High Plains Aquifer Hydrogeologic Characterization, Mapping, and Modeling Act

I ask for the yeas and nays on the amendment.

Will the majority leader yield?

I just request of the majority leader if we might start the votes at 9:45 instead of 9:30 to accommodate one of our Members. I also request of our colleagues, I know some people--Senator Conrad and I do not want vote-aramas. And I hate for anybody to come back and say: I have not had a chance to debate my amendment. We will be here tonight to discuss amendments, and we will work together to schedule amendments according to Senators' wishes. But we need to see copies of the amendments in advance, and then we will try to schedule the amendments. We will work energetically--as soon as we get copies of amendments--to work out some of these amendments, maybe accept some amendments if we have some advance notification. We are going to try to be as cooperative as possible.

So my first request would be, hopefully, to move the first rollcall vote to 9:45. And then I just urge our colleagues, if they wish to debate their amendments tonight, please do so. And if not, I request that they submit us copies of the amendments as early as possible so we can do some work on those amendments tonight.

I thank the leader.

No.

Will the leader yield?

I wanted to make that clarification. For the information of our colleagues, I guess theoretically we could spend a lot of time talking about amendments pending and not allow time to be discussed on Iraq. That is not our intention. I will be happy to share time with my colleague from North Dakota and others who wish to speak on Iraq. We will be here until midnight. If people want to speak longer on amendments, I am happy to do that, too. I want to be as accommodating as possible but still try to complete this resolution by tomorrow night. I will be happy to yield some time if it would help some of our colleagues.

The Senator is correct.

I would be happy to, out of the time we have in the bank, you might say, for the amendments, to allow Members to speak up to an hour on the Iraq resolution, if they so desire. I don't want to yield all of it, but I will be happy to do that. I don't think that is going to be necessary. I will be happy to work with our colleagues.

Mr. President, I am going to speak on both the economic package and the highway bill, but I see my friend and colleague from Louisiana. Does she wish to speak?

We will be happy to have you discuss it, but prefer you not send it to the desk immediately.

I yield to my friend and colleague before speaking.

Mr. President, I yield myself such time on the Breaux amendment.

Most agree we need to do something to grow the economy. There are different ideas, and I compliment my colleagues for some of the ideas. We have some very good ideas on both sides. Maybe we can come up with some of the best. I wish to talk about our plan a little bit and also make a couple of comments on the highway bill, as well.

We are dealing with a budget. We have a deficit, and a lot of people ask, why do we have a deficit? Revenues have declined, and declined substantially. In the year 2000 revenues were over $2 trillion, and last year they were $1.85 trillion. That is a reduction of $175 billion. If you look at the history of the United States, almost every year there has been some increase. Hardly ever have we seen a decrease 2 years in a row. That is a decrease together of 9 percent. That is a reason we have a deficit, coupled with the fact expenditures are up. Revenues went down 9 percent and expenditures went up by 12 percent. I am not casting blame. That is the situation and where we are today.

Right now we spend more than we take in. That is a $160 billion difference and the projection is worse for this year.

How do we get this number to grow? This is a real reduction. What caused that? We look at gross domestic production and the economy really declined. It started declining in the year 2000. We had robust economic growth through the mid-1990s. In 1997, when we reduced the capital gains tax from 28 percent to 20 percent, that created an economic explosion that helped the stock market and helped the economy grow. More companies were paying more bonuses and the economy had a robust growth.

Chairman Greenspan said it is irrational exuberance because the market climbed precipitously. It started falling in the year 2000 and we had negative three quarters which is called a recession, the last part of 2000; it fell down in the first three quarters of 2001. It was negative so we had recession. It bounced up in 2002, but still very soft.

If you look at what happened in the stock market, there was a lot of reduction of wealth in NASDAQ which was up to 5,000 in March of 2000, and by December of 2000 it was half that amount, less than 3,000; 2,800 I believe. NASDAQ fell about half in the last 9 months of 2000.

Again I am not faulting anyone, but there was a precipitous decline in wealth, precipitous decline in market value and, to some extent, that continued in the year 2001, particularly after September 11.

Add those things together and the market falls, revenues fall, we have a big deficit. 2001 caused a lot of increase in expenditures, helping those people who needed help and rebuilding our cities and the Pentagon, and so on, the war on terrorism. A lot happened to cause enormous deficits.

Most of us ask, what can we do to improve this? How can we turn the economy around? I mentioned in 1997 we reduced the capital gains rate, we had a very positive increase of revenues to the Government even when we reduced taxes. So we are trying to think, what can we do now to help the economy? That certainly worked in 1997. I don't think anyone disputes that. What can we do in the year 2003 that might help the economy?

I think we should eliminate the double taxation of dividends. People sometimes who maybe do not follow the economic markets, tax policy, and so on, are shocked when I say, did you know we tax dividends twice? We tax dividends higher in the United States than any other country in the world but Japan, and Japan and the United States are taxed about the same. Higher than anyone. The effective rate is about 70 percent. The corporate rate is 35 percent. Individual rates could be 38.6 or 35 percent or 27 percent, but the combined rate, if it is 35 percent and the individual rate is 30 percent, is 65 percent. That is two-thirds of the money going to Government. So if a corporation makes money and they want to distribute to their owners, the Government gets two-thirds and the owners get one-third. That is not a big deal. That discourages investment. Who wants to invest in a company if that is what they get back? I owned and operated a company. It does not make sense to distribute earnings in the form of dividends. The Government would be the primary beneficiary, the owner would be the secondary beneficiary. That did not make good sense.

The President is proposing eliminating double taxation of dividends. That is exactly right. We would be closer to other countries. It is embarrassing to me to see we tax dividends at a rate greater than the French, greater than Hungary, greater than the Czech Republic, greater than Greece. It is time for a change.

People whom I respect, what do they say? Charles Schwab says:

I can't think of any other tax policy that would, at one

stroke, be more beneficial to ordinary investors. The impact

[of dividend relief] would be enormous.

I think he is right. I don't think he was doing that for personal interest.

Here is the analysis by several analysts in their projection of what they think, by eliminating double taxation of dividends, how much the market might rise. A lot of well-respected individuals--Lehman Brothers--say anywhere from 5 percent to about 15 percent. Most said it would be a positive benefit to the market.

Alan Greenspan testified:

In my judgment, the elimination of the double taxation of

dividends will be helpful to everybody. There is no question

that this particular program will be, net, a benefit to

virtually everybody over the long run, and that is one of the

reasons I strongly support it.

That was in his testimony before the House on February 12 of this year.

So I just make those comments. I hate to see a proposal that is before us--I should not say that. I welcome the alternatives that are offered by my friends and colleagues, that are supporting the so-called $350 billion proposal. The tax reduction in the 350 proposal is really $323.3 billion. The balance of that is additional refundable tax credits; in other words, the Government is writing a check.

I am afraid, if that amendment is agreed to, and we will be voting on it tomorrow--I have great respect for my colleagues, Senators Breaux, Voinovich, Snowe, who offered this amendment, Senator Baucus. I have great respect for them and served with them for many years in my Senate career and have the pleasure of serving with them on the Finance Committee. The Finance Committee will take whatever number we give them out of the budget, and they will fashion together a growth package.

I am afraid if we went with a growth package that is limited to tax reduction of $323 billion, we will not be able to do this dividend proposal, we will not be able to follow the advice of Mr. Greenspan and Mr. Schwab and many others who really think this would help grow the economy. I don't want to take the growth out of the growth package. I do want us to be innovative enough to say, wait a minute, if we can change tax policy and grow the economy, let's do it. If you find effective tax rates anywhere above 60 percent, that is very suffocating to economic growth. It dampens it to such an extent, a lot of people say, why make the investment? Why would people invest, if they are primarily interested in dividends, if they realize the complicated and very heavy burden of taxation that is in the present law? Especially when you can invest in other countries and the taxation rate is not nearly as high.

Now we have such an international investment system, with the home PC, you can invest anywhere in the world any time of the day you want. It is wonderful, the opportunities we have in the United States. You don't have to invest in the United States.

What has really happened as a result, people realize the economic consequences of investing in companies that pay large portions of their proceeds in dividends, so they shy away from those companies, in many cases, and go towards what we would call

growth stocks, stocks that do not pay dividends but they have greater growing potential. They may be more volatile, may be a little more risky, but the taxation rate on those companies--not on distribution of dividends, it is on capital gains--taxed at 20 percent. It is not double taxed. Capital gains would be capped at 20 percent, about half the rate of dividends. So you have a real encouragement. Frankly, you have had an explosion in growth of those companies vis-a-vis the companies that pay dividends.

Why should we disadvantage companies that distribute the benefits of their earnings to their owners through the form of cash?

I think the administration is right on target. I think they have come up with a good proposal that would benefit, not just investors, not just the people who own a lot of stock, they would benefit the fireman, benefit the policeman, the teacher, the civil servant, they would benefit anybody who happened to have money in a retirement fund that happens to invest in stocks. And most all retirement funds do.

So, let's do something to help the teachers and the firemen and let's do something that would help government employees and other people, individuals, to help grow the economy. When we do that, we will see the stock market grow and we will see capital gains being paid again; we will see more revenues coming into the Government; we will see more investment, more jobs created.

It is estimated that this proposal on dividends alone would create well over a million jobs--I think 1.4 million jobs just in the first year.

Also, on family relief, there are a couple of packages we have. We have the investment proposal, and I want to talk about that primarily. Also, the package we have that the administration proposed and that we are hopeful will be reported out of the Finance Committee--again, we don't write the bill on the floor. I think some people think we do that in the budget. We do not, unless Senator Conrad and I can come up with an amendment and change the way we do business. We just give the Finance Committee an instruction. But the instruction we are hoping to give would allow them to eliminate double taxation of dividends and also provide what I would call small business and family relief. We would do, I think, some wonderful, long overdue things that would help grow the economy. We would tax individuals no more than we tax corporations.

Why in the world would we tax individuals at a rate about 10 percent higher than we tax corporations? We do that today. We will not if we are able to pass this package.

Why in the world would we have heavy taxes on families? The proposal we have before us would provide tax relief to 92 million taxpayers. It is very profamily.

We would have marriage penalty relief that would benefit 42 million couples. Marriage penalty relief--somebody says, what are you doing? We are taking the individual tax rate of 15 percent--and individuals who have taxable income of $28,000 pay 15 percent. Above that, they pay 27 percent. We are saying, why don't we double that for a couple. The present law doesn't do that. So we expand the 15 percent bracket for couples from about $46,000 to $56,800. What is the impact of that? That means that for a couple, a married couple, if they have a combined income up to $56,800, their tax rate is 15 percent. That will save them about $1,222.

Think about that. I heard somebody say about the tax proposal, I know the bulk of this goes for the wealthy. That is not correct. That is very significant tax relief for a lot of married couples today, $1,200, if they have combined income up to $56,000. If they have two kids, they get an additional tax credit per child. The present law is $600; we would accelerate that to $1,000 per child.

