State and Local Aid and Economic Stimulus Act of 2003

Mr. President, I rise to speak to the critical issue of State fiscal relief, which I believe adds tremendous value to this economic growth package. As I have discussed on numerous occasions, I believe that one of the best stimulants for the economy is providing assistance to our State and local governments, which is why I have fought for its inclusion in this package.

Since December, when I first identified elements that I believed would stimulate the economy, I insisted on a State and local fiscal relief component. Today, I am pleased that the Senate is taking action through this floor amendment to further refine both the agreement and language that Senator Smith and I insisted must be included in the growth package as passed by the Senate Finance Committee.

The growth package that the Senate Finance Committee reported establishes a $20 billion trust fund in S. 1054, the Jobs and Growth Tax Relief Reconciliation Act of 2003, to provide critical, flexible relief for both State and local governments. Also, I would like to thank Chairman Grassley for his willingness to work with me to identify appropriate offsets that ensured this proposal would not increase the net cost of the growth package, and also that the relief provided was not only flexible, but helped to meet the challenges faced by our communities.

By securing support to include a $20 billion fiscal relief trust fund in this package, I was able to ensure that States and localities received the help they need in balancing their fiscal year 2004 budgets. Fiscal relief to State and local governments is vitally important to the health and strength of our economy, which is why I fought to ensure that half of the $20 billion would be modeled after my bill, S. 201, and would be flexible and divided between State and local governments with 40 percent going to localities and 60 percent to States.

The floor amendment under consideration will provide $20 billion in State and local aid to be distributed in fiscal years 2003 and 2004. Ten billion dollars in flexible funding will be distributed between state and local governments, with the remaining $10 billion provided to States through a temporary increase to the Federal Medical Assistance Percentage, known as FMAP, to help alleviate the short-term spike in Medicaid costs.

Because I thought it was important, we are providing $4 billion in flexible funding to local governments. While I know a number of my colleagues have questioned the necessity and importance of providing relief to local governments, I strongly believe that local governments have all the more pivotal and increasing responsibilities at a time such as this, when they face decreasing revenues. And a large percentage of this increased burden has come from unfunded federal mandates related to education, homeland security and election reform. By including $10 billion in flexible funding, distributed between state and local governments, we will ensure that essential government functions are performed.

As we all know, our states and local communities are struggling. For the past 3 years, while the economy has been in a downturn, they have worked to meet the needs of residents, while 49 out of 50 States including Maine are also required to balance their budgets. In fact, the National Conference of State Legislatures reports that since fiscal year 2001, the combined budget shortfall in states has totaled more than $200 billion. And the outlook for fiscal year 2004 is not proving different. In January, 36 states reported budget gaps totaling more than $68 billion for this year alone. In Maine, the Governor and Legislature were forced to trim $1.2 billion from their biennial budget in the wake of a $150 million shortfall in fiscal year 2003.

Some argue State budget shortfalls result from overspending--yet a report issued by the National Governors Association shows that State spending from 1995 to 2001 increased 6.5 percent per year, a rate identical to spending from

1979 to 2003. Rather, it has been a drop in the stock market and the economy concurrent with increased costs associated with necessities like elementary and secondary education, programs under the Individuals with Disabilities Education Act, or IDEA, homeland security, and Medicaid--that has been the real culprit in burdening State and local budgets.

The National Conference of State Legislatures has reported a substantial decline in projected revenue, including drops in income, sales and property tax receipts, and user fees. Indeed, data suggest that over three-fourths of the combined State budget shortfall is due to declines in State revenues. Again, unlike the Federal Government, States don't have the option of running deficits--and after 3 years, most practical belt-tightening measures have already taken effect.

On the spending side, the NCSL estimates that unfunded mandates for the policy areas I just mentioned account for up to $82 billion in increased expenses. And States rightly argue that the vast majority of their increased cost burden comes from the growing unfunded Federal mandate for providing care to the elderly and disabled. Medicaid provides access to health care for almost 43 million of America's poor, elderly and disabled citizens and it alone is a program for which costs have grown by 11.1 percent from 1990 to 2000.

Because of benefit shortfalls in the Medicare program--such as a prescription drug benefit--Medicaid ends up providing more vital services. Indeed, while seniors and the disabled represent only one- quarter of the Medicaid population, they account for almost three- fourths of all Medicaid expenses. For example, in fiscal year 2002 States provided $6.9 billion in prescription drug assistance to Medicare beneficiaries, and another $5.5 billion in copayment and premium assistance.

That is why providing fiscal relief is so critical--because while there is no question this population needs to be served, there should also be no doubt we can't leave States to be the last line of defense in footing the bill.

It is the same with issues like education--and that is why I also support providing flexible funding for States and localities to use as they see fit. In California 20,000 teachers are at risk of being laid off, in New York local districts are raising property taxes to offset the expected 4 percent cut in State education aid, and in Nebraska officials have told 1,000 students that their academic scholarships to state universities are being canceled and 431 college positions were eliminated. We are making such great advances in education--and we all know that education is the key to our future economic success. By providing fiscal relief, the Federal Government is continuing its commitment.

Of course, the level of assistance that Congress is providing would not eliminate any State or local governments' total budget shortfall. But it will provide vitally important assistance and has the support of the largest State and local associations that represent our country's local elected representatives and leaders. Moreover, providing this State and local fiscal assistance within the tax package is entirely in keeping with our efforts to stimulate the economy.

According to a recent Wall Street Journal article, ``Analysts at Goldman Sachs figure State and local belt-tightening will shave as much as a half-point from the economy's growth so that overall fiscal policy will be no more than neutral next year.'' After all, dollars spent on education, health care and transportation have an economic value today and tomorrow.

In fact, the U.S. Chamber of Commerce reports that for every $1 billion invested in transportation, 47,500 new jobs are created. And let us not forget that State and local governments account for more than 15 million jobs nationwide. As we take steps to put more money into the hands of consumers, we must also make sure that those who are employed by a State or local government, either directly or through a government service contract, are able to stay employed.

Providing short-term fiscal relief to help State and local governments balance their budgets is vitally important to the long-term viability of our economy. I thank Chairman Grassley for his leadership on this issue, and I urge my colleagues to support this amendment.

Mr. President, I rise today to speak regarding the jobs and growth package that was reported by the Senate Finance Committee and that has been considered on the Senate floor. It was a long and often arduous journey that brought the bill here for consideration, and I especially thank the majority leader and Finance Chairman Grassley for their extraordinary and tireless efforts in ensuring we were able to pass a package in committee and consider this economic stimulus bill in the full Senate.

Let us remember, this debate began when the President rightfully and forcefully made the case that we have an obligation to help jump-start an economy that was already in the doldrums even before the tragedy of September 11. Over the past few months--as we worked to pass a budget for the first time in 2 years and as the tax cut package moved through the respective House and Senate committees--some said the reductions should be smaller--some said larger--and others even believe that no cuts were warranted. Last week, the House passed a very different tax bill than the one the Senate is considering today, further reflecting the diversity of deeply held beliefs as to our appropriate course of action in Congress.

