Ending the Double Standard for Stock Options Act

Mr. President, I am introducing today on behalf of myself and Sen. McCain two separate bills relating to stock options. Stock options are unfinished business from the last Congress. They are the 800-pound gorilla that has yet to be caged by corporate reform.

Stock options allow a company's employees, usually its top executives, to purchase company stock at a set price for a specified period of time, perhaps 10 years. If the stock price rises after the option is issued, the executive can exercise the option, buy the stock at the set price, and then sell it on the open market at a profit. Today, most CEOs of U.S. publicly traded companies receive a large percentage of their pay from stock options.

Despite their widespread use, stock options remain a stealth form of compensation because, under current accounting rules, they never have to appear on the company books as a compensation expense. In fact, they are the only form of compensation that companies do not have to book as an expense at any time. In addition, stock options are the only form of compensation that a company can claim as a deductible business expense on its tax return, even when no expense is ever recorded on the company books.

These stock option accounting and tax rules are inconsistent and illogical. The two bills we are introducing today, the Stock Option Accounting Review Act, and the Ending the Double Standard for Stock Options Act, were introduced in the last Congress to address this problem. Each bill tackles a different aspect of the stock option issue. One addresses stock option accounting; the other addresses the stock option tax deduction.

Last year, Senator McCain and I proposed the accounting provision as an amendment to the Sarbanes-Oxley corporate reform bill that was before the Senate in July. There appeared to be sufficient support to pass it at the time, but we were unable to obtain a vote on it or on any other stock option legislation. That is why we are back this Congress.

Congress failed to resolve the issue last year, even though stock option abuses were repeatedly linked to serious corporate abuses and dishonest accounting. In fact, virtually every corporate disaster that has struck in recent years has had a stock option component.

Enron, of course, was the poster child. Congressional investigations, including by the Permanent Subcommittee on Investigations on which I sit, showed that, at the same time Enron investors and employees were losing their shirts, Enron executives were cashing in their stock options for tens or hundreds of millions of dollars. Ken Lay, the Chairman of the Board, took home $123 million from stock options in 2000 alone. Jeff Skilling, the CEO, took home over $60 million. Another executive, Lou Pai, topped them all by cashing in Enron stock options, in 2000, for $265 million.

Stock options also contributed to Enron's inflated earnings, since despite providing the lion's share of executive pay, this compensation never appeared on the company books as an expense nor was it ever deducted from earnings. And many have blamed stock options for encouraging Enron management to rig the company's financial statements through other accounting deceptions to help boost apparent income and, in turn, the company stock price, so they could sell their Enron stock at enormous profit.

Still others have noted that Enron used about $600 million in stock option tax deductions to avoid paying any corporate income taxes in four out of the last five years before its bankruptcy while, at the same time, touting record amounts of corporate income. What is now only beginning to be understood is that Enron's stock option tax deductions played a central role in much of its wrongdoing, after all, Enron was able to inflate its corporate income with impunity, in part, because its stock option tax deductions allowed it to avoid paying taxes on any of its phony inflated income.

Enron was the poster child for stock option abuses, but it was far from the only company in that category last year. Worldcom, Tyco, Qwest Communications, and many others have stock option stories that are equally disturbing.

And the problems did not stop with companies engaged in accounting deceptions or other corporate misconduct. Even companies that never appeared on the 2002 rollcall of corporate deception have been excoriated in media reports for giving huge stock option pay to executives while socking employees and investors with lower stock prices, mounting losses, and lousy corporate performance.

High tech companies that have been the biggest promoters of stock options have been some of the biggest culprits. Company after company in Silicon Valley paid their executives big bucks via stock options while laying off employees, losing money or market share, and stiffing investors. One example frequently cited in the media is Lawrence Ellison, CEO of Oracle Corp., who exercised options in 2001 to obtain profits of $706 million, while his company's stock price dropped by more than 50 percent.

Aggregate stock option statistics are also sobering. Business Week, for example, has estimated that stock options now account for ``a staggering 15 percent of all shares outstanding.'' Federal Reserve Chairman Alan Greenspan estimated that stock options have been used to overstate reported company earnings by an average of 6 to 9 percent. Perhaps that is why Chairman Greenspan has picked honest stock option accounting as his number one post-Enron reform.

Stock option abuses have been linked to inflated company earnings, dishonest accounting, and executive misconduct. These abuses have been facilitated by existing accounting and tax rules which allow stock option compensation to never appear on a company's books as an expense, even when a company claims this compensation as a business expense on its tax return. This double standard is fueling Enron-style abuses, and it is time for it to end.

Many in the U.S. business community apparently agree and, unlike the Congress, have taken direct action on the stock option issue. In fact, over the last year, there has been significant movement in the business world to end dishonest stock option accounting.

Over 120 companies, including such American giants as Coca-Cola, General Motors, General Electric, Dow Chemical, Wal-Mart, and Home Depot have announced that they will begin expensing options in 2003, joining longtime expensers like Boeing and Winn-Dixie. Standard and Poors has created additional pressure for honest stock option accounting by announcing a new ``core earnings'' calculation for companies which requires stock option compensation to be subtracted from a company's earnings.

Accounting experts are also moving. The International Accounting Standards Board in London has announced that, by the end of 2003, it will issue accounting standards requiring companies to expense stock options. The U.S. equivalent, the Financial Accounting Standards Board, or FASB, has announced that it will decide by the end of the first quarter of this year whether it will issue stock option accounting standards similar to those of the International Board.