My daughter just gave birth to a new son, my grandson Nicholas. They will be able to get a $1,000 tax credit for Nicholas and that's true for every child in America--$1,000. That is significant. If you have four kids, that is $4,000 somebody wouldn't be paying taxes on. They will be able to use that money for their education, for their health care, for taking care of them. This is very family friendly. I think it is also very friendly for growing the economy.

We also provide expensing for small business. I used to own and operate a small business. I had a janitorial service with my wife, and that was a small business. We would be able to expense things, not amortize them. That is a positive thing. That means you get to recoup your investment over a very short period of time--actually, immediately. Up to $75,000 you get to expense it, not write it off over years. It makes sense to write it off in the year you write the check, rather than spread it over several years. It makes you more likely to make the investment, which means you would make more investments and create more jobs. It is a very positive, progrowth, probusiness change.

If you look at several of these provisions in the President's package, I think they would help the economy, help the stock market, help small businesses, help American families. They would help taxpayers.

If we cut it in half, I am afraid we will not be able to do the things either for the family or do the things for investment. We will not be able to grow the economy. We won't be able to create jobs. I am afraid if we cut the package in half, we would basically be taking the growth out of the growth package. It might be some tax relief, but the net result would be, I am afraid, you wouldn't get much growth.

You say: Why is that, $350 billion sounds like a lot of money. Over this 10-year period--and that is what we are talking about--the Federal Government is estimated to take in $28 trillion. So if you talk about $350 billion over $28 trillion, that is a very small percentage. We are proposing you need to have a little more if you are really going to have an impact on the economy.

Is it too much? Is 725? Well, $725 billion is really not the tax cut. The real tax cut portion is $698 billion--again, spread out over 10.

Somebody will say, Wait a minute, your budget proposal is more. The President had $1.5 trillion; you have $1.3 trillion. What we are reconciling is this $698 billion. By reconciling, for those who are not familiar with Senate language, that means we are telling the Finance Committee: Report out a bill that would do such-and-such. We didn't say put the entire package over the next 10 years, this $1.3 trillion in the package. We are telling the Finance Committee, take about half of it and make it law this year because we want to grow the economy this year; we want to do it now. Part of the tax cut could be done anytime up to the year 2010. Because we are basically just extending present law.

We have several years to do that. This needs to be done now. This needs to be done now because we need to create jobs now.

So I just mention that. I have the greatest respect for my colleagues, some of whom are sincere deficit hawks, and they believe maybe if we did this, we might not be good for the deficit. I think we need to do something more aggressive to help grow the economy.

We have a legitimate difference of opinion. I have great respect for their opinion. I have great respect for colleagues who have different ideas. We have had proposals that will be considered tomorrow, or we have already had them on the floor, from $100 billion, to more than that, $350 billion, $700 billion--you name it. There may be someone who has it for more.

I think the President has a pretty good balance. I encourage my colleagues to not vote for the amendment which would cut the growth package in half.

Amendment No. 358

Mr. President, I wish to make a couple of other comments.

My friend and colleague, Senator Bond, discussed an amendment dealing with transportation. He talked about highways. Frankly, every Member of Congress--probably every elected official in any elected capacity-- happens to be a friend of highways.

If you are in a city council, someone is talking to you about roads; if you are the mayor of Minneapolis or St. Paul, people are talking to you about roads. If you are in State government, you spend half your time talking about highways.

I used to be in the State senate. They ran me off. But everybody is concerned about highways. Everybody is concerned about infrastructure. And they

are right. And particularly after a harsh winter, roads are particularly bad.

We are all concerned about bad roads. Somebody was talking about the commutes take too long. Part of it is because of the bad roads. There is a lot of truth in everything that is said. We have a lot of compelling infrastructure needs.

But I have some reservations about the amendment offered by my colleague from Missouri, and, frankly, my colleague from Oklahoma, for whom I have the greatest respect, and other people who are supporting this. I think they are as well intended as anybody you will find. But I am concerned about what I am afraid the amendment would do.

It would move us away from the idea of user taxes to pay for roads. That is a tradition that we have had certainly since Eisenhower, since we started building the Interstate System. Since we have had a Federal highway program, we have had gasoline taxes pay for highways. And then we take off a percentage of gasoline taxes to pay for mass transit. But basically it is the user fees that pay for the expansion of the program.

And looking back, I remember debating, in 1982 or 1983--I think there was a nickel-a-gallon gasoline tax, and we had a filibuster that lasted right before Christmas. It was over whether or not there would be a nickel-a-gallon gasoline tax increase. I was opposing it at that time, thinking the States should have to have the right if they wanted to do it, the State should have the option, not a Federal mandate. I lost that debate, but it was a long and interesting debate. But I can see the demand by people who want to have more highways built, and maybe a Federal gasoline tax, and so on.

I am a lot more sympathetic now to listening to the demands. People say: We want more for highways. I certainly want to listen to them, but I think they should be paid by gasoline taxes.

Some people are proposing that we now have a significant infusion of general revenue funds to pay for highways. You might say: Why are you opposed to that? Because there is no limit as to how much that would cost the Federal Government. There is no limit to the demand for more money for highways, absolutely no limit, no limit whatsoever.

You could take any program before us, and you could multiply it by five, and somebody could legitimately say that is not enough-- legitimately because there are a lot of demands. You can take these figures and multiply them. There are a lot of demands for more highways.

But, to me, it is a serious mistake and maybe a budget breach. If you say we are going to use general revenues to pay for highways, then a lot of people think, if it comes from the Federal Government, it doesn't cost anything. It doesn't cost you anything because it is from the Federal Government--especially if you have a highway formula that says 80 percent of it comes from the Federal Government and only 20 percent comes from the State.

So the States may decide: let's raise gasoline prices because we want to get four times as much from the Federal Government. You think about that. We have not done that in the past.

Now, we made some changes. I look back. In 1990--guess what--the Federal program for highways was $10 billion. Today, it is over $30 billion. This is 12 years later, and we are spending three times what we spent in 1990.

In 1997, we were spending less than $20 billion, $18.7 billion. Today, we are spending over $30 billion. That was just about 5, 6 years ago that we were spending $18.7 billion. Now we are spending over $30 billion.

Congress even changed the formula when we had gasoline revenues going up. We did, and the economy was really going well. Frankly, when the economy is going well, you have more highway usage, and you have more money coming into the trust funds. So the fund formulas were altered to allow the highways to get more of that money more immediately. I supported that. It seemed good. More money was coming in, so let them have it. It is a user fee. Let the user fee apply.

But the formula also said, if the highway funds decline, they will be reduced. That was agreed to. That is part of law. That was part of the agreement. Well, guess what? Revenues declined, and then everybody said: No. Whoa. We can't take a decline. And so, in the last year's appropriations bill--actually this year; we just passed it in January-- it said, instead of going down, according to law, what, to $24 billion, it came in at $31.6 billion. It was supposed to go down to $24 billion. Congress said: No, no, no. We don't want to have a reduction of that percentage even though we agreed to it. We decided to put more money in more quickly, but we were supposed to reduce it if it started falling.

Highway revenues started falling because of different reasons, maybe because of terrorism or gasoline prices, but the total money coming into the fund went down. But Congress said: No. Let's spend more money. So we went from $31.3 billion.

The administration requested $29.3 billion in 2004. And I will tell you, as the chairman of the Budget Committee, we squeezed every way we could. We came up with: Can we squeeze the trust fund down quicker? Can we move some money into the trust fund that should have been in there? Yes, we found some gasohol money going into general revenue funds. We put that in. That was about $700 million per year. We did some other things.

If it is a legitimate user fee concept, I am willing to consider it. I think there are vehicles driving around today that are tax exempt, that do not pay taxes, and, by golly, they ought to pay a tax. They are tearing up the road like everybody else. Some of them Senator Bond alluded to that I agree with. Some have new technology and maybe Congress tried to encourage that by saying they will be tax exempt. But I don't think they should be, if they are tearing up the road.

We have some cases where maybe even some groups do not pay highway taxes and they are on the highway. Let's stop that. They are using the highways. They should pay for them. Some people in my State will not like me saying that because we have a lot of individuals who are doing that today. So let's close whatever loopholes we can and get whatever money could come into the highway fund as a result.

But the proposal that is before us now, that we will be voting on-- and it may well pass; I can count votes around here probably as good as some--would increase that $31 billion program. The President's request was $29 billion. We were able to scrape it around and come out with, what, $32.1 billion. That is about the best we can do out of the money that is coming into the fund.

I am open to ideas. If we can do better, I am happy to consider that. We put in language that says, if we in the Finance Committee raise more money one way or another through a user fee, whatever they would do, great, they get the money. Power to them. If they raise gasoline prices, they index gasoline prices, they put on an excise tax on tires, whatever the committee might do, if they close the loophole because they find out certain groups are on tax-exempt vehicles that ought to be paying taxes, power to them. Whatever they can get, they should come in. And maybe we have underestimated it. The Finance Committee does a great job or the Ways and Means Committee. If they can find more ways of closing loopholes, power to them; they get 100 percent of the money.

But the proposal we have before us now just basically let's you increase that by about $8 billion. Let's take that $32 billion and make it a $40 billion program. It increases costs over what we have proposed in the first 6 years of our budget, about almost $60 billion for 6 years. Our budget is a 10-year budget. But for the first 6 years, it is about $10 billion a year.

Now, that is a big increase: $10 billion a year being highways and mass transit. That is a big increase. And it is not paid for by gasoline taxes. It is basically paid for by an increase in the deficit. And maybe even worse than that, it breaks this tradition of paying for roads and highways through user fees.

I will say again, the reason why I am speaking very strongly about this is that I think that is a terrible precedent to set. If we are going to be general funding highways, we are opening ourselves up to unlimited demands on Federal money, especially if you stay with

the 80-to-20 ratio. The 80-to-20 ratio is 80 percent the Federal Government and 20 percent States. And there is no limit to the demands at that kind of ratio.

If we are going to be paying 80 percent of the cost, you are going to do general revenue funds, I will tell you right now, Congress will be besieged with more requests and put in more general revenue funds.

I understand the highway lobby is powerful. I understand they are out in the Halls. I understand they have lots of cosponsors. I understand they are making phone calls: We need this to get our road; we need this to get a better ratio for our State, our State has been a donor State for years.

I want to see that corrected. Some people see this as a solution for correcting it. If you go general revenue funds, we will regret it. At least if you have a user fee concept, it is limiting the growth of the program because there is a negative on raising gasoline taxes. People can see it, and they are having a hard time paying their gasoline prices right now, with gas line prices at $1.75 and $2, in some cases.

Maybe the war in Iraq will go well and can be over soon. I hope and pray that it does. God bless our troops and our leaders. They are doing a fantastic job. If that happens, my guess is oil prices will come tumbling down as will gasoline prices, and maybe then it will be more palatable to be raising gasoline taxes.

