacity is not the problem, as illustrated by the fact that inflation 
has dropped during this downturn from 2.8 percent in 2001 to 1.6 
percent in 2002.
  We need to encourage consumption so that businesses will have the 
confidence to invest in new plants and equipment and hire more workers. 
Before the debate was politicized, the Business Roundtable, which 
represents the CEOs of major U.S. corporations, wrote the President 
that an immediate reduction in the payroll tax would be more effective 
than ``any other proposal'' to stimulate demand and productivity.
  Third, a payroll tax cut is equitable. It would benefit the many 
Americans who work, not just the few who receive taxable dividends. The 
Congressional Research Service estimates that 40 percent of all 
dividends are received by the wealthiest 2 percent, or those with 
incomes of $200,000 or greater. By contrast, the majority of American 
households now pay more in payroll taxes than Federal income taxes.
  Fourth, a payroll tax reduction removes a large disincentive to 
creating jobs. In our present economy output is flat with GDP running 
at an annualized rate of only 1.6 percent, but productivity is 
increasing. The result is that since 2000 the economy has lost over 2 
million jobs, and Americans are remaining out of work longer. A payroll 
tax reduction will lower the cost of labor for an employer by about 15 
percent, making it more likely that employers will keep workers on the 
payroll and hire more people.
  Finally, a payroll tax cut is affordable. The $188 billion estimated 
cost of a one-time payroll tax reduction is about one-half the cost of 
the President's dividend tax cut plan. While it costs less, a payroll 
tax reduction provides more immediate stimulus. By contrast, the 
President's dividend tax cut delivers only $2.5 billion in stimulus in 
2003--50 times less impact.
  If we want to grow the economy today, it makes sense to put money to 
work now, not ten years from now. Most importantly, since a payroll tax 
cut is a one year plan, it does not create structural deficits in our 
economy which drive up our national debt and undermine our long term 
growth.
  Let me now turn to the issue of State aid.
  We have had bi-partisan agreement to provide $20 billion in direct 
Federal aid to the States and localities on a one-time basis. I commend 
Senator Grassley for his leadership in getting this done. It is a very 
good start, but it is not enough.
  This amendment provides a bigger boost to our States and locals. They 
clearly need the money.
  According to estimates provided by the National Conference of State 
Legislatures, the total budgetary shortfall for all States in fiscal 
year 2004 was in the range of $80 billion, and an approximate $22 
billion gap still remains from

[[Page 11564]]

fiscal 2003. Many believe these figures remain significantly 
understated.
  Almost every State is running a significant, multi-hundred million 
dollar deficit. In many States the figure runs into the multi-billions 
of dollars. In several States the deficit's percentage of the total 
State budget is estimated to be in the range of 25 percent or more. New 
York State's budget shortfall alone is $12 billion.
  The situation at the local level is just as dire.
  According to the National Association of Counties, nearly 72 percent 
of counties are facing budget shortfalls, 37 percent are reducing 
services and 17 percent are increasing taxes--all at a time when the 
demand for services and the need for tax cuts is rising given the sour 
economy.
  This is not a regional issue. It is a national crisis.
  I have heard some argue that State aid is not good economic policy. 
But numerous reports indicate that most economists believe that aid to 
the States is, in fact, an extremely effective means of providing 
fiscal stimulus, as it quickly puts money in the hands of people who 
need it and will spend it.
  State and local aid also alleviates the need for States to cut more 
jobs, cut more programs, and raise taxes, which acts as an ``anti-
stimulus'' on the economy.
  Without any State aid, an individuals' or family's decrease in 
Federal taxes could be surpassed by an increase in State and local 
taxes.
  We should not support policies where, ``What one hand giveth the 
other taketh away.'' We should not ``rob Peter to pay Paul.''
  This modest increase in the amount of aid is a 1-time shot in the arm 
for the States. It is not an enormous, multi-year change that threatens 
to build more deficits. It is a short-term proposal in response to a 
crisis that threatens to further drag down our economy and further 
increase the tax burden on our citizens.
  Some argue that States and cities have dug their own fiscal graves, 
and should now lie in them. I could not disagree more. Our States and 
cities face the same economic forces as the Federal Government. As the 
economy has forced a dramatic reversal in fiscal health in our Federal 
budget, so has it wreaked havoc on local budgets.
  Why should we hold states and localities to a different standard than 
we hold ourselves?
  And if we want to teach states a lesson, why should we force citizens 
to bear the brunt of that discipline through higher taxes on their 
income, bigger class sizes for their children, and less services for 
those in need?
  The money we are discussing is not a bailout. Nowhere close. States 
and locals will still need to make painful cuts and possibly raise 
taxes. But we can help alleviate the pain which will fall not on 
lawmakers, as we all know, but on our citizens.
  At a time when we are struggling to find funds for homeland defense, 
public education, health services, and the environment, it is 
unacceptable to many of us to push through massive, multi-year tax 
cuts.
  On behalf of the many citizens and business leaders who play by the 
rules and quietly shoulder the burden of financing our government, it 
is time for a new approach.
  This amendment gives us an opportunity for that new approach.
  Ms. LANDRIEU. I thank my colleagues for their comments. I will speak 
an additional 2 or 3 minutes to wrap up, as I stated when I began.
  First of all, I have a great deal of respect for the Senator from 
Iowa, who has been under a great deal of pressure to try to provide a 
plan for the Senate to consider. If we are given a fair hand, we could 
have actually designed a plan that could have been more stimulative, 
more fair, more equitable than the one we will be considering tomorrow.
  No. 1, the dividend proposal--and I could say scheme--tries to 
convince people this will create jobs in America when it will not 
create jobs, and it will raise taxes because of the way it is designed 
in the big picture, taxes at the local level. That is happening now.
  If people think that is not going to happen, look at Arkansas. The 
State of Arkansas just raised income taxes across the board by 3 
percent. That is why they have a zero deficit, because they just raised 
income taxes.
  This plan, if it does not create jobs, will actually raise taxes at 
the local level. In Louisiana, only 18 percent of filers even file for 
a dividend tax. The average is $450 in earnings, so we are saving them 
$100.
  The plan that Senator Corzine, Senator Schumer, and I offer will give 
relief to every worker. It gives help to the creation of jobs in 
America. It gives a check to every businessperson, every small 
business, every large business. It puts money in the economy in a 
significant amount. For a two-wage-earner family, it is $1,500--not 
next year, not in 2004. The checks go out within a few months--two 
checks this year.
  Averages can be extremely misleading. One of the best examples of 
this was an article written recently that said if Bill Gates--assume he 
was worth $20 billion--happened to walk into a homeless shelter and sat 
down at a table with 19 homeless men, and one of the guys from the 
other side walked in and said, What is the average income of the people 
in this homeless shelter, the average income would be $1 billion. But 
that average is not reflective of the reality, which is one guy has $20 
billion and 19 guys have zero. But the average would be $1 billion.
  So beware of averages. I am not fighting for averages. I am fighting 
for the 4.5 million people who live in Louisiana who deserve a break. 
If we are going to give out $350 billion on this floor, then give them 
a fighting chance to get a portion of it, to keep their job, to send 
their kid to college, to pay their house note. And stop confusing them 
with these charts and these averages that do not mean a hill of beans. 
Talk the truth to people. That is what we need. We need to speak the 
truth and keep our promises and be disciplined in what we do.
  I offer this amendment with a great deal of passion. A great deal of 
study has gone into this because we want to work with the President. I 
want to work with the President. I want to work with the Republican 
leadership. I have demonstrated that time and time again.
  But I can't vote for a package that doesn't make sense, that will not 
create jobs, and will raise taxes, all the time promising people it is 
going to do the opposite.
  Like I said on the television, it is hogwash. We are going to offer 
our amendment tomorrow. Hopefully, we will get some votes.
  I ask to send two other amendments to the desk. I am not going to 
debate them tonight, but I offer them now and ask to have the clerk 
report them. I offer them for consideration but not until tomorrow.


                           Amendment No. 620

  The PRESIDING OFFICER. Is there objection to laying aside the pending 
amendment? The Chair hears none, and it is so ordered. The clerk will 
report.
  The legislative clerk read as follows:

       The Senator from Louisiana [Ms. Landrieu] proposes an 
     amendment numbered 620.

  Ms. LANDRIEU. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To provide pay protection for members of the Reserve and the 
                National Guard, and for other purposes)

       At the end of subtitle C of title V add the following:

     SEC. __. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT ADDED 
                   TO GENERAL BUSINESS CREDIT.

       (a) Ready Reserve-National Guard Credit.--Subpart D of part 
     IV of subchapter A of chapter 1 (relating to business-related 
     credits) is amended by adding at the end the following:

     ``SEC. 45G. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.