While there has been a major shift in the U.S. business world toward honest stock option accounting, not all companies are on board. Some companies, especially those in the high tech sector, have announced that they will not expense stock options until forced to do so. That means, until FASB acts, there will be a discrepancy between those companies that are voluntarily expensing options and those that are not, when there ought to be a level playing field where everyone plays by the same accounting rules. It is this discrepancy that continues to make our stock option legislation relevant and necessary for Congressional action this year.

Let me describe both bills.

First is the Stock Option Accounting Review Act. This bill is very simple. It would direct FASB to conduct a fresh review of the current accounting treatment for stock options and, within one year, establish what it deems to be the appropriate stock option accounting standards.

The bill does not specify the stock option accounting standards that FASB should issue; that matter is left to the experts where it belongs. But

the bill does put the Senate on record as urging FASB to review the existing rules and take appropriate action within one year. This legislative directive is important, because the only other time the Senate has spoken on this issue, in 1994, the Senate majority urged FASB to keep allowing companies to exclude stock option expenses from their financial statements. The Senate's position contradicted FASB's position at the time which was to require stock option expensing. It is long past time for the Senate to rescind its mistaken advice.

The second bill we are introducing today is the Ending the Double Standard for Stock Options Act. This bill would not address the accounting treatment of stock options. Instead, it would address the tax treatment of stock option compensation, ending the costly double standard in federal law which allows a company to take a tax deduction for stock option compensation, even if the company does not show that compensation as a business expense on its financial statements.

Essentially, our bill would prevent a company from claiming a stock option expense on its tax return unless the company also includes that expense on its books. It would require companies to be consistent in how they treat stock options, and take a corporate tax deduction that mirrors the expense shown on the company books. If a company took the position that it incurred no expense from stock option compensation on its books, the bill would allow the company to take that position, but would also require it to take the same approach on its tax return and forego any deduction. The bill would stop companies from telling stockholders one thing, that it has no stock option expenses, while telling the opposite to Uncle Sam.

And to add insult to injury, in 2001, the IRS issued Revenue Ruling 2001-1 which determined that companies whose tax liability was erased through stock option expenses were not subject to the corporate alternative minimum tax. That revenue ruling meant that our most successful publicly traded companies, if they doled out enough stock options to insiders, could arrange their affairs to escape paying any taxes. That absurd result leaves the average taxpayer feeling like a chump for paying his fair share when a company like Enron can use its success in the stock market to apparently end up tax free.

One last point. Some opponents of stock option reform argue that reining in stock options would hurt the average worker, but this contention is nothing more than a red herring. While many average workers are eligible for stock options, few actually receive them. Stock options are overwhelmingly reserved for top corporate executives.

A recent Bureau of Labor Statistics survey did the research. This nationwide government survey found that in 2000, a banner year for stock options, only 1.7 percent of non-executive workers actually got any stock options. The BLS survey also looked at corporate executives and found that only about 5 percent of these corporate executives received any stock options. These results are consistent with the findings of a private sector group not associated with the government called the National Center for Employee Ownership, which favors stock options. Looking at a small sample of companies, the Center reported that 70 percent of all stock options were given to managers rather than other employees, and about 50 percent were given to the most senior executives. The reality is that stock options are a perk mainly reserved for a very small group, and neither average workers nor most executives would be affected by honest accounting or consistent tax and accounting treatment for stock options.

It is also important to understand that neither of our bills would bar any company from issuing stock options. Companies would still be able to issue stock options to their executives and other employees. The goal of this legislation is not to stop the use of stock options, but to promote honest accounting and consistent treatment of stock options on federal corporate tax returns.

Stock option abuses have damaged investor confidence in American business. I hope our colleagues will support enactment of these bills to help restore investor confidence and end stock option abuses. I ask unanimous consent to have reprinted in the Record after my remarks the text of both bills.

Mr. President, I am introducing today legislation to provide the Securities and Exchange Commission with stronger administrative authority to detect, investigate, and punish corporate and individual misconduct. This legislation, the SEC Civil Enforcement Act, among other measures, would provide the SEC with new authority to impose administrative civil fines on those who violate federal securities laws. The bill is cosponsored by Senators Bill Nelson, Corzine, and Biden.

The SEC has repeatedly requested the new enforcement tools that this bill would provide, and I ask unanimous consent to print in the Record after my remarks a copy of a letter from SEC Chairman Harvey Pitt supporting enactment of this legislation.

Mr. President, I am introducing today on behalf of myself and Sen. McCain two separate bills relating to stock options. Stock options are unfinished business from the last Congress. They are the 800-pound gorilla that has yet to be caged by corporate reform.

Stock options allow a company's employees, usually its top executives, to purchase company stock at a set price for a specified period of time, perhaps 10 years. If the stock price rises after the option is issued, the executive can exercise the option, buy the stock at the set price, and then sell it on the open market at a profit. Today, most CEOs of U.S. publicly traded companies receive a large percentage of their pay from stock options.

Despite their widespread use, stock options remain a stealth form of compensation because, under current accounting rules, they never have to appear on the company books as a compensation expense. In fact, they are the only form of compensation that companies do not have to book as an expense at any time. In addition, stock options are the only form of compensation that a company can claim as a deductible business expense on its tax return, even when no expense is ever recorded on the company books.

