[Congressional Record (Bound Edition), Volume 152 (2006), Part 1]
[Senate]
[Pages 458-509]
[From the U.S. Government Publishing Office, www.gpo.gov]




            TAX RELIEF EXTENSION RECONCILIATION ACT OF 2005

  The PRESIDENT pro tempore. Under the previous order, the Senate will 
proceed to the consideration of H.R. 4297, which the clerk will report.
  The legislative clerk read as follows:

       A bill (H.R. 4297) to provide for reconciliation pursuant 
     to section 201(b) of the concurrent resolution on the budget 
     for fiscal year 2006.

  Mr. FRIST. I suggest the absence of a quorum.
  The PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. FRIST. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDENT pro tempore. Without objection, it is so ordered.


                   RECOGNITION OF THE MAJORITY LEADER

  The PRESIDENT pro tempore. The majority leader is recognized.


                                SCHEDULE

  Mr. FRIST. Mr. President, today, in just a short while, we will begin 
consideration of the House-passed tax reconciliation bill. As Senators 
remember, the Senate passed our bill, the Senate bill on November 18. 
We considered the bill for 3 days and after 17 votes, passed the bill 
with a 64-to-33 vote. With the two bills now complete, we would 
normally reach agreement to send them to conference to produce a final 
conference report. I have had a number of conversations with the 
Democratic leader on this matter. I know Members on his side of the 
aisle will object and desire to start the House bill with the 20 hours 
remaining under the statute. That is their right and that is what we 
will be doing.
  We have already considered the Tax Relief Act of 2005, and it is not 
my desire to take up any more of the Senate's time on this bill. We do 
need to move forward and get both bills to conference in order to reach 
an agreement on final language. That would take unanimous consent and, 
with objection from the other side, we have no choice but to proceed in 
the manner that we will, under statute over the next 20 hours. I do ask 
that Senators on both sides of the aisle use restraint and try not to 
use their entire block of time.
  Much of the discussion that carried on in the quorum call is how we 
can organize that in such a way to consider amendments appropriately 
and in a reasonable way. But we should not have to use all 20 hours. We 
have a lot of other important issues to consider.
  In the meantime, we will be on the reconciliation bill throughout the 
day and the evening and the rest of the week until we finish the 
measure.
  I ask unanimous consent that after the House bill is reported, we 
begin a period of morning business, as under the order from last night, 
and further, that following the scheduled morning business period, the 
bill be open for debate only until later today when either I or the 
assistant majority leader is recognized.
  The PRESIDENT pro tempore. Is there objection?
  Mr. REID. Reserving the right to object, I haven't talked 
specifically to either one of the Republican leaders about this, but I 
would like that to be amended. We did not clear time for Senator Durbin 
to speak as in morning business. I ask unanimous consent that he be 
allowed to speak in morning business for 15 minutes, and another 15 
minutes would be added to the time of the majority, and that the only 
thing that would be out of the ordinary is that Senator Durbin would be 
recognized. The Republicans are to have the first half hour. I ask that 
Senator Durbin be recognized for 15 minutes. He has to give a speech. 
He could be recognized to use his additional 15 minutes when we start 
morning business.
  The PRESIDENT pro tempore. Is there objection?
  Mr. REID. We understand that additional half hour would come out of 
the time on the resolution.
  Mr. FRIST. As I understand it, all morning business time, including 
this additional 30-minute increment, would be part of the 20 hours.
  The PRESIDENT pro tempore. Is there objection to the request of the 
Democratic leader?
  Mr. FRIST. Reserving the right, the recognition prior to Senator 
Durbin would be to Senator Bond?
  Mr. REID. I am trying to get to Senator Durbin so he can go downtown 
and give a speech. How long will the Senator from Missouri be talking?
  Mr. FRIST. We have the initial 30 minutes. Is the request made to 
talk within our 30 minutes?
  The PRESIDENT pro tempore. The Chair understands the request is for 
Senator Durbin to speak before the 30 minutes commences.
  Mr. REID. Through the Chair to the Senator from Missouri, how long 
will you be speaking?
  Mr. BOND. Mr. President, responding to the distinguished minority 
leader, I plan to speak about 10 minutes. I would be happy to allow 
Senator Durbin to go first. I have some obligations.
  Mr. REID. I am wondering if after you complete your speech, could he 
go ahead and do his?
  Mr. FRIST. Mr. President, reserving the right to object, we had 30 
minutes. Our people are not here, but they were lined up. The plans had 
been scheduled. I request that the Senator from Illinois speak right 
after our 30 minutes, the first part.
  Mr. REID. That is OK. I didn't want to use leader time, but we will 
work it out. We have an extra 15 minutes on each side.
  The PRESIDENT pro tempore. The agreement is to add 30 minutes to the 
original hour?
  Mr. REID. That is correct.
  The PRESIDENT pro tempore. Is there objection?
  Mr. REID. And the Republicans' 45 minutes is first.

[[Page 459]]

  The PRESIDENT pro tempore. Without objection, it is so ordered.
  Under the previous order, there will be a period for transaction of 
morning business for up to 90 minutes, with the first half of the time 
under the control of the majority leader or his designee, and the 
second half of the time under the control of the Democratic leader or 
his designee, with the time counted against the underlying statutory 
time limitation on the bill.
  Who yields time?
  The Senator from Missouri is recognized.


                    Commending Our Military Overseas

  Mr. BOND. Mr. President, I rise today to recognize and commend the 
valiant efforts of our men and women who are serving overseas. Almost 
4\1/2\ years after the dreadful events of September 11 seized our 
Nation, brave Americans continue to serve overseas in our response to 
those attacks. During the past 2 months, I have visited with our 
troops, agency operators, and aid workers in two areas I believe are 
the two fronts of the war on terrorism, the Near East and Southeast 
Asia. Those I met with in the Philippines, Indonesia, Thailand, Iraq, 
Afghanistan, and Pakistan all relayed to me, on the whole, very 
encouraging reports. In Iraq, our congressional delegation, which 
included Senator Bayh, Senator Obama, Representative Ford, and I, was 
told by intelligence officials that in spite of the increasing numbers 
of IEDs, improvised explosive devices, attacks, they see more reason 
for optimism this year than they did in the previous year, and they see 
it as no small achievement that many of the insurgent groups are 
joining the political process. From Iraqi President Jalal Talabani, to 
U.S. Ambassador Zalmay Khalilzan, to U.S. military commanders, 
intelligence officials, aid workers, and the Iraqi people themselves, 
everyone told us that this year will be a bellwether year for Iraq in 
which we see the potential for great achievements. But we need to make 
progress in three key areas:
  First, the Iraqis must ensure that a national unity government reigns 
in Baghdad. This was emphasized by President Talabani. The Sunni, Shia, 
and Kurds have to work together to incorporate all three parties in one 
governing structure. We were all greatly encouraged by the 77-percent 
voter turnout in the December general elections, as it evidences that 
more and more Iraqis are buying into the wonderful concept of 
democracy. Now they need to show us they are willing to work together 
as we provide them assistance and stability.
  Second, we need to focus our primary efforts in standing up Iraqi 
police and domestic forces this year. Civilian authority must reign in 
Iraqi cities for citizens to gain confidence in their new democratic 
form of government.
  Third, we must continue to provide maximum assistance for 
reconstruction efforts so that more Iraqis may gain access to 
electrical power, use water and sewer systems, and drive safely on 
their roads.
  This is not to say we have not already made significant gains in 
these areas, for everywhere I went our troops and workers expressed to 
me their disappointment that the tremendous achievements we have made 
have gone largely unreported in the U.S. media. One phrase I heard used 
often in our major networks is: If it bleeds, it leads. They talk about 
the tragedies and the losses, but they somehow fail to talk about the 
progress we have made. A few suicide bombings per day executed by 
wayward individuals, mindless terrorists, who are willing to sacrifice 
themselves, is apparently a higher priority in the media than acts of 
sacrifice, courage, and commitment by several hundred thousand 
coalition workers and over 26 million Iraqis. To be sure, Iraq is a 
dangerous place--the day before we arrived at one base, five of their 
marines had been killed--but it is also a place of tremendous 
transformation, and over the past year our progress is often crowded 
out on the evening news.
  But we must not lose our resolve. As the President said last night:

       In all these areas, from disruption of terrorist networks, 
     to victory in Iraq, to the support of freedom and hope in 
     troubled regions, we need the support of friends and allies. 
     To draw that support we must always be clear in our 
     principles and willing to act. The only alternative to 
     American leadership is a dramatically more dangerous and more 
     anxious world.

  The President also addressed his terrorist surveillance program. He 
said:

       This program has helped prevent terrorist attacks in our 
     country. It remains essential to the security of America. If 
     there are people inside our country who are talking with al-
     Qaida, we want to know about it because we will not sit back 
     and wait to let it happen again.

  That is what I hear from the people I talk to in my home State.
  In Afghanistan, also, phenomenal progress has been made. Yet what we 
hear about on the daily news are the incidents of terrorism that grab 
headlines. Today in London, the international community is coming 
together to chart the course for Afghan assistance for the next few 
years. This is a vital meeting where peace-loving nations will commit 
to invest in Afghanistan's newfound democracy. Afghanistan is in a very 
different situation from Iraq, yet it currently has two of the same 
pressing needs: the standup of strong, reliable, civil-controlled 
interior security forces and infrastructure development.
  I also heard from our leaders on the ground, including President 
Karzai of Afghanistan and our commander of that region, General 
Eikenberry, that Afghanistan desperately needs a viable agriculture and 
farm credit system. We need to get the farmers back on their feet so 
they do not turn to poppy production to feed their families. We have 
tremendous agricultural resources in our country, as the occupant of 
the chair knows. We can leverage these resources to help gain leverage 
for international security in Afghanistan. I have written the U.S. 
Secretaries of State, Defense, and Agriculture to encourage their 
cooperation in developing a joint venture to put Afghan farmers back on 
their feet. I envision a corporate venture between State, USAID, the 
Defense Department, the Department of Agriculture, land grant colleges 
and universities, and private sector volunteers, working together to 
provide Afghanis with viable forms of agriculture. This endeavor would 
counter the significant drug problems in Afghanistan and destroy the 
incentive that many farmers face in deciding to grow poppy. Existing 
counternarcotics funds in the Defense budget would be well spent in 
this area by giving farmers a way out of drug production. I am more 
than willing to encourage assistance from the colleges and universities 
in Missouri and to work legislatively with my colleagues on a proposal 
to move this initiative forward.
  In Afghanistan, there is now enough security in many areas to put 
less of an emphasis on warfighting and more emphasis on the livelihoods 
of the Afghan people we are there to serve. This is one of the most 
effective ways to invest in our national security for the future--
making an investment in their infrastructure and assisting them to 
develop a viable economic means of earning a living, without turning to 
the production of poppy, which leads to the production of dangerous 
drugs.
  Finally, I will address an issue of great frustration to me. Over the 
past year, there seems to have arisen in our national security 
community an apparent absence of fear of punishment in regard to the 
arbitrary and senseless divulging of our most secret and classified 
intelligence information. I am talking about individuals who have taken 
solemn vows to protect our Nation, who are breaking these vows for 
their own particular purposes. In taking a vow to protect classified 
information, one must acknowledge that he or she will be privy to 
information that, if divulged, could be very harmful to their fellow 
Americans. They acknowledge a solemn trust by the people of the United 
States to protect classified information and thereby to protect their 
neighbors and themselves. I myself am under an obligation as a Senator, 
and particularly as a member of the Senate Intelligence Committee, to 
protect classified information. I believe the access I have to such 
information is a privilege and a solemn trust, and

[[Page 460]]

how I handle that information has repercussions.
  For example, it has come to my attention from a variety of 
intelligence officials on the ground, on the front lines, who have told 
us that the leaks in the past year have adversely and significantly 
affected our intelligence operations and thus diminished our national 
security. It is my view that we are much less safe in our homeland 
because of some of the actions we have taken, some by legislation, but 
primarily by individuals disclosing information that has been 
classified for good reason. Potential sources in the regions I have 
visited are now refusing to speak with U.S. officers or to cooperate 
with them for fear of their information leaking. They see some of our 
most sensitive programs on the front pages of our newspapers and 
conclude that we are a nation that has no respect for classified 
information. As a result, we are less likely to get information we need 
because sources are rightfully fearful that disclosure of their 
information could lead to their identification and the assassination of 
the sources themselves and probably their families.
  Would you or I want to put our lives and the lives of our families in 
the hands of a nation that we believed could not keep a secret? Of 
course not. Last month, the Arab news network al-Jazeera aired a tape 
by Osama bin Laden warning the U.S. of future terrorist attacks planned 
for our Nation. On Monday of this week, his deputy, the infamous and 
deadly Ayman al-Zawahiri, taunted President Bush on videotape for not 
killing him at Damadola, a village in Pakistan--in the ungovernable and 
unreachable areas of Pakistan. These tapes demonstrate that the threat 
from al-Qaida is present and very real. From my personal visit to that 
area, I can tell you that that area of Pakistan, the tribal areas in 
which they operate, is truly a hostile environment to all foreigners, 
and not just to the United States, or British, or Australians, but to 
representatives of the Pakistan Government. When we drove out toward 
the tribal areas, we were faced with a sign that said ``foreigners not 
allowed.'' When we drove up to that checkpoint, five men with AK-47s 
stepped out in the road in front of us. I thought this was a good 
signal to turn back.
  We have a great difficulty in getting information on what is going on 
in that area. But leaks of our secrets and our top sensitive programs 
are killing one of our last lines of defense against pending terrorist 
attacks. I think any reasonable person would agree.
  This is an election year. Some may be content to play politics with 
our national security. I am not one of them. I don't think the people 
of America appreciate that. For me, I will do all in my power to ensure 
that we move forward in the work that needs to be done to strengthen 
our national security. I invite my colleagues, no matter their 
political persuasion, to join me in this endeavor. This, to me, is a 
very significant challenge, a challenge from which we cannot retreat. 
We must persevere and we must remedy the costs to our intelligence 
gathering that is so essential in a war against terror. We must help 
countries develop strong economies and democratic structures, 
recognizing human rights and civilian control of forces. This is a 
challenge that is ours to keep and we must not slack from that effort.
  Mr. President, I yield the floor.
  The PRESIDENT pro tempore. The Senator from Pennsylvania is 
recognized.


                       STATE OF THE UNION SPEECH

  Mr. SANTORUM. Mr. President, I congratulate the Senator from Missouri 
for his excellent comments. I join with him in talking about some of 
the issues the President brought up with respect to the State of the 
Union and, in particular, some of the issues confronting us overseas.
  Before I do that, I congratulate the President for focusing like a 
laser beam on the crucial issues we have to deal with on the domestic 
side--the issues of health care, doing something to curb health care 
costs, improving the efficiency of the system through technology, 
expanding access through both health savings accounts and tax credits 
to those health savings accounts to let more people who do not have 
employer-provided health care purchase health insurance; his 
initiatives on competitiveness and education, preparing all of our 
students, K-12 as well as in college, for the new technology jobs that 
will be available; and an emphasis on improving the quality of 
education through teacher training, as well as providing opportunities 
and incentives for folks who get into the areas of math and science--
very important initiatives.
  Obviously, there was a lot of focus on energy. It has profound 
national security implications, as the President laid out.
  The President cited our addiction to oil and laid out a charge for us 
to reduce our dependency. It is a great aspirational goal for a 
President to lay out and charge all of us, on both sides of the aisle, 
to come forward with our best ideas to create more energy in the United 
States using the great minds and the technologies being developed in 
our university communities and in our laboratories.
  We are going to work very diligently on trying to address energy 
again in this session of Congress, to build on what we did last year.
  We bring up the tax bill, what I call the Tax Increase Prevention 
Act, which is to continue the presence of progrowth policies that have 
resulted in dramatically increasing revenues to the Federal Government 
because we have seen dramatic improvement in the health of the economy, 
more jobs being created, stronger investment, more capital investment 
which has led to more capital gains taxes than otherwise anticipated. 
We actually have seen an increase in capital gains taxes over what was 
anticipated prior to reduction. Here we reduced the rate and got more 
revenue. It is something many of us here have been arguing for a long 
time, and we see it borne out with the issue of capital gains.
  Again, one of the hindrances of our economic system right now is 
lawsuit abuse and the horrific trauma some of these unscrupulous trial 
lawyers--there are a lot of good trial lawyers, but there are some 
unscrupulous ones, a small percentage, who are wreaking havoc on our 
society, which we will deal with after the Tax Increase Prevention Act, 
and also medical liability, frivolous lawsuits in a whole host of other 
areas, obesity lawsuits and the like. We need to get our arms around 
that and have a much more rational system. The President called for 
that.
  Finally, there is the issue of fiscal responsibility, tighter 
spending. I think he is going to propose a very tough budget for next 
year. It will be tough to get done, but I think many of us are looking 
forward to the kind of fiscal discipline we believe this country needs 
as we enter a period of time when the baby boomers are going to start 
to retire and the pressure on us is going to grow dramatically, 
exponentially.


                 U.S. SERVICE MEMBERS' SUCCESS IN IRAQ

  Mr. SANTORUM. Mr. President, the reason I have come to the Chamber to 
speak is because I received a letter recently, which was passed on to 
me, from a soldier in Iraq. This was passed on to me by his parents. 
This is not a letter he sent to me; he sent it to his parents and his 
friends telling about his experience in Iraq.
  The letter was written on December 15 of last year. His parents 
wanted me to see it to share their son's experience of what is going on 
and to juxtapose that with what some in this Chamber have been saying 
is going on in Iraq, as certainly many in the national media say. It 
dovetails nicely with what the President said last night and the 
advances and the progress that are being made in Iraq. Instead of 
hearing my words, I will read what this fine soldier--this fine 
Pennsylvania soldier--said to his friends in writing from Baghdad. It 
says:

       Friends, I apologize in advance for this mass email. I felt 
     I had to gather every email address I had and send a message. 
     . . . I am writing this from outside of Baghdad, and this is 
     how I see the war from my small corner. This is my opinion 
     only, and not the position of the U.S. Army or government (I 
     think I have to say it).
       The bottom line is that I have witnessed enormous progress 
     in just my short four

[[Page 461]]

     months in Iraq. We are on the right path, and we must 
     complete our mission here.
       Democracy is Winning:
       The election today was a great success with more voters and 
     less violence than anyone imaged. I sat in our operations 
     center watching reports come in. I think the biggest 
     emergency was getting a busload of students to the polls 
     despite the ban on driving (Iraqi police escorted them). 
     Building democracy is a slow process that must be shepherded 
     along the way, but clearly the majority of Iraqis want to 
     participate in a democratic process and have a democratic 
     government. This is evident all the way from the neighborhood 
     councils to these national elections. The choice is between 
     terrorism and democracy . . . and 15 million chose democracy.
       We are Defeating the Enemy:
       Our battalions in our area have routed out much of our 
     enemy, forced them to ground, or forced them to flee. The 
     Marine and Army actions in the west have cut off new recruits 
     and supplies. If a bad guy does something, nine out of ten 
     times, he pays for it. The threat is shifting from terrorism 
     to one that is more criminal in nature, but make no mistake, 
     the insurgency is not over. This is driven by the casualties 
     we have taken in our unit, though they have been gratefully 
     few. The insurgency will continue even as Iraqis take over 
     the fight, and it may continue for years, but it is waning, 
     there is no doubt.
       The Iraqi Army is Effective:
       I can only speak for our area, but here the Iraqi Army 
     units are motivated and effective. We continue to turn over 
     more and more of the city to the Iraqi Army and they have 
     done well at continuing to defeat the insurgents. The Iraqi 
     Army and police successfully provided all of the security for 
     the elections in our area, with our units acting only as a 
     quick reaction force if required. We continue to partner U.S. 
     soldiers with Iraqi units and they continue to improve. It is 
     inevitable that they will be able to carry the full burden 
     securing their country in the near future.
       Consequences:
       The consequences of pulling out too early are enormous. It 
     would likely lead to a civil war and terrorist haven in Iraq, 
     possibly dragging the entire region into further turmoil. Al 
     Qaeda would be encouraged to continue to attack America, at 
     home and abroad. Staying to finish this fight, though more 
     soldiers will lose their lives, is a much smaller price to 
     pay. The benefits of creating a modest democracy in Iraq are 
     also enormous. The people of Iran, Syria, and Saudi Arabia 
     will witness the benefits of an open democracy and, 
     hopefully, pressure the governments to change. What was a 
     swelling of jobless, dissatisfied Arab young men, easily 
     recruited to the ideology of terror just a few years ago, 
     will soon have nonviolent outlets through democracy and an 
     economic future through open markets.
       Negative Political and Media Comments are Damaging our 
     Efforts:
       I want to make it unequivocally clear that political 
     comments about pulling out of Iraq or losing this war does 
     hurt soldier morale and absolutely gives hope and 
     encouragement to our enemies. The only way the terrorists can 
     win in Iraq is if the American people lose the will to finish 
     what we started and withdraw early. Now our battered enemies 
     have been given a sliver of hope by weak politicians, so they 
     will fight on and gain additional recruits. This political 
     mistake will cost more blood than any military error yet made 
     in this war. Of course the crime is worsened by an alarmist 
     media always willing to tell everyone the sky is falling. 
     Well, it is not. The great thing is that the support regular 
     American citizens show for their soldiers is overwhelming and 
     counters the negative political and media comments. Care-
     packages, cards, e-mails, and letters are abundant, and send 
     a strong message to those of us in the fight.
       There is a Plan:
       And the plan is that we pull U.S. soldiers out as Iraqis 
     become strong enough to secure themselves. We are doing this 
     little by little, slowly withdrawing and turning security 
     over to the Iraqis. Slow and methodical is the key, not a 
     rushed abandonment of our allies and friends. A vacuum in the 
     wake of a rapid U.S. pullout would only be filled by chaos.
       Like almost all soldiers here, I would like to go home. For 
     me it would be to see my young children and wife. However, in 
     the end I would prefer to stay until the job is done, or 
     return for a second tour. I say this because I recognize that 
     we are making progress, and that we will win . . . and I 
     recognize the cost of failure. I do not want my family to be 
     a target of terrorism in my homeland, nor do I want my son to 
     have to fight the war I should have finished.
       Thank you for taking the time to read this. I hope it helps 
     balance what you are hearing in the media.

  This soldier wrote this letter on his own. No one called him or wrote 
him or asked him to write this letter. He did it, obviously, because he 
cares a lot about his country, his family, and the future security of 
our country.
  I can tell you that this is not an unusual letter I have received or 
an unusual comment I have been given by soldiers who have returned from 
their duty in Iraq. It is almost unanimous. The sentiments expressed in 
this letter are the sentiments I hear, whether it is talking to folks 
back in Pennsylvania, talking to folks at Walter Reed or Bethesda. I 
hear it over and over--the optimism, the high morale, the sense of 
accomplishment, and the fact that we are, in fact, winning this 
conflict in Iraq.
  I will tell you that I agree with him, that we are making progress, 
that we have a plan, that democracy is winning, we are defeating the 
insurgents, the Iraqi army is becoming more capable and effective each 
day, and, as he said, there are real consequences of losing, of 
withdrawing before the job is finished, and that the defeatist rhetoric 
and the media bias do have an impact on our ability to accomplish this 
task.
  It is far too often in this country, now that we are 4\1/2\ years 
removed from the events of 9/11, that we forget what happened there and 
what happened before; that we were not antagonizing our enemy, we were 
not out there riling up the insurgency, we were not threatening 
terrorists around the world. We were ``minding our own business,'' and 
they hit us and hit us hard.
  My wife and part of my family watched the A&E special the other night 
on flight 93. I encourage every American to watch that just to be 
reminded of, obviously, the incredible heroism of the members of that 
ill-fated flight but also of what we are up against and what they are 
willing to do to take down our way of life.
  We have a job to do, and we need to finish it, and that includes we 
have a job to do in the U.S. Congress. We have to pass the PATRIOT Act. 
It is absolutely irresponsible for us to have every few months or few 
weeks the PATRIOT Act potentially not being extended, out there hanging 
over our law enforcement people. We need to improve the PATRIOT Act, 
pass it, improve both civil liberties and our ability to protect 
ourselves, and we need to do it now.
  We also need to stand behind our President in his efforts to make 
sure we are intercepting communications between suspected al-Qaida 
terrorists and those who want to coordinate from places all over the 
world.
  I hear often in reference to the events of 9/11 that the critics of 
the administration are saying they failed to connect the dots. I don't 
know how many times I have heard that the President or the 
administration or the intelligence community failed to connect the 
dots. And these very same people today want to erase the dots. They 
don't even want us to have the dots to connect. They don't want us to 
get the intelligence so we can, in fact, proceed in having those dots a 
little closer together so we have an idea of in what direction they are 
going.
  This is not a political folly of the President, to track down enemies 
of the administration and eavesdrop on them. This is a targeted program 
run by professional people of suspected al-Qaida terrorists who are 
communicating overseas. I find it almost incredible that this has 
become a political football in this overtly and, I believe, extreme 
political environment we are in right now.
  I am hopeful that the rhetoric will back off and that we will focus 
again on what this soldier said. We have a mission to accomplish--to 
protect America and to secure our freedom in the future--and we need to 
do so together, in a bipartisan manner, without snipping at each 
other's heels trying to get political advantage. Simply support the 
mission that is best for the long-term future of our security.
  I have one final comment on the NSA program of trying to uncover 
terrorists who are potentially planning and plotting further 
destruction in America.
  It came from an op-ed that I read in the Wall Street Journal the 
other day, from the sister of Charles Burlingame. He was one of the 
pilots on American Airlines flight 77. He was from my State. I had the 
opportunity to meet his wife and members of his family.
  Debra Burlingame writes in the Wall Street Journal this week:

       NBC News aired an ``exclusive'' story in 2004 that 
     dramatically recounted that how

[[Page 462]]

     al-Hazmi and al-Mihdhar, the San Diego terrorists who would 
     later hijack American Airlines flight 77 and fly it into the 
     Pentagon, received more than a dozen calls from an al Qaeda 
     ``switchboard'' inside Yemen where al-Mihdhar's brother-in-
     law lived. The house received calls from Osama Bin Laden and 
     relayed them to operatives around the world. Senior 
     correspondent Lisa Myers told the shocking story of how, 
     ``the NSA had the actual phone number in the United States 
     that the switchboard was calling, but didn't deploy that 
     equipment, fearing it would be accused of domestic spying.'' 
     Back then, the NBC didn't describe it as ``spying on 
     Americans.'' Instead, it was called one of the ``missed 
     opportunities'' that could have saved 3,000 lives.

  It is a classic case in point where people complained about 
connecting the dots, but in this case we simply did not have the dots 
because we were afraid to go out and find the information we needed to 
prevent the loss of lives in America.
  Don't hamper our ability to do that in the future. Quit playing 
politics with the safety and security of the American public.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Vitter). The Senator from Alaska is 
recognized.
  Ms. MURKOWSKI. Mr. President, how much time remains on the majority 
side?
  The PRESIDING OFFICER. There remain 12\1/2\ minutes on the majority 
side


                           Affordable Energy

  Ms. MURKOWSKI. Mr. President, I want to take a few minutes this 
morning to speak to the issue of affordable energy that the President 
raised last night in his State of the Union Address. He said that 
keeping America competitive requires affordable energy. I think all of 
us across the country are certainly keying in to the terminology that 
he used, ``affordable energy.''
  Right now what we are seeing is causing us to choke a little bit at a 
time when world oil prices are back up to nearly $68 a barrel for crude 
oil. Yesterday, it was $67.95 for a barrel of crude oil. This is after 
even an unusually warm winter in the Northeast.
  Gasoline prices nationally are averaging $2.34 a gallon. This is up 
nearly a quarter in the past several weeks, according to the Automobile 
Club of America. So when we are talking about energy supplies, it is 
the prices that people in the United States are really focused on. It 
is not just when it comes to paying the price at the pump, it is also a 
very heavy reminder to us as we receive our utility bills every month 
and as we look at the ever-increasing price of natural gas and what it 
is costing to heat our homes. The cost of home heating fuel in my State 
of Alaska is through the roof. We have families, we have whole 
communities that are struggling to make their payments, wondering how 
cold this winter is really going to be and what it is going to mean to 
them in terms of the availability of fuel and their ability to pay. It 
might be warm here, but it is the coldest January that interior Alaska 
has seen in probably 30 or 35 years or so. The average temperature in 
Fairbanks this past month has been--I think it was 22 degrees below 
zero, but that is just the average. So it is cold there. So when we 
talk about the cost of home heating fuel and what it means to people, 
it really does hit home.
  The President said last night that we must reduce our reliance on 
Middle Eastern sources of oil. He is setting a goal for us to reduce 
that reliance by 75 percent. He suggests the way we need to do it, the 
way we have to get there, is to utilize technology to promote new 
energy sources and new efforts at energy efficiency. But, really, it 
comes down to the technology.
  As we all know, just last year we finally were successful in moving 
forward a comprehensive energy bill that promotes ethanol production, 
promotes hydrogen fuel cell development, promotes energy from biomass, 
ocean currents, new generation of nuclear power--we took positive steps 
last year through that bill. The President has clearly recognized that 
and is seeking to move forward on that agenda and improve on that. He 
spoke specifically to enhanced wind, solar, ethanol through saw grass. 
He is looking to that technology that will reduce our reliance on 
foreign sources of oil.
  He said, further, we must also change how we power our automobiles. 
This is significant. It is important. We agree we must work toward this 
particular goal. We must change how we power our automobiles. But we 
also have to keep in mind that it is not just the automobiles that are 
using the oil that we consume as a nation. Think about how we get here, 
through the airplanes, the aviation fuel, the diesel products, the 
petrochemical products that we consume as a nation--whether it is Band-
Aids or CDs or cosmetics. So much of what we utilize in our daily 
products is petroleum based.
  While we must be honest and say we must figure out another way to 
power, to fuel our vehicles, we have to recognize that to a certain 
extent we will still need oil in our society. We will still need these 
petroleum-based products. We will still need aviation fuel for our 
aircraft.
  So how do we get to where the President wants to get, which is a 
reduced reliance on foreign sources? It is all about what we do 
domestically. It is all about what we do with our innovation to provide 
for additional resources domestically so we are not reliant on Middle 
Eastern oil, we are not reliant on the OPEC countries. We have to do 
more in a balanced way to use the new technology to increase the 
domestic energy production from conventional sources. This means 
producing more oil, more natural gas, and more coal from American land.
  Last night, the President specifically mentioned coal and the use of 
zero-emissions coal. This is what we need to be doing, where we need to 
be going. But when it comes to oil production, you have heard me on the 
floor of the Senate, and Senator Stevens on the floor of the Senate, 
talking about what the potential is up north in Alaska on a tiny 
portion of Alaska's coastal plain; the opportunity on the Arctic 
National Wildlife Refuge for additional sources of oil that could help 
America reduce its reliance on foreign sources.
  When the President talked about the key to America ending its 
addiction to oil, often imported from unstable parts of the world, it 
is through utilizing this new technology. He said: Go there. He might 
just as well have used ANWR. He didn't use it. All the newspaper 
articles this morning noted the fact that he didn't use that. But we 
have already developed and continue to develop a host of new 
technologies that will permit oil development from the Arctic coastal 
plain without harm to the environment or the wildlife.
  There was an energy conference in Anchorage just a couple of weeks 
ago where the industry unveiled this new directional extended-reach 
drilling. It is technology that will be tested this year. It should 
permit the oil deposits to be tapped from up to 8 to 10 miles away from 
a well site, 8 to 10 miles away from that well site. This is almost 
double the 4 miles that drilling currently accesses oil at the nearby 
Alpine field up on the North Slope. So the technology is moving at an 
incredible rate.
  Further improvements in extended-reach drilling--what this does is 
allows us to have less disruption on the surface. This means that 
potentially you are looking at almost a 100-square-mile area that is 
going to be absolutely undisturbed on the surface so animals can range 
freely, undisturbed by drilling sites. A 100-mile area is a lot of 
room, whether you are a caribou or muskoxen--or a lot of caribou. We 
have also new three-dimensional and four-dimensional drilling 
technology that will identify small oil pools without the disturbance 
to wildlife that once was caused by the old seismic technology. We have 
new equipment that allows oil wells to be drilled within a few feet of 
one another, thus reducing the size of the pads by as much as 88 
percent. Compare this to what we are currently doing on the original 
Prudhoe Bay oilfield, which is about 90 miles to the west. It is 
something worth seeing. I hope to have the opportunity yet again this 
year to invite other Senators to come up north to see for themselves 
what the technology means as far as reducing disturbance to the land, 
preventing pollution, and preventing any environmental degradation.
  With this new technology--this is according to the latest estimates 
that we

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received last year from the USGS--we can develop the nearly 10 billion 
barrels of oil that we anticipate will be found on the coastal plain. 
When you look at the prices we are at now and you estimate $55 a 
barrel, the opportunity for us as a nation to provide for America's 
needs, and thus reduce reliance on foreign sources, is incredibly 
significant.
  When we look at where we are receiving our oil from now, America 
today is importing 4.7 million barrels of oil a day from OPEC nations--
1.47 million from Saudi Arabia, 1.43 million from Venezuela. These are 
just the names of the OPEC nations on which we are relying now. ANWR 
production--given the estimates I just cited from USGS, given the 
estimates I have of the prices--we estimate we would likely see 1 
million barrels per day, potentially as much as 2 million barrels a 
day. This, again, is according to USGS estimates. This will 
dramatically reduce our dependence in the future on OPEC and should 
help to lower world oil prices.
  We understand that the President is going to have more to say on 
several of the measures that he discussed last evening, including 
energy and his proposal for the national security as well as economic 
security when it comes to reliable, affordable energy. He understands 
our concerns and understands that in order to be a competitive nation 
in a global economy, we must have reliable, affordable energy; an 
energy source that does not cause us to be vulnerable.
  Some may think that ANWR was settled just a few weeks ago at the end 
of December when we missed by just several votes in the Senate from 
breaking a filibuster on the issue. But I want to assure Senate Members 
that the issue of ANWR is far too important for us as a nation to not 
bring forward again. For the good of this Nation we need a balanced 
energy solution, one that both increases domestic production of 
conventional sources and that produces new energy from alternative 
sources and improves efficiency, improves energy conservation. It has 
to be all three. I will not stand before you and say it just is the 
production piece.
  That is not a balanced approach. That is not the approach for the 
future. The approach for the future is to make sure we use our 
technology and our innovation to get us to the point where we have 
energy independence. That ought to be a goal for us as a nation, energy 
independence, and we can get that. But it does have to be a solution 
that is comprehensive and balanced.
  For the good of the Nation, we need to get moving forward quickly in 
utilizing our new technology to produce more energy from both ANWR and 
new energy sources.
  I thank the Chair. I yield the floor.
  The PRESIDING OFFICER. The Senator from West Virginia is recognized.
  Mr. ROCKEFELLER. Mr. President, I ask unanimous consent to speak as 
if in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The remarks of Mr. Byrd, Mr. Reid, and Mr. Rockefeller pertaining to 
the introduction of S. 2231 are printed in today's Record under 
``Statements on Introduced Bills and Joint Resolutions.'')
  The PRESIDING OFFICER (Mr. Graham). The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, we are back at taxes once again. What 
the people of this country are going to be hearing in the debate for 
the most part is very similar to what we discussed in this Chamber back 
in the second and third week of November of last year. Thinking of how 
to give a picture to this debate, I picked as a starting point the fact 
that tomorrow is Groundhog Day. I think you see a portrait of 
Punxsutawney Phil, the famous groundhog. Tomorrow, is he going to see 
his shadow? If he does, then we have 6 more weeks of winter. If he 
doesn't, then spring is here. I guess that is the way it has been for 
100 years or maybe longer.
  Punxsutawney is in Pennsylvania, and Phil is the name of the 
groundhog. In thinking of Phil and his impending weather report, I also 
thought of a popular film entitled ``Groundhog Day,'' which starred 
Bill Murray, in which a man relives the same day, Groundhog Day, over 
and over and over. This film has taken on greater significance for me 
as I seem to be in a similar situation. More than just a sense of deja 
vu, I feel I am reliving a past experience because starting this hour, 
we are going to begin debate on a Senate tax reconciliation bill. Yet I 
seem to remember that we had this debate. I referred to these debates 
in the first words of my time when I said that we did this starting 
Wednesday, November 16, 2005. That was at 3:35 Wednesday afternoon. We 
took up S. 2020, the Tax Relief Act of 2005. I want to hold this up 
here. This isn't just any little document we took up; it is a tax bill, 
expiring provisions. Everything in this, when we were discussing this 
on November 16, was reenacting provisions that sunset December 31, 
2005, so that there would not be an automatic tax increase on the 
American people. We are in a situation that if we don't get this done 
pretty soon and a year from now people are filing their taxes for 2006 
and 2007, they are going to have big tax increases. One that is very 
obvious to everybody is the alternative minimum tax, which I will 
discuss in a minute. The alternative minimum tax is going to hit no 
fewer than 14 million people and maybe as many as 19 million people who 
would not otherwise be paying the alternative minimum tax. All these 
people would be basically middle-income Americans. The alternative 
minimum tax was meant to hit very wealthy people who took advantage of 
every tax relief available or every tax loophole that was legally 
available within the Tax Code and still didn't pay any taxes, that they 
ought to pay some tax. So it was referred to as the alternative minimum 
tax so that everybody, regardless of how wealthy they might be or how 
high their income might be, paid a little something into the income tax 
fund for the privilege of living in America. That privilege is a 
constitutional right, but everybody contributes something to it. That 
was the theory behind it.
  Well, that was not indexed. And since that wasn't indexed, we have to 
change the Tax Code from time to time so it doesn't apply to more 
people. Actually, the thing ought to be repealed because it is not 
serving the purpose it was intended to serve.
  First of all, it was not meant to hit middle-income taxpayers. 
Secondly, a lot of people today, because they hire the right people to 
do their income tax, have legally found ways of avoiding the 
alternative minimum tax. So it is not even hitting the people it was 
supposed to hit. Yet it is hitting millions of people it was never 
intended to hit. How you keep tax policy like that on the books, I 
don't know. I would like to repeal it. If I could get 51 votes to 
repeal it, that would be my first amendment. But under the way we do 
things in the Senate and the points of order that can be made, I am not 
apt to get that sort of an approach. So what we do is, we kick the can 
down the road.
  I wish to get back to this history--deja vu--of seeing the shadow and 
the Groundhog Day and all that stuff to give you the history of why the 
question is, Why are we going through this now on February 1 and 2, and 
it will probably carry over into next week, to February 4, 5, and 6? 
Why are we going through this when we spent all that time back in 
November doing exactly the same thing?
  The rules of the Senate provide the minority--or maybe I should say 
not just the minority, every Member, but in this case it looks to me as 
if it is mostly the minority which is taking advantage of it--certain 
motions that have to be given to get to conference to iron out the 
differences between the House and the Senate. In this case, the 
minority is going to take full advantage of that even if we redo all 
the debate.
  I will bet you can take speeches out of November 2005 and you will 
read the same speeches today and tomorrow and next Monday and Tuesday 
in the debate on this bill. If you take out speeches of a month ago and 
can repeat them, there is no end to the speech-making you can do in 
this body. We started this debate at 3:35 on Wednesday, November 16, 
2005. We took up this bill, S. 2020. As we were considering