If my colleagues vote for a gasoline tax increase, power to them. I hope every dime of it goes into highways. But to get something started where you end up having about 25 percent of highways being built with general revenue funds, I think would be a mistake. I also don't think the President will sign the bill. So I mention these things. It is important for us to pass a highway bill and to get it passed.

I make a commitment to work with my friends and colleagues, Senator Inhofe and Senator Bond, others who have a very strong interest in this. I want to work with them. I want a good highway bill to be signed by the President, and I would like to think that we would put one on his desk that would be responsible as well.

I am afraid that the bill we have before us, going from basically $10 billion in 1990 to $18 billion in 1997 and now we are at $31, $32 billion, to try to jump that up immediately at 40 with general revenue funds is wrong. If we do it through some other type of a user fee, that might be more palatable.

I encourage my colleagues. I don't think this is really sustainable, if we don't do something different. I know there is some flexibility among some of the proponents. I commit that I will work with them to try to come up with something that will be agreeable, sustainable, and something that can be signed.

I mention those reservations with the greatest respect to the proponents. I will urge my colleagues to vote no on the amendment tomorrow.

I apologize to my colleague from Delaware because he has been waiting for a few minutes. I didn't mean to speak at that length, but I thank the Chair and yield the floor.

Will the Senator yield?

That is percentage of GDP. We have a much bigger percent of GDP, but a tax rate is a tax rate.

I ran a corporation. When I made profits, I paid that rate. Maybe somebody was able to figure out some Enron-type schemes and things. This corporation didn't. Most corporations, a lot of corporations do not. I wanted to make sure, the percentage GDP, because we have the largest GDP in the world, I don't think is the relevant type of analysis to use.

Will the Senator yield?

How much time would be available on the amendment for those who are opposed to the amendment?

I ask unanimous consent that I be allowed to speak following the Senator from Montana in opposition.

Thank you, Mr. President. I yield myself such time as I may consume.

Mr. President, I have been very interested in the discussions we have had up until now. I think there are several things that need to be said. Even though they have been said before, they need to be stressed again.

With respect to the projections that are made about the future, and the numbers we are looking at, the one thing we can be sure about, with respect to the projections, is they are wrong. What we cannot be sure of is whether they are wrong on the high side or the low side. But we can be sure they are wrong.

We also can be sure they will be adjusted, revised, and issued with the same pronouncement of certainty a year from now. They will be different a year from now, but we will be told: These are the numbers.

The second thing I think we need to understand as we enter this debate is the nature of the recession we have just gone through. I have referred it to as the first recession of the information age.

The recession in 1990-1991, I believe, was the last recession of the industrial age. That is why this recession is so different from any others we have had.

I want to make it very clear, we are not currently in a recession. The press talks as if we are. I have heard speeches on the floor saying: This is the worst economy in 50 years. This is not the worst economy in 50 years. This is not close to the worst economy that we have had in this last half century, in any way.

It is different. It feels different. For some people, it feels terrible. For other people, these are booming times. If you are in the housing business right now, you say: What recession? Because housing has been booming all through the recession period.

If you look at the unemployment rate--when I went to school, I was taught in economics that 6 percent unemployment was full employment, that you could not get below 6 percent unemployment without causing strains in the economy. We proved that wrong in the 1990s. We got down to the point where we thought 3 percent unemployment was normal.

Well, we hit 6 percent unemployment as a result of the recent recession. We are now backing off from that number. The last number was 5.7 percent.

If we were to take the economic numbers that currently apply to the United States and transport them to Germany, the Germans would feel they were in the strongest recovery they could imagine, because unemployment there is double digits.

Last year--a sluggish year, a year that Alan Greenspan referred to as a ``soft patch''--we grew at 2.7 percent of GDP. The Germans are not growing. The Japanese are not growing. The French are not growing. They would be delighted to have our numbers. And they are clearly not nearly as bad as people are talking about them. But they are a soft patch. And the soft patch is too soft, and it is going on too long. And we need to address the question of what we do about it.

I have said, this is the first recession of the information age. It is not a recession driven by inventory imbalances which usually has signaled a recession in the industrial age. This recession was created by overinvestment, something that in the industrial age we never saw. And, indeed, as an investment recession, it has to be dealt with with an investment solution.

We saw the excitement, almost to the point of ``tulip time,'' that occurred in the late 1990s. I say ``tulip time'' to refer to the great tulip mania of the Dutch in the Middle Ages, where the price of a tulip bulb rose so high, as people thought tulips would always continue to increase in value, that families would mortgage their farms, sell everything they had, to buy a single bulb, in the hope they could sell that bulb to somebody else for more money later on. When the tulip mania burst, the economy of Holland was damaged for close to a century, as they had to deal with it.

Well, that is an overstatement of what we went through in the late 1990s, but we went through a fascination with dot-coms and with high- tech companies and IPOs, where we had an investment bubble. And the bubble burst. When it burst, we had a tremendous decrease in what economists refer to as ``the wealth effect,'' as Wall Street saw a correction to that overenthusiasm of the time. It was not brought about by a traditional business cycle. It was brought about by a new kind of overexuberance in the business cycle.

The Wall Street numbers were inflated improperly. They had to come down. But when they came down, the confidence was lost, the wealth effect was gone, and people who had overinvested then decided they were going to stop investing.

So we had an investment-led recession for the first time. As that recession was coming, but before it hit, we had the projection of a $5.6 trillion surplus over the next 10 years. That was given to us by the same models that now talk about deficits as far as the eye can see. They were not bad people who made those decisions. The models worked themselves out. The problem was, the assumptions that went into the models, seemingly logical at the time they were made, produced that kind of a situation.

What happened to the surplus? We have heard a lot of rhetoric about who is responsible for destroying the surplus. Some of the rhetoric has been quite political. Let's just look at the same numbers for the $5.6 trillion surplus and say, all right, as we feed in current numbers, what happened to the surplus?

This in dark blue is the Bush tax cut. Yes, that was done deliberately on the grounds that the surplus could afford it. The surplus said we should bring taxes down. I will talk about that in a moment.

The gray over here, light blue, depending on what you see it as, 45 percent of the loss of the $5.6 trillion surplus is the weak economy and changes in the estimates. In other words, these estimates were made before we realized where we were in the excesses of the 1990s. And as the economy contracted and people changed the estimates, obviously, while the tax cut represented 25 percent of the surplus, and that was done deliberately, this hit us because we didn't make the right calculations. To be sure and to be fair to the people who made the calculations, they did not anticipate September 11. They did not anticipate all of the shock waves that came out of that situation. They did not anticipate what would happen when the economy hit the investment recession to which I referred.

The red represents increased spending, increased spending at 28 percent. We have spent more than the tax cut. Some of that, again, we did not anticipate. We did not anticipate we would have to spend $40 billion to rebuild New York. We did not anticipate we were going to have to spend the amount of money that we have spent in homeland security. We did not anticipate all of the other. But a lot of that spending came out of the mentality that, gee, we have a $5.6 trillion surplus; we can spend a little more here and we can spend a little more there. And a little more here and a little more there turned out to be a lot more when added to the problems. And this is what we get.

Now let's put it in 2004 because we have had a lot of rhetoric about this particular fiscal year and the budget we are facing. Here are the same numbers with respect to the projections that were made for the surplus for fiscal year 2004. The Bush tax cut for that original projection of the surplus: 19 percent. It is a smaller percentage of the deficit for 2004 than it is for the 10-year. The weak economy: 51 percent. It is a bigger number affecting 2004 than it does the 10-year picture. Increased spending, 24 percent; and then other tax relief becomes a bigger issue.

I am happy to.

No. This is the tax increase that was enacted.

That is correct.

I happen to have another chart. I will get to that if the Senator will be patient. I appreciate his willingness to listen.

Back to 2004, we see once again the impact of the soft patch. We see that if we are going to look at this and say, what can we do to get this money back, the first thing we can do, the best thing we can do, is get rid of this. Fifty-one percent of the whole comes from the weak economy. Another good thing we can do is hold down this: 24 percent comes from increased spending.

For those who said, we will solve our deficit problem if we just repeal the tax cut--and we have heard that rhetoric on the floor--no, that is the least effective way to get this back where it belongs. I am glad people who have said let's repeal the tax cut are backing away from that position.

Here is another way of demonstrating how the projections went wrong and the impact of the spending. These were the revenues in that boom time. And then we began to see the revenues start to slack off just as outlays that were increasing at one level began to increase very sharply. Here again is the responsibility of where we are.

Here is the chart answering the question about the impact of the President's growth plan. This shows the total taxes that will be paid in the next 11 years, $29.3 trillion. And the President's growth plan says we will have $725 billion, or 2.4 percent of that amount, that will come out of the overall pie. If you add the $725 billion to the $29.3 trillion that will still be paid, you come up with $30 trillion. It is obvious that the $30 trillion is a nice round figure, which will be wrong. It will once again be wrong on the high side or wrong on the low side, but no one with any certainty can look out 11 years and add up the exact amount of tax revenue that will come in. It is simply not humanly possible.

The best estimate that can be made says: Well, it will be, and it is rounded off, at $30 trillion. So you take $30 trillion, and we are talking about 2.4 percent of that.

The net effect of this over the next 11 years is, if I might use a phrase we are all familiar with, within the margin of error. It is clear that the estimate of what this will be cannot be that close, to a 2.4 percent accuracy. It is within the margin of error. We are not talking about a major impact. Seven hundred twenty-four billion sounds like a huge amount of money, and of course it is. But when it is stretched out over 11 years and when it is compared to $30 trillion, then you put it in perspective.

Many people say: Why should we be cutting taxes at all? Let's err on the prudent side and get that money in.

The fact is, of course, that we cannot assume that if we set the tax burden at a certain level, the economy will yield that kind of tax revenue.

I was in Ireland with a group of my colleagues last summer, and the Irish economy was booming, growing more rapidly than any other economy in Europe. We said to the Prime Minister of Ireland: To what do you attribute your growth? He said: We attribute it to the fact we cut our corporate tax rate to 10 percent, and we immediately started booming.

I will concede immediately that is a simplistic answer and there must have been other reasons involved, but I will not concede that the decision to cut the corporate tax rate to 10 percent was a trivial one or that it did not have a major impact on seeing that the Irish economy became the strongest economy in Europe.

I think it is not an accident that they have the lowest tax rates and the highest rate of growth. I think there is some correlation between those two, while conceding that there are other aspects.

Let's look at the historic tax burden we have had in the United States measured in the only way that really makes any sense; that is, as a percentage of the economy. For those who say: Oh, no, that does not matter, let me repeat again a personal experience that I think demonstrates it does matter.