       ``(a) General Rule.--For purposes of section 38, the Ready 
     Reserve-National Guard employee credit determined under this 
     section for any taxable year is an amount equal to 50 percent 
     of the actual compensation amount for such taxable year.
       ``(b) Definition of Actual Compensation Amount.--For 
     purposes of this section, the term `actual compensation 
     amount' means

[[Page 11565]]

     the amount of compensation paid or incurred by an employer 
     with respect to a Ready Reserve-National Guard employee on 
     any day during a taxable year when the employee was absent 
     from employment for the purpose of performing qualified 
     active duty.
       ``(c) Limitations.--
       ``(1) Maximum period for credit per employee.--The maximum 
     period with respect to which the credit may be allowed with 
     respect to any Ready Reserve-National Guard employee shall 
     not exceed the 12-month period beginning on the first day 
     such credit is so allowed with respect to such employee.
       ``(2) Days other than work days.--No credit shall be 
     allowed with respect to a Ready Reserve-National Guard 
     employee who performs qualified active duty on any day on 
     which the employee was not scheduled to work (for reason 
     other than to participate in qualified active duty).
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified active duty.--The term `qualified active 
     duty' means--
       ``(A) active duty, other than the training duty specified 
     in section 10147 of title 10, United States Code (relating to 
     training requirements for the Ready Reserve), or section 
     502(a) of title 32, United States Code (relating to required 
     drills and field exercises for the National Guard), in 
     connection with which an employee is entitled to reemployment 
     rights and other benefits or to a leave of absence from 
     employment under chapter 43 of title 38, United States Code, 
     and
       ``(B) hospitalization incident to such duty.
       ``(2) Compensation.--The term `compensation' means any 
     remuneration for employment, whether in cash or in kind, 
     which is paid or incurred by a taxpayer and which is 
     deductible from the taxpayer's gross income under section 
     162(a)(1).
       ``(3) Ready reserve-national guard employee.--The term 
     `Ready Reserve-National Guard employee' means an employee who 
     is a member of the Ready Reserve or of the National Guard.
       ``(4) National guard.--The term `National Guard' has the 
     meaning given such term by section 101(c)(1) of title 10, 
     United States Code.
       ``(5) Ready reserve.--The term `Ready Reserve' has the 
     meaning given such term by section 10142 of title 10, United 
     States Code.''.
       (b) Credit To Be Part of General Business Credit.--
     Subsection (b) of section 38 (relating to general business 
     credit) is amended by striking ``plus'' at the end of 
     paragraph (14), by striking the period at the end of 
     paragraph (15) and inserting ``, plus'', and by adding at the 
     end the following:
       ``(16) the Ready Reserve-National Guard employee credit 
     determined under section 45G(a).''.
       (c) Conforming Amendment.--The table of sections for 
     subpart D of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 45F the 
     following:

``Sec. 45G. Ready Reserve-National Guard employee credit.''.

       (d) Revision of Partial Exclusion of Dividends Received By 
     Individuals.--Section 116(a)(2)(B) of the Internal Revenue 
     Code of 1986, as added by section 201, is amended by striking 
     ``2007'' and inserting ``2008''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.


                           Amendment No. 621

  Ms. LANDRIEU. I waive any debate. I send another amendment to the 
desk.
  The PRESIDING OFFICER. Without objection, the pending amendment is 
set aside and the clerk will report.
  The legislative clerk read as follows:

       The Senator from Louisiana [Ms. Landrieu] proposes an 
     amendment numbered 621.

  Ms. LANDRIEU. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To amend the Internal Revenue Code of 1986 to allow employers 
in renewal communities to qualify for the renewal community employment 
  credit by employing residents of certain other renewal communities)

       At the end of end of subtitle C of title V add the 
     following:

     SEC. __. RENEWAL COMMUNITY EMPLOYERS MAY QUALIFY FOR 
                   EMPLOYMENT CREDIT BY EMPLOYING RESIDENTS OF 
                   CERTAIN OTHER RENEWAL COMMUNITIES.

       (a) In General.--Section 1400H(b)(2) (relating to 
     modification) is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(3) subsection (d)(1)(B) thereof shall be applied by 
     substituting `such renewal community, an adjacent renewal 
     community within the same State as such renewal community, or 
     a renewal community within such State which is within 5 miles 
     of any border of such renewal community' for `such 
     empowerment zone'.''.
       (b) Reduction of Acceleration of Top Rate Reduction In 
     Individual Income Tax Rates.--Notwithstanding the amendment 
     made by section 102(a) of this Act, in lieu of the percent 
     specified in the last column of the table in paragraph (2) of 
     section 1(i) of the Internal Revenue Code of 1986, as amended 
     by such section 102(a), for taxable years beginning during 
     calendar year 2003, 35.1% shall be substituted for such year.
       (c) Effective Dates.--
       (1) The amendments made by subsection (a) shall take effect 
     as if included in the amendment made by section 101(a) of the 
     Community Renewal Tax Relief Act of 2000.
       (2) Subsection (b) shall take effect on the date of 
     enactment of this Act.

  Ms. LANDRIEU. I waive any debate until tomorrow.
  Mr. GRASSLEY. I yield such time as he might consume to the Senator 
from Nevada.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. ENSIGN. Mr. President, I ask unanimous consent the pending 
amendment be set aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 622

  Mr. ENSIGN. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Nevada [Mr. Ensign] proposes an amendment 
     numbered 622.

  Mr. ENSIGN. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To encourage the investment of foreign earnings within the 
  United States for productive business investments and job creation)

       On page 281, between lines 2 and 3, insert the following:

     SEC. __. TOLL TAX ON EXCESS QUALIFIED FOREIGN DISTRIBUTION 
                   AMOUNT.

       (a) In General.--Subpart F of part III of subchapter N of 
     chapter 1 is amended by adding at the end the following new 
     section:

     ``SEC. 965. TOLL TAX IMPOSED ON EXCESS QUALIFIED FOREIGN 
                   DISTRIBUTION AMOUNT.

       ``(a) Toll Tax Imposed on Excess Qualified Foreign 
     Distribution Amount.--If a corporation elects the application 
     of this section, a tax shall be imposed on the taxpayer in an 
     amount equal to 5.25 percent of--
       ``(1) the taxpayer's excess qualified foreign distribution 
     amount, and
       ``(2) the amount determined under section 78 which is 
     attributable to such excess qualified foreign distribution 
     amount.

     Such tax shall be imposed in lieu of the tax imposed under 
     section 11 or 55 on the amounts described in paragraphs (1) 
     and (2) for such taxable year.
       ``(b) Excess Qualified Foreign Distribution Amount.--For 
     purposes of this section--
       ``(1) In general.--The term `excess qualified foreign 
     distribution amount' means the excess (if any) of--
       ``(A) dividends received by the taxpayer during the taxable 
     year which are--
       ``(i) from 1 or more corporations which are controlled 
     foreign corporations in which the taxpayer is a United States 
     shareholder on the date such dividends are paid, and
       ``(ii) described in a domestic reinvestment plan approved 
     by the taxpayer's president, chief executive officer, or 
     comparable official before the payment of such dividends and 
     subsequently approved by the taxpayer's board of directors, 
     management committee, executive committee, or similar body, 
     which plan shall provide for the reinvestment of such 
     dividends in the United States, including as a source for the 
     funding of worker hiring and training; infrastructure; 
     research and development; capital investments; or the 
     financial stabilization of the corporation for the purposes 
     of job retention or creation, over
       ``(B) the base dividend amount.
       ``(2) Base dividend amount.--The term `base dividend 
     amount' means an amount designated under subsection (c)(7), 
     but not less than the average amount of dividends received 
     during the fixed base period from 1 or more corporations 
     which are controlled foreign corporations in which the 
     taxpayer is a United States shareholder on the date such 
     dividends are paid.
       ``(3) Fixed base period.--
       ``(A) In general.--The term `fixed base period' means each 
     of 3 taxable years which are among the 5 most recent taxable 
     years of the taxpayer ending on or before December 31, 2002, 
     determined by disregarding--
       ``(i) the 1 taxable year for which the taxpayer had the 
     highest amount of dividends from 1 or more corporations which 
     are controlled foreign corporations relative to the other 4 
     taxable years, and

[[Page 11566]]

       ``(ii) the 1 taxable year for which the taxpayer had the 
     lowest amount of dividends from such corporations relative to 
     the other 4 taxable years.
       ``(B) Shorter period.--If the taxpayer has fewer than 5 
     taxable years ending on or before December 31, 2002, then in 
     lieu of applying subparagraph (A), the fixed base period 
     shall mean such shorter period representing all of the 
     taxable years of the taxpayer ending on or before December 
     31, 2002.
       ``(c) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Dividends.--The term `dividend' means a dividend as 
     defined in section 316, except that the term shall also 
     include amounts described in section 951(a)(1)(B), and shall 
     exclude amounts described in sections 78 and 959.
       ``(2) Controlled foreign corporations and united states 
     shareholders.--The term `controlled foreign corporation' 
     shall have the same meaning as under section 957(a) and the 
     term `United States shareholder' shall have the same meaning 
     as under section 951(b).
       ``(3) Foreign tax credits.--The amount of any income, war, 
     profits, or excess profit taxes paid (or deemed paid under 
     sections 902 and 960) or accrued by the taxpayer with respect 
     to the excess qualified foreign distribution amount for which 
     a credit would be allowable under section 901 in the absence 
     of this section, shall be reduced by 85 percent.
       ``(4) Foreign tax credit limitation.--For all purposes of 
     section 904, there shall be disregarded 85 percent of--
       ``(A) the excess qualified foreign distribution amount,
       ``(B) the amount determined under section 78 which is 
     attributable to such excess qualified foreign distribution 
     amount, and
       ``(C) the amounts (including assets, gross income, and 
     other relevant bases of apportionment) which are attributable 
     to the excess qualified foreign distribution amount which 
     would, determined without regard to this section, be used to 
     apportion the expenses, losses, and deductions of the 
     taxpayer under section 861 and 864 in determining its taxable 
     income from sources without the United States.