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this bill, we dealt with 80 different amendments. They were filed. 
Maybe we didn't deal with 80, but at least there were 80 ideas out 
there by people who wanted to change this bill. They were filed. Now, 
seven of them were agreed to. It was a very lively debate. It 
culminated in 18 rollcall votes about whether amendments ought to be 
included in the bill or whether there ought to be final passage. We 
finally got to final passage at 12:05 a.m., Friday, November 18.
  According to the Secretary of the Senate, at least 97 of us were 
there at that midnight hour to vote on this bill, so I am not the only 
one reliving this experience. There are going to be 97 Senators who 
were there at midnight on November 18--or I guess you would say that 
Friday morning at 12:05 a.m. As we considered the Senate amendment to 
the House version of this bill--the House version is the Tax Relief 
Extension Reconciliation Act of 2005--I have to ask myself--but in a 
sense, I am asking each of the Members--why are we still here? Didn't 
we already go through this exercise? Are we not finished with the 
Senate debate?
  I conclude that there is no rational reason for still being here 
because, normally, it would be a unanimous consent motion that we ought 
to go to conference to work out the differences between the House and 
Senate. Unless you do that, you never get anything to the President. It 
has to pass both bodies in identical form. That is usually a pro forma 
operation here. We could have done that in 5 minutes--Senator Baucus 
and I--or the leaders could have done that, but we are still here 
because maybe people want to slow up the process. Maybe they don't want 
to get to the asbestos bill next week, which is very important to get 
to. The fact is, we already went through this exercise, and we ought to 
be finished with the Senate debate, but we are not.
  In the face of a multitude of other important issues this body needs 
to deal with, does the Democratic leadership really want to reenact 
recent debates and resuscitate old talking points? Our tax 
reconciliation bill already passed, and not just by Republican votes 
because 64 of us voted for that, including 15 Democrats. The only way 
you get anything done in the Senate, because of protection of minority 
rights, which the Constitution allows, is by bipartisanship; otherwise, 
nothing gets done. So we had bipartisanship on this bill.
  While I believe this legislation is extremely important, and I will, 
as chairman of the committee and manager of the bill, debate it as long 
as is necessary, quite frankly, as I have indicated in my points, I 
question the necessity of going through a long process that resulted in 
the bipartisan passage of the same bill just 2 months ago. So that is 
my first point.
  This is a very curious exercise. It is an exercise with no purpose, 
no apparent purpose other than simply delay. Is the delay on the part 
of the Democratic leadership important? The answer is yes. Ask the 
American taxpayers, and you will get an answer. The answer is yes, if 
you are one of almost 20 million families waiting for certainty that 
you are not going to be caught up in the clutches of the alternative 
minimum tax.
  We hear a lot about the AMT, the alternative minimum tax. You will 
hear about it in this debate over the next few hours. This bill does 
something about the AMT: it extends the hold-harmless provisions so 
those 14 million, up to 19 million Americans won't get hit with it. I 
have a chart here that will tell you exactly the number of people in 
the respective States, based upon the previous year, 2003, so it 
doesn't add up to the 14 million to 19 million people we think will be 
hit by 2006. But the number of people who will be hit by it in my State 
of Iowa is 65,813.
  In the State of Nevada, even more people--68,273 people--are going to 
be hit by it. Why would anybody from Nevada not want to do something 
yesterday rather than tomorrow about the alternative minimum tax? As I 
said, these numbers understate what this problem is today because there 
are going to be a lot more people getting hit by it.
  The basis of the bill the Senate passed, and the bill that is once 
again before us, is an extension of the alternative minimum tax hold-
harmless provision. So every Member who is participating in this 
deliberate strategy of delaying--delaying our entrance into the 
conference with the House of Representatives is delaying the certainty 
these millions of American taxpayers deserve.
  I emphasize the word ``certainty'' as far as the Tax Code is 
concerned. There is nothing that does more economic good than knowing 
what the future holds in the way of taxes as it affects spending and 
investment. So if you want to improve the economy of this country, if 
you want to keep this economy strong, certainty of tax policy is very 
important.
  These are the facts on the AMT. Look it up in the Internal Revenue 
Code. The AMT relief provision expired already, on December 31, 2005. I 
ask my friends in the Democratic leadership to take a look at the 
calendar. One month now has passed, and the AMT hold-harmless provision 
has not been extended. That is the cornerstone of this very massive 
piece of legislation. It also happens to be the cornerstone of a bill 
the Democratic leadership is delaying. So I don't want to hear folks 
talk about some sort of AMT problem and at the same time delay real 
action to help those millions of taxpaying families.
  This bill goes way beyond helping people who would be hurt by the 
AMT. It also includes popular and broadly applicable tax benefits. I 
wish to talk about some of them and talk about them individually and 
use charts as I move along.
  For instance, the deductibility of college tuition is a very 
important part of that 2001 tax bill. This is a benefit for families 
sending their kids to college. By definition, this benefit is geared 
toward helping middle-income families who always have a hard time 
educating their kids. They might not qualify for Pell grants or 
guaranteed student loans, yet they need help to send their kids to 
college because they are not millionaires. These are not high-income 
people. They get the full benefit of the deduction if they make up to 
$65,000 as a single person and up to $130,000 as a couple. Beyond these 
levels, the benefit phases out. A lot of these folks are paying 
significant Federal, State, and local taxes, and they get no help in 
defraying the high costs of a college education for their kids. This 
tax deduction helps provide and helps these hard-pressed, middle-income 
families with a benefit, and it furthers a very important national goal 
of supporting higher education--not an end in itself, but to keep 
America competitive in the global economy.
  This deduction runs out at the end of this year. It did run out 
December 31, 2005, but we have to be ahead of the curve as people plan 
to send their kids to college. Will this be around for 2007? Not unless 
this bill passes. So these folks are going to face a tax increase 
without even a vote of the Congress. Automatically, taxes are going to 
go up if we don't enact this piece of legislation which we already 
passed back in November.
  Here I have a chart that shows for each Member how many families in 
their respective States are going to be hit next year if we don't enact 
this legislation. Again, I will speak to my State of Iowa, where the 
number is 37,364 taxpayers. In Nevada, it is 25,776 taxpayers. Why 
would anybody want Nevada taxpayers to pay more taxes? And why would 
you not want them to know that today rather than tomorrow? Why not get 
this bill to conference and get this issue behind us so that the 
taxpayers in Nevada know that in the year 2007, their families are 
going to be able to take advantage of the college tuition exemption 
from the income tax? Once again, in that particular State, it is 25,000 
families.
  There is another benefit that is addressed in this bill, S. 2020. It 
is called the small savers credit. Here I am talking about a tax credit 
for low-income people to save through an IRA or a pension plan. We are 
talking about people who don't know about saving or don't have the 
ability to save, that we are going to give an incentive to save

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and can get an ethic for saving because saving for retirement is 
something not enough Americans have done and particularly not enough 
low-income Americans have done. So as a matter of public policy, to 
encourage savings for people who cannot afford to save or don't have 
the ethic to save, give them an incentive to save through the small 
savers credit. We all think that savings is important. We all want low-
income people to save for retirement.
  I have a chart that shows the number of low-income savers who benefit 
in this bill on a State-by-State basis, which benefit won't be there if 
we don't pass this, or it is being delayed by 4 or 5 days because we 
have to go through the same debate we went through back in November.
  Again, in my State of Iowa, there are 95,000 people who could take 
advantage of this small saver's credit but who will not be able to.
  Let's take another State, Nevada. There are 36,923 people who are low 
income who will not be able to take advantage of this provision.
  Again, if you want to establish an ethic for saving, you should not 
pass tax policy to encourage that ethic for saving and then sunset it 
and expect people to establish a lifelong pattern of saving. You cannot 
stop and start tax policy and expect people to develop an ethic to 
conform to saving, and I believe we all think the ethic of saving is 
very important.
  The bill before us will also extend a tax deduction for teachers who 
buy their own supplies for their students. I think this provision was 
developed in the 2002 tax bill by Senators Warner and Collins to give 
teachers who go that extra mile by paying out-of-pocket expenses some 
help through the Tax Code.
  Who is going to argue with that? One might argue that we ought to pay 
teachers more, so they don't have to do that. We ought to appropriate 
more money for schools so they don't have to buy the supplies out of 
their pockets. But we have 40,000 school districts in the country, and 
we are not going to be able to make policy here for every school 
district. We know that some teachers are so devoted to their students 
that they are going to spend some of this money out of their pockets, 
so Senators Collins and Warner came up with this idea of a tax credit 
for teachers who pay for supplies out of pocket.
  Again, on a State-by-State basis, I have a chart that shows how many 
teachers benefit from this provision. I will pick out Nevada again. 
Nevada has 21,853 teachers who took advantage of this provision. In 
Iowa, we had 33,812 teachers take advantage of this provision. Why 
wouldn't you want teachers who devote a life to a profession at 
relatively low pay--compared to what other people with the same amount 
of education get in other segments in the economy--because they are 
devoted to doing good or they wouldn't be teaching in the first place--
why would you want to question this so they won't have it this year?
  Right now those teachers are buying supplies and probably don't think 
the least bit that Congress would have sunsetted this legislation on 
December 31, 2005. So they are going out and buying all these supplies 
thinking they are getting a deduction, and then when they file their 
income tax a year from now, they are going to be surprised.
  I wish I could tell every one of them that the Democratic leadership 
won't let us go to conference so we can keep that provision. I am not 
going to be able to tell all 33,000 teachers in Iowa. They are going to 
find it out the rude way when they go to file their income tax. I would 
really like to tell the teachers in Nevada about this as well.
  We don't have to have this problem. All we have to do is get to 
conference. We can get to conference in 5 minutes and work these 
provisions out, and by next week, we can have this bill to the 
President of the United States, or give us another week to work out the 
differences between the House and the Senate. We can get this all 
worked out, get the bill to the President, and we don't have to worry 
about that.
  There is another point. We all think of small business. There are 
small business provisions in this bill, S. 2020, that passed the Senate 
by a bipartisan vote at the midnight hour way back in November, and 
here we are piddling around with procedural motions to get to 
conference.
  Everybody advocates small business because it creates 70 to 80 
percent of the new jobs in America. This bill would extend the small 
business expensing. Many small businesses use this benefit to buy 
equipment on an efficient aftertax basis. It is good for small 
business, it is good for small business workers, and it is good for 
economic growth.
  I have a chart on a very important issue, at least to the people of 
Alaska, Florida--and Nevada, again, is going to benefit--South Dakota, 
Tennessee, Texas, Washington, and Wyoming. This is because we 
established in the tax bill the deductibility of State and local taxes. 
This bill will help 12.3 million taxpayers in these States--Alaska, 
Florida, Nevada, Washington, Texas, South Dakota, Tennessee, and 
Wyoming. Tennessee is involved. It is the home of our distinguished 
leader. Senator Frist has worked very hard to get this bill to the 
floor, and for the second time. He is frustrated because we can't move 
this along.
  Nevada is one of these States. It is the home of my friend, the 
Democratic leader. Unfortunately, the Democratic leader has fought this 
bill tooth and nail, even though his constituents benefit from it, 
particularly in this instance with the deductibility of State and local 
taxes.
  I ask them to focus on the taxpayers of their respective States, 
whether they are from Alaska, Florida, Nevada, South Dakota, Tennessee, 
Texas, Washington, or Wyoming, to get this bill passed so their 
taxpayers will know their local and State sales taxes can be deducted. 
I hold out hope that the Democratic leadership will see the light. I 
hope they will work with me to see their folks in their State will be 
able to deduct these State and local taxes this year and know they can 
do it very soon this year.
  These provisions are bipartisan and millions of American taxpayers 
rely on them. Every Senator ought to help us pass this bill for these 
provisions alone.
  The bill before us addresses expiring business and individual 
provisions that I have not talked about yet, what we call extenders. 
These provisions include research and development tax credits and the 
work opportunity tax credit, just to mention a couple.
  This bill also includes many of the charitable incentives that were 
introduced in what we refer to as the CARE Act and which have 
previously passed the Finance Committee and previously passed the 
Senate. I appreciate the work of Senator Santorum and Senator Baucus in 
working with me to balance these incentives with several of the much 
needed reforms that are supported by the charitable sector, the 
Treasury Department, the IRS, the donors, and the taxpayers to make 
sure charitable giving and the tax exemption for it serves the purpose 
intended and that charitable organizations use the money that was 
donated to them for the purpose they asked for it.
  Beyond the CARE Act, this bill contains loophole closures and tax 
shelter fighting provisions that raise revenue.
  This bill is bipartisan. I have not thanked my friend and ranking 
member, Senator Baucus, for his cooperation. We had cooperation going 
way back when we first started working on this bill in the summer of 
last year so we could be ahead of the curve. He and I, when we first 
started, were not partners, but we teamed up in the Finance Committee. 
We teamed up in the first Groundhog Day floor debate and, as always, 
his cooperation and, more important with something as serious as this, 
his good humor makes a difference.
  I thank those Democratic Senators, and that is 13 others besides 
Senator Baucus, who joined me in a bipartisan effort on our first floor 
journey. I ask them to help me persuade their leaders to let this bill 
proceed. I ask them to ask their leaders to focus on taking care of the 
legislative business and put a damper on the political games that 
appear to me to be nothing but going through what we went through last 
November. We waste enough taxpayer

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money. There is no point wasting it again, duplicating the debate of 3 
days back in November.
  We can move on to other important items, including a lot of items the 
Democrats want us to bring up on the floor of the Senate. I yield the 
floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, last evening at 8:30, the Senate assembled 
as a body to proceed to the House Chamber to sit together as one 
Congress. We did so because every year about this time, we meet to hear 
the President deliver his State of the Union Address. We also meet 
together in the House--all Members of the Senate and Members of the 
House of Representatives--for an address to the Congress, for example, 
by a foreign leader. We did so for the address last July by the Prime 
Minister of India. But it is the exception rather than the rule when 
the House and Senate sit together.
  Our country's Founding Fathers, in their wisdom, created a bicameral 
legislative branch; that is, the House and Senate separately. Carrying 
into practice the ideas of Montesquieu and Madison, our Constitution 
creates a very separate House of Representatives and Senate, two 
totally, entirely different bodies.
  Oftentimes when confronted with the same task, the House and the 
Senate come to very different solutions. That is certainly the case 
with the bill before us today, the tax reconciliation bill.
  We have something called a budget resolution which we take up every 
year. That resolution gave the House and the Senate the same task. On 
April 28 of last year, the Congress adopted that resolution, and the 
conference report was adopted by a narrow margin of 52 votes. That 
budget resolution instructed both the House Ways and Means Committee 
and the Senate Finance Committee to report legislation that would cut 
taxes by a net of $70 billion.
  Underlying that budget resolution was the assumption that the two 
committees--the Ways and Means Committee in the House and the Finance 
Committee in the Senate--could cut taxes on capital gains, cut taxes on 
dividends, prevent tax increases by virtue of the alternative minimum 
tax, otherwise known as the AMT, and extend a series of expiring tax 
provisions.
  The chairmen of the Ways and Means Committee and the Finance 
Committee each set out to do those things, and each of those able 
chairmen found that it was not easy to assemble the votes to do all of 
those things. Faced with that reality, faced with that task, the House 
and the Senate came to very different solutions.
  The Senate is a place where Members often work together across party 
lines. The Senate is a place that often requires a supermajority, which 
helps encourage Senators to work together. Chairman Grassley, the 
chairman of the Finance Committee, often works with me, the senior 
Democrat. We meet together every Tuesday the Senate is in session, and 
I might say, those Tuesday meetings are terrific. We get an awful lot 
done at those weekly meetings. It is essentially bipartisan, working 
together to get solutions.
  Last year, Chairman Grassley worked together with many Democrats and 
produced the Senate's version of the reconciliation bill. The Senate 
reconciliation bill included continued alternative minimum tax relief. 
The Senate bill included extensions of expiring tax provisions. The 
Senate bill, however, did not include capital gains and dividends tax 
cuts. And the Senate included offsets--that is some increases, 
basically the so-called loophole closers--to pay for some of the bill.
  In keeping with the traditions of the Senate, that was also a 
consensus solution, because in November of last year the Senate passed 
a bill with 64 votes.
  Contrast that with the House of Representatives, which took a 
different path. The House is a body where the majority rules. There is 
no requirement of supermajority. And often the majority rules 
absolutely. It is often a place where the slimmest of majorities rules. 
Some on the House side of the Capitol, I believe, too conveniently and 
inappropriately believe any votes more than needed for a majority are 
wasted votes. That is a mistake. But that is the House. That is their 
decision.
  When the House considered this tax bill that is under the same 
instructions the Senate considered it, the House did something 
different. It did include capital gains and dividend tax cuts. The 
House did not, however, include AMT relief as contained in the Senate 
bill. And the House bill did not include any offsets to pay for any of 
the bill for them.
  In keeping with the House traditions, that was a partisan solution. 
In December of last year, the House passed that bill with 234 votes, 16 
more than the 218 needed to pass the bill.
  Confronted with the very same task, the House and Senate came to very 
different solutions. At the heart of this debate today is the 
difference between alternative minimum tax protection for working 
families and capital gains tax cuts for investors.
  What is AMT, alternative minimum tax? For 17 million American 
families the year 2006 came in with an unwelcome surprise; that is, a 
stealth tax, a new tax, an additional tax called AMT. The temporary 
protection from the AMT expired on December 31 of last year. That means 
17 million more American families will be subject to this additional 
tax in the tax year 2006. That is an increase from 3 million people to 
20 million people in 1 year alone. Three million last year paid it. 
This next year, if Congress does not act, 20 million Americans will be 
paying the additional AMT stealth tax.
  Many families will not see this higher tax bill until later this year 
or next April. But saying, Don't worry, we will fix it, probably will 
not reassure those families when they hear there is nothing--that is 
right, nothing--in the House bill to fix the alternative minimum tax; 
that is prevent that tax from going into effect. The House tax 
reconciliation bill before us today chooses to extend capital gains and 
dividends cuts. However, those tax cuts do not expire until January 
2009. AMT protection expired 3 weeks ago. That is why I urge my 
colleagues to reject the House solution and insist on the Senate 
version, remembering we have an enforcer here, a limitation of $70 
billion. We cannot lower taxes in the net, the aggregate, more than $70 
billion, so it is almost impossible to do all the provisions lowering 
taxes so many Members have in mind. We have to choose.
  I think the better choice is to prevent the tax going into effect 
next year rather than worrying about a tax increase that may go into 
effect in the year 2009. We do not have the luxury to do it all right 
now, today.
  The House proposal says the extension of capital gains and dividends 
tax cuts is a priority over AMT. If that House proposal fails, then 
taxpayers will have reason to worry. If Congress does not extend the 
alternative minimum tax protection, then the AMT will hit a family with 
three children earning $63,000 this year. The AMT is a family-
unfriendly tax and the AMT creeps deeper and deeper into the middle 
class each year. Protection from the AMT should be a priority for all 
in both Houses of Congress, and especially for the American people.
  Instead, however, the House has passed a separate AMT bill that is 
outside the context of the budget resolution. That bill does not have 
the procedural protections of this reconciliation bill. This other 
House bill purports to protect families from the AMT, but under that 
other House bill there would still be 600,000 additional taxpayers 
paying higher taxes next year due to this stealth AMT tax.
  Some called the House AMT tax a hold-harmless provision, but that 
provision does not hold everyone harmless. Under existing tax law, 3.6 
million American taxpayers paid this alternative minimum tax in 2005. 
Under the House bill, 4.2 million taxpayers would pay the alternative 
minimum tax in 2006, an increase of 600,000 taxpayers and an increase I 
hope we can avoid. The House gave alternative minimum tax relief 
second-class status--not first-class status, second class, although it 
expired last year. Not only

[[Page 467]]

that, the House bill pokes a hole in the patch. Instead, this House 
bill allocates $50 billion over the next 10 years in order to extend 
for 2 years the capital gains and dividends tax cuts--again reminding 
all present, Senators especially, that need not be done because the 
current provision with respect to dividends and capital gains, that is 
the provision that was in effect last year, is also in effect next year 
and the next year up until, as I mentioned, January 1, 2009.
  In summary, I think it makes sense for us to reject the House 
solution. Let us remember what our priorities are, especially the 
priorities of the American people, given the limitations we have in the 
budget reconciliation instructions, and let us protect the millions of 
working families now subject to a tax increase courtesy of the 
alternative minimum tax.
  The PRESIDING OFFICER. The Senator from Mississippi.
  Mr. LOTT. Mr. President, parliamentary inquiry: I don't believe there 
is any order of speaking rather than the normal trying to rotate back 
and forth, so I wish to make a few brief remarks now.
  Mr. BAUCUS. Sounds good.
  Mr. LOTT. Mr. President, I thank Chairman Grassley for his speech 
this morning. I thought it was extraordinarily good. I thought there 
was a little bit too much emphasis on Iowa--we need a little more 
mention of Mississippi in the process--but it was very good. My 
colleague touched on every important issue I had actually thought I 
might mention, but I will not belabor those points. He made it very 
clear that this is tax legislation that has broad support: 64 Senators 
voted for it back in December and there were at least 2 who missed it 
who would have supported it, so 66 at least are for this. This is a 
classic case where there are some people, I guess, who are opposed to 
moving on to conference because of something they think may be in 
conference or some other things which I suspect, which I will talk 
about in a moment. But there has been good leadership. It is time to 
get into conference.
  I thank Senator Grassley's partner and helpmate on most legislation, 
Senator Max Baucus, for what he has had to say and for the support he 
has given on good tax policy over the years. They are examples of what 
can happen in this institution, how we can work together across the 
aisle, in committees, as individuals. I commend them both for their 
position on these issues.
  Of course, you can go through every bill and find some piece or some 
portion or some section you don't necessarily agree with or would like 
to have more or all kinds of arguments. But this one is amazing to me. 
I will talk a little bit about the substance in a moment, but I want to 
talk about what is happening here.
  Some people have said to me, Why are we doing this? Have we done this 
in the past? Have we had extended debate and the opportunity for 20 
hours of time and a vote-arama at the end and amendments ongoing to 
confront? No, we have not. This is unusual.
  Why are we in this position? This is a case where the Senate got sort 
of--we didn't want to wait forever on the House. We moved first. 
Because of the way it was taken up, procedurally, we now have to go 
through this extra motion to take up the House bill and all of that. I 
don't want to get into the details because it is irrelevant, but I will 
make this point: This is an administrative proceeding. This is a 
question dealing with the fact the Senate acted before the House and 
usually the House acts first on a tax bill. Maybe we should not do 
that. Yet we get criticized quite often because the House is waiting on 
us. This is a case where we were waiting on the House. We passed good 
legislation, with broad support. We should go to this conference. We 
should have done it earlier today. This is a voice-vote thing. There 
should not be any debate.
  So what is happening here? I think it is sort of the sign of the 
times. We just went through the Supreme Court confirmation of Sam 
Alito. A lot of us scratched our heads and said, How did it come to 
this? How low do we go? When do we stop the partisanship?
  Some people look at us and say, Why is this? Here is an example. 
There is no call for this. When are we going to end the tit for tat, 
and I will get you here or I got you there, delaying the process? 
Obstructionism--I don't get it. Why we do not have an agreement of how 
to deal with this now is beyond me. Why our leadership--I am not 
criticizing either one of them. There is just the fact that there has 
not been an agreement to do it by voice vote, no agreement to limit the 
time or agreement to limit the amendments--no agreement.
  Here we are, on an administrative proceeding to go to conference on a 
very important tax package, action if we do not take will cause 
people's taxes to be raised.
  We need to stop. We need to work out an agreement how this is going 
to proceed. We should be through this by sundown tonight. But, no, what 
is going to happen is we are now headed--we are going to be on this 
next week. Some people say we ought to be doing this, we ought to be 
doing that, why aren't we debating--whatever--because we are messing 
around like this.
  As a Republican and in support of the bill, my attitude is, fine; 
throw me in the briar patch. I love to talk about this. This is a 
positive agenda. This will help the economy. This will help the 
families with children. This will help my State. This will help most 
Senators' States. Why don't we just do it? If we want to talk about it, 
we can do that. But I urge both sides of the aisle, find a way to get 
an agreement on how to do this.
  What is going on here beneath the surface is two or three things. It 
is kind of a general anger right now, unfortunately, between both 
sides. We need to get over that. But, also, there is a plan, I am sure, 
to offer other agenda items, nongermane, ``gotcha'' kind of amendments. 
That is what is going to happen. I don't like that. I think it 
contributes to the bad atmosphere around here. But I am a realist. We 
can deal with that. Tell us what the amendments are and identify a 
limited number and let's get it on, let's have a vote, and let's be 
done with it.
  We can't even get that done. That is what is going to happen. We are 
going to have ``gotcha'' amendments on a whole variety of subjects. I 
don't want to talk about them right now because I maybe know what they 
are going to be and maybe I should not know, but that is OK. If you 
want to have a debate on some nonrelevant amendment coming out of the 
stratosphere to put people on the spot, OK, but let's at least agree to 
how we get that done.
  There is another reason behind this. There are some people who fear 
that, in conference, we might eventually also include something to do 
with holding down capital gains rates--capital gains taxes and dividend 
taxes. I hope so. I certainly hope we will do that because it is 
important to individuals, it is important for the economy. But it is 
not in this bill. This is another case where we are having a huge 
argument over what is not in a bill. This is a classic example of why 
the atmosphere here is so bad. I hope we will find a way to do it. We 
should all assume some of the blame. We ought to all root around and 
say to each other, ``Can we work this out? Can we find a way to kind of 
get through this process?'' Let's do it and get on to the next subject. 
I know the next bill we go to is going to cause a fracas--and probably 
it should.
  Asbestos reform? I have been trying to figure a way to do asbestos 
reform for 20 years and haven't been able to do it. We have not been 
able to do it.
  Do we need it? Yes.
  Is the bill which the judiciary reported out a perfect solution? I am 
not saying it doesn't have some good benefit. I know the committee has 
worked hard on it, and I know Arlen Specter has worked hard on it. But 
it is tough. We should at least do that.
  If we are going to be attacked by the Democrats, that would be a good 
place to do it. It will be a bipartisan fight, I am sure.
  I don't understand. I wish we could get over it.
  This is good legislation. It has been coming for a long time. It is 
ready for conference. The conference probably won't be that 
acrimonious, and it probably won't take that long. I hope and

[[Page 468]]

expect that it will be bipartisan. It probably will be.
  But this procedural, dilatory action which will drag us out for the 
rest of this week and into next week probably is holding up a number of 
important issues.
  Do the Democrats really oppose the centerpiece of the bill? The 
biggest chunk of it--$30 billion--is for ensuring the AMT doesn't hit 
more than 9 million middle-income families this year. Do they oppose 
that?
  Do Democrats oppose the research and development tax credit, a 1-year 
extension which costs nearly $10 billion?
  Do they oppose small business expensing?
  We all stand here on the floor of the Senate and praise the small 
businesses in this country as to how important they are to the economy 
and the jobs they create. They do. It is true. Why wouldn't we want to 
extend small business spending? Why would we want that to end? It will, 
if we don't act.
  Do Democrats oppose the work opportunity tax credit?
  Do they oppose extending the welfare-to-work tax credit?
  Do they oppose allowing above-the-line for teacher classroom 
expenses?
  Do they oppose the provisions in here that would be beneficial to 
States which do not have a sales tax, such as Nevada and Florida?
  The answer is no, they don't oppose those things. They are for them. 
An overwhelming majority support 98 percent of what is in this bill. 
Yet we are going to ding round here the rest of this week, and we are 
going to even have to go through an extra motion of sending it back to 
the House, and having the House kick it back over here. I think we 
should not be proceeding in this way.
  I also want to make it clear that I think it is very important for us 
to take another look at what is in the House version in conference 
which would support the progrowth policy of tax and capital gains and 
dividends at 15 percent or at 5 percent for individuals in the 10- or 
15-percent tax brackets.
  I am disappointed that we don't have a 2-year extension in this bill. 
I believe if we did that it would spur and encourage economic growth 
and would bring in more revenue to the Treasury.
  The CBO has indicated that the capital gains and dividends tax relief 
policies generated an additional unanticipated $26 billion into the 
Treasury.
  This is not what has caused the deficit. The deficit is caused by us 
spending more money. A lot of it is justified. We have the war in 
Afghanistan, the war in Iraq, the war on terror. I have been here 
pleading with my colleagues to help those of us in the Katrina area. It 
costs lots of money; both of them hundreds of billions of dollars.
  But we also have not been able to check our appetite for spending. 
There is no offsetting reduction in spending.
  If we don't have these progrowth tax incentives, we will have a worse 
deficit because the revenue they generate will not come in.
  I don't want to mislead anybody. I am absolutely hoping that I will 
be a conferee, and I will be pushing for holding down these capital 
gains and dividend rates.
  We need to look at what is happening in the economy. What is 
happening is good. It is not perfect. But we need to think about ways 
to continue the growth we have seen and create the jobs. Millions of 
jobs have been created in the last 3 years. Unemployment is 4.9 
percent. The gross domestic product growth is strong. Household wealth 
is at an all-time high, reaching $51.1 trillion in 2005. Seventy 
percent of Americans now own their homes. The American dream is 
becoming a reality. Income is rising. Inflation remains in check. There 
is a lot to be proud of. But that is not good enough.
  We need to look at where the problems exist and at how we can provide 
incentives for growth and create better paying jobs and to pay 
attention to people's retirement needs and their health care needs. 
There is a lot we need to do.
  I wish we could find a way to agree more on how we can move 
legislation in this body--not how we can drag it out or get the drop on 
each other.
  I remember when I used to talk to Tom Daschle when we were in 
leadership positions. We would get tangled up in arguments--heated 
ones. And I used to fill up the tree every now and then where 
amendments could not be offered, which he didn't appreciate, and he 
said as much. But many times we would come together and say in the end: 
Good politics means good policy. If you do things that help the people, 
everybody benefits--Democrats and Republicans.
  Do we need to do something about the delivery of health care in 
America and the accessibility and affordability of it? Yes.
  Do we need to find a way to deal with border security and all of the 
ramifications of immigration? Absolutely.
  Do we need to find more ways and better ways to deal with the future 
energy needs of this country? Yes.
  Would it be good if we could find reform on asbestos that would 
actually help the people who are truly injured and not have all the 
money go to my friends in the plaintiffs' bar? Yes. We ought to do 
that. We ought to find a way to do it in a bipartisan way.
  I plead again with the leadership of the Democratic side. Let us get 
an agreement on how to finish this. Let us not have a shootout when it 
is not even necessary on this bill. There will be plenty of time for a 
shootout. In fact, let us arrange a time. OK, at 12 noon we are going 
to meet at the OK Corral next Tuesday and get it over with--but not on 
this bill.
  Can we do a few things together before we fight like cats and dogs 
because it is an election year? We ought to find a way to do that.
  But if we are not going to get an agreement, I will say repeatedly, 
as long as we are on this bill, this is our territory. I am glad to 
talk the rest of this year about going to conference on tax relief for 
working Americans, for teachers, for families with children. 
Hallelujah. I would just as soon let us stay on this for the rest of 
this month. I will be a happy camper. Politically, I don't know who is 
winning. Maybe we are. That suits me fine, too. I have my speech ready 
to talk about the substance over and over again. We can do that. But we 
also can go to conference and get this work done, and then we could go 
on to the next issue.
  I thank the Chair and my colleagues for this time. I yield the floor.
  The PRESIDING OFFICER (Ms. Murkowski). The Senator from Montana.
  Mr. BAUCUS. Madam President, I must say it is delightful to listen to 
the Senator from Mississippi. I wish sometimes he could come to the 
floor more often. He makes a good point, that we have to work together. 
And we all know that we try hard to work together. At the same time, 
Senators have the right to offer amendments. We will work together the 
very best we can.
  I want to say how much I appreciate the comments he made and how much 
I appreciate the addition he is making to the discussion.
  As I noted in my opening statement, one of the weightiest differences 
between the underlying House bill and the pending Senate substitute 
before us is that the House bill includes capital gains and dividend 
tax cuts. The Senate didn't include them. The Senate chose instead to 
favor AMT protection for working families. We couldn't do both. The 
Senate chose to apply the AMT relief.
  There are several reasons the Senate did not include the capital 
gains and dividend tax cuts. One among the many good reasons is that 
the Senate's rules make them hard to include.
  In a moment, I will propound a series of parliamentary inquiries to 
the Presiding Officer on this point. But let me first take a moment to 
explain.
  The Senate's Byrd rule--actually, we know there are several Byrd 
rules--section 313 of the Congressional Budget Act contains what a 
reconciliation bill can include. The rule is named after the 
distinguished senior Senator from West Virginia. Senator Byrd and those 
who joined him in writing the Byrd rule recognized that the budget 
reconciliation process is a powerful engine. And the Byrd rule keeps 
reconciliation bills more on the purpose for which they were intended.

[[Page 469]]

  One subparagraph of the Byrd rule deals with the worsening deficit in 
the outyears; that is, years beyond the budget resolution. Section 
313(b)(1)(E) of the Budget Act says that a provision is out of order if 
the title that includes it would worsen the deficit for any future 
fiscal year after the fiscal years covered by the reconciliation bill. 
The provision was designed to prohibit legislation that would make our 
deficit problem worse by hiding the costs in the future.
  The capital gains provision in the House bill is one such provision. 
The dividend provision in the House bill is another. The capital gains 
provision in the House bill would worsen the deficit by close to $13 
billion in fiscal year 2012 alone. This is because lower capital gains 
tax rates in the short run will induce holders of property to sell 
their assets earlier than they otherwise would have. As a result, the 
U.S. Treasury may realize some increased revenues in the short run as 
property holders pay capital gains on those sales. But the Treasury 
will lose revenue in the long run because the property holders will not 
sell that asset at the later time which they otherwise would have sold 
the asset. And the Treasury will also lose revenue in the long run 
because the Government will tax capital gains at a lower rate.
  A similar phenomenon takes place with dividend tax cuts. The dividend 
tax cuts in the House tax bill would worsen the deficit by more than $9 
billion in 2011 alone.
  I have been citing numbers provided by the Joint Committee on 
Taxation.
  I ask unanimous consent that the full table setting forth the Joint 
Committee's estimated revenue effects of the House bill be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

[[Page 470]]



               ESTIMATED REVENUE EFFECTS OF H.R. 4297, THE TAX RELIEF EXTENSION RECONCILIATION ACT OF 2005, AS REPORTED BY THE COMMITTEE ON WAYS AND MEANS--FISCAL YEARS 2006-2015
                                                                                      [Millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
              Provision                      Effective           2006       2007       2008       2009       2010       2011       2012       2013       2014       2015     2006-10    2006-15
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I. Extension and Modification of
 Certain Provisions Through 2006:
    1. Treatment of nonrefundable     tyba 12/31/05.........       -565     -2.260  .........  .........  .........  .........  .........  .........  .........  .........     -2,825     -2,825
     personal credits under the
     individual alternative minimum
     tax (sunset 12/31/06).\1\
    2. Tax incentives for business
     activities on Indian
     reservations:
        a. Indian employment tax      tyba 12/31/05.........        -21        -29        -11         -1  .........  .........  .........  .........  .........  .........        -62        -62
         credit (sunset 12/31/06).
        b. Accelerated depreciation   ppisa 12/31/05........       -161       -280       -104         23         77        120         98         52          6        -10       -445       -179
         for business property on
         Indian reservations (sunset
         12/31/06).
    3. Extend and modify the work     wpoifibwa 12/31/05....       -125       -193        -87        -38        -23        -13         -2  .........  .........  .........       -466       -480
     opportunity tax credit (sunset
     12/31/06).
    4. Welfare-to-work tax credit     wpoifibwa 12/31/05....        -12        -27        -24        -12         -6         -3         -1      (\2\)  .........  .........        -80        -85
     (sunset 12/31/06).
    5. Enhanced deduction for         cmd tyba 12/31/05.....        -66        -55  .........  .........  .........  .........  .........  .........  .........  .........       -121       -121
     qualified computer
     contributions (sunset 12/31/06).
    6. Availability of Archer         DOE...................                                                       Negligible Revenue Effect
     medical savings accounts
     (sunset 12/31/06).
    7. 15-year straight-line cost     ppisa 12/31/05........        -46       -138       -181       -177       -171       -155       -146       -155       -152       -150       -714     -1,472
     recovery for qualified
     leasehold improvements (sunset
     12/31/06).
    8. 15-year straight-line cost     ppisa 12/31/05........        -22        -56        -68        -68        -68        -67        -67        -65        -63        -57       -283       -601
     recovery for qualified
     restaurant improvements (sunset
     12/31/06).
    9. Suspension of 100 percent-of-  tyba 12/31/05.........        -46        -25  .........  .........  .........  .........  .........  .........  .........  .........        -70        -70
     net-income limitation on
     percentage depletion for oil
     and gas from marginal wells
     (sunset 12/31/06).
    10. Tax incentives for            tyba 12/31/05.........        -58        -30         -2         -1         -4        -13        -46        -23        -21        -23        -95       -221
     investment in the District of
     Columbia (sunset 12/31/06)\3\.
    11. Possession tax credit with    tyba 12/31/05.........         -2         -8  .........  .........  .........  .........  .........  .........  .........  .........        -10        -10
     respect to American Samoa
     (sunset tyba 12/31/06).
    12. Parity in the application of  DOE...................         -3        -45        -10  .........  .........  .........  .........  .........  .........  .........        -58        -58
     certain limits to mental health
     benefits (sunset 12/31/06)\4\.
    13. Extend and modify the         apoia 12/31/05 & tyea      -3,330     -3,219     -1,480     -1,097       -740       -192  .........  .........  .........  .........     -9,866    -10,057
     research credit (sunset 12/31/    DOE.
     06).
    14. Qualified zone academy bonds  bia 12/31/05..........         -3         -7        -14        -19        -20        -20        -20        -20        -20        -20        -62       -162
     (sunset 12/31/06).
    15. Above-the-line deduction for  epoi tyba 12/31/05....        -60       -139  .........  .........  .........  .........  .........  .........  .........  .........       -199       -199
     teacher classroom expenses
     capped at $250 annually (sunset
     12/31/06).
    16. Deduction for qualified       pmi tyba 12/31/05.....       -420     -1,260  .........  .........  .........  .........  .........  .........  .........  .........     -1,680     -1,680
     tuition and related expenses
     (sunset 12/31/06).
    17. Deduction of State and local  tyba 12/31/05.........       -525     -1,574  .........  .........  .........  .........  .........  .........  .........  .........     -2,099     -2,099
     general sales taxes (sunset 12/
     31/06).
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
            Total of Extension and    ......................     -5,465     -9,345     -1,981     -1,390       -955       -343       -184       -211       -250       -260    -19,135    -20,381
             Modification of Certain
             Provisions Through 2006.
II. Extensions of Certain Provisions
 for Two Additional Years, and Other
 Modifications
    1. Extend and expand to           epoia 12/31/05........       -219       -375       -130         47         54         56         49         44         38         32       -625       -406
     petroleum products the
     expensing of ``Brownfields''
     environmental remediation costs
     (sunset 12/31/07).
    2. Controlled foreign
     corporations:
        a. Exception under subpart F  (\5\).................  .........       -775     -2,339     -1,682  .........  .........  .........  .........  .........  .........     -4,796     -4,796
         for active financing income
         (sunset 12/31/08).
        b. Look-through treatment of  (\6\).................        -82       -237       -260       -167  .........  .........  .........  .........  .........  .........       -746       -746
         payments between related
         CFCs under foreign personal
         holding company income
         rules (sunset 12/31/08).
    3. Tax capital gains and
     dividends with a 15%/0% rate
     structure:
        a. Capital gains (sunset 12/  tyba 12/31/08.........  .........  .........     -1,549     -8,375      2,672        -54    -12,698      (\2\)      (\2\)  .........     -7,252    -20,004
         31/10).
        b. Dividends (sunset 12/31/   tyba 12/31/08.........  .........  .........       -860     -4,431     -8,008     -9,368     -6,326     -1,224       -450       -112    -13,299    -30,779
         10).
    4. Credit for elective deferrals  tyba 12/31/06.........  .........       -481     -1,428       -903        -10        -11        -11        -11        -10        -10     -2,823     -2,875
     and IRA contributions (sunset
     12/31/08).
    5. Increase section 179           tyba 12/31/07.........  .........  .........     -2,605     -4,459       -209      2,707      1,772      1,222        826        476     -7,274       -271
     expensing from $25,000 to
     $100,000 and increase the
     phaseout threshold amount from
     $200,000 to $400,000; include
     software in section 179
     property; and extend indexing
     of both the deduction limit and
     the phaseout threshold (sunset
     12/31/09).
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
            Total of Extensions of    ......................       -301     -1,868     -9,171    -19,970     -5,501     -6,670    -17,214         31        404        386    -36,815    -59,877
             Certain Provisions for
             Two Additional Years,
             and Other Modifications.
III. Other Provisions:
    1. Taxation of certain            aafca DOE.............         -3         -9        -10        -11        -12        -13        -14        -15        -15        -15        -45       -117
     settlement funds (sunset 12/31/
     10).
    2. Modify rules for               generally da DOE......         -1         -7         -8         -8         -9         -9         -5         -3         -1  .........        -33        -51
     distributions of controlled
     corporations (sunset 12/31/10).
    3. Expand the qualified           bia 12/31/05..........      (\2\)         -1         -2         -4         -7         -8         -9         -9         -9         -9        -14        -58
     veterans' mortgage bond program
     (sunset 12/31/10).
    4. Provide capital gains          soel tyba DOE.........         -1         -4         -5         -5         -4         -2         -4  .........  .........  .........        -19        -25
     treatment for certain self-
     created musical works (sunset
     12/31/10).
    5. Expand the eligibility for     tyba 12/31/05.........         -2         -3         -4         -4         -4         -3  .........  .........  .........  .........        -17        -20
     the tonnage tax election
     (minimum of 6,000 deadweight
     tons) (sunset taxable years
     ending before 1/1/11).
    6. Modification of certain        bia DOE...............  .........  .........         -1         -2         -1      (\2\)      (\2\)  .........  .........  .........         -4         -5
     arbitrage rules for certain
     funds (include 20% State
     limitation) (sunset 8/31/09).
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
            Total of Other            ......................         -7        -24        -30        -34        -37        -35        -32        -27        -25        -24       -132       -276
             Provisions.
                                     ===========================================================================================================================================================
                Net Total...........  ......................     -5,773    -11,237    -11,182    -21,394     -6,493     -7,048    -17,430       -207        129        102    -56,082    -80,534
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\The ``Economic Growth and Tax Relief Reconciliation Act of 2001'' provides that the child tax credit and adoption tax credit are allowed for purposes of the alternative minimum tax for 2002
  through 2010.
\2\Loss of less than $500,000.
\3\The extension of tax-exempt financing is effective for bonds issued after the date of enactment.
\4\This provision will have a negligible effect on penalty excise tax receipts. However it will have an indirect effect on income tax receipts through increases in employer-contributions for
  health insurance and corresponding decreases in cash wages. The table shows this indirect revenue effect, which was estimated by the Congressional Budget Office.
\5\Effective for taxable years of foreign corporations beginning after December 31, 2006, and before January 1, 2009, and to taxable years of U.S. shareholders with or within which such
  taxable years of such foreign corporations end.
\6\Effective for taxable years of foreign corporations beginning after December 31, 2005, and before January 1, 2009, and to taxable years of U.S. shareholders with or within which such
  taxable years of such foreign corporations end.
 