I have believed since last fall that the American people must know we are serious about creating jobs with a plan that can be effective now. We have lost 2.3 million jobs since March 2001, and with 48,000 jobs lost in April alone, we have reached the highest level of unemployment in 8 years at 6 percent. In the last quarter of 2002, the economy was growing at a languid 1.4 percent annual rate, and the Commerce Department's latest report showed the economy was still at a weak growth rate of 1.6 percent. Consumer spending has increased more slowly than at any time since the 2001 recession, and capacity at the Nation's factories is at a low of 72 percent--meaning that demand can and must be increased.

So the President is absolutely right to make passage of a robust growth package central to his agenda, and I applaud his unflagging leadership in rejuvenating our economy. At the same time, I have also held throughout this debate that to deficit-finance too high

a level of tax cuts would be to risk condemning future generations to the corrosive economic effects of unsustainable deficits--and tying hands of future Congresses in addressing our most pressing domestic challenges.

With a net $350 billion for stimulus, the package reported by the Finance Committee is consistent with these principles, and those that are embodied in a letter I signed along with Senators Voinovich, Baucus, and Breaux before consideration of the budget resolution. In that letter, we stated our belief that ``our nation would benefit from an economic growth package that would effectively and immediately create jobs and encourage investment.'' But we also expressed our belief that ``any growth package that is enacted through reconciliation this year must be limited to $350 billion in deficit financing over 10 years and any tax cuts beyond this level must be offset.''

So how did I arrive at 350? It was not by simply splitting the difference. It was by making a clear, bright-line distinction as to which measures were truly effective, short-term stimulus and which were not. The $350 billion package approved by the Finance Committee provides for all of the President's proposals that can truly have the immediate, stimulative effect our economy requires in their entirety. Indeed, as economist William Gale of the Brookings Institute has said, within that $350 billion figure, we would likely get most of the short- term job boost.

To pay for dividend tax cuts that could create long-term growth, the Finance Committee package employs genuine offsets. With all the provisions of the committee plan in effect for the full 10 years-- accelerating policy that was already passed by the Congress in 2001--it creates the kind of continuity and stability for both markets and consumers that is critical in making investment and spending strategies.

While some undoubtedly believe we should pass a significantly larger tax cut, let us remember that $350 billion in net tax cuts is by no means inconsequential. In fact, if enacted it may be the third largest tax cut in history--and is being considered just 2 years following the largest tax cut in history. Moreover, the Finance Committee bill is a responsible bill that recognizes the lessons learned from past debates on economic stimulus--that boosting both consumer purchasing power and business investment is vitally important to economic growth.

For example, the package would cut the marginal tax rates across the board--impacting workers' paychecks by increasing their take-home pay this year. The bill also accelerates tax relief for families with children, including a provision not in either the President's plan or the House bill to accelerate the increase in the amount of the child tax credit that is refundable for working families with low incomes-- building on my inclusion of refundability in the 2001 tax package. Married couples would also receive tax relief from the unfair marriage penalty through the expansion of the standard deduction and the 15 percent tax bracket.

To spur investment, the Finance Committee bill triples the amount a small business can write off for investments in new business assets-- and with small businesses representing 99 percent of all employers-- contributing to 51 percent of private-sector output--and providing about 75 percent of net new jobs, that is exactly the kind of policy that can help create jobs soon. It would also provide needed capital to small businesses by expanding the ability of pension plans and other tax-exempt entities to invest in the securities of Small Business Investment Companies. This provision alone is expected to create an additional 16,000 jobs due to the additional investment capital available for small businesses.

Furthermore, the State fiscal relief provision in the Finance Committee plan can provide additional economic stimulus. With States facing combined shortfalls of more than $68 billion in fiscal year 04, I thank Chairman Grassley for working to include a ``trust fund'' in the package of $20 billion in relief for the States and local governments to use as they see fit to address increasing Medicaid costs, transportation needs, homeland security infrastructure, education, and other critical functions.

I know some have argued State budget shortfalls result from overspending. Yet, as a report issued by the National Governors Association shows, State spending from 1995 to 2001 increased 6.5 percent per year, a rate identical to spending from 1979 to 2003, and I would like unanimous consent to print that report in the Record.

I also have here a letter from the heads of the Conference of State Legislators, the Council of State Governments, the U.S. Conference of Mayors, the National Association of Counties, the National League of Cities and the International City/County Management Association documenting that States and localities are experiencing their worst fiscal conditions since World War II. I ask unanimous consent this letter also be printed in the Record along with my statement.

Moreover, according to a recent Wall Street Journal article, ``Analysts at Goldman Sachs figure state and local belt-tightening (in their budgets) will shave as much as a half-point from the economy's growth. . .'' By providing State fiscal relief, we have the opportunity to return that half-point of growth to our economy. And let us remember, dollars spent on education, health care, and transportation have an economic value today and tomorrow.,

Indeed, should State decide to use a portion of the assistance on transportation, it is worth nothing that, according to the U.S. Chamber of Commerce, for every $1 billion invested in transportation, 47,500 new jobs are created. And let us not forget that State and local governments account for more than 15 million jobs nationwide. As we take steps to put more money into the hands of consumers, we must also make sure that those who are employed by a State or local government, either directly or through a government service contract, are able to remain employed.

On that note, I am pleased an amendment was included here on the floor to further refine the agreement and language that Senator Smith and I included in the growth package reported by the Senate Finance Committee.

After working to generate strong bipartisan support for this issue, the Senate Finance committee established a $20 billion trust fund in S. 1054, the Jobs and Growth Tax Relief Reconciliation Act of 2003, to provide critical, flexible relief for both State and local governments. I also want to thank Chairman Grassley again for his willingness to work with me to identify appropriate offsets that enured this proposal would not increase the net cost of the growth package.

By securing support in committee to include a $20 billion fiscal relief trust fund, I was able to ensure that States and localities receive the help they need in balancing their fiscal year 2004 budgets. The subsequent amendment we passed on the floor, with my support included my proposal which requires half of the $20 billion to be distributed between State and local governments--with States receiving $6 billion and localities receiving $4 billion. The remaining $10 billion goes to States through a temporary increase to the Federal Medical Assistance Percentage, known as FMAP, to help alleviate the short-term spike in Medicaid costs. The assistance would be distributed in fiscal years 2003 and 2004.

So, again, the Finance Committee bill fully provides for the appropriate range of short-term stimulus measures. At the same time, for me--as I have stated--the net $350 billion cost of that package strikes a balance in keeping with the requirements imposed by my allegiance to the principles of fiscal responsibility. Because I came to this debate as one deeply rooted in the idea that perhaps the issue that best demonstrates our commitment to the generation of tomorrow is balancing the Federal budget. I have said time and again that there is not goal more critical to the economic future of our Nation--and that is not just my view.