These stock option accounting and tax rules are inconsistent and illogical. The two bills we are introducing today, the Stock Option Accounting Review Act, and the Ending the Double Standard for Stock Options Act, were introduced in the last Congress to address this problem. Each bill tackles a different aspect of the stock option issue. One addresses stock option accounting; the other addresses the stock option tax deduction.

Last year, Senator McCain and I proposed the accounting provision as an amendment to the Sarbanes-Oxley corporate reform bill that was before the Senate in July. There appeared to be sufficient support to pass it at the time, but we were unable to obtain a vote on it or on any other stock option legislation. That is why we are back this Congress.

Congress failed to resolve the issue last year, even though stock option abuses were repeatedly linked to serious corporate abuses and dishonest accounting. In fact, virtually every corporate disaster that has struck in recent years has had a stock option component.

Enron, of course, was the poster child. Congressional investigations, including by the Permanent Subcommittee on Investigations on which I sit, showed that, at the same time Enron investors and employees were losing their shirts, Enron executives were cashing in their stock options for tens or hundreds of millions of dollars. Ken Lay, the Chairman of the Board, took home $123 million from stock options in 2000 alone. Jeff Skilling, the CEO, took home over $60 million. Another executive, Lou Pai, topped them all by cashing in Enron stock options, in 2000, for $265 million.

Stock options also contributed to Enron's inflated earnings, since despite providing the lion's share of executive pay, this compensation never appeared on the company books as an expense nor was it ever deducted from earnings. And many have blamed stock options for encouraging Enron management to rig the company's financial statements through other accounting deceptions to help boost apparent income and, in turn, the company stock price, so they could sell their Enron stock at enormous profit.

Still others have noted that Enron used about $600 million in stock option tax deductions to avoid paying any corporate income taxes in four out of the last five years before its bankruptcy while, at the same time, touting record amounts of corporate income. What is now only beginning to be understood is that Enron's stock option tax deductions played a central role in much of its wrongdoing, after all, Enron was able to inflate its corporate income with impunity, in part, because its stock option tax deductions allowed it to avoid paying taxes on any of its phony inflated income.

Enron was the poster child for stock option abuses, but it was far from the only company in that category last year. Worldcom, Tyco, Qwest Communications, and many others have stock option stories that are equally disturbing.

And the problems did not stop with companies engaged in accounting deceptions or other corporate misconduct. Even companies that never appeared on the 2002 rollcall of corporate deception have been excoriated in media reports for giving huge stock option pay to executives while socking employees and investors with lower stock prices, mounting losses, and lousy corporate performance.

High tech companies that have been the biggest promoters of stock options have been some of the biggest culprits. Company after company in Silicon Valley paid their executives big bucks via stock options while laying off employees, losing money or market share, and stiffing investors. One example frequently cited in the media is Lawrence Ellison, CEO of Oracle Corp., who exercised options in 2001 to obtain profits of $706 million, while his company's stock price dropped by more than 50 percent.

Aggregate stock option statistics are also sobering. Business Week, for example, has estimated that stock options now account for ``a staggering 15 percent of all shares outstanding.'' Federal Reserve Chairman Alan Greenspan estimated that stock options have been used to overstate reported company earnings by an average of 6 to 9 percent. Perhaps that is why Chairman Greenspan has picked honest stock option accounting as his number one post-Enron reform.

Stock option abuses have been linked to inflated company earnings, dishonest accounting, and executive misconduct. These abuses have been facilitated by existing accounting and tax rules which allow stock option compensation to never appear on a company's books as an expense, even when a company claims this compensation as a business expense on its tax return. This double standard is fueling Enron-style abuses, and it is time for it to end.

Many in the U.S. business community apparently agree and, unlike the Congress, have taken direct action on the stock option issue. In fact, over the last year, there has been significant movement in the business world to end dishonest stock option accounting.

Over 120 companies, including such American giants as Coca-Cola, General Motors, General Electric, Dow Chemical, Wal-Mart, and Home Depot have announced that they will begin expensing options in 2003, joining longtime expensers like Boeing and Winn-Dixie. Standard and Poors has created additional pressure for honest stock option accounting by announcing a new ``core earnings'' calculation for companies which requires stock option compensation to be subtracted from a company's earnings.

Accounting experts are also moving. The International Accounting Standards Board in London has announced that, by the end of 2003, it will issue accounting standards requiring companies to expense stock options. The U.S. equivalent, the Financial Accounting Standards Board, or FASB, has announced that it will decide by the end of the first quarter of this year whether it will issue stock option accounting standards similar to those of the International Board.

While there has been a major shift in the U.S. business world toward honest stock option accounting, not all companies are on board. Some companies, especially those in the high tech sector, have announced that they will not expense stock options until forced to do so. That means, until FASB acts, there will be a discrepancy between those companies that are voluntarily expensing options and those that are not, when there ought to be a level playing field where everyone plays by the same accounting rules. It is this discrepancy that continues to make our stock option legislation relevant and necessary for Congressional action this year.

Let me describe both bills.

First is the Stock Option Accounting Review Act. This bill is very simple. It would direct FASB to conduct a fresh review of the current accounting treatment for stock options and, within one year, establish what it deems to be the appropriate stock option accounting standards.

The bill does not specify the stock option accounting standards that FASB should issue; that matter is left to the experts where it belongs. But

the bill does put the Senate on record as urging FASB to review the existing rules and take appropriate action within one year. This legislative directive is important, because the only other time the Senate has spoken on this issue, in 1994, the Senate majority urged FASB to keep allowing companies to exclude stock option expenses from their financial statements. The Senate's position contradicted FASB's position at the time which was to require stock option expensing. It is long past time for the Senate to rescind its mistaken advice.