Note: Details may not add to totals due to rounding. Date of enactment is assumed to be December 1, 2005.
Legend for ``Effective'' column: aafca = accounts and fund created after; apoia = amounts paid or incurred after; bia = bonds issued after; cmd = contributions made during; da = distributions
  after; epoi = expenses paid or incurred in; epoia = expenses paid or incurred after; DOE = date of enactment; pmi = payments made in; ppisa = property placed in service after; soei = sales
  or exchanges in; tyba = taxable years beginning after; wpoifibwa = wages paid or incurred for individuals beginning work after.


[[Page 471]]

  Mr. BAUCUS. Madam President, under the Budget Act, the Budget 
Committee is the authority on scoring matters. Section 312(a) of the 
Budget Act provides in relevant part that ``the levels of . . . 
revenues for a fiscal year shall be determined on the basis of 
estimates made by the Committee on the Budget . . . the Senate, as 
applicable.''
  In practice, this means that the Presiding Officer will turn to the 
chair of the Budget Committee for projections of dollars and cents 
effects of the legislation. In practice, the chair of the Budget 
Committee tends to rely on the Joint Committee on Taxation for revenue 
estimates.
  I have let the chairman of the Budget Committee know that I was going 
to propound this inquiry. I believe the chairman of the Budget 
Committee concurs that the Joint Committee on Taxation estimates that I 
have just cited are authoritative.
  I have a series of parliamentary inquiries. Is it not true that by 
virtue of section 313(b)(1)(E) of the Budget Act, section 313(b)(1)(E) 
of the act--part of the Byrd rule--applies to conference reports?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. BAUCUS. Madam President, if the conference committee on the 
legislation before us today were to return a conference report that 
included the capital gains and dividends tax cut provisions in the 
underlying House bill before us today, is it not true that a point of 
order would lie under section 313(b)(1)(E) of the Budget Act against 
both of those provisions?
  The PRESIDING OFFICER. The Senator is again correct.
  Mr. BAUCUS. Madam President, if a Senator raised that point of order 
against the provisions just cited, and the Presiding Officer sustained 
the point of order, is it not true that the offending provisions would 
be deemed stricken from the conference report and the Senate would then 
have before it an amendment between the Houses consisting of the rest 
of the conference report not so stricken?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. BAUCUS. Madam President, is it not true that a motion to waive a 
point of order raised under that section of the Budget Act or an appeal 
of the ruling of the Chair under that section would require the 
affirmative vote of 60 Senators to succeed?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. BAUCUS. Thank you, Madam President.
  I believe this set of inquiries has established an important point. 
The capital gains and dividend provisions in the House bill worsen the 
deficit in the outyears. The conference committee thus must remove 
those provisions from the bill, pay for them in the outyears, or plan 
for needing 60 votes to waive the violation of the Budget Act. Those 
are the alternatives.
  I might note that in the waning days of the last session, the Senate 
demonstrated that it is capable of employing the Byrd rule against 
reconciliation conference reports. For example, Senator Conrad raised a 
point of order under the Byrd rule against several provisions in the 
spending reconciliation bill, and the Presiding Officer sustained the 
points of order under the Byrd rule. That is why the House of 
Representatives, this very day, in 2 or 3 hours, is voting on that 
spending reconciliation bill again.
  So there are good reasons for the conference committee on this bill 
not to include the capital gains and dividend tax cuts the House bill 
includes. One of those good reasons is the Senate rules.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Madam President, I thank the Senator from Montana for 
reviewing for our colleagues the rules that relate to points of order, 
points of order that may lie because of Byrd rule violations with 
respect to this legislation. It is critically important we do this 
within the rules.
  I commend the ranking member and the chairman for putting together an 
excellent package. I have other business now, unfortunately, that will 
take me away from the Senate, but I intend to come back and at some 
point offer a substitute that will be paid for with the same package. 
The chairman and ranking member have done an excellent job of 
presenting a package that is very much in the interest of the country. 
Also, I will offer a pay-go provision. I don't think we can give up on 
the notion that any new spending or any tax cuts need to be paid for. 
Our deficits and debt are running amok.
  I again alert my colleagues what concerns me the most, even though 
the deficit gets all the attention in the press, the far more serious 
threat is the exponential growth of the debt. Last year, the deficit 
was some roughly $320 billion, but the growth of the debt was $550 
billion.
  For this year, when we put back things that have been excluded, we 
see a deficit in the $360 billion range, but the growth of the debt we 
now estimate is more than $630 billion, every penny of which has to be 
repaid.
  The budget that we are still working on from last year will increase 
the debt of this country--by the estimates of the authors of the 
budget--will increase the debt more than $600 billion a year each and 
every year of the 5 years of its life. That is a $3 trillion increase 
in the debt. The first 5 years of this administration the debt has 
already increased more than $3 trillion.
  Looking ahead to the next 5 years, there is another $3 trillion 
increase. We are now headed, we believe, for a $12 trillion debt by the 
end of this 5-year period, a doubling of the debt in a 10-year-period. 
Foreign holdings of our debt have doubled in 5 years.
  It took 42 Presidents 224 years to run up $1 trillion of debt held 
abroad, U.S. debt held by foreigners. In the last 5 years under this 
President, we have doubled that amount--in fact, more than doubled that 
amount. That is an utterly unsustainable course. It is absolutely 
incumbent on us to get hold of our budget deficits and our trade 
deficits that are requiring this unprecedented foreign borrowing. I 
will have more to say about this when I offer a substitute and when I 
offer a pay-go provision.
  I urge my colleagues to pay close attention. Together we have to deal 
with this burgeoning deficit and debt. It is threatening our country. 
It threatens our economic security. It threatens our national security. 
It certainly threatens our financial security. In my substitute, I 
alert my colleagues, I will take the very provisions the chairman and 
ranking member proposed--they have done an excellent job of putting 
together a package that makes sense for the country. It has the right 
priorities. They have done an excellent job. I have taken those 
provisions, and I have added some more pay-fors so we cover the cost.
  Again, clearly, some of these tax reductions need to be extended. 
Goodness knows we have a whole series of things on which the American 
people rely. We ought to extend them. The chairman and the ranking 
member have done a terrific job of putting this package together in a 
bipartisan way. I will offer a substitute that takes their package and 
adds some pay-fors so the cost is covered.
  With that, I indicate to my colleague that we will try to work out 
with his staff when it is most appropriate to return. I have another 
obligation at 12:30.
  Mr. BAUCUS. Madam President, I very much thank my good friend from 
North Dakota. More than any other Senator, he is constantly reminding 
Members that our budget deficit is getting out of control. It is a 
message I wish more Senators and the public would heed. I hear the 
problem constantly.
  I was in India and China for 10 days earlier this month. We all 
travel overseas, and we all talk to the leaders privately and publicly 
worldwide. I heard this constantly. We Americans have to get our fiscal 
house in order. We have to do it right away. The earlier we begin the 
better. There is no doubt, all mainstream economists agree, after a 
while it makes it very difficult for the United States to compete, and 
we have such a low savings rate, our national savings rate and our 
personal savings rate.
  I thank the Senator again. I want him to know how much I appreciate 
all

[[Page 472]]

he is doing to try to get some attention to this very important 
subject.
  Mr. CONRAD. I appreciate the remarks of the Senator from Montana.
  Mr. BAUCUS. Madam President, our personal savings rates are negative. 
We consume more than we save in America today. Our national savings 
rate is low today because our fiscal deficit is so high. Corporate and 
private debt is high.
  We have a great country, no doubt about that, a wonderful country. I 
am saying as clearly as I can say it, we run a great risk as a country 
of squandering what we now have as Americans if we do not, sooner 
rather than later, get our act together and get the deficits down. I am 
not being partisan.
  It was not too many years ago we had projected surpluses. President 
Clinton bit the bullet. It was tough, very tough. He sent a budget to 
the Congress which included spending cuts and included some revenue 
increases only on the most wealthy. It was 50-50, 50 percent revenue 
cuts and 50 percent revenue raises on only the top 2 percent income 
earners in America, and it got through the Congress, one vote in each 
body.
  Guess what. As a consequence, we projected surpluses, about $5 
trillion in surplus over the following 10 years. I know that gave a 
great boost of confidence to businesses, to investors, that we would 
have a surplus in America, that we would be a strong country. It did 
not adversely affect the overall economic factors we face today.
  With that huge deficit, I remind everyone, who is financing the 
deficit? Foreigners. Foreign governments by and large are financing 
this deficit. China's reserves at the end of the year will be $1 
trillion, surpassing Japan's foreign reserves. They are building up 
their bank accounts to such a great degree, loaning dollars to the 
United States with treasuries and other instruments. They are financing 
this.
  We have to begin to get this budget deficit down right away. There is 
no alternative. The sooner we begin the better. I thank the Senator 
from North Dakota and others who are working very hard to try to get 
the job done and get our budget deficits reduced.
  The Senate is now considering, to remind my colleagues, the House tax 
reconciliation bill, the bill before the Senate now. The Senate 
substitute is not yet pending. Thus, I encourage Senators who wish to 
speak on the tax provisions--that is, the House bill before the 
Senate--to come to the floor and deliver their statements. At some 
point in midafternoon we expect the majority leader or the assistant 
majority leader to offer the Senate substitute and the Grassley-Baucus 
perfecting amendment, essentially taking the House bill before the 
Senate now and substituting the Senate-passed reconciliation bill. We 
hope the Senate will adopt the Grassley-Baucus perfecting amendment by 
voice vote. Thereafter, I encourage tax-related amendments.
  Just to review the situation now, this is a good time to make 
statements on the bill. I also encourage Senators who have tax-related 
amendments to offer those first. I would like the tax-related 
amendments brought before the Senate, debated, and dealt with. 
Afterwards, we can deal with the non-tax-related amendments, amendments 
which will be nongermane and, if offered, against which points of order 
will be made, we are in a 60-vote situation.
  That is where we are today. It is Wednesday noon. We have a total of 
20 hours on the whole bill. I am hopeful we will not have to use that 
20 hours, but it is 20 hours. The clock is ticking. I urge Senators to 
come to the Senate now.
  Like the budget deficit, earlier is better than later. Senators can 
offer their amendments now, and they have a better chance of getting 
full debate. Later, they probably will get squeezed.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Ohio.
  Mr. VOINOVICH. Madam President, I rise out of concern for our 
generation and also for the generations of our children and 
grandchildren and the legacy we leave them.
  It has been said that the real test for a moral society is the kind 
of world it leaves to its children. With that in mind, I speak about 
the reconciliation tax bill before the Senate.
  First, I comment on the larger context of what I and others see as a 
great threat to our future way of life. Comptroller General David 
Walker has said that the greatest threat to our future is our fiscal 
irresponsibility.
  He also says:

       America suffers from a serious case of myopia or 
     nearsightedness both in the public sector and the private 
     sector. We need to start focusing more on the future, we need 
     to recognize the reality that we are on an imprudent and 
     unsustainable fiscal path and we need to get started now.

  In November of last year, Alan Greenspan testified before the Joint 
Economic Committee and told Congress:

       We should not be cutting taxes by borrowing. We do not have 
     the capability of having both productive tax cuts and large 
     expenditure increases, and presume that the deficit doesn't 
     matter.

  I, for one, am taking this warning very seriously, and I have since I 
have been a Member of the Senate. I strongly believe deficits do 
matter. I do not know how anyone can say with a straight face that when 
we voted to cut spending in December to help achieve deficit 
reductions, we can now turn around a short while later to provide tax 
cuts that exceed or cancel out the reduction in spending. I voted to 
cut spending in the reconciliation bill, but I voted against the tax 
cuts that were part of the reconciliation effort. In my opinion, it is 
the only responsible course of action.
  There are three reasons we should oppose tax cuts at this time. It is 
simple. First of all, we cannot afford those tax cuts; two, we do not 
need these tax cuts; three, we should be working on tax reform rather 
than tax cuts.
  Let's look at some of the looming problems or liabilities that our 
Federal Government will have to face in the near future. There is the 
often quoted but perhaps not recognized statistic that 77 million baby 
boomers, about whom the President talked last night--he is one of them; 
so is Bill Clinton--will begin to retire in just a couple of years, and 
they will be a tremendous drain on our entitlement programs. It has 
been called a demographic tsunami that will never go away.
  By 2030, the Congressional Budget Office projects Social Security 
spending as a share of the U.S. economy will rise by 40 percent. The 
bottom line is the predictions are that by 2030 almost the entire 
budget will be used for Social Security, Medicare, and Medicaid, and we 
will not have anything left for anything else.
  At the size of the Federal budget today, according to the 
Congressional Budget Office, the prescription drug benefit will cost 
$155 billion a year by 2016, and taken together with Medicare and 
Medicaid will cost us $1.3 trillion or about one-third of Federal 
spending.
  On top of this, we must consider the pension liabilities taxpayers 
may soon take on. The Pension Guaranty Corporation has assumed 1.3 
million pensions, which adds up to about $23 billion more in 
obligations than its premiums can cover. That shortfall could grow to 
more than $100 billion in the near future, considering that about 1,100 
companies are at high risk of defaulting on their plans. All that may 
be added to the Government's bill to pay. We are going to have to pick 
up the tab on that if this happens.
  The war on terror has cost us over $350 billion since it began. This 
just happens to be the size of the tax cut we enacted in 2003. I took a 
lot of heat for holding the line on that $350 billion, but the costs of 
the war were not clear at that time. Consider where we would be today 
had we not limited the scope of the tax cuts. Where would we be in 
terms of our budgets being in balance and our national debt? I voted 
for funding for the war on terror because it is the Federal 
Government's primary duty to provide national security. However, 
considering these large increases in spending, it certainly does not 
make sense to give away large tax cuts.
  The Congressional Budget Office projects that Defense spending will 
rise from $420 billion in 2006 to $461 billion in 2011. This is 
excluding supplemental appropriations. And, of course, we

[[Page 473]]

must look at the Federal spending for Hurricane Katrina. While not as 
expensive as originally thought, relief spending will amount to about 
$101.5 billion--the total cost of the supplemental appropriations, 
targeted tax relief, and other Katrina-related bills we have passed.
  Now add to that we are already operating in a deficit. In case anyone 
has forgotten, the deficit for fiscal year 2005 was $319 billion. In 
October of last year, the gross Federal debt climbed past $8 trillion. 
The debt has grown from $5.5 trillion, when I first came into office, 
to a staggering $8.1 trillion. The debt service alone threatens to 
gobble up revenues in the near future. According to CBO, in fiscal year 
2005, interest on the public debt grew more rapidly than any other 
major spending category, rising 14 percent above the fiscal year 2004 
level.
  Let's face it, we have been lucky. Interest rates have been very low 
so our interest costs to the debt have been relatively modest. But as 
we move up the chain and interest rates start to rise, they are going 
to take a much larger share of our expenditures.
  Without major spending cuts, tax increases, or both, the national 
debt will grow by more than $3 trillion through 2010, to $11.2 
trillion, according to the General Accounting Office. In other words, 
it is going to grow more than $3 trillion through 2010. According to 
the General Accounting Office, that will be nearly $38,000 for every 
man, woman, and child. The interest alone would cost $561 billion in 
2010, the same as the budget of the Pentagon. In other words, the 
interest costs in 2010 are going to be the same cost as to entirely 
fund our Defense budget.
  However, we all know the real problem is our long-term debt. By the 
General Accounting Office's own estimates, about 35 years from now, 
when my grandchildren have their own children to care for, balancing 
the budget could require actions as large as cutting total Federal 
spending by 60 percent. We had a tough time with our modest reduction 
in terms of cutting expenses 1 percent. We went through all kinds of 
furor around here.
  By passing these tax cuts into law, I believe we are increasing the 
deficit and thus the Nation's debt, which results in a future tax on 
our Nation's children. I believe it is immoral to bequeath trillions of 
dollars in debt to our children and grandchildren. This will not be 
politically easy, and I understand that. But the simple, undeniable 
fact is we cannot have it all. We have to make hard choices. We have to 
decide we cannot say to them: You pay for things we wanted and were not 
willing to pay for. We should either pay for them or be doing without 
them.
  I learned this lesson while I was mayor of Cleveland for 10 years and 
as Governor of Ohio for 8. You have to balance budgets. You have to 
deal with deficits.
  In the words of Robert J. Samuelson in a Newsweek article called 
``Capitalism vs. Democracy'':

       So it is that budget deficits persist; any combination of 
     spending cuts and tax increases arouses a coalition of the 
     angry. And so it is that--despite a gradual aging of the 
     population that will require huge and, probably, damaging tax 
     increases--no one has seriously attempted to contain these 
     costs. It is easier to pretend that there will be no ill 
     effects.

  It is time to recognize a simple fact, and that is this: Tax cuts do 
not pay for themselves. We have heard all of this about: Did the tax 
cuts generate more revenues than what we had expended? The red bars on 
this chart show the revenue projected before we cut taxes in 2003. In 
other words, these are the revenues we expected to get if we had not 
cut taxes. The blue bars show the revenue projected after we cut taxes. 
The green bars show the revenue actually collected. The green bar shows 
the most important thing.
  The blue bar shows what we thought we were going to get, and we did 
get more revenue than we expected in 2003. We expected this, as shown 
by the blue bar, in 2004, and we got the green. We expected what is 
shown with the blue bar, as projected, and we were able to get added 
revenue, as shown by the green bar. The revenue came up, but there is a 
big debate.
  Particularly, we were talking about that yesterday in a meeting, 
about what caused the increase in revenues. Some were arguing it was 
because of reducing the tax on dividends and lowering the capital gains 
tax. I asked the question: Did the lowering of interest rates have 
anything to do with the fact that we had added revenues? We talk about 
the stock market. Did the fact interest rates were down impact on the 
fact that the stock market has gone up?
  So there are a lot of things that come into play. I am sorry, but so 
many of my colleagues say these two tax reductions made the difference 
for America and fail to realize there were a lot of other things that 
were happening in our economy. The 2003 tax cuts, yes, were not as 
expensive as we feared, but the fact is, they still did not pay for 
themselves in terms of what we projected the revenues to be if we did 
not have the tax cuts.
  The Government Accountability Office and the Congressional Budget 
Office have both stated we cannot simply grow our way out of the 
problem. The Congressional Budget Office said last year:

       [E]conomic growth alone is unlikely to bring the nation's 
     long-term fiscal position into balance.

  What I am saying is we have to make some tough choices around here. I 
voted for tax cuts in 2001, 2002, and 2003 because the country needed 
stimulative medicine. It has worked. The economy has grown. But like 
any other medicine, an overdose of tax cuts can, and in my opinion 
will, do more harm than the original disease.
  In 2003, I said that $350 billion in tax cuts would be enough to get 
the economy moving, and it worked. Now I am saying that any more would 
be an overdose. It is time to put the tax cut medicine back on the 
shelf, particularly in light of the war in Iraq, our spending on 
homeland security, Hurricanes Katrina and Rita, and all the other 
mandatory spending I have mentioned earlier.
  The second reason to put the tax cut medicine back on the shelf is 
that many important tax extensions do not have to happen today. They do 
not. For instance, the reduced rates on dividends and capital gains do 
not expire until 2008. As a matter of fact, we could wait until 2009 to 
deal with it in terms of the 2008 tax year. That is 3 years from now. 
If we wait to look at these extensions, perhaps it would give us a 
chance to find offsets to pay for them or even look further at 
something that is long overdue, tax reform. I am going to discuss that 
in a moment.
  When Alan Greenspan testified before the Joint Economic Committee at 
the end of last year, a member of the committee asked if he supported 
extending the current 15-percent tax rate for capital gains and 
dividends. Former Chairman Greenspan replied he could only support 
extending these tax cuts if they were paid for. According to Chairman 
Greenspan, large budget deficits will drive up interest rates over 
time, raising the Government's debt-service costs, which I referred to 
5 minutes ago; that is, interest costs go up, and we end up paying a 
large portion of our budget on interest costs. Chairman Greenspan said: 
unless the situation is reversed, at some point these budget trends 
will cause serious economic disruptions.
  The fact is if these taxes are so important, we should pay for them, 
which is why I supported the pay-go amendment to the budget resolution 
in March and supported it again in November. We have pay-go that says 
if you want to spend more, you have to find some way to pay for it. We 
should do the same thing with tax cuts. No, we decided not to do that.
  I also supported the Deficit Reduction Act when it passed the Senate 
in December because I believe controlling the growth of entitlement 
spending is essential to dealing with our fiscal challenges. The 
Deficit Reduction Act has been presented as an important step toward 
putting our fiscal house in order.
  However, adjusting the balances on the pay-go scorecard to reflect 
the passage of the reconciliation bill would give credence to the 
criticism that we voted to restrain entitlement spending

[[Page 474]]

to allow for larger tax cuts, not to reduce the deficit. In other 
words, you guys cut your expenses so you could pay for your tax 
reductions, and you did nothing for the deficit.
  Furthermore, even though the budget resolution adopted last April 
allowed for legislation increasing the deficit by $75.6 billion, the 
fiscal and political environment is very different now than it was when 
the budget resolution was adopted. As I mentioned before, the costs of 
responding to Hurricane Katrina have had a substantial impact on the 
budget deficit. Katrina hit the United States on August 29, well after 
we passed the budget resolution. We had no idea this was coming. This 
was the worst natural disaster we have had, and we have to say: Well, 
we will take care of it. We will find some way to fudge it and pay for 
it. But we know fudging it means our budget for 2006 is going to be 
more unbalanced and we are going to add to the national debt.
  The Office of Management and Budget recently announced that the 
deficit will exceed $400 billion once again in fiscal year 2006, $60 
billion higher than projected last summer.
  Another important step toward fiscal responsibility is to have honest 
accounting for the Social Security surplus. We have borrowed over $1.9 
trillion from Social Security to finance the rest of the Government. I 
want to make this point clear. When I first came to the Senate, we were 
talking about ``unified budget'' and ``on budget.'' All of a sudden, we 
are now back to the unified budget. In those days, we were saying: We 
cannot spend the Social Security surplus. Now we do not even talk about 
the Social Security surplus. The real number is masked by borrowing 
from the trust funds of other programs. When you add the off-budget 
surplus of $175 billion from the Social Security trust fund and Postal 
Service outlays, the real, or on-budget, number is $494 billion. The 
American people do not understand that. We report $319 billion. The 
fact is, it cost us almost $500 billion. The Government's accounting 
for total trust fund surpluses is actually $226 billion. That would 
increase the total deficit to $545 billion.
  In other words, we talk about the Social Security surplus we spent. 
We do not tell the American people that we are also spending the other 
money that is in the trust funds. So if you add them all up, we are 
talking about a deficit of $545 billion, when you include spending the 
money that is in Social Security and the other trust funds.
  It is time to stop the raid on Government trust funds. That is why I 
have introduced the Truth in Budgeting Act. I am happy Senator Conrad 
is willing to work with me on this important budget reform. The 
legislation would stop the Federal Government from using surplus trust 
fund revenues to hide the true size of the Government's deficit 
spending and highlight the true size of the Federal debt by forcing the 
Government to increase borrowing from the public to cover general fund 
expenses.
  I have introduced this bill not as a Social Security reform measure 
but as a budget reform measure. It is important to have an honest 
accounting of where we are and where we are headed from a fiscal 
perspective.
  If you look at a study by the Heritage Foundation on Western European 
economies, you get a glimpse of where we are going. Many older European 
nations have been forced to impose large tax increases on workers to 
fund benefit systems mainly for retirees. Overall government spending 
in the 15 nations comprising the European Union averages 48 percent of 
GDP, and tax revenues average 41 percent of GDP, which has placed a 
significant drag on their economies. Compared to the United States, per 
capita income is 30 percent lower in these countries. Economic growth 
rates are 34 percent lower than the United States, and unemployment is 
substantially higher. As their populations continue to age, the 
economies of countries such as Germany and France risk collapsing under 
the weight of their unrealistically generous retirement and welfare 
systems. We can't allow that to happen here.
  I am pleased that President Bush, in the State of the Union Address 
last night, called for a bipartisan commission to examine the full 
impact of baby boom retirements on Social Security, Medicare, and 
Medicaid. He said the commission ``should include Members of Congress 
of both parties and offer bipartisan solutions. We need to put aside 
partisan politics and work together and get this problem solved.'' I 
couldn't agree more. We have ignored this issue. It is time that we sit 
down in a bipartisan basis and face up to this pending disaster and 
deal with it now before it is too late.
  My third reason for opposing tax cuts at this time is that the 
President's Advisory Panel on Tax Reform released its final report in 
November of last year. All of us have heard from families and 
businesses in our States lamenting the complexity and frustration with 
the current Tax Code. I don't know about the Presiding Officer, but I 
know my wife and I spend hours getting our papers together, and we have 
to take them to an accountant. I used to do my tax return. I am a 
lawyer. I wouldn't touch my tax return today with a 10-foot pole.
  I am disappointed that the administration seems to have put tax 
reform on the back burner. Why extend tax reductions, which we are 
talking about now, piecemeal when we should be considering fundamental 
tax reform instead? The goal of any government revenue program should 
be to raise sufficient funds to operate public programs with the least 
amount of disruption to the economy. Our tax structure should be 
simple, fair, and honest. Our current Tax Code achieves none of these 
objectives.
  Last year, the Tax Foundation, a conservative think tank, estimated 
that Americans spent more than 6 billion hours doing their taxes and 
that complying with the current Federal income tax code costs U.S. 
individual businesses and nonprofits $265 billion, which is 22 cents 
for every dollar of income tax collected. This is equivalent to the 
combined budgets of the Departments of Education, Homeland Security, 
Justice, Treasury, Labor, Transportation, Veterans Affairs, Health and 
Human Services, and NASA.
  Individuals and businesses lose money they could otherwise save, 
invest, spend on their kids' education, or enjoy an extra evening out 
with the family. But the Federal Government gains nothing from this 
atrocious tax system we have. It is the equivalent of stacking money in 
a pile and lighting a match. It doesn't do anything for anybody.
  We all recognize the need for a simple, fair, and honest Tax Code. 
This would be a win-win goal for everyone. We will soon be considering 
a bill that would cut taxes by about $60 billion. Simply cutting tax 
compliance costs in half, from 20 percent to 10 percent, would have the 
impact of a much larger tax cut in the amount of $130 billion. In other 
words, if we could get a fair, simple, understandable Tax Code and 
eliminate this enormous amount of money it costs all of us to pay our 
taxes and reduce that by half, we could save the American people $130 
billion. That is real money. This tax cut we are talking about is $60 
billion. We are talking about $130 billion out there that we have in 
our pockets. It doesn't impact the revenues to the Federal Government 
one iota. However, it would be a tax cut that doesn't reduce our 
revenue.
  We all know that fundamental tax reform is critical. I cannot 
understand why some of my colleagues want to make so many provisions of 
the Tax Code permanent or add new tax cuts when we very well may be 
eliminating precisely the same provisions as part of fundamental tax 
reform.
  The problem we have is this, if you want to be practical: When I got 
involved in this whole business in 2003 of the $350 billion tax 
reduction to stimulate the economy, and we started talking with some of 
the high leadership in the House of Representatives, I was saying to 
them: When I was Governor, what we did is we looked at tax reductions 
that stimulate the economy, and then we looked at other areas where we 
could increase taxes that would have less impact on the economy. We had 
to be concerned about balancing our budget.

[[Page 475]]

  What I heard from the leadership on the other side of the Capitol 
was: We can't increase taxes because we all took the pledge that we 
can't increase taxes.
  I said: Even if you could increase taxes that don't have that much 
impact on the economy so that you could decrease taxes that would help 
stimulate the economy?
  No way.
  Where are we going? If that is the deal, we will never get anything 
done around here.
  It is my opinion that it is not time for piecemeal tinkering. No 
homeowner would remodel their kitchen and bathroom a year before 
tearing down the house to build a newer and better one. We need to tear 
down the house.
  If you look at that Tax Code, consider it to be a Christmas tree. If 
you look at all the ornaments on that tree, you would sit back and say: 
Who in the devil ever decorated this tree? They must have been under 
the influence of alcohol or drugs. That is what it is today. We just 
keep adding things, one after another, another bell, another whistle, 
this and that. It is time for us to look at this.
  I wish to reiterate the three reasons I think we should oppose these 
tax cuts at this time.
  No. 1, we cannot afford them because of our soaring deficit and the 
national debt. Putting our spending on the credit cards of our kids is 
unconscionable, particularly because they are going to have to work 
harder and smarter to compete in a global marketplace just to maintain 
our current standard of living. Don't think they are not worried about 
that. And as a parent, don't think I am not worried about the kind of 
environment in which my kids are going to live. They are going to have 
to work very hard in this new competitive world. We better wake up to 
it. It is the most formidable competition we have ever had in my 
lifetime; from China, India, you name it. What we are basically saying 
to our kids is: You are going to go into this competitive society and 
have to work harder than you have ever had to before. And by the way, 
down the road, you are going to have to pay for things we weren't 
willing to do without or pay for. God bless you.
  I can't do that. I cannot do that. I don't think any of us can do 
that.
  Second, we don't need tax cuts at this time. If this body believes we 
must have them, then follow Alan Greenspan and David Walker's advice 
and let's pay for them.
  Third, from a public policy point of view, these tax cuts are 
premature because in the very near future we may well change them as 
part of fundamental tax reform and simplification.
  I thank my colleagues for their attention and urge them to consider 
the ramifications of additional tax cuts at this time and reaffirm a 
principle we have held dear over the years and that I have adhered to 
as mayor of Cleveland and governor of Ohio. That is to balance budgets 
and reduce deficits and, yes, when the circumstances warrant it, cut 
taxes, as I did the last 3 years as governor of Ohio.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Thune). The Senator from New Mexico.
  Mr. BINGAMAN. Mr. President, I am informed that it is not appropriate 
at this point to offer an amendment or to call up my amendment and 
offer it, but I do wish to speak to one of the amendments, which is at 
the desk, that I have filed. It is an amendment that is cosponsored by 
Senators Rockefeller, Murray, Cantwell, Clinton, Kennedy, Kohl, 
Lieberman, Schumer, Menendez, Kerry, and Leahy.
  This amendment relates to the prescription drug problem which all of 
us hear about when we return to our home States. It is an immediate 
issue and an immediate concern for our constituents. I have an 
amendment that tries to address a substantial amount of that concern.
  On January 1, 2006, just a month ago, senior citizens and people with 
disabilities were promised and fully expected to begin enjoying savings 
on their prescription drugs through the Medicare program. For many, the 
drug bill has been a lifeline and is working. But for millions of 
Americans, the transition to this new prescription drug benefit has 
been nothing short of a disaster.
  The sad reality is that implementation problems with the Medicare 
drug benefit are widespread. What is especially troubling is that the 
problems are adversely affecting the most vulnerable--low-income 
beneficiaries who have lost comprehensive drug coverage they previously 
had under Medicaid and have found themselves without coverage for 
certain drugs they previously had or have fallen completely through the 
cracks and have no coverage for any kind of drugs.
  It is unacceptable that this benefit is costing taxpayers hundreds of 
billions of dollars over the next 10 years and yet has left many of our 
Nation's most vulnerable citizens actually worse off. Consequently, I 
will offer at the appropriate time this critically important amendment 
to address the crisis.
  The amendment simply ensures that our Nation's seniors and 
pharmacists and States, many of which have come forward to fill the 
gap, are not left holding the bag for mistakes and problems caused by 
the Federal Government's failed implementation of the program.
  This legislation ensures that senior citizens and people with 
disabilities are getting the prescription drugs and services they need 
and that both States and pharmacists are being compensated for the 
costs they are absorbing whenever either Medicare or the drug plan has 
failed to cover those costs.
  While it is impossible to know the exact number of senior citizens 
and people with disabilities who are facing problems, we do know that 
at least 300,000 low-income seniors are paying far more in drug costs 
than they are supposed to be paying. We understand that up to 100,000 
seniors showed up at their local pharmacy and were not in the new 
Medicare system at all.
  Further, we know that the Health and Human Services Inspector 
General's Office confirmed last week that millions of the dual-eligible 
individuals who were automatically enrolled in the new program were 
placed in drug plans that did not cover the drugs they used. For some 
senior citizens and for the disabled, it was a cruel lottery that has 
left them without the drugs they need. Fortunately, as Americans of 
good conscience always do, both the pharmacists and States all across 
the Nation have stepped up to fill the gaps. But their good deeds 
should not be punished. We should make sure they are fully compensated 
for their effort, and this amendment will, in fact, do that.
  I appreciate all that Secretary Leavitt has committed to do to 
address the multifaceted problems that have been identified. I do 
believe things are getting somewhat better. However, we are a long way 
off from having these problems resolved, and promises of better times 
ahead are not adequate.
  A pharmacist in Carlsbad, NM, reported to my office yesterday the 
problems, in his words, that are still prevalent. As he says:

       We call the processor; they say call Medicare. We call 
     Medicare; they say call the drug plan. It is just a 
     continuous circle of finger pointing with no resolution.

  Therefore, I rise today, at the first opportunity we have had in this 
Congress, to offer this critically important amendment to fix some of 
these immediate problems with the Medicare prescription drug bill. The 
language of the amendment comes largely from legislation introduced by 
my good friend, Senator Jay Rockefeller, in a bill which is entitled 
the ``REPAIR Act.'' Who are the people we are talking about?
  In a New York Times article entitled ``Medicare Woes Take High Toll 
on Mentally Ill,'' an article published on January 21, a little over a 
week ago, reporter Robert Pear profiles Mr. Stephen Starnes, who begged 
for medication he had been receiving for 10 years to combat paranoid 
schizophrenia. His pharmacy could not get approval for this medication 
from the new Medicare drug plan. The result was that he was 
hospitalized, and he was treated by a fee-for-service Medicare provider 
due to failure of the private drug plan.
  So in effect, Medicare pays private drug plans for coverage and then 
it

[[Page 476]]

pays again for their failure to provide that coverage in a much more 
costly way.
  Clearly, immediate action is needed. This is one of dozens and dozens 
of newspaper reports nationwide. I have a chart that makes the case 
fairly dramatically. We have taken some of these headlines from around 
the country: ``Medicare Woes Take High Toll'' is the one I mentioned 
before; ``Patience Only Remedy For Drug Plan Confusion''; Pharmacists 
Deal with Medicare Confusion''; Pitfalls No Surprise in Drug Benefit 
Launch''; ``Seniors Denied Prescription Drug Benefits.'' There are is a 
wealth of these stories throughout country. The problems are legion, 
and we all hear about them on a daily basis when we are in our home 
States.
  Mr. President, I know that some will likely speak in opposition to 
this amendment and point out that the underlying legislation on the 
floor is a tax reconciliation bill. They will raise the objection that 
the amendment is nongermane. However, this crisis dictates that we 
should not let Senate procedural motions prevent our Nation's senior 
citizens from getting the prescription drug benefit they were promised. 
I urge my colleagues not to take parliamentary steps to keep us from 
considering and dealing with this issue.
  Others might say that the administration has promised to fix the 
problems. Yet we know they have had the opportunity to fix the problems 
already, but they have not done so. Here are some examples:
  On November 3 of last year, a couple of months ago, our colleague, 
Senator Murray, traveled around her State and foresaw many of the 
problems we are witnessing today. Consequently, at that time in 
November, she offered an amendment that would have provided a 6-month 
transition during which dual eligibles--people both on Medicaid and 
eligible for Medicare--could continue to receive drug coverage through 
Medicaid. This would have given the administration more time to work 
through the many problems that confront these dual-eligible 
individuals. Unfortunately, the administration opposed that amendment 
and it was rejected.
  The CMS had a second opportunity when Medicare rights centers and a 
number of other senior and disability organizations filed suit to 
compel the Secretary to continue Medicaid drug benefits ``for any dual 
eligible who is not then enrolled in a Medicare prescription drug plan 
or otherwise receiving Medicare drug coverage.'' But again, the 
administration fought that suit by arguing that the ``remedy is 
unnecessary and it runs counter to the public interest because of the 
considerable obstacles and confusion it will generate in the few 
remaining days between January 1, 2006.'' They further argued that they 
would be in a position to quickly rectify any problems that might 
arise.
  I think we can all agree that it is unfortunate that both Congress 
and CMS failed to take advantage of clear opportunities to slow the 
transition of the 6 million dual-eligible individuals from the Medicaid 
system to Medicare and that CMS was clearly way off in its assessment 
of how smoothly that transition would occur.
  Unfortunately, we have missed both of those opportunities that I 
mentioned. But we have a third chance, and that chance is being 
presented by this amendment I am offering today to provide immediate 
help to seniors and people with disabilities who are being adversely 
impacted by problems that have arisen with the implementation of the 
drug benefit.
  We had a meeting in the Finance Committee this last week. Chairman 
Grassley asked a question of Secretary Leavitt, who was meeting with us 
there, and CMS Administrator McClellan. Chairman Grassley asked whether 
legislation was needed to fix some of these problems. Dr. McClellan 
simply responded ``no.'' The administration continues to take the 
position that Congress is not needed as part of the solution, that 
legislation is not needed, and that these problems will resolve 
themselves.
  Two weeks ago, CMS announced that States that had stepped into the 
breech to provide vulnerable citizens with the prescription drugs they 
needed would not be reimbursed by CMS because they didn't have the 
legal authority to help these States. Legislation was introduced 
immediately in the House and the Senate, and less than a week later CMS 
reversed itself and said it would be working to ensure that States 
would be fully reimbursed.
  Public opinion polls indicate that approval ratings for the Congress 
have sunk to the lowest levels in a decade. Part of that is due to the 
repeated failure of Congress to act when action is clearly called for. 
Hundreds of thousands of our citizens are calling out for help to 
address the many bureaucratic snafus that we are witnessing in the 
implementation of this Medicare prescription drug program.
  I urge my colleagues to support this amendment, when it is offered 
later today, to ensure that senior citizens and pharmacists and States 
get the support they need to get through this immediate crisis.
  Mr. President, I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call roll.
  Mr. BINGAMAN. 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. BINGAMAN. Mr. President, I ask unanimous consent that all quorum 
calls be counted equally against both sides.
  The PRESIDING OFFICER. Without objection, so ordered.
  Mr. BINGAMAN. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. CARPER. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                       State of the Union Message

  Mr. CARPER. Mr. President, I was joking earlier with the occupant of 
the chair, and I said I would like to be recognized so I could tell you 
what I thought of the President's State of the Union message last 
night. I appreciate the chance to offer some thoughts and comments.
  First of all, the Presiding Officer may recall that when he kicked 
off his speech, he called for a return to civility. That is called for 
around here from time to time. Sometimes it is called for earnestly and 
other times it is something that we just say. I hope that it was 
offered in earnest and that all of us, Democrats and Republicans, will 
respond in like kind. I always found that in my old job in Delaware as 
Governor, I got a lot more done when we were civil to one another. 
Regarding the kinds of issues before us that the President talked about 
last night, if we are going to be successful, we need to do that.
  One of things I have been calling for, for I guess about a year or 2 
now, ever since the President laid out his Social Security reform 
initiatives, was the notion of, if we are making progress on something 
as politically explosive as Social Security reform, it would be helpful 
to go back in time maybe 23 years to when President Reagan was 
President and Tip O'Neill was Speaker of the House. At the time, I was 
elected to the House of Representatives, where the Presiding Officer 
also served. In 1982, when I got there, we learned that Social Security 
was about to go bankrupt and that we needed to do something not to ward 
off the problem in 10, 15, 20, or 25 years but that next year, in 1983, 
because we were going to run out of money to pay benefits to our 
seniors. What President Reagan and Tip O'Neill did and maybe the 
Democratic leader of the Senate, who may have at the time been our 
colleague, Robert Byrd--I am not sure--they created a commission 
chaired by Alan Greenspan.
  The members included people such as Senator Robert Dole, whose wife 
serves with us now, and Senator Daniel Patrick Moynihan, now deceased. 
He was