As I have said before, before I came to the Senate, I ran a business. When I was hired as the CEO of that business, the total debt of the business was $75,000. When I stepped down as the CEO of that business prior to running for the Senate, the total debt of that business was $7.5 million. If you are going to measure my stewardship by the size of the debt, you can say Bennett was a lousy steward and we are good to get rid of him because he took a little tiny debt of $75,000 and ran it up to $7.5 million, and now we have to pay off that debt and he left us in this terrible hole.

Let me add a few more facts. When I took over as the CEO of the company, they were doing about $300,000 a year in total business; $75,000 in debt represented 25 percent of the sales and, indeed, threatened the survival of the business because the business could not service a $75,000 debt on $300,000 in sales. Indeed, the business was losing money at $300,000 a year in sales and could not survive unless we did something.

When I stepped down as the CEO of the business, we were doing over $75 million in sales, and the $7.5 million in debt represented 10 percent of the sales instead of 25 percent of the sales. Furthermore, we were earning enough money, our margins were strong enough that we had over $7 million in the bank.

You say: Why didn't you pay off the debt? Because the debt represented primarily mortgages on real estate that had prepayment penalties on them. We had borrowed the money to build the facility. We needed to run the business, and it was cheaper for us to earn interest on the money in the bank than it was to pay the prepayment penalty on the mortgage.

I frankly think I did a pretty good job at that company. I think my stewardship was proper, if you measure it solely on the basis of the debt, though I took a $75,000 debt and ran it up to $7.5 million. If you take the total value of the company, it was failing, and at the point of extinction with a $75,000 debt, it had a market cap of $200 million or $300 million with the $7.5 million debt.

Applying that same principle, and I think it is legitimate to do so, we should look at our debt now not in terms of how big is it in numbers, but how big is it with respect to the size of the economy, and it is now at a level with respect to the size of the economy less than it was at the time of the Eisenhower administration.

The highest point of our debt as a percentage of gross national product was in 1945 at the end of the Second

World War. We were running a total debt of close to 1\1/2\ times the size of the economy. Adding in the Social Security trust funds and all of the rest of it, it is about 60 percent. We are way below a level that at one time in our history we demonstrated we could survive with.

Putting that same calculation to the issue of taxation, here is a demonstration of taxes as a percentage of GDP. We have drawn a line at 20 percent of GDP. When did taxes get higher than 20 percent in our history? Once back in 1945, again responding to the Second World War when we had a debt that was three times GDP, and we immediately brought the taxes down to 15 percent and started to see the economy growing in such a fashion that the debt started coming down in dramatic fashion as a percentage of GDP.

With the tremendous surge of tax revenue that came primarily as a function of the high-tech run up in the late nineties and the realization from capital gains when, in this Chamber, we cut the capital gains tax rate so people started cashing in their dot-com stocks and paying enormous capital gains revenues to the Treasury, even though the rate went down, the rate went down but the realizations went up. We saw, once again, for the first time since the Second World War the total tax take as a percentage of GDP go above 20 percent.

To me that was the more compelling argument than the one that even the President made when he said: We are taking too much of your money; we need to give it back to you. I said how does it fit overall in the economic pattern?

Historically, when the tax take begins to get up to this 20-percent line, it is a signal that you have too much burden on the economy and you need to bring the tax take down below 20 percent. That is why I supported the President's decision and supported the President's position in the Tax Code that said: OK, let's bring it down.

You always see tax revenues drop in a time of recession. We had the tax cut, and then it was followed by the recession. This is the estimate of what will happen under current law if we do not do something about making the tax cut permanent. We will be in a historic area until the tax cut expires and goes back up, at which point we will bounce back over 20 percent of GDP.

I want GDP to grow more rapidly than Government expenditures. If GDP grows more rapidly than Government expenditures, we have no need to worry about the future. But if it does not, we cannot tax our way to prosperity. We cannot tax our way to a balanced budget.

There have been a lot of quotations of Alan Greenspan around here. I happen to be a great Greenspan supporter. Sometimes I am a little surprised to think I can understand him. I have been in the Senate now 10 years and on the Banking Committee, and he has appeared before us every year. I am on the Joint Economic Committee, and he appears there every year. For the first few years, I did not break the code, but I think I am now beginning to understand Greenspan speak.

This is a point he made to a group of us that I think is essential to this debate: You can set expenditures at almost any level you want. You cannot set revenues at any level you want. Revenues are a function of the economy, and if you do something wrong in fiscal policy that causes the economy to fail, you are not going to get the revenues you may project.

One can, on the spending side, commit themselves to long-term, built- in obligations that they cannot then cover if the revenues are not there. This is the ominous number on this chart. If we can get the revenues back up by getting the economy back up, back to the first chart--get this part of it solved, the weakness in the economy--then we will be just fine.

Now we come to the amendment. After all of the presentation, we come to the question of how big should the growth package be? Should it cost $724 billion over 11 years or can we get rid of this part of the softness for only $350 billion over the next 11 years? I think that is the wrong question to ask because it is a mathematical question to which there is no correct answer.

As I said at the beginning, all of these projections are wrong. All of them will be revised. No one can, with certainty, make a prediction of what is going to happen in 11 years in this economy and be anywhere near close. So the question to ask is, Will the proposals the President has made actually produce a structural change within the economy that has a chance of dealing with the softness in the economy?

I go back to the other thing I said, which is this particular recession was an investment recession. So the fundamental question to ask is, Will the proposals the President has made address the investment side of the soft patch we are in?

Well, we had a tax cut. Part of it addressed the consumer side and we thought: that is going to stimulate the economy. We sent out checks, 300 bucks for everybody who had filed a tax return. We discovered that it was not stimulative. Why not? Because it was aimed at the consumer side. It was not aimed at the investment side. And it did not produce any major structural change to give us the kind of growth we needed. It did not even hit the consumer side to the point that we projected because many consumers we now know did not spend it. They used it to pay down personal debt, which is a very logical thing for many people to do. But it upset all of the projections we made of what would happen.

So as I see it, the President's proposal has two big groups. The first group is a collection of tax cuts: the marriage tax penalty, the elimination of the death tax, the child credit. That is about half of the $720 billion that we are talking about. I think those are all salutary. I think those will all help, and I am prepared to vote for them.

Then we come to the other half, which is the elimination of the double taxation on dividends. If we pass this amendment, the conventional wisdom is that the elimination of double taxation on dividends is dead, that it will never come out of the Finance Committee.

Let me focus on why the passage of the President's proposal with respect to the elimination of double taxation on dividends will go directly to the heart of the softness on this chart and why it is the investment solution to deal with an investment recession.

If we go back to the excesses of the late 1990s and look at them now historically, we find that one of the things that drove the excesses on the stock market, and indeed got us into trouble as far as corporate management is concerned, was the tremendous desire to drive up stock prices. Stock prices were driven up by driving up earnings estimates. Enron, WorldCom, and the rest of these companies did everything they could to create the notion that they had tremendous earnings. They drove it up partly by leverage. Leverage, by definition, means borrowing, and they were borrowing because they could deduct the interest. They could get the money, they could deduct the interest, they could produce the leverage, and in the case of Enron they could lie about it. Make no mistake, there was tremendous greed and chicanery going on, but the whole system was geared towards debt as the primary source of capital.

If you go to the equity market and try to entice people to give you sound equity investments, you have to say to them, we cannot pay you a return on your investment because dividends are taxed at an effective 60-percent rate, so your only return on investment will be if you can sell your shares to somebody else at a higher price than you bought them. Sound like tulips? Yes, there is some similarity. The greater fool theory--the bigger fool theory: I buy this stock hoping that there is a bigger fool than me out there who I can sell it to at a higher price.

That is not really the way the stock market works, but that is the way it seemed to work in the late 1990s. Remember when Alan Greenspan warned us against irrational exuberance in the stock market? The Dow was at 6,000. Today, it is over 8,000, and we are saying it is the worst economy in 50 years. It got to 12,000 before tulip time finally hit and it backed down.

If we change the situation so a company can go to the equity market and say, if you give us equity capital instead of going to the debt market to get debt capital, we can give you a return on your equity capital that will only be taxed once, we can give you a return that will make it logical for you to hang in with us over the long term,

even if the stock does not go up immediately in the short term, you can hold the investment because you are going to get your dividends and your dividends are only going to be taxed once. This is a structural change that the economy badly needs. This is a structural change, once again to quote the guru that has been talked about, that Alan Greenspan has endorsed as good for the economy. This is a structural change that can begin to address the question of the weaknesses in the economy that can have long-term consequences. And this is a structural change that will make us more competitive with the rest of the world because the rest of the world does not tax dividends at the same rate we do.

That is what this debate really should be about. It should not be about numbers: Is 350 too little or is 350 too much? Is 724 too big or is 724 too little? It should be about whether these proposals work. I believe they will.

If we have identified that they will work, then the question is, How much money do we need to put in the budget to allow them to go forward?

So the number comes after the decision of whether the program makes sense rather than the number driving the program. In my opinion, this is a gamble well worth taking.

Back to the total tax take that we are talking about, where the 2.4 percent of the estimate is within the margin of error, this is not a serious gamble. In my opinion, if one were to say, OK, we are going to cut this in half at 350 so the 2.4 percent goes down to 1.2 percent, that is really what we are talking about, 1.2 percent of a $30 trillion pie when the evidence is overwhelming, in my view, that the dividend thing will work.

How does it have to work in order to pay for itself? It has to make the economy 1.2-percent more efficient. The studies out of the business roundtable from the econometric model down at the University of Maryland say this will add 2 points to GDP growth. What will happen to this $30 trillion pie if it grows at 2 points higher than the present estimate? It is a gamble worth taking. That is why I oppose this amendment.

I just want to talk about your chart.

Mr. President, if the Senator will put back the one chart, I would like to address that chart. The one which the Senator quotes as coming from the President.

Under contract to the White House.

First, let me say, in another time and place, and I know others wish to speak, I think the Senator and I could explore this at some greater depth. I agree with him absolutely that the problem is ahead in the retirement years of the baby boomers. The place where we differ is whether this proposal the President has put before us will prepare us for a more efficient economy in that period and thereby give us the strength we need or whether it will do damage. The Senator obviously believes this proposal will damage the economy. I, obviously, believe it will better the economy.

As long as we are quoting economists back and forth, I once again say that Alan Greenspan has endorsed the dividend thing as a logical long- term structural change.

When Mr. Greenspan comes before the Joint Economic Committee, I will explore that with him in depth, so we can get it nailed down.

The point I want to make off the Senator's chart, where he has the black line demonstrating the impact of the President's policy and the green line representing the base, he shows the President's policy would indeed produce a significant beneficial change in 2004.

The question, of course, is whether or not the projections beyond that are reliable. Once again, my experience in this body is that everything gets changed year to year, as you go forward. To get us out of this soft patch we are in, it would be very nice to have that kind of a spike in 2004.