The second bill we are introducing today is the Ending the Double Standard for Stock Options Act. This bill would not address the accounting treatment of stock options. Instead, it would address the tax treatment of stock option compensation, ending the costly double standard in federal law which allows a company to take a tax deduction for stock option compensation, even if the company does not show that compensation as a business expense on its financial statements.

Essentially, our bill would prevent a company from claiming a stock option expense on its tax return unless the company also includes that expense on its books. It would require companies to be consistent in how they treat stock options, and take a corporate tax deduction that mirrors the expense shown on the company books. If a company took the position that it incurred no expense from stock option compensation on its books, the bill would allow the company to take that position, but would also require it to take the same approach on its tax return and forego any deduction. The bill would stop companies from telling stockholders one thing, that it has no stock option expenses, while telling the opposite to Uncle Sam.

And to add insult to injury, in 2001, the IRS issued Revenue Ruling 2001-1 which determined that companies whose tax liability was erased through stock option expenses were not subject to the corporate alternative minimum tax. That revenue ruling meant that our most successful publicly traded companies, if they doled out enough stock options to insiders, could arrange their affairs to escape paying any taxes. That absurd result leaves the average taxpayer feeling like a chump for paying his fair share when a company like Enron can use its success in the stock market to apparently end up tax free.

One last point. Some opponents of stock option reform argue that reining in stock options would hurt the average worker, but this contention is nothing more than a red herring. While many average workers are eligible for stock options, few actually receive them. Stock options are overwhelmingly reserved for top corporate executives.

A recent Bureau of Labor Statistics survey did the research. This nationwide government survey found that in 2000, a banner year for stock options, only 1.7 percent of non-executive workers actually got any stock options. The BLS survey also looked at corporate executives and found that only about 5 percent of these corporate executives received any stock options. These results are consistent with the findings of a private sector group not associated with the government called the National Center for Employee Ownership, which favors stock options. Looking at a small sample of companies, the Center reported that 70 percent of all stock options were given to managers rather than other employees, and about 50 percent were given to the most senior executives. The reality is that stock options are a perk mainly reserved for a very small group, and neither average workers nor most executives would be affected by honest accounting or consistent tax and accounting treatment for stock options.

It is also important to understand that neither of our bills would bar any company from issuing stock options. Companies would still be able to issue stock options to their executives and other employees. The goal of this legislation is not to stop the use of stock options, but to promote honest accounting and consistent treatment of stock options on federal corporate tax returns.

Stock option abuses have damaged investor confidence in American business. I hope our colleagues will support enactment of these bills to help restore investor confidence and end stock option abuses. I ask unanimous consent to have reprinted in the Record after my remarks the text of both bills.

Mr. President, it is with profound honor and reverence that I,

together with my friend and colleague, Senator Feinstein, introduce a bipartisan constitutional amendment to permit Congress to prohibit the physical desecration of the American flag.

The American flag serves as a symbol of our great Nation. The flag represents, in a way nothing else can, the common bond shared by an otherwise diverse people. As a sponsor and long-time supporter of the proposed constitutional amendment to protect the American flag, I am very pleased, but not surprised, by the way Americans have been waving the flag as a symbol of solidarity following the September 11 attacks of 2001. The emotion that Americans feel when they see the stars and stripes confirms my view that the flag is much more than a piece of cloth--it is a unifying force that represents the common core ideals all Americans share. Whatever our differences of party, race, religion, or socio-economic status, the flag reminds us that we are very much one people, united in a shared destiny, bonded in a common faith in our nation.

More than a decade ago, Supreme Court Justice John Paul Stevens reminded us of the significance of our unique emblem when he wrote:

A country's flag is a symbol of more than nationhood and

national unity. It also signifies the ideas that characterize

the society that has chosen that emblem as well as the

special history that has animated the growth and power of

those ideas. . . . So it is with the American flag. It is

more than a proud symbol of the courage, the determination,

and the gifts of a nation that transformed 13 fledgling

colonies into a world power. It is a symbol of freedom, of

equal opportunity, of religious tolerance, and of goodwill

for other peoples who share our aspirations.

Throughout our history, the flag has captured the hearts and minds of all types of people--ranging from school teachers to union workers, traffic cops, grandmothers, and combat veterans. In 1861, President Abraham Lincoln called our young men to put their lives on the line to preserve the Union. When Union troops were beaten and demoralized, General Ulysses Grant ordered a detachment of men to make an early morning attack on Lookout Mountain in Tennessee. When the fog lifted from Lookout Mountain, the rest of the Union troops saw the American flag flying and cheered with a newfound courage. This courage eventually led to a nation of free men--not half-free and half-slave.

In 1941, President Franklin Roosevelt called on all Americans to fight the aggression of the Axis powers. After suffering numerous early defeats, the free world watched in awe as five Marines and one sailor raised the American flag on Iwo Jima. Their undaunted, courageous act, for which three of the six men died, inspired the Allied troops to attain victory over fascism.