[[Page 477]]

chairman of the Finance Committee, either then or at a later time. It 
also included Claude Pepper, from Florida, chairman of the Aging 
Committee in the House, and a number of other notable people. So Alan 
Greenspan chaired the Commission. They went to work in 1982 and came up 
with a whole raft of ideas. The Commission endorsed them in total.
  We endorse all these ideas to raise revenues, to slow the outflow of 
spending from the Social Security trust funds. Because they embraced 
the ideas in total, it gave the rest of us cause to believe that maybe 
there is some merit to them.
  Not only that, President Reagan said we are going to take the 
politics out of this. If you, the House and Senate, pass this package, 
I will sign it. Ronald Reagan, a Republican President, gave political 
coverage to the Democrats in the House and Senate. Tip O'Neill and the 
majority leader of the Senate gave political coverage to the 
Republicans. I describe it as drinking the Kool-Aid together, holding 
hands and jumping off the bridge together.
  We passed a major overhaul of Social Security, and the President 
signed it into law. It put Social Security on firm footing, not just in 
1983 but for a couple of decades to come. We know, looking down the 
road in 20, 30 years, we will have a serious problem with Social 
Security. The sooner we get started on it, the better off we all will 
be.
  It reminds me a little bit of compounded interest. Save a little, and 
as time goes by, it adds up to a lot of savings. To the extent we can 
get started on Social Security sooner rather than later, it will help 
us more quickly than we might imagine.
  As worrisome as the Social Security trust funds may be, the Medicare 
trust fund is an even greater, more urgent problem that needs to be 
addressed. I was very pleased to hear the President say last night not 
only a blue-ribbon commission with an eye toward the boomers and their 
effect on retirement but also Medicare and Medicaid. As you know, more 
than half the money we spend in Medicaid ends up with senior citizens 
in long-term care facilities. So I think that was a very good thing.
  Going back to the President's call for civility, a bipartisan 
approach, unless we have it, this kind of deal may see the light of 
day, but we will never make any progress on it. And, frankly, we need 
to make progress on it for the sake of our parents and for the sake of 
our children and grandchildren, some of whom are the ages of the pages 
sitting in front of me today.
  The President also lamented the fact that we have this terrible 
addiction to imported oil and that we have to do something about it. 
That was great. In fact, when John Kerry was running for President, one 
of the centerpieces of his campaign was energy independence I think by 
2020, or something such as that. The President echoed some of the same 
concerns last night in his speech. I welcome those. People on our side 
welcome them as well.
  It is important we not just say the words but we go forward and make 
sure we fund the technology initiatives and other initiatives that will 
help make renewable energy a reality, not just biodiesel and ethanol, 
but that we do a better job than we are doing now on solar energy, 
wind, and geothermal.
  The President also mentioned last night a new generation, not just 
encouraging more wind, solar, soy, diesel, ethanol, and so forth, but 
he also called for a new generation of nuclear powerplants. I know 
people have concern about the waste, and we should, but I also think we 
ought to be smart enough to figure out in the next 10 to 20 years what 
to do with the waste, how to recycle and better control it and reduce 
the threat that someone will get hold of it and turn it into nuclear 
weapons. We are too smart a people not to solve that problem.
  The President mentioned in his speech--I was kind of concerned by 
this--I think he said let's replace 75 percent of our oil dependence on 
the Middle East by 2025. I don't think all our oil comes from the 
Middle East. I think 60 percent is imported today, not all from the 
Middle East. A lot comes from other places around the world. To say we 
are going to reduce our oil from the Middle East is not good enough and 
I don't think good enough to do it by 2025. It is my hope that we can 
move up that timetable sooner and maybe eradicate not only our 
dependence on oil from the Middle East but from other places outside 
our borders as well.
  The President talked about affordable health care. The cost of health 
care is killing our competitiveness as a nation. One of the reasons--
not the only reason--but one of the reasons why GM and Ford are 
struggling, losing money, laying people off, and closing plants is the 
huge legacy costs they carry with their pensions and health care costs 
for their employees today and for people who are retired.
  GM alone provides health insurance for about a million people--folks 
working in the plants and their families, people who used to work in 
the plants and are retired. It is about a million people. Some folks 
describe GM and some of these auto companies as basically a health care 
provider that happens to build cars and trucks on the side. I know they 
say that with tongue in cheek, but it is not far off the mark.
  A couple things the President mentioned I think made a lot of sense. 
One was electronic records. For a lot of people, it doesn't mean much. 
I will use an example.
  We had hearings this morning on Katrina, a followup to what went 
wrong and what didn't go wrong on the heels of Katrina in New Orleans. 
When most people were evacuated--and we spent a fair amount of time 
this morning talking in our hearing about the evacuation of people who 
were in nursing homes and how it didn't go well. A lot of times people 
who were in nursing homes ended up in places outside Louisiana. 
Frankly, the people who received them in other nursing homes and other 
hospitals did not have a clue what medicines these folks were taking, 
they didn't know what their lab tests were, they didn't know the 
condition they were in. They had no real record of their x-rays or 
their MRIs. Basically, all these older people were dumped in the laps 
of these nursing homes and hospitals outside the gulf coast. It was a 
mess.
  Compare and contrast that with the folks who are veterans and are 
being cared for by the VA in VA nursing homes and hospitals in the same 
area. When they were transferred to their new sites and other States 
surrounding the gulf coast, going with them, figuratively and 
literally, were their electronic health records. When they ended up in 
a new hospital or nursing home, the receiving entity knew they had the 
medical history of this veteran. They knew what medicines they were 
taking. They knew what their lab tests were, MRIs, x-rays. They had a 
running history of the health care provided to these veterans. The 
veterans had an electronic health care record.
  We have a similar system put in place for Active-Duty folks in the 
Department of Defense. When I was in the Navy, we carried around manila 
folders that literally had our health care records. We would take them 
from station to station, base to base, as we were transferred. We don't 
do that anymore. Frankly, we do something similar to that in civilian 
life. We ought not do it.
  My little State of Delaware is trying to provide something similar to 
that. It is called the Delaware Health Information Network. That would 
allow everybody in our State to have an electronic health record. If 
you go into a hospital or doctor's office, they can figure out a little 
bit about your health history and how they can provide better care for 
you.
  We obviously need to do that for our country. The Congress and the 
President can do something to help that. It is not just money either. 
It is having standards so we are basically singing off the same sheet 
of music. People who go to a hospital in South Dakota, North Dakota, or 
Delaware can have standards that are interoperable, systems that are 
interoperable and using the same standards so we can get good care, 
better care because the folks receiving us know something about our 
medical history.
  The President talked about health savings accounts. They are about a

[[Page 478]]

year or so old. He talked about ideas to make them better. I know not 
everybody is crazy about health savings accounts. I know it is not a 
silver bullet, but it is part of the solution to provide health care 
help for those who don't have health care insurance, which is about 45 
million people. It is an option that we can try to improve.
  I want to mention one last point. Here on the Senate floor not too 
long ago, I was with our colleague, Lamar Alexander from Tennessee. He 
is a very thoughtful guy. Senator Alexander shared with me an idea that 
grew out of the National Academy of Sciences. It is an idea of looking 
ahead and figuring out how we are going to provide job opportunities 
for children who are the same age as my children--15, 17, the age of 
these pages. I guess they are about 15, 16, 17 years old as well.
  The folks at the National Academy of Sciences came up with this idea. 
Senator Alexander was good enough to give this to me, Mr. President. I 
don't know if you have seen this. It is titled ``Rising above the 
Gathering Storm.'' It is the executive summary, a quick read. I commend 
it to everybody. When I heard the President talking about his idea last 
night of making sure our young people coming out of our high schools 
are better steeped in math and science and making sure the people 
teaching in our schools can actually teach math and science--I think 
the President said double the investments in technology that lead to 
innovation. I said that sounds vaguely familiar to me.
  As it turns out, it is basically in the recommendations shared with 
me by Senator Alexander that came out of the work done by the National 
Academy of Sciences. It is good stuff.
  As we look forward, trying to figure out how we are going to be 
competitive with the rest of the world in this century, I am not sure 
we have all the answers. Part of it is, frankly, making health care 
more affordable for our people and employers. That is part of it. Part 
of it also is making sure our kids, our students, our young people who 
walk out of our high schools and colleges and go off into the world can 
read, write, think, they can do math, they know science, and are 
familiar with technology. There are a lot of good ideas in this 
publication, and I think the President has embraced this proposal and 
we, as Democrats and Republicans, might want to do the same.
  P.S., sometimes we say things in speeches that sound good and a lot 
of people stand up and applaud and say: That is right, that is good, I 
like that. But the followthrough is not always there. It is important, 
if we are going to go down this road--and we probably should--that the 
followthrough be there.
  What do I mean by that? The President is going to submit a budget 
proposal to us in about a week or so. It will be interesting to see how 
the administration funds these initiatives. When we go through the 
budget process, at the end of the day--we will adopt our appropriations 
bills later this year--it will be interesting to see how hard the 
administration pushes for these kinds of provisions outlined in the 
proposal from last night and from the National Academy of Sciences. It 
will be interesting to see what the administration proposes next year 
and the year after that and the year after that and how hard they push 
for funding.
  I will be watching, and to the extent the administration wants to 
support these proposals, I suspect they will have my support and 
probably the support of other Democrats and Republicans. It would be 
nice not just to hear words from the President but deeds as well.
  I say to the Presiding Officer, I don't know how he felt about the 
President's speech last night. I didn't catch his interviews. I know he 
did them. I did them back in Delaware, and they don't cover much in 
South Dakota either or in Washington, for that matter. I heard 
encouraging things in what the President said. I wanted to mention 
those.
  I will close. I know the Senator from North Dakota is waiting for me 
to get out of his way so he can take the floor as well. I will close 
with this. Just about every Member of the Senate has been over to Iraq 
in the last year or so. I was in Iraq in December. I met with our 
military leaders, I met with our civilian leaders, and I met with Iraqi 
military leaders and Iraqi civilian leaders. I was encouraged on 
several fronts.
  It was just before they had their elections. It was encouraging we 
had so many people wanting to run for the parliamentary seats--275 
seats and 7,000 candidates. That is a pretty amazing outcome in terms 
of participation, trying to put a coalition government together, stand 
it up, rewrite their constitution, build the economy. That is a whole 
lot to do at once in the middle of an insurgency.
  One of the more encouraging comments I had was from GEN George Casey. 
We were talking about whether the Iraqis are able to stand up, take on 
more of the fight, cover the responsibilities geographically and 
otherwise. We got an encouraging report, not one that said we are going 
to be able to leave in 6 months, 12 months, or even 24 months. But in 
General Casey's words, what he said with reference to our presence in 
Iraq is it is time for us, the United States, to start moving toward 
the door.
  Our President has said consistently that when the Iraqis are ready to 
stand up militarily, we, the United States, will be ready to stand 
down. He has been pretty consistent in saying that. What I heard from 
our own military leaders there, and the Chairman of the Joint Chiefs of 
Staff is that the Iraqis are able to militarily stand up in ways this 
year that they could not a year ago: Battalions can lead the fight, and 
there are some that can actually go out and fend for themselves; how 
the Iraqis control the border with Syria, control roughly one-third of 
Baghdad; have taken over a bunch of the bases where the United States 
used to be.
  They are standing up, and as they stand up, at least in the words of 
our own military leaders, maybe it is time for us to head toward the 
door. The President said last night--this is almost a quote--those 
decisions as to troop level will be made by our military commanders and 
not by politicians in Washington, DC. I heard that last night.
  Most people applauded, but I thought, what our military commanders in 
Iraq are telling me is that it is time for us to begin moving toward 
the door--not to leave, not to close the door, but to begin moving 
toward the door.
  I was a little disappointed last night. I think the President may 
have missed an opportunity to signal that we are in a position to begin 
reducing, to some extent, our troop presence there.
  In a way, a perverse kind of way, what that is likely to do is, as 
the Iraqis move up and stand up and the other Arab nations come to 
support this new government in Iraq, in a perverse kind of way our 
beginning to reduce our presence undercuts the latent support the 
insurgency enjoys.
  I could not understand why there is this latent support for the 
insurgency over in Iraq, but one of the reasons is when the Iraqi 
people hear--or at least a lot of them hear--our President say or us 
say we are there until we have complete victory, we are there for as 
long as it takes, what they hear is: The Americans are here for our 
oil, and they are not going to leave until they get it all or at least 
control it all. Hence this latent support for the insurgency.
  I hope we will look for opportunities--not to pull out lock, stock, 
and barrel by the end of the year; that doesn't make any sense--we are 
going to be there for some time--but to find a way for us to be, in the 
words of one Iraqi I heard over there, less visible and less numerous. 
To the extent we are able do that and they stand up and assume the new 
responsibilities, maybe we will be able to enable them to do a bit more 
with a bit fewer of us, which would please the American people; I 
believe it would please the Iraqi people; it would help reduce, a 
little bit, our budget deficit and maybe actually promote the day when 
Iraqis are running the show on their own and making them proud and us 
proud of them.
  I have gone on long enough. Thank you for the opportunity today to 
share some reflections from last night.

[[Page 479]]

  With that having been said, I yield the floor. I see my friend from 
North Dakota is ready to take the floor and say a few words.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. I thank my colleague from Delaware.
  Mr. President, the issue that is going to be debated now and voted on 
later today and perhaps tomorrow is the revenue piece of the 
reconciliation bill. I know that sounds a little like a foreign 
language to some people, but we have a process here called 
reconciliation. One part of that is spending, and the other part is 
revenue. This is the revenue side.
  For all of us, the question is, As we legislate here, are we gaining 
ground or losing ground? Are we moving our country ahead, or are we 
falling behind?
  I listened attentively last night to the President's State of the 
Union Address. He described some of these issues, although he did not 
describe domestic policy in much detail. The first half hour or so was 
about foreign policy. There is no question that Iraq is very important. 
The war on terrorism and national security are issues that are very 
important to our country. But I also believe it is important as well to 
begin taking care of things here at home, and we have a lot to take 
care of.
  I have told my colleagues before about a wonderful man in North 
Dakota called the Flying Farmer from McCody. McCody is a town of about 
80 people. The Flying Farmer from McCody goes out to county fairs and 
State fairs and he takes an old car he fixed up--he works in a machine 
shop--then he puts up a ramp and jumps other cars; a daredevil kind of 
thing. The Flying Farmer from McCody. He jumps cars at county fairs.
  But he is also in the Guinness Book of Records. John Smith, the 
Flying Farmer from McCody, is in the Guinness Book of Records. He is in 
there because he drove a car in reverse 500 miles, averaging 36 miles 
an hour. I don't know who would want to drive a car in reverse 500 
miles or who would want to set a record for a reverse speed of 36 miles 
an hour for 500 miles, but he owns the record.
  That is probably a perfect metaphor for the U.S. Congress--setting 
records for going backward. The question for us is, Can we move 
forward? Can we take this country forward, move ahead, and advance this 
country's interests?
  As we talk now about the revenue side of reconciliation, we are 
talking about taxes. So let me talk a bit about the tax system and 
where we are.
  In recent days, we have had an announcement by Ford Motor Company 
that they are deciding to cut 30,000 more jobs. They cut 10,000 last 
year. They are going to cut 30,000 more workers. This follows on the 
heels of General Motors. General Motors announced it was going to cut 
30,000 workers.
  By the way, the top guy in General Motors who is in charge of 
acquiring parts called all the suppliers of General Motors together, 
some 300 of them, the CEOs of the parts companies, and said to them 
this last year: You need to start outsourcing your parts production to 
China to bring your costs down. The parts for General Motors, Ford--
shut down the jobs, move jobs to China. Is our country moving ahead or 
backward when we see these things?
  The reason I mention this Ford announcement is Ford announced that at 
the same time it was cutting 30,000 jobs, from the Washington Post, 
Ford said:

       Repatriation of foreign earnings pursuant to the American 
     Jobs Creation Act of 2004 resulted in a permanent tax savings 
     of about $250 million.

  Let me describe that in English. What Ford said is they picked up a 
quarter of a billion dollars in tax breaks under the act Congress 
passed that they called the American Jobs Creation Act. They announced 
that same day, we are cutting 30,000 people. How is it that Congress 
passes something called the American Jobs Creation Act and the company 
that announces it gets a quarter of billion dollars of benefit under 
that act at the same time tells us it got that benefit that it cuts 
30,000 jobs? How does that work? Does that make sense to anybody? Do 
people who pass this kind of legislation and call it the Jobs Creation 
Act, do they seem embarrassed when they see this?
  It is not just Ford Motor. I should not pick on Ford Motor. But 
Hewlett-Packard brought $14.5 billion back from abroad and cut 14,500 
workers. Colgate Palmolive, Motorola--I could go on.
  What was this little scheme called the 2004 American Jobs Creation 
Act? Here is what it was. It said for those companies which have parked 
income overseas and have not repatriated their income yet back to this 
country--which when they do, they will owe on it with a credit for 
foreign taxes paid--we will give you a special deal under this Jobs 
Creation Act. If you bring your money back to this country, you can pay 
a 5.25 tax rate. That is one half the tax rate of the lowest income 
American who pays income taxes. So we said to the biggest companies in 
the world: If you bring your income back, we will give you a deal--5.25 
percent. That is the income tax rate you pay.
  We now know they repatriated somewhere around $350 billion. By my 
calculation, this Congress--not with my vote by the way awarded those 
companies $104 billion in tax breaks.
  I don't know of anybody who actually stands up and boasts about that 
here on the floor of the Senate. They do it because they believe in 
this sort of thing, but they don't want to brag about it. But I hope 
those who talked on this issue, when this American Jobs Creation Act 
was passed, would come to the Chamber and recite for us what they said 
then and what we know now.
  They said if we give these biggest companies huge tax breaks, it will 
create jobs in this country. Now what we know is--and Ford is the best 
example of it--they announced: We got a quarter of a billion--thank 
you, Congress--and we are going to cut 30,000 workers. It is right on 
down the line. I could spend some time talking about these companies. I 
will not do that, only to say those who believed this was a jobs 
creation act now should be disabused of that notion.
  We talk about our Tax Code and suggest what is the best way to use 
our money. They decide the best way to use our money would be to go to 
some of the largest corporations in America that are doing business 
overseas and say to them: If you bring that money back, you can pay the 
lowest income tax rate in America--yes, it is lower than your neighbor, 
lower than the person down the street, lower than the person up the 
block, lower than the person out on the farm. You get to pay the lowest 
tax rate in America. That is almost unbelievable. It is stranger than 
fiction. But that is exactly what the majority in this Congress did. 
One would think it should be profoundly embarrassing when we see the 
results.
  Let me also say that this is not just about providing big tax cuts to 
companies. It is a situation where, with these kinds of tax policies, 
when we say, Put up a slice of bread here and let us slather some 
butter all over it, what we are saying to these companies is, We want 
to encourage you to actually take jobs and move them overseas. We want 
to tell you that, if you will fire your American workers, padlock the 
front gate on your American manufacturing plant, and move it all to 
China or India or Sri Lanka or Bangladesh or Vietnam, we will give you 
a tax cut. I know people must listen to that and say: That cannot be 
true. That would be absolutely nuts; you cannot possibly be accurate. 
But I am. I am. We actually offer a tax cut for companies that get rid 
of their American workers, outsource their production, and then ship 
the production back into this country for sale on our store shelves in 
Toledo and Pittsburgh and Los Angeles and Fargo. Produce it in China, 
sell it back here, and we will give you a tax break.
  I want to draw a circle around all this because it all relates. I 
want to show a picture of a building. I want to show you what is 
happening because this relates to taxes and jobs.
  This building is a little five-story building in the Cayman Islands. 
It is a

[[Page 480]]

white building. It is called the Ugland House. According to Bloomberg 
News, this building on Church Street in the Cayman Islands is the 
official address of 12,748 companies. Let me say that again because 
someone would say that is kind of crowded. That would be crowded if 
they were all there. They are not there, of course. This is just their 
address. 12,748 companies claim this little white building as their 
official address in the Cayman Islands on quiet Church Street. Why 
would that be the case? I will tell you why. Because companies these 
days want to do the following: They want to produce in China by paying 
people 30 cents an hour, working them 12 to 14 hours a day, 7 days a 
week; they want to ship the products to the store shelves of the United 
States of America to sell to American consumers because that is where 
the money is; and they want to run their income through the Ugland 
House in the Cayman Islands so they can avoid paying U.S. taxes on 
their profits. It is perfect symmetry, isn't it?
  Of course, it doesn't involve saying the Pledge of Allegiance. You 
can't really say the Pledge of Allegiance and do this: say, I want all 
America has to offer, all the protection of our country, the ability to 
be chartered in America as an American corporation, the ability to be 
protected by American military might, the ability to be protected by 
American laws and courts, but I also want this for my company: I want 
to be able to produce in China, sell in Cincinnati, and run my money 
through the Cayman Islands. I am telling you, you don't say the Pledge 
of Allegiance when you do that. You weaken this country. You pull the 
rug out from American workers. And you also weaken those who are not 
leaving this country and who are deciding to continue to manufacture 
here.
  There are some wonderful companies that do stay here and do 
manufacture here. I have told stories of a number of them. I will not 
do that today. This is not a broad-brush of all companies, but it is 
increasingly the activities we see in some very large companies that no 
longer think of themselves in any terms of economic nationalism. They 
are world enterprises, citizens of the world who want to produce where 
it is cheap, sell into an established marketplace in the United States, 
and run their income through a tax haven country. It does not work, in 
my judgment, in the long term. What do we do about all that?
  In addition to talking about the Ugland House, I wish to make sure 
people understand, from other speeches I have given, that these 
companies which are leaving America are real companies.
  This company, by the way, was a company in this country for over a 
century. For over 100 years, this company made little red wagons, and I 
guarantee most American kids have sat in a little red wagon called 
Radio Flyer. Radio Flyer wagons were originally created by a guy in 
Chicago, an immigrant. The ``Radio''? That was after Marconi. He was so 
enthused about Marconi. And the ``Flyer''? That is because he loved 
flying. So he built a little red wagon called Radio Flyer, and I bet 
every kid in this country at one time has seen it, and most of them 
have ridden in one.
  After 100 years in this country, the Radio Flyer is gone. This is 
gone. They don't make Radio Flyers in America anymore; they make them 
in parts of the world where you can pay 30 cents and 40 cents an hour 
for labor. So the company that makes Radio Flyers still aspired to sell 
them in the United States, it is just that they don't make them here 
anymore.
  I could go through a list of dozens and dozens of companies that 
represent exactly the same story.
  We have all seen these ads over many years, the guys who are dressed 
as grapes--you know, green grapes, red grapes. They dance and they 
sing. What a playful bunch of people. Who on Earth thought you could do 
a little television commercial with a bunch of people singing dressed 
like grapes? Fruit of the Loom underwear.
  Now Fruit of the Loom underwear is gone. It is all gone. They are in 
other parts of the world where you can produce shorts and t-shirts and 
underwear for much less cost. The people who used to work for Fruit of 
the Loom used to have good jobs, the same as the people who worked for 
Radio Flyer. They worked there for a lifetime, loved their jobs, but 
then they were told: You cannot compete with 30 cents an hour. So long. 
See you later. Yet the grapes still sing, and the workers weep for 
their jobs.
  I only point out Huffy bicycles because Huffy bicycles just announced 
it was becoming Chinese in nationality, which was, in fact, just a 
formality because they don't make Huffy bicycles here anymore; they 
have been making them in China. All the people in Ohio lost their jobs 
making Huffy bicycles. They lost their jobs because they were told they 
make $11 an hour plus benefits, and that is way too much money, and we 
are going to make Huffy bicycles at 33 cents an hour in China, for 
people who work 7 days a week, 12 to 14 hours a day.
  The last job, by the way, for the folks in Ohio was to put this decal 
on. This is a decal of the globe. This used to be a decal of the 
American flag, when Huffy bicycles were made by Americans here in 
America. They changed that because all the Huffy bicycles workers were 
fired. Huffy bicycles are made in China, and now the flag decal was the 
last job those workers performed before losing their jobs and having to 
drive out of that plant for the last time. They put the decal of the 
globe on it.
  So if you want to buy a Huffy bicycle at Wal-Mart, Kmart, or Sears, 
understand they used to be made by people in this country making $11 an 
hour. No longer. It is all in China. And incidentally, this company 
also decided it cannot pay the retirement benefits that were owed to 
the workers, so now the American taxpayer is going to pay that.
  The company declared bankruptcy. Now they have announced it is going 
to be a Chinese company, a Chinese brand and style of Huffy. It is 
still a Huffy, of course.
  One last thing: Lest some think this doesn't matter, the people at 
Huffy, I was told by someone who on the last day of work, when they 
left their parking space, those workers who lost their jobs making 
Huffy bicycles, on the last day in their jobs, those workers left a 
pair of shoes in the space where their cars used to park. It was their 
way of sending a message to the company that you can move our jobs to 
China but you are not going to fill our shoes. It is what those jobs 
meant to those people.
  It is going on all over this country.
  When you hear that Ford is going to lay off 30,000 workers, you don't 
think much; you think 30,000 jobs is not much; it is too big to 
understand. But the fact is think this country is losing jobs all over, 
and they are being replaced by jobs that pay less with fewer benefits.
  American workers are now discovering downward pressure on wages 
because this strategy doesn't pull American workers up. It pushes 
Americans workers down as it exploits foreign workers.
  We are in a situation where we have the largest trade deficit in 
history--$740 billion last year, we believe. That is $2 billion a day, 
7 days a week above that which we export from other countries. We are 
selling America. Every single day, we sell $2 billion worth of this 
country to foreigners with this insidious trade strategy.
  The people who listen to me talk about this will say this is another 
protectionist, xenophobic, isolationist stooge who doesn't get it. What 
I get is the need to stand up for the economic interests of this 
country.
  I support trade, the more the better. But it must be fair trade. If 
it is not fair trade, and if this country doesn't have the guts to 
require other countries to pull their standards up, then all we are 
inevitably going to do is continue do push standards down in our 
country. That is not what we should aspire to in the long term in this 
country.
  It is my intention to offer an amendment that will once again deal 
with this perverse tax break that pays people to actually shut American 
plants down and move their jobs overseas. I hope to do that on this 
bill.

[[Page 481]]

  Let me also say I have offered that amendment four times. Members of 
the House and Senate decided they wanted to continue a tax break for 
those companies that ship their American jobs overseas.
  I hope that one of these days there is a big, old klieg light that 
shines on all of these votes so people have to answer to those votes. 
At the very least, we ought to have some sort of neutrality. We ought 
not be giving tax breaks or benefits to those companies that decide to 
ship their jobs outside of this country.
  If I may make one final point, I talked a bit about these tax issues 
and running income through the Cayman Islands. We ought to shut that 
down.
  By the way, I have introduced a bill that says if your purpose for 
setting up operations in a tax-haven country is for the purpose of 
avoiding taxes, we are going to treat you for tax purposes as if you 
never left this country. You have a responsibility to pay taxes in this 
country. We can shut all of that down very quickly, if we have the guts 
to do it.
  If you can't take the first baby step in the right direction to shut 
down tax breaks for people who are getting rid of American jobs and 
shipping their jobs overseas, how can you do something more complex?
  We will have another vote on that. It will be the fifth vote on that. 
If some have not seen the light, they can perhaps feel the heat and 
change at some point.
  I have described all of this not in terms of Democrats or 
Republicans. All of us, I think, want this country to do well. I want 
the President to do well. I want this country to do well. I want there 
to be less partisanship. I want there to be more cooperation. But I 
also want us to take a look at public policy that is wrongheaded and 
change it.
  If we say we have a jobs creation act out there and we give $100 
billion in tax breaks and we see fewer jobs as a result of it, 
something is wrong with that. We ought to understand it.
  I want to make one final point about the tax issue. One of the things 
hanging up the revenue side of the reconciliation bill is the issue of 
dividends and capital gains, and a 15-percent top tax rate for both 
dividends and capital gains income.
  There are some people who look at the issue of taxation and they 
think this: We have the opportunity to levy taxes on several different 
things. We can tax work. We all know what work is. That is when 
somebody gets up in the morning, puts on a pair of shoes, and clothes, 
and goes to work. We can tax work. We can tax investment, we can tax 
rents, and so on. We have people who have decided with respect to 
dividends and capital gains, that investment income, dividends and 
capital gains should have a much lower tax rate than tax on work.
  Ask the question: Where do you stand on taxation? Some of them say, 
Well, you know what I think we ought to do. We ought to tax work and 
exempt investment.
  Say you have two people living side by side. One is a 
multimillionaire who makes all of his or her money on dividends and 
capital gains. The other one lives next door and wears steel-toed boots 
and goes to work every day. He works hard, sweats, comes home and feels 
he has earned a good day's income. We have people in this Chamber who 
believe the way that ought to be taxed is the person who works should 
be taxed, the person who earns it only in capital gains and dividends 
should have no tax. I know. It is 15 percent. But there are a lot of 
people in here who would like it to be zero.
  We have a circumstance where we say let us tax work, and let us give 
a benefit to investment. I don't know, what value system is that? Is 
investment worthy? Of course it is, absolutely. There is no question 
that people who are investors are good people. They help run this 
economic engine. I understand that. What value system is it that says 
work ought to be taxed higher than investment? Work reflects the labor 
of the American people. I will not go through the list, but it was, I 
think, in 1943 when Stalin turned to Roosevelt when he was meeting with 
Roosevelt and Churchill, and he pointed out that we wouldn't have a 
chance to win this war without American manufacturing. He was talking 
about the productivity of the American worker. ``The Glory and The 
Dream'' by Manchester describes what this country did, what American 
manufacturing did to turn out massive products in the form of liberty 
ships, airplanes, tanks, and trucks; unbelievable. The American worker 
is an unbelievable force in this country.
  When we come to the side of taxation, tell me the value system that 
says, by the way, let us tax work but let us exempt investment. There 
is a fairness issue here that this Congress has a requirement to 
confront, in my judgment. I know this issue is actually hanging up this 
bill between the House and the Senate. The House is insisting no, no, 
no, you have to substantially extend this lower tax rate for investment 
income. I do not know.
  Who is standing up here on the floor of the Senate saying I am 
standing up for work, for the people who earn a wage? I am standing up 
for the person who has to shower after work, people who sweat, work 
hard, earn an honest day's pay?
  Finally, let me say this. Part of this is all about the noise of 
democracy, about debate, about coming to the same point from several 
different intersections and different perspectives. I feel passionately 
and strongly about my perspective about trade. Our trade is way off 
balance. It is going to injure this country. We are going to become a 
nation of sharecroppers. Warren Buffet makes that point. He is 
absolutely dead right. Our fiscal policy is way off track.
  People say the budget deficit is only $340 billion next year. 
Nonsense. We will borrow $650 billion in additional debt. That is what 
our obligation is to our kids.
  Trade is out of balance and our fiscal policy is way off track. I am 
not suggesting there has to be a Republican or Democratic way to fix 
it. I am just suggesting that we ought to look truth right in the eye, 
the President and the Congress, and say we have trouble here and we 
need to fix it. Let us find a way to come together to fix it, get 
together with what everybody has to offer, that works for each, but 
find a way to move this country forward.
  I am pleased we are having this discussion today about our fiscal 
policy, and I wanted to come over at least briefly today and weigh in 
on some thoughts that I think are very important on trade and fiscal 
policy, about the economic direction of this country, about the 
direction we are headed, about things we can do--we, the President and 
Congress--all of us together can do to fix them so we have a brighter 
future and a future of expansion, of opportunity not just for some but 
for all Americans.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Mr. President, I wish to respond directly to my friend from 
North Dakota on a couple of points which he made in the context of the 
discussion of the legislation before us.
  I wish to begin by quoting what the President said last night in his 
State of the Union Speech, and then I think we will see how it fits 
into comments just made.
  Last night, the President reported in his State of the Union Speech 
in terms of our economy.
  He said:

       Our economy is healthy, and vigorous, and growing faster 
     than other major industrialized nations. In the last two-and-
     a-half years, America has created 4.6 million new jobs--more 
     than Japan and the Europeans Union combined. Even in the face 
     of higher energy prices and natural disasters, the American 
     people have turned in an economic performance that is the 
     envy of the world.

  Then he went on to say:

       Keeping America competitive begins with keeping our economy 
     growing. And our economy grows when Americans have more of 
     their own money to spend, save, and invest. In the last five 
     years, the tax relief you passed has left 880 billion dollars 
     in the hands of American workers, investors, small 
     businesses, and families--and they have used it to help 
     produce more than four years of uninterrupted economic 
     growth. Yet the tax relief is set to expire in the next few 
     years.

[[Page 482]]

     If we do nothing, American families will face a massive tax 
     increase they do not expect and will not welcome.
       Because America needs more than a temporary expansion, we 
     need more than temporary tax relief.

  Part of what is in the bill before us is designed to continue that 
same tax policy.
  There are, for example, funds to do what the President talked about 
last night to stimulate research and development. There are tax 
provisions that encourage people to do that. This legislation would 
continue those tax policies.
  The President last night talked about educating our young people. 
When you pay college tuition, if you are not an itemizer, we believe 
you should still have a tax deduction for that. As a result, this bill 
would continue that tax policy. Those are the kinds of provisions that 
are embodied in the bill that is before us.
  I ask my colleagues, almost two-thirds of us who voted for this very 
same bill before, has something changed where we would not want to 
continue those kinds of tax policies, the kind of things that have 
helped us to stimulate and continue this economic growth? It seems to 
me we want to continue those policies.
  One of the things that has been discussed is not in the bill; that 
is, the tax on capital gains and dividends my friend from North Dakota 
talked about. That is not in the bill before us. Nevertheless, it is a 
good discussion to have because, as the President noted last night, 
this is part of that tax package that has provided this great economic 
growth, and it is part of what the House of Representatives has passed.
  When the bill goes to conference with the House of Representatives, 
it is very likely, and I think very desirable, that the continuation of 
the tax rates on capital gains and dividends be included in the final 
conference report we will approve. Those rates expire in 2008. When 
people are making investments today, they want to know what the tax 
rate is going to be when they invest. Is there a return on the 
investment, let us say in 4 years--4 years from now is 2010. What we 
want to do is extend those rates from 2008 to 2010. If we don't, what 
we are going to find, as the President said, is tax increases the 
American people do not expect, do not appreciate, and it certainly 
won't be good for the economy.
  My friend from North Dakota said people who work hard and have a tax 
on their wages get one set of taxes, but presumably people who do not 
work hard and receive dividends or capital gains should not have a 
lower tax rate. This is a fundamental misunderstanding of the Tax Code 
and the way our economy works.
  Take the person who put on his boots every day and went to work and 
for 40 or 50 years paid income taxes, tried to save some money along 
the way, and when he could invested that money because upon retirement 
he does not want to be dependent upon Social Security benefits. He has 
a small pension or he has invested in the stock market. He retires and 
he is now faced with a situation where he is not receiving a wage 
anymore that he is paying taxes on. Instead, his income now is coming 
through the deferred gratification of the investment he made throughout 
the years when instead of spending money he saved it and invested it. 
Now there are rewards coming to him in the form of dividends or capital 
gains--in other words, a return on his investment. That, plus Social 
Security, is now all he has to live on.
  He paid income tax on that money. Make this point very clear: All his 
working life he paid his income tax and his aftertax dollars went into 
these investments. Now he is being taxed a second time on that money 
when he begins to get the return, when he gets dividends from his 
investment or capital gains. Yes, the tax rate is a little lower 
depending upon what his taxable bracket is. It could be the same, but 
the tax currently is 15 percent. Thank goodness, because the reduction 
a few years ago from 20 percent down to 15 percent means we have had a 
tremendous stimulation for the economy. So this person has paid his 
income tax and now he is paying another tax on capital gains or on 
dividends.
  Actually, this is not just the second time this money is taxed; this 
money was also taxed when the corporation or the entity that earned the 
money earned it and had to pay its taxes. So the corporation pays its 
taxes and then what is left over it either takes as profit or returns 
part of that profit in the form of dividends to the shareholders--our 
friend now, the senior citizen we are talking about.
  This money has been taxed at least three times now: When the income 
was earned by the individual, when the corporation paid the tax on the 
investment, and when it provided the dividend to our senior citizen, 
the retired fellow living in Sun City, AZ. And he now has to pay 15 
percent on that again.
  You can only tax this so many times. Yet we have found that by having 
a Tax Code that tries to keep these taxes as low as possible, we are 
able not only to continue to stimulate investment, create jobs, and 
provide a living for people, and then a retirement income, but also to 
provide enough money for our Government to grow. We are spending a lot 
of money in this Government now. We are not standing still. We are 
spending far too much money, according to some--and I put myself in 
that category. Revenues are not the problem with respect to our 
deficit; we are spending too much. Our revenues exceeded the 
projections last year by something like $270 billion or more. It was 
$100 billion more than we assumed at the beginning of last year. So we 
have gotten far more in revenues than we ever expected. Why? Because 
our economy is growing so rapidly. What is one of the reasons it is 
growing? Because of the tax structure we have. That tax structure is 
part of what the legislation before the Senate intends to continue so 
we cannot only leave more money in the hands of the people who provide 
the growth for our country and provide for our families and small 
businesses but also provide the revenue for the Government to provide 
what they need, as well.
  There was something else my friend from North Dakota said that is 
quite wrong. That is the comment that we provided tax relief for rich 
people, that these dividends and capital gains are not for the average 
working person, and that the tax policy we are promoting in this 
legislation, therefore, does not help most Americans, that somehow it 
only helps the wealthy.
  I noted before the legislation before the Senate does not even 
mention the words ``capital gains'' or ``dividends,'' but we are 
assuming when the bill comes back from conference it will have those 
taxes in it. One of the taxes we are seeking to ameliorate the effect 
of in this bill is the AMT. Almost everyone believes we either ought to 
eliminate the AMT, the alternative minimum tax, or significantly reduce 
its impact on taxpayers. Let's take a look at what the AMT does to the 
people in the country versus capital gain and dividends since, 
according to my colleague, the latter two are good ways to raise 
revenue and the AMT is a bad way.
  Of all of the taxpayers in the AMT in 2003, the last year we have 
statistics, 9.7 percent had an adjusted gross income of under $100,000. 
We are talking about relief in the bill before the Senate that 
presumably most of my friends on the other side of the aisle are very 
much for, relief here for 9.7 percent of the filers having income of 
less than $100,000. The other people we are providing relief for were 
above that, obviously.
  Let's compare that with the people who are paying capital gains or 
dividends. Of all the taxpayers reporting capital gains income in the 
year 2003, 67.5 percent had adjusted gross income under $100,000. Of 
all the taxpayers reporting dividends income in 2003, more than 70 
percent had an adjusted gross income under $100,000.
  If we are talking about trying to provide relief for the average 
American family--maybe a two-worker family; their income, in any event, 
is less than $100,000--the AMT relief we are providing, 9.7 percent of 
the folks we are providing relief for are in that under $100,000 
category, whereas the relief we

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would be providing if we included the capital gain and dividends would 
apply to 67.5 percent with respect to capital gains and 70 percent with 
respect to dividend income. These are the people, 70 percent, who 
report incomes of $100,000.
  The fact is we have become a nation of investors. Over half of the 
American people now are invested in the stock market. When we talk 
about providing tax relief, we are providing tax relief for average 
families, for small businesses and investors in America who rely on 
these kinds of investments in their retirement years. More than half of 
all Americans own stock either directly or through mutual funds. In the 
2003 marginal rate on investment, marginal rate cut on investment 
income worked by giving these investors an incentive to put more of 
their money at work in the markets. That is what stimulated the great 
economic recovery we are enjoying now. At the lower rates, the tax 
penalty imposed on the additional investment earnings--the reward for 
taking the additional risk--the penalty is smaller and thus the risk is 
more attractive. That is why we have had this great economic recovery 
because people have been willing to invest more of their money getting 
a greater return for that investment.
  It is interesting that all of the guesses about what kind of income 
our economy would derive from capital gains, to take one of these 
taxes, turned out to be incorrect. What we find is instead of the 
capital gains rate cut cutting revenues, the capital gains rate cut 
from 20 percent to 15 percent in 2003 has actually increased revenues 
to the Treasury. In other words, this tax cut has more than paid for 
itself.
  This is not just me saying it; this is according to the Congressional 
Budget Office, the CBO. Its annual Budget and Economic Outlook, just 
released, shows the 2003 tax cut on capital gains has more than paid 
for itself. What the CBO did was compare the estimated revenues from 
capital gains with the actual revenues from capital gains. The actual 
liabilities from capital gains were $71 billion in 2004, $80 billion in 
2005 for a 2-year total of $151 billion. What was originally estimated 
to be the return from this tax? The sum of $125 billion. So there was 
an actual increase in revenue to the Federal Treasury of $26 billion. 
Instead of costing the Government $27 billion, which was originally 
estimated, the tax cuts actually earned the Government an extra $26 
billion.
  The bottom line is that sometimes raising tax rates does not raise 
tax revenue. If you want to think of this in simple terms, say we want 
to bring in the maximum amount of revenue. Say we will put a tax on of 
100 percent. One cannot get any higher than that. How many of us would 
work if 100 percent of our earnings would be taxed? I daresay not very 
many. How about 90 percent? How about 80 percent? We still will not get 
many takers. The point is, people will not work or invest, put their 
capital at greater risk, if the tax penalty is so great it is not worth 
it. The object is for Government to find that level which produces the 
most revenue to the Treasury with the least amount of damage to the 
economy. In other words, it encourages people to work or encourages 
people to invest to the maximum extent and that extent, then, produces 
the maximum amount of revenue.
  Basically, one thing we found from the tax rate reduction from 20 
percent to 15 percent with capital gains is 20 percent was still too 
high. With 15 percent people were far more willing to invest. It put 
their money at risk. And because so much of that activity occurred, the 
revenues, even with lower rates, far exceeded the revenues at the 
higher rates. That is why the House of Representatives has included in 
its legislation a 2-year continuation of this same 15-percent rate for 
capital gain and dividends because it will actually produce more 
revenues to the Treasury because more Americans will invest and will 
save, because this will provide more job creation and provide continued 
economic growth in our country.
  Since over half of Americans are investors in our stock market, since 
more than 70 percent of those earning $100,000 or less receive this 
benefit with respect to capital gains and with respect to dividends, 
67.5 percent, clearly this is designed to help most Americans.
  I find it ironic my colleagues who are so insistent on doing 
something to fix the problem of the AMT are talking about only 9.7 
percent of the people with adjusted gross incomes under $100,000. When 
sometimes people loosely say, your tax cuts are only for the rich, I 
guess I would say to my friends, your tax cuts are for the rich, if you 
are focusing mostly on the alternative minimum tax.
  Now, I happen to think we should provide relief in all of those 
areas. That is why I think what we are doing in this legislation--to 
provide relief from the alternative minimum tax; and then, assuming the 
House of Representatives includes it in the conference, for dividends 
and capital gains, when the bill comes back to us--we will ensure that 
not only will we be able to continue to help our families and our small 
businesses but also to ensure that we will continue to have economic 
growth in this country. That is why I encourage my colleagues to 
support the legislation before us.
  The PRESIDING OFFICER (Mr. Sununu). The Senator from Montana.
  Mr. BAUCUS. Mr. President, I yield 15 minutes to the Senator from New 
York.
  The PRESIDING OFFICER. The Senator from New York is recognized for 15 
minutes.
  Mr. SCHUMER. Thank you, Mr. President. I thank our leader on the 
Democratic side on this committee for his leadership on this issue and 
so many others. I thank also my colleague from Iowa, the chairman of 
the committee, who always tries to work things in a bipartisan way. In 
fact, on this issue which I will be speaking about, the alternative 
minimum tax, we have tried in the Senate to work in a bipartisan way on 
a proposal that passed earlier.
  I rise in support of two amendments that I have filed with my 
colleague from New Jersey, Senator Menendez, on the important issue of 
the alternative minimum tax.
  It is unclear right now when the majority will let us bring up either 
of these amendments for a vote. But the issue is an extremely important 
one. It cannot be swept under the rug. I want to alert my colleagues to 
what we will do.
  AMT relief is a critical part of the Senate's version of this bill, 
and we all must do everything we can to ensure that this tax--which 
affects middle-class and upper-middle-class taxpayers, above all--is 
addressed this year.
  In fact, this body will have a choice: whether we take the money we 
can use for tax cuts and give it to the person who is in the middle 
class or slightly above middle class or give it to people whose income 
is above $1 million. That is the choice that faces us.
  Our first amendment would substitute the Senate-passed AMT relief for 
the 2-year extension of the tax cuts on dividends and capital gains 
which were signed into law in 2003 but do not expire until the end of 
2008. The amendment contains the necessary offsets so that the overall 
bill stays within the parameters in the budget resolution.
  The second amendment is a sense of the Senate. Senator Menendez and I 
will be joined, I believe, by Senators Feinstein and Kerry on that one 
as well. It simply states that providing relief from the alternative 
minimum tax should be a higher priority for the Congress than providing 
a tax cut on dividends and capital gains in 2009.
  It is simple, straightforward, and, in my view, should hardly be 
controversial because whatever your views are on the preference of 
which tax, the alternative minimum tax will go up this coming fiscal 
year; whereas, the dividends and capital gains do not expire until 
2009.
  Now, it would be nearly impossible to overstate the AMT issue in its 
importance and its urgency. The individual alternative minimum tax was 
enacted in 1969 as a supplemental tax on wealthy tax evaders, but, 
unfortunately, as incomes have risen, it has evolved into a tax on 
millions of middle-class working families, particularly