As Chairman Greenspan recently testified, ``(The deficit) does affect long-term interest rates, and it does have an impact on the economy.'' And he has also warned that, ``If . . . you get significant increases in deficits which induce a rise in long-term interest rates, you will be significantly undercutting the benefits'' of tax cuts. If you consider that the two sectors that are keeping the economy afloat right

now--housing and automobiles--are also two of the most interest rate sensitive--just imagine where we would be in the future with high unemployment and high interest rates.

And it is not just our future economy at stake--if that by itself isn't reason enough for fiscal prudence. I will recall the years we fought to arrive at balanced budgets and surpluses--and reaching that fiscal ``holy grail'' in the late 1990s was supposed to open a window of opportunity to address the domestic challenges of the coming decade--most significantly, strengthening Social Security and Medicare.

Yes, even then, many of us were mindful that projections of future surpluses were just that--projections. That is why even as I supported the tax cuts in 2001--to provide, in Chairman Greenspan's words--an ``insurance policy'' against the effects of a recession, and to provide relief at a time when Americans were suffering under the highest tax burden since World War II--I proposed and I championed a trigger linking the level of spending and taxes to the level of surpluses actually realized.

Of course, none of us could have foreseen that so many challenges would soon arrive, as the President has said, ``In a single season.'' September 11, the war on terrorism, and the necessity of disarming the Iraqi regime, the costs of bolstering our homeland security--all those shook an already fragile economy and sparked a return to deficits. In fact, CBO attributes fully 68 percent of the evaporated $5.6 trillion in surpluses to the recession and economic downturn.

So here we are, with CBO having projected just this month that the deficit will be $300 billion--which is 22 percent higher than their projection from only 3 months ago and about 92 percent more than last year! Keep in mind that is without accounting for the approval of additional tax cuts or additional costs of pressing national priorities like the war in Iraq, homeland security costs, and passing a Medicare prescription drug benefit. And Citigroup economic forecasters have recently predicted that the 2003 deficit could be as high as $500 billion.

Even optimist projections that assume higher-then-expected productivity growth anticipate substantial long-term deficits. And if growth remains just ``average'', the Nation will fact unsustainable budget deficits. Just this month, economists with Goldman Sachs expressed alarm about projections that Federal debate will grow from 33 to 49 percent of gross domestic product--a circumstance they say will undermine the economy, instead of spurring economic growth. And as we face a true cumulative deficit through 2013 projected to be nearly $4.5 trillion--not counting the $2.7 trillion in surpluses from Social Security that are currently being sued to mask the size of the deficit--we cannot tolerate the confluence of burgeoning deficits in perpetuity with the retirement of 77 million baby boomers beginning in 2013.

That is why it was critical that--in establishing a policy on the taxation of dividends that could be built on as we assess the reaction of, and overall impact on, the financial and business sectors--the Finance Committee package pays for it with offsets. As Chairman Greenspan has said, cutting taxes on dividends will ``bolster the economy's long-term ability to grow''--but they should also be paid for.

As reported by the Finance Committee, the bill includes real offsets, scored by the Joint Committee on Taxation, to fully compensate the approximately $80 billion cost of the provision. Moreover, in providing a capped exclusion of $500 for the taxation of dividends, with an additional exclusion for dividend amounts above $500 that goes from 10 percent to 20 percent over 10 years, the proposal would benefit all taxpayers who receive dividends, eliminating the tax entirely for 84.7 percent of all taxpayers.

One of the arguments that proponents of eliminating the tax on dividends use to tout the proposal's benefits is that it will reduce the cost of capital for business over the long term. I agree. However, cutting taxes on dividends affects the financial markets as well.

I am concerned that enacting a shorter term provision with a sunset would have negative consequences and potentially harm the economy. Kevin Hassett, a scholar at the American Enterprise Institute, has commented on such a dividend plan, saying that, ``Since the eliminate of dividend taxes is only temporary, investors must evaluate the risk that dividend taxes will come back. If they do, then the cash flows to investors from owing stock will plummet, as will the value of shares. Under such circumstances, it is undeniable that government policy significantly increases the fundamental risk of stocks. It would be hard to imaging that this would be good for the stock market or the economy.''

Moreover, the benefits of cutting taxes on dividends cannot be viewed in isolation--the effect on the budget must be factored in the analysis. A key point is that, as the Federal budget goes further in the red, the associated mounting Federal debt will ``crowd out'' private capital in the marketplace--having a damaging impact on the economy. This will become more and more evident as we approach the end of this decade, with the pressures of the very large increase in baby boomer retirements.

The bottom line is that, while deficits have supplanted surpluses due to war costs and the lingering effects of recession, we have a fundamental responsibility to ensure they are a temporary phenomenon-- not a perpetual cycle ``as far as the eye can see.'' The years of balanced budgets in the late 1990s should be no brief fiscal interlude, but rather the rule--so lowering taxes and containing deficits until we return to balanced budgets must not be mutually exclusive goals.

Again, the tax bill that was reported out by the Finance Committee provides the right balance of tax relief that would stimulate both consumption and investment. The fiscally responsible growth policies contained in that package meet the dual, critical challenges of immediate, stimulative economic growth without further inflating budget deficits and returning to a perpetuity of red ink. And, as I have said, the dividend plan in the Finance bill is a long-term policy that takes an important, but incremental step to eliminating that ax on dividends.

Regrettably, however, the temporary dividend proposals in the final bill, I believe, is not good long-term tax policy. If we assume a future Congress will extend this provision permanently, then the true cost would be over $300 billion--adding further to ballooning deficits well above the $350 billion net cost of the Finance Committee bill. On the other hand, if Congress does not extend the policy, it could have dire implications on the financial markets and companies.

Finally, it must be noted the way in which this provision is paid for dilutes the important benefits of the section 179 expensing by sunsetting its expansion and cutting short marriage penalty relief proposed by the President. Therefore, for the reasons I have just detailed, I regret I am unable to support the final package, as amended.

Mr. President, I ask unanimous consent that the letter I referred to earlier be printed in the Record.

Mr. President, I rise to speak in opposition to the amendment of the Senator from Arizona. This amendment would retroactively breach the contracts entered into by States and their attorneys, and the settlement agreement reached in the tobacco-related Medicaid expenses litigation.

Let me remind my colleagues of the context in which this historic tobacco settlement came about. There were over 40 years of law suits brought against tobacco companies, occurring over three different time periods.

When these attorneys brought this litigation, cases against tobacco companies would go on for years and years, almost always with little or no favorable results. In order to catch the deception and subterfuge of these companies, these cases needed staying power. The attorneys bringing these cases needed the ability to withstand significant losses while they uncovered the facts needed to make the damning case that the tobacco companies had been hiding from the public.

The plaintiffs' attorneys undertook this riskiest of cases against daunting odds, with a high likelihood of never getting paid at all. In the first phase of tobacco litigation, no one was able to muster the resources needed to bring these cases. Then a group of attorneys in the public interest pooled over $100 million of their own money in order to withstand the onslaught put up by tobacco companies bent on hiding the truth from the public.