In 1990, President Bush called on our young men and women to go to the Mideast for Operations Desert Shield and Desert Storm. After an unprovoked attack by the terrorist dictator Saddam Hussein on the Kingdom of Kuwait, American troops, wearing arm patches with the American flag on their shoulders, led the way to victory. General Norman Schwarzkopf addressed a joint session of Congress describing the American men and women who fought for the ideals symbolized by the American flag:

[W]e were Protestants and Catholics and Jews and Moslems

and Buddhists, and many other religions, fighting for a

common and just cause. Because that's what your military is.

And we were black and white and yellow and brown and red. And

we noticed that when our blood was shed in the desert, it

didn't separate by race. It flowed together.

General Schwarzkopf then thanked the American people for their support, stating:

The prophets of doom, the naysayers, the protesters and the

flag-burners all said that you wouldn't stick by us, but we

knew better. We knew you'd never let us down. By golly, you

didn't.

The pages of our history show that when this country has called our young men and women to serve under the American flag from Lookout Mountain to Iwo Jima to Kuwait, they have given their blood and lives. The crosses at Arlington, the Iwo Jima memorial, and the Vietnam Memorial honor those sacrifices. But there were those who did not.

In 1984, Greg Johnson led a group of radicals in a protest march in which he doused an American flag with kerosene and set it on fire as his fellow protestors chanted: ``America, the red, white, and blue, we spit on you.'' Sadly, the radical extremists, most of whom have given nothing, suffered nothing, and who respect nothing, would rather burn and spit on the American flag than honor it.

Contrast this image with the deeds of Roy Benavidez, an Army Sergeant from Texas, who led a helicopter extraction force to rescue a reconnaissance team in Vietnam. Despite being wounded in the leg, face, back, head, and abdomen by small arms fire, grenades, and hand-to-hand combat with vicious North Vietnamese soldiers, Benavidez held off the enemy and carried several wounded to the helicopters, until finally collapsing from a loss of blood. Benavidez earned the Medal of Honor. When Benavidez was buried in Arlington National Cemetery, the honor guard placed an American flag on his coffin and then folded it and gave it to his widow. The purpose of Roy Benavidez' heroic sacrifice--and the purpose of the American people's ratification of the First Amendment--was not to protect the right of radicals like Greg Johnson to burn and spit on the American flag.

The American people have long distinguished between the First Amendment right to speak and write one's political opinions and the disrespectful, and often violent, physical destruction of the flag. For many years, the people's elected representatives in Congress and 49 state legislatures passed statutes prohibiting the physical desecration of the flag. Our founding fathers, Chief Justice Earl Warren, and Justice Hugo Black believed these laws to be completely consistent with the First Amendment's protection of the spoken and written word and not disrespectful, extremist conduct.

In 1989, however, the Supreme Court abandoned the history and intent of the First Amendment to embrace a philosophy that made no distinction between oral and written speech about the flag and extremist, disrespectful destruction of the flag. In Texas v. Johnson, five members of the Court, for the first time ever, struck down a flag protection statute. The majority argued that the First Amendment had somehow changed and now prevented a state from protecting the American flag from radical, disrespectful, and violent actions. When Congress responded with a federal flag protection statute, the Supreme Court, in United States v. Eichman, used its new and changed interpretation of the First Amendment to strike it down by another five-to-four vote.

Under this new interpretation of the First Amendment, it is assumed that the people, their elected legislators, and the courts can no longer distinguish between expressions concerning the flag that are more akin to spoken and written expression and expressions that constitute the disrespectful physical desecration of the flag. Because of this assumed inability to make such distinctions, it is argued that all of our freedoms to speak and write political ideas are wholly dependent on Greg Johnson's newly created ``right'' to burn and spit on the American flag.

This ill-advised and radical philosophy fails because its basic premise--that laws and judges cannot distinguish between political expression and disrespectful physical desecration--is so obviously false. It is precisely this distinction that laws and judges did in fact make for over 200 years. Just as judges have distinguished which laws and actions comply with the constitutional command to provide ``equal protection of the laws'' and ``due process of law,'' so too have judges been able to distinguish between free expression and disrespectful destruction.

Certainly, extremist conduct such as smashing in the doors of the State Department may be a way of expressing one's dissatisfaction with the nation's foreign policy objectives. And one may even consider such behavior speech. Laws, however, can be enacted preventing such actions in large part because there are peaceful alternatives that can be equally powerful. After all, right here in the United States Senate, we prohibit speeches or demonstrations of any kind, even the silent display of signs or banners, in the public galleries.

Moreover, it was not this radical philosophy of protecting disrespectful destruction that the people elevated to the status of constitutional law. Such an extremist philosophy was never

ratified. Such a philosophy is not found in the original and historic intent of the First Amendment. Thus, in this Senator's view, the Supreme Court erred in Texas v. Johnson and in United States v. Eichman.

Since Johnson and Eichman, constitutional scholars have opined that an attempt by Congress to protect the flag with another statute would fail in light of the new interpretation currently embraced by the Supreme Court. Thus, an amendment is the only legal means to protect the flag.

This amendment affects only the most radical forms of conduct and will leave untouched the current constitutional protections for Americans to speak their sentiments in a rally, to write their sentiments to their newspaper, and to vote their sentiments at the ballot box. The amendment simply restores the traditional and historic power of the people's elected representatives to prohibit the radical and extremist physical desecration of the flag.

Restoring legal protection to the American flag will not place us on a slippery slope to limit other freedoms. No other symbol of our bi- partisan national ideals has flown over the battlefields, cemeteries, football fields, and school yards of America. No other symbol has lifted the hearts of ordinary men and women seeking liberty around the world. No other symbol has been paid for with so much blood of our countrymen. The American people have paid for their flag, and it is our duty to let them protect it.