[[Page 484]]

families in which both parents work and families with two or more 
children--hardly people we would want to penalize.
  Some people say it has evolved from a ``class tax'' into a ``mass 
tax.'' Other people say it has evolved from a ``wealth tax'' into a 
``stealth tax.'' But whatever you call it, it is something that catches 
unsuspecting middle-class families by surprise. And starting next year, 
it will explode in significance if Congress fails to act.
  In fact, by the end of the decade, the AMT will ensnare more than 30 
million taxpayers, the majority of whom will have incomes below 
$100,000. The National Taxpayer Advocate at the IRS has identified the 
alternative minimum tax as the most serious problem facing individual 
taxpayers.
  There is an important point I want to make for my colleagues. The AMT 
is often portrayed as a tax that is most problematic for residents of 
so-called blue States, such as New York, California, Massachusetts, New 
Jersey. It certainly affects my State. But that is not the truth, the 
whole truth, that it just affects ``blue'' States. There are a whole 
lot of ``red'' States or ``purple'' States that have a significant 
percentage of taxpayers affected by the AMT, including States of 
colleagues from across the aisle: Oregon, Virginia, Minnesota, Ohio, 
Maine, Georgia, North Carolina, and Pennsylvania. So this problem is 
not a ``red'' State or ``blue'' State issue or a partisan issue. It is 
simply an issue of national importance.
  Here are a few statistics I want to mention to my colleagues. They 
are quite astounding. The year 2006 is the ``tipping point'' for the 
AMT. The number of taxpayers affected will explode from 3.6 million to 
more than 19 million, if the Congress fails to act. A family with two 
children will become subject to the AMT at about $67,500 of income in 
2006. That is hardly anybody who is wealthy. People with that income 
often struggle. I know many of them myself. And a family with five 
children will start owing in the AMT at about $54,000 of income this 
year, if Congress does not act.
  In 2004, only 6.2 percent of families earning between $100,000 and 
$200,000 a year were subject to the AMT. It will explode to 50 percent 
this year. Half of all people making above $100,000 but below $200,000 
will be affected. They are hardly rich.
  And starting in 2008, the average married couple with two children 
earning $75,000 will find that more than half of the tax cuts they have 
been expecting from the laws passed since George Bush became President 
will be taken back via the AMT, if Congress fails to act.
  There are two main reasons why the AMT relief should be a high 
priority for the Congress rather than extending the cuts on dividends 
and capital gains. The first has to do with fairness, the second with 
timing.
  If the AMT relief is extended through 2006, about two-thirds of the 
benefits will be realized by families earning under $200,000. It 
affects people whose income is between $50,000 and $200,000--not the 
poorest people in our society but people who get clobbered by taxes, by 
large expenses, and who do not simply have the necessary income.
  More than half of the total benefits will go to families with incomes 
between $100,000 and $200,000. In New York, and many other States, 
particularly in or near major cities, a combined income of $100,000 or 
$150,000 does not make you rich.
  Contrast this with the tax relief for dividends and capital gains, 
where more than half of the total benefit goes to families with over $1 
million in income. This is more than 50 percent of the benefit going to 
less than one-half of 1 percent of all the taxpayers in the country. So 
we are faced with a choice here. This is not our classic tax cuts 
versus spending. This is, rather, tax cuts for the very wealthy versus 
tax cuts for the middle- and upper-middle-income range.
  Now, some Members say some people do not like it when we point out 
these lopsided statistics. They say it is ``class warfare.'' This is 
not class warfare. This is just the obvious truth of prioritizing tax 
cuts. And a dividend and capital gains cut put ahead of AMT relief 
hurts the hard-working middle class. No amount of rhetoric can change 
that.
  I want my colleagues to think about what it means for the AMT to 
start hitting families with children making $75,000 or $100,000. These 
are the same families facing higher health care costs, higher tuition 
costs, higher energy costs. And they will soon start to lose their tax 
cuts to the AMT.
  A police officer and a schoolteacher in my city of New York will 
almost certainly be pushed into the AMT, if they have not been already. 
A Georgia family, maybe a marine biologist at the new Atlanta aquarium 
and her insurance broker husband, will pay the AMT, if we do nothing. A 
computer programmer in Virginia, married to a firefighter; or a 
professor in Oregon, married to a vintner that makes some of the 
State's great pinot noir; or two factory workers in Ohio--all these 
families would be subject to the AMT if we fail to act.
  There is something else these families likely have in common; and 
that is, the dividends and the capital gains cuts passed in 2003 helped 
them very little, if at all. The reason for this is most middle-class 
families who own stocks, bonds, or mutual funds have them in either a 
retirement plan or a savings plan for their kid's education. That is 
where my family's savings go right now.
  These middle-class families probably own very little in terms of 
taxable investments. Their savings are already growing tax free. So 
they get very little benefit from the lower rates on dividends and 
capital gains. That is why these tax cuts benefit the very wealthy. It 
is because most of the stocks and bonds owned by the middle class--and 
that is a lot--but they are shielded from tax already.
  I know my friends on the other side of the aisle talk about the so-
called investor class and point out, correctly, how, for the first 
time, more than half of all Americans own stock. Senator Kyl made this 
point a moment ago. But the truth is, most middle-class families own 
very little in the way of taxable investments. More than three-quarters 
of Americans earn less than $1,000 a year in taxable income from 
dividends and capital gains.
  Let me repeat this because it may be a surprise to some. More than 
three-quarters of American families earn less than $1,000 in taxable 
income from dividends and capital gains.
  So in terms of priorities, in terms of whom it affects, we should 
prefer the AMT, whatever we feel about dividends and capital gains 
cuts. And I am not averse to those cuts in a nonbudget-deficit 
situation.
  How about timing? This is even more obvious. Consider the statistics 
I mentioned and who will become subject to the AMT this year if we fail 
to act. Now consider when each tax takes effect, when it bites. Capital 
gains, dividends, not until 2009. AMT, immediately, in the next fiscal 
year. Many of my colleagues on the other side of the aisle make the 
argument we need to extend the relief now since the market is counting 
on it. They say it is ``built'' into the market, and the stock market 
will decline if we do not extend those cuts today. That is simply not 
true.
  If there's one thing I know about investing--and a lot of people in 
my State make a living at it--it's this: People who are really affected 
by these rates who buy and sell significant amounts of stocks and bonds 
are sophisticated investors, and they follow politics. They know that 
Congress changes tax laws all the time. It is hard to believe people 
are investing their money today based on what the tax rate might be 
years from now when they finally sell that investment. Smart 
businesspeople, smart investors make their investment decisions based 
on market factors, not on what Congress might or might not do, 
particularly in this type of situation where it is simply this year or 
next year.
  And, of course, there is the obvious argument that if making all of 
these tax laws consistent and permanent was so important, then the 
leadership on the other side should not have pushed for reconciliation 
protection in the

[[Page 485]]

first place. They should have compromised back in 2001 and 2003 and 
passed less ideological legislation within the Senate's normal rules of 
procedure.
  In conclusion, Mr. President, the Senate was right the first time. 
After some initial debate in the Finance Committee, we passed out a 
bipartisan bill that excluded the dividends and capital gains cuts and 
provided generous AMT relief for 2006 that will keep nearly 8 million 
families out of the AMT this year. That bill passed the Senate with 64 
votes, and I encourage Chairman Grassley to bring a similar bipartisan 
bill back from conference.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Montana.
  Mr. BAUCUS. Mr. President, I yield 10 minutes to the Senator from New 
York.
  The PRESIDING OFFICER. The Senator from New York is recognized for 10 
minutes.
  Mrs. CLINTON. Thank you, Mr. President. I thank the Senator from 
Montana. I commend my colleague from New York for that very eloquent 
and lucid description of what the challenges facing 8 million families 
are with respect to the AMT.
  I rise to talk about Katrina. I introduced legislation to establish a 
Katrina commission last year. I am proud to have 17 cosponsors. I 
intend to offer this legislation as an amendment on this bill or any 
other bill that is coming before the Senate.
  Now, I can imagine some asking: Why are we talking about a Katrina 
commission on the tax reconciliation bill? The answer is that the White 
House is stonewalling the ongoing House and Senate investigations, as 
many of us feared and warned that they would. And something must be 
done about it.
  I commend our colleagues in the Senate on the Governmental Affairs 
Committee, led by Senator Collins and Senator Lieberman, for their 
diligent, persistent efforts to try to get information that would 
answer the questions that people have about what happened.
  Stonewalling the investigation into a storm that killed over 1,000 of 
our fellow Americans, displaced hundreds of thousands, and cost over 
$100 billion in damages is something every American should wonder 
about.
  Last week, it was reported that the White House is declining to turn 
over key documents related to Hurricane Katrina and that senior White 
House officials will not provide sworn testimony about the failed 
Federal response to the people in the gulf region. Other reports 
indicate that the White House Situation Room, which is the nerve center 
of the White House crisis response, received reports that a storm like 
Katrina would cause severe flooding and breaching of the levees, but 
apparently that was not a priority. There are reports that the 
Department of Homeland Security has attorneys telling witnesses not to 
talk about any communications whatsoever between the Department of 
Homeland Security and the White House. In fact, reports indicate that 
Michael Brown, whom we will remember as ``heck of a job, Brownie,'' the 
former head of FEMA, is now refusing to provide testimony because FEMA 
lawyers are advising him not to tell the congressional committees when 
he talked to the President and what he said, if he did, about damage 
and destruction on the ground.
  Just today the Comptroller General of the United States issued a GAO 
report which stated that there was a complete failure of leadership at 
the highest levels of our Government after the storm hit and that there 
needs to be a single person put in charge.
  There are also reports that the Army Corps of Engineers may not be 
providing adequate information to investigators. We have heard that a 
team of independent engineering experts, whose work is funded by the 
National Science Foundation, say they have grown frustrated with the 
Army Corps. In fact, it has been reported that the Corps has refused to 
release information needed to fully understand the levee failures that 
left so much of New Orleans shattered and soaked.
  If we don't have an open, broad-ranging inquiry into why the levees 
failed, if the Army Corps is not responding to independent engineering 
experts, can we, with any confidence, expect that whatever kind of 
patchwork is going on now will secure those levees when the next 
hurricane season comes around starting next summer?
  There are separate committees in the House and Senate conducting 
their own hearings, seeking to establish what happened. We have to be 
absolutely unafraid to face the facts, wherever they take us. People's 
lives are at stake. A great part of our country is devastated. I have 
been there. I have seen the destruction with my colleague, Senator 
Landrieu. It is heartbreaking.
  How do we know that the money we are appropriating, that we are 
sending somewhere to someone--independent contractors and other 
recipients, billions of dollars of taxpayer money--is doing what needs 
to be done when we don't know what was wrong the first time they did 
it?
  I hope we look to the model of the 9/11 Commission. The 9/11 
Commission was instrumental in both helping America understand what 
happened and beginning a process of us coming together to try to make 
sure it doesn't happen again. We had a dedicated group of citizens who 
lost loved ones who came to the Congress month after month, who went to 
the White House and said: We want to know why our husbands, our wives, 
our children, our parents died. You have to give us answers.
  I was heartened when I saw in the last several days a dedicated group 
of citizens from the impacted gulf coast region, called Women of the 
Storm, were up here demanding answers and actions. They deserve no 
less. These are our fellow Americans. These are our brothers and 
sisters. I commend them for coming to Washington to petition their 
Government. But if we do not establish this commission, I fear they 
will not ever get the information they deserve. Even worse, we may make 
the same mistakes again.
  In this GAO report, it refers to a study that was done after 
Hurricane Andrew in southern Florida. There were a series of 
recommendations made. The Clinton White House followed the 
recommendations. People were put in charge. There was a chain of 
command. Information went up. Decisions were made. FEMA, on the Clinton 
administration's watch, functioned. It was filled with experts, not 
cronies. In 5 short years, all that work was undone.
  So here we are, after the worst natural disaster in modern times, 
after having demoralized and defunded FEMA, after having created the 
behemoth Department of Homeland Security, and no one was in charge. I 
guess that is what the White House doesn't want anybody to figure out; 
although, frankly, I think we have a pretty good idea that no one was 
in charge. But we need to fix our systems.
  I will, once again, be offering a Katrina commission amendment. I 
will, once again, try to help the people of the gulf coast get the 
answers they deserve. I will, once again, call on us to do what we did 
after 9/11, put together an independent commission--appointed by 
Democrats and Republicans--of distinguished people who can concentrate 
on this issue. They are not in Congress, responding to a million 
different pressures. Give them the power to get the answers and give us 
the recommendations that we need in order to make sure that no part of 
our country, no American ever faces both the natural and manmade 
disaster that happened on the gulf coast.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Montana.
  Mr. BAUCUS. Mr. President, on another matter, I am speaking now 
because we are waiting for the Senator from North Dakota. I ask 
unanimous consent to speak as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                             National Guard

  Mr. BAUCUS. Mr. President, I rise in support of our National Guard, 
and I

[[Page 486]]

want to express my serious concern for their future.
  The National Guard comprises only 45 percent of the entire Department 
of Defense budget, yet next week when the President's budget and the 
Quadrennial Defense Review are presented to Congress, the Guard's force 
structure may be dangerously reduced. There is a grave national 
security danger in doing this, and quite simply, it just does not make 
sense.
  Last night in his State of the Union Address, the President stated 
that ``we remain on the offensive in Afghanistan and Iraq.'' At a time 
when we cannot forsee any cutbacks in our military commitments at home 
and abroad, why are we proposing cutbacks in our National Guard?
  The Guard is now fighting overseas in unprecedented numbers. In the 
global war on terrorism, over 50 percent of the land combat forces in 
Iraq are Army National Guard and over 85 percent of available Army 
National Guard units have been mobilized. The Air National Guard is 
providing over 50 percent airlift capability.
  Since September 11, 2001, about 80 percent of Montana's National 
Guard members have been deployed to the Middle East, some of them more 
than once. Our guardsmen have never failed a mission. In fact, they 
have gone above and beyond, and they have fought with maturity and 
experience.
  Reports estimate that the Department of Defense will be carrying out 
across-the-board cuts of up to 26,000 Guard personnel. On January 18, 
the Secretary of the Army confirmed that DoD has proposed making cuts 
to the number of brigade combat teams. Their ground units are in 
Pennsylvania, North Carolina, Washington State, Tennessee, Mississippi, 
Louisiana, Minnesota and Idaho.
  In Montana, the National Guard's 1-163rd Infantry Battalion is a 
subordinate unit of the 116th Brigade Combat Team of the Idaho National 
Guard. This is one of the units to face troop reduction, and the loss 
of this unit would mean the loss of 800 of Montana's Army National 
Guardsmen. That's one third of the Montana Army National Guard.
  The Guard predicts that the payroll losses associated with these jobs 
could reach $15.5 million.
  Our Governors and adjutant generals should not have to send guardsmen 
to war without the security that those troops will have jobs and a 
future when they return home.
  We are treating our guardsmen as active-duty members with full time 
demands, but not in the benefits that they receive. Let me emphasize 
the danger that this presents to the volunteerism that has kept our 
guard going. Montana has a proud tradition of serving our country, and 
we need the resources of our National Guard.
  Montana is a rural, northern border State, and it is crucial that we 
have our guardsmen to fight fires, support law enforcement, and support 
homeland security initiatives.
  I traveled to the Gulf States days after Hurricane Katrina hit, and I 
saw first-hand the valuable and unique emergency response capabilities 
of Montana's guardsmen who had been deployed to the region. The Guard 
has a dual role, and we must have them available to fulfill these 
requirements at home.
  Last night, regarding Iraq, President Bush said, ``We must stand 
behind the military in this vital mission.'' The President is a former 
Governor and National Guardsmen. So I have no doubt that the President 
is aware of the Guard's immense contribution to our Nation.
  I stand behind our military and I support the National Guard 
Association, the Governors, and the adjutant generals in their 
opposition to all reductions in National Guard troop structure.
  Last week, I joined Senator Ben Nelson, Senator Lindsey Graham, and 
others from both sides of the aisle as an original cosponsor of a 
resolution which calls for the Department of Defense to consult the 
Governors and the TAGs whenever there are decisions to make changes to 
the Guard. I have joined that National Guard Caucus' letter to 
Secretary Rumsfeld, and I have sent my own letters to Secretary 
Rumsfeld and the President.
  Last summer, I fought hard on behalf of Montana's 120th Fighter Wing 
when DoD proposed closing their base. I should not be here again.
  Our Air Guard last year won the Air Force Outstanding Unit Award, the 
Maintenance Effectiveness Award, and the Air Force Security Forces 
Award, while standing alert and deploying to Iraq. Montana's Army Guard 
has deployed many times overseas and the 1-163rd Infantry Battalion has 
just returned from an 18 month deployment in Iraq.
  Our brave National Guards men and women join the ranks of many other 
military personnel and lay their lives on the line to help protect the 
freedoms we enjoy as Montanans and Americans. At a time when our Guard 
is already stretched too thin, we should not be sacrificing manpower. 
We should be boosting it. The National Guard is the backbone of our 
armed services, and troop reductions of any kind would be detrimental 
to the Nation and to my home State of Montana.
  While I am waiting for the Senator from North Dakota--he wants to 
speak for about 35 minutes, and he is the ranking member of the Budget 
Committee--let me again remind Senators of where we are. Essentially, 
we are still on the House bill. My sense is that the majority leader, 
in the not too distant future, will offer the Senate amendment as a 
substitute. It will include the perfecting amendment by Senator 
Grassley and myself. It is my hope that the perfecting amendment can be 
adopted by voice vote. I think it is not controversial. Then we will 
have before us both bills, the House bill, as well as the Senate 
substitute amendment. I am not sure how much time remains. We have 20 
hours on this bill. But it is my expectation and my hope that Senators 
will come up quickly and offer amendments.
  I might say to my very good friend, the chairman of the committee, we 
face an alternative. Frankly, I hope we can work this out in a way that 
is amicable to Senators. We have two options. One option is to fill a 
tree; that is, prevent any amendments from coming up until we get to 
the expiration of the 20 hours. At that point, Senators can offer 
amendments because when you get off the bill and pass the bill, we have 
to start taking down the tree.
  When the tree starts coming down, amendments come down, and Senators 
can offer amendments then. Although we will be in a vote-arama 
situation, time will not have expired for the purpose of offering 
amendments. Senators will still be able to offer amendments. The 
question is, Is it better all the way around to have the tree filled 
and offer those amendments when we get to the so-called vote-arama, or 
is it better to let Senators offer their amendments earlier and 
accommodate Senators a little more because we are going to get the 20 
hours one way or the other?
  It is my thought that probably if Senators are allowed to offer 
amendments earlier on--that is, the tree is not filled up--and there is 
an accommodation made to Senators who are going to offer amendments 
anyway, that we may be able to proceed more expeditiously because 
Senators will be accommodated and won't be upset and so forth. On the 
other hand, if the tree is filled and Senators are not allowed to offer 
amendments until afterward--I don't know this; I am just saying this 
because it is a possibility or speculation--that Senators may say: I 
was denied my opportunity, and I can't offer it now. They didn't give 
me an opportunity to offer my amendment. Maybe he wasn't going to offer 
it anyway.
  I raise that question for the majority to think about as we decide 
how to proceed on this bill. Many Senators have come up to me and said 
they wanted to offer an amendment. That is a Senator's right. I have 
said to them I understand that, but I am not sure when they will be 
able to offer them. They will be able to anyway, but the question is 
whether they will be able to do it earlier or later. I know that is not 
a decision that is going to be decided at this point, but it is a 
decision I think we are going to have to deal with. My general view is 
it is better to work

[[Page 487]]

with people than not. Generally, if you work with people, you are more 
likely to get matters resolved more expeditiously and more amicably. I 
raise that point for the consideration of all concerned.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. GRASSLEY. Mr. President, my response to that is a friendly 
response. It is not a very definitive response because I think my 
friend from Montana knows that some of these negotiations go on at a 
little higher level than he and I are in leadership.
  Mr. BAUCUS. No negotiation goes on higher than the chairman of the 
Finance Committee.
  Mr. GRASSLEY. Well, there are other considerations that come into 
this. I will put it in this perspective. First of all, I hope what he 
says could happen. It seems to me that, No. 1, we are kind of in an 
environment where we believe we are wasting some time, in the sense 
that we are going through a lot of procedural motions that redebate 
something that was decided in a bipartisan way by this body back on 
December 18 on a 64-to-something vote, a very bipartisan vote. 
Normally, what we are doing now is trying to go to conference. We are 
faced with a lot of amendments--some that might be the same as what we 
dealt with previously. So that is kind of an environment that maybe a 
lot of us believe we should not have to go through because it is a 
waste of time. But now that is a fact of life. That is how the Senate 
operates.
  So as what my friend, the distinguished Senator from Montana, said, 
it boils down to this: To the extent we can have a massive amount of 
transparency on what might be offered, with some limit on the number of 
amendments that might be offered, and get that settled very soon, then 
what happened in the sense of him saying we would fill up the tree with 
amendments, we would not do that.
  That is what we would like to do. But it seems to me there has been 
some inability to know exactly how many amendments might come from the 
Democratic side of the aisle, what they were, and the extent to which 
they were germane versus nongermane. Obviously, the more that are 
nongermane as opposed to germane makes it even more difficult. If we 
can settle those things--I know Senator Baucus and I could settle those 
things, and we could be on our way to not filling the tree. So far we 
have not seen that sort of transparency.
  Mr. BAUCUS. Mr. President, my good friend makes a very good point. I 
had a chuckle to myself because, I say to my friend, I am not even 
aware of all of the amendments. The Senators don't come to me, frankly, 
as I would like them to. It makes it difficult to decide some of these 
issues. The Senator makes a good point. Over the next hour and a half 
or so, let's sit down and see what we can do to work out a list the 
best we can to get a sense of things so that we can proceed more 
expeditiously.
  Mr. GRASSLEY. Mr. President, I always anticipate the picture show 
that we are going to have now from the Senator from North Dakota. 
Anyway, I hope he will be tolerant. I have always wanted to engage him 
in some debate on these issues because I think he always tells half the 
story. I don't think he ever says anything that is wrong, but the whole 
story could give a different impression to the public.
  I yield the floor.
  Mr. BAUCUS. Mr. President, I yield up to 35 minutes to the Senator 
from North Dakota, the ranking member of the Budget Committee.
  The PRESIDING OFFICER. The Senator from North Dakota is recognized.
  Mr. CONRAD. Mr. President, I thank my colleague for his courtesy. I 
also laud his very good work and the chairman's good work in putting 
this package together. I know we enjoy these debates. I certainly enjoy 
them because we have found a way to disagree without being 
disagreeable.
  Mr. President, I also say to my colleagues that I believe deeply that 
the additional tax cuts ought to be paid for. At the appropriate time, 
I will offer a way of paying for them. I think the package that the 
chairman and the ranking member put together is a responsible package. 
There are things that need to be done for the American people and the 
American economy. The one difference I have is I would really like to 
see it paid for. I think there is a way to do that.
  In addition, I will be offering, at the appropriate time, a pay-go 
amendment to go back to the budget disciplines we have used in the past 
that say: If you are going to have more tax cuts, pay for them. If you 
are going to have new mandatory spending, pay for it. I very strongly 
believe we have to restore those budget disciplines. It is also the 
view of the departing chairman of the central bank in this country, 
Chairman Greenspan. I think it is the view of most people who are 
seriously interested in restoring fiscal discipline to this country 
that we have to restore the pay-go rules that functioned very well for 
the country in the 1990s.
  The reason I am so concerned is I look at our budget situation today, 
and here is what I see. We have just had, in these last 4 years, four 
of the biggest budget deficits in the history of the country. In fact, 
we have, in the case of these four budgets, the four biggest deficits 
we have ever had in dollar terms. That is coming off the last year of 
the Clinton administration when we had a surplus. Of course, the year 
before in the Clinton administration we had an even larger surplus.
  Last year, the deficit was $318 billion. This year, they are 
forecasting $337 billion, but they are leaving out certain things. If 
you put back the things that they have left out, we can now anticipate 
a deficit of about $360 billion this year.
  That is just the beginning of the story. The situation we face with 
the debt is really far more serious. The deficit, as we project it this 
year, of $364 billion--it is a little more than that, but look at how 
big the debt is going to grow. The debt is going to grow not by $364 
billion but by over $637 billion. I don't see the media cover the 
growth of the debt. All they want to talk about is the deficit because 
that is the story they are used to writing. The problem is that things 
have changed.
  Well, what has changed? The biggest thing is that Social Security 
surpluses are growing, and growing dramatically year after year. And 
the idea was to prepare for the retirement of the baby boom generation. 
The problem is, this Congress and this administration are taking the 
money. They are taking every penny of the Social Security surplus--it 
is not really a surplus at all because we are going to need every dime 
when the baby boomers retire. But instead of using that money that is 
in surplus this year, this Congress and this administration are taking 
every dime to pay other bills.
  When you look at every other trust fund, they are raiding every trust 
fund in sight. The result is, instead of $360 billion being added to 
the debt, the real increase in the debt would be over $600 billion--not 
just this year, but every single year of this 5-year budget deal, at 
the very time the President is telling us: Don't worry, we are going to 
cut the deficit in half over the next 5 years.
  The problem is, the deficit does improve over the next 5 years, but 
growth of the debt keeps getting worse. Why the difference? Because 
Social Security surpluses are growing every year to prepare for the 
retirement of the baby boom generation. But we are not using the money 
to either prepay debt or pay down the debt or prefund the liability. 
Instead, we are taking, and the President is taking every dime to pay 
other bills.
  Here is the pattern of expenditures and revenues of the Federal 
Government, going back to 1980. The red line is the expenditure line of 
the Federal Government. You can see that during the 1990s each and 
every year spending as a share of gross domestic product came down. Why 
do it as a percentage of gross domestic product? Every economist will 
tell you that is the fairest comparison to make. That takes out the 
effect of inflation. The same is done with the revenue line. You can 
see that during the 1990s revenue went up every year and the result of 
declining expenditures and rising revenue was to eliminate the deficit, 
and during the 3 or 4 golden years here, we eliminated

[[Page 488]]

deficit spending and reduced the growth of the debt. Then President 
Bush came into office and spending has gone up. In fairness to him, 
spending went up because of the increased spending for defense, the 
increased spending for homeland security, and rebuilding New York. Just 
those three items explain about 90 percent of the discretionary 
spending increase.
  You can see that spending as a share of GDP is still substantially 
below where it was in all of the 1980s and much of the 1990s. So while 
it is true that we have had a substantial increase in spending, we are 
still well below where we were in all of the 1980s and a big chunk of 
the 1990s.
  On the revenue side of the equation, President Bush came into office 
here and he said revenue was at a record high. He was right. Look what 
has happened--the revenue side of the equation has collapsed. And while 
it is true we had an uptick last year and the year before, we are still 
way below the historical average for the 1980s and 1990s.
  Going forward, you can see we have this big gap between projected 
spending and projected revenue. The result is a never-ending stream of 
deficits and burgeoning debt.
  Some have said the tax cuts of the Bush era show that if you cut 
taxes, you get more revenue. No, it doesn't show that. In fact, revenue 
has just recovered last year over where it was--just gotten back to 
where it was in 2000. We have not had increases in revenue. As a share 
of GDP, here is what happened to revenue. It collapsed. It is this 
combination of increased spending, dramatically reduced revenue--and a 
big chunk of this is because of the tax cut. That combination has 
plunged us into record deficits and even more rapidly growing debt.
  My colleagues, this is utterly unsustainable. My colleagues say when 
you cut taxes, you get more revenue. No, you don't. You would have 
gotten more revenue had you not cut taxes.
  Look, here is the reality. Back in 2000, the revenue was just over $2 
trillion. It took until 2005 for the revenue side of the equation to 
come back to where it was 5 years before. Again, as a share of GDP, we 
have never gotten back. We are nowhere close to where we were, and I 
don't advocate we should get back to where we were because revenue was 
at record levels. We are nowhere near close to the average of the 
eighties and nineties.
  On individual income taxes, we are still below where we were in 2000, 
and by 10 percent. So the notion that if you cut taxes you get more 
revenue is a great theory, but it has not worked in reality.
  The President says to us we are going to cut the deficit in half over 
the next 5 years. No. 1, I don't believe that ought to be the goal 
because if you look at the President's plan, the deficits explode right 
beyond the 5-year window. But in addition to that, the only way the 
President reaches his conclusion is he leaves out all kinds of items. 
He leaves out war costs, he leaves out the cost to fix the alternative 
minimum tax, and he leaves out the effect of his making the tax cuts 
permanent.
  When we add all those items back in, including his defense buildup, 
here is what we see in terms of the deficits, according to the 
Congressional Budget Office, adjusted for the things that have been 
left out. Here is what we see, the long-term deficit outlook. In fact, 
it is an ocean of red ink that gets much worse past the year 2011.
  This is the harsh reality of the Bush plan. It is a plan of 
burgeoning deficit, of massive debt, and at the worst possible time, 
right before the baby boomers retire.
  The President of the United States is, in effect, hiding from the 
American people the full consequences of his proposals because he stops 
his budget after 5 years. But here is what happens right beyond the 5-
year window.
  He has dramatically underfunded long-term war costs. Fifty billion 
dollars has been appropriated for war costs in 2006 so far. The CBO 
estimates of additional outlays for ongoing military operations are 
$378 billion.
  The President says he is going to cut the deficit in half, but he 
accomplishes that by leaving out things we all know we are going to 
have to pay for. War cost is No. 1. The President dramatically 
understates what the war is going to cost.
  Here is the big enchilada. The President said last night: Make the 
tax cuts permanent. This dotted line on this chart is the next 5 years. 
This is what it costs over the next 5 years to make the tax cuts 
permanent. We see it is very modest. Look what happens to the cost of 
making the tax cuts permanent right beyond the 5-year budget window. 
The costs of the tax cuts absolutely explode. Total cost over 10 years 
to make the tax cuts permanent is over $2.2 trillion.
  That is the President's plan. He has no plan to pay for it. He is not 
cutting spending to cover this difference. We are already at record 
deficits. The baby boomers are just going to begin to retire, and the 
President says: Dig the hole deeper; dig it deeper; let's have more 
debt. What kind of a plan is that for America's future, more debt.
  It is not just the war cost the President has left out or 
understated, it is not just the full effects of making the tax cuts 
permanent, but the President has left out entirely the cost of fixing 
the alternative minimum tax.
  The alternative minimum tax is the old millionaire's tax that is 
rapidly becoming a middle-class tax trap. If we don't act on the 
alternative minimum tax, it is going to affect 20 million people this 
year--20 million people. It takes $1 trillion over 10 years to fix the 
alternative minimum tax. The President doesn't have a dime in his 
budget to deal with this.
  This is the problem we have. We have an air of unreality in this town 
about where we are headed. Here is what the President told us back in 
2001:

        . . . [M]y budget pays down a record amount of national 
     debt. We will pay off $2 trillion of debt over the next 
     decade. That will be the largest debt reduction of any 
     country, ever. Future generations shouldn't be forced to pay 
     back money that we have borrowed. We owe this kind of 
     responsibility to our children and grandchildren.

  That is what the President said when he embarked on this course: 
Paydown of the debt. Let's do a reality check and look at what has 
happened versus what the President said. See any paydown of debt going 
on here? Any paydown of debt? There is no paydown of debt.
  Leading up to this, when the President came in, the debt was $5 
trillion. The debt was below the bottom of this chart. The bottom of 
this chart is $7 trillion. The debt was below the bottom of this chart 
when the President started. He has increased the debt by $3 trillion. 
That is in 5 years. He said he was going to pay down the debt by $2 
trillion. Instead, he has increased the debt by $3 trillion, and that 
is where we are today.
  But look where we are headed under his plan. He is going to add 
another $3.5 trillion over the next 5 years. He has already added $3 
trillion; now he is going to add another $3.5 trillion. We are going to 
have $12 trillion of debt by the time this President's plan is done.
  What difference does it make? Ask yourself this question: Where are 
we getting the money? Where are we getting the money to float this 
boat? Increasingly, we are borrowing this money from abroad. When we 
have a debt auction, increasingly the ones who are buying our debt are 
foreigners.
  It is very instructive. It took 42 Presidents 224 years to run up $1 
trillion of external debt, debt of ours held by foreigners. This 
President has more than doubled that amount in 5 years. That is utterly 
unsustainable. Foreign holdings of U.S. debt have doubled under this 
President in just 5 years.
  The result is we owe Japan almost $700 billion. We owe China $250 
billion. We owe the United Kingdom over $220 billion. My favorite, the 
Caribbean banking centers, we now owe them over $115 billion. We owe 
Taiwan $71 billion. We owe OPEC almost $70 billion. We owe South Korea 
over $60 billion. We owe Germany, Canada, Hong Kong, and up and up it 
goes, debt on top of debt.
  Now the Secretary of the Treasury writes us a letter on December 29. 
That is an interesting time to write us, the week between Christmas and 
New Year's when Congress is not here and

[[Page 489]]

nobody is paying attention. What does the Secretary of the Treasury say 
to us:

       The administration now projects the statutory debt limit, 
     currently $8,184 billion--

  Let me repeat that, the current debt of our country is $8,184 
billion. You can translate that into trillions. It is $8.2 trillion.
  He says:

       [The debt limit] will be reached in mid-February of 2006. 
     At that time, unless the debt limit is raised or the Treasury 
     Department takes authorized extraordinary actions, we will be 
     unable to continue to finance Government operations.

  That is a fancy way of saying we won't be able to pay our bills. The 
most powerful Nation in the world won't be able to pay its bills by the 
middle of February unless the debt is dramatically increased.
  Here is what has happened to the debt under this President. Remember, 
he said he is going to have maximum paydown of the debt; he is going to 
pay the debt down by $2 trillion. That is not what happened. Instead of 
debt being reduced, debt has been dramatically increased.
  By the way, in the previous 5 years, during the Clinton 
administration, this is how much the debt limit increased: Zero. We 
were actually paying down debt. In 2002, the debt had to be increased 
$450 billion; in 2003, under this administration, the debt had to be 
increased another $984 billion; in 2004, the debt had to be increased 
another $800 billion; and now they want to increase the debt another 
$781 billion. You add it up. This President, in just these 4 years, has 
added $3 trillion to the debt. The debt was only $5 trillion when he 
took over. He has increased the debt in just these 5 years by 60 
percent, and we now know that in the next 5 years, he is going to 
increase the debt another $3 trillion. He will more than have doubled 
the debt of our country during his administration.
  One President--1 out of 43--has run up more debt than the other 42 
combined--more national debt, more debt held by foreigners.
  Is this supposedly an indication of strength? What would people say 
out there? Is this an indication that our country is strong, that we 
are borrowing more and more money all around the world, or is it a sign 
of weakness?
  I know what I think. I think it is a sign of vulnerability.
  Last night, the President said we are addicted to foreign oil. He is 
right. You know what else? We are addicted to foreign money, and this 
President says: It is the people's money, give it back to them. The 
problem is, he is borrowing the money from China, Japan, and all around 
the rest of the world to give it back to them. That is what is going on 
here.
  It is the people's money, yes; absolutely, it is the people's money. 
Do you know what else? It is the people's debt. Every dime of this has 
our taxpayers' name on it, and they are going to have to pay it, and 
this President doesn't seem to be the least bit concerned about this 
explosion of debt on his watch.
  Now we have this budget proposal before us, and there are three 
chapters to it. There are three chapters to this book. Chapter 1 is to 
cut spending $39 billion. That is what they call the deficit reduction 
package.
  Look what the second chapter says. The second chapter says: Oh, when 
you have cut the spending $39 billion, cut the revenue by $70 billion.
  I was educated in schools in Bismarck, ND. I went to Roosevelt grade 
school. I had wonderful teachers--Ms. Senzick, Ms. Barbie, Ms. Hook. 
They taught me math and they were very good teachers, and I was good in 
math. I could go back to the second grade and figure this out. Is the 
deficit getting smaller or larger as a result of this plan? If you cut 
your spending $39 billion but you cut your revenue $70 billion, have 
you made the deficit bigger or smaller?
  Everybody knows you have made the deficit bigger. Yet our friends on 
the other side of the aisle say they have a deficit reduction package. 
No, they don't. They have a deficit increase package when we already 
have record deficits, record additions to the debt. And they say they 
have a deficit reduction package? Come on. There is no deficit 
reduction going on here.
  The third chapter of the book is the one they really don't want you 
to read. The third chapter of the book is they are going to increase 
the debt $781 billion.
  Here it is another way: $39 billion of spending cuts over 5 years--
virtually nothing as a share of the spending which will occur over that 
period--and $70 billion of tax cuts not paid for. The result is they 
have just added to the deficit, added to the debt, and they will tell 
you this is really working because we are getting strong economic 
growth.
  Are we really? Are we really getting strong economic growth? Let me 
say this: In the last 4 years, median family income in this country has 
gone down each and every one of the years. That is a fact. Median 
family income has gone down each and every one of the last 4 years. We 
only have the records through 2004, but 2005 I predict will show the 
same thing--another reduction in the median family income in this 
country.
  When we compare this recovery to the previous recoveries since World 
War II, here is what we see. This is the average of the nine previous 
business cycles; that is, if you look at the nine recoveries we have 
had from recessions since World War II, here is what we see. This red 
line is the average in terms of economic growth. This black line is the 
growth we have seen in this recovery. It is well below the average. It 
is 25 percent lower than the average economic growth we have seen in 
the previous recoveries.
  These are facts. Something is wrong. This strategy is not working. It 
is no wonder the American people are concerned about the economy, even 
though people tell us the economy is great. What we see is, in a 
recovery, this is one of the weakest of any we have had since World War 
II.
  Let's look at another measure: business investment. This red line is 
what has happened in each of the nine recoveries. This is the average 
of each of the nine recoveries since World War II. But here is what has 
happened in this recovery. Yes, things have gotten better, but they are 
way below--in fact, 50 percent less than the average of every other 
recovery since World War II. These are signs something is wrong. 
Something is not working with this strategy.
  It does not stop there. Here is the job loss comparison. This red 
line shows the average of every recovery since World War II, nine of 
them. We have had nine major recessions and nine recoveries. This red 
line shows what has happened on average with job growth during a 
recovery.
  Here is the line with respect to this recovery. We are 6.9 million 
private sector jobs short of a typical recovery. Is anybody paying any 
attention? Is anybody doing anything other than making rhetorical 
speeches and running around the country chanting ``economic growth, 
economic growth, this is really working''? Something is not working. 
The average recovery since World War II has been stronger than this one 
in job production, in economic growth, and in business investment.
  These are facts. The Federal Reserve Chairman, Mr. Greenspan, who 
just left office, said he opposes deficit-financed tax cuts. He said we 
should not be cutting taxes by borrowing. The Chairman of the Federal 
Reserve was exactly right. We should not be cutting taxes by borrowing, 
especially borrowing from China and Japan and the Caribbean banking 
centers.
  The Chairman said this about pay-go, which is the amendment I will be 
offering when it is appropriate to do so. Pay-go is a budget 
discipline. Pay-go says simply this: If you are going to have more tax 
cuts, yes, you can have them, but you have to pay for them. Yes, you 
can increase mandatory spending, but if you do, you have to pay for it. 
If you want new spending, you have to pay for it. If you want more tax 
cuts, you have to pay for them.
  The Chairman of the Federal Reserve, who just retired, Chairman 
Greenspan says:


[[Page 490]]

       All I'm saying is that my general view is I like to see the 
     tax burden as low as possible.