The tobacco companies spent approximately $700 million a year in legal fees to their lawyers during this period. Thanks to their tenacity, their legal skill, and the righteousness of their cause, in the end the attorneys who brought this action prevailed. They secured a settlement that returned $246 billion to the States. That is ``billion'' with a ``b.'' To put it in perspective, that is almost as large as our entire budget deficit.

Let me say that again the tobacco settlements resulted in a huge windfall for the States and for the American people. I daresay that, in this day and age when State budgets are more squeezed than ever as a result of Federal cuts and unfunded mandates, if the States were offered this deal again, including the attorney's fees, they would take the deal in a heartbeat. In a heartbeat.

And the money collected by the States under this settlement is only the beginning. The settlement funds a new public education program to reduce youth tobacco use; it provides money every year for tobacco- related research; it dissolves the organizations that have historically served as the tobacco companies' propaganda machines; and it prohibits tobacco advertising aimed at children, such as the use of cartoon characters.

Supporters of this amendment would have you believe that its provisions somehow make the existing system fairer. Nothing could be further from the truth.

The American way is to reward those who take a risk and succeed. We grant patents that protect inventions for 17 years. We give copyright owners exclusive rights to their works for their entire life, plus another 70 years. More importantly, we don't punish people who come up with a great idea and turn it into a success. To the contrary we let them keep the fruits of their labor. But under the logic of this amendment, we would seek to penalize Bill Gates' $40 billion net worth, simply because he started with little more than a great idea and a vision to make it happen, took the risk, and prevailed. Just like these attorneys who brought the tobacco cases.

Supporters of this bill would also have you believe that it is only the trial lawyers and their supporters who oppose this amendment. Nothing could be further from the truth. Among others, consumer advocates people who look out for the little guy strongly oppose this amendment.

I also find it ironic that this amendment, which would abrogate a settlement entered into by the States, is being offered by some of the very same Senators who have made a career of advocating for States rights. This amendment, which would abrogate the contractual rights of private parties, is being offered by some of the very same Senators who have made a career of upholding the right to enter into contracts without undue regulation.

Just to be clear my colleagues refuse to interfere in the right of States to send defendants to execution without competent counsel, but insist on interfering to undo an agreement where the States reap $246 billion from the tobacco companies. Quite simply, they have got their priorities backwards.

I might also remind my colleagues of one other historical fact: Some of the Senators who are pushing this amendment today are the same folks who, just a few years ago, were doing everything in their power to defeat Federal attempts to force the tobacco companies to pay for the huge damages they have inflicted on the American people. Fortunately for the American people, and for the 50 States, they failed. Now, however, they are trying to undo this successful settlement after the fact.

Ladies and gentlemen, this is America. We make deals and we stick to them. We do not go back on our word. I urge you to oppose this amendment.

amendment no. 594

Mr. President, our economy is in a slump unlike any in recent memory. In fact, we are experiencing a downturn with features unseen since the days of the Great Depression.

In the last 2 years, we have lost over 2.6 million jobs in the private sector. That is the longest continous decline in the number of jobs in over 50 years. It has almost doubled the number of Americans who are stuck in long-term unemployment--out of a job for over half a year.

The unemployment rate has just risen to 6 percent, with 8.8 million Americans out of work.

The stock market has lost value by more than ten percent each of the last 3 years. The last time that happened was, again, the Great Depression of the 1930's. A drop of almost 30 percent in the value of the stock market has decimated the retirement savings of millions of Americans, and drained over $5 trillion in wealth from their net worth.

That is why we are here today, to debate how to respond to this crisis. This crisis is real, it is affecting millions of families directly and indirectly across this country. In addition to the thousands of jobs lost with every new report, millions more families are concerned about the security of their own jobs.

In fact, the situation is so precarious that the Federal Reserve, under the leadership of Alan Greenspan, has shifted its historical concern about inflation to a worry we haven't seen since the 1930's-- deflation. Despite a series of 12 interest rate cuts in a row, that thave pushed interest rates to forty-year lows, the Federal Reserve's meetings are now focused on keeping us out of the kind of deflation trap that Japan has been stuck in for more than a decade.

When the Fed is more worried about deflation than inflation, you know you have a probiem.

And while we ended the last century with the Federal budget in balance for the first time in a generation, we now begin the new century facing deficits bigger that we have ever seen. The Congressional Budget Office has just raised its estimate of this year's deficit to $300 billion, and that doesn't even count this $350 billion tax cut before us today.

Wall Street analysts expected the actual deficit to be closer to $400 billion or even more for this year--the biggest dollar figure ever.

This kind of budget policy is the reason why we will soon be voting to raise the national debt ceiling--to allow us to borrow enough money to pay the bills we have already incurred.

This will be the single largest increase in the national debt in our history, adding almost a trillion dollars to the debt limit, raising it to over $6.7 trillion.

Just a few short years ago we were paying down the national debt.

We have gone from a projected surplus of $5.6 trillion to a $1.8 trillion deficit. This is a record of economic bad news that has not been equaled in most American's lifetimes.

Now we are piling up additional debt, and adding heavy new interest charges to the spiraling costs of this administration's irresponsible budget policy. Over the next 10 years, we will add an additional $1.7 trillion in interest costs on that Debt--$1.7 trillion that will not be available for homeland defense, for health care, for education, for law enforcement.

How well I remember. How the men and women in the business community would come to me in the decades of deficit and tell me, ``Balance the budget, stop borrowing money like nobody else needs it. Get the government out of the credit markets so we can invest and grow.''

Where are those voices we used to hear on the Senate floor, imploring us to reverse decades of borrowing and return to the straight and narrow of balanced budgets?

We need a strong dose of those principles now. We need an economic stimulus that works. And we need an economic policy that does not mortgage our future, that does not dump the bill on our children and grandchildren.

We need a plan that we can afford, that treats the very real, specific problems that average families in Delaware and around the country are facing today. Unfortunately, the bill before us is the wrong plan, at the wrong time, at the wrong price.

We need an economic policy that has an impact right now, in the very short term--an impact on consumer spending, on the demand side, to give employers a reason to bring those workers back.

That means tax cuts for the vast majority of American families who need some relief, and who can be counted on to go out and spend that money--to create demand for more products, create more jobs.

But in addition to the very real and very serious problems we are facing today, in the very near future, just around the corner, the retirement of the baby boom generation will stretch our Social Security system to the breaking point.

Just a decade from now, surpluses in the Social Security system-- extra funds that help to cover some of our current deficits--those surpluses will disappear. Then the drain on our resources will accelerate until--according to the Social Security System's trustees-- by 2030 Social Security and Medicare will be a third of every Federal income tax dollar, and by 2040, almost half of every Federal income tax dollar.