This amendment offers Senators, from both sides of the aisle, the opportunity to stand united for the protection of the sacred symbol of our nation.

Restoring legal protection to the American flag is not, nor should it be, a partisan issue. More than 40 Senators, both Republicans and Democrats, have already joined with Senator Feinstein and myself as original cosponsors of this amendment. I am pleased that this amendment has the unqualified support of our distinguished colleagues: Senators Ted Stevens; Zell Miller; John McCain; John B. Breaux; Larry E. Craig; John E. Ensign; Richard G. Lugar; Blanche Lincoln; Max Baucus; Christopher S. Bond; Trent Lott; Ernest F. Hollings; Mark Dayton; Jeff Sessions; E. Benjamin Nelson; James M. Inhofe; Jim Bunning; Wayne Allard; Susan M. Collins; Michael D. Crapo; Michael DeWine; Bill Frist; Charles E. Grassley; Chuck Hagel; Kay Bailey Hutchinson; Pat Roberts; John W. Warner; George Allen; Sam Brownback; Conrad R. Burns; Pete V. Domenici; Judd Gregg; Rick Santorum; Richard C. Shelby; Olympia J. Snowe; Lindsey Graham; John Cornyn; James Talent; Lamar Alexander; Ben Nighthorse Campbell.

Polls have shown that 80 percent of the American people want the opportunity to vote to protect their flag. Numerous organizations from the American Legion to the Women's War Veterans to the African-American Women's clergy all support the flag protection amendment. All 50 State legislatures have passed resolutions calling for constitutional protection for the flag.

I am, therefore, proud to rise today to introduce a constitutional amendment that would restore to the people's elected representatives the right to protect our unique national symbol, the American flag, from acts of physical desecration.

I ask unanimous consent that the text of the proposed amendment be printed in the Record.

I am very honored to be a cosponsor with my dear friend from California, Senator Feinstein. I appreciate the effort and unwavering support she has put forth in this battle. I am proud and privileged to be able to work with her.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, today I join my friend and colleague from Ohio, Senator George Voinovich, to introduce the National Aviation Heritage Area Act, an act to establish a National Aviation Heritage Area within our home State of Ohio.

For hundreds of years prior to the 20th Century, man dreamt of flying. Some of the earliest records of mankind reveal a fascination with birds and the ability to leave the ground. In fact, the Renaissance revolution in art showed us many of the first recorded designs for achieving this feat. By 1903, man succeeded, altering the course of modern history.

This year, we mark the 100th anniversary of manned flight. I am proud to say that the famed Wright Brothers, Wilbur and Orville, were native Ohioans. These two men are important symbols of an evolving age of discovery, an age beginning with the Wright Brothers' first controlled, heavier-than-air flight on December 17, 1903. A mere half-a-century or so later, mankind was flying not just above the ground, but above our planet Earth, which was quickly followed by Neil Armstrong's first steps on the moon. It is amazing to just sit back and consider that all of these things, all of these incredible achievements have all occurred in a very short span of less than one hundred years.

There is so much to say about the historical and cultural significance of the birth of aviation, but I think one of its unique educational aspects is its ability to be interactive with students outside of the classroom. And, that is one of the main reasons we are introducing our National Aviation Heritage Area legislation today.

Our bill seeks to help foster strong public and private investments in many of Ohio's aviation landmarks, landmarks that have enormous educational value. Some of these landmarks include the Wright Brothers' ``Wright Cycle Company,'' located in Dayton and the Wright-Dunbar Interpretive Center, where students of all ages can learn about the painstaking measures the Wright Brothers and many of their predecessors took to achieve what today seems to be so commonplace. Other landmarks include the Huffman Prairie Flying Field, where, after the Wright Brothers' famous flight in Kitty Hawk, NC, the Brothers returned home to perfect the design of the world's first airplane and the Paul Laurence Dunbar State Memorial, which showcases this great African American poet's strong international voice for racial equality and justice. The Heritage Area also includes the Neil Armstrong Museum, which highlights the great achievements of man's first walk on the moon. If I may add also, Neil Armstrong is a native Ohioan.

Flight has become a very important square in the patchwork of our nation's history, and I am proud that my home State of Ohio has played such a large role in its evolution. We are reminded of how manned flight has changed our history every time we look skyward and see the crisscross of jet contrails. We are reminded of this every time we walk through the Rotunda of our very own U.S. Capitol and see the last frieze square that depicts the Wright Brothers and their invention. And, we are reminded of this by one of the great symbols of America, the eagle, a flying bird that represents the freedom of a people.

It is vital that we protect the sites that have played such an important role in aviation. In doing so, we can enhance the education and enrichment of our children and our grandchildren for many years to come.

Mr. President, I rise today to raise further awareness of an issue that affects over 22,000 people a year, and that issue is organ donation. The sad fact about organ donations is this: We have the medical know-how to save lives, but we lack the organs. We lack organs because most Americans simply are unaware of the life-giving difference they can make by choosing to become organ donors.

Sadly, each day the waiting list for those needing organs continues to grow. Today, over 80,000 people remain on the national transplant waiting list.

Right now, more than 56,000 people, alone, are waiting for kidney transplants. That number is expected to double within the next decade. Additionally, close to 6,000 people die each year just waiting for an available organ.