But even if we accept the chart exactly as it is presented, is it not true that the black line ends up, long-term, above the green line? That in the years out there, it shows the long-term impact of the President's proposed policy is a better economic result than the baseline, and that, if it is true, is the argument I am making that the long-term structural change of the President's proposal will give us, long term, a healthier economy, and long term is where the Senator and I both agree the problem lies.

With that, I do not want to prolong this. I have taken up too much of the Senate's time on it and I appreciate the indulgence of my colleagues as I have gone on. I appreciate the openness and candor and expertise of the Senator from North Dakota.

Mr. President, the Kyl amendment would move up the time of making permanent the elimination of the estate tax by 1 year. That costs $46 billion. The Senator has proposed paying for it by cutting the Finance Committee jurisdiction. That means cutting Medicare, Medicaid, Temporary Assistance for Needy Families, the State Health Improvement Program, and the earned-income tax credit.

This is the wrong way to go. We ought to reform the estate tax, not repeal it. I hope my colleagues will resist the Kyl amendment.

Mr. President, the Senator yesterday said he took it from the Finance Committee jurisdiction for mandatory spending. That is what the record shows. That is where it comes from.

If the majority leader will yield, let me attempt to make a clarification because I do not think we want a misunderstanding on this question.

The majority side has yielded back all of their time. I have something like 4\1/2\ hours remaining on this side. But the way the rules work, there are three pending amendments, and the Republican side gets half on each of those amendments.

My understanding is--and I think it is the appropriate inclusion here--that time on the war resolution from your side would come off your amendment time, not off my time.

I thank the Senator.

I say to my colleagues on our side, if I may, please understand that when they say there is 4\1/2\ hours left, there is 4\1/2\ hours left in total. Even though they have given back all of their time, because there are three amendments pending, they get half of the time on each of those amendments. So we do not have 4\1/2\ hours. We have much less than that left potentially.

We have significant amendments to debate. I know there are colleagues who would like to speak, still, on the war resolution. We will attempt to accommodate them. But my intention is to give them 2 minutes each because otherwise we are not going to have time to debate very consequential amendments with respect to reducing the size of the tax cut, with respect to the transportation infrastructure amendment that is very significant, with respect to other amendments that are pending, Senator Harkin's IDEA amendment, and others.

So we are going to have to use a lot of discipline and forbearance for people to have an opportunity to debate very consequential items and discuss the war.

I am happy to yield.

I am more than pleased to yield 2 minutes to the Senator from Maryland.

I yield to the Senator from Connecticut.

How much time is the Senator seeking?

I yield 4 minutes to the Senator from Connecticut, who has been very patiently waiting.

I yield 2 minutes to the Senator from Iowa.

Mr. President, I agree completely with the Senator from Connecticut. I deeply regret the decision was not made to spend this day discussing the war. I said this morning, I find it very difficult to understand, as much as I value the budget and the budget process, after spending my entire time in the Senate on the Budget Committee. That is not, frankly, the focus of the attention of the American people today. The war is the focus of the attention of the American people today and we should have spent this entire day on the war. We should have put off the budget discussion and the budget debate until later.

The majority refused to do that. The majority insisted the budget was the priority and we would have limited time to discuss the war. That is a mistake. It is not right. That is where we are.

The Senator from Wisconsin is seeking time, and I yield 3 minutes to the Senator from Wisconsin.

(The remarks of Mr. Kohl are printed in today's Record in the debate on S. Res. 95.)

I thank the Senator from Wisconsin. I thank him very much for his patience. Again, I want to express my regret that we are forced into this circumstance of limiting time on such a consequential subject. But the rules unfortunately dictate the circumstance we are in, and the unwillingness of the other side to give us an extended time for discussion; instead to be locked into the budget discussion, which is regrettable.

The Senator from Louisiana has also been extraordinarily patient, not just today but for several days. He has an amendment that is one of the most consequential to come before the body on this subject. So I apologize to the Senator from Louisiana. He has been, as always, a gentleman. How much time would the Senator seek?

I am happy to yield 10 minutes to the Senator from Louisiana. If he would like additional time, we will do that as well.

I thank the Senator.

Amendment No. 339

Mr. President, how much time is the Senator seeking?

I yield 15 minutes to the Senator from Ohio.

Mr. President, I ask unanimous consent that the time yielded to Senators Breaux, Snowe, and Voinovich be taken from the amendment time rather than the resolution time.

Just to comment, first, I respect very much my colleagues, Senator Breaux, Senator Snowe, Senator Voinovich, and Senator Baucus for offering this amendment. They come from a centrist tradition of the Senate of which I was long a member before I got into this position, and it is really no longer appropriate for me to be part of that group. I have enormous respect for them. I thank them.

The Senator from Montana is seeking 15 minutes off the amendment.

Might I revise my request. There are only 7 minutes; we take 7 minutes off the amendment and give an additional 8 minutes off the resolution so the Senator from Montana would have 15 minutes.

Will the Senator yield for a question?

On the previous chart, if you could go back to that for a moment, might I just ask, is the President's additional proposed tax increase included in that chart?

That is the tax increase already passed and implemented?

If I could inquire of the Senator, if the additional proposed tax increase by the President were added to that chart, can the Senator tell us then what one would see in terms of the calculation of the disappearance of the surplus and what is the primary culprit?

I yield myself such time as I may consume.

Mr. President, the reason I inquired of the Senator what his chart depicted was that he has only shown the tax cut advocated by the President that has already been implemented. He did not show the additional effect of the tax cut the President has proposed, which is even larger than the one that has already been implemented.

He showed on his chart that 25 percent of the $5.6 trillion surplus went to the President's first tax cut. He does not talk about the additional tax cut that costs $1.9 trillion when you add the associated interest costs.

Second point: On the Senator's chart he attributes the additional interest cost of the tax cut to spending. Any fair allocation of the additional interest costs from the tax cut has to be attributed to the tax cut, not to spending.

Those two things change the picture quite dramatically. What we see is, over the decade, if you take the President's tax cuts already implemented and the tax cuts proposed, and attribute the interest costs of the tax cuts to the tax cuts, the biggest culprit in the disappearance of the surplus, and in fact, moving to deficit, is the tax cuts.

The Senator makes a very important point on what will work. The Senator believes the additional tax cuts the President has proposed will help grow the economy. I don't believe it. Not only don't I believe it, but a whole group of economists do not believe it.

This chart is the work of Macroeconomic Advisors. These folks are under contract to the White House, they are under contract to the Congressional Budget Office to do macroeconomic analysis. What they have concluded is the President's plan will give a short boost--this is the green line--if you do nothing; the black line is if you do the President's policy. After 2004, they say the President's plan will actually reduce growth from what we would have if we did nothing. Why? Because they say, as Chairman Greenspan has said, you will get a crowding out effect because the President's tax cuts are not financed by cutting spending, they are financed by borrowing the money.

You cannot borrow your way to prosperity. What happens when you borrow the money is you reduce the pool of societal savings; you reduce the amount of money available for investment; you reduce economic growth.

Let's talk about real world tests of that theory. In the 1980s, we had a real world test of the notion of running deficits and having tax cuts and that would spur the economy.

Let me finish, and I will be more than happy to yield.

Let me complete this thought, and I will be happy to talk about this chart or your chart or other charts.

In the 1980s, we tried the big tax cut, the big deficits. In the 1990s, we tried the alternative, which was to eliminate deficits and to have restraint, to reduce spending, actually increase revenues.

I have a chart that shows the long-term spending revenue. This is a very important debate to have. The red line shows spending from 1981 projected out to 2018. The red line is spending as a percentage of GDP, which the Senator from Utah indicated is an appropriate way to judge these things. I agree entirely. The blue line is the revenue line.

In the 1980s, we had an enormous gap with big budget deficits. Spending went up to over 23 percent of gross domestic product. In 1993, we passed a plan to bring down spending and to raise revenue. We did them both. The economy was weak. When we did that plan, we were told by the other side it would crater the economy. We were told: You are going to increase deficits; you are going to decrease economic growth. I can remember the debate in the Senate so well, being told it would crater the economy.

They were wrong. We raised revenue, we cut spending, and we helped a surge of economic growth unprecedented in our history, the longest period of sustained economic growth in U.S. history, the lowest unemployment in 30 years, the lowest inflation in 30 years. We turned deficits into surpluses, and we did it the old-fashioned way; we got revenue above expenditures.

Now look at what happened. Our friends are showing the chart. It is true, revenue collapsed. Part of that is the tax cuts. It is true that spending has gone up. Why has spending gone up? Where did the spending go? In 2001, 73 percent of the increase in spending went to national defense. We all supported it. Fifteen percent of the increased spending went to homeland security. We all supported it. And 7 percent went to New York City relief. We had to rebuild New York. We all supported it.

In 2002, 55 percent of the increase went to national defense, 21 percent to homeland security, 19 percent to rebuilding New York; 95 percent of the spending increase in those 2 years was national defense, homeland security, rebuilding New York.

In 2003, 73 percent is defense, 15 percent is homeland security, and 88 percent of the spending increase went for the purposes of homeland defense and national defense.

That is where the money has gone. We all supported it. The question is, How are we going to pay for it? What my colleagues are proposing is to keep the revenue line down below the spending line for the entire rest of this decade.

The reason that is so dangerous, in this Senator's opinion, is this decade is like no other in our economic history. What is coming is not a projection. What is coming is the retirement of the baby boom generation that is going to double the number of people eligible for Social Security and Medicare. It will explode the cost to the Federal Government of those two programs.

Those programs right now are throwing off big cash surpluses in their trust funds, but in the next decade they start to go cash negative. When they do, that is the very time the President's tax cut, which is the red bar--the trust fund is green, and blue is Medicare-Social Security surplus, the red is the President's tax cut--the very time the costs explode, the costs of tax cuts explode, leading to deficits totally unsustainable.

We just got released today the results of the Federal Open Market Committee meeting of January 28 and 29.

There is a lag before the releasing of the results of the meeting. Here is what the report says: A number of members expressed the hope that the legislation would not encompass provisions that would lead to permanently large Federal deficits with negative consequences for the economy over the longer term.

That is precisely what is wrong with the President's plan and wrong with the budget plan from the committee. It is going to lead to large budget deficits over time. That is going to hurt economic growth. Don't take my word for it. The deficits in the budget resolution are right here. They are large and continuing. The President's own documents go out to 2050 and they show these are the good times. Even though they are record budget deficits now, his own documents, page 43 of ``analytical perspectives,'' show the deficits now are the good times because, as you go forward and adopt the President's policy, the cost of the tax cuts explodes at the very time the cost of the retirement of the baby boomers explodes and you have deficits of such enormous size: 10 percent, 11 percent of GDP, 2 \1/2\ times what they are today. That is totally unsustainable.