That is clearly an impossible situation that we cannot permit to occur. We must act now to makes sure that we have the resources to keep the promises we made to the millions of Americans who have paid their Social Security taxes over the years.

But every dime of the $350 billion tax cut before us today is borrowed from Social Security--it breaks our promise to those who depend on Social Security, and sends the bill to our children and grandchildren.

The solution we are seeking today, for the ongoing loss of millions of jobs, must not ignore the crisis in federal finances that is beginning now and crests just a decade away.

It is not just that it is unfair and irresponsible to put the burden of our choices off on our children. That should be reason enough to reject this policy out of hand.

But a moment's reflection tells us that if we borrow $350 billion, or $550 billion, or--if the President had his way, $726 billion--if we borrow that money from the same capital markets where our corporations and home buyers get their money, that policy is self-defeating.

It raises the cost of money, and slows the economy down, while handing out windfall tax breaks that people will get without any change in the behavior.

That policy is indeed unfair. It is irresponsible. And it is ineffective.

But a kick-start that gets people spending and businesses hiring--and that has a reasonable cost--that kind of policy can work.

First, we all know that the real price of this bill is not $350 billion. We have already heard that key members of the Republican leadership do not expect that the tax increases in this bill, that keep the cost of the tax cuts down, will survive a conference with the House. If those tax increases go, the cost of this bill goes up.

And key provisions in the bill--like the dividend exemption--phase in slowly and then are supposed to expire after ten years. Even if you buy the idea--which I don't--that giving a tax break to the small percentage of Americans who receive dividends can somehow turn the economy around, how can you expect that change to happen if businessmen know they should wait a few years until the exclusion is phased in?

And what kind of permanent change in corporate behavior can we expect

when we know that the door is going to slam shut on this deal 10 years out?

One answer is that they don't expect that door to close. They expect the dividend provision and others to be extended. Or more and more dividends could be excluded--that creeping expansion and acceleration has been the pattern since we passed the 2001 tax cuts.

Full exemption of dividends, if it were in place at the end of this decade, would cost $750 billion over the next 10 years.

For that and many other reasons, this tax cut, as big and irresponsible as it is, is just a place holder for even more reductions, and even more deficits, even more debt.

But designed this way, to get ten pounds of tax cuts into a five pound bag, so to speak, has resulted in a tax cut that even a conservative economist who supports the administration has called, and I quote from yesterday's Washington Post, ``one of the most patently absurd tax policies every proposed.''

But maybe if this bill offered the average American family some real tax relief, maybe if we could expect a little help for the millions of jobless men and women stuck in long-term unemployment, some of the cost would be worth it.

Tragically, there is no reason to expect this legislation to do anything to stimulate the economy this year or next. The way this tax cut is designed, there is no reason to expect any benefit to the economy, and every reason to believe that the deficits it creates will cause harm.

Estimates by Congressman Henry Waxman, who examined corporate statements, show that the top three executives at Fortune's largest 100 companies would get a tax cut of $118 million if dividends were totally excluded from taxation, the goal that administration officials admit is the real aim of the partial exclusion in this bill. Under full exclusion, twenty one executives would get a tax cut of $1 million.

That is for doing nothing. Just for doing what they already do. That is not corporate tax reform, it is simply a windfall. I trust that those men and women earn every dime they already make. But no one can argue that a $118 million personal windfall into the already large pay packages of those executives is going to create a single new job.

I you really wanted to fix the problem of dividend taxation, even Republican economists--indeed, especially Republican economists--will tell you that you should eliminate the tax at the corporate level. That at least has the potential of changing the behavior of firms that now must choose between borrowing that is not taxed and dividends that are taxed.

That could be part of an honest debate about tax reform and job creation.

And when Alan Greenspan endorsed the idea of reforming dividend taxes, he said it should be done in a way that does not add to the national debt, and that it should be part of a bigger plan of reform. This proposal flunks all of those tests.

Only 13 percent of the impact of this bill will be felt in this year, Mr. President--and less than half in its first 2 years. And the vast majority of the revenue losses come in the future, as the crisis in Social Security approaches. This plan turns economic logic on its head.

This is not designed to stimulate the economy--if it were, it would provide a quick, short-term boost to family incomes, and would give businesses incentives to act right now to increase investment and create jobs.

Under this bill, the one-tenth of one percent of Americans who have an income of over $1 million will receive an average tax cut of $64,000. But those Americans in the middle 20 percent of the income spectrum would get an average tax cut of $233.

That's right, the average American gets a tax cut of $233, under this bill.

That is not fair. But it is not good economic policy either. Those good men and women fortunate and hard-working enough to make over a million dollars a year are not going to change their behavior, they aren't going to create any new jobs, just because they get an additional $64,000.

But getting money to the families who will go out tomorrow and spend it, getting money to those who are about to lose long-term unemployment benefits, getting money to the states to prevent further state tax increases or spending cuts--that has the best hope of giving the economy the stimulus it needs.

The tax cut program that makes sense and that I supported would provide a tax cut for every American taxpayer--for example, $300 for every adult, $300 for the first two children. It increases the child tax credit to $700 this year and $800 next year. And for middle class and working families, this tax cut plan that I supported accelerates relief from the marriage penalty.

Altogether, a middle class family of four would have gotten a tax cut of $1630 this year under the Democratic tax cut plan.

And if you add to that my proposal to allow parents to deduct the cost of college tuition a family with kids in college could get an additional $3000 tax break. That is real help, for real families, to deal with a real problem, and frees up real money to stimulate the economy.

Incredibly, this so-called ``Jobs'' bill makes no provision to extend the life of the long term unemployment program that expires in just two weeks. With the number of long-term unemployed at record levels and growing, this bill simply ignores their needs.

Equally astounding, the bill provides almost nothing for the states whose fiscal crisis is dragging the economy down. State budget cuts in education, health care, law enforcement--even homeland security--slow the economy as workers lose jobs and businesses lose customers.

While there appears to be $20 billion in aid to the states in this bill, in reality, the reductions in federal dividend and income taxation will cut as much as $11 billion from state taxes based on those sources.

Under the tax cut plan I support, small businesses would get three times the tax write off for investments--$75,000 worth--this year, and a tax deduction for 50 percent of the cost of new equipment, along with help getting health insurance for their employees.

The tax cut I support would get $20 billion in real help to the states to confront the fiscal crisis that is compounding the national economic slump.

And the tax cut program I voted for would extend unemployment benefits to help those looking for work sustain that search in a time of record job losses.

Finally, the plan I supported is affordable. Its effects take place immediately, and it would not leave a hole in our finances for our children to repair.

That's the plan I supported, and it is the plan our country needs. I cannot vote for this bill that is now before us because it fails to do so.

Mr. President, on rollcall vote No. 162, I voted nay. It was my intention to vote yea. I ask unanimous consent that I be permitted to change my vote to yea, which was the Landrieu amendment, since it will not affect the outcome of the vote.