To remedy the organ shortage, we must increase public awareness. By educating the public and raising awareness, more people will choose to become organ donors. At the very least, through these efforts, we can encourage more families to discuss what their wishes are and whether they would want to be organ donors.

But, our efforts must not stop there. We must do more than just implement public awareness campaigns, because the face of organ donation is changing. For the first time ever, the number of living organ donors outnumbered cadaver donors. In 2001, there were 6,082 donor cadavers while 6,534 people opted to become living donors, usually giving up a healthy kidney to help a family member or friend.

Recognizing this, my colleague, Senator Durbin, and I are introducing a bill today that would help protect living organ donors in the group insurance market. Our bill would ensure that those individuals who choose to be living organ donors are not discriminated against in the insurance marketplace. Our bill builds on the protections provided by the Health Insurance Portability and Accountability Act, so that living organ donors are not denied insurance nor are they applied discriminatory insurance premiums because of their living organ donor status.

Quite simply, a brother who donates a part of his kidney to his sister should not be denied health insurance. But tragically, that is what oftentimes happens. Frequently, individuals who are living organ donors are denied health insurance or restricted from the insurance market. Instead, we should celebrate living organ donors and remove obstacles and barriers for the successful donation of organs. Insurance concerns should not undermine someone's decision to be a living organ donor.

Some states are evaluating how living organ donors affect the market. States are amending their Family Medical Leave eligibility so that living organ donors can participate and benefit from the program. The Federal Government, with the Organ Donor Leave Act of 1999, offered 30 days paid leave to Federal employees who chose to be an organ donor. But, paid leave and job protection doesn't mean much if people are denied health insurance or are required to pay higher premiums because they donated an organ to save another person's life.

The impact of living organ donation is profound. A living organ donor not only can save the life of one patient, but can also take that person off the waiting list for a cadaver donation. That means the next person on the waiting list is ``bumped up'' a spot, giving additional hope to the 86,000 persons on the national transplant waiting list.

Living organ donors give family members and friends a second chance at life and the opportunity to reduce the number of people on the waiting list to receive an organ. It is time for Congress to make a sensible decision in support of a person's decision to be a living organ donor.

I encourage my colleagues to join me in co-sponsoring this bill.

Mr. President, I rise today to join my friend and colleague, Senator Durbin, in introducing a bill to help organ transplant patients maintain access to the life-saving drugs necessary to prevent their immune systems from rejecting their new organs.

Tragically, today over 86,000 Americans are waiting for a donor organ. Those individuals who are blessed to receive an organ transplant must take immunosuppressive drugs every day for the life of their transplant. Failure to take these drugs significantly increases the risk that the transplanted organ will be rejected.

We need this bill, because Federal law is compromising the success of organ transplants. Let me explain. Right now, current Medicare policy denies certain transplant patients coverage for the drugs needed to prevent rejection. Medicare does not pay for anti-rejection drugs for Medicare beneficiaries, who received their transplants prior to becoming a Medicare beneficiary. So, for instance, if a person received a transplant at age 64 through his or her health insurance plan, when that person retires and relies on Medicare for health care coverage, he or she would no longer have immunosuppressive drug coverage.

Medicare only pays for anti-rejection drugs for transplants performed in a Medicare-approved transplant facility. However, many beneficiaries are completely unaware of this fact and how it can jeopardize their future coverage of immunosuppressive drugs. To receive an organ transplant, a person must be very ill and many are far too ill at the time of transplantation to be researching the intricate nuances of Medicare coverage policy.

End Stage Renal Disease, ESRD, patients qualify for Medicare on the basis of needing dialysis. If End Stage Renal Disease patients receive a kidney transplant, they qualify for Medicare coverage for three years after the transplant. After the three years are up, they lose not only their general Medicare coverage, but also their coverage for immunosuppressive drugs.

The amendment that Senator Durbin and I are introducing today would remove the Medicare limitations and make clear that all Medicare beneficiaries including End Stage Renal Disease patients who have had a transplant and need immunosuppressive drugs to prevent rejection of their transplant, will be covered as long as such anti-rejection drugs are needed.

In the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act, Congress eliminated the 36-month time limitation for transplant recipients who both receive a Medicare eligible transplant and are eligible for Medicare based on age or disability. Our bill would provide the same indefinite coverage to kidney transplant recipients who are not Medicare-aged or Medicare-disabled.

I urge my colleagues to support this legislation and help those who receive Medicare-eligible transplants to gain access to the immunosuppressive drugs they need to live healthy, productive lives.

Mr. President, far from the stuff of science fiction, nanotechnology has become a reality in the lives of many Americans. While there is tremendous potential for further study in this field, nanotechnology's current impacts range from the pedestrian to the extraordinary. A TV commercial demonstrates the practicality of nanotechnology through stain-resistant pants. Prosthetic and medical implants have been improved through molecularly designed surfaces that interact with the cells of the body. There is no question that this field will dramatically change the way Americans live.

I was pleased that my colleagues in the Commerce Committee in the last Congress recognized the tremendous potential of nanotechnology and passed this bill out of committee with unanimous bipartisan support. Nanotechnology innovations will bring enormous benefits to America's economy and to nearly every aspect of life in the coming decades. My own judgment is the nanotechnology revolution has the potential to change America on a scale equal to, if not greater than, the computer revolution. I am determined that the United States will not miss, but will mine the opportunities of nanotechnology. At present, efforts in the nanotechnology field are strewn across a half-dozen Federal agencies. I want America to marshal its various nanotechnology efforts into one driving force to remain the world's leader in this burgeoning field. And I believe Federal support is essential to achieving that goal.