     For purposes of applying subparagraph (C), the principles of 
     section 864(e)(3)(A) shall apply.
       ``(5) Treatment of acquisitions and dispositions.--Rules 
     similar to the rules of section 41(f)(3) shall apply in the 
     case of acquisitions or dispositions of controlled foreign 
     corporations occurring on or after the first day of the 
     earliest taxable year taken into account in determining the 
     fixed base period.
       ``(6) Treatment of consolidated groups.--Members of an 
     affiliated group of corporations filing a consolidated return 
     under section 1501 shall be treated as a single taxpayer in 
     applying the rules of this section.
       ``(7) Designation of dividends.--Subject to subsection 
     (b)(2), the taxpayer shall designate the particular dividends 
     received during the taxable year from 1 or more corporations 
     which are controlled foreign corporations in which it is a 
     United States shareholder which are dividends excluded from 
     the excess qualified foreign distribution amount. The total 
     amount of such designated dividends shall equal the base 
     dividend amount.
       ``(8) Treatment of expenses, losses, and deductions.--Any 
     expenses, losses, or deductions of the taxpayer allowable 
     under subchapter B--
       ``(A) shall not be applied to reduce the amounts described 
     in subsection (a)(1), and
       ``(B) shall be applied to reduce other income of the 
     taxpayer (determined without regard to the amounts described 
     in subsection (a)(1)).
       ``(d) Election.--
       ``(1) In general.--An election under this section shall be 
     made on the taxpayer's timely filed income tax return for the 
     taxable year (determined by taking extensions into account) 
     ending 120 days or more after the date of the enactment of 
     this section, and, once made, may be revoked only with the 
     consent of the Secretary.
       ``(2) All controlled foreign corporations.--The election 
     shall apply to all corporations which are controlled foreign 
     corporations in which the taxpayer is a United States 
     shareholder during the taxable year.
       ``(3) Consolidated groups.--If a taxpayer is a member of an 
     affiliated group of corporations filing a consolidated return 
     under section 1501 for the taxable year, an election under 
     this section shall be made by the common parent of the 
     affiliated group which includes the taxpayer, and shall apply 
     to all members of the affiliated group.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary and appropriate to carry out 
     the purposes of this section, including regulations under 
     section 55 and regulations addressing corporations which, 
     during the fixed base period or thereafter, join or leave an 
     affiliated group of corporations filing a consolidated 
     return.''.
       (b) Conforming Amendment.--The table of sections for 
     subpart F of part III of subchapter N of chapter 1 is amended 
     by adding at the end the following new item:

``Sec. 965. Toll tax imposed on excess qualified foreign distribution 
              amount.''.

       (c) Effective Date.--Except as otherwise provided, the 
     amendments made by this section, other than the amendment 
     made by subsection (d), shall apply only to the first taxable 
     year of the electing taxpayer ending 120 days or more after 
     the date of the enactment of this Act.
       (e) Termination of Rehabilitation Credit.--Section 47 
     (relating to rehabilitation credit) is amended by adding at 
     the end the following new subsection:
       ``(e) Termination.--This section shall not apply to 
     expenditures incurred after December 31, 2003.''.

  Mr. ENSIGN. Mr. President, I send a second-degree amendment to the 
desk.
  Mr. BAUCUS addressed the Chair.
  The PRESIDING OFFICER. The amendment is not in order while time 
remains on the first-degree amendment.
  Mr. ENSIGN. Mr. President, I withdraw the second-degree amendment.
  I want to speak on the first amendment I sent to the desk. The 
amendment I have sent to the desk is a fairly simple amendment. It was 
one of those ideas you find when you go around and listen to real 
people. When you do that, you can come up with ideas that will lead to 
good policy that will actually help real Americans get back to work.
  It has been said that we are in a sluggish economy right now. I agree 
with that. Certainly, the American economy is the strongest economy in 
the world. It has been incredibly resilient, but it is not nearly as 
strong as what we would like to see. So when you talk to various 
people, there are all kinds of ideas of how to get the economy started.
  While I support what the President is trying to do, I have talked to 
a lot of people in small businesses and large businesses who support 
the elimination of the double taxation on dividends. They support the 
acceleration of the cuts in the marginal tax rates and several of the 
other small business expensing items and the like in the bill that the 
President had sent up here, parts of which are in the Finance 
Committee's mark. Those provisions will stimulate the economy.
  I have a provision we sent to the desk that, for a very little cost, 
as far as the people who score these budgets ascertained, for very 
little cost will put a tremendous amount of money into the U.S. 
economy.
  Right now, we encourage businesses to go overseas. We encourage that 
through our Tax Code, and actually it is beneficial a lot of times for 
companies to relocate overseas. But if they do that and make money and 
pay taxes in those other countries, when they try to bring the money 
back here to invest in this country, they pay a 35 percent tax rate on 
that money. So if a company is faced with bringing the money they have 
made overseas back here or investing that money overseas, they say to 
themselves: Do I want to invest $100 out of every $100 overseas or do I 
want to invest $65 out of every $100 back here in the United States? 
The obvious answer is they keep that money overseas, and they invest 
that overseas.
  I appreciate the support of both the ranking member and the chairman 
of the Finance Committee. This amendment was brought up in the Finance 
Committee. They both voted for it. I appreciate their vote on it. It 
narrowly lost, by one vote. That is why we are taking another run at 
this.
  Our amendment says we will give companies that have invested overseas 
and have made money overseas 1 year's time to bring that money back to 
the United States and, instead of paying a 35-percent tax rate, they 
will only pay a 5.25-percent tax rate.
  J.P. Morgan and Associates just did a study to find out how much 
money would actually come back into the United States if this amendment 
is adopted within 12 months, the next 12 months. It is estimated $300 
billion will come back into the United States--$300 billion.
  Compare that with all the other plans that have been talked about 
around here. For a cost of only $4 billion over 10 years, as far as 
what the budget people score it, as far as loss of tax revenues, to get 
a $300 billion boost in the economy--there is nothing else in the 
stimulus package that gives you as much bang for the buck.

[[Page 11567]]

  While I support the rest of it, and I am voting for the rest of it, 
this is something that needs to be included in a stimulus package 
because this will truly bring the money back into the United States.
  This is money that is not going to be here any other way. This is not 
taking money away from Government and putting it in the private sector, 
or taking it away from the private sector and putting it in the 
Government. This is money outside the United States that will come back 
here and create U.S. jobs.
  This is a bipartisan amendment. We have done a couple of things to 
make sure it not just comes back here. It cannot go for executive pay, 
for one thing. It has to come back here and be invested in the United 
States, in their companies in the United States.
  We have gone around and talked to people in business, instead of 
relying on a study. I went around talking to a lot of businesses. I was 
talking to some people the other day. They said they have $2 billion in 
cash sitting overseas that they would bring back here in a heartbeat if 
this passed. That is $2 billion in high-tech industry. A big part of 
the sluggish part of our economy has been in the high-tech industry--$2 
billion in just one company that will come back here to the United 
States in the next 12 months. You can clearly see this would have a 
very strong stimulative effect on our economy.
  I thank the cosponsors of the original bill that we introduced--
Senator Boxer, Senator Gordon Smith, and Senator Allen--for joining as 
original cosponsors of this bill. It is bipartisan in nature. Several 
other Members from the other side of the aisle have approached us.
  We think this amendment will be a significant part of this stimulus 
package. Most people aren't aware of this amendment. Most people aren't 
aware of the impact it will have on the economy. But I encourage all of 
our colleagues to learn about this before we vote on it tomorrow. It is 
very obvious that there are upsides to this. I just do not see any 
downside. The upsides are tremendous. A huge amount of money will come 
back into the United States to create American jobs.
  If you ask yourself whether to vote for this amendment, you just have 
to ask yourself whether you want to create jobs overseas or do you want 
to create jobs in the United States? We are talking about $300 billion 
coming back into the United States in the next 12 months to create 
jobs. That is a lot of capital. We have heard about the lack of capital 
and business investment being part of the recession. This would be a 
significant addition to our economy.
  I encourage our colleagues to vote for this amendment.
  I ask for the yeas and nays, and I yield the floor.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, in regard to the statement just made by 
the Senator from Nevada, I voted for the amendment that he speaks about 
in committee. It lost by a 1-vote margin. I don't know whether Members 
have had a chance to give it the thorough thought it ought to have when 
it is brought up on the floor. I hope Members will take a good look at 
it. If there is evidence to back up what has been said about the 
amendment bringing money home, it is something that would give a shot 
in the arm to the economy. It ought to be something we look at. I think 
there has been some talk about it, but not enough at this point. I am 
not suggesting the amendment should not be voted for tomorrow. I am 
just suggesting it is something I am taking a very good look at.
  Mr. ENSIGN. Mr. President, will the Senator yield?
  Mr. GRASSLEY. I yield for a short statement and then I want to 
continue.
  Mr. ENSIGN. The only comment I would make is that a couple of years 
ago when this was introduced, the Joint Tax Committee scored this as 
bringing about $150 billion back into the economy. J. P. Morgan's--a 
private institution--latest study estimated it would be $300 billion. 
They have the latest figures. That is where we would come up 
conservatively. Even if you do not go with the new study, the old study 
said $150 billion. It puts a lot of money back into the economy.
  The PRESIDING OFFICER (Mr. Grassley). The Senator from Montana.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that all pending 
amendments be temporarily set aside so that the Senator from New York 
can offer an amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from New York.


                           Amendment No. 557

  Mr. SCHUMER. Mr. President, I send amendment No. 557 to the desk and 
ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from New York [Mr. Schumer] proposes an 
     amendment numbered 557.
  Mr. SCHUMER. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

  (Purpose: To amend the Internal Revenue Code of 1986 to make higher 
                       education more affordable)

       At the end of subtitle C of title V, insert the following:

     SEC. __. EXPANSION OF DEDUCTION FOR HIGHER EDUCATION 
                   EXPENSES.

       (a) In General.--
       (1) Amount of deduction.--Subsection (b) of section 222 
     (relating to deduction for qualified tuition and related 
     expenses) is amended to read as follows:
       ``(b) Limitations.--
       ``(1) Dollar limitations.--
       ``(A) In general.--Except as provided in paragraph (2), the 
     amount allowed as a deduction under subsection (a) with 
     respect to the taxpayer for any taxable year shall not exceed 
     the applicable dollar limit.
       ``(B) Applicable dollar limit.--The applicable dollar limit 
     for any taxable year shall be determined as follows:

                                                             Applicable
``Taxable year:                                          dollar amount:
  2003......................................................$8,000 ....

  2004 and thereafter......................................$12,000.....