  So do I.

       And in that context, I would like to see tax cuts continue.

  So would I.

       But as I indicated earlier that has got to be, in my 
     judgment, in the context of a PAYGO resolution.

  That is what I am going to be offering to my colleagues, the exact 
pay-go resolution the Chairman is referring to, the pay-go we had in 
the 1990s, which helped us impose discipline, which helped us restore 
fiscal responsibility, which helped us turn record deficits into record 
surpluses, which got us on a sound financial course, which, 
unfortunately, under this President and this administration and this 
Congress, we have veered from so dramatically back into the deficit 
ditch--record deficits, record increase in debt. We are headed for $12 
trillion of debt, more than a doubling of our debt on this President's 
watch and already more than a doubling of U.S. debt held by foreigners.
  Think of it. It took 42 Presidents 224 years to run up $1 trillion of 
external debt for this country. This President has more than doubled it 
in 5 years. What is conservative about that? This is the biggest 
liberal, when it comes to debt, we have ever had in the White House in 
this Nation's history. He is very free with debt.
  The pay-go I am offering simply says that all mandatory spending and 
all tax cuts that increase deficits must be paid for or require a 
supermajority vote, 60 votes. The current pay-go rule, and you will 
hear from the other side that we have pay-go--we have it; it is a joke. 
It exempts all tax cuts and exempts all mandatory spending increases 
that are assumed in any resolution, no matter how much they increase 
deficits. And they say they have pay-go? Come on. They don't have pay-
go; what they have is debt-go. Let's get going on the debt, that is 
what these guys have. And they are doing it and, boy, is our country 
going to pay a terrible bill for what these guys are doing.
  This administration and this Congress are not going to be treated 
well by history because at the critical moment, just before the baby 
boomers retire, instead of what other countries are doing, which is to 
run surpluses to get ready for the retirement of the baby boomers, this 
country, under this administration, this Congress, is running massive 
debt, doubling the debt of our country during this President's watch.
  I will offer the pay-go resolution at the appropriate time. I will 
offer a second amendment which will say: Yes, we can have these tax 
cuts which the chairman and ranking member have brought before us, 
which is a responsible package. But it ought to be paid for.
  Let me put up the tax cut package I will offer my colleagues, the 
very same one the chairman and ranking member have come up with: small 
business expensing, a savers credit, tuition deduction--all of these 
until 2009, the same as their package; new market tax credit until 
2008, same as theirs; sales tax deduction until 2007; the R&D credit 
until 2007, exactly what they have; work opportunity welfare-to-work 
credits, the same as they have; teacher classroom expenses until 2007, 
the same as they have; leasehold and restaurant improvements until 
2007; other traditional extenders until 2007, exactly as they have; the 
AMT hold harmless, through this year.
  The difference is I am paying for it over the next 10 years, paying 
for it all. How am I doing it? In this way: I am providing the same 
offsets as the Grassley-Baucus substitute. In other words, they have a 
package of offsets here closing the tax gap by shutting down abusive 
tax shelters and other reforms. They have $34 billion. That includes 
ending the tax benefit for leasing foreign subway and sewer systems--
saving $5 billion.
  This is the scam of all time. This is the scam of all time. We have 
people who are buying subway systems and sewer systems in foreign 
countries and depreciating them for the purpose of their U.S. taxes and 
then leasing back the sewer systems and the subway systems to foreign 
countries in foreign cities. Is anybody listening? You tell me we 
should not stop this scam? This is unbelievable. When my staff first 
brought this to my attention, I could not believe it myself. You have 
to be kidding me. Companies in America are buying the sewer systems in 
foreign countries and depreciating them for the purposes of their U.S. 
taxes. Can you believe this is going on? Companies are buying the sewer 
systems in a foreign country and depreciating them for the purposes of 
their U.S. taxes? It is true. We could stop that and save $5 billion.
  I take that package, then I add ending a loophole for oil companies 
that lets them avoid taxes on foreign operations. That is another $9 
billion.
  We could require tax withholding on Government payments to 
contractors such as Halliburton just as we do to mainstream businesses 
in this country. You know, if you are a business in this country, you 
have to pay withholding taxes. But we have Halliburton over there with 
all these funny-money contracts in Iraq--they don't have that 
requirement. Why not? That would save $7 billion.
  If we renew the Superfund tax so the polluting companies pay for 
cleaning up toxic waste sites, we would save $17 billion. And then we 
close other tax loopholes for another $22 billion.
  This is a picture of Ugland House in the Cayman Islands, the building 
from which they run all of these scams. I used to be a tax 
administrator. One of my jobs used to be to scout out these scams. That 
is one of the reasons I am here, because people I represent thought I 
did a pretty good job of unearthing these scams and shutting them down. 
But this one takes the prize. I credit my colleague, Senator Dorgan, 
for finding it.
  Has anybody been to the Cayman Islands? The Cayman Islands are just 
south of Cuba. You go to the Cayman Islands, and you find this 
building. It is five stories tall, and 12,748 companies call this 
building home. This is one of the scams of the ages. Let me repeat 
this. You have this building right here--this is a picture of it--down 
in the Cayman Islands. It is five stories tall. It is home to 12,748 
companies. Do you see them all? They are working there. Are they 
working there? Are 12,700 companies working there? No, they are not. 
They are running fraudulent operations there. They are shuffling paper 
there.
  When I was tax commissioner, I found a major company that showed all 
of its profits down in the Cayman Islands. Gee, how would that be? They 
are doing work all over the country in the United States, buying and 
selling, buying and selling. They showed those were all break-even 
operations.
  Then they ran a little operation with one person down in the Cayman 
Islands. They showed a $1 billion profit.
  This shouldn't be a partisan issue. This is a scam. It is a scam on 
all of us to have 12,000 companies.
  I was just describing the company. They had one employee down in the 
Cayman Islands. They showed all of their profits down there with one 
employee. I said that is the most efficient man in the world. This one 
man--all the profits of the company are in his division, and he is the 
only one in the division.
  Why do they do it in the Cayman Islands? Because there are no taxes 
in the Cayman Islands. They weren't doing any work down there. They are 
just shoveling profits between subsidiaries.
  That is what is going on in this building. This building is home to 
12,748 companies that are doing business down in the Cayman Islands. 
They are shoveling tens of billions of dollars in profit out of this 
building. This building, I am sure, is a smart building. It must have 
the latest wiring. They must have the latest technology to be producing 
tens of billions in profits in this one building--the profits of 12,000 
companies. What a scam. We ought to stop it.
  My bill says: Yes, we should have this tax relief for the American 
people. We ought to pay for it by closing that kind of scam. We ought 
to stop the scam where companies are buying foreign sewer systems and 
depreciating

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them on the books in the United States for the purposes of lowering 
their taxes here. It is nothing but a ripoff and a scam, and we ought 
to stop it. We ought to pay for the tax cut, every dime of it. That is 
what my proposal does.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER (Mr. Sununu). Who yields time?
  Mr. BAUCUS. Mr. President, I yield 15 minutes to the Senator from 
Massachusetts.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized 
for 15 minutes.
  Mr. KERRY. Mr. President, thank you very much. I thank the 
distinguished manager.
  Mr. President, we don't know at this point what is going to happen in 
terms of the parliamentary procedure. So I am not sure whether the 
Senator from New Jersey is going to have the opportunity, which I know 
he wants, to be able to propose an amendment with respect to the AMT. 
My hope is that he will be able to because I think it is absolutely 
critical that the Senate address this issue.
  I wish to speak for a few minutes about the amendments that the 
Senator from New Jersey will submit and why I support them and why I 
think it is so important.
  There is no rationale--no economic rationale, no social rationale, 
political rationale--for addressing tax issues that expire in 2009 
before we take care of the individual alternative minimum tax issue 
that affects people today.
  There is no common sense behind saying we are going to address a tax 
issue with respect to 3 or 4 years from now when we have an enormous 
number of American families who are going to be negatively impacted by 
the alternative minimum tax.
  It is almost inexplicable that the House bill chooses capital gains 
and dividend relief over preventing 19 million families from having to 
pay AMT.
  Let me make it clear that I have supported a reduction in the capital 
gains tax on any number of occasions. In fact, I wrote it with Senator 
Bumpers back in 1993. We drafted a targeted capital gains tax reduction 
that passed the Senate. It got caught up in the complicated rulemaking 
process. It didn't work as effectively as it might because of the 
rules, not the concept. Ultimately, I have supported a reduction in 
capital gains.
  But to suggest that we ought to now make it permanent, when we see 
the gap growing wider and wider between the ``haves'' and ``have 
nots,'' when we realize that what we are talking about in this tax 
reduction is providing those Americans who earn more than $1 million a 
year about $32,000 worth of tax relief next year alone, while people 
earning less than $50,000 a year will get about $20 each.
  It doesn't make sense, on any measurement of fairness or common sense 
about how we are trying to expand the economic pie for all Americans, 
particularly when you look at the data about the numbers of American 
families who are being squeezed and squeezed when having a hard time. 
Median wages have not gone up--they have gone down about 2 percent over 
the last few years for average Americans. But public college tuition 
has gone up about 57 percent. Since 2000, private college tuition has 
gone up something like 32 percent. Families are paying higher health 
care costs.
  All of us know, as the President reminded us last night in the State 
of the Union Message, gasoline prices are killing people at the pump. A 
lot of workers are seeing whatever gains they might have tried to save 
get taken away just trying to get to and from work.
  We are struggling with this gap, which is growing. Yet the priority 
of the House of Representatives is to give the wealthiest people in 
America yet another break while many Americans are going to be pushed 
into the alternative minimum tax regime.
  You shouldn't even call it the alternative minimum tax. You ought to 
call it the family tax because that is what it is. The taxpayers get 
hit by the alternative minimum tax according to where they live and 
because they have children.
  If you live in a certain State--take a State with a relatively high 
standard of living and a fair amount of public contribution, such as 
Massachusetts or California or some other State, New York, Connecticut. 
In those States, the only thing you can do to not pay this tax is to 
not start a family. If you start a family and have children, the tax 
cuts end. You wind up being hit harder.
  We are literally punishing Americans for having children and building 
families. The more children you have, the more you are impacted by the 
alternative minimum tax at a lower income level. It doesn't make sense.
  If no action is taken on the alternative minimum tax, a family with 
three children with an income of $63,000 would be impacted by the AMT, 
and a family with six children with an income of $50,000 would be even 
more impacted by the AMT.
  In May, we heard testimony from the Urban Institute about how the AMT 
was once upon a time a class tax, but it is soon becoming a mass tax 
because more and more taxpayers, mostly because they are having 
children, will be forced to pay it.
  Nina Olson, the taxpayer advocate who works every day on practical 
implications of what we do, has repeatedly testified about the 
complexities and the inequities of the AMT. She said sarcastically the 
AMT punishes taxpayers for such classic tax avoidance behavior as 
having children or living in a high-tax State.
  If you look at his history of the AMT, you can tell that it really 
does need reform.
  The individual AMT was created in 1969. It was created in 1969 to 
address 155 individual taxpayers in America whose incomes exceeded 
$200,000 a year, who paid no Federal income tax at all in 1969. That is 
why this tax was created. You had high-income people paying no income 
tax, and 155 people were the target of this effort. But now it has 
grown from 155 taxpayers in 1969 to 1 million in 1999, to almost 29 
million by the year 2010. It now affects families with incomes well 
below $200,000 a year.
  By the end of the decade, repealing the alternative minimum tax will 
cost more than repealing the regular income tax.
  Unfortunately, we can't end this today. Obviously, we can't do that. 
But we can do a lot more than what is in the House reconciliation bill. 
The House tax reconciliation bill includes a provision that extends 
taxation of capital gains and dividends at a lower rate through 2010; 
whereas, the alternative minimum relief expired at the end of 2005, and 
it needs to be addressed. The capital gains and dividends provision 
doesn't expire until 2008.
  The amendment before the Senate--provided Senator Menendez is given 
the opportunity to provide it--is going to strike the extension of 
capital gains and dividends at a lower rate. That provision has a cost 
of $20 billion over 5 years and a $50 billion cost over 10 years.
  The budget resolution has been drafted in a way that hides the cost 
of the capital gains and dividend cuts by putting most of the expenses 
outside of the 5-year budget window, and it will actually cost more 
than twice as much as is stated.
  One rationale for cutting the tax on capital gains and individual 
dividend income is that it stimulates investment.
  That has not held true, and the record does not show that is, in 
fact, what happened. If you talk to people on Wall Street, they will 
tell you point blank, No. 1, they are concerned about the deficit, and 
No. 2, they believe that their behavior is not going to be affected. It 
is a great windfall for them. They will all tell you that if they get 
an extra $100,000 in their pocket, at their income levels, they can do 
something with it. But it will not affect the fundamental investment 
decisions that they are going to make anyway.
  The fact is that the stock market, as we all know during the 1990s, 
did a lot better than it is doing today when it had a higher capital 
gains rate, notwithstanding the fact that we lowered it at that time.
  We have a choice, a very straightforward choice: Either help the

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wealthiest investors in America or you can help hard-working families.
  It is that simple. That is exactly what this choice is about. I hope 
a majority of the folks believe--that we ought to be helping those 
families that most need the help today.
  It is a simple matter of priority. It is a simple matter of fairness, 
and it is common sense with respect to our economy and the money we 
want to put into the pockets of Americans so they can go out and pay 
their bills, continue to purchase, and drive our economy.
  I want the tax bill to reward work first and wealth second.
  This can be done by making the alternative minimum tax relief a 
priority over capital gains and dividend tax relief.
  The fact is that Congress has an opportunity to stop punishing 
taxpayers because of where they live, because they move from one State 
to another for work or for school, or because they decide to start a 
family. Those are not the reasons on which you ought to base a tax on 
in our country.
  We have an important opportunity to take a step to deal with this. It 
is my hope that we will do so.
  I yield whatever time may remain.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I want to comment on what the Senator 
from Massachusetts said.
  First of all, I think everything he said about the AMT, I agree with; 
what he said about the capital gains, I disagree with.
  I am only going to comment on that part that I agree with him on 
about the AMT.
  But let us have a little history in the process of doing that.
  No. 1, either in 1998 or 1999, we repealed the AMT. President Clinton 
vetoed it.
  So we wouldn't be dealing with this issue if President Clinton had 
signed that bill.
  In a sense I am kind of asking for support from anybody on the other 
side of the aisle who thinks we are not doing enough on AMT. I happen 
to be one of those who even today, 6 to 7 years later, is for repeal. I 
believe it ought to be repealed. We ought to have a standup vote, 
without any points of order, and get rid of this.
  There are Republicans who would say if we do that in the out years, 
our budget might look like it has a much bigger deficit than it has, 
and over here there might be people who say if you are going to get rid 
of this tax, you ought to have an offset for it, so the budget deficit 
does not look different. The reason neither one of those concerns is 
legitimate is because in this bill we are talking about having the AMT 
hit the middle-class Americans whom it was not intended to hit.
  The Senator from Massachusetts is right in the sense that for parents 
with children and the larger the family the more it hits them. It was 
never intended to hit but a few wealthy people who used every legal 
loophole to avoid paying taxes and that somehow everyone who makes a 
lot of money ought to pay a little something of income tax into the 
Federal Treasury. A little something or big something, whatever the 
case might be, whatever the alternative minimum tax hit them with, they 
ought to pay that.
  If Senator Baucus will bear with me, he has heard me say 150 times 
how ridiculous it is to have this side of the aisle say we ought to 
offset a tax that was never intended to be collected in the first place 
from the people who otherwise will be hit with it if we did not pass 
this legislation, and over here, people are worried if we do away with 
it, the budget deficit will look bigger because we do not have the 
phantom tax income coming in from people who were never supposed to pay 
the alternative minimum tax in the first place. If we have a tax 
hitting people who were never intended to pay it in the first place, it 
should not be showing up in the budget figures, anyway. So we have to 
worry about an offset or we have to worry about whether we have a 
burgeoning budget deficit over here if it is not there. It is a 
phantom. We ought to do what you do with phantoms, hit them with a 
needle, let the air out, get rid of them.
  Also, particularly what the Senator from Massachusetts said about 
hitting people, it is like a geographical tax to some extent because a 
lot of States, such as New York, New Jersey, and California, have a lot 
of high-income people. Therefore, they have a disproportionate number 
of people getting hit by the AMT. If you fall into that income class, 
you will get hit with it. More of these people live in higher income 
States and it happens that some of the States are what we call blue 
States instead of red States, so I don't know why we do not have a 
massive drive on this side to force Republicans to do something that is 
hurting your constituents.
  Let's do away with the darned tax. People aren't supposed to be 
paying it in the first place. Why are we spending a lot of time working 
the issue? I would like to have the Senator from Massachusetts solve 
this problem forever and help us repeal it, like we did in 1998, with a 
President who I am sure will sign it.
  On a procedural matter, I wish also to make a comment. My good friend 
from Montana asked if we could see what we could work on, on 
amendments. I will briefly comment even beyond what he has asked us to 
do and try to help speed this along as best I can, as to where we are.
  It has been suggested on this side that Republicans work with Members 
to help them get their amendments up and voted on. First, we should not 
even be in this situation, a truly unprecedented situation, where we 
are essentially being forced to do a reconciliation bill over. Yes, we 
are doing a reconciliation bill over, within 2 months of when we first 
did it. We could be doing the Nation's business of problems that have 
to be solved, not waste 3 days on this bill now when we spent 3 days on 
it in November. We could be working on lobbyist reform. We could be 
working on asbestos reform and a lot of other things that Members want 
before the Senate. However, leadership on the other side is wasting the 
Senate's time and the American people's time. Surely there is a better 
way.
  For those who thought this was over back in November, we are in the 
middle of a rude awakening. Cooperation is a two-way street. Even 
though we should not be in this position where the minority party is 
trying to reopen the bill, we have said we are willing to entertain a 
limited number of amendments. Another way to put this, I said to 
Senator Baucus privately that we need total transparency on this, get 
everything on the table. We do not get a response from the Democratic 
leadership.
  They have taught me a few lessons from our first go-around on this 
bill. I learned that you do not vote on amendments too early because we 
know what happens if you do that; they get their press release out, 
they lose the amendment, then it comes back within a matter of hours, 
sometimes two or three different versions of the very same amendment. 
We end up voting on all of them, wasting everyone's time. So the extent 
to which we lay everything on the table and level with everyone on what 
we are faced with, we will be able to get this bill completed. We could 
finish this late tomorrow night.
  Unless we can get an agreement for a limited number of amendments or 
amendments in total, I don't see any reason but to wait until the time 
has expired on the bill and let the so-called vote-arama begin one vote 
right after another and we spend a couple of minutes debating an 
amendment back and forth, to have that vote-arama without an agreement. 
I am convinced this will save the Senate a lot of time in the end. 
Either way, we have a limited number of amendments. Let us know what 
they are, have some sort of agreement so we can get done, or have a 
vote-arama.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Burr). The Senator from Montana.
  Mr. BAUCUS. Mr. President, I listened with great attention to my good 
friend from Iowa. I feel very lucky to have him as chairman of my 
committee. I don't know any Member who is more decent and fair and in a 
certain sense nonpartisan than the Senator

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from Iowa. I deeply appreciate his approach and friendship.
  I think he knows no one is trying to delay anything. This is the 
Senate, after all. The Senators on both sides of the aisle have the 
opportunity to offer amendments. That is why we are Senators. We can 
offer amendments to bills. Sometimes one political party is in the 
majority and sometimes the other party is in the majority. As the 
Senator knows, it goes back and forth. I remember years when the party 
on the Senator's side of the aisle was in the minority, and my Lord, we 
faced all kinds of amendments because Senators wished to offer 
amendments to their points of view.
  We are here today trying to work our way through. I have instructed 
Senators on the Democratic side of the aisle to tell me all the 
amendments Members have and we will work our way through this so we can 
be more than accommodating to the Senator from Iowa.
  My view is to lay all your cards on the table so people know what 
they are. As civil and reasonable people we will figure out a 
reasonable way to deal with this. We all know the rules. We will let 
Senators offer their amendments in a way that is civil, positive, and 
accommodating--nothing personal. These are legitimate points of view 
that 100 Senators have. I hope to get the list to the Senator from Iowa 
very quickly so we can work that out.
  I yield 10 minutes to our new Member, Senator Menendez, from New 
Jersey. We are honored to have him here.
  The PRESIDING OFFICER. The Senator from New Jersey is recognized for 
10 minutes.
  Mr. MENENDEZ. Mr. President, I thank the distinguished ranking 
Democrat on the Senate Committee on Finance for yielding time and for 
his work in preparing the opportunity to offer this amendment.
  Later today I intend to offer an amendment, and I do certainly hope 
it will be in order, that lets families across the Nation know we are 
on their side.
  In the bill before the Senate we have a clear choice: We can stop a 
tax increase for 17 million middle-class taxpayers, a tax that was 
never intended to penalize anyone considered middle class; or we can 
continue to give people who need it the least a break on their capital 
gains at the expense of middle-class workers.
  I thank my colleagues on the Committee on Finance, Senators Baucus, 
Schumer, Kerry, and Feinstein, who have worked very hard on this issue 
to ensure that the final result of this bill will not be a tax increase 
for middle-class families.
  The options before the Senate are a choice of values. Do we value 
ensuring fairness for all hard-working Americans or would we rather 
give a break to those who need it the least? The Senate made the 
sensible choice when it passed the tax reconciliation bill last 
November by extending the protection for middle-class families from the 
alternative minimum tax. Now that the House bill is to come before the 
Senate, this Senate must make it clear it stands by that vote and that 
middle-class families will not bear an additional burden of tax cuts 
for the wealthy.
  In the past year, this Congress has given enormous tax breaks to an 
oil industry that has racked up record profits while American drivers 
saw the price of gas go through the roof, and given out tax break after 
tax break for those who need it the least, while ignoring middle-class 
families.
  I am proud to later offer an amendment that will help hard-working 
families in America and New Jersey get real relief and to make sure in 
this great body the middle class is heard at least as clearly as the 
powerful and the privileged.
  Last night we heard more of the familiar rhetoric on tax cuts. We 
heard the President speak about ``a massive tax increase'' American 
families will face that ``they do not expect and will not welcome,'' if 
the President's tax cuts are allowed to expire as scheduled in the next 
few years. The truth is, millions of families, not only in New Jersey 
but across the landscape of the country, will face an unexpected 
increase this year if the AMT exemption is not extended and the 
President's tax cuts do not include a fix for this problem.
  Time and time again, the President has pushed for his tax credits 
from 2001 to be made permanent, which overwhelmingly benefit those who 
need it the least. More than 70 percent of the President's tax cuts 
have gone to people who make over $200,000, while families who earn 
between $50,000 and $75,000 have received less than 5 percent of the 
cuts. Yet the President has done nothing to make the AMT exemption 
permanent, a tax which in the next 4 years will affect nearly every 
two-parent family with two kids earning between $75,000 and $100,000.
  We also heard the President call for more than just ``temporary 
extensions.'' Yet the fact is all the President has done in terms of 
this middle-class tax is to propose temporary extensions and only 
cosmetic changes while proposing no underlying reform to the AMT 
itself.
  Would we like to do more than a 1-year extension? Absolutely. But 
when the President has directed all of his efforts, his priorities, and 
the Nation's bank account to tax breaks for the wealthy, there is 
little room, let alone money, left over for the reforms that affect 
nearly 20 million middle-class taxpayers.
  When Americans wonder why there has been little attention on what 
most tax analysts refer to as the single most important tax issue 
facing the Nation, they should know that it is because tax cuts for the 
middle class have not been a priority for this administration.
  Let's be honest. Once again, it is the middle-class families, the 
hard-working families, who are struggling to send their children to 
college, to keep up with the cost of health care, to care for aging 
parents, who pay all of their bills and try to make ends meet each 
month who are being asked to foot the bill for the top earners in our 
country. Why? How many middle-class families out of the 17 million know 
right now they could be facing a tax increase this year? I would guess 
not very many. It does not help that the President has been silent on 
this, one of the most significant tax increases facing the middle 
class.
  The fact is many families will be faced with a harsh reality at the 
end of the year. In my State of New Jersey, where nearly 180,000 
families were subject to AMT in 2003, the number of middle-class 
taxpayers subject to this tax will at least double if no fix is 
enacted.
  Average families, which are far from wealthy and think they are below 
the threshold, could face significantly higher taxes this year if we do 
not act on the crisis at hand. For example, a typical New Jersey family 
with two parents, where one is a preschool teacher and the other a 
paramedic, with three kids would be subject suddenly to this new tax 
increase this year.
  So this amendment we hope to offer is for middle-class families who 
may not know a tax hike is coming and for average families who should 
not be expected to shoulder the burden of the President's tax cuts for 
the wealthy.
  This amendment will make very clear that our priority should be to 
protect middle-class families from this unintentional tax hike and that 
millions of taxpayers should not wake up next tax season to realize 
they owe more in taxes even though their income has not changed.
  Let's remember, this was a tax intended to assure those making some 
very significant income pay some taxes. It was never intended to raise 
the taxes of average Americans.
  This is a zero-sum game. With soaring budget deficits and rapidly 
climbing debt, tax cuts for top wage earners are just one more burden 
being put on the shoulders of the working middle class.
  The reality is, without this amendment, many families could be paying 
possibly $1,000 more in taxes next year. That is $1,000 more they could 
put in their pocket, $1,000 more they could use to save for their 
retirement, $1,000 more they could use for college tuition, $1,000 more 
to help make ends meet.
  It is clear there is not room on the President's tax cut agenda for 
this

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middle-class tax crisis. That is why we seek to offer this amendment. 
This is why it is vital this body once again show its support for a tax 
package that includes an increased AMT exemption to protect middle-
class families and not ignore the looming crisis before us.
  We in this body know the consequences if we do not act. Many 
Americans do not. We know that if we fail to act, an astounding 30 
million Americans will be subject to a higher tax rate within the next 
4 years. We also know what many American families do not--that a family 
with three kids making $63,000 will be facing a higher tax rate next 
year if we do not enact this fix now.
  Now, I hear a lot of talk about values. With this amendment, the 
Senate can decide which values--which values--it wants to embrace: 
rewarding those who work hard, play by the rules, and struggle to make 
ends meet, or give yet another tax cut to those who need it the least?
  Let's send a clear message that the values we embrace are the values 
of American families. Let's embrace fairness and equal treatment for 
those who work hard. This is a chance for this body to go on record 
that we should not be imposing an unfair tax break on our middle-class 
families just to extend a tax break for those at the top.
  I hope my colleagues will support this amendment when it is offered, 
presuming we have the opportunity to offer it, and ensure that hard-
working American families, not just top dividend earners, remain our 
top priority.
  I also look forward to offering an amendment later on with Senator 
Kennedy that would expand a critical tool for college students and 
their families under the HOPE scholarship tax credit. As the first in 
my family to go to college, I fully understand the power of some of 
these programs and how they helped me, in my case, be the first in my 
family to go to college.
  This amendment will simply expand what the credit can cover to 
include other associated costs for a college education. I look forward 
to the opportunity to offer that amendment as well.
  I yield back whatever time I may have.
  The PRESIDING OFFICER (Ms. Murkowski). The Senator's time has 
expired.
  Mr. BAUCUS. Madam President, I yield 5 minutes to the Senator from 
Florida.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. NELSON of Florida. Madam President, I intend to bring forward an 
amendment that will provide additional protections for Medicare 
beneficiaries during the first year of the implementation of the new 
Medicare prescription drug benefit. And that first year is right now, 
since it just started.
  The amendment expands the existing 6-month open enrollment period 
from the May 15 deadline to 6 months later, into December. It is going 
to give people additional time to do the research to make the best 
decisions.
  Secondly, the amendment is going to give to every beneficiary the 
opportunity to make a one-time change in the plan enrollment at any 
point during this calendar year, 2006.
  Now, why is this important? Well, if every Senator here has been 
hearing from their senior citizens like the Senators in Florida have 
been hearing from our senior citizens, you can certainly understand 
that the senior citizens are very concerned. In many cases, they are 
confused because of the multiplicity of plans.
  As a matter of fact, in Florida, there are 18 companies offering a 
total of 43 stand-alone prescription drug plans. Now, each of those 
plans differs in terms of premiums, cost-sharing requirements, drugs 
covered, and pharmacy access, and some of these plans are very time-
consuming and very confusing. So when senior citizens are telling us 
Senators they are confused and bewildered, we ought to be paying 
attention.
  Now, in some cases, the senior citizens are frightened, as well. This 
is because they know that come the deadline of May 15, if they have not 
selected a plan, they could be penalized 1 percent a month or 12 
percent a year. That frightens them. What also frightens them is if 
they pick a plan by the deadline and then realize they made a mistake, 
they cannot rectify that mistake for a year. That is the source of 
great consternation and some fright to senior citizens.
  Now, we can easily fix this. Back in November, when we had this bill 
before us then, I offered this amendment. It got 51 votes. It got a 
majority of the Senate. But there was a point of order on the budget 
because there is a minor financial consequence to this. So under the 
rules of the Budget Act, there has to be a 60-vote majority to pass 
such an amendment. We got 51 votes. I think we have a good chance to 
get 60 votes now because of Senators having heard all of the confusion 
and the bewilderment and the fright our senior citizens are 
experiencing. So I will be offering this amendment at the appropriate 
time.
  Madam President, I yield the floor.
  Mr. BAUCUS. 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. 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 wish to make the very simple but very 
important point that given the choice, given the alternative between an 
extension of dividend and capital gains tax provisions compared with 
the AMT change, it is far better for this Congress to grant the 
alternative minimum tax relief than it is to grant an extension of the 
dividend and capital gains tax reduction.
  First of all, the current law provides, under what is called the 
alternative minimum tax--which taxpayers who have certain incomes will 
pay, basically middle-income taxpayers--that this year they will be 
paying more taxes if we do not change the law. And 17 million Americans 
will be paying more taxes than they would pay under an ordinary 
calculation of their income under the Tax Code.
  To say the same thing differently, because of this provision called 
the alternative minimum tax, 17 million more Americans will be paying 
more taxes--actually 20 million. Three million Americans this last year 
paid more taxes because they fell under the alternative minimum tax. 
Next year, if we do not make changes for tax year 2006, 17 million more 
will be paying it, for a total of 20 million. If we do not make these 
changes, 20 million Americans will be paying increased taxes next year, 
and those 20 million are essentially middle-income taxpayers.
  To contrast that with dividend and capital gains, current law 
provides for lower dividend and capital gains taxation. That law 
extends, if we do nothing, for 2 more years, until essentially January 
1, 2009.
  So we have a choice here, all things being equal. We have a choice 
generally because we have a $70 billion floor. The budget resolution 
says we cannot pass more than $70 billion of tax cuts unless we want to 
override that with 60 votes. We have that floor, and it is hard to do 
everything. It is hard to have a capital gains extension, and it is 
hard to have an AMT extension. But basically we have the choice of 
either preventing a tax increase this year under AMT or extending 
dividends and capital gains, which need not be extended because 
currently the favorable dividends and capital gains is already in law 
and does not expire until January 2009.
  The alternative is to extend capital gains and dividends from January 
1, 2009, for 2 more years and do nothing to AMT. Or do we say, that's 
not very smart, we will deal with a dividends and capital gains 
extension later. Or do we, instead say, we are not going to extend 
something that does not need to be extended but rather we will reduce 
the AMT bite for this year. To say it differently, will we prevent the 
implementation of the alternative minimum tax this year, which has the 
effect of raising people's taxes? That is the question.
  The Senate bill answered that question by saying, it makes more sense 
to

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prevent the AMT from going into effect this year than it does to extend 
dividends and capital gains which doesn't have to be extended anyway 
for the reasons I indicated.
  The House bill, on the other hand, looks at that exact opposite. The 
House bill says, we are not going to prevent the increase of the 
alternative minimum tax this year. They are going to allow that to go 
ahead. Rather, they are saying, we want to extend dividends and capital 
gains favorable treatment, even though current law gives that treatment 
and it is going to be in law until January 1, 2009. That is what the 
House did.
  There were some on the Senate floor earlier today who said: Gee, the 
House bill is better. Why? The argument is, without addressing the 
timing issue, because AMT relief is only for wealthy Americans. That is 
the argument. Whereas a dividends-and-cap-gains extension gives 
favorable tax treatment to a lot broader base and maybe middle-income 
Americans because a lot of people have mutual funds and own stocks and 
so forth. So, really, if you are going to help middle America, 
basically it is better to extend dividends and capital gains than it is 
to pass AMT relief, although we don't have to anyway because current 
law provides those benefits.
  I would like to show with this chart a little bit about what AMT 
actually does to rebut that point. The facts show that AMT relief helps 
middle-income taxpayers a lot more than does favorable dividend and 
capital gains treatment. I will show that with a couple other charts.
  This first chart basically shows income levels where the alternative 
minimum tax starts to take hold. To remind everyone, taxpayers have to 
make two calculations when calculating their income taxes. One is the 
regular way. You look at your deductions, decide whether you have the 
standard deduction or itemized deductions. That is the standard, 
ordinary way.
  After a taxpayer has calculated his or her income taxes, every 
taxpayer has to then go through a separate set of calculations. It is 
called the alternative minimum tax. Under that separate set of 
calculations, if it turns out that you owed more under the AMT than 
under the regular tax, then that is the tax you pay. You pay the 
greater of the two calculations.
  AMT, when it was passed years ago, was supposed to hit the very 
wealthy. That was the intention. But it has not worked out that way. 
The actual effect of the AMT is to hit essentially middle-income 
Americans.
  It comes down to the question, what do you mean by middle income? 
That is the question. This chart shows that for a family earning about 
$80,000--that is becoming more and more the middle-income taxpayer. If 
you have a family making $80,000, they have expenses: kids going to 
school--$80,000 these days is not an awful lot of money.
  Unfortunately, most Americans earn less than that, but an awful lot 
of Americans earn $80,000. The point being, if you earn $80,000 
roughly, then you probably don't have to pay the alternative minimum 
tax if you have no children. But this chart shows that the more 
children you have, if you have one child, two children, four children, 
then--and that is what the brown lines show on the chart for this year, 
2006--it shows that if you have more children, then the level at which 
the AMT starts to kick in is lower and lower.
  That means, say, you have four children. At that level, if you are 
earning $60,000 for a family with four children, then at that point the 
AMT starts to kick in, which is to say, you start paying more tax.
  There are other considerations, such as if the taxpayer is in a State 
with high State and local taxes. If you are in a State with high State 
and local taxes, or the more children you have, et cetera, then the AMT 
is going to be much more of a bite and hurt you. The main point is, we 
are talking about income levels. For families with one child, it is 
$72,000; for a family down on the end of the chart with, say, six 
children, it is about $50,000. That is not a lot of money for a family 
with six kids. So it is a middle-income tax.
  Before I turn to the next chart, this is for this year showing what 
will happen if we do nothing. Those are the brown bars on the chart. 
The blue bars are really for last year, 2005, which goes to show you 
that if we do nothing this year, this AMT is really going to hit. The 
current AMT hit about 3 million taxpayers. This year, it is going to 
hit 17 million more, for a total of 20 million. That is why there is a 
difference between the blue and the brown lines on the chart. This 
year, it will really start to hit.
  This chart shows that relief from the alternative minimum tax helps 
taxpayers more in the middle income of the tax bracket compared with 
tax relief under dividends and capital gains. The blue bars are the 
alternative minimum tax relief. That is what the blue bars show. The 
other brown bars show relief from dividends and capital gains 
reductions. What does this show? We are talking about a little bit 
wealthier taxpayer. The blue bar shows if your income is, say, $75,000 
to $100,000, and then especially about $100,000 to $200,000, 52 percent 
of the relief of what we will be enacting, if we pass the alternative 
minimum tax, will be for taxpayers in that bracket. I grant you that is 
higher than a lot of Americans, but it still shows that beginning at 
about $50,000 of income and up to $100,000, then it starts to fall off 
if you earn $200,000.
  It also shows that the very wealthy don't pay the alternative minimum 
tax. The wealthy whose income is, say, $500,000, $1 million, $2 to $3 
million, AMT doesn't affect them. Rather, the AMT hits people whose 
incomes are roughly between $75,000 up to, say, $200,000 to $250,000.
  Contrast that with the dividends and capital gains tax relief. That 
is the brown bars on the chart. What does that show? The brown bars 
show that by far the greater relief that people receive from the 
benefit of the dividends and capital gains reduction is the very high 
income bracket of Americans. That is what the brown bars show. That is 
$1 million--more than $1 million in income. The bar shows that about 
over 52 percent of the relief from dividends and cap gains relief goes 
to taxpayers where incomes are over $1 million; whereas 52 percent of 
the AMT tax relief goes to taxpayers in the bracket at under $200,000. 
Again, the facts show that dividend and capital gains relief goes by 
far to the most wealthy Americans. Those earning $1 million or more get 
by far the largest break from this provision. Whereas the AMT tax 
relief does not give relief to the most wealthy. It gives relief to 
those, as shown by this chart, roughly between $50,000 in income and up 
to $150,000 and $200,000 in income. That is a big difference.
  Again, I must remind all my colleagues, the alternative minimum tax 
will be a tax this year, 2006, this year, if we do nothing. If we pass 
the relief we are talking about here for 1 year, then taxpayers who pay 
taxes in 2006 will find their taxes are not increased. If we do nothing 
about capital gains and dividends taxes this year, there will be no 
change in taxation on dividends and capital gains. There will be no 
change next year on income taxes on dividends and capital gains.
  It is abundantly clear to me that in the alternative, we should 
certainly focus on passage of a provision which prevents a tax increase 
for 2006 that will otherwise go into effect rather than not doing that, 
let the tax increase go into effect, and say, well, we will extend the 
current law with respect to dividends and capital gains for 2 more 
years, beyond 2009 into 2010. That is a no-brainer.
  You might ask: Gee, why not do both? Let's do both. Therein is the 
rub because we have a $70 billion limit given to us by the budget 
resolution which we all passed in this body and the other body. You 
can't do it all. And add to that that we don't want to, I don't think, 
worsen the deficit. We already have huge deficits facing the country, 
increasing debts on top of that.
  We could pay for both, if we want to, by raising taxes someplace 
else. That is an option. I don't know whether we want to do that. But 
we cannot and