Legislation I am introducing today will provide a smart, accelerate, and organized approach to nanotechnology research, development, and education. In my view, there are three major steps America must take to ensure the highest success for its nanotechnology efforts.

First, a National nanotechnology Research Program should be established to superintend long-term fundamental nanoscience and engineering research. The program's goals will be to ensure America's leadership and economic competitiveness in nanotechnology, and to make sure ethical and social concerns are taken into account alongside the development of this discipline.

Second, the Federal Government should support nanoscience through a program of research grants, and also through the establishment of nanotechnology research centers. These centers would serve as key components of a national research infrastructure, bringing together experts from the various disciplines that must intersect for nanoscale projects to succeed and building a network that includes State- supported centers. As these research efforts take shape, educational opportunities will be the key to their long-term success. Through this legislation, I commit to helping students who would enter the field of nanotechnology. This discipline requires multiple areas of expertise. Students with the drive and the talent to tackle physics, chemistry, and the material sciences simultaneously deserve all the support we can offer.

Third, the government should create connections across its agencies to aid in the meshing of various nanotechnology efforts. These could include a national steering office, and a Presidential nanotechnology Advisory Committee, modeled on the President's Information Technology Advisory Committee.

I also believe that as these organizational support structures are put into place, rigorous evaluation must take place to ensure the maximum efficiency of our efforts. Personally, I would call for an annual review of America's nanotechnology efforts from the Presidential Advisory Committee, and a periodic review from the National Academy of Sciences. In addition to monitoring our own progress, the United States should keep abreast of the world's nanotechnology efforts through a series of benchmarking studies.

If the Federal Government fails to get behind nanotechnology now with organized, goal-oriented support, this Nation runs the risk of falling behind others in the world who recognize the potential of this discipline. Nanotechnology is already making pants more stain- resistant, making windows self-washing and making car parts stronger with tiny particles of clay. What America risks missing is the next generation of nanotechnology. In the next wave, nanoparticles and nanodevices will become the building blocks of our health care, agriculture, manufacturing, environmental cleanup, and even national security.

America risks missing a revolution in electronics, where a device the size of a sugar cube could hold all of the information in the Library of Congress. Today's silicon-based technologies can only shrink so small. Eventually, nanotechnologies will grow devices from the molecular level up. Small though they may be, their capabilities and their impact will be enormous. Spacecraft could be the size of mere molecules.

America risks missing a revolution in health care. In my home State, Oregon State University researchers are working on the microscale to create lapel-pin-sized biosensors that use the color-changing cells of the Siamese fighting fish to provide instant visual warnings when a biotoxin is present. An antimicrobial dressing for battlefield wounds is already available today, containing silver nanocrystals that prevent infection and reduce inflammation. The health care possibilities for nanotechnology are limitless. Eventually, nanoscale particles will travel human bodies to detect and cure disease. Chemotherapy could attack individual cancer cells and leave healthy cells intact. Tiny bulldozers could unclog blocked arteries. Human disease will be fought cell by cell, molecule by molecule, and nanotechnology will provide victories over disease that we can't even conceive today.

America risks missing a host of beneficial breakthroughs. American scientists could be the first to create nanomaterials for manufacturing and design that are stronger, lighter, harder, self-repairing, and safer. Nanoscale devices could scrub automobile pollution out of the air as it is produced. Nanoparticles could cover armor to make American soldiers almost invisible to enemies and even tend their wounds. nanotechnology could grow steel stronger than what's made today, with little or no waste to pollute the environment.

Moreover, and this is even more important given our struggling economy, America risks missing an economic revolution based on nanotechnology. With much of nanotechnology existing in a research milieu, venture capitalists are already investing $1 billion in American nanotech interests this year alone. It's estimated that nanotechnology will become a trillion-dollar industry over the next 10 years. As nanotechnology grows, the ranks of skilled workers needed to discover and apply its capabilities must grow too. In the nanotechnology revolution, areas of high unemployment could become magnets for domestic production, engineering and research for nanotechnology applications--but only if government doesn't miss the boat.

Our country's National Nanotechnology Initiative is a step in the right direction. This Nation has already committed substantial funds to nanotechnology research and development in the coming years. But funding is not enough. There must be careful planning to make sure that money is used for sound science over the long-term. That is the reason for the legislation I am issuing today. The strategic planning it prescribes will ensure that scientists get the support they need to realize nanotechnology's greatest potential.

In 1944 the visionary President Franklin Delano Roosevelt requested a leading American scientist's opinion on advancing the United States' scientific efforts to benefit the world. Dr. Vannevar Bush offered his reply to President Harry S Truman the next year, following FDR's death. In his report to the President, Dr. Bush wrote, ``The Government should accept new responsibilities for promoting the flow of new scientific knowledge and the development of scientific talent in our youth. These responsibilities are the proper concern of the Government, for they vitally affect our health, our jobs, and our national security. It is in keeping also with basic United States policy that the Government should foster the opening of new frontiers and this is the modern way to do it.''

Those principles, so true nearly 60 years ago, are truer still today. I propose that the government now accept new responsibilities in promoting and developing nanatechnology. I am pleased to be joined on this legislation by Senators Allen, Lieberman, Mikulski, Hollings, Landrieu, Clinton, and Levin. I ask unanimous consent that this statement be entered in the Record.