       ``(2) Limitation based on modified adjusted gross income.--
       ``(A) In general.--The amount which would (but for this 
     paragraph) be taken into account under subsection (a) shall 
     be reduced (but not below zero) by the amount determined 
     under subparagraph (B).
       ``(B) Amount of reduction.--The amount determined under 
     this subparagraph equals the amount which bears the same 
     ratio to the amount which would be so taken into account as--
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $65,000 ($130,000 in the case of a joint return), 
     bears to

       ``(ii) $15,000 ($30,000 in the case of a joint return).
       ``(C) Modified adjusted gross income.--For purposes of this 
     paragraph, the term `modified adjusted gross income' means 
     the adjusted gross income of the taxpayer for the taxable 
     year determined--
       ``(i) without regard to this section and sections 911, 931, 
     and 933, and
       ``(ii) after the application of sections 86, 135, 137, 219, 
     221, and 469.

     For purposes of the sections referred to in clause (ii), 
     adjusted gross income shall be determined without regard to 
     the deduction allowed under this section.
       ``(D) Inflation adjustments.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003, both of the dollar 
     amounts in subparagraph (B)(i)(II) shall be increased by an 
     amount equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 2002' for 
     `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding.--If any amount as adjusted under clause 
     (i) is not a multiple of $50, such amount shall be rounded to 
     the nearest multiple of $50.''.
       (2) Qualified tuition and related expenses of eligible 
     students.--
       (A) In general.--Section 222(a) (relating to allowance of 
     deduction) is amended by inserting ``of eligible students'' 
     after ``expenses''.
       (B) Definition of eligible student.--Section 222(d) 
     (relating to definitions and special rules) is amended by 
     redesignating paragraphs (2) through (6) as paragraphs (3) 
     through (7), respectively, and by inserting after paragraph 
     (1) the following new paragraph:

[[Page 11568]]

       ``(2) Eligible student.--The term `eligible student' has 
     the meaning given such term by section 25A(b)(3).''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to payments made in taxable years beginning after 
     December 31, 2002.
       (b) Slower Acceleration of Top Income Rate.--
       (1) In general.--The table in paragraph (2) of section 1(i) 
     (relating to reductions in rates after June 30, 2001), as 
     amended by this Act, is amended to read as follows:

------------------------------------------------------------------------
                                     The corresponding percentages shall
                                      be substituted for the following
  ``In the case of taxable years                percentages:
  beginning during calendar year:  -------------------------------------
                                       28%      31%      36%       39.6%
------------------------------------------------------------------------
2001..............................    27.5%    30.5%    35.5%      39.1%
2002..............................    27.0%    30.0%    35.0%      38.6%
2003..............................    25.0%    28.0%    33.0%      38.6%
2004..............................    25.0%    28.0%    33.0%      37.6%
2005..............................    25.0%    28.0%    33.0%      37.6%
2006 and thereafter...............    25.0%    28.0%    33.0%      35.0%''.
------------------------------------------------------------------------

       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years beginning after December 31, 
     2002.
       (c) Application of EGTRRA.--The amendment made by 
     subsection (b) shall be subject to title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 to the same 
     extent and in the same manner as the provision of such Act to 
     which such amendment relates.

  Mr. SCHUMER. Mr. President, I will be brief.
  This amendment would continue the work we made in the last tax bill a 
few years back to further increase the deduction for college tuition. 
The bottom line is a simple one: College is a necessity today for young 
people. Good jobs are hardly available without a college education. 
They are getting rarer and rarer. Yet the cost of college is very, very 
expensive.
  If you are wealthy, you can afford it. If you are poor, we often pay 
for your tuition, as we should. I fully support that. But if you are in 
the middle class, that tuition bill every year is a fright. My wife and 
I make good salaries, and we are up late at night trying to figure out 
how we are going to pay for our two daughters' college education. One 
is a freshman in college. One is in the 8th grade. So we know, because 
our salary is better than the average American, what the average 
American does: They struggle in terms of thinking of how they are going 
to pay for tuition.
  This amendment, cosponsored by Senators Biden, Boxer, Durbin, 
Cantwell, and Lieberman, takes the current deduction and makes it 
permanent, because now it expires at the end of 2005. It increases the 
eligible tuition amount to $8,000 for the tax year 2003 and $12,000 for 
the tax year 2004 and thereafter. It now is $4,000 for the tax year 
2003 and thereafter.
  The deduction is available to joint filers with taxable income up to 
$130,000, with a phase-out up to $160,000; and single filers with 
taxable income up to $65,000, with a phase-out up to $80,000.
  The bottom line is simple: This helps middle-class people with 
perhaps the greatest problem they struggle with. It also can be taken 
by parents or grandparents who pay the tuition of a dependent child or 
grandchild. It applies to any student enrolled at least half time, 
including graduate students. It is per student, so if you have two 
students in college or graduate school, you get the deduction for each 
of them.
  It would cost about $26.3 billion for the 10-year period of 2003 to 
2013. The cost of the amendment would be offset by slowing the 
acceleration of the top tax rate reduction so that the top rate would 
become 37.6 percent in 2004 and 35 percent in 2006.
  Now, again, we are dealing with choices. It would be nice to get that 
top rate down quickly, but if you ask me, the future of America depends 
on kids who deserve to go to the best college being able to afford to 
go to the best college. That is probably more important than quickly 
accelerating the top rate.
  This amendment, as I said, applies to the solid, middle class who get 
very, very few tax breaks and yet sweat and struggle to send their 
children to college.
  Mr. President, when a young man or young woman either does not go to 
college, even though they have the grades to get in, or goes to a 
lesser college than the one they deserve to go to, they lose. Their 
lifetime productivity will be lower. Their families lose, but we lose. 
America loses, because in this new ideas-oriented economy, we need the 
best educated labor force possible.
  So I can hardly think of a better investment for America than tuition 
deductibility. We made a good step in the tax bill of 2001, as I said.
  For the first time, I, Senator Snowe of Maine, and then-Senator 
Torricelli of New Jersey managed to get this into the tax bill for up 
to the $4,000 level. This will bring it up to $8,000 and make sure it 
does not expire in 2005.
  Mr. President, as I said, in today's information-driven economy, a 
college degree is no longer a luxury, it is a necessity.
  In terms of long-term economic growth and developing this country's 
human capital--which is ultimately the true source of innovation and 
competitive advantage--we could make a few better investments than 
ensuring future generations have access to an affordable college 
education.
  The challenge is that the cost of college tuition has increased 
faster than any other major consumer item including health care over 
the last 20 years, skyrocketing from $5,156 in 1981 to $21,768 in 2001, 
an increase of 322 percent.
  Even in real, inflation adjusted dollars the price of a 4-year public 
or private college education has almost doubled over the past two 
decades.
  As currently written, this bill does everything except invest in 
people. We have incentives for plants, property, and equipment. Let's 
take this opportunity to invest in the next generation.
  As I said, the amendment makes the current tax deduction permanent 
and increases the eligible tuition amount to $8,000 for tax year 2003 
and $12,000 for tax year 2004 and thereafter.
  The deduction is available to joint filers with taxable income up to 
$130,000, with a phaseout up to $160,000, and single filers with 
taxable income up to $65,000, with a phaseout up to $80,000. For 
example, for a joint filer with an income of $105,000, the legislation 
would mean a savings of as much as $3,240.
  The legislation would allow families to choose the Hope Scholarship 
instead of the deduction, depending on which is more beneficial to 
them.
  I know the hour is late. I heard my colleague from North Dakota got 
out of his lovely home to come to the floor because he was so eager to 
speak, and I am eagerly awaiting his remarks. I hope he did not have to 
get out of his pajamas and back into his nice suit and tie. I don't 
know what his status was while he was at home.
  Mr. President, I ask for the yeas and nays on my amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. SCHUMER. Mr. President, I ask that my remaining time be ceded 
back to the Senator from Montana.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, under our informal agreement, we had been 
switching back and forth. The Senator from South Carolina is now 
recognized.
  The PRESIDING OFFICER. The Chair recognizes the Senator from South 
Carolina.
  Mr. BAUCUS. Mr. President, I urge the Senator, at this late hour, to 
speak briefly so everybody who wants to speak can. The bewitching hour 
arrives at about 10 minutes after midnight tonight.
  Mr. GRAHAM of South Carolina. With that in mind, I will be very 
brief.
  Mr. President, I do appreciate the opportunity to be recognized very 
briefly. The reason I want to speak is to recognize the Finance 
chairman's great job, taking a pretty bad situation and making the best 
of it. It got off to a rocky start in the Senate about how to craft a 
tax package to help stimulate the economy. But I am very impressed by 
what has happened.
  Almost everyone has some view of how to cut taxes. That is good for 
the American public. I am not here to criticize my colleagues on the 
other side who have put forward tax packages. I think we all see the 
economy soggy--whatever adjective you want to