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should not pass dividends and capital gains relief at the expense of 
AMT.
  I might add, under a ruling from the Parliamentarian earlier today, I 
think the Presiding Officer was presiding at that moment, a budget 
point of order would lie against a conference report that came back 
with dividends and cap gains extensions because of the outyear costs, 
unless it is paid for.
  It is my fervent hope that we deal with what we have to deal with 
now, and that is the alternative minimum tax. Let's not let that go 
into effect.
  I don't see anybody else who wishes to speak, so 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. ROCKEFELLER. 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. ROCKEFELLER. Madam President, I ask that I be allowed to speak 
for several minutes.
  The PRESIDING OFFICER. The Senator is recognized.
  Mr. ROCKEFELLER. Madam President, I rise to let my colleagues know 
that, at an appropriate time, I plan to offer an amendment to the 
package of tax cuts that the Senate is, in fact, considering today.
  The recent tragedy in West Virginia's coal mines, as well as in 
Kentucky, highlights the need for Congress to take steps to better 
protect miners who have worked hard for years to extract the coal used 
to create over half of all of our electricity and the country doesn't 
know it because we are always talking about oil.
  The amendment I am going to offer provides incentives for coal 
companies to make crucial investments in equipment and training that 
will help coal miners return to their families safely each night. The 
world of coal mining, as you know, is a very close one. Almost nobody 
ever gets to go into a coal mine for the obvious reasons--its danger 
and the training needed. So as to that which provides the majority of 
our power in this country, people never get to see and understand the 
dangers involved.
  Let me briefly explain the tax incentives this amendment would 
create. First, coal companies would be allowed to immediately expense 
50 percent of the cost of purchasing new safety equipment. This is 
extremely important because American mines simply don't have the best 
available equipment at this time. In fact, some of the equipment, I 
regret to say, is the most important--for example, oxygen. Rescue 
hasn't changed a whit since 1977. Other countries, such as Canada, New 
Zealand, and Australia, have much more advanced mining equipment than 
do we. That is not fair to American miners. We need to mine coal and 
have companies willing to do it. We need to be absolutely certain that 
miners are as safe as we can possibly make them.
  Several types of safety equipment would be eligible under my 
amendment for the tax benefit. First, communications technology that 
enables miners to maintain constant contact with the ground above. That 
would seem to be easy; to wit, we can talk from the Moon to the Earth 
but we cannot talk from over ground 500 feet down or a thousand feet 
down to a miner who is trapped to take their vital signs and do all 
kinds of things so we can protect them and get them out safely.
  I am absolutely confident that the technology for doing this exists. 
It is just that it hasn't been put into use. That is not fair. So there 
are several types, and I mentioned the contact with ground. Secondly, 
electronic tracking devices that enable an individual above ground to 
locate miners underground at all times.
  Third, emergency breathing appara-
tuses, including devices carried by miners and additional oxygen 
supplies stored by the mine in tunnels off to the side of the mine as 
you go down the main shafts.
  You are no doubt aware that Canada had a problem very recently. They 
had these sort of sheds, little houses that went behind that people 
could go in and be totally safe. In there was oxygen, food, and all 
kinds of things. Nobody was hurt or killed because they had equipment 
which we don't have. I think Congress needs to decide whether, with 
coal mining increasing in this country and with probably not much 
chance of doing anything major about oil, we ought to be protecting our 
miners so they can mine coal for us.
  Finally, mine atmospheric monitoring equipment to measure the levels 
of carbon monoxide and methane and oxygen in the mine at all times. 
That is very important because often a rescue team, if it is in a mine, 
cannot proceed if the level of carbon monoxide, for example, is too 
high or if methane is too high and there is a chance of an explosion. 
Knowing the levels of all of those is important to be able to 
understand that from above ground.
  In addition to investment in lifesaving technology, we need our mines 
to invest more in mine rescue teams. Experienced miners, specially 
trained to rescue their fellow workers, are essential in the event of 
an emergency.
  I can remember when I was Governor, we used to have right outside my 
window, so to speak, multi-State competition between mine rescue teams 
from various States. Mine rescue operations are extraordinarily 
complex, extraordinarily precise, and they have to be taught and 
practiced, and they have to keep at it. So that it is in our interest 
that, unlike what happened at Sago where no mine rescue teams arrived 
for a long time because Sago did not have its own rescue team, being a 
relatively small mine, they do not have to wait. The result at Sago, as 
we all know, in part, is that 12 people did not live.
  Of course, training and equipping a mine rescue team is expensive. 
Companies have not committed enough resources to having skilled rescue 
teams available at all times and during all shifts, if there is a 
multishift operation.
  Therefore, the amendment I am proposing would provide a mine operator 
a tax credit of $10,000 for each miner that they have trained and 
equipped as a mine rescue team member. Somebody will say that is a lot 
of money. If a mine doesn't have a rescue team, then the chance--if 
there is an explosion--of safely getting them out of the mine 
diminishes enormously. To me, it is akin to the cost of doing business. 
Having said that, the people don't have it. I think we have to be able 
to ease them into it, to encourage them, incentivize them to do it--not 
make it permanent but incentivize them to make it permanent so they get 
going on that. It is my understanding that a credit of this size would 
offset approximately 20 percent of the cost of preparing a miner to be 
ready to rescue his colleagues. So it is not paying for the whole 
thing.
  I believe we need to make our mines safer as soon as possible, so I 
am proposing that both of these tax incentives be available only for 
the next 3 years. We need coal mines that are improving their safety 
standards immediately, which also gives them sufficient time to find or 
develop the best equipment.
  I know that in DOD, DARPA, for example, in research labs around the 
country--I had someone visit me yesterday with all kinds of ideas, and 
they are working on mine safety rescue equipment. There just has not 
been a push on the part of anybody--MSHA, the companies, us, whoever--
to get more modern equipment into the mines. If you are using the same 
oxygen rescue equipment that you were in 1977, we know that is 
inadequate.
  Let me answer some skeptics who may be wondering why we need to 
provide tax breaks to companies to encourage them to take safety 
precautions they ought to be required to take. That is a very fair 
question, and I am sure it will come up.
  I share the desire to mandate by, either Federal law or regulation, 
strict safety regulations on America's coal mines. I believe we owe 
coal miners the safest possible work environment, all within the 
context of coal being the energy source of the future, not exclusively, 
but the energy source, the biggest one of the future.
  That said, I believe we must also act in good faith with coal 
companies. This is not a punishment. This is about improving the 
situation. If we are asking

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them to make substantial new investments in specific technology and 
training, it is appropriate to offer tax relief to lessen the impact of 
those investments at least for a period of 3 years.
  Following any kind of accident in a mine, the most important things 
are locating the miners underground--that is very hard to do now--
communicating with them--and that is hard to do now--making sure they 
have sufficient supplies of oxygen until they are rescued--and that is 
very hard to do now since the oxygen usually runs out after 1 hour--and 
having skilled and well-trained mine rescue teams quickly available.
  These are worthy results. Sometimes people say: Can a mine afford it? 
The answer is yes. Look at the Sago mine in northern West Virginia. 
That is going to be closed for a long period of time. What they are 
losing in the way of their bottom line compared to what I am talking 
about here isn't even close. So I think it is in our interest to do 
this, and I really believe that.
  Miners deserve to know that in the event of an accident that their 
employers have made the investments necessary for their safe return. 
The amendment I am proposing today will stimulate such investments.
  In closing, I am very pleased to be working with my colleagues on the 
Finance Committee, Chairman Grassley and Senator Baucus, on this 
proposal. I am grateful for their cooperation and assistance as we try 
to make coal mines safer. And I am very hopeful that these investment 
incentives can be included in the tax bill before the Senate.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Coburn). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for 
the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BAUCUS. Mr. President, I was pleased to hear President Bush talk 
last night about the U.S. economy in the State of the Union Address. 
Some of the other proposals of the President, such as reducing the 
deficit and making the R&D tax credit permanent, make a lot of sense. I 
strongly support them. Others, such as his proposal on health care 
costs, frankly, would do very little to rein in soaring health care 
costs that we see. And that is important, frankly. We must do more to 
rein in health care costs because they serve as a drag on the 
competitiveness of American industry. But there are certainly areas 
where we can work together on health care.
  For the past year, I have made a number of statements on the steps 
our country must take, in my judgment, to bolster U.S. competitiveness. 
Just last week, I unveiled plans for a comprehensive legislative effort 
to bolster U.S. competitiveness from education to savings to innovation 
and research. I invite the President to support these provisions, to 
support this agenda. I look forward to working with him to turn these 
proposals into law. Only by working together can we ensure that we keep 
America first in the world, preserve its economic leadership, and 
assure jobs and prosperity for American generations to come.
  ``Competitiveness'' is an amorphous term because it covers some 
different areas, from international trade to education. But these are 
the issues which are critical to our future. Why? Because the world is 
changing, and for America to remain on top, we have to make sure our 
domestic house is order.
  I just got back from a 10-day trip to China and India. I must tell 
you, it was, to say the least, very eye-opening.
  In China, I saw gleaming superhighways burrowing through brightly lit 
tunnels. I saw robots stacking the shelves of a Chinese computer 
company. I saw teams of Chinese researchers determined to discover the 
next big thing. I saw capitalists and entrepreneurs betting on China's 
rise. I saw a confident middle class ready for the future.
  It is astounding. We all know that. Every time you go to China, it is 
amazing how much more advanced they are compared to the previous visit. 
I was there only a year earlier.
  After a quarter century of growth, China is set to become the world's 
largest economy by about the year 2030. Just think about that. By 2030, 
China is positioned to become the world's largest economy. China is 
already the world's third largest exporter. China has surpassed America 
as the largest exporter of information technology products.
  India, I might say, is no different. There, I saw confident, young 
engineering students who have no doubt that the India of tomorrow will 
be better than the India their parents left them. I saw information 
technology companies where state-of-the-art technology has made them 
global technology leaders. I saw Indian Government leaders bent on 
making 21st century India the world's success story.
  As a side note--it is a very small point but not so small--I asked 
the head of a major high-tech research center in India why they are in 
India. What is the answer I got? The answer I got was because India has 
the greatest talent pool for engineers and scientists.
  I asked, What is the next best country?
  China, he said.
  I asked, Where is the United States?
  Sorry, Senator, you are down the list pretty far.
  That is a small slice of what we are going up against. These two 
reawakening civilizations, with over 2.3 billion people between them, 
are on the march. Their confidence is palpable. Are we prepared to meet 
the challenge they present? Of course we are. We are Americans. We have 
a great history of meeting challenges. America is capable of overcoming 
any challenge. We are capable, but we must act.
  America remains the world's economic powerhouse--very much so. We are 
undisputed today. We lead all major economies in output. Our companies' 
workers grow more productive each year. However, we also have to face 
facts. In many important areas, America is beginning to lose its 
competitive edge.
  In information technology, we have lost our preeminence, falling 
behind Singapore, Iceland, Finland, and Denmark. At the same time, 
Federal support for R&D is in a 30-year decline.
  In education, we have neglected our human capital. When I started in 
the Senate, America ranked third in the world in the share of young 
people with science or engineering degrees. Thirty years later, we have 
slipped--not back to 3rd, 4th, or 5th; we have slipped to 17th. In 
global rankings of math, reading, and science skills, our 15-year-olds 
have also fallen even further behind 17th in the world.
  In health care, rising costs threaten to cripple many companies. Too 
often, employees have little or no health care coverage. The average 
American spends more than $5,000 a year on health care costs--twice as 
much on a per capita basis as the next most costly country. We spend 
twice as much on health care in America as any other country. I ask, 
are we twice as healthy even though we spend twice as much per person? 
Clearly, the answer is no. We must cut back on the cost we pay for 
health care.
  In international trade, over the last few years we have distanced 
ourselves from Asia, leaving China to engage the region. By not pushing 
to open the world's biggest markets and not explaining the importance 
of trade, this administration fosters surging protectionism.
  To make that same point, I heard constantly in Asia, China, India, 
and Singapore--I had a very long conversation with Lee Kuan Yew, who is 
the wise man of Singapore--where is America? Where is the American 
Government? There are all kinds of international trade negotiations and 
forums. We don't show up. We don't participate. I asked: What about our 
companies? Our companies are not there. Sure, we have American 
companies in China. In India, I heard constantly from every person I 
spoke with that we can't find Americans; we need American companies to 
do business in India.
  There is a big, fancy subway, for example, in New Delhi. When you 
think of New Delhi, most Americans don't have an image of tall, 
gleaming skyscrapers as in Manhattan. Think of

[[Page 498]]

 Delhi, India. It is a huge city. There is a New Delhi and an Old 
Delhi. But India and Delhi have a subway system built, completely 
finished, and it is gleaming. It is fancy. It is up to date. Guess 
what. Cell phones work in the New Delhi subway. In a lot of American 
subways, you can't turn on your cell phone. They are not wired for cell 
phone use. You can in India. And they plan to build subways in 18 other 
cities in that country.
  Finally, our macroeconomic fundamentals are at a danger point. That 
is a fancy term. What does that mean? Essentially, it means that we are 
in deep financial trouble. Our country is set to rack up another record 
account deficit. That is another big, fancy word. It basically means we 
are importing a lot more materials and goods than we are exporting. 
That is the current account deficit.
  We borrow more than 80 percent of the world's savings. Think of that 
for a second. Americans borrow more than 80 percent of the world's 
savings.
  Our net foreign debt has not been this high as a percentage of gross 
domestic product--that is how we count our economy--since Grover 
Cleveland was in the White House. This is unsustainable and costly. And 
too few people think about it. When they do they wonder, Why didn't we 
do something about it earlier?
  Do we just put our heads in the sand and give up? No. Clearly, we 
must choose a path to greater economic competitiveness. That means 
taking advantage of opportunities we see and meeting our challenges 
head-on. We need a comprehensive agenda for a 21st century competitive 
economy. We must look inward and scrutinize our own policies 
thoroughly, comprehensively, and honestly. Look at the facts, put aside 
ideologies, put aside partisanship. The stakes are just too high.
  I have spent much of the last year attempting to develop such an 
agenda--not perfect, clearly. I have no monopoly on the best ideas. But 
I believe we must start, and I have done my best to start.
  In the coming months, I will launch seven individual legislative 
proposals to address America's competitiveness in education, energy, 
health, savings, research, tax, and international trade. That is how we 
can compete better--by improving our education dramatically.
  How do we wean ourselves from OPEC? Thank goodness the President 
mentioned that, and I praise him for his comments in the State of the 
Union last night.
  How do we address this health care problem in America, the high cost 
of health care, and make sure more Americans are covered? How do we 
encourage more savings? That is a bit alarming. I know that it is just 
a statistic. It is still quite alarming.
  We Americans are not savers. We Americans have a negative personal 
savings rate. We also on average spend more than we save. We charge up 
our credit cards, mortgage payments, and we spend more than we save. 
That adds up. After a while, it catches up to us.
  What about other countries? In China, the personal savings rate is 
about 40 percent. About 40 percent of what the Chinese people earn, 
they save. There are similar, high statistics in other Asian countries. 
Japan--I do not know the exact figure; I know it is high. In Singapore, 
it is about the same level. In India, it is very high, too. Some might 
say that is because those countries don't have savings accounts; they 
don't have Social Security, as well, as we have; they do not have 
health care benefits or pension plans as lucrative as ours. Ask any 
American how well our savings plans are working and how health care 
benefits are working. We have a problem.
  The point is, they are saving and we are not saving. They are saving, 
we are spending. They are investing, we are consuming. After a while, 
that catches up.
  As I said, I don't pretend to have all the answers. But we have to 
start tackling these questions right now. I invite my colleagues on 
both sides of the aisle as well as the administration and anyone in our 
country to join me in enacting these bills.
  I welcome the President's focus on education. I will soon introduce 
what I call the Education Competitiveness Act, designed to make the 
priority of lifelong learning an inseparable part of American society 
and American culture. We have to continue to be educated to grow and 
learn. My bill will encourage more students to go into math and science 
by funding college scholarships for the sciences, providing free 
tuition for science and engineering students, and creating partnerships 
with employers and continuing education centers to meet the technology 
needs of companies. I will also propose legislation to invest in our 
teachers by raising starting salaries and providing loan forgiveness 
for teachers.
  I was very impressed a couple of nights ago to see on the evening 
news that in the city of Chicago, Chinese language is offered at every 
level K-12. Chinese language is offered in the Chicago school system. 
That is incredibly important. I wish Chinese were offered in many more 
American school systems. Why? Because Chinese is the language that is 
going to be very important down the road. Sure, English is going to be 
the major language in the countries of the world. That is absolutely 
clear. But the more we understand Chinese, the more we are going to 
help. We can learn the Indian language and lots of others, too, but 
Mandarin Chinese is going to be very important in the future.
  Also, students might not be fluent in Chinese. They may just take 2 
or 3 years. Some students may become very fluent in Chinese. Even for 
those students who don't become fluent in Chinese, what does it do it 
for us and for our kids to think a little bit more about overseas, 
about Asia, think more internationally, think more about what is going 
on in the world? When some event occurs in a country--it doesn't have 
to be China--if you study Chinese, it will help. You will think about 
it more and read the newspapers or watch the news. You will begin to 
think about how these things are interrelated.
  We have to strongly boost our education system. I must say that I 
take my hat off to the Chicago school system for offering Chinese at 
every single level, K-12.
  I applaud the President's recognition of energy as a critical facet 
of our Nation's competitiveness and the critical factor that innovation 
and R&D play in ridding ourselves of our dependence on Middle East oil. 
The President said last night that we are addicted to foreign oil. We 
are at our peril. The sooner we wean ourselves from OPEC and become 
more self-sufficient, the better off we are all going to be.
  What can we do about it?
  I will invite the President to support my energy competitiveness 
bill. What does it do? It will create a new agency, what I call the 
Advanced Research Projects Agency, or ARPA-E, modeled after the Defense 
Research Projects Agency, which is so helpful in providing so many 
cutting-edge technologies. It will help provide cutting-edge research 
to break out of the energy squeeze that we now face.
  Last night, the President mentioned programs within the Department of 
Energy. I think that is good. My personal view is that this is such an 
important issue, we have to have a separate outfit called ARPA-E; 
otherwise, it will be consumed in the Department of Energy. I worry 
that it is going to be lost in the bureaucracy much too soon. It has to 
be a lean, mean agency.
  I also support the commitment to expand research and to make 
permanent the research and development tax credit. I will introduce a 
research competitiveness bill in the coming weeks which does just that. 
The tax credit is not enough, especially when it comes to basic 
research. We have to do more than the R&D tax credit. I believe more 
support for private and public research partnerships can be an 
effective vehicle for basic research. They can help find the resources 
for more basic research.
  We did this in the 1980s when semiconductor companies and the 
Government collaborated to share risk and leverage discoveries for 
semiconductor technology. It is called Semtech. It was in Austin, 
Texas. I spent a couple of days there and was very impressed with what 
they have done. It was so

[[Page 499]]

successful it helped support semiconductor technology that has spun 
off. Semtech is no longer necessary. It would get us jump-started in 
meeting the Japanese and other challenges where countries are 
underwriting the development of semiconductor production.
  I welcome the President's focus on savings and acknowledge the need 
to address mounting Government costs and the growing deficit. We should 
not focus solely on programs such as Social Security and Medicare if we 
are going to address this problem. Rather, it is time to explore every 
nook and cranny for opportunity to bring the deficit down, to look at 
corporate tax loopholes, and to close the annual $300 billion tax gap.
  What is that? What is the $300 billion annual tax gap? Every year 
about $300 billion in taxes legally owed is not collected. We can do 
better. I don't know if we can get it all, but we ought to get the 
lion's share of that collected. That is a way to help pay for some of 
these things, the investments we have to make. Let's do a better job in 
closing the tax gap. The IRS is working on it. I have prodded the 
chairman of the committee, Chairman Grassley, many times. The time has 
come to light a bigger fire, accelerate this effort to make sure that 
most of that $300 billion of taxes legally owed to Uncle Sam is 
collected; otherwise, we are subsidizing $300 billion worth of 
deadbeats because those taxes are not collected.
  A savings competitiveness plan such as the savings competitiveness 
bill I will introduce will make certain the Federal Government spends 
taxpayer dollars wisely. We can accomplish that objective if, when we 
spend money around here, we pay for it; otherwise, the debt and deficit 
keep building. We are borrowing more and more. We cannot continue this 
borrowing binge.
  It must also create incentives for private savings by pursuing the 
automatic enrollment savings plan. Make the tax credit permanent for 
savers. There are a lot of things we can do on the edges that will 
snowball as we increase personal savings in the country, which clearly 
is needed for investment in energy, other technologies, education, in 
training programs to assure people they can keep their job, and if they 
cannot keep the job, they can make the adjustment to a new job; 
otherwise, with all the hundreds of thousands of people who have been 
laid off in companies in America because of global competition, they 
will not have a stake in what we are trying to do. We have to do this 
together as a country. I certainly believe increasing the personal 
savings will be a large part of that.
  Then we have to turn to international trade. Competitiveness requires 
we break down market access barriers and seek opportunities in foreign 
markets such as China and India, which continue to crave American 
investment. We pass laws to encourage our companies to export and to do 
business overseas. We must do that to help American companies strive 
and do well, so long as they pay attention to local workers. We must 
let them know their Government has their back and that foreign markets 
are open and stay open when they play by the rules. We have to make 
sure the countries play by the rules. They are not playing by the rules 
as much as they should and could.
  Take intellectual property, for example. Many countries overseas--
China, India--are making some progress, but we are losing all kinds of 
dollars because America is not enforcing the rules sufficiently for 
other countries.
  I will introduce a trade competitiveness bill to make the 
administration more politically accountable to Congress, identifying 
and pursuing the most egregious foreign market access barriers. It will 
build on an idea of Senator Stabenow of Michigan to create a new 
Senate-confirmed chief trade prosecutor at the USTR dedicated to 
investigating and prosecuting trade enforcement cases.
  Then we have taxes. The President's focus there is not quite properly 
placed. We need to make sure our international tax rules, which were 
written in a time when U.S. businesses were the only players on the 
block, are changed. Make sure they provide other businesses flexibility 
to compete.
  The Tax Code contains a number of anti-abuse rules so companies 
cannot shelter passive income but must allow U.S. businesses to 
redeploy the resources from active to foreign operations, as their 
competitors already do.
  I will review these rules, as well as transfer pricing rules, cost 
recovery periods for business assets, and the inappropriate use of 
offshore tax havens to make sure U.S. businesses can compete fairly on 
a level playing field with both domestic and foreign competitors.
  A final element of my plan is health care. That is where the 
President's address fell short. The President offered some options for 
some Americans, but as broad health care solutions, they may not be 
doing very much to control costs or expand health insurance coverage. 
In fact, Americans who need health insurance coverage the most could 
pay more out of their pockets under health savings account plans.
  The President ignored the health care elephant in the room: the 
problems our seniors are having with the drug care benefit. I am 
surprised he did not mention that. It is on seniors' minds. We have to 
address that.
  My health competitiveness legislation will invest in innovation, in 
efficiency, and also will put emphasis on making Medicare move toward 
pay for performance as we get better quality of value for Medicare 
dollars.
  I close by saying competitiveness is the key to America's future. 
Bolstering our great companies' competitive potential will allow us to 
ensure that we leave our children more productive, more prosperous, and 
a more secure America than our parents left us. This is important. It 
is very difficult to get our hands wrapped around it. But the more we 
do and the earlier we do so, the better off we are all going to be.
  I yield up to 20 minutes to the Senator from Rhode Island, the 
ranking Democrat of the Joint Economic Committee, the senior member of 
the Committee on Armed Services.
  The PRESIDING OFFICER. The Senator is recognized for 20 minutes.
  Mr. REED. Mr. President, it is my intention when it is appropriate to 
offer an amendment entitled Strengthening America's Military. This 
amendment will repeal the extension of tax breaks for capital gain and 
dividends and instead use the funding to give our military some of the 
vital help it needs. There is no question we have the most formidable 
military in the world. It is a combination of the courage and skill of 
our fighting men and women, together with the best technology. But we 
have to ensure that this Army and our Marine Corps and all of our 
military forces are adequately equipped.
  It is a question of priorities. As members of this administration are 
quick to point out, we are a nation at war. But they have not asked all 
the people of this Nation to sacrifice for that war, something this 
country has done in almost all past conflicts. There are literally 
thousands of young Americans serving and sacrificing in Afghanistan, 
Iraq, and around the globe. Their families sacrifice as they wait for 
them to return. Their communities have sacrificed as they have seen 
National Guard units mobilized and sent overseas. But the vast majority 
of Americans has not been summoned to this great struggle. I argue now 
is the time where such sacrifice is necessary, particularly among those 
who benefit most from society.
  Rather than debating whether to extend certain tax cuts, we should 
consider ways to increase Federal revenues to pay for the costs of the 
war, something the country has done in almost all past military 
conflicts. To raise the additional revenues needed to equip our 
military, we first need to remove the provisions in the tax 
reconciliation bill that extend the lower tax rates on dividends and 
capital gains.
  There are many reasons to oppose the extension of the lower tax rates 
and dividends on capital gains, but the key reason is the fact they are 
unfair. Most of the tax goes to upper income families: 53 percent of 
the tax goes to .2 percent of families who have incomes of $1 million 
or more; 78 percent of the tax goes to families with incomes of 
$200,000 or more.

[[Page 500]]

  Secondly, there is a host of offsets that Democrats and Republicans 
alike have supported. As the ranking member on the Budget Committee, 
Senator Conrad has long pressed for such amendments, including shutting 
down abusive tax shelters, ending a loophole for oil companies that 
lets them avoid taxes on foreign corporations, and ending the tax 
benefit for the leasing of foreign subway and sewer systems, requiring 
tax withholding on Government payments to contractors, and renewing the 
Superfund tax so polluting companies pay for cleaning up toxic waste. 
These offsets, included in this amendment, more than meet the equipment 
needs of our soldiers, and as such, the remaining revenue will go for 
reducing the deficit, another important goal and need.
  When I say ``equipment needs,'' I mean repairing, rehabilitating, and 
replacing, or what the military calls ``resetting and 
recapitalization'' of the equipment of the Army and the Marine Corps 
which is being used in Afghanistan and Iraq.
  I recently returned from my seventh trip to Iraq and my fourth trip 
to Afghanistan. I was impressed by the superb dedication and 
professionalism of our fighting men and women. However, it is clear to 
me and to many experts who study the military that our Armed Forces, 
particularly our ground forces, are suffering from the strain on 
personnel and equipment.
  An article in today's USA Today notes that the war in Iraq is taking 
the biggest toll on military equipment since the Vietnam war.
  Last week, the National Security Advisory Group, chaired by former 
Secretary William Perry, released a report about the strain and risk 
for our military. In their words:

       Given the harsh environment of Iraq and Afghanistan 
     [resetting the force] is proving more extensive and expensive 
     than in previous operations. Estimates of the cost of 
     rehabilitating Army equipment coming back from operations 
     overseas continues to grow . . . in addition, both the Army 
     and the Marine Corps expect to see increasing costs 
     associated with recapitalizing aging forces and transforming 
     their capabilities for a broader range of 21st century 
     missions.

  Gary Motsek, the Army's Deputy Director for Support Operations at the 
U.S. Materiel Command, has stated the Army has to repair or rebuild 
virtually everything that goes to Iraq. If you have been to Iraq--and I 
know many of my colleagues have--this is an intense and difficult 
environment to operate equipment; certainly intense and difficult for 
military personnel there. The temperatures in the summertime can get to 
be 120 degrees. There is sand throughout the country which is sucked up 
into the blades of helicopters, into the intakes of moving vehicles on 
the ground. The wear and tear is extensive.
  The same is true with Afghanistan. It is very difficult, in addition, 
because of the high altitudes. It is extremely difficult for our 
helicopters and our fixed-wing aircraft to operate, particularly 
helicopters. These are very demanding environments and they are taking 
their toll on equipment. We have to ensure that our military forces 
have this equipment.
  Let me further point out, we are not talking about buying a new class 
of ships or planes. We are just talking about taking those vehicles 
that have been run down because of combat operations and bringing them 
back into the shop, fixing them, repairing them, and getting them back 
to our troops. If we do not do that, then what we are going to see--
perhaps not this month or next month or this year but inevitably--is 
that our forces will be sent out with equipment which is inadequate, 
which is literally, perhaps, falling apart.
  We owe it to these soldiers, we owe it to these marines, we owe it to 
the Nation to make sure they have the best equipment, the best 
maintained equipment. That is going to cost a lot of money. The 
question here today is, very simply: How will we pay for it? Do we give 
tax breaks to the wealthiest Americans in terms of dividend 
preferences, or do we give a dividend to our soldiers and marines? And 
the dividend is equipment they can count on--reliable, well-maintained 
equipment, ready for battle. I would vote for a dividend for our 
troops, not special dividend treatment for the wealthiest Americans.
  In a briefing given to staff members of the Armed Services Committee 
this month, the Army estimated over the next 6 years it will cost 
approximately $35.6 billion to reset and recapitalize the force.
  Last November, the Marine Corps estimated it would cost $11.7 billion 
to repair and replace their equipment over the next 5 years.
  These are costs that are already incurred. We cannot avoid them. This 
is not buying new things we need or want. This is fixing what we have 
and must operate. And there is no end in sight to our operations in 
Afghanistan and Iraq. We hope that improvements in the security climate 
will allow forces to be redeployed, equipment to be redeployed. But any 
sensible observer in both countries would tell you quickly that our 
presence will be long term and the demands on our troops and equipment 
will be there not just this year but for many years in the future.
  GEN Paul Kern, who just retired as head of the Army Materiel Command, 
gave an estimate of between $60 and $100 billion to replace the Army 
equipment alone--just the Army equipment: to replace it, repair it, get 
our troops back to the condition they were before these operations 
began in Afghanistan and Iraq.
  Last October, GAO released a report on military readiness. It 
assessed the state of 30 pieces of equipment, predominantly tanks, 
vehicles, helicopters, and aircraft. It made several disturbing 
observations. It stated:

       GAO's analysis showed that reported readiness rates 
     declined between fiscal years 1999 and 2004 for most of these 
     items. The decline in readiness, which occurred more markedly 
     in fiscal years 2003 and 2004, generally resulted from 1. the 
     continued high use of equipment to support current operations 
     and 2. maintenance issues caused by the advancing ages and 
     complexity of the systems. Key equipment items--such as Army 
     and Marine Corps trucks, combat vehicles and rotary wing 
     aircraft--have been used well beyond normal peacetime use 
     during deployments in support of operations in Iraq and 
     Afghanistan.

  In sum, we are wearing this equipment out in combat operations 
overseas that are continuing today and will continue for the 
foreseeable future. This equipment is essential for our defense and for 
the protection of our military personnel. We have to do this. It is 
unavoidable. And the question, again, is very clear: Are we going to 
give a dividend to the wealthiest Americans or a dividend to our troops 
in the form of equipment they can rely upon, equipment they can use to 
defend us, equipment that will protect them, equipment that will assure 
their families they have the best, so when they bid them farewell, as 
their unit deploys, they will not have to worry that equipment will 
break down and endanger their loved ones? That is our job. To me, the 
choice is pretty clear.
  This report of the GAO goes on to say:

       Until the DOD ensures that condition issues for key 
     equipment are addressed, DOD risks a continued decline in 
     readiness trends, which could threaten its ability to 
     continue meeting mission requirements. The military services 
     have not fully identified near and long term program 
     strategies and funding plans to ensure that all of the 30 
     selected equipment items can meet defense requirements.

  This language is very disturbing. It suggests rather strongly that 
the readiness of our military forces is in question in terms of 
equipment, certainly, if we do not respond quickly. And ``respond'' 
does not simply mean borrow some more money and throw it at the 
problem. To me, it means making sure our priorities are such that we 
can afford to do this not just today but in the years ahead.
  Another GAO report states that more than 101,000 pieces of National 
Guard equipment, including trucks, radios, and night vision devices, 
have been sent to soldiers in operations overseas. This means the Guard 
does not have the equipment it needs to respond to crises here. It is 
another aspect of our deployment situation. We have shipped Guard units 
over along with their equipment. The equipment has stayed behind. The 
Guard has come back. If there is a crisis in the homeland, if there is 
a natural disaster, we are deploying Guard units without a lot of

[[Page 501]]

the equipment they had just 2 or 3 years ago, a lot of the equipment 
which is essential to their plans to respond to crises in the homeland 
and natural disasters.
  I believe this problem was exemplified during Katrina when the Guard 
stated its communications equipment had been overseas and, therefore, 
it was unable to operate effectively in the aftermath of the disaster.
  There are real costs that we have to face today, and we have to face 
it not simply by charging it to the next generation but by biting the 
bullet, asking people to make sacrifices. And, again, when the 
sacrifice is the choice between a dividend that accumulates for the 
very wealthiest Americans or a dividend for the troops, give the 
dividend to the troops.
  Mr. President, these reports are warning signs. Now, Secretary 
Rumsfeld continues to state that our troops are performing well and are 
battle hardened. He is absolutely correct. But our troops and their 
equipment cannot continue to perform well without the proper upkeep. 
Our troops need a break, and their equipment needs to be repaired and 
refurbished. I think he has to distinguish, and we all have to 
distinguish, between the individual valor and skill and patriotism of 
soldiers and marines and their units and the institutional Army and 
Marine Corps, with their need to continue to provide adequate equipment 
for all of these troops and these units.
  There is no doubt about the fighting spirit and fighting skill and 
the tenacity and the experience of these units today. But you have to 
look very clearly at the capacity of the Army and the Marine Corps to 
generate the equipment and rehabilitate the equipment and repair the 
equipment that these soldiers and marines rely upon.
  Secretary Rumsfeld says reports such as the Perry report I mentioned 
and the report by Andy Krepenevich--a former military officer who was 
actually commissioned by the Pentagon to do the report, and who looked 
at it and reached the same conclusions, essentially, as the Perry 
report--he says they were looking at old data when they found that the 
military was strained. There Secretary Rumsfeld is wrong. These reports 
were not looking back, they were looking forward. And they see danger 
ahead, and make the point very clearly that our Army is not broken, but 
the strain is increasing. And if we do not act now--responsibly now--to 
fix these problems, the future ahead is dire, indeed, for our forces in 
terms of their readiness, in terms of their equipment preparedness, and 
in terms of the strain on our personnel.
  The responsible thing to do is not simply go out and borrow $50 or 
$60 billion more and add it to our deficit, it is to make the hard 
choices here, to demand a little of the sacrifice that our soldiers and 
marines and sailors and airmen and airwomen give us every day.
  Secretary Rumsfeld says we have the finest fighting force in the 
world. I agree with that. The difference is, I want to keep it that 
way, and I want to do it honestly. I want to do it by paying for it. I 
want to do it by making sure we set the priorities right here, now, not 
simply borrowing more money, going down the road borrowing again and 
again and again because eventually--and I believe the military 
understands this--we are not going to be able to fund these operations 
and these requirements by simply having supplemental appropriations 
every year which are outside the budget.
  At some point, the effect on our economy, the effect on our fiscal 
posture is so crippling that we will have to scale back. And the people 
who will be squeezed out, then, will be the soldiers and the marines 
and the sailors and airmen and airwomen we count on today to defend and 
protect us.
  The Perry report makes the following recommendation:

       In order to restore the health of U.S. ground forces in the 
     wake of Iraq, the nation must step up and invest substantial 
     resources to reset, recapitalize, and modernize the force. . 
     . . Restoring the health of both services is not a matter of 
     simply returning them to their status quo; it is a matter of 
     ensuring that they are organized, trained, equipped and 
     restored to meet the full range of traditional and 
     nontraditional challenges in the future.

  Next year alone, in the budget and the supplemental, the Army needs 
$23 billion and the Marines need $7.5 billion for reset and 
recapitalization--again, military terms for repairing, rehabilitating, 
getting the equipment back up to operational readiness. While we have 
yet to see the President's budget, or the supplemental, it is not 
guaranteed these needs will be funded.
  In recent years, the President's budget requests and the 
supplementals have provided less funding than the military services 
have requested. Furthermore, if it is funded, this just covers this 
year's bill. These bills will continue on for many years.
  As I pointed out before, at some point economic pressures--and, 
ironically, those pressures will be more severe if the situation in 
Iraq and Afghanistan begin to resolve themselves--those pressures could 
curtail the adequate funding necessary to fully care for this equipment 
and the personnel who operate this equipment.
  It is time we asked Americans to sacrifice a little for those who do 
so much for us. As someone who commanded a company of paratroopers in a 
younger day, I can tell you, there is nothing more disconcerting to 
morale than not having good equipment to do your job. Not only does it 
endanger the soldier and the marine, it sends a much stronger signal 
about our priorities and what we care about in terms of supporting the 
military than any speech given by any politician in Washington or 
elsewhere.
  That is our responsibility today, to stand up and be counted--like 
those troops are standing up and being counted--to take care of their 
needs, and do it responsibly, not add more to the deficit, not add more 
force to choke off, eventually, the funding they need so desperately to 
do their job so well.
  More than anything else, when soldiers go out on operations, they and 
their families want to be certain they have the best equipment and that 
that equipment is well maintained. Rather than providing dividends to 
the wealthy, let's provide our troops with an equipment dividend.
  Our fighting men and women have volunteered to risk their lives every 
single day in a war zone for the rest of us. They deserve the best, and 
we owe it to them.
  I urge my colleagues to support this amendment. To me, the logic is 
compelling. The need to help is there. Let's put our actions where so 
many times our words are.
  Mr. President, I yield back the remainder of my time to the Senator 
from Montana.
  The PRESIDING OFFICER (Mr. DeMint). Who seeks time?
  The Senator from Iowa.
  Mr. HARKIN. Mr. President, once the Senate amendment is laid down, I 
intend to offer an amendment for myself and Senators Kennedy, Kohl, and 
Levin that will eliminate a very expensive pair of provisions contained 
in the 2001 tax bill, most of the benefits of which go to those 
individuals in America making over $1 million a year in income. The 
amendment I intend to offer would take that money and increase the 
benefits going to working-class families trying to cover the costs of 
daycare for their children or elder care for their parents. And the 
rest of the money would go for deficit reduction.
  The bill we will have before us, as soon as the Republican leader 
lays down the Senate amendment, will sharply increase the deficit in 
future years by as much as $70 billion. Again, most of the benefits, as 
usual, go to taxpayers making high incomes.
  Indeed, the House bill is even worse, with 40 percent of the benefits 
going to those making over $1 million per year. Forty percent of the 
benefits in the House-passed tax bill go to those individuals making 
over $1 million a year.
  Now, the chairman of the Finance Committee in the Senate discussed 
how this measure contains a 1-year extension of relief from the AMT, 
the alternative minimum tax. He correctly noted there are millions of 
people who would face a tax increase if the 1-year fix in the Senate 
bill is not passed. Well, it should be passed. But I believe it ought 
to be fully paid for.