The conclusion of many economists is those tax cuts will actually hurt economic growth. It is the dead weight of those deficits and debt that will hurt economic growth. The fundamental reason is the President's tax cuts are not offset by spending reductions. He is not proposing offsetting them by spending reductions. He is proposing increases in spending. I do not fault him for that. He is talking about increasing defense--we have to do it; increasing homeland security--we have to do it. But we have to pay for it. If we do not, on the eve of the retirement of the baby boom generation we will saddle this country with so much deficit and so much debt that it will serve as a dead weight on this economy and it will inhibit, it will limit, it will reduce the pool of societal savings, and it will reduce the amount of money available for investment.

I am not going to take longer. I could go on, on this subject, for a long time. But I am happy to respond to an inquiry from my colleague.

Yes--no, this is not from the President. This is from Macroeconomic Advisers, which is under contract to the White House and under contract to CBO.

Yes.

Could I just say on that point, you have to read very carefully what Chairman Greenspan said. He said the dividend proposal, as long as it is revenue neutral--not financed by borrowing--is good for the economy. If it is financed by borrowing, it is not good for the economy.

I have enjoyed this debate. Let me just say to my colleague, I wish I had--I am asking my staff to get it, but I do not want to interrupt the discussion any further.

Let me just say the text of the analysis from Macroeconomic Advisers makes clear they believe the long-term impact is negative. Because of the crowding-out effect, because it is borrowed money, it is because that reduces the pool of societal savings. I have loads of other economic analysis that concludes the same thing. It is what I believe. I think it is a mistake. That is where we differ.

I am not going to interfere any further in this other discussion we promised people they could have. How much time is the Senator seeking?

I yield 20 minutes to the distinguished Senator from Missouri.

I thank the Senator.

Amendment No. 358

Mr. President, the Senator from Vermont is seeking time. I propose that he take 15 minutes off the amendment of the Senator from Missouri.

The Bond amendment.

I don't think it makes much difference. Does it make a difference to you, Mr. Chairman? I took Senator Bond's time off the resolution. I am not sure it makes much difference, whichever one is top on your list there.

Will the Senator yield for a moment so I can thank the Senator for his courtesy in doing that? That is a gracious act, especially at this time of night. I appreciate it very much.

I yield time.

Mr. President, I will take a couple of minutes. I apologize for this, but it is important for the Record that we address the famous chart my colleague has shown over and over on the comparison of corporate tax rates. We have seen several references to this chart that is entitled ``United States, Second Highest in the World Combined Corporate and Dividend Taxes.''

The chart says that the U.S. has a tax rate of 70 percent, second only to Japan. My colleague and my friend, the Senator from Oklahoma, has referred to this chart so often that I decided to go off and do a little independent research on that chart.

Let me tell you what I found. First, let's look at corporate taxes alone. When we look at corporate taxes alone this is for 2000 as a percentage of GDP, which Senator Bennett said is the appropriate way of looking at it--a much different picture emerges about where we fit in.

This is from OECD, the international scorekeeper. What they have found is the United States ranks 22nd out of 29 in effective corporate tax rates. The Senator from Oklahoma shows nominal tax rates, the tax rate that appears in the Tax Code. We all know that is not what people actually pay. When you look at what they actually pay, you see a much different picture: 22nd out of 29 in effective corporate tax rates as a percentage of gross domestic product. We are down here, 22nd out of 29.

I will.

Well, I respect my colleague's view. Let me just say, this is how OECD does the scorekeeping on effective tax rate comparisons, what people are actually paying. This is their conclusion about where the United States fits in.

Let me continue because the Senator raises an important point. There is an implication that we have a competitive problem because our tax rate is so high.

The fact is, as this chart shows, over 40 years, corporate taxes have fallen as a share of our economy but risen for other industrial economies. This line shows the United States. We have gone from an effective rate as a percentage of GDP of 4 percent, which is a way of giving an accurate comparison between countries with different levels of GDP. Ours has gone down dramatically. Other OECD countries have gone up over the 40 years.

The Senator from Oklahoma's chart and the arguments he made suggest that all corporate income is taxed at the maximum corporate and individual tax rates. This goes to the Senator's question. I hope the chairman will listen to this. At least a quarter of corporate profits are not taxed at all because of various tax preferences. That translates into a zero-percent effective tax rate. Another half of corporate income is taxed once at the corporate level, but not taxed again because it goes to pension funds and other stockholders who do not pay individual income taxes. That again lowers it. The Senator is showing nominal tax rates, not effective tax rates.

Finally, the chart being used assumes that all corporate income goes to individuals in the top individual tax bracket at the Federal, State, and local level. In recent years, corporations have used stock buybacks to convert their profits into individual capital gains which have an effective tax rate of less than 10 percent.

How can it be at 10 percent when the capital gains rate we all know is double that? The reason for that is the deferral that is inherent in capital gains which gives you a much lower effective tax rate than the nominal tax rate.

I say this because it is important to have in the Record that this notion that we have a 70-percent rate on corporate profits is not accurate. That is not the effective tax rate. It is nowhere near that. And if one compares corporate taxes in this country to other countries on a fair comparison basis, we are not a high tax jurisdiction. We just are not. I offer that for the Record.

The Senator from Delaware has been extraordinarily patient. How much time would he like?

I yield 10 minutes to the Senator from Delaware.

I thank the Senator.

Mr. President, I rise today to join my fellow colleagues, Senators Breaux, Snowe and Voinovich, in support of this important amendment that works to reach a middle ground.

This is a bipartisan amendment and will allow Congress to pass a responsible economic stimulus package, a package that will provide a real boost to the economy while not burdening our future generations with skyrocketing deficits.

The budget resolution we are debating today includes a ``reconciliation'' instruction for the Finance Committee to reduce revenues by up to $725 billion over 10 years.

This is the same amount of the President's economic stimulus package. And while I support tax cuts and have worked closely with the President in the past to enact tax cuts, I am very concerned by the size of his current package.

First, we are at war and the immediate and long term costs of the conflict and reconstruction are unknown. Our economy is sluggish and we face rising unemployment. This is not the time to enact a package of tax cuts as large as the President has suggested.

I recognize that the economy needs a shot in the arm. So I have joined my fellow Senators in offering this amendment to keep a stimulus package at $350 billion. And ensure that the $375 billion which is saved goes toward deficit reducing measures.

Our amendment does not dictate what tax cuts should be passed out of the Finance Committee. It simply reduces the size of the tax cut. And I believe if this amendment is not passed, the Federal budget and the U.S. economy will be hurt significantly.

As my colleagues know well, ``reconciliation'' instructions ensure that any legislation that is reported out by a Committee pursuant to those instructions enjoys special privileges when it is brought to the Senate floor.

That means that the legislation only needs a simple majority of 51 votes to pass. In contrast, without reconciliation protection, legislation takes a supermajority of 60 votes to pass.

Legislation under reconciliation instructions is also protected from non-germane amendments. Such amendments can create serious obstacles to the passage of legislation. But passage of a non-germane amendment to reconciliation legislation requires a supermajority of 60 votes. And this is usually difficult to achieve.

What these special privileges really mean is that reconciliation legislation is more likely to pass the Senate.

Unfortunately, passing legislation to reduce revenues by $725 billion would hurt our budget and our economy. I believe the budget resolution should not instruct the Finance Committee to make $725 billion of tax cuts.

Why do I believe $725 billion of tax cuts is inappropriate? The most serious problem is that this enormous tax cut is not paid for. The Federal budget is facing huge annual deficits.

This is happening at the worst possible time. In a few short years, the huge baby boom generation will begin to retire. The added costs for Social Security, Medicare and Medicaid will put a huge amount of additional stress on our budget. And on our economy too.

With these budgetary and economic pressures looming, we should be running surpluses--not deficits--as soon as the economy returns to full employment in the near-term. We should be retiring debt, not creating it when the economy is at full employment.

If this amendment does not pass, we are going to add an additional $375 billion in debt and deficits during the next ten years. This is during a period when the economy should be at full employment.

What difference does it make if we run large deficits when the economy is at full employment?

The answer is that large deficits eat up savings that would otherwise be used by businesses to invest in new plant and equipment. Without these investments, the economy will grow more slowly. And our future standard of living will be reduced. As well as the standard of living of our children and grandchildren.

Once the economy is at full employment, large deficits will also cause long-term interest rates to go up. This will increase the cost of mortgages. And car loans. This will hurt the consumer. But it also will hurt the economy. Because people will buy fewer homes and cars.

The simple truth is this. We cannot afford to increase Federal budget deficits by an additional $375 billion. If anything, we should reduce deficits, not add to them.

With the concerns about the costs of a war and growing deficits, many of you may be asking why aren't we trying to eliminate the entire $725 billion package?

The answer is that right now, the economy is not at full employment. That means that we need to encourage more spending. More spending will stimulate more production. And that will increase employment and return economic growth to its full potential.

The $350 billion of tax cuts that we are leaving intact, therefore, should be used for tax cuts and program initiatives that would increase spending right now.

And, the incentives to encourage more spending must also be temporary. Once the economy returns to full employment, the decrease in savings that would result from the increase in consumption will reduce investment. And that will lower our standard of living in the long-run.

Again, I want to emphasize that we do not dictate what the tax cuts should be--we simply say the amount should be lower. But I believe there are three specific areas we should consider to effectively stimulate the economy in the short-run.

First, probably the best short-run stimulus is increasing aid to state governments on a one-time basis. The recession and subsequent weak economy has severely reduced state revenues. States are facing budget deficits in the upcoming fiscal year of $70 to $85 billion.

Unlike the Federal Government, almost all states have annual balanced budget requirements. So even though the economy is weak, States must lay off workers, cut spending programs, and increase taxes in order to balance their budgets.

These actions make the economy even weaker. They also reduce important services that state governments provide.

There is a remedy, however. By increasing Federal aid to states, states can avoid layoffs. Avoid cutting programs. And avoid increasing taxes. In contrast, any attempts by Congress that lack a state relief component will ultimately fail to stimulate the economy. Because efforts to spur the economy will fail if, at the same time, states are forced to raise taxes, cut spending, and eliminate jobs.

Increased aid to state governments should only be made on a temporary basis, however. Once the economy improves, the increased aid must stop.

Second, cutting taxes on households who are likely to spend those tax cuts quickly effectively stimulates the economy. The President's plan includes an acceleration of many of the tax cuts that were enacted in 2001.

I fully support acceleration of some of the tax cuts that are primarily directed to those taxpayers who will spend most of the tax cuts they receive. Such as accelerating the reductions in the marriage penalty or the increases in the child tax credit.

But, a portion of America's households will not receive any benefit at all under the President's plan. Therefore, I believe we also need to accelerate the reduction of marriage penalties for households receiving the earned income tax credit. And we also need to accelerate the refundable portion of the child tax credit from the 2001 tax cut.

Acceleration of these tax cuts will give the economy a boost in the short run. But without increasing deficits in the long-run. Because the revenue losses are in the years when the acceleration takes place. There is no revenue loss in the years after that.