[[Page 11569]]

use--but both parties have a view of getting money back into the 
economy. That is good.
  I congratulate those who have stepped up to the plate to put money 
back into the economy. I may disagree with your approach. But also I 
would like to congratulate those Senators who took the road less 
traveled; that is, saying: We do not need a tax cut. We cannot afford a 
tax cut. We are in deficits. Now is not the time to take money out of 
the revenue stream. We should be retiring the debt. To those Senators, 
I say, you are absolutely right in terms of having a philosophy that 
makes sense.
  The problem is, if we do not cut taxes, we have shown a propensity, 
particularly our friends on the other side, to spend the money. That is 
an overarching thing that I think is well-documented.
  It is not a debate as to whether we will take the $350 billion, the 
$152 billion, the $550 billion, or the $726 billion, and put it on the 
debt. That is not going to happen. That should happen, but it is not 
going to happen.
  So now the debate becomes, how do we take whatever money we are going 
to set aside for taxes to create jobs? Because if it does not create 
jobs, I am not going to vote for it.
  Twelve Democratic Senators joined with the President and members of 
the majority party to cut taxes in 2001 in a very comprehensive manner. 
A lot has happened since that tax cut: America has been attacked, the 
defense spending needs have gone up, the Iraq war has come, and a lot 
of money has been spent. But I would argue that everything we have done 
to make America stronger, to free the people of Iraq, making us 
stronger, is money well spent. Let's keep that same theme of spending 
our money wisely.
  The one thing that disappoints me about my friends on the other side 
is that every amendment they have to offer or every approach to taxes 
goes after the dividend tax cut. That is the centerpiece of the 
President's view of how to stimulate the economy. Every amendment being 
offered takes money from the dividend tax cut to pay for that 
amendment.
  The best example of what is going on here is Senator Dorgan's 
amendment about repealing the Social Security tax. A month ago we had a 
chance to do that, and our friends on the other side en masse voted no. 
We had a chance to expand the budget resolution by doing away with the 
tax on senior citizens at the 85-percent rate on their Social Security. 
This tax was put in in 1993 by our friends on the other side. I would 
argue that offering this amendment now is the best evidence one could 
point to as to what is going on here. Everything this President is 
asking for in terms of job stimulus and economic activity beyond 
helping people put money in their pockets goes to the dividends, double 
taxation exclusion.
  The Senate Finance Committee has produced a bill that addresses that 
problem. There will be an amendment on this floor that will basically 
mirror what the President has asked for. It will take taxation 
dividends to zero for a 3-year period.
  I honestly believe that is the best way to create jobs simply because 
if you could buy stock and receive a dividend without paying taxes, 
more people would be likely to buy stock. People say the stock market 
would go up 10 or 20 percent. I don't know if that is right or not, but 
that makes sense to me.
  The $350 billion tax proposal by Senator Landrieu I disagree with. 
But you have to understand that the difference between Senator 
Daschle's plan of $152 billion, the Finance Committee's of $350 
billion, and Senator Landrieu's amendment of $350 billion is negligible 
in terms of the money it takes out of the economy to help people 
receive tax benefits. So this argument that our President's plan 
doubles the national debt has to give way to facts. Everybody is 
wanting to cut taxes.
  The point I am trying to make is the American people have to choose 
between these competing plans. We will have to choose. Here is what I 
am going to do. I am going to make a choice to take the tax package 
that was passed in 2001 and accelerate the benefits. Because the reason 
we haven't received the full benefit of the 2001 tax package is we put 
everything off in terms of rate reductions. Let's take the money we are 
putting on the table now and accelerate the rates. Let's accelerate the 
child tax credit so people will have more money to spend. But let's do 
something we didn't do in 2001. Let's create a system so that jobs can 
be created by economic activity.
  You will never convince me that if you make an investment in the 
stock market more attractive, people will not have better jobs, and 
there will be more jobs for people. That is why I will follow the lead 
of the President.
  I am pleased that I am a Member of the Senate at a time when both 
parties want to cut taxes.
  I yield the floor.
  Mr. REED. Mr. President, we find ourselves here, yet again, 
confronted with the third tax cut package in 3 years from the 
President. As a recent Washington Post article pointed out, President 
Bush seems dead set on ramming through tax cuts every year he is in the 
Presidency---regardless of the economy, regardless of the budget 
deficit, regardless of its competition with much-needed programs like a 
universal and comprehensive prescription drug benefit for Medicare.
  In fact, after years of harping on budget deficits, the Republican 
Party has now jettisoned its sense of fiscal responsibility, but only 
after President Clinton adopted that same fiscal responsibility and 
successfully delivered budget surpluses. Now, Republicans are silent on 
the issue.
  But only when we put all of these concerns aside do we get to the 
most fundamental question---the question of fairness. President Bush 
has taken great strides to launch preemptive rhetorical attacks, 
claiming Democrats are engaging in class warfare with opposition to tax 
cuts. But when we consider the facts, it is the President who is 
engaging in class warfare by pushing through a package that steals from 
the poor and then gives to the rich. His preemptive rhetorical attacks 
will not measure up to the facts.
  So, with all the challenges we have ahead, we are being asked to vote 
on another tax cut that will not help the average American family. It 
is incumbent on us to separate the myth of Republican rhetoric from 
reality in how this tax cut will affect our constituents, our families, 
and our country. It is time to set the record straight.
  Myth 1: The Republican tax proposals are best at generating new jobs 
and promoting a strong sustainable recovery. The reality is that the 
Republican tax proposals are poorly targeted to the problems facing the 
economy. They generate fewer jobs and less economic growth this year 
when they are needed most than does the Democratic alternative.
  The economy is in a slump now, with 2.7 million fewer private sector 
jobs than in March 2001, and even the Fed's outlook for the near future 
is weak.
  Economic forecasters expect that the economy will eventually bounce 
back, but they have been expecting a recovery ``soon'' for over a year 
and it has not come yet. With the economy still in a slump, with excess 
unemployment and underutilized factories, the policy we need now is 
job-creating stimulus that restores full employment quickly.
  Republicans still insist that long-term tax cuts for the wealthy 
somehow create jobs, despite the poor track record that 1.7 million 
jobs have been lost since passage of the 2001 tax cut. Their program is 
so backloaded that it doesn't take effect until past the time when it 
is needed. Such a policy is not just ineffective but counterproductive, 
because it creates large deficits and an increase in the public debt 
that is a drag on long-term growth.
  Additionally, most of the Republicans' proposed capital income tax 
cuts reward capital owners without directly encouraging new capital 
formation or higher output. Such tax cuts can't be expected to create 
new jobs if they don't encourage output. In fact, to the extent that 
the tax cuts effectively reduce the cost of capital facing businesses, 
some businesses may be encouraged to substitute capital for labor

[[Page 11570]]

without increasing their output, so that jobs are lost rather than 
gained. If the goal of the tax cut is really job creation, the tax cuts 
should be designed to directly encourage businesses to hire more 
workers.
  The Democratic proposal adheres to the basic principles of sound 
policy: it provides a boost to job creation and economic growth now 
when it is needed and does not create large future deficits or 
increases in debt that are a drag on growth. The Democratic plan just 
has ``more taste'' and is ``less filling.''
  When the JEC Democratic staff compared the impact on jobs and growth 
of the President's $726 billion ``Jobs and Growth Initiative'' and a 
much smaller but more targeted Democratic alternative, they found that 
the Democratic proposal generated roughly twice the additional jobs and 
growth by the end of this year than the President's plan but at one-
seventh the cost. The Republican proposal provides less growth and 
fewer jobs in the first year when they are really needed than the 
Democratic proposal.
  Myth 2: The Republican tax proposals are good for economic growth. 
The reality is that the Republican tax proposals hurt economic growth 
and depress national income in the long run.
  An analysis by the JEC Democratic staff found that because of its 
long-run budgetary costs, the President's plan had adverse long-run 
supply-side effects that lowered national income in 2013 by 0.4 to 0.6 
percent. In their most recent analysis of the President's budget, the 
CBO found adverse macroeconomic effects if tax cuts are not paid for--
that a proper ``dynamic scoring'' would raise, not lower, the costs of 
the administration's tax proposals.
  Economic theories that claim that private saving should fully make up 
for drops in public saving are unsupported by experience. What did we 
learn from the Reagan era and the fiscal discipline of the 1990s? The 
Reagan tax cuts pulled down both public saving and national saving; the 
tax cuts failed to generate the large supply-side responses that had 
been claimed by the proponents of the cuts.
  Myth 3: The Republican proposals are fair and are aimed at the middle 
class. In reality, the Republican proposals are unfair and are heavily 
tilted toward the very top of the income distribution.
  The lion's share of the tax cuts enacted in 2001 already went to the 
very richest of households, particularly the tax cuts scheduled to take 
effect after 2002. Before the 2001 tax cut, the justification for large 
tax cuts for the wealthy was that we were simply ``returning the 
people's money'' and getting rid of surpluses that were too big, and 
the wealthy were the ones who paid the most in taxes. But that is 
clearly not the case because now we have no surpluses.
  By 2010 when the tax cut is fully phased in, over a third of the tax 
cut goes to the richest 1 percent of households, while less than one-
fourth goes to the entire bottom 60 percent. Despite this, the 
administration has proposed additional tax cuts that would clearly 
benefit only high-income households: the dividend tax exclusion and the 
new savings incentives. As part of their growth and jobs package, the 
administration also proposes to accelerate the portions of the 2001 Tax 
Act that highest-income households benefit the most, while leaving 
unchanged, continuing to phase in slowly, elements of the 2001 tax cut 
that most benefit lowest income families with children. The plan truly 
keeps the spirit of the administration's proposals--``leave no 
millionaire behind.''
  In advertising just how ``fair'' their growth package is, the 
administration has repeatedly relied on the average tax cut statistic, 
stating that households will ``on average'' receive a tax cut of over 
$1,000 in 2003. But this is far greater than what a typical household 
near the middle of the income distribution would receive; in fact, 
four-fifths of households would receive less than this amount. 
According to the Urban-Brookings Tax Policy Center, the middle 20 
percent of households would get tax cuts averaging only $200 in 2003 
from the President's plan. Meanwhile, households in the top 1 percent 
would enjoy an average tax cut of over $20,000, and millionaires would 
get tax cuts averaging about $90,000.
  The compromise tax cut package crafted by Senator Grassley limits the 
dividend exemption to the first $500 of a family's dividends in fiscal 
year 2003, increasing by 10 percent of dividend income above $500 from 
2004 to 2007, and 20 percent above $500 from 2008 to 2012. Still, even 
in the first year with the $500 limit, the great bulk of the dividend 
tax cuts will go to highest income households simply because they are 
most likely to have dividend income, and among those with dividend 
income are the most likely to have at least $500 of dividend income. In 
later years as the tax break for higher dividend income increases, the 
share of the dividend tax cut benefiting highest income households will 
increase. Overall, the Grassley plan would still provide a 
disproportionately large tax cut to the highest income households.
  But most importantly, even though the low- and moderate-income 
families need the most help in this troubled economy, Republican 
proposals assist them the least.
  Myth 4: The Republican tax plan is the best way to address the 
problems of long-term unemployment. The reality is that the Republican 
tax plan ignores the plight of the unemployed and the long-term 
unemployed.
  Although the temporary Federal unemployment insurance program will 
expire at the end of May for workers exhausting regular state UI 
benefits, currently the Republican plan does not extend the program. 
Nor does the plan provide any further assistance to the approximately 
1.1 million workers who have exhausted all of their unemployment 
benefits and still have not found work.
  The unemployment rate today is 6.0 percent, higher than when the 
temporary Federal UI program was created in March, 2002, or extended in 
January, 2003. During the last 3 months, over 540,000 private-sector 
jobs have been lost and the economy has lost 2.7 million private-sector 
jobs since the recession began. On average, job losses in a recession 
bottom out after about 15 months and are erased within 2 years. The 
persistence of job losses at the 25-month mark in this recession is the 
most severe since the 1930s. These workers have carried the brunt of 
this recession, there are simply no jobs out there for them.
  Myth 5: The Republican tax plan is fiscally responsible, but the 
reality is that the Republican plan leads to deficits as far as the eye 
can see and exacerbates the fiscal pressures posed by the imminent 
retirement of the baby boom generation.
  What was a $5.6 trillion 10-year surplus when the President took 
office has virtually disappeared, even without counting any current 
proposals. The administration has repeatedly claimed that the 
deterioration was largely out of their control, but the fact is that 
even including the effects of the recession and other technical changes 
to the CBO budget forecast, the tax cuts already passed are responsible 
for over a third of the deterioration in the budget. Enactment of the 
President's new budget proposals would result in a $2.1 trillion 10-
year deficit--a turnaround of an astounding $7.7 trillion.
  A particularly large bias in administration estimates comes from 
assuming that expiring tax provisions will indeed expire and that the 
alternative minimum tax will continue to affect a larger and larger 
segment of the population without any fix.
  Deficits reduce national saving, reduce the resources available for 
productive investments, and hence reduce future economic growth. Even 
Chairman Greenspan recently warned of the danger to our nation's long-
term economic health: ``I support the program to reduce double taxation 
on dividends and the necessary other actions in the federal budget to 
make it revenue-neutral . . . it should be done in the context of paygo 
rules, which means that the deficit must be maintained at minimal 
levels.''
  Myth 6: States will benefit from the Republican tax plan. The reality 
is that the Republican tax plan ignores the fiscal crisis of the States 
and probably makes it worse.