Mr. President, I too am concerned that the language of Section 333 could have unintended consequences. It was my understanding that Section 333 was intended to exclude certain payments.

Mr. President, I am in support of the Dorgan amendment to the reconciliation tax cut bill that would strike a provision in the bill to privatize tax collection by the Internal Revenue Service.

The proposal to privatize tax collection is misguided. Privatizing tax collection will hurt both Federal employees, by contracting out Federal jobs, and taxpayers, who could be subject to the abuse and mismanagement of a private company. Privatization of tax collection has already been tried by the IRS in a 1996 pilot project. The pilot project was such an extraordinary failure that a further 1997 pilot project was cancelled. The contractors who conducted the project did not protect the sensitive information of taxpayers, and the project ultimately did not save the Federal Government any money.

The proposal would allow private companies to engage in collection activities without providing adequate safeguards for taxpayers against abusive activities. It is my understanding that the Fair Debt Collections Practices Act, known as FDCPA, which provides the most important protections for consumers from abusive or unfair actions by debt collectors, would not fully apply to the activities of the private tax collectors. I am particularly concerned that a taxpayer's ability to recover certain damages from an abusive private tax collector may be severely limited under this proposal.

In addition, the privatization of tax collection is a major change to the way our Government works. To make such a change without holding any hearings on the matter, and without considering all aspects of the proposal, particularly the failed pilot project and whether or not the plan will actually save money, is irresponsible.

Mr. President, I rise today in opposition to the pending legislation, S. 1054.

Our economy today is in a precarious position. It was reported yesterday that retail sales in April fell. Initial unemployment claims remain well above 400,000, the level typically associated with a weak labor market. This morning we learned that industrial production decreased by one-half of 1 percent last month and that capacity utilization fell to 74.4 percent, and is now at the lowest level in 20 years. Our industrial base is producing less, we have more plants and equipment idle which has led to fewer jobs, reduced consumer spending and increased economic insecurity for the vast majority of Americans. The unemployment rate has risen to 6.0 percent, the highest level sine 1994 and our economy has grown only at rate of 1.5 percent over the past 6 months, far below its potential. This growth rate is far too slow to create enough jobs for the nearly 9 million unemployed American workers who want to find work but can not because there are not enough jobs to be had.

The facts indicate the serious nature of the problem facing the economy in the short run. Our economic growth is not strong enough to even maintain our job base, much less create the jobs needed for those who lost their jobs during the recession.

Unfortunately, the legislation before us today will not help solve these serious problems. The administration's proposal would create very little stimulus this year, when it is needed the most. Two economic consulting firms used by the administration reached this conclusion. One estimate, performed by Economy.com, calculated that the President's proposal will add only 0.4 percent to our gross domestic product this year. The President's proposal will not create enough jobs this year, when people are out of work and can not find a job because there are none to be had. Macroeconomic Advisers issued a report, entitled `A Preliminary Analysis of the President's Jobs and Growth Proposals' which concluded that the plan would create only 242,000 jobs by the end of this year. That is less than half the 525,000 jobs that we have already lost this year alone.

The President's proposal falls far short of what the economy truly needs. Instead the administration proposal focuses on large permanent structural tax reduction aim at providing the maximum benefit to the wealthiest few. This will have very little stimulative effect while costing a great deal in both the present and the future. Far from stimulating the economy, the President's tax cut will create a large structural deficit which will slow future economic growth and result in fewer jobs. That is not just my conclusion. The Committee for Economic Development, CED, found that the President's proposal, ``would raise the cumulative 2004-2013 deficit by about $920 billion (including interest) and raise the annual deficit ten years from now by about $100 billion.

Large structural deficits have real consequences. They reduce national savings and investment, raise real interest rates and reduce economic growth. The costs of the President's plan over the long run are so substantial that the President's plan would actually reduce future economic growth. Macroeconomic Advisers concluded that ``as interest rates rise, the initial increase in the stock market and decline in the cost of capital are reversed. Weakening investments leads to a sustained decline in labor productivity and hence potential GDP.'' They found that the President's plan will reduce economic growth in the long run. Economy.com reached a similar conclusion. It estimated that the President's plan would actually shrink the economy over the next 10 years.

In his April 26 radio address, the President stated: ``Some Members of Congress support tax relief but say my proposal is too big. Since they already agree that tax relief creates jobs, it doesn't make sense to provide less tax relief and, therefore, create fewer jobs.'' In regard to that statement, the Washington Post reported, ``Asked to evaluate Bush's new argument, one Republican economist with close administration ties quipped, `I suppose it matters whether you think economics matters.'' '

I believe that economics matter. I also believe that when you pursue economic policies based on ideology instead of sound economic principles you end up hurting the lives of millions of Americans and threatening our economic future and prosperity. Look at the record of this administration: Since the President took office, the economy has lost 2.7 million private sector jobs. That is the largest job loss under any one President since we began keeping such statistics. This administration is on track to become the first administration since the Great Depression to witness a decrease in the number of jobs in America. When the President took office, what he, in effect, inherited was a 10-year surplus estimated at $5.6 trillion. That was a projection out for 10 years: a surplus of $5.6 trillion. Now with the policies that he has enacted and the policies that he is proposing, in particular, of course, this very heavily weighted tax cut for the benefit of upper income people, we will go from projecting a $5.6 trillion surplus over the 10-year period to projecting a $2.1 trillion deficit. That is a seismic shift in our position.

Many of my colleagues in the Senate as well as the President have argued that these deficit estimates are inaccurate because they fail to take into account the so-called dynamic effects from the President's proposed tax cuts. In a recent speech the President said that, ``in order to get rid of the deficit, you boost revenues coming into the Treasury by encouraging economic growth and vitality'' through his proposed tax cut. Yet when the Congressional Budget Office analyzed these dynamic effects under nine different models, it found that these dynamic effects made little difference on net and that under five of the nine models theses effects actually increased the deficit. That is under all of the various assumptions used by the CBO the so-called dynamic effects that the President has argued would help the tax cut pay for itself will not only fail to deliver on that promise but may actually increased the deficit. This is yet another example of engaging in a policy driven by political ideology instead of sound economics.

This bill is modeled on the failed economic policy that this administration has advanced: vast tax cuts for the extremely wealthy. The administration's proposal as estimated by the Brookings Institution creates a tax giveaway of over $89,000 to the average millionaire while providing only $482 to the average family with an income of $50,000. This truly represents the priorities of `Leave No Millionaire Behind' instead of `Leave No Child Behind.'

This does not have to be the case. The Congress could enact sensible, prudent policies which provide a real, substantial boost to our economy, create many more jobs now when they are needed, maintain our economic strength and security over the long run. Senator Daschle presented an alternative that would create real jobs, grow the economy, help unemployed workers, and assist State and local governments that are facing their worst fiscal crisis since WWII. Extending unemployment insurance benefits serves to stimulate the economy immediately as those receiving the benefits

are almost by definition sure to turn around and spend what they receive. Providing aid to State and local governments will allow them to forestall cuts to vital programs or tax increases, either of which would only exacerbate our current economic problems.