Third, we can stimulate the economy by completely eliminating the income tax on the first $3,000 of wages. This proposal also puts money into the hands of taxpayers who will spend it. Especially if we make it refundable. Which will provide a tax cut to the 30 million Americans who are left out of the President's program.

These are just three ways to stimulate the economy--aid to the states, acceleration of some tax cuts, and elimination of income tax on the first $3,000 of wages. Needless to say, there are other proposals that we should consider. Some of these other proposals include increased funding for highway construction, health insurance tax credits for businesses, and allowing small businesses to deduct more of their investments in plant and equipment.

A reconciliation instruction of $350 billion of tax cuts to the Finance Committee can be used for several types of economic stimulus without increasing long-run deficits. But we cannot add to that a larger tax cut that will increase long-run deficits. That would weaken our economy. We cannot let that happen.

Therefore, I urge my colleagues to support this amendment.

Mr. President, while I have the floor, I also want to say that I will be proposing another amendment this evening, or tomorrow.

My amendment is a very simple amendment. It would clarify the Medicare reserve fund language to say that beneficiaries who choose to remain in the current fee-for-service program which, I might add, is 89 percent of all seniors right now should get the same drug benefit as those who choose to enroll in a private plan.

Let's put aside the question of whether $400 billion is enough for an adequate drug benefit. Having spent a lot of time reviewing the cost of different benefit levels, I know that $400 billion buys a rather paltry benefit.

But whatever benefit level we can afford with that amount, we should make sure that the same benefit is available to seniors who choose to stay in the fee-for-service program as those who enroll in an HMO, a PPO or any other sort of private plan in Medicare.

I believe that is the commitment many of us have made to our seniors, and that is the commitment we ought to fulfill.

Earlier this month, President Bush unveiled his vision for Medicare reform. I am pleased that he doubled the amount of money he is willing to spend on a prescription drug benefit over what he proposed last year.

But I am concerned that the President's vision for reform is to privatize the program. He would give a comprehensive drug benefit to seniors who enroll in private plans. But those who choose to stay where they are now, in the fee-for-service program, would get only a discount card and catastrophic coverage.

That is not something I am willing to support. Let me explain why.

First, we already know that private plans have had difficulties serving the Medicare population. Many of my colleagues may recall that the reason Medicare was created in the first place was because so many seniors were ill-served by the private market. About half of the elderly were uninsured in 1965. Because of Medicare, now nearly all elderly are covered.

More recently, since Medicare+ Choice was created in 1997 to expand private plan options in Medicare, we have seen a dramatic drop in the number of HMOs participating in the program. And as a result, an estimated 2.4 million beneficiaries have lost their health plan.

As you can see by this chart, only 875 counties across the country currently have a Medicare managed care plan. That is out of a total of 3,200 counties. So more than 2,300 counties don't have access to managed care plans or PPOs.

Looking at this map, I might add that the counties without these plans are predominantly rural.

And it is not that plans are underpaid, as some might try to argue. The average payment to Medicare+Choice plans is currently 104 percent of local fee-for-service costs. That figure doesn't tell the whole story, but it does suggest that simply increasing payments will not draw private plans into rural areas.

My own state of Montana is a good example. The floor payment for Medicare+Choice plans in Montana is 128 percent of local fee-for- service costs. Yet, we don't have any HMOs or PPOs in my state.

Let me repeat that: despite a payment rate that is 28 percent higher than traditional Medicare, private health plans are still not serving Montana seniors.

All this leads me to the second reason I do not support the President's proposal it doesn't save any money. Moving beneficiaries into private plans will not save the program for the next generation and will do nothing to address Medicare solvency.

We can all talk about coordination of care, disease management, and the potential efficiencies private plans might be able to achieve. But at the end of the day, private health plans are subject to the same cost pressures affecting the entire health care system. Just look at the Federal Employees Health Benefits Plan, FEHB. This plan serves federal employees, retirees, and their dependents and has been held up as a model for Medicare reform. Yet we find that FEHB premiums have increased, on average, by more than 10 percent each year in the last 5 years. Far faster than Medicare's per capita costs.

Third, and finally, I don't support a differential drug benefit, because it is just not fair to make beneficiaries move into a private plan to get a drug benefit. In Montana, virtually all beneficiaries are in traditional Medicare. That means, in order for them to get a drug benefit, they would need to drop their supplemental coverage and enroll in a private plan accepting all the restrictions, preferred networks, and coverage limitations that come along with the plan.

For a senior who may be older, used to what she currently has, and to anyone with a chronic health condition, this is a frightening proposition.

As the chairman of the Energy and Commerce Committee, Mr. Tauzin so aptly said recently, ``You couldn't

move my own mother out of Medicare without a bulldozer. She trusts it, believes in it. It's served her well.''

That is the case with millions of seniors around the country. They like what they have now, and they want to stay there. They need a drug benefit, they have been pressing Congress to act for months, years now, and they don't believe they should have to swallow such far-reaching reforms to get the help they need. And the more we delay, the more expensive it gets to provide this benefit.

In the 4 years that Congress has been seriously debating Medicare prescription drugs, we have considered a range of options. And we've seen the CBO scores for these proposals go up and up as we've taken longer and longer to act.

While there are differences in the bills we have debated, they all have one thing in common. They would offer all seniors the same level of drug benefit if they chose to enroll in the new benefit. Not just private plan or HMO enrollees, but all beneficiaries.

In closing, I would like to point out that 90 Members of the Senate who are here today voted in favor of legislation last summer that would uphold this principle.

I think we should keep the commitment we made last summer. I am happy to work with the administration and my colleagues across the aisle on ways to improve and increase private plan participation in Medicare. But we need to make sure that the benefit is provided in full to fee- for-service beneficiaries as well as private plan enrollees.

For the sake of America's seniors, particularly the oldest, the sickest, and the most frail, and for the sake of America's rural seniors, I urge adoption of this amendment.

Mr. President, I yield the floor.

Mr. President, I rise today to support the amendment to increase highway and transit spending levels in the budget resolution.

Increasing transportation spending is an important objective. Highway investments create jobs, increase the productivity of our economy, and improve the quality of life for all Americans. In Montana, its our lifeblood. We count on highway money for our economic development and we count on transit money to give our rural areas access to goods and services and people.

In 1998 Congress passed one of the most successful and bipartisan bills in recent memory--the ``Transportation Equity Act for the 21st Century'', better known as ``TEA-21.'' I am honored to have been an author of that piece of legislation and I look forward to working on the next reauthorization act.

TEA-21 passed overwhelmingly in 1997 because there was a 40 percent increase, on average, in funding. So, even if some states got a lower percentage of funds than their neighbor, everyone brought home more dollars than under ISTEA. That 40 percent increase was primarily derived by the transfer of the 4.3 cent gas tax from the general fund to the Highway Trust Fund, the new budgetary treatment for highways and the ``protected'' status of the Highway Trust Fund.

We are hoping to build on the success of TEA-21 by ensuring that our Budget Resolution can accommodate higher levels of spending for highways and transit. These higher levels of spending will enable the successor to TEA-21 to become law.

In order to pass a TEA-21 reauthorization bill, we will need more money. Increasing funds into the Highway Trust Fund is the sole responsibility of the Senate Finance Committee. Senator Grassley and I have been working very hard to find ways to increase funding for both highways and transit. We are absolutely committed to growing the programs without raising taxes.

I can't emphasize enough that the single principal feature of any new highway reauthorization bill has to be its increased funding for the program, something that will help all States and all citizens. Our first step is this blueprint for our budget.

The Finance Committee believes that the levels included in this amendment to the Budget Resolution can be reached. $255 billion for Highways and $56.5 billion for transit over 6 years can be achieved without raising taxes. I know this because over the past 3 months finding this money has been a priority for myself and my chairman, Senator Grassley.

Let me sum up by saying that the Senate Finance Committee has the responsibility to figure out how to grow the highway and transit programs. We believe that we can come up with increased funding for both highways and transit. We can do it without raising taxes. This amendment gives us the room to achieve that.

I urge all my colleagues on both sides of the aisle to vote yes for increased investment in infrastructure. I say both sides of the aisle because, as I've said in the past, there are no Democratic roads or Republican bridges. We will all benefit from this investment. We should all support it.

I thank the Senator for yielding.

Mr. President and Members of the Senate, these obviously are very difficult times and, obviously, the point at which we find ourselves in trying to reconcile some of the more significant issues that are incorporated in this budget resolution.

As the Senator from Louisiana indicated, several of us have been working across the political aisle--with the Senator from Montana and the Senator from Ohio--to reconcile some of the issues with respect to the central question in this budget resolution in terms of the extent to which we should have a growth package--what type, what size, and what should be included in that growth package.

Obviously, the policy will not be determined in the budget resolution. But certainly we can determine the size that could dictate ultimately the policy in the days and weeks ahead.

I appreciate our ability to work across the political aisle to help craft this amendment. As the Senator from Louisiana indicated, it is an amendment that will reduce the size of the tax cut from $726 billion to $350 billion. And the remaining $376 billion would be applied towards deficit reduction. Through this alone, we would achieve $86 billion savings in interest costs.

I happen to believe this is a responsible, well balanced approach that will both stimulate our economy in the short term and protect our economy from the effects of unnecessary deficits in the long term. That is particularly important because when we compound future deficits, we raise the likelihood we will drive up long-term interest rates.

I understand the challenges of bringing forth a budget resolution. First, I commend the chairman of the Budget Committee, in his new position as chairman, for having the persistence and the determination, as well as the dedication, to bring this budget resolution before the Senate.

I commend him for his tireless work in forging and producing the budget we have debated on the floor this week. As a former member of the Budget Committee, I know what goes into this process. I also know that Senator Nickles wants what we did not have last year, which was a budget resolution. It is critical because it imposes structure and discipline and defines the priorities in Federal expenditures.

That is a fundamental responsibility of Congress. That is why it is so critical and instrumental to get it done, to pass a budget resolution, so we can advance the budget process that ultimately will determine the policy as well as the appropriations, so we do not have what we had this year. This year, the first month and a half was devoted to the unfinished business of the last Congress--half of the domestic budget--because we had failed to pass a budget resolution. So that is important.

That is why I and the Senator from Louisiana, the Senator from Montana, and the Senator from Ohio worked together, because we understood, in order to pass a bipartisan budget resolution, it was also important to focus on some of the issues that would divide us. One of those questions was, of course, on the size of the growth plan as proposed by the President.

I commend the President for his leadership in initiating the debate on the

necessity of stimulating our economy. I happen to share his belief that we should take steps to rejuvenate this sluggish economy, to try to do what we can in the short term to strengthen the economy.

I also happen to believe that our budget resolution has to bear the stamp of the totality of the extraordinary historic events and times in which we live. In the last 2 years, it has been an extraordinary transformation for America, in the aftermath of the most horrific event, the devastating attack on American soil, the ongoing war on terrorism, the initiation of military action in Iraq and more than 250,000 troops poised for potential war. We also have grave concerns about the nuclear proliferation on the Korean peninsula. All of these global uncertainties have cast a dark shadow over a domestic economy that was already on shaky ground even before September 11. The events of September 11 catapulted an already shaky economy into a recession.