[[Page 11571]]

  The Senate Republican plan established a $20 billion fund to be 
equally divided between State governments and local governments, to be 
used for education and job training, health care including Medicaid, 
infrastructure, law enforcement, and other essential services. However, 
at the same time, the Federal tax changes will reduce State revenues by 
approximately $10 billion, leaving States on net with no additional 
funds.
  The recession that began in March 2001 has hit State budgets from 
both sides. Income and sales tax revenues have fallen with reduced 
economic activity, while the demands on social services have grown as 
joblessness has increased and family incomes have declined. Every week 
brings a new headline--or two--announcing another State's proposed 
cutbacks in services or program eligibility as it responds to a 
worsening budget crisis. Numerous spending cuts in social programs, 
including Medicaid, have been announced by States as they work to close 
their widening funding gaps. Some 22 States have proposed or adopted 
cuts in Medicaid and the SCHIP that would drop coverage for at least 
1.7 million people if all the proposals were adopted. Prospects for 
2004 are worse: the National Conference of State Legislators estimates 
that 41 States will face a cumulative budget shortfall of $78 billion.
  The Democratic proposal requires that the Federal Government provide 
twice as much money to help States mitigate the negative impacts of the 
recession on poor and working families. This will also aid job 
creation.
  Myth 7: The congressional Republican tax plans adhere to the limits 
set in the budget resolution. The reality is that the Republican tax 
plans are full of ``smoke and mirrors'' gimmicks that hide their true 
costs.
  The true cost of the 2001 tax cut is much greater than the official 
cost because of the gimmicks of phase-ins and sunsets and because the 
tax cut allowed the alternative minimum tax to pick up additional 
revenue from more and more over time--a situation that is not likely to 
be tolerated for too long. The official cost ignores interest costs as 
well. As a result, a more realistic estimate of the cost of the 2001 
tax cut is much greater than the official cost--nearly $2.5 trillion 
over the first 10 years, not the $1.35 trillion as officially scored. A 
fully phased in version of the tax cut would cost even more over 10 
years, over $4 trillion, even before counting interest payments.
  Myth 8: Republican tax and budget proposals are no threat to Social 
Security and Medicare. In reality the Republican tax and budget 
proposals break our promises on Social Security and Medicare.
  Tax cuts now mean even bigger tax increases later. The Bush tax cut 
agenda gambles away the income security of future generations, and for 
what? Current tax cuts to the wealthy, which Republicans claim will 
ultimately benefit everyone. Instead, those tax cuts will ultimately 
cost everyone.
  Our country's impending demographic challenge and corresponding 
fiscal pressures are a certainty. We were already faced with tough 
decisions ahead about how the retirement of the baby boomers would be 
made ``affordable'' to our Government budget: either taxes will have to 
rise in the future, spending cuts, or some combination of both. The 
Bush tax cut agenda is not responsible for that situation, but it 
surely and dramatically has made the tough problem even tougher. It 
makes the fiscal hole even deeper, and it unjustly pushes off most of 
the financial responsibility for the tax cuts and government programs 
we now enjoy, onto our children and grandchildren. We're putting our 
tax cuts on a credit card that our kids will have to pay off.
  In the end, tax reform should be considered in a time of surpluses 
and not in a time during record budget deficits. Most importantly, we 
as a Congress have responsibility to act fairly and effectively to 
combat our Nation's economic crises. The Republican plans do not live 
up to that responsibility and I can only hope that my words today have 
separated the rhetorical myths from the facts.
  Mr. ENZI. Mr. President, once again we have a challenging task before 
us. We have to draw a road map that will lead to economic growth, 
development, and future sustainability. We have to come up with a 
package that is fair to all taxpayers. One that eliminates complexity 
instead of creating more of it. Unfortunately, this is much easier said 
than done. So far, we have all been talking about it. In fact, as I 
have listened to my colleagues speak throughout the day, I have been 
struck by the unusual tenor of this debate. We have Democrats claiming 
they want to eliminate tax increases and Republicans saying we need to 
use tax increases to offset other provisions. While I have serious 
reservations about voting for a package that appears to rob Peter to 
pay Paul, I believe the Finance Committee has crafted a bill that will 
lead to the creation of new jobs. And, that is what this debate should 
be about.
  In April, the number of unemployed people in this country rose to 8.8 
million--8.8 million. That is 8.8 million Americans without jobs and 
without paychecks--but still with plenty of bills to pay. That kind of 
economic chaos sends ripples throughout the economy. It affects more 
and more people until we do something to stop it. Until we take action 
to stem and control the problem so that the economy can regain its 
strength.
  The strength of our economy lies in our workforce, so we have to put 
into place a plan for growth that will actually encourage the creation 
of new jobs. I think this plan is a good step toward that goal, and I 
believe the tax relief provided in this plan will put money back into 
the pockets of taxpayers and provide much needed resources for 
businesses to draw on in order to create more jobs for those who need 
them.
  That is what I would like to talk about for a moment--the employers, 
the small business owners, the entrepreneurs. I am a strong supporter 
of the President's dividend proposal, and I am extremely disappointed 
we have been forced to reduce it in the Senate. I would hope we could 
eventually reach an agreement here and with our colleagues in the House 
to restore that proposal.
  Nearly every week, I go back to Wyoming, and small business owners 
and local residents from around my State want to talk about the 
unfairness of our tax policy when it comes to the double taxation of 
dividends. In fact, I have a stack of over 300 letters from 
constituents representing different age groups and different income 
levels supporting the full elimination of the double taxation on 
dividends.
  Although some of my colleagues continue to misrepresent to the 
American people that this provision would only help the rich, I think 
it is important to remind everyone that families, single people, 
married couples, college students, working mothers, single dads, senior 
citizens, and everybody in between are all unfairly burdened by the 
loss of spendable cash that results from the double taxation of 
dividends. We should not be surprised by that. After all, it is not 
just corporate executives who receive dividends.
  If we eliminate the double taxation on dividends we will put money 
back into the pockets of hardworking taxpayers, and we will also create 
jobs for working Americans across the country. Studies have shown that 
the President's dividend proposal could create as many as 400,000 new 
jobs. That would provide enough jobs for over four-fifths of Wyoming's 
population. That is a lot of jobs.
  I would prefer we pass a dividend proposal that completely eliminates 
this unfair double taxation, but I understand why my colleagues on the 
Finance Committee had to come up with a new dividend plan. They were 
faced with a tough problem--staying within the budgetary constraints 
set forth by Congress while still providing real, economic growth. I 
believe they came up with a workable compromise that will provide some, 
if not all, of the relief necessary to encourage short and long-term 
investment by individuals and corporations. Under this plan, 
individuals will have more money to reinvest in their portfolio, and 
companies will be more likely to use equity financing to fund future 
growth.