Comparing the Democratic alternative and the administration's proposal, the conclusions are the same using almost any economic model: The Democratic plan would create over 1 million jobs at by the end of this year, which is twice as many jobs as the administration's own estimate of their plan; the Democratic plan would provide more stimulus to the economy this year leading to higher economic growth; and the Democratic plan is temporary and far less costly than the President's proposal.

Mr. President, I oppose this legislation and I urge my fellow colleagues to vote no on this bill.

Mr. President, this Republican tax bill provides lavish support for the wealthy, but it gives only the back of its hand to America's senior citizens. This amendment changes those backward priorities. It eliminates the dividend tax cut and the cut in the top rate bracket, and uses the funds to pay for a Medicare prescription drug benefit for the elderly.

The two tax cuts my amendment eliminates will primarily benefit the rich. Prescription drug coverage under Medicare will benefit 40 million senior citizens and the disabled individuals, who are overwhelmingly of modest means and typically have high medical costs. These men and women have stood by our country through war and depression. Giving them the medical care they deserve is a higher priority than giving the wealthy even greater wealth. When Republicans side with the wealthy, they call it free enterprise. When senior citizens ask for fair treatment, Republicans call it class warfare.

Medicare is not class warfare. It's a solemn promise between government and the American people. It says, ``Play by the rules, contribute to the system during your working years, and you will have health security in your retirement years.'' Because of Medicare, the elderly have long had insurance for their hospital bills and their doctors bills. But the promise of health security at the core of Medicare is broken every day because Medicare does not cover the soaring price of prescription drugs.

Too many elderly citizens must choose between food on the table and the medicine they need. Too many elderly Americans are taking only half the drugs their doctor prescribes--or none at all--because they can't afford them. Today, the average senior citizen has an income of $14,000--and prescription drug bills of $1,500, and many senior citizens pay far more than that.

Every day, senior citizens face the harsh fact that prescription drug costs are going through the roof, while their incomes are stagnating. Over the last four years, prescription drug costs have gone up by 16 percent a year, while the Social Security benefits on which senior citizens depend have gone up only 2.3 percent a year. Hard-pressed employers are cutting back on retiree prescription drug coverage--and some retirees are losing their coverage altogether, because their former employers are now bankrupt.

While millionaires receive huge tax breaks they do not need under the Republican tax plan, the Republican budget shortchanges senior citizens who desperately need prescription drug coverage. Prescription drug spending for senior citizens will total $1.8 trillion over the next decade but the Republican budget allocates only $400 billion for Medicare.

Even worse, the Republican budget's $400 billion for Medicare isn't even reserved for prescription drug coverage. The President wants to spend tens of billions of this amount on so-called reforms to force senior citizens to give up Medicare and join HMOs or other private insurance plans. Relief for hard-pressed doctors, hospital, home health agencies, and nursing homes is also supposed to come out of this minimal allocation.

It is important for every Senator to understand who it is that Medicare protects--and who it is that the Bush administration would force into an HMO or other private insurance plan. The typical Medicare enrollee is a 75-year-old widow, living alone. Her total income is just $11,300 a year. She has at least one chronic condition and suffers from arthritis. In her younger years, she and her husband worked hard. They raised a family. They stood by this country through economic hard times, the Second World War, the Korean war, and the cold war. They sacrificed to protect and build a better country--not just for their children but for all of us.

This is the woman Republicans want to force to give up her doctor and join an HMO. This is the woman they say should give up her freedom to go to the physician and hospital of her choice, so that HMOs can profit. This is the woman who would be victimized if Congress allows the GOP plan for Medicare to become law.

Senior citizens deserve prescription drug coverage--no ifs, ands, or buts. Republicans say Medicare is a failed program--but millions of senior citizens know better. Republicans believe that the private sector does a better job of controlling costs than Medicare--but studies show the reserve is true. Republicans say senior citizens should be forced to give up the doctors they trust, so that HMOs and private insurance plans can enjoy higher profits--but the American people don't agree; and the U.S. Senate shouldn't agree either.

Senior citizens are faced with a deadly double whammy. Prescription drug costs are out of control, and private insurance coverage is drying up. Last year, prescription drug costs soared by a whopping 14 percent. They have shot up at double-digit rates in each of the last five years. Whether we are talking about employee retirement plans, Medigap coverage, or Medicare HMOs, prescription drug coverage is skyrocketing in cost, and becoming more and more out of reach by the elderly.

It used to be that the only seniors with reliable, adequate, affordable coverage were the very poor on Medicaid. Today, because of the state fiscal crisis created by the recession and the let-them-eat- cake attitude of the Republican party, even the poorest of the poor can no longer count on protection.

States are now facing the largest budget deficits in half a century--an estimated $26 billion this year, and $70 billion next year.

The result is that States are cutting back on prescription drug coverage for those least able to pay. Thirty-nine States expect to cut their Medicaid drug benefit this year. In Massachusetts, 80,000 senior citizens were about to lose their prescription drug coverage under the State's Senior Advantage program on July 1. Emergency action by the State legislature saved the program, but only after making substantial reductions in coverage.

Tax cuts in this Republican bill will make the States' fiscal situation even worse. Because State taxes are often pegged to the Federal system, the dividend tax cut alone will cost States $11 billion over the next 10 years.

Ten million of the elderly enjoy high quality, affordable retirement coverage through a former employer. But retiree coverage is plummeting too. In just 8 years--from 1994 to 2002--the number of firms offering retiree coverage fell by a massive 40 percent.

Medicare HMOs are also drastically cutting back. Since 1999, more than 2 million Medicare beneficiaries have been dropped by their Medicare HMOs. Of the HMOs that remain in the program, more than 70 percent limit drug coverage to a meager $500 a year or less, and more than half only pay for generic drugs. Medigap plans that offer drug coverage are priced out of reach for most seniors--and even the coverage offered is severely limited.

Thirteen million Medicare beneficiaries have no prescription drug coverage at all. Only half of all senior citizens have coverage throughout the year.

Previous Republican proposals have shown what happens to senior citizens when funds are inadequate. High deductibles, gaps in coverage, demeaning asset tests, and incentives for employers to drop retiree coverage are just some of the unacceptable features of programs that give crumbs to the elderly and plums to the wealthy.

This amendment strikes two provisions of the tax bill that primarily benefit the rich, in order to provide funds to give the elderly the prescription drug benefit they deserve. The first provision the amendment strikes speeds up the reduction of the top tax rate from 38.6 percent to 36 percent. Virtually all the benefits of this Republican tax rate reduction go to people earning more than $310,000 a year. People earning a million dollars a year or more will receive a tax cut of $60,000. I ask Members of the Senate: Do persons with a million dollars in income a year really need another $60,000 in tax cuts? Surely, our values and priorities have not become so warped that we think it is more important for millionaires to be richer than it is for senior citizens to have life-saving prescription drugs.