[[Page 502]]

  Fixing the AMT problem in the long term is likely to cost about $860 
billion from 2007 to 2017--$860 billion. So it is a big problem.
  Well, why do we have this big alternative minimum tax problem that 
the chairman of the Finance Committee was talking about? In large part, 
it is because of the way the 2001 tax bill was put together and pushed 
through by the Republican majority. That measure, very much on purpose, 
doubled the number of people who would be affected by the AMT in the 
long term, while only fixing the problem for the first couple of years.
  Now, I have here a chart prepared by the Joint Tax Committee, which 
was prepared when we were considering the 2001 tax bill. People knew 
about it. What is important to note is, this chart was prepared in 2001 
by the Joint Tax Committee. We had this data before us before the 
Republican majority pushed through the 2001 tax bill. We had it before 
us. Prior to the 2001 tax bill being passed, we could see that in 2006 
the estimate was that about 8.7 million taxpayers would be affected by 
the alternative minimum tax. Going out to 2010, there would be 17.5 
million.
  They passed the 2001 tax bill. Look what the Joint Tax Committee said 
would happened if the bill became law. By 2006, the amount of taxpayers 
affected by the alternative minimum tax, an estimated 19.6 million--
over double what it would have been had we not had the 2001 tax bill 
passed. In the first years, they are all about the same amount of 
taxpayers because they included a short-term fix to the problem. It 
explodes in 2005 and 2006, and it explodes in 2007, 2008, 2009, and 
2010.
  So for the chairman to say that we have this big problem and we have 
to do something about it--well, yes, but why do we have this problem? 
We have the problem to a significant degree because of what they did in 
the 2001 tax bill. You can actually say that if we hadn't had the 2001 
tax bill, about 8.7 million taxpayers would still affected by the 
alternative minimum tax. Now, if the estimate held, it is 19.6. So you 
could say over half of those with the alternative minimum tax have it 
because of what the tax committees did in 2001 and what the Senate did 
and the House did and what the President signed into law.
  I find it of more than passing interest that people now come in and 
say: My gosh, we have this terrible problem, we have to fix it. I am 
sorry. You created a large part of the problem. By not fully addressing 
the AMT timebomb, the 2001 bill was able to encompass a range of 
additional tax cuts. These other tax cuts were designed in such a way 
that their costs would explode later on. That is why the President, in 
his State of the Union Message, said: We have to make the tax cuts 
permanent. But, it is going to explode.
  That is setting the groundwork for my amendment because my amendment 
seeks to do something about a pair of the provisions which were 
included in the 2001 tax bill that is grossly unfair. It is a provision 
in the 2001 tax bill that I defy any Senator--I ask if there is any 
Senator who has correspondence from individuals saying that they want 
these two provisions repealed. I would like to see it. These two 
provisions called PEP and Pease.
  Rather than get into the ways to describe it--it is a little 
convoluted. It has to do with deductions and how you figure deductions 
on upper income people and exemptions. That is basically it.
  What happened in 2001 in the tax bill is they said: Beginning this 
year, in 2006, we will phase out provisions of the tax laws that were 
put in in 1990. The first year to go into effect may have been either 
1990 or 1991. It was put in by President George Herbert Walker Bush. 
Why? To reduce the deficit. So we lived with these provisions from 1990 
until 2006--16 years.
  What my amendment does is three things. It stops the phaseout of 
these PEP and Pease provisions, which, as I pointed out, helps mostly 
those making over $1 million a year. And it will cost the Treasury $29 
billion between now and 2010--$29 billion that we will be collecting 
taxes from high-income people which will go into the Treasury between 
now and 2010 will not be collected. And in the decade after that, the 
cost of this phaseout is $146 billion.
  My amendment stops this phaseout. It reallocates the savings in the 
coming 5 years to reducing the deficit and a portion of the savings to 
helping child and dependent care. Again, the need for this is 
overwhelming and obvious. This fiscal year alone, in order to pay for 
the Iraq war and hurricane damages, the deficit is expected to climb 
back toward $360 billion, close to an all-time record. Yet, today on 
the Senate floor, the majority party is using reconciliation not to 
reduce the deficit, which is what reconciliation was supposed to be for 
when we passed it in the 1970s--reconciliation was in order to hold 
down the deficit. Here we have a reconciliation tax bill before us that 
doesn't reduce the deficit but increases the deficit even further by 
passing another $70 billion in tax cuts. It actually increases the 
deficit.
  This is reckless. It is unconscionable. Our first priority must be to 
use the savings from my amendment. It will reduce the deficit by more 
than $100 billion in the long term.
  My amendment also updates the child and dependent care tax credit. 
This credit is provided to working families who have children in 
daycare who need to pay for the care or who need to pay for the care of 
elderly parents. If taxpayers aren't working, they don't get the 
credit. This goes to working families. Right now, the maximum amount 
that can be taken is $3,000 for child or dependent care or up to $6,000 
for two or more. That was set some years ago. Clearly, dependent costs 
have been rising. My amendment would increase the amount of dependent 
care costs that can be taken against the tax credit to $6,000 for a 
single child or any other dependent or $10,000 for two or more.
  The amendment also increases the percentage of the credit that can be 
taken. Right now, a taxpayer with $50,000 of income gets a 20-percent 
credit. Under my amendment, that would increase to 30 percent, and 
then, as income increases, it would phase out and go down to 20 
percent. So for a person making $50,000 a year, this could increase the 
size of the tax credit from $1,200 a year to $3,000 a year. That is 
meaningful. That would help working families with their childcare or 
dependent care costs.
  The cost of improving this credit would be about $2 billion, while 
eliminating PEP and Pease would save about $23 billion through 2010. So 
the rest of that would be used for deficit reduction. But the big gains 
would occur in the long term, since the full savings are expected to be 
over $140 billion in the decade after 2010.
  Again, the repeal of these PEP and Pease provisions, which 
overwhelmingly benefit the wealthiest Americans, was included in the 
2001 tax bill. But the effective date was delayed until 2006 which took 
a far smaller share of what could be spent in the first 10 years. But 
like other provisions in the 2001 tax bill, it created a bow wave of 
debt beyond. We simply cannot afford it.
  Five years after the passage of the 2001 tax bill, the chickens are 
now coming home to roost. We now know the true cost of those 2001 tax 
cuts. They have created a string of record budget deficits, and the 
deficits are only going to get bigger in the years to come. It is time 
to restore some measure of order and sanity to the Federal budget.
  But the majority party, the Republicans, are not saying ``enough.'' 
Despite record deficits, despite a war in Iraq that has now cost us 
over $250 billion and rising, despite the unpaid bills for two 
devastating hurricanes, they are demanding more tax cuts, more tax cuts 
overwhelmingly for the wealthiest in our country. They are using this 
reconciliation process not to cut the deficit but to ram through 
another $70 billion in tax cuts rather than find offsets, increasing 
the deficit. To make matters worse, they are insisting that the PEP and 
Pease tax reductions go forward, adding another $146 billion to the 
deficit over the next decade. Why? Again, to give more tax breaks to 
those who least need it.
  According to CBO, more than half of the benefits of repealing PEP and

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Pease would go to taxpayers earning more than $1 million a year. 
Ninety-seven percent of all the benefits of repealing this tax measure 
would go to those earning more than $200,000 a year, 97 percent, half 
of it to those making over $1 million a year.
  Again, when I raised this issue several months ago and I did, and we 
had a vote on it during the so-called vote-arama last summer--the 
chairman of the Finance Committee came to the floor and said that my 
amendment, which would retain the PEP and Pease provisions which had 
been in the law since 2000, would effectively be a tax rate increase. I 
am sorry. That is not right.
  All I am saying is, don't lower the effective rates on people making 
more than $1 million and those making over $200,000 a year with these 
two provisions. That is what the law was. If the provisions were in the 
law, my amendment would keep those rates the same. What the majority 
party did in the 2001 tax bill is, they took the effective tax rates 
and further lowered them.
  So it is wrong to say that my amendment will increase rates. My 
amendment would just keep the rates the same as they have been for 15 
years. So there is no effective rate increase with my amendment. All I 
am doing is saying: Don't cut it out. Keep it in the law. I wanted to 
clear up that point.
  Let me state the obvious. The rich don't need PEP and Pease taken out 
of the law. I have not heard from any rich people in America saying: 
Oh, I have to get rid of this PEP and Pease that has been in the law. 
They hardly notice it. Yet we are just going to give them some more 
money. We are going to take money from hard-working Americans who have 
to pay their taxes, and we are going to give it to the wealthy. That is 
all they are doing by doing away with PEP and Pease. It is income 
transfer from working families to the wealthy.
  I am going to offer this amendment to keep PEP and Pease in. And to 
use the money to offset the deficit and to help pay for the increased 
cost of childcare and dependent care.
  Again, I believe that by voting for this amendment, Senators have an 
opportunity to join with the American people to say: Enough of this 
giveaway to the wealthy. Enough of putting the burden on our grandkids 
to pay these huge bills. Enough of exploding the deficit. Enough of 
going to China with hat in hand and asking them if they will just 
please buy some more of our bonds, which they are doing. That is 
another issue we have to address--the amount of our debt being 
purchased by foreign countries, especially by China.
  Now, you may say that is not a problem right now. Well, China already 
finances our debt to the tune of more than $800 billion. That gives 
them leverage in trade disputes and in diplomatic negotiations. It put 
our whole economy at the mercy of decisions made by the Chinese 
Government regarding our bonds they own, which at last look was not a 
democratically elected government, by the way. They may choose to dump 
their dollars and hurt our currency and throw us into a recession.
  We are increasing our deficits and giving more tax giveaways to the 
wealthy. I urge my colleagues to vote yes to reduce the deficit, yes 
for shared sacrifice, and yes to help working class families with their 
childcare and dependent care.
  When the Senate lays down its amendment, I will be offering this 
amendment. I assume it will be some time tomorrow. I hope to have a few 
more minutes to expound on it tomorrow.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. BAUCUS. Mr. President, I yield 10 minutes to the Senator from 
Illinois.
  Mr. OBAMA. Mr. President, I thank the Senator from Montana.
  Let me begin by congratulating Senator Harkin for his outstanding 
explanation of some of the flaws in the reconciliation bill that we are 
receiving from the House. I thank Senator Grassley and Senator Baucus 
for the fine work they are doing in trying to deal with what is 
probably the biggest ticking timebomb we have in the Tax Code, and that 
is the alternative minimum tax. It is absolutely a critical necessity 
for us to address that.
  Mr. President, I rise to speak about an amendment to the tax 
reconciliation bill that I intend to offer at the appropriate time.
  The amendment achieves two goals. First, it helps keep a promise the 
President made to rebuild the gulf coast in the wake of Hurricane 
Katrina. Second, in a $70 billion bill laden with tax cuts for the 
wealthy and well- connected, it sets aside less than 1 percent for the 
neediest in our society.
  Two weeks after Katrina made landfall, President Bush stood in the 
ruins of New Orleans and vowed to ``do what it takes'' to help the 
region recover. He also acknowledged the terrifying images of abject 
poverty that struck Americans on their TV screens and said, ``We have a 
duty to confront this poverty with bold action.'' Five months later, 
the President's timid actions have not matched his bold rhetoric. He 
has not lived up to his promises.
  My amendment uses a cost-effective and proven tool in our tax code--
the child tax credit--to extend aid to 1ow-income working families 
affected by Hurricane Katrina.
  Enacted in 1997, the child credit allows families with qualifying 
children to receive a credit of $1,000 per child against their Federal 
income tax. Unfortunately, the credit is skewed so that many families 
who need it the most can't get it.
  Under current law, families that earn less than $11,000 get no 
benefit from the refundable child credit. That means that a child is 
left out of the credit even if her parent works full time at minimum 
wage, which has not increased since 1997. And the child doesn't get the 
full benefit of the $1,000 credit until her parent earns close to 
$18,000, or even more if the child has siblings.
  What's worse, if her parents' incomes stagnate, are disrupted for any 
reason, or the economy stalls and work hours or wages are reduced, the 
value of the credit drops or even disappears. Under current law, almost 
17 million children get less than the full credit.
  We all know what happened to the families on the gulf coast due to 
Hurricane Katrina, and it will be a long time before these families can 
rebuild their lives. Many of the families in the affected States were 
evacuated to other areas, and many of them cannot even afford to go 
back. And the Federal response so far has been inadequate to get these 
families effectively back on their feet.
  We need to do better. At a time when we are debating $70 billion of 
tax breaks, many of which will benefit those who need the least help, 
it is critical that we remember the worst off and the most vulnerable 
members of our society.
  When I went to Houston after the hurricane, I met an evacuee from New 
Orleans who said to me: ``we had nothing before the hurricane, and now 
we've got less than nothing.'' Life was hard for many families even 
before Katrina hit. In Louisiana, Mississippi, and Alabama, for 
example, more than 900,000 children under 17 years of age were so poor 
that they got no child tax credit or only a partial credit. These 
States had among the highest rates of children too poor to get the full 
credit. In fact, more than one-third of the children in Mississippi and 
Louisiana didn't get the full benefit of the child tax credit. That is 
what our measure is designed to do.
  This amendment, at a cost of less than 1 percent of the overall tax 
reconciliation bill, will provide necessary assistance to many of these 
families. The amendment eliminates the income threshold that excluded 
all children in families with less than $11,000 of income.
  My amendment sends a simple message: If you work, your kids get a 
benefit. It provides a partial credit starting with the first dollar of 
a parent's income for families who lived in the areas affected by 
Hurricane Katrina.
  The amendment is simple. It says that the children of low-income 
working parents affected by Hurricane

[[Page 504]]

Katrina will no longer be denied the child credit. You work, your kids 
get a benefit. If you don't work, no benefit. And if you want the full 
benefit, you have to earn at least $10,000, which is just about the 
income of a full time job at minimum wage.
  That's a commonsense way to support families with children, 
especially families that have experienced the huge cost--psychological 
and financial--of a natural disaster.
  My amendment is also narrowly tailored and fiscally responsible. It 
is aimed at families affected by the hurricanes, and it provides short-
term support, expiring in 2008.
  With this amendment, hundreds of thousands of this country's most 
disadvantaged children will see an increase in their credit. Katrina 
offered us a window into America's poverty. Let's not let that window 
close without doing something to provide a chance for America's 
children to rebuild their lives with dignity, hope, and opportunity. 
That is what this country is about. I hope that is what this Chamber is 
about.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. BAUCUS. Mr. President, I yield 15 minutes to the Senator from 
Connecticut.
  The PRESIDING OFFICER. The Senator from Connecticut is recognized.
  Mr. DODD. Mr. President, I thank my colleague from Montana.
  I begin by once again expressing my appreciation to both he and my 
good friend from Iowa, the chairman of the Finance Committee, and their 
staffs. They do tremendous work and we are all grateful to them and the 
members of their staffs for pulling together important pieces of 
legislation such as this one. It is not an easy job. It is one of the 
most important, if not the most important, committees of the Senate. 
They do a remarkable job and I personally thank them for a tremendous 
job. I know we don't make their lives any easier when we, who are not 
on the committee, offer different amendments and ideas, but we have 
ideas we would like to suggest as well.
  Let me mention, if I can--I will state the obvious--that we are a 
nation at war. It has been said over and over again by others, but 
maybe not often enough. We enjoy a relative calm and comfort in 
Washington these days, but as we speak, we know that there are the 
young men and women of our armed services who are in harm's way in 
Afghanistan and Iraq. These soldiers, sailors, airmen, and marines are 
bravely defending our freedom on battlefields overseas, and keeping 
America safe and secure at home. The President, last evening, in the 
State of the Union Address spoke to this issue, and the thunderous 
response from Democrats and Republicans in the joint session of 
Congress, I think, evidenced the strong support we all feel for these 
brave men and women who wear the uniform of the United States both on 
troubled battlefields as well as elsewhere around the globe. They 
deserve our unending support and admiration for their work.
  We all know that over 2,200 men and women in uniform have been killed 
in Iraq, and over 16,000 have been severely wounded. The U.S. 
Government should have few higher priorities than taking care of our 
military veterans who have served in harm's way to defend our freedom.
  Sadly, however, the Bush administration in recent years has had other 
priorities, it would seem. Throughout the last 5 years, the 
administration failed, in my view, to meet its commitments to our 
troops and their families, despite the rhetoric coming from the White 
House. In fact, just days ago we learned the Pentagon has now only 
started to address the inexcusable and shocking shortfalls in troop 
protection. Three years into the Iraq war and more than 4 years after 
the start of the conflict in Afghanistan, the Pentagon has just now 
decided to order more than 200,000 additional sets of body armor. 
Sadly, it may take another year before all of this equipment reaches 
our soldiers and marines deployed in harm's way.
  The administration's failures have not ended there. When our troops 
have come home, the Government's efforts to meet their needs also has 
fallen short. In fact, last year, despite adamant denials by the 
administration, we now know as a matter of fact that the President's 
2006 budget fell over $1 billion short of meeting veterans' health care 
needs. Although our colleagues such as Dan Akaka of Hawaii and Patty 
Murray of Washington, had said so from the very outset last year on 
this floor and warned about what was being done, Congress had to step 
up as late as June to restore funding in an emergency supplemental.
  Such an occurrence, in my view, is unconscionable--that the White 
House's Office of Management and Budget seemed to treat America's 
veterans and their health care needs as almost an afterthought. I fear 
the administration is poised to repeat that mistake in 2007 as well.
  Indeed, we already know that our Federal resources are straining to 
meet veterans' needs, particularly the needs of military personnel just 
returning from Iraq and Afghanistan.
  According to the Department of Defense, 120,000 servicemembers, or 28 
percent of military veterans returning from Central Asia, are being 
treated in the VA system. But for some reason, the administration 
refuses to incorporate those very figures into its development of the 
VA budget.
  Other medical facilities treating America's brave men and women are 
straining as well--military hospitals, such as Walter Reed, put on the 
base closure list by the administration; State veterans facilities 
funded by State budgets already stretched far too thin, such as my own 
State of Connecticut's State Veterans medical and residential 
facilities at Rocky Hill; and private health facilities that help 
veterans throughout the country.
  It has been noted recently in the press that a rehabilitation center 
for amputees and other wounded soldiers is being built near the Brooke 
Army Medical Center. This critical facility, to be established at Fort 
Sam Houston, will be the nation's premier facility for treating troops 
who have lost limbs, suffered severe burns, blindness, and head 
injuries on the battlefields of Iraq and Afghanistan.
  But as the San Antonio Express-News recently asked on its front page: 
Why isn't the Federal Government paying for any of it? In fact, 
although eventually this facility will be handed over to VA and Army 
personnel to administer, its construction is being fully financed with 
donations of private citizens.
  I admire those making these contributions to support this facility 
for our heroes, but the idea that the Federal Government would not be 
taking better care of our veterans, I think, is an outrage. But 
apparently, the Bush administration believes that our military veterans 
should have to rely on the charity of private citizens to provide the 
resources for their critical care--because to the White House, tax 
breaks for millionaires seems to be a far bigger priority.
  Such logic simply makes no sense. It is our Federal Government's 
responsibility to meet its obligations to our combat veterans.
  I mentioned the other night that I had a knee replacement operation a 
few weeks ago. I go downstairs in this very building and I get 
rehabilitation. We have a wonderful facility where I can spend an hour 
each day and get rehabilitation. I am happy to do that.
  Explain to this Senator why it takes private donations to provide 
facilities for rehabilitation for veterans coming back from Iraq or 
Afghanistan who lost a leg, is blind, or has suffered burns or other 
serious injuries? There is something wrong with a situation when 
Members of Congress can get taken care of, but our veterans do not.
  The amendment I will be offering tomorrow will provide critical 
resources to facilities such as the Center for the Intrepid in Texas 
which, due to current shortfalls in the federal government, is being 
constructed using exclusively private funds.
  Again, I respect immensely those making the private donations, but we 
have to do better on behalf of our veterans than we are doing. It is 
unconscionable that we now have to rely on

[[Page 505]]

the charity of citizens to establish important rehabilitation centers 
for our military veterans.
  We already know that our Federal resources are being stretched thin 
as a result of this administration's policies. The package of budget 
reconciliation legislation this body has considered over the previous 
few months presents us with a clear choice in philosophies: Do we 
invest in the priorities that will meet our commitments to America's 
brave men and women who have sacrificed on the battlefield for our 
country, or do we continue to prolong a primitive agenda that has 
failed to address the major challenges of our era?
  We heard the President at least begin to say the right things in his 
State of the Union Message last evening to support our troops, and I 
thank him for that, but it is not enough just to talk about these 
issues; we need to do far more. We need to start matching our words 
with our policies. Rather than put Federal resources toward important 
facilities, including the ones I have mentioned, the President has 
decided to reward the wealthiest of our fellow citizens with these tax 
cuts.
  One could argue that no Presidential administration in history has 
been as generous toward the ultra-affluent as this administration has. 
Under the tax breaks of 2001 and 2003 alone, individuals with incomes 
greater than $1 million a year, who represent two-tenths of 1 percent 
of the population, have received more than $125 billion in tax-cut 
benefits. Meanwhile, our soldiers and veterans are being told to go 
without essential items and rely on private donations to take care of 
them with items such as body armor and the health care they need and 
deserve.
  If we cancel the final 2 years of the capital gains and dividend tax 
breaks for two-tenths of 1 percent--two-tenths of 1 percent, Mr. 
President--of individuals with incomes greater than $1 million--only 
two-tenths of 1 percent--then we can save approximately $28 billion, 
while still preserving reduced rates for 99.8 percent of all the other 
Americans.
  My amendment would make this change, and with the $28 billion saved 
over the next 2 years, funds would be distributed to health facilities 
that treat military personnel and veterans. These facilities would 
include, as I mentioned, Federal military hospitals, VA hospitals and 
clinics, State and other institutions that treat military veterans 
throughout our Nation. We owe it to America's men and women in uniform.
  This is not hyperbole. These are the facts. It is tragic, in this day 
and age, that we can't do a better job of servicing these brave 
individuals. So at an appropriate time tomorrow, I will offer this 
amendment which will do what I have been talking about.
  Again, I thank my colleague from Montana and my colleague from Iowa 
for their gracious leadership on this bill.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I yield 10 minutes to the Senator from 
Illinois.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I thank the ranking member of the 
committee, Senator Baucus of Montana, for yielding a few minutes to me.
  We are in the process of considering an important tax bill, the 
reconciliation bill. The chairman of the Finance Committee, the Senator 
from Iowa, is on the floor now. I am about to offer an amendment which 
I have offered before. Senator Grassley is aware of this amendment. I 
am hoping this time to win his support for the amendment. Let me tell 
my colleagues very briefly what amendment No. 2701 will do. I know the 
time will come when we can make a specific offer of these amendments.
  We have choices to make on the floor of the Senate just as families 
across America have choices to make every day. We have to take a 
limited amount of Federal revenue and decide who will receive it. In 
this case, we are talking about who will receive a tax break. The tax 
break is rather substantial for the wealthiest people in America. We 
can't quite put our finger on how many may benefit from this tax break 
that will give them added benefits if you claim capital gains or 
dividends as income, but we know that the amount is substantial. In 
fact, the estimates I have suggest that over a 2-year period of time, 
the extension on capital gains would cost some $20 billion. That is the 
reality.
  So we have to decide whether giving a capital gains tax break to the 
wealthiest people in America is the best expenditure of America's 
resources. The only way to make that choice is to take into 
consideration what else we might do with that money. My amendment No. 
2701 makes a specific suggestion, and here is the reasoning.
  There are 9.1 million children in America without health insurance. 
Not having health insurance has its consequences for these children. 
According to the Center for Studying Health System Change, uninsured 
children, when compared to privately insured children, were 3\1/2\ 
times more likely to have gone without needed medical, dental or health 
care; uninsured kids are four times more likely to have delayed seeking 
medical care; five times more likely to go without needed prescription 
drugs; 6\1/2\ times less likely to have a usual source of care.
  Let me give a hard number. From the year 2003, 6 million children in 
America went without needed health care. The President last night 
challenged us and America to do something about health care in America. 
The amendment which I am offering does something directly.
  While Congress has failed to address the overall problem of health 
care coverage, we should, at the very least, take steps to extend the 
coverage of health insurance to our children to make health insurance 
accessible, affordable, and quality health insurance coverage.
  Kids are the least expensive people to insure. The average cost to 
cover a child under the SCHIP program is $93.25 a month. So the total 
cost to the Federal Government to cover all 9.1 million children in 
America under SCHIP would be about $7 billion a year.
  Remember that figure I mentioned earlier. The capital gains tax break 
going to the wealthiest people, primarily to the wealthiest people in 
America, is going to cost us, over a 2-year period of time, $20 
billion. We could cover all the kids in America for 2 years for the 
cost of the capital gains and dividend tax cuts and still have money 
left over for deficit reduction.
  My amendment will make it possible for all States to do what my home 
State of Illinois is already setting out to achieve: Make sure every 
child in my State has health insurance.
  I salute my Governor, Rod Blagojevich, who has engineered this 
approach. If Illinois achieves it--and I believe we can under his 
leadership--we will set a standard for the Nation. It will be 
inexcusable for States and for our Nation not to insure all the 
children.
  If you are going to extend health insurance across America, wouldn't 
you start with our kids?
  My amendment would provide grants to States, safety-net providers, 
schools, and other community and nonprofit organizations to facilitate 
the enrollment of 6.8 million children currently eligible for SCHIP but 
not enrolled.
  It will make all uninsured children in America eligible for the SCHIP 
program.
  It will establish a grant program under which a State may apply for a 
waiver to expand coverage of children in their State.
  It will encourage States to cover all insured children by providing 
them with an enhanced matching rate under SCHIP if they submit a plan 
to cover all children.
  The majority of the benefits of the capital gains and dividend tax 
cuts go to households with incomes over $1 million a year.
  Think about that. Do we want to provide a tax cut for families and 
households making over $1 million a year or do we want to provide 
health insurance for 9 million uninsured children in America? That is 
our choice. It is a choice on which we can vote.
  With amendment No. 2701, Members of the Senate can make that choice. 
So

[[Page 506]]

like families in America, we will decide our priorities. A family has 
to decide whether it is going to buy a big car or a small car, an 
expensive vacation or a modest one. We have to decide whether 
households making over $1 million a year are a higher priority than 9 
million uninsured children. We have to decide whether giving those 
households more money to put into their savings account, the 
opportunity to perhaps buy another home or another car or a boat or 
some luxury item is more important than basic health care for children.
  I think it is a pretty simple choice, and I hope that my colleagues 
on both sides of the aisle will remember what the President told us 
last night: Health care is a priority for America. If it is a priority, 
with amendment No. 2701, we will be able to move this country closer to 
the goal of full insurance. Out of 46 million uninsured Americans, we 
can make sure that the 9 million most vulnerable children are covered.
  I think this amendment speaks to the priorities Americans want us to 
address. There is no special interest group standing outside the door 
begging for health insurance for children. There are plenty all around 
Washington begging for tax breaks for millionaires. To whom are we 
going to listen? The special interest groups for the millionaires or 
the children of families across America who need health insurance?
  We should make giving kids a healthy start in life a priority over 
giving millionaires the high life.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I hope every taxpayer in this country 
knows that what they heard was a philosophy that every dollar you make 
belongs to the Government, and we are going to let you keep a little 
bit of it.
  We kept hearing about tax cuts costing us, tax cuts costing us. If we 
give you a tax cut, it is costing us in Government, and we can't do as 
much for you as if we tax you more.
  So there is a basic philosophy behind this legislation whether we 
ought to let tax cuts stay in the pockets of Americans and let them 
spend it and do the economic good and let the marketplace decide how 
the goods and services in this country be divided or whether we ought 
to tax at a higher rate and bring it to Washington and let a few 
politicians make a decision on how to spend it.
  I opt for trusting the American people with how they spend their 
money and the growth that comes from the investment that creates jobs 
that causes our economy to expand.
  I will have more to say about some of the other speakers who have 
been in opposition to this bill as soon as the Senator from New 
Hampshire concludes. I wanted to make that point before my good friend 
got out of here because a lot of times he never gets a chance to hear 
what I say, and I wanted to make sure he heard it.
  I yield whatever time he might consume to the Senator from New 
Hampshire.
  Mr. GREGG. Mr. President, I thank the Senator from Iowa. I associate 
myself with the Senator's comments. I agree, as I think most Americans 
do if they apply common sense, and this is a little Midwestern common 
sense we are getting from the Senator from Iowa, as we always do, which 
is that the Government doesn't own this money. This money doesn't 
belong in Washington. This money belongs in the pockets of the 
taxpayers who earned it. And, yes, taxes must be paid, but they must be 
paid at a reasonable rate, a rate which allows people to continue with 
their lives, to make the investments to start a small business or to 
send a child to college or to buy a home or purchase a car.
  You cannot tax people simply because somebody in Washington has a 
good idea and they want to pay for it and they figure, Let's go out and 
take it from the people working for a living and bring it to Washington 
and spend it.
  It reflects a certain elitism and arrogance to take that position, in 
my opinion, basically saying to average Americans that those of us sent 
to Washington--and this great bureaucracy grown up in Washington--know 
more about how to manage your life than you do as working Americans. If 
you turn your money over to us, we will do a better job of managing 
that money than you can do. I don't agree with that. I think the 
Senator from Iowa made that point, an appropriate point.
  The point I want to reinforce is that the Senator from Iowa, as 
always, has done yeoman's labor to bring forward a very strong bill to 
extend tax cuts or tax proposals which benefit working Americans. The 
irony of this is that it is being attacked from the other side of the 
aisle with enthusiasm on the basis, essentially, as the Senator from 
Iowa has pointed out, that tax cuts and extending tax cuts is a bad 
idea; that this money should stay in Washington. But, also, the irony 
of this is most of the items within this bill are actually supported 
from the other side of the aisle, or will receive significant votes 
from the other side of the aisle if they are taken up separately. These 
are items like the alternative minimum tax patch, items like extending 
the R&D tax credit, items like the deduction for teachers who spend 
money for their classrooms so they can bring crayons or whatever they 
want into their classrooms. Those are items which have general support 
around here. If you add them all up they make up the vast majority of 
this tax package.
  Yet if you were to listen to the generalities of the language from 
the other side of the aisle, you would think this proposal to extend 
these tax cuts was an outrage, that we were somehow taking money out of 
Washington and transferring it to rich people across the country. That 
is not true at all. It is not true at all. These tax cuts, in fact, 
basically have the impact of giving working Americans the opportunity 
to take advantage of the dollars they earn and not have them taken by 
the Federal Government.
  I think equally important is the issue of the one item of tax policy 
which does not happen to be in the Senate bill but which is in the 
House bill, which is the extension of the capital gains and dividends 
rates, where we do get this debate or this argument that this is a tax 
which basically benefits wealthy Americans. To begin with, the 
practical effect of these proposals, the reduction in capital gains 
rates--or the maintenance of the capital gains rate at 15 percent and 
the maintenance of the dividend rate at 15 percent basically benefits 
the Government because the effect of those two tax rates is that it 
generates significant economic activity which results in more taxes 
coming into the Federal Treasury.
  You do not have to believe me on this. Just look at the numbers. The 
numbers are hard, they are real, and they are there. Prior to the 
capital gains rate going into place, the Joint Tax Committee estimated 
that there would be $45 billion raised from capital gains in 2003. But 
after the cut, it turns out there is $50 billion. That is a $5 billion 
change.
  Then in 2004 it was estimated there would be $44 billion with the 
capital gains rate at 15 percent. After the change in rates, the 
Federal Government got $60 billion. In 2005 it was estimated that with 
higher rates there would only be $49 billion coming in through capital 
gains taxes. It turns out with the lower rates the Federal Government 
got $75 billion.
  As a result of lowering the capital gains rate, the Federal 
Government received $47 billion we didn't expect to get. Those are 
Joint Tax numbers. Those are hard numbers. Those are real numbers--$47 
billion. Why is that? It is very simple. It is called human nature, and 
human nature drives what revenues are here at the Federal Government. 
If you are going to have a high tax on someone when they sell their 
home or when they sell their business or when they sell some sort of 
the stock that they may have purchased a long time ago and it has 
appreciated in value, the odds are that person may make a decision: I 
don't want to pay all those taxes upon making that sale, so I am just 
going to hold on to that asset. As a result, they hold on to the asset 
and the Federal Government does not get it. There is no sale, no 
capital

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gains tax as a result of that, and the Federal Government doesn't get 
any income from that event.
  But when you lower that tax rate, as we did under the President's 
suggestion, a person says: Now I can adjust to this. I can make this 
sale and I can live with this tax rate and then I am going to take the 
profits from that sale and I am going to reinvest them. That creates 
two events that are very positive for the Federal Government and for 
taxpayers generally. No. 1, it is a taxable event so that money comes 
in. As we have seen, $60 billion came in that was not there before, or 
we did not expect it before because the people were making that 
activist decision now that the tax rates were lower.
  No. 2, what was money which was locked up in maybe a nonproductive 
economic activity is moved. By human nature it is going to be moved 
into something that is more productive, and that is going to generate 
more economic activity. Maybe somebody is going to start a small 
business or something with those extra dollars they now have, and that 
is going to create jobs. It is just basic economics that when you 
reinvest money like that you have the money go to a much more efficient 
use, which produces a more productive, more efficient economy, and 
therefore more jobs. So you get more tax revenues and you get more jobs 
out of a lower rate. This has been proven time and time again. It was 
proven by the Kennedy tax cuts. That was President John Kennedy. It was 
proven by the Reagan tax cuts, and now it has been proven by the Bush 
reduction in capital gains and dividends rates.
  Reducing those rates creates more economic incentive for people to be 
productive, and it actually generates more economic activity which is 
taxable and therefore generates more income to the Federal Treasury, 
and as a result $47 billion of income came in that we would not 
otherwise have had.
  I misstated, I said $60 billion before. It was $47 billion during 
that 3-year period we would not have gotten before--$47 billion more 
than was anticipated.
  Last year, as a result of this economic activity that was created by 
this engine of productivity which was generated by having lower tax 
rates, we saw the biggest jump in revenues, I think, or the second 
biggest jump in our history. We picked up literally tens of billions of 
dollars of income as a Federal Government that we did not expect to 
get. That helped reduce the deficit, and it also helped us carry on the 
business of the Federal Government, specifically the need to fight 
terrorism, invest in health care, invest in education.
  These tax cuts have been extraordinarily positive, and the extension 
of these rates is critical to maintaining that economic activity. But 
to get back to one point here, which is this: this package of proposals 
coming out of the Senate has very broad support in this body, and it is 
a good package in general. However, there is a single item that I 
happen to take reservation with, and that is the deductibility of State 
and local sales taxes.
  Why do I have concerns about that? It is not the biggest item in the 
package. The R&D tax is bigger, and obviously the AMT patch is bigger, 
but the deductibility of State and local taxes creates an atmosphere 
where we give to high tax States an incentive to increase their taxes 
because we allow the people in those States to deduct the taxes as 
those taxes are increased. So you are basically transferring taxing 
room, if you will, available assets that may be taxed from the State 
governments to the Federal Government, which allows those States which 
pursued a high tax policy to benefit and creates, actually, an 
incentive in those States to increase those taxes.
  I don't happen to be a big supporter of the deductibility of State 
and local taxes, but I suspect the majority of the other side is, even 
though they are railing against this bill. My view is a State such as 
New Hampshire, which doesn't have a sales or income tax and takes a 
very frugal approach to government, should not be penalized for that at 
the Federal level by turning a deduction over to other States, thus 
reducing Federal revenues, which encourages high-tax States--such as 
New York, Connecticut, Illinois, New Jersey, California--to basically 
raise their taxes.
  This comes to the irony of this bill. Even though it is being 
attacked profusely and aggressively by the other side, it turns out 
probably the majority of the Senators on the other side support 
deductibility of State and local taxes, sales taxes. As a matter of 
fact, all those high-tax States I have listed have only Democratic 
Members of the Senate. This bill benefits them. I would like to take a 
test and offer an amendment to strike that language from this bill and 
see whether there was strong bipartisan support for that type of 
language. My own view is from a tax policy standpoint it makes little 
sense to have it in here.
  In a general sense, what we are dealing with here is the economics of 
what happens when you give people the chance to keep more of their 
money. The simple fact is, what happens is that when you give people a 
chance to keep more of their money, they are more productive and they 
have a bigger incentive to go out and work and therefore they create 
more economic activity which in turn creates more taxable events which 
in turn creates more revenue for the Federal Government.
  We should continue tax proposals which do expand and energize the 
creativity of the economic entrepreneur. A key element of that is to do 
the capital gains and dividend extension. If we fail to do that, in my 
opinion, we are going to have a fairly significant negative effect on 
revenues coming into the Federal Government, and instead of having $47 
billion revenues coming in as a result of a lower capital gains tax 
rate, we will probably see we actually go back to the original Joint 
Tax proposals or estimates, and we will lose revenue. So it is not a 
revenue gainer to our Government to overtax people.
  Although I said it in a convoluted way, it is just a summary or 
restatement of what the Senator from Iowa said in a very down-to-earth 
and commonsense way. Therefore, I congratulate the Senator from Iowa. I 
appreciate his bringing this bill forward and look forward to working 
for its passage.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I appreciate hearing from all my 
colleagues, both Republicans and Democrats, about everything that is 
wrong with the AMT because there is a lot wrong with the AMT. But I 
take great pleasure in trying to remind, particularly my Democrat 
colleagues, that a Republican-controlled Senate and House in 1998 
completely repealed the alternative minimum tax. They completely 
repealed it, sent it to President Clinton, and he vetoed it. So I don't 
want anybody telling me how bad the alternative minimum tax is and that 
something ought to be done so that middle-income Americans, who were 
never intended to pay the tax, don't get caught paying it.
  Besides the repeal that we proposed in 1998, I can also point to a 
lot of tax bills since then where we have done what we call hold-
harmless so no more people are hit by the alternative minimum tax 
because of tax changes that you make in any tax bill which indirectly, 
then, affects who might pay the alternative minimum tax.
  So I specifically want to take issue with the remarks of my colleague 
from Iowa, Senator Harkin. It was suggested the tax cuts have 
contributed to this AMT problem. That demonstrates a complete 
misunderstanding of what we have done in several tax bills, going back 
to the year 2001, or it at least doesn't give us credit for proposing 
repeal of the AMT in 1998.
  It is true that we are required to act to extend the hold-harmless 
provision as the Senate has done in Senate-passed reconciliation bills 
and in the years going forward--the bill we are on now and in the bills 
going forward. But that is the point of the hold-harmless. Of course, 
it is critically important that we included AMT relief in our bill. 
Moreover, it has been the subject of public debate, as all my 
colleagues likely know. But we take issue with

[[Page 508]]

analyses that suggest that tax cuts are the source of enhancing the AMT 
problem. Quite to the contrary, the fact is that failure to index the 
alternative minimum tax for inflation for the last 35 years is the key 
source of the problem.
  I don't know why folks cannot own up to that fact and recognize that 
at a minimum we are going to have to index the alternative minimum tax 
going forward, if it is meant to serve its original purpose of hitting 
just very high-income people who avoid paying any income tax through 
use of legal loopholes and not hit middle-income Americans.
  Again, for the understanding of my colleague from Iowa who spoke on 
this point--but other people have spoken on it as well, mostly from the 
other side of the aisle--in 2001 and 2003, in those tax bills, we made 
sure that the alternative minimum tax would not impact any more 
taxpayers as a result of the tax reductions of those bills.
  So it is entirely wrong to say that tax cuts bring about the AMT 
problem or that we don't care about that problem or that we didn't do 
anything about that problem because we did in each of those tax bills.
  We have to continue to uphold the promise that we made that we were 
not going to tax any more people with the alternative minimum tax.
  This is a very important part of this reconciliation bill that we 
passed back in November that we are now making a rerun of this year.
  This bill includes $30 billion of alternative minimum tax relief to 
ensure that Senator Harkin's argument is, in fact, untrue, and it is 
also untrue as far as the 2001 tax bill and the 2003 tax bill is 
concerned.
  I wish to give some figures so people know what this is. It is not 
just in the State of New Jersey, as we heard from the junior Senator 
from New Jersey. It is not just a problem in Illinois, where we heard 
from the junior Senator from Illinois. It is not just a problem in 
Massachusetts, as we heard from the Senator from Massachusetts. The 
alternative minimum tax problem is a problem in Iowa as well.
  Another point that my colleague brought up--I don't think anybody 
else has talked about the arcane issues of what we call PEPS and Pease. 
I don't want to say those things without explaining what they are. They 
were put in, I think, in the 1990 tax bill because nobody wanted to go 
over the 40-percent marginal tax rate. Yet they wanted to raise more 
money and have a higher marginal tax rate on a little higher income 
people.
  What was done in that tax bill to camouflage a higher marginal tax 
rate was to leave the marginal tax rate at 39.6 percent, but for 
certain people above--for certain people of higher income--then phase 
out a lot of the exemptions that every other taxpayer can use and 
effectively raise the marginal tax rate--I do not know for sure, around 
42 percent--maybe people who were involved in subchapter S 
corporations, maybe even a marginal tax rate around 45 or 46 percent. I 
am not sure exactly what those percentages were.
  But the idea was the terms ``PEPS'' and ``Pease'' were put into the 
Tax Code to camouflage higher marginal tax rates by making it look like 
nobody ever paid a tax rate above 39.6; whereas, the fact was a lot of 
taxpayers got hit at a marginal tax rate above 40 percent--in some 
cases quite a bit above 40 percent.
  I am very troubled by the comments of my colleague regarding PEPS and 
Pease because they are hidden in the marginal tax increase that affects 
millions of Americans, including thousands of Iowans. We have 32,906 
Iowans that are hit by the Pease part of the Tax Code on their returns. 
And we have 14,000--almost 15,000--Iowans that are hit by what we call 
the PEPS part of the Tax Code on their returns.
  If somebody tells me that these are tax cuts for the millionaires, 
let me tell you, I know that we don't have 32,900-plus, or 14,900 
millionaires in my State of Iowa.
  So we are talking about camouflaging the Tax Code to raise the 
marginal tax rate on a lot of middle-income Americans.
  That was done in the 1990 tax bill. Starting this year, under the 
2001 tax bill, these are gradually going to be phased out.
  I think it is truth in taxing, truth in packaging, that if you have a 
marginal tax rate of 35 percent, it ought to be a marginal tax rate of 
35 percent. And you shouldn't remove a lot of exemptions from a certain 
number of people to raise it up to 40 or more percent. If you want to 
tax people that high rate of taxation, you ought to have the guts to do 
it.
  We took those camouflage things out of the Tax Code because we wanted 
a marginal tax rate of 35 percent which was transparent, with no hidden 
additional taxes.
  Now it is said that we are trying to benefit millionaires through 
this, when 33,000 and 15,000 people--that would be 48,000 people in my 
State--are being hit by those taxes.
  To listen to my colleagues, you would think that PEPS and Pease was 
paid only by millionaires. Nothing could be further from the truth. 
PEPS and Pease hit millions of families, two-income families that are 
struggling to pay their mortgage, as most Americans do, struggling to 
send their children to college, as most families do, or people who want 
to contribute to their churches and charities, as most middle-income 
Americans do.
  In fact, the families hit by PEPS and Pease are very often the same 
families hurt by the AMT that my colleague was expressing so much 
concern about.
  PEPS and Pease is bad tax law. It is dishonest tax law. It 
complicates the Tax Code. It hurts families and discourages charitable 
giving. It is bad tax law that needs to be shown the door.
  We did that in the 2001 tax bill, truth in taxing, and somebody is 
finding fault with it. It isn't a millionaire tax. Keeping PEPS and 
Pease is a ``Full Employment for Accountants Act'' because of that 
complicated Tax Code, and the people who have to deal with it are going 
to hire more accountants to accomplish the goal that we have.
  We have heard from many Senators today, singing the old song that the 
problem of the deficit before us, the budget deficit, is because we cut 
taxes. The tax cuts that have brought about our economic growth and 
created millions of jobs is good policy. I don't expect anybody to 
accept Senator Grassley, the Senator from Iowa, making that statement. 
There is no one with better credibility on economic and tax policies 
than Chairman Greenspan. And he has made it very clear that the 12 
quarters of economic growth that we have had, creating 4.6 million new 
jobs, and a higher rate of growth than we had even during the 1990s--
and most of my Democrat colleagues would think the 1990s was the best 
economy you could ever have. But in fact, the economic growth of the 
last 12 quarters is higher than the average growth we had during the 
previous administration. Chairman Greenspan said that the tax cuts are 
responsible for this growth.
  To get back to the reality of deficits, it is caused by record 
spending. It is done by Republican Congresses or Democratic Congresses, 
whether we have a Democratic President or a Republican President. 
Spending beyond our means has caused our budget deficit problem.
  Because of the tax cuts, revenues are way up--record highs projected.
  Chairman Greenspan gives Congress credit for the tax cuts of 2003 
bringing about the best economic growth we have ever had and which has 
resulted in $270 billion more coming into the Federal Treasury from 
income taxes in 2005 than we had in 2004; in fact, so much beyond 
projection that we had $70 billion more coming in throughout 2005 than 
we even thought we would have coming January 1, 2005.
  The answer is not to raise taxes and hurt our economy. The answer is 
to do something on the spending side of the ledger.
  We can say, after the vote in the House of Representatives this very 
day by a 2-vote margin, they passed our budget reconciliation bill, 
saving $39.6 billion over the next 5 years that Congress would have 
otherwise spent if we had not passed that measure. We didn't get any 
help from the other side of the

[[Page 509]]

aisle on getting this budget reconciliation through.
  That came from the fiscal responsibility of people on this side of 
the aisle.
  Whether it is tax cuts, spending cuts, tax increases, whatever the 
issue might be, if you listen to your people in town meetings--and I 
only have the opportunity to listen to Iowans in my town meetings 
because I don't represent anyplace else in the country--I know I don't 
have people coming to me and saying: I am undertaxed, tax me more. But 
I surely have people come to my town meetings and saying: You guys are 
responsible for your spending there in Washington, DC. Get your 
spending down.
  I yield the floor. 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. FRIST. Mr. President, I ask unanimous consent that the order for 
quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, so ordered.

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