[[Page 11572]]

  Other important components of this bill are the small business and 
agricultural provisions, as well as the section that will increase the 
allowable amount for small business expensing from $25,000 to $75,000. 
Small business is truly the backbone of our economy, the engine that 
makes it go, and we have to create an environment that encourages 
rather than discourages growth. As corporations struggle to meet income 
projections and cost reductions, small businesses are the ones 
providing jobs and putting food on the tables for our working families.
  As many as 22.4 million small businesses could directly benefit from 
provisions like the increase in small business expensing. Other 
employers will benefit from provisions like the repeal of the Special 
Occupational Tax and the extension of the applicable period for a 
taxpayer to replace livestock sold on account of drought, flood, or 
other weather-related conditions. These provisions mean thousands and 
thousands of employers will have more money to reinvest in their 
company, hire more people, and create more jobs. That means putting 
more Americans back to work.
  This package should be about jobs; and I support the tax relief 
provisions, because I think they will create the jobs that will 
increase the flow of revenues that will bring this economy out of its 
current slump.
  However, I want to make it clear that I am concerned about the high 
number of revenue provisions that are included in the bill. An economic 
growth package should not simply shift the tax burden from one person 
to another. That is not the way to create a more fair tax system. 
Despite my concerns, I will vote for this package because we need an 
economic growth package now. I encourage my colleagues to join me in 
supporting this plan to put more Americans back to work and help our 
families get back on their feet again.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I yield 10 minutes off the remaining time 
on the bill to the Senator from North Dakota.
  Mr. CONRAD. I thank the manager of the bill, the ranking member of 
the Finance Committee.
  The Senator from South Carolina has just been talking about this 
scheme to give the President all that he wants on dividends, but to do 
it within the limits of the $350 billion tax bill that is before the 
Senate.
  A prominent Republican economist commented on this scheme today, 
calling it, ``The Dividend Fiasco.'' This scheme would exempt exempt 
one-third of dividends this year, two-thirds the next year, and all of 
them in the third year, and then sunset the whole proposal after that. 
Again, this is an economist whom Republicans have called before the 
Congress repeatedly to testify on their behalf. Here is what he says 
about that scheme:

       Think, for a moment, of the likely wacky effects of such a 
     plan. If a firm pays you a dividend next year as opposed to 
     this year, then you will save 33 percent on your taxes. With 
     rates falling so sharply, it would be positively 
     irresponsible for a firm to pay any dividends at all until 
     the rates are at their lowest. Then, in 2005, the rate is 
     zero for only one year. Thus, a firm will have an incentive 
     to pay dividends that it might have planned to pay in 2006 in 
     2005 as well. So under the administration's proposal, 
     dividends would go as close to zero as firms could manage for 
     a few years, spike to their highest level in history, then 
     drop sharply for some time.
       Administration sources admit that dividends will likely 
     decline relative to today under this plan between now and 
     2005. How can that be a harmless event given that increases 
     in dividend payments are viewed to be so wonderful? Clearly, 
     this proposal is one of the most patently absurd tax policies 
     ever proposed.

  That is from a prominent Republican economist. He has it exactly 
right. That is patently absurd.
  It is a hoax. It is an absolute hoax. The principle behind this bill 
is to limit the total tax cut to $350 billion. The reality of the 
proposal advocated by the Senator from South Carolina is that it would 
never be sunsetted, and the cost would turn out to be even more than 
the President's original proposal.
  While I was gone, my colleague from Arizona on the Finance Committee, 
and for whom I have a great deal of respect, suggested that corporate 
taxes are high compared to other nations. That is just not true. If you 
look at the effective tax burden--not the nominal tax burden, the 
effective tax burden--what companies really pay, the United States is a 
relatively low tax jurisdiction. Look at where the OECD places the 
United States in its international ranking of corporate income taxes as 
a percentage of GDP. This is where the United States ranks. We are way 
down the list, nowhere close to being high up on the list.
  Another thing I have heard repeatedly is that this plan is a jobs 
growth package. Let's do the math. If this is a jobs package, it is one 
of the most poorly designed in economic history. They say it is going 
to produce a million jobs. Actually, the models that have been done say 
from 230,000 to 900,000 jobs. Let's say it is a million jobs. It costs 
$350 billion. Let's divide 1 million jobs into $350 billion. Do you 
know what the cost of this program is per job? Three hundred fifty 
thousand dollars a job. Let's say that one more time. The cost of this 
program to create a job is $350,000. Now, that is patently absurd. What 
a ridiculous way to create jobs. The cost is $350,000. What are the 
jobs going to be--$50,000 jobs, if they were pretty good jobs. So it 
would cost $7 for every $1 you would produce in jobs? That makes no 
sense.
  My colleague said that consumer demand is not the problem in the 
economy. That is absolutely the problem. Consumer demand in the last 2 
months has been 1.4 percent and 1.7 percent. That has been the growth. 
That is mighty tepid growth. That is right at the heart of what is 
wrong in this economy.
  My colleague from South Carolina said Senator Dorgan's amendment on 
the Social Security tax is an example of what is wrong here. No. It is 
an example of what is right here. The Senator from South Carolina said 
we had a chance on the budget resolution to do something about the 
previous increase in income subjected to Social Security tax. No, the 
budget resolution doesn't decide those things. It has nothing to do 
with that--nothing, zero.
  This is the place where you can do something about repealing a 
previous tax increase. The budget resolution doesn't change the tax 
code. This is the bill that determines the specifics. Our colleagues 
will have a chance tomorrow to indicate whether they are going to 
repeal the previous tax increase that involved Social Security 
recipients.
  One other thing I heard my colleague from Arizona say was that the 
dividend proposal would be such a tremendous benefit to the elderly. 
That's true, if you are wealthy. If you are an elderly person earning 
more than $500,000 a year, this plan gives you an average benefit of 
$24,000. If you are an elderly person earning less than $50,000 a year, 
your average benefit is just $90. If you are earning $50,000 or less, 
and you are elderly, you get $90. If you are earning over half a 
million dollars, this dividend tax cut gives you $24,000. I don't think 
that is equitable. I don't think it is fair. I don't think it does much 
to stimulate the economy.
  Let's remember the context within which we are making these 
decisions. The budget deficits have skyrocketed. All of this money, 
everything being proposed here, is with borrowed money. This is not 
being offset by spending reductions. This is all borrowed money.
  The Senator from South Carolina says that at times you need to do 
that to give a boost to the economy. I agree with that entirely. That 
is absolutely the right economics. But do you know what? The deficit 
this year on an operating basis is going to be between $500 and $600 
billion.
  Should we do more? I believe we should. In fact, I think we should do 
more than what is in this plan, because this plan doesn't do much. This 
plan doesn't do much in the first year or the second year. This plan is 
very tepid in terms of what it does. In the first year, this plan gives 
$44 billion of stimulus in a $10.5 trillion economy.
  Frankly, that is not going to do much of anything. That is exactly 
what we see when you analyze this proposal in terms of what it is going 
to do

[[Page 11573]]

to grow the gross domestic product. Senator Daschle's plan is the only 
plan that has much stimulus--$125 billion this year. Only $44 billion 
is in the plan before us.
  Here is an analysis of what the various plans would do in terms of 
stimulus. The President's plan, which is even more costly than the one 
before us, would increase GDP by less than half of 1 percent. The 
Democratic plan is significantly more, seven-tenths of 1 percent. In 
the second year, the Republican plan is half of 1 percent, and the 
Democratic plan nine-tenths of 1 percent.
  But what is most interesting is that the Republican plan, over the 10 
years, is actually negative. It actually hurts economic growth. How can 
that be? Very simply, because it is going to explode deficits and debt.
  Here is what happens under the Republican plan: The debt of $6 
trillion in 2002 will go to $9 trillion by 2008, and to $12 trillion by 
the end of this budget period. It explodes the deficits and debt.
  The Chairman of the Federal Reserve, Mr. Greenspan, has told us:

       With a large deficit, you will be significantly 
     undercutting the benefits that would be achieved from the tax 
     cuts.

  He also said:

       New academic evidence had strengthened his opinion that 
     budget deficits led directly to higher interest rates, and 
     that those higher interest rates choke off economic growth.

  It is not just Chairman Greenspan. Here are 10 Nobel laureates in 
economics.
  The PRESIDING OFFICER (Mr. Graham of South Carolina). The Senator has 
used 10 minutes.
  Mr. CONRAD. I will conclude by saying the tax cut plan proposed by 
President Bush is not the answer to these problems of weak economic 
growth.
  I ask unanimous consent for an additional 30 seconds to call up my 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CONRAD. Mr. President, I ask unanimous consent to set aside the 
pending amendments.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 611

  Mr. CONRAD. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from North Dakota [Mr. Conrad] proposes an 
     amendment numbered 611.

  Mr. CONRAD. Mr. President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To make the child tax credit acceleration applicable to 2002)

       Strike page 14, line 8 through page 15, line 11, and insert 
     the following:
       ``(d) No Interest.--No interest shall be allowed on any 
     overpayment attributable to this section.''.
       (2) Clerical amendment.--The table of sections for 
     subchapter B of chapter 65 is amended by adding at the end 
     the following new item:

``Sec. 6429. Advance payment of portion of increased child credit for 
              2003.''.

       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2002.
       (2) Subsections (a) and (c).--
       (A) The amendment made by subsection (a) shall apply to 
     taxable years beginning after December 31, 2001.
       (B) The amendments made by subsection (c) shall take effect 
     on the date of the enactment of this Act.
       Strike the first table on page 8 and insert the following:

------------------------------------------------------------------------
                                     The corresponding percentages shall
                                      be substituted for the following
  ``In the case of taxable years                percentages:
  beginning during calendar year:  -------------------------------------
                                       28%      31%      36%       39.6%
------------------------------------------------------------------------
2001..............................    27.5%    30.5%    35.5%      39.1%
2002..............................    27.0%    30.0%    35.0%      38.6%
2003..............................    25.0%    28.0%    33.0%      38.6%
2004..............................    25.0%    28.0%    33.0%      37.6%
2005..............................    25.0%    28.0%    33.0%      37.6%
2006 and thereafter...............    25.0%    28.0%    33.0%      35.0%''.
------------------------------------------------------------------------

  Mr. CONRAD. The amendment increases the child tax credit from $600 to 
$1,000 and makes it retroactive to the beginning of 2002 instead of 
2003, as called for in the bill. To offset the cost, the amendment 
would delay the rate reduction for the 1 percent of taxpayers in the 
top income tax bracket from this year to 2005. I hope my colleagues 
will give it close consideration.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the pending 
amendments be temporarily laid aside so I might call up amendment No. 
612.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 612

  Mr. BAUCUS. Mr. President, I send the amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Montana [Mr. Baucus], for Mr. McCain, 
     proposes an amendment numbered 612.