The second provision the amendment strikes is the dividend tax cut. That cut does virtually nothing for senior citizens and everything for the wealthy. The provision in the bill is only a partial elimination of the tax on dividends, but its intention is clearly to set the stage for full repeal of the tax. The full repeal would certainly be welcomed by millionaires. They will get an average tax break of $52,000. But a low- income elderly person with $8,600 in income will get a tax cut averaging $1. And the average elderly person with an income of $14,000 will get a tax cut of $26. Do the Members of the Senate really believe this is the right priority for our country?

The funds saved from this amendment--$115 billion over 10 years--will be used to provide a better prescription drug benefit than will be possible if this tax bill passes in its current form. Passing this amendment will be a clear statement by the Senate that mending the broken promise of Medicare is more important than lavishing unneeded and undeserved new tax breaks on millionaires.

Mr. President, I am pleased to cosponsor and support amendment No. 594 being offered by the chairman of the Finance Committee with respect to the Medicare Program.

The amendment provides approximately $25 billion over 10 years to reduce the inequity in the Medicare Program between urban and rural areas and between the States that has so penalized health care providers in New Mexico and includes language from four bills that I have either introduced this year or introduced last year.

First, I am pleased the Grassley amendment includes the language from S. 379, the Medicare Incentive Payment Program Improvement Act of 2003, which I introduced with Senator Thomas and makes automatic the 10 percent bonus payment intended to physicians

in rural, medically underserved areas. Under current law, physicians must go through a cumbersome application process, if they even know they are eligible and can apply, and subject themselves to increased scrutiny for audits if they do apply. Consequently, few doctors are receiving the payment intended to provide physicians incentives to treat Medicare patients in medically underserved areas and to retain those doctors already providing services in those areas.

Second, the Grassley amendment includes language that significantly reduces the geographic inequities that are a part of the current Medicare physician payment system and disadvantages New Mexico physicians. This language is similar to that in S. 881, the Rural Equity Payment Index Reform, REPaIR, Act of 2003, which I introduced with Senator Cochran and is a companion bill to H.R. 33, introduced in the House of Representatives by Representative Bereuter. Reducing the inequity in just the work component of the physician payment schedule will increase payments to New Mexico physicians by an estimated $3 million annually.

Third, this amendment includes language from legislation I introduced late last year entitled the Medicare Hospital Outpatient Department Fair Payment Act with Senator Snowe to extend the hold harmless for rural hospitals in outpatient departments, and adds a 5 percent add-on payment for clinics and emergency room visits in rural hospitals.

And fourth, the amendment lifts the rural cap in the Medicare disproportionate share hospital, DSH, program, which comes from the Medicare Safety Net Hospital Improvement Act that I introduced last year with Senator Roberts. This provision will add an estimated $4 million annually to New Mexico rural hospitals.

In addition, I would like to applaud the chairman for including language from legislation, S. 816, introduced by Senator Conrad that I was an original cosponsor of and entitled the Health Care access and Rural Equity Act. Among other things, the language eliminates the disparity in hospital payments caused by the differential paid to rural and small urban hospitals compared to large urban hospitals and significantly reduces the disparity caused by the wage index in the hospital payment formula. Although rather arcane provisions in the hospital payment formula, they result in significant disparities in payments and the changes will have an important impact on hospitals throughout New Mexico.

Before closing, I would like to express profound concern with respect to the offsets used by the amendment, which include the addition of copayments for clinical services and the impact the change in payments for outpatient department prescription drugs will have on oncology physicians. However, Chairman Grassley has committed to work to address the need for a revision in payments to oncology doctors and we will work to change the language with respect to copayments for clinical laboratory services as this language moves forward.

Mr. President, I would like to thank the chairman and ranking member of the Finance Committee, Senators Grassley and Baucus, for agreeing to accept the language in the amendment being offered by me and Senators Enzi, Lincoln, Smith, and Nelson of Nebraska, that would increase the Federal allotment to States for Medicaid disproportionate share hospital, or DSH, payments to what are called ``extremely low-DSH States'' from 1 percent of overall Medicaid spending in each State to 3 percent. The language comes from legislation, S. 204, that I introduced with Senators Enzi, Lincoln, Baucus, Smith Harkin, Domenici, Johnson, Nelson of Nebraska, and Dayton, and was cosponsored by Senators Pryor, Dorgan, and Daschle, entitled the Medicaid Safety Net Improvement Act of 2003.

This amendment is important to the continued survival of many of our Nation's safety net hospitals that provide critical health care access to a number of our Nation's 41.2 million uninsured citizens, including 373,000 in New Mexico, through the Medicaid disproportionate share hospital, or DSH, program.

At a time of growing numbers of uninsured and increased financial strain on our Nations' safety net, we need to increase the ability of ``extremely low-DSH States' to address the problems facing their safety net and to reduce

the current inequity in funding among the States. In fact, many hospitals have resorted to cutting services or eliminating jobs to deal with the growing uncompensated care problem, and it threatens the health care safety net across this country.

At Memorial Medical Center in Las Cruces, NM, the hospital recently announced the elimination of its maternity and mental health care services due to the rapidly growing burden of uncompensated care. While the elimination of those services has been temporarily forestalled, the uncompensated care burden and bottom line deficits at that hospital remain and the personnel layoffs of over 100 staff members in that community has already occurred.

Indeed, the stories about the growing burden on hospital emergency rooms across the country are well known. This is completely and directly related to the economic recession facing our country and makes this amendment directly relevant to this legislation.

It is also why the amendment has the support of the American Association, the National Association of Public Hospitals and Health Systems, the National Association of Children's Hospitals, the Federation of American Hospitals, the Association of American Medical Colleges, and the Catholic Health Association of the United States. As they write, ``Today, safety net hospitals face a confluence of challenges--including increased uncompensated care as more Americans find themselves without health insurance--that put critical pressure on hospitals' ability to serve their entire communities.''

The 20 States that would benefit from this amendment include: Alaska, Arkansas, Delaware, Hawaii, Idaho, Iowa, Kansas, Maryland, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Utah, Wisconsin, and Wyoming. I would add that the legislation does not impact the Federal DSH allotments in other States but only seeks to give ``extremely low-DSH States'' the ability to respond to the growing burdens of uncompensated care in their States.

I would note that Hawaii and Tennessee have been included in their amendment because their respective States currently do not have DSH programs and are prohibited from making such payments. The amendment provides them that authority under certain circumstances.

I would like to once again thank Senator Grassley and his staff members, Ted Totman, Colan Roskey, Jennifer Bell, and Leah Kegler, Senator Baucus and his staff members, Bill Dauster, Liz Fowler, Kate Kirchgraber, and Andrea Cohen, for their help in getting this amendment passed. In addition, this would have never come to fruition without the strong support by Senators Enzi, Lincoln, Smith, Nelson of Nebraska, and the other cosponsors of S. 204.

Amendment No. 666