Indeed, over the past year our Nation's economy has only grown worse. The economy grew at an anemic .7 percent in the fourth quarter, the weakest quarterly gain since the end of the recession, and just last month 308,000 people joined the unemployment rolls, bringing our unemployment to an 8-year high. Since the recession began, we now have lost more than 2.3 million jobs in the private sector. Without question, we need to have a stimulus package to address the short-term, immediate economy.

As Allen Sinai said, chief economist for Decision Economics, the fiscal stimulus is ``absolutely essential'' because the U.S. and world economies are struggling.

In short, failing to act now by passing an immediate growth package in this budget is to risk contributing to a jobless recovery or incurring a double dip recession. We cannot afford to wait until our military action in Iraq is concluded.

This is the right time. This is the right vehicle for action. We can always debate further issues later. But we will never be able to turn the clock back to jump-start the economy.

When we were involved in deliberations about a stimulus package in 2002, we had numerous discussions with Chairman Greenspan and other experts. The one thing we did hear was this: If you want to effect the short-term behavior of the economy, you have to do it as soon as possible to have the maximum impact on short-term behavior. So we cannot afford to lose time. I believe we should have a growth package in this budget. At the same time, given these unprecedented times and the confluence of circumstances on which they are defined, whether it is the economic uncertainties, the war in Iraq, the projection of higher and higher budget deficits, the domestic fiscal challenges that lurk on the horizon because of Social Security and Medicare, our responsibility to carefully evaluate the impact of any tax reduction and spending increases in this budget is that much greater.

That is the context in which we must shape this budget. These are realities that we cannot afford to ignore. Indeed, our projected Federal deficit for this fiscal year is now estimated to be $246 billion. That is an increase of 54 percent. That is without any new spending or tax cuts. There were only 3 other years in the last 32 years in which we saw higher deficit levels in terms of real dollars. What is required in this budget resolution is careful calibration, if we are to produce short-term benefits for our economy without jeopardizing long-term fiscal responsibility and economic growth.

Let there be no mistake, just as the need for short-term economic stimulus is compelling, so, too, is the need to return to balanced budgets and, indeed, surpluses as soon as possible.

I have been in Congress, both the House and Senate, for 25 years. I have seen how difficult it is to achieve a balanced budget. After all, it took 18 years of my career before we saw the realization, the accomplishment of a balanced budget amendment. We all cheered on the success, that for the first time we were able to escape the chronic budget deficits that had characterized the budgetary process for decades. Then a year later we were able to have the first on-budget surplus. We have been able to have 4 years of surpluses from 1998 to 2001. I don't want that to be an anomaly. I want deficits to be an anomaly.

As I said, over the last two decades, I saw the progression of the deficits. I saw the progression of various procedures and how we were going to attack deficits, from Gramm-Rudman-Hollings to every other mechanism. There were those who said we should not have a balanced budget because they said it was a gimmick. I said, if it was a gimmick, we would have passed it a long time ago. It wasn't a gimmick. It worked.

We cannot risk the impact of undue deficits in the long term because those chronic deficits drive up interest rates. That is going to stymie our ability to do what we need to do for future generations. It will diminish our ability to address the problems associated with Social Security and Medicare.

That is how I am approaching this economic growth question in the budget resolution. What will stimulate the economy today versus what will not? And for those measures in this package, and the funding measure that we are including in this budget resolution are not strong, immediate, and of limited duration, if they truly have merit in their own right, then they should be paid for as we go.

We need to ask ourselves in this current circumstance, can we really afford to deficit finance nonstimulative proposals? Maybe we could do it in a different time or place, but not now.

It all comes back to setting priorities. That is what we said time and again in all those years that we were fighting for a balanced budget that was accomplished right here in the Senate back in 1996. That is what we talked about, establishing priorities, getting our fiscal house in order. Now that is what we need to do in this budget resolution. We have to draw lines, and we have to draw distinctions.

What I am saying tonight is, if those proposals that are nonstimulative to change our tax structure are part of a long-term economic growth plan or are part of tax reform, those proposals should be fully paid for so as to not exacerbate our future economic situation and lead to greater problems down the road. That is not my view. It is the prevalent view among economists--Chairman Greenspan and so many others across the board--because we are dealing with so many challenges and crises simultaneously.

How much can we afford to do now? How much? How much is too much? Should it be $726 billion? Should it be a trillion? Should it be $2 trillion? We have to draw lines. That is why I am here tonight. That is why I reached across party lines, to work together so we can pass a bipartisan budget resolution that reaches a consensus on this key issue of whether or not we should have a growth plan, and, if so, how much can we afford to do now?

I drew the line on what was stimulus versus nonstimulus. We need to have a carefully calibrated growth plan that is limited, of short duration, to have an immediate impact on the economy and that will not have a negative impact on long-term interest rates.

I looked at the outyears because I wanted to get exactly a snapshot of where we are today and where we are going in 2013. All I can see down the road are deficits as far as the eye can see. We have deficits every year. We have deficits through 2013, the year in which we will also have the onset of 77 million baby boomers retiring. So we will have a convergence of not only that massive wave of retirement that will impact Social Security and Medicare, but we will also continue to have deficits.

I looked at the projections by CBO. What I found were interesting facts. CBO projects a return to surpluses in 2008. But let it be clear, the assumptions do not account for real budget costs--the war in Iraq, tax cuts, prescription drugs, more spending on defense and homeland security, all national imperatives.

In fact, CBO's baseline assumes real discretionary spending will remain constant. That certainly contravenes the recent trends of around 8 percent growth in spending. According to the Brookings Institute, it said:

Such assumption implies real outlays will fall by 9 percent

relative to population, and by 20 percent relative to gross

domestic product over the next decade.

I do not think anybody seriously believes that is realistic. Putting these

costs into the budget, we could have a deficit this year of over $300 billion and next year it could approach $400 billion. If we anticipate a supplemental of $100 billion or more in the short term, that will push our deficit near 4 percent of GDP, and that will be a historical high. I have heard time and again these deficits represent a minimal amount as a percentage of the GDP. I heard those arguments through the eighties. I heard them in the nineties. How much is too high? Today it is 2 percent. Tomorrow it will be 3 percent. With the supplemental next week, it could be 4 percent.

Why are we not focusing on how we can return to a balanced budget as soon as possible? Are balanced budgets no longer part of the political and economic lexicon? We should be devoting our time to figuring out, given all these exigencies, extenuating circumstances which, without question, need to be funded, how much can we do now in terms of a tax cut? We had a tax cut in 2001. We had a tax cut in 2002, and in my entire career, I have supported tax cuts, but now we are looking at multiple challenges on the horizon that demand significant Federal expenditures.

Therefore, I say, let's be prudent, let's be proportional, let's be practical, and target the growth plan to $350 billion that would be sufficient to have an effect on the short-term economy to turn this economy around.

Some people say wait until after the conflict with Iraq is over. If you have a weak economy, we have no way of prognosticating the future in terms of what the economy will look like in the aftermath of Iraq. We may have fundamentals strong enough that we can rebound. Certainly Chairman Greenspan has indicated he thinks that will be the case. If not, we do not want to take the risk, particularly because it affects the well-being of the American people and particularly those who have lost their jobs. So let's put something in place now. Mr. President, $350 billion seems to me to be a right size approach to do that for the short term.

Some people say that is just splitting the difference, 726, 350, it is half a loaf. It is splitting the difference. It is the moderate's approach to splitting it in half. It is not about splitting the difference, it is about making a distinction. It is making a distinction between what is a stimulus and what is not, what we can pay for now and what we can pay for in the future. That is the difference, and that happens to be a major difference.

Finally, when I look to the future, I think we all share the concern about the fact that we now have reverted back to using the surplus of the Social Security trust fund to mask the size of the true deficit. As I said earlier, we broke that chronic pattern of bad fiscal behavior. We were able to finally realize that moment where we could say that we no longer use the surpluses from the Social Security trust fund.

We know why we are in this situation today. No one questions that. The question is, how do we get back to where we were? That is my concern. When I look at the long-term projections, when I look at the fact that in the year 2013, we will be using $2.5 trillion in the Social Security trust fund surpluses to mask the true condition of the bottom line, that is of concern. That should be a concern to all of us, particularly at a time in which we will see as well the first wave of baby boomers retiring.

These are serious times. We cannot afford to diminish our ability to strengthen Social Security and Medicare. We have looked to this next decade, the decade we are in, as a window of opportunity to return to surpluses to prepare us for the future challenges. But as we have seen over the last 18 months, we can see how projections dramatically change and opportunities have evaporated. We know we had a $5.6 trillion surplus just 2 years ago, but we also understand what happened on September 11 that transformed this country. We obviously had to address emergencies, homeland security, the war on terrorism, and 68 percent of the surpluses were evaporated as a result of the declining economy.

So I do believe we need to have a growth plan, but we must exercise caution so that we do not aggravate the long-term picture and threaten our ability to address long-term priorities.

We have to be cautious because when you have fluctuations, and as the ones that have been as dramatic as they have been over the last few years, it can increase or it can decrease the amount of revenues that are available for other programs and certainly can decrease the amount of revenues coming in to the Federal Treasury.

Just a 1-percent fluctuation in the GDP can decrease tax receipts by $120 billion over 5 years and increase outlays by $52 billion over 5 years--just a 1-percent change. Think of where we have been in terms of economic growth and the fluctuations that have occurred.

That is why I think we have to be prudent. The President was right to offer a growth plan, but I think we cannot ignore the impact of all the challenges we face. If we step back and take the long view, I do believe we have to make a decision in terms of how much we can afford to do now, and what we need to do is to stimulate the short-term economy. What we cannot afford to do, without paying for it, without adding to the deficit, is advancing long-term economic growth plans, tax reform, nonstimulative proposals.

I hope my colleagues will give this very serious consideration in support of this amendment. I do not offer this lightly. I have taken this responsibility very seriously. I happen to believe it is important to get a strong bipartisan budget resolution with the right size number for a stimulus plan, a figure that will help us get a budget on a timely basis, a number that will help us to stimulate the economy.

I happen to believe the amendment we are offering today strikes the right balance. It represents the most effective way, I believe, that we can advance a growth plan that can achieve the strongest possible support but, more importantly, have the maximum effect on our economy without affecting the long-term future. We know these are extraordinary times, but I hope we will not abandon our goals for fiscal discipline. I hope we will not compound the outlook, the chronic future budget deficits, and diminish our ability to address and finance our security in Medicare. We need to lift the economy but without adding to future deterioration.

I hope we are not retreating in the notion that we can never return to balanced budgets. I hope we will concentrate on the goal of returning to balanced budgets as soon as it is possible. I hope we can begin now.

I yield the floor.