  Mr. BAUCUS. Mr. President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. BAUCUS. Mr. President, this is the Military Fairness Act. I am 
offering it, and it is being cosponsored by Senator McCain.
  Very simply, this is the amendment that is Ping-Ponging back and 
forth between the House and Senate. We did pass, at one point, 
provisions that allow National Guard, Reservists, and other military 
personnel to have a level playing field and not be unfairly taxed, 
particularly while serving in our Armed Forces. One is the death 
benefits gratuity and another is the travel expenses. There are similar 
provisions like that.
  It is only fair, particularly as we are winding down the war in 
Iraq--and the hostilities there are not over--about 80 percent of the 
benefits of this amendment are to our Reservists and National Guard who 
will always be serving our country. This amendment makes very good 
sense. It is paid for by slightly reducing the rate reduction at the 
top rate. It is a very modest change. I think it is only fair and 
proper.
  Again, the major cosponsor of this amendment is the Senator from 
Arizona, Senator McCain. I urge adoption of the amendment at the 
appropriate time.
  Mr. McCAIN. Mr. President, I am proud to sponsor with my colleague 
Senator Baucus this important amendment to S. 1054, the Jobs and Growth 
Tax Act of 2003. This amendment would simply add the Armed Forces Tax 
Fairness Act of 2003, as previously passed by this body, to the growth 
bill. This amendment is much needed tax relief for our men and women in 
uniform whose sacrifice and commitment are the foundation upon which 
the freedom we all enjoy is built. There are a number of provisions to 
this amendment that many of us have worked on for several years.
  One of the provisions I would particularly like to highlight today is 
section 601. The Military Home Owners equity Act has passed this body 
previously on a 97-to-0 vote. This legislation would allow service 
members, who are away on extended active duty, to qualify for the same 
tax relief on the profit generated when they sell their main residence 
as other Americans. I am pleased to announce that Secretary of State 
Colin Powell fully supports this legislation and this legislation 
enjoys overwhelming support by the senior uniformed leadership--the 
Joint Chiefs of Staff--as well as the Office of Management and Budget 
Director Mitch Daniels, the 31-member associations of the Military 
Coalition, the American Foreign Service Association, and the American 
Bar Association.
  The average American participates in our Nation's growth through home 
ownership. Appreciation in the value of a home allows everyday 
Americans to participate in our country's prosperity. Fortunately, the 
Taxpayer Relief Act of 1997 recognized this and provided this break to 
lessen the amount of tax most Americans will pay on the profit they 
make when they sell their homes. Unfortunately, the 1997 home sale 
provision unintentionally discourages

[[Page 11574]]

home ownership among service members and Foreign Service Officers.
  This provision will not create a new tax benefit, it merely modifies 
current law to include the time service members are away from home on 
active duty when calculating the number of years the homeowners have 
lived in their primary residence. In short, this provision is narrowly 
tailored to remedy a specific dilemma.
  The Taxpayer Relief Act of 1997 delivered sweeping tax relief to 
millions of Americans through a wide variety of important tax changes 
that affect individuals, families, investors, and businesses. It was 
also one of the most complex tax laws enacted in recent history, and 
unfortunately our service men and women were left out of this critical 
tax relief act.
  The 1997 act gives taxpayers who sell their principal residence a 
much needed tax break. Prior to the 1997 act, taxpayers received a one-
time exclusion on the profit they made when they sold their principal 
residence, but the taxpayers had to be at least 55 years old and live 
in their residence for 2 of the 5 years preceding the sale. This 
provision primarily benefitted elderly taxpayers, while not providing 
any relief to younger taxpayers and their families.
  Fortunately, the 1997 act addressed this issue. Under this law, 
taxpayers who sell their principal residence on or after May 7, 1997, 
are not taxed on the first $250,000 of profit from the sale, joint 
filers are not taxed on the first $500,000 of profit they make from 
selling their principal residence. The taxpayer must meet two 
requirements to qualify for this tax relief. The taxpayer must (1) own 
the home for at least 2 of the 5 years preceding the sale, and (2) live 
in the home as their main home for at least 2 years of the last 5 
years.
  I applaud the bipartisan cooperation that resulted in this much 
needed form of tax relief. The home sales provision sounds great, and 
it is. Unfortunately, the second part of this eligibility test 
unintentionally and unfairly prohibits many of the women and men who 
serve this country overseas from qualifying for this beneficial tax 
relief.
  Constant travel across the United States and abroad is inherent in 
the military and Foreign Service. Nonetheless, some service members and 
Foreign Service officers choose to purchase a home in a certain locale, 
even though they will not live there much of the time. Under the new 
law, if they do not have a spouse who resides in the home during their 
absence, they will not qualify for the full benefit of the new home 
sales provision because no one ``lives'' in the home for the required 
period of time. The law is prejudiced against families who serve our 
Nation abroad. They would not qualify for the home sales exclusion 
because neither spouse ``lives'' in the house for enough time to 
qualify for the exclusion.
  This amendment simply remedies an inequality in the 1997 law. The 
bill amends the Internal Revenue Code so that service members and 
Foreign Service officers will be considered to be using their house as 
their main residence for any period that they are assigned overseas in 
the execution of their duties. In short, they will be deemed to be 
using their house as their main home, even if they are stationed in 
Bosnia, the Persian Gulf, in the `no man's land,'' commonly called the 
DMZ between North and South Korea, or anywhere else they are assigned.
  In the wake of September 11 and operations in Iraq and Afghanistan, 
our Armed Forces are now deployed to an unprecedented number of 
locations, in very significant numbers. They are away from their 
primary homes, protecting and furthering the freedoms we Americans hold 
so dear. We cannot afford to discourage military service by penalizing 
military personnel with higher taxes merely because they are doing 
their job. Military service entails sacrifice, such as long periods of 
time away from friends and family and the constant threat of 
mobilization into hostile territory. We must not use the Tax Code to 
heap additional burdens upon our women and men in uniform.
  In my view, the way to decrease the likelihood of further 
inequalities in the Tax Code, intentional or otherwise, is to adopt a 
fairer, flatter tax system that is far less complicated than our 
current system. But, in the meantime, we must ensure that the Tax Code 
is as fair and equitable as possible.
  The Taxpayer's Relief Act of 1997 was designed to provide sweeping 
tax relief to all Americans, including those who serve this country 
abroad. Yes, it is true that there are winners and losers in any tax 
code, but this inequity was unintended. Enacting this narrowly tailored 
remedy to grant equal tax relief to the members of our Uniformed and 
Foreign Services restores fairness and consistency to our increasingly 
complex Tax Code.
  I would like to thank Senator Baucus and the chairman of the Finance 
Committee, Senator Grassley, for their superb effort on behalf of our 
soldiers, sailors, airmen, marines, and Foreign Service officers. As I 
stated earlier, the provisions in this amendment are issues we have 
needed to fix for a long time. Let's get it passed this year and 
finally enacted into law.
  Mr. GRAHAM of South Carolina. I rise today to tell you about an 
urgent issue in my State that could benefit from the same relief this 
bill provides for Arkansas schools. The relief is known as ``advance 
refunding.''
  Just like homeowners, municipally owned utilities are able to 
refinance or ``refund'' their bonds. But the Tax Code permits them to 
do this only once. Imagine if you had refinanced your home at 7.5 
percent a few years ago. Having taken that one opportunity, now that 
rates are at 5.15 percent, you would not be permitted to do another 
refinancing. You would miss out on this opportunity to refinance.
  There is a utility in my State that finds itself just in this 
position and all of the utility's consumers suffer the consequences. 
Without an additional advance refunding, it customers face significant 
rate increases as the utility struggles to remain competitive in the 
restructured marketplace while paying off debt it incurred to bring 
electricity to many customers in my State. I want my constituents to 
enjoy stable rates just as I know yours do, Mr. Chairman. I ask if you 
would work with me in this conference to provide additional advance 
refunding relief to meet this urgent need in my State.
  Mr. GRASSLEY. I agree that an additional advance refunding 
opportunity would be helpful and practical in your situation and in 
others. I will work with you in conference to see if there is an 
opportunity to accommodate you.
  Mr. BAUCUS. Mr. President, tomorrow, an amendment will be offered--I 
am not sure by whom; it may be Senator Nickles from Oklahoma--which 
accelerates the dividend exclusion provisions considerably beyond the 
provisions that are in the Finance Committee bill. Our understanding is 
it is a 50 percent exclusion in the first year, 2003, and 100 percent 
up through 2006, and after that the provision will be sunsetted.
  I will make a couple of comments because we will not have time to 
comment on it tomorrow at any length. One is that this is a significant 
increase from the committee bill, which costs $80 billion. My 
understanding is that this amendment will cost in the neighborhood of 
$124 billion. How is the $40 billion difference going to be paid for?
  Clearly, there is going to have to be cutting back on other tax 
cuts--whether it is the marriage penalty or whatever--to bring that to 
the attention of Members who may believe it is better to have a child 
tax credit or a marriage penalty and whatnot.
  And I have not seen the amendment, so I am not exactly sure of the 
provisions, but from all indications, it will eliminate the provisions 
in the President's dividend exclusion, which will require that before a 
dividend can be paid, a company would have to pay income taxes in the 
prior year. If that provision is eliminated, that is going to mean that 
we are not only ending double taxation of dividends, in many cases we 
will be ending single taxation of dividends, which, in a sense, will 
mean dividends will be tax-free. All American wages will be taxed, 
interest income will be taxed, and other ordinary income is going to be 
taxed. But

[[Page 11575]]

if a company did not pay taxes in the prior year, then the company will 
be basically giving dividends to shareholders, and there will be no tax 
on them, not at the individual level or the corporate level. That, I 
think, is a gross miscarriage of justice.
  For that additional reason, I hope the Senate does not adopt that 
provision when we vote on it tomorrow.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.

                          